-
Growth in Specialty
Ingredients sales and adjusted earnings drove strong results in the
quarter
-
Company raises 2018
earnings guidance based on strengthening outlook in all three
operating segments
-
Announces plan to
accelerate EBITDA margin expansion within Specialty
Ingredients
COVINGTON, KENTUCKY, May 1, 2018 -
Ashland Global Holdings Inc. (NYSE: ASH), a premier global
specialty chemicals company serving customers in a wide range of
consumer and industrial markets, today announced
preliminary(1) financial
results for the second quarter of fiscal 2018:
-
Sales grew 21 percent year-over-year to
$974 million.
-
Reported net earnings were $73 million,
while earnings from continuing operations were $66 million, or
$1.04 per diluted share;
-
On an adjusted basis, income from
continuing operations was $67 million, or $1.06 per diluted share,
compared to our previous guidance of $0.80-$0.90 per share, driven
by stronger operating results and a lower effective tax rate.
-
Adjusted EBITDA was $179 million, up 30
percent from the year-ago period.
"All three operating segments
generated robust growth in sales and adjusted EBITDA," said William
A. Wulfsohn, Ashland chairman and chief executive officer. "Our
Specialty Ingredients team succeeded in growing overall sales by 19
percent, including 5 percent organic growth from strong volumes,
improved product mix and continued pricing actions. All end markets
improved, with pharma leading the way with a 17 percent sales
increase, driven largely by increased capacity from our asset
utilization initiatives. In addition, Pharmachem results improved
sequentially, as expected, and made a strong contribution in the
quarter. Together, this broad-based growth contributed to a 20
percent increase in adjusted EBITDA, to $153 million, and a
40-basis-point increase in adjusted EBITDA margin, to 23.7 percent,
within the segment. Meanwhile, the Composites team continued to
deliver strong sales and earnings growth from volume/mix
improvements, pricing discipline and contributions from the plant
in France acquired last year. Within Intermediates and Solvents,
the team delivered an 18 percent increase in sales through strong
pricing and favorable currency."
He continued: "The Ashland team is
generating broad-based sales and earnings momentum as we enter the
second half of the fiscal year, with all three of our operating
segments on track to meet or exceed their original financial
targets for the year. As a result, we have increased our outlook
for the year and now expect adjusted earnings per share in the
range of $3.30 to $3.50 in fiscal 2018, which would represent
growth of 35-45 percent compared to the previous year. This
momentum is being driven by specific actions to sustain and grow
Ashland's premium mix, such as through new market strategies and
successful product introductions that reinforce our brand promise
of 'always solving' for our customers. We have also taken action to
enhance our competitiveness by focusing on improved asset
utilization, value selling and cost management. We have made
important progress in many of these areas, as evident in our
financial results in the first half of the year, but there is more
work to be done. We expect these initiatives to gain greater
traction beginning in the third quarter and continuing
thereafter."
Today Ashland also announced a
program to eliminate a total of $120 million of existing corporate
and Specialty Ingredients SG&A expenses, along with
facility-related costs. Under this program:
-
Approximately $70 million of corporate costs
allocated to the Composites business and to the butanediol
manufacturing facility in Marl, Germany, are expected to be offset
or eliminated through transfers and reductions.
-
Approximately $50 million of costs are expected
to be eliminated to drive improved profitability in Specialty
Ingredients and accelerate achievement of its adjusted EBITDA
margin target of 25-27 percent.
"As we work to position Ashland
with a more streamlined portfolio focused on specialty ingredients,
we are also taking the opportunity to create a leaner, more
competitive cost structure. Under this program, we will be taking
action to drive fundamental change across our global organization
and redefine how our teams work together. We believe these actions
will speed decision making, improve operating efficiency and drive
a more customer-centric organization while lowering costs. We
expect to achieve the full run-rate savings by end of calendar year
2019, leading to improved margins that should generate enhanced
value for shareholders," Wulfsohn said.
Reportable
Segment Performance and Outlook
To aid in the understanding of
Ashland's ongoing business performance, the results of Ashland's
reportable segments are described below on an adjusted basis. In
addition, EBITDA, or adjusted EBITDA, is reconciled to operating
income in Table 5 of this news release. In addition, free
cash flow is reconciled in Table 7 and adjusted earnings per share
is reconciled in Table 8 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 filed with
the Securities and Exchange Commission in conjunction with this
earnings release.) These adjusted results are considered non-GAAP
financial measures. For a full description of the non-GAAP
financial measures used, see the "use of Non-GAAP measures" section
that further describes these adjustments on page 4.
Specialty
Ingredients
- Sales increased 19 percent, to
$646 million, driven by strong volumes and improved product mix in
addition to the contribution from the Pharmachem acquisition.
Personal Care and Adhesives sales both rose 7 percent, Coatings
sales climbed 4 percent and Construction/Energy improved 8 percent.
Favorable currency contributed 4 percentage points to the top-line
growth.
- Selling, General and
Administrative (SG&A) costs increased 9 percent, driven by the
Pharmachem acquisition and foreign currency. SG&A was down,
however, after excluding these items.
