- Earnings from continuing
operations attributable to Ashland were $1.42 per diluted share,
compared to earnings of $1.38 per diluted share in the year-ago
period
- Adjusted earnings from
continuing operations attributable to Ashland totaled $1.71 per
diluted share, compared to $1.83 in the year-ago period
- Ashland Specialty Ingredients
reported continued year-over-year growth in sales and volume;
Ashland Performance Materials posted year-over-year sales and
volume growth in Composites
- Acquisition of Pharmachem
expected to be completed by end of June; expected to be accretive
to earnings per share in first year following close of transaction
COVINGTON, KY, April 25, 2017 -
Ashland Global Holdings Inc. (NYSE: ASH), a premier global
specialty chemicals company serving customers in a wide range of
consumer and industrial markets, and also the majority owner of
Valvoline Inc. (NYSE: VVV), today announced preliminary(1) financial
results for the second quarter of fiscal 2017.
Quarterly
Highlights
(in millions except per-share amounts) |
|
Quarter Ended Mar. 31, |
|
|
|
2017 |
|
|
2016 |
Operating income |
|
$ |
170 |
|
$ |
147 |
Key items* |
|
|
26 |
|
|
46 |
Adjusted operating income* |
|
$ |
196 |
|
$ |
193 |
Income from continuing operations |
|
$ |
102 |
|
$ |
87 |
Key items* |
|
|
19 |
|
|
28 |
Adjusted income from continuing operations |
|
$ |
121 |
|
$ |
115 |
Net income |
|
$ |
105 |
|
$ |
87 |
Adjusted EBITDA* |
|
$ |
247 |
|
$ |
274 |
Diluted earnings per share (EPS) |
|
|
|
|
|
|
From net income attributable to Ashland |
|
$ |
1.47 |
|
$ |
1.38 |
|
|
|
|
|
|
|
From continuing operations attributable to Ashland* |
|
$ |
1.42 |
|
$ |
1.38 |
Key items* |
|
|
0.29 |
|
|
0.45 |
Adjusted EPS from continuing operations* |
|
$ |
1.71 |
|
$ |
1.83 |
|
|
|
|
|
|
|
Cash flows provided by operating activities from
continuing operations |
|
$ |
50 |
|
$ |
184 |
Free cash flow* |
|
$ |
(11) |
|
$ |
134 |
|
|
|
|
|
|
|
*See Tables 5, 6 and 7 for Ashland definitions and U.S.
GAAP reconciliations. Certain figures exclude Ashland's
non-controlling interest in Valvoline Inc. |
|
|
|
"Ashland's overall financial
performance in the second quarter reflected progress in a number of
key areas as we continue working toward our 2017 plan," said
William A. Wulfsohn, Ashland chairman and chief executive officer.
"Within Ashland Specialty Ingredients, the team delivered volume
growth of 4 percent and sales growth of 3 percent, with good gains
in consumer end markets. In addition, the team maintained good cost
discipline and initiated several price increases which partially
offset the negative impact from higher-than-expected raw material
costs and foreign currency during the quarter. Within Ashland
Performance Materials, Composites volume grew 5 percent, while
Intermediates and Solvents (I&S) volume rose 21 percent amid
continued price recovery in butanediol. Meanwhile, the Valvoline
team reported good gains in lubricant gallons and sales."
He continued: "We also see a
number of exciting growth opportunities with our recently announced
agreement to acquire Pharmachem Laboratories, a leading provider of
quality ingredients to the global health and wellness industries
and high-value differentiated products to fragrance and flavor
houses. This acquisition will strengthen our specialty product
portfolio, particularly in higher-margin end markets. It also
enhances our position in fast-growing nutraceutical end markets,
opens a new opportunity within fragrances and flavors, and
strengthens Ashland's food ingredient division by adding customized
functional solutions. In combining Pharmachem and Ashland, we can
leverage our extensive sales channels, technical service network
and global applications labs to accelerate Pharmachem's growth
while also generating significant cash flow. We expect to complete
this transaction by the end of June and look forward to welcoming
Pharmachem's talented employees to the Ashland team."
