Ashland Inc. (NYSE: ASH) today provided an update for preliminary
fiscal 2023 fourth-quarter results, full-year sales and Adjusted
EBITDA.1 Ashland’s financial results during the quarter reflect
market-demand dynamics and underlying business performance that
were generally consistent with previously communicated
expectations. Earnings for the quarter were most directly impacted
by additional inventory-reduction actions taken to better position
the company for more conservative demand scenarios.
Key preliminary results are as follows:
- Fiscal fourth-quarter and full-year sales of $518 million and
$2.19 billion, respectively;
- Net loss (including discontinued operations) of $4 million for
the quarter; net income (including discontinued operations) of $178
million for the full year;
- Adjusted EBITDA of $74 million for the quarter and $459 million
for the full year including approximately $58 million of
inventory-control actions during the fiscal fourth quarter;
- Inventory reduction of $86 million compared to June 30,
2023;
- Ongoing free cash flow of $104 million in the quarter.
Sales in the quarter were approximately $518
million. Pricing remained favorable for all segments other than
Intermediates. Volumes during the quarter continued to be
negatively impacted by customer inventory destocking across most
end markets. Foreign currency favorably impacted sales by
approximately two percent.
“Customer demand was generally consistent with
our expectations in the fourth quarter,” said Guillermo Novo, chair
and chief executive officer, Ashland. “While we are seeing certain
signs of stabilizing demand and reduced destocking actions by
customers, there continues to be limited visibility regarding the
timing of demand normalization.”
“As a result, we proactively took additional
inventory-control actions to manage production, reduce inventory
levels and drive stronger free cash flow generation,” continued
Novo. “Although these actions will better position Ashland to
operate in an uncertain and potentially lower demand environment,
they resulted in Adjusted EBITDA for the quarter and full year that
were below our original expectations. To drive improved
performance, we will be taking additional portfolio and investment
actions during fiscal year 2024.”
Portfolio-optimization
actionsAshland is taking the following
portfolio-optimization actions to further strengthen the company’s
resilience and improve margins and returns in this uncertain
environment:
- Commencing a divestiture process for the company’s
nutraceuticals business;
- Optimizing and consolidating our carboxymethyl cellulose (CMC)
and methyl cellulose (MC) industrial businesses and related
capacity to improve productivity and mix;
- Developing plans to repurpose the impacted CMC and MC assets to
support other longer-term growth initiatives;
- Optimizing the company’s global hydroxyethyl cellulose (HEC)
manufacturing network for greater efficiency.
- Increasing resources and investments to drive our higher-value
“globalize and innovate” strategy.
“We are pleased with the progress our
Nutraceuticals team has made to strengthen and grow the business,”
said Novo. “However, we have determined that it is not core to
Ashland’s business model or longer-term strategy. As we saw
with the sale of our Adhesive business, we believe Nutraceuticals
will be better positioned to thrive as part of an organization
where Nutraceuticals is a core to their model and future investment
strategy.”
When completed, these portfolio actions are
expected to result in improved Adjusted EBITDA margins of
approximately 200 basis-points and returns on net assets of 150 to
200 basis-points. These actions will also reduce volatility,
improve focus and decrease working capital and maintenance capital
expenditures. The impact of these portfolio actions is expected to
reduce annual sales by approximately $200 million to $225
million. Ashland plans to take actions to fully offset the
approximately $100 million of stranded costs and lost gross profit
that is expected to result from these actions.
At the same time, the company plans to increase
its investments and resources for the core growth businesses
consistent with the “globalize and innovate” strategy that was
outlined at the company’s recent Innovation Day. During fiscal year
2024 the company plans to deploy an incremental $4-6 million in
commercial and technical resources to support this growth.
"We are repositioning Ashland to further reduce
our participation in lower profitability markets where we do not
have strong leadership positions. We plan to redeploy assets to
support productivity or growth in the new technology platforms we
outlined at our Innovation Day in early September," continued Novo.
“These actions further enhance focus on our pharmaceuticals,
personal care and coatings businesses and position the company well
for improved performance and profitability. I look forward to
discussing our fiscal-fourth quarter financial results and outlook
in more detail during our upcoming earnings call and webcast,”
concluded Novo.
The information in this release is preliminary,
based upon information available at the time of this news release,
and actual results may differ.
Conference Call WebcastAshland
plans to issue its fourth-quarter earnings release at approximately
5 p.m. ET on Wednesday, November 8, 2023. The company’s live
webcast with securities analysts will include an executive summary
and detailed remarks. The live webcast will take place at 8 a.m. ET
on Thursday, November 9, 2023. Simultaneously, the company will
post a slide presentation in the Investor Relations section of its
website at http://investor.ashland.com.
Among those participating in the webcast
presentation will be:
- Guillermo Novo, chair and chief executive officer;
- Kevin Willis, senior vice president and chief financial
officer; and
- Seth Mrozek, director, investor relations.
To access the call by phone, please go to this
registration link and you will be provided with dial in details. To
avoid delays, we encourage participants to dial into the conference
call fifteen minutes ahead of the scheduled start time.
The webcast and supporting materials will be
accessible through the Investor Relations section of Ashland's
website at http://investor.ashland.com. Following the live event,
an archived version of the webcast and supporting materials will be
available on the Ashland website for 12 months.
