-
Broad-based growth in
Specialty Ingredients sales, margins and adjusted earnings drove
strong results in the quarter
-
Company expects to
capture initial $20 million in annualized run-rate savings by end
of September quarter as part of previously announced plan to
accelerate EBITDA margin expansion
COVINGTON, KENTUCKY, July 31, 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 third quarter of fiscal 2018:
-
Sales grew 12 percent year-over-year to
$971 million;
-
Reported net income was $36 million,
compared to a loss of $30 million last year, while income from
continuing operations was $36 million, or $0.56 per diluted
share;
-
On an adjusted basis, income from
continuing operations was $72 million, or $1.13 per diluted share,
compared to Ashland's previous guidance of $0.95-$1.05 per share,
driven by stronger operating results and a lower effective tax
rate;
-
Adjusted EBITDA was $189 million, up 17
percent from the year-ago period.
"The Ashland team continued
building momentum in the third quarter on our path to becoming a
premier specialty chemicals company, with all three operating
segments delivering strong sales and earnings growth," said William
A. Wulfsohn, Ashland chairman and chief executive officer. "Our
Specialty Ingredients team executed at a high level. The commercial
team produced another quarter of strong organic sales growth
through our more differentiated product mix, while the
manufacturing team executed on our asset utilization strategy to
generate improved gross margins. The teams also demonstrated good
cost discipline, with adjusted selling, general and administrative
(SG&A) expenses as a percentage of sales declining 70 basis
points compared to prior year. Specialty Ingredients' operating
income grew 57 percent in the quarter. Adjusted EBITDA climbed 18
percent, with Pharmachem contributing over $16 million. Adjusted
EBITDA margin rose 210 basis points, to 24.3 percent, marking good
progress toward our margin target. Meanwhile, the Composites team
continued to deliver strong sales and earnings growth from
volume/mix improvements and price over raw materials. Within
Intermediates and Solvents, the team delivered a 19 percent
increase in sales through strong pricing and favorable
currency."
Update on EBITDA
Margin Acceleration Plan
In early May, Ashland announced a
program to accelerate EBITDA margin growth by creating a leaner,
more cost competitive company with improved operating efficiency,
faster decision making and a stronger customer focus. Under this
program, Ashland intends to eliminate a total of $120 million of
existing allocated costs, direct expenses within Specialty
Ingredients SG&A, and facility-related costs as follows:
-
Approximately $70 million of 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. This reduction is intended to
eliminate stranded costs.
-
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.
Ashland continues to expect to
achieve the full $120 million in run-rate savings by the end of
calendar year 2019. An initial $20 million in annualized run-rate
savings under this program is expected by the end of the September
2018 quarter. An additional $30 million in run-rate savings is
expected in the December 2018 quarter, bringing the total
annualized run-rate to $50 million by the end of calendar 2018.
"We are pleased with the progress
our teams are making under this program. We have already begun
executing on the initial phase of actions, and we expect the full
redesign plan to be completed in early November and ready for full
implementation," 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 8 percent, to
$638 million, driven by strong volumes, improved product mix and
pricing.
- Pharma grew 12 percent; Personal
Care, Adhesive and Coatings all climbed 5 percent; and
Construction/Energy gained 13 percent. Nutrition sales were flat
year-over-year following an exceptionally strong second quarter.
Favorable currency contributed 2 percentage points to the top-line
growth.
- Gross profit as a percentage of
sales expanded by 190 basis points, to 34.9 percent, as the ongoing
asset utilization program drove better absorption, higher
production and lower operating costs.
- SG&A, as a percentage of
sales, declined by 70 basis points compared to the prior year,
reflecting ongoing cost discipline.
- Adjusted EBITDA rose 18 percent,
to $155 million, and adjusted EBITDA margin grew 210 basis points,
to 24.3 percent.
Composites
- Sales climbed 20 percent, to $250
million, as the team generated strong organic growth from continued
pricing discipline as well as business growth in nearly all
regions.
- Adjusted EBITDA grew 4 percent,
to $28 million.
Intermediates
& Solvents
- Sales increased 19 percent, to
$83 million, driven by continued strong pricing.
- Adjusted EBITDA in the quarter
was $17 million, compared to $10 million a year ago.
Balance Sheet and
Cash Flow
-
Total debt was $2.5 billion.
-
Net debt was $2.4 billion.
-
During the quarter, cash provided by
operating activities from continuing operations totaled $130
million compared to $133 million in the prior-year period.
-
Free cash flow was $88 million compared
to $80 million in the prior-year quarter. These figures include $8
million in restructuring payments in the third quarter of fiscal
2018, and $21 million in the year-ago period.
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 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.
For the fourth quarter of fiscal 2018, Ashland
expects adjusted earnings in the range of $0.90-$1.00 per diluted
share, compared to $0.78 in the prior-year period. This estimate
assumes an effective tax rate of 19 percent for the fourth
quarter.
For the full 2018 fiscal year
Ashland now expects adjusted earnings per share in the range of
$3.50 to $3.60, which would represent growth of 43 - 48 percent
compared to the previous year. The company expects free cash flow
of $170 million in fiscal 2018. This figure includes approximately
$50 million of separation and restructuring-related payments.
Please see the table below for additional details related to the
company's fiscal 2018 financial outlook.
|
Prior FY2018 Outlook |
Updated |
Adjusted EBITDA |
|
|
|
$565 - $585 million |
$570 - $580 million |
|
$90 - $100 million |
$95 - $100 million |
|
$50 - $60 million |
$55 - $60 million |
|
($35 - $45 million) |
No change |
|
|
|
Key Operating Metrics |
|
|
|
>$170 million* |
No change* |
|
$3.30 - $3.50 |
$3.50 - $3.60 |
|
|
|
Corporate Items |
|
|
|
~$300 million |
No change |
|
$123 - $128 million |
$123 - $125 million |
|
13 - 17% |
No change |
|
$195 - $205 million |
$195 - $200 million |
|
~64 million |
No change |
*This figure
includes approximately $50 million of
separation and restructuring-related payments.
For additional information on
Ashland's third-quarter financial results, please see the slide
presentation accompanying this news release.
Conference Call
Webcast
Ashland will host a live webcast
of its third-quarter conference call with securities analysts at 9
a.m. EDT Wednesday, August 1, 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 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 Q3 2018 Earnings
Presentation for Release Slides - FINAL
Ashland Q3 2018 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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