Second Quarter
Fiscal 2017 Results
For the quarter ended March 31,
2017, the company reported earnings from continuing operations of
$102 million, which includes $13 million of earnings attributable
to Ashland's non-controlling interest in Valvoline Inc., on sales
of more than $1.3 billion. These results included one key item -
costs related to the Valvoline separation - that reduced income
from continuing operations attributable to Ashland by approximately
$19 million, net of tax, or $0.29 per diluted share. For the
year-ago quarter, the company reported earnings from continuing
operations of $87 million, or $1.38 per diluted share, on sales of
more than $1.2 billion. There were three key items in the year-ago
quarter that, on a combined basis, reduced income from continuing
operations attributable to Ashland by $28 million after tax, or
$0.45 per diluted share. (Please refer to Table 5 of the
accompanying financial statements for details of key items.) For
the remainder of this news release, financial results have been
adjusted to exclude the effect of key items in both the current and
prior-year quarters.
On an adjusted basis, Ashland's
income from continuing operations attributable to Ashland in the
second quarter of fiscal 2017 was $1.71 per diluted share, versus
$1.83 per diluted share for the year-ago quarter.
Consolidation of
Valvoline Inc. Results
Ashland completed the initial
public offering of Valvoline Inc. on September 28, 2016, and
Valvoline's results are consolidated into Ashland's results for the
second quarter of fiscal 2017. Valvoline's net income attributable
to Ashland's non-controlling interest of $13 million, or $0.21 per
year-ago diluted share, and adjusted EBITDA of $24 million are
excluded from net income attributable to Ashland and from adjusted
EBITDA for the quarter, respectively.
In a separate announcement,
Ashland today said that its board of directors has approved the
distribution of all its remaining interest in Valvoline to Ashland
stockholders and has determined the approximate distribution ratio,
record date and distribution date for the final separation. Please
refer to Ashland's news release dated April 25, 2017, for more
information on the final separation and share distribution.
Beginning with the June quarter,
nearly all of Valvoline's results for all historical periods,
including the June quarter, will be reclassified into Ashland
discontinued operations.
Reportable
Segment Performance
To aid in the understanding of
Ashland's ongoing business performance, the results of Ashland's
reportable segments, other than Valvoline, are described below on
an adjusted basis and EBITDA, or adjusted EBITDA, is reconciled to
operating income in Table 7 of this news release. (For a more
detailed review of the segment results, please refer to the
Investor Relations section of ashland.com to review the slides and
prepared remarks filed with the Securities and Exchange Commission
in conjunction with this earnings release.) In addition, although
Ashland provides forward-looking guidance for adjusted EBITDA,
Ashland is not reaffirming or providing forward-looking guidance
for U.S. GAAP-reported financial measures or a reconciliation of
forward-looking non-GAAP financial measures to the most directly
comparable U.S. GAAP measure because it is unable to predict with
reasonable certainty the ultimate outcome of certain significant
items without unreasonable effort.
Ashland Specialty Ingredients
(ASI) reported sales growth of 3 percent, to $544 million, and
volume growth of 4 percent, driven by increased demand for
Ashland's value-added products sold into the Consumer Specialties
and Industrial Specialties end markets. This volume growth was
offset by higher raw material costs and the strengthening dollar,
the combined impact from which exceeded Ashland's original estimate
for the second quarter. As a result, adjusted EBITDA of $127
million was flat with the prior-year period. Consumer Specialties
sales and volumes each grew by 2 percent compared to the prior-year
period. Within Consumer Specialties, the Personal Care team
generated volume growth across all end markets. In pharma, sales of
our leading excipients remained strong. Target mix optimization
actions reduced overall pharma volumes, but margins improved.
Meanwhile, Industrial Specialties drove solid gains across all end
markets, delivering total year-over-year sales and volume growth of
3 percent and 5 percent, respectively.
Amid the larger-than-expected
negative impact of raw material costs and currency that emerged in
the second quarter, the ASI team is continuing to take action to
offset these costs through cost discipline and commercial
excellence initiatives such as value-based pricing. For the third
quarter, ASI sales are expected to be in the range of $535-$565
million. Adjusted EBITDA in the third quarter is expected to be in
the range of $123-$133 million, versus $128 million in the year-ago
quarter. Ashland anticipates closing the Pharmachem acquisition in
the June quarter. With the addition of Pharmachem's related income,
we now expect ASI's adjusted EBITDA for fiscal 2017 to be in the
range of $485-$500 million, despite the impact from raw material
inflation and foreign currency. The outlook for ASI's adjusted
EBITDA excludes any Pharmachem-related earnings in the third
quarter, but includes an estimated $10-$15 million from Pharmachem
in the fourth quarter.