- Adjusted EBITDA rose 20 percent,
to $153 million, driven by these strong results, and adjusted
EBITDA margin grew by 40 basis points to 23.7 percent.
Composites
- Sales climbed 28 percent, to $238
million, as the team generated strong organic growth from continued
pricing discipline through an ongoing focus on commercial
excellence and value selling, as well as business growth in North
America, South America and India.
- Adjusted EBITDA grew 39 percent,
to $25 million.
Intermediates
& Solvents
- Sales increased 18 percent, to
$90 million, driven by continued strong pricing and favorable
currency.
- Adjusted EBITDA in the quarter
was $12 million, compared to approximately $5 million a year
ago.
Balance Sheet and
Cash Flow
-
Total debt was $2.6 billion.
-
Net debt was $2.4 billion.
-
During the quarter, cash provided by
operating activities from continuing operations totaled $23 million
compared to $58 million in the prior-year period.
-
Free cash flow was ($13) million
compared to $17 million in the prior year. These figures include $6
million in restructuring payments in the second quarter of fiscal
2018, and $11 million in the year-ago period.
Outlook
Ashland today raised its adjusted
earnings guidance for fiscal 2018 to a range of $3.30 - $3.50 per
share based on strengthening outlooks for each of its operating
segments. The company also reiterated its outlook for more than
$220 million in free cash flow in fiscal 2018. Please see the table
below for additional details related to the company's fiscal 2018
financial outlook.
Although Ashland provides
forward-looking guidance for adjusted EBITDA, free cash flow and
adjusted diluted earnings per share, 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. Such
reconciliations have not been included because Ashland is unable,
without unreasonable efforts, to estimate and quantify the most
directly comparable U.S. GAAP components, largely because
predicting our future operating results is subject to many factors
not in Ashland's control and not readily predictable and that are
not part of Ashland's routine operating activities, including
various domestic and international economic, political,
legislative, regulatory and legal factors.
|
Prior FY2018 Outlook |
Updated |
Adjusted EBITDA |
|
|
|
$560 - $590 million |
$565 - $585 million |
|
$85 - $95 million |
$90 - $100 million |
|
$40 - $50 million |
$50 - $60 million |
|
($35 - $45 million) |
No change |
|
|
|
Key Operating Metrics |
|
|
|
>$220 million |
No change |
|
$2.90 - $3.10 |
$3.30 - $3.50 |
|
|
|
Corporate Items |
|
|
|
~$290 million |
~$300 million |
|
$125 - $135 million |
$123 - $128 million |
|
16 - 20% |
13 - 17% |
|
$195 - $205 million |
No change |
|
~64 million |
No change |
For the third quarter of fiscal
2018, Ashland expects adjusted earnings in the range of $0.95-$1.05
per diluted share, compared to $0.83 in the prior-year period. This
estimate assumes an effective tax rate of 17 percent for the third
quarter.
For additional information on
Ashland's second-quarter financial results, please see the slide
presentation accompanying this news release.
Conference Call
Webcast
Ashland will host a live webcast
of its second-quarter conference call with securities analysts at 9
a.m. EDT Wednesday, May 2, 2018. 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.
Key items 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.
Tax-specific key items are defined
as financial transactions, tax law changes or other matters that
fall within the definition of key items as described above.
These items relate solely to tax matters and would only be recorded
within the income tax caption of the Statement of Consolidated
Income. As with all key items, due to their nature, Ashland
does not consider the financial effects of these tax-specific key
items on net income to be the most accurate reflection of Ashland's
underlying business performance and trends.
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.
Adjusted diluted earnings per
share is a performance measure used by Ashland and is defined by
Ashland as earnings (loss) from continuing operations, adjusted for
identified key items and divided by the number of outstanding
diluted shares of common stock. Ashland believes this measure
provides investors additional insights into operational performance
by providing the diluted earnings per share metric that excludes
the effect of the identified key items and tax specific key
items.
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 approximately
6,500 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.
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. 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, 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: the program to eliminate certain existing
corporate and Specialty Ingredients expenses (including the
possibility that such cost eliminations may not occur or may take
longer to implement than anticipated), the expected divestiture of
its Composites segment and for the butanediol (BDO)
manufacturing facility in Marl, Germany, and related merchant
Intermediates and Solvents (I&S) products (including, in each
case, the possibility that a transaction may not occur or that, if
a transaction does occur, Ashland may not realize the anticipated
benefits from such transaction), the impact of acquisitions and/or
divestitures Ashland has made or may make, including the
acquisition of Pharmachem (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); Ashland's
ability to generate sufficient cash to finance its stock repurchase
plans; the potential that Ashland does not realize all of the
expected benefits of the separation of its Valvoline business; the
potential that the Tax Cuts and Jobs Act enacted on December 22,
2017, will have a negative impact on Ashland's financial results;
and severe weather, natural disasters, cyber events and legal
proceedings and claims (including product recalls, 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.
(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:
Media Relations:
Seth A.
Mrozek
Gary Rhodes
+1 (859)
815-3527
+1 (859) 815-3047
samrozek@ashland.com
glrhodes@ashland.com
Ashland Q2 2018 Financial Tables -
FINAL
Ashland Q2 2018 Earnings Presentation for Release Slides -
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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