Use of Non-GAAP MeasuresAshland
believes that by removing the impact of depreciation and
amortization and excluding certain non-cash charges, amounts spent
on interest and taxes and certain other charges that are highly
variable from year to year, adjusted EBITDA provides Ashland’s
investors with performance measures that reflect the impact to
operations from trends in changes in sales, margin and operating
expenses, providing a perspective not immediately apparent from net
income. The adjustments Ashland makes to derive the non-GAAP
measure of adjusted EBITDA exclude items which may cause short-term
fluctuations in net income and which Ashland does not consider to
be the fundamental attributes or primary drivers of its business.
Adjusted EBITDA provides disclosure on the same basis as that used
by Ashland’s management to evaluate financial performance on a
consolidated and reportable segment basis and provide consistency
in our financial reporting, facilitate internal and external
comparisons of Ashland’s historical operating performance and its
business units, and provide continuity to investors for
comparability purposes.
Key items, which are set forth on Table 2
accompanying this release, are defined as financial effects from
significant transactions that, either by their nature or amount,
have caused short-term fluctuations in net income and/or operating
income, which Ashland does not consider to most accurately reflect
Ashland’s underlying business performance and trends.
Further, Ashland believes that providing supplemental information
that excludes the financial effects of these items in the financial
results will enhance the investor’s ability to compare financial
performance between reporting periods.
The free cash flow metrics enable Ashland to
provide a better indication of the ongoing cash being generated
that is ultimately available for both debt and equity holders as
well as other investment opportunities. Unlike cash flow provided
by operating activities, free cash flow and ongoing free cash flow
include the impact of capital expenditures from continuing
operations and other significant items impacting free cash flow,
providing a more complete picture of current and future cash
generation. Free cash flow, ongoing free cash flow and ongoing free
cash flow conversion are non-GAAP liquidity measures that Ashland
believes provide useful information to management and investors
about Ashland’s ability to convert Adjusted EBITDA to ongoing free
cash flow. These liquidity measures are used regularly by
Ashland’s stakeholders and industry peers to measure the efficiency
at producing cash from regular business activities.
Free cash flow, ongoing free cash flow and ongoing free cash
flow conversion have certain limitations, including that they do
not reflect adjustments for certain non-discretionary cash flows
such as mandatory debt repayments. The amount of mandatory versus
discretionary expenditures can vary significantly between
periods.
About Ashland
Ashland Inc. (NYSE: ASH) is a global additives and specialty
ingredients company with a conscious and proactive mindset for
environment, social and governance (ESG). The company serves
customers in a wide range of consumer and industrial markets,
including architectural coatings, construction, energy, food and
beverage, nutraceuticals, personal care and pharmaceutical.
Approximately 3,800 passionate, tenacious solvers thrive on
developing practical, innovative and elegant solutions to complex
problems for customers in more than 100 countries.
Visit ashland.com and ashland.com/ESG to learn
more.
Forward-Looking Statements This
news release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended.
Ashland has identified some of these forward-looking statements
with words such as “anticipates,” “believes,” “expects,”
“estimates,” “is likely,” “predicts,” “projects,” “forecasts,”
“objectives,” “may,” “will,” “should,” “plans” and “intends” and
the negative of these words or other comparable terminology.
Ashland may from time to time make forward-looking statements in
its annual reports, quarterly reports and other filings with the
SEC, news releases and other written and oral communications. These
forward-looking statements are based on Ashland’s expectations and
assumptions, as of the date such statements are made, regarding
Ashland’s future operating performance, financial, operating cash
flow and liquidity, as well as the economy and other future events
or circumstances. These statements include but may not be limited
to Ashland’s expectations regarding its ability to drive sales and
earnings growth and manage costs.
Ashland’s expectations and assumptions include,
without limitation, internal forecasts and analyses of current and
future market conditions and trends, management plans and
strategies, operating efficiencies and economic conditions (such as
prices, supply and demand, cost of raw materials, and the ability
to recover raw-material cost increases through price increases),
and risks and uncertainties associated with the following: the
impact of acquisitions and/or divestitures Ashland has made or may
make (including the possibility that Ashland may not realize the
anticipated benefits from such transactions); Ashland’s substantial
indebtedness (including the possibility that such indebtedness and
related restrictive covenants may adversely affect Ashland’s future
cash flows, results of operations, financial condition and its
ability to repay debt); severe weather, natural disasters, public
health crises, cyber events and legal proceedings and claims
(including product recalls, environmental and asbestos matters);
the effects of the ongoing Ukraine and Russia conflict, on the
geographies in which we operate, the end markets we serve and on
our supply chain and customers, and without limitation, risks and
uncertainties affecting Ashland that are described in Ashland’s
most recent Form 10-K (including Item 1A Risk Factors) filed with
the SEC, which is available on Ashland’s website at
http://investor.ashland.com or on the SEC’s website at
http://www.sec.gov. Various risks and uncertainties may cause
actual results to differ materially from those stated, projected or
implied by any forward-looking statements. Ashland believes its
expectations and assumptions are reasonable, but there can be no
assurance that the expectations reflected herein will be achieved.
Unless legally required, Ashland undertakes no obligation to update
any forward-looking statements made in this news release whether as
a result of new information, future events or otherwise.
1 Financial results are preliminary until
Ashland’s Form 10-K is filed with the SEC.
™ Trademark, Ashland or its subsidiaries,
registered in various countries.
FOR FURTHER INFORMATION:
Investor Relations: |
Media Relations: |
Seth A. Mrozek |
Carolmarie C. Brown |
+1 (302) 594-5010 |
+1 (302) 995-3158 |
samrozek@ashland.com |
ccbrown@ashland.com |
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