Ashland Performance Materials
(APM) reported sales of $262 million for the second quarter, a 10
percent increase from prior year. Adjusted EBITDA was $23 million,
consistent with the outlook provided at the beginning of the
quarter as solid volume growth in Composites and I&S partially
offset the impact of higher raw-material costs. The Composites team
generated volume growth of 5 percent during the quarter, driven by
solid demand from customers in North America and China. Prices for
key raw materials - namely styrene - continued to rise early in the
quarter, and were exacerbated by a force majeure at a large styrene
supplier in North America. This unexpected event led to
higher-than-anticipated margin compression for the quarter. The
commercial team was able to recover some of these costs via
pass-through pricing and, as a result, Composites sales increased
by 10 percent versus prior year. The I&S team grew volume by 21
percent and sales by 8 percent, as improved demand was offset by
substantially lower selling prices. I&S earnings were well
below the prior year as butanediol (BDO) pricing, though
recovering, remains below a year ago. However, APM continues to see
the impact of recent BDO price increases announced by Ashland and
other global producers.
For the third quarter of fiscal
2017, APM expects sales to be in the range of $260-$280 million.
Adjusted EBITDA is expected to be in the range of $27-$33 million,
versus $30 million in the year-ago period, and reflects the impact
of price increases offsetting raw material inflation. For fiscal
2017, APM is raising its outlook for adjusted EBITDA to a range of
$100-$110 million, reflecting positive price and volume in both
Composites and I&S.
Earlier this month, Ashland
announced it has made a binding offer to acquire a composites resin
manufacturing facility in Etain, France, from Reichhold Holdings
International B.V. The facility manufactures unsaturated polyester
resins (UPR) used in a variety of end markets, including
transportation and construction. The transaction, which is expected
to be completed by the end of June, is a unique opportunity to
strengthen Ashland's cost competitiveness and position in the
European composites market at a highly attractive price, and with
very compelling terms and conditions.
Valvoline continued to perform
well in the second quarter, with good growth in lubricant gallons
and sales. For more information on Valvoline's results, please see
Valvoline's second-quarter earnings release dated April 25,
2017.
Ashland's effective tax rate for
the March 2017 quarter, after adjusting for key items, was 24
percent. This is below the company's previous estimate of 28-29
percent due to discrete items and income mix. For the third quarter
of fiscal 2017, Ashland expects an adjusted annual effective tax
rate of 10-15 percent, reflecting Ashland's global footprint and
the separation of Valvoline.
Looking
Ahead
"Today's separate announcement
that Ashland will be distributing all of its remaining interest in
Valvoline to Ashland shareholders on May 12 represents the final
step in our journey to create two great companies. With that final
separation soon to be completed, we are focused on Ashland's two
core priorities for the year - positioning Ashland to deliver
against our fiscal 2017 plan and pivoting to become the premier
specialty chemicals company," Wulfsohn said.
"Thus far this fiscal year, we
have made great progress in multiple areas. Within ASI, we are
driving sales and volume growth in the majority of our key end
markets, including Personal Care, and we must build on that
momentum in the second half of the year. Within APM, both the
Composites and I&S teams have raised prices to help offset the
expected impact of raw material inflation in the second half of
fiscal 2017. Notably, we also have taken aggressive actions across
the global organization to hold year-over-year SG&A constant
through various cost-saving initiatives."
He continued: "During the second
quarter, ASI saw increasing raw material costs and the effects of a
stronger dollar. For the second half of fiscal 2017, we expect the
combined impact from these factors to be approximately $14 million
versus the outlook we shared in late January. To partially offset
this incremental expense, the team is working to implement price
increases and further reduce costs.
"Ashland's second core priority is
to 'pivot' to becoming the leading premier specialty chemicals
company, one that capitalizes on its highly differentiated
portfolio of specialty ingredients, delivers top-quartile EBITDA
margins and growth, and consistently drives strong cash
conversion. Clearly, the Pharmachem acquisition is consistent
with this strategy. We are looking forward to sharing additional
details on our financial targets and supporting action levers for
all of Ashland during our investor day next week," he said.
Ashland will host its Investor Day
at the JW Marriott Essex House at 160 Central Park South in New
York City on Monday, May 1, 2017. The presentations will begin at
8:30 am EDT and the conference will conclude by noon.
Conference Call
Webcast
Ashland will host a live webcast
of its second-quarter conference call with securities analysts at 9
a.m. EDT Wednesday, April 26, 2017. The webcast will be accessible
through Ashland's website at http://investor.ashland.com. Following
the live event, an archived version of the webcast and supporting
materials will be available for 12 months.
Use of Non-GAAP
Measures
Ashland 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, EBITDA
and Adjusted EBITDA provide 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 and operating
income. The adjustments Ashland makes to derive the non-GAAP
measures of EBITDA and Adjusted EBITDA exclude items which may
cause short-term fluctuations in net income and operating income
and which Ashland does not consider to be the fundamental
attributes or primary drivers of its business. EBITDA and Adjusted
EBITDA provide 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.
The free cash flow metric enables
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 includes the
impact of capital expenditures from continuing operations,
providing a more complete picture of cash generation. Free cash
flow has certain limitations, including that it does not reflect
adjustment for certain non-discretionary cash flows such as
mandatory debt repayments. The amount of mandatory versus
discretionary expenditures can vary significantly between
periods.
The non-GAAP information provided
may not be consistent with the methodologies used by other
companies. All non-GAAP amounts have been reconciled with reported
GAAP results in Tables 5, 6 and 7 of the financial statements
provided with this news release.
About Ashland
Ashland Global Holdings Inc. (NYSE: ASH) is a premier global
specialty chemicals company serving customers in a wide range of
consumer and industrial markets, including adhesives, architectural
coatings, automotive, construction, energy, food and beverage,
personal care and pharmaceutical. At Ashland, we are 6,000
passionate, tenacious solvers - from renowned scientists and
research chemists to talented engineers and plant operators - who
thrive on developing practical, innovative and elegant solutions to
complex problems for customers in more than 100 countries. Ashland
also maintains a controlling interest in Valvoline Inc. (NYSE:
VVV), a premium consumer-branded lubricant supplier.
Visit ashland.com to learn more.
C-ASH
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. These forward-looking statements
include statements relating to our expectation that the proposed
acquisition of Pharmachem Laboratories, Inc. (Pharmachem) will be
completed before the end of the June quarter and the expected
completion of the final separation of Valvoline Inc. ("Valvoline")
through the distribution of Valvoline common stock. In addition,
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 and financial condition, the
expected completion of the final separation of Valvoline Inc., the
strategic and competitive advantages of each company, and future
opportunities for each company, as well as the economy and other
future events or circumstances. 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: 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);
the impact of acquisitions and/or divestitures Ashland has made or
may make, including the proposed acquisition of Pharmachem
(including the possibility that Ashland may not complete the
proposed acquisition of Pharmachem or Ashland may not realize the
anticipated benefits from such transactions); and severe weather,
natural disasters, and legal proceedings and claims (including
environmental and asbestos matters). Various risks and
uncertainties may cause actual results to differ materially from
those stated, projected or implied by any forward-looking
statements, including, 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. 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.
Information on Ashland's website is not incorporated into or a part
of this news release.
(1)
Preliminary Results
Financial results are preliminary
until Ashland's Form 10-Q is filed with the SEC.
(TM) Trademark, Ashland or its
subsidiaries, registered in various countries.
FOR FURTHER
INFORMATION:
Investor Relations:
Seth A.
Mrozek
+1 (859) 815-3527
samrozek@ashland.com
Media Relations:
Gary Rhodes
+1 (859) 815-3047
glrhodes@ashland.com
Q2 2017 Earnings Presentation for
Release Slides 04 25 17 - FINAL
Q2 2017 Earnings Prepared Remarks 04 25 17 - FINAL
Q2 2017 Earnings Release & Financial Tables Combined -
FINAL
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Ashland Inc. via Globenewswire
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