Ashland Global Holdings Inc. (NYSE: ASH) today announced financial
results1 for the fourth quarter of fiscal year 2021, which ended
September 30, 2021, together with its fiscal year 2021 results
summary and fiscal year 2022 outlook. The global additives and
specialty ingredients company serves customers in a wide range of
consumer and industrial markets.
Sales were $591 million, up twelve percent
compared to the prior-year period. Strong demand continued across
the company’s core, global end markets. Enhanced pricing and the
addition of the Schülke & Mayr acquisition also contributed to
the growth. These factors were partially offset by the exit of
low-margin product lines and reduced sales of hand-sanitizer
additives within Personal Care and Household. Global supply-chain
and logistics disruptions also limited the company’s ability to
meet all customer demand. Foreign currency favorably impacted sales
by one percent.
Net income was $43 million compared to $5
million in the prior-year quarter. Income from continuing
operations was $33 million compared to a loss of $14 million in the
prior-year quarter, or $0.55 per diluted share compared to a loss
of $0.22 in the prior-year quarter. Adjusted income from continuing
operations excluding intangibles amortization expense was $73
million compared to $63 million in the prior-year quarter, or $1.22
per diluted share, up from $1.03 in the prior-year quarter.
Adjusted EBITDA was $149 million, up from $131 million in the
prior-year quarter.
Cash flows provided by operating activities
totaled $151 million compared to $132 million in the prior-year
quarter. Free cash flows totaled $120 million which includes a $16
million inflow associated with the U.S. Accounts Receivable Sales
Program and $9 million of cash restructuring payments. Free cash
flows in the prior-year quarter totaled $89 million which included
$7 million in cash restructuring payments.
“As we indicated with our earnings update on
November 1, overall demand during the quarter was strong and the
team executed at a high level in the face of continued global
supply-chain challenges,” said Guillermo Novo, chairman and chief
executive officer, Ashland. “Because of these efforts, we were able
to achieve sales and earnings results that were consistent with the
outlook we had communicated earlier in the fiscal year.”
“I am pleased with the progress our team has
made executing our strategy, especially in the context of a
difficult operating environment,” continued Novo. “We experienced
cost inflation for energy, freight and raw materials, while
supply-chain logistics challenges remained with only slight
improvements in on-time delivery achieved during the quarter. While
demand is improving, the persistence of the global pandemic is
still impacting consumer behavior. We are focused on capitalizing
on the improving demand environment and satisfying incremental
demand from our customers while also pursuing appropriate pricing
actions to account for the considerable cost inflation we are
experiencing. We expect these dynamics to continue into calendar
year 2022,” added Novo.
“We made excellent progress during the quarter
reshaping our portfolio, strengthening our balance sheet and
returning capital to shareholders. The announced signing of a
definitive agreement to sell the Performance Adhesives business for
$1.65 billion, the establishment of the annual renewable
environmental trust, the new $450 million bond issuance and the
$450 million accelerated share repurchase program are all key
milestones as we continue to execute our strategy. I look forward
to sharing more insight into our reshaped portfolio and our plans
for the future during our live, virtual investor day on November
12,” said Novo.
Reportable Segment
PerformanceTo 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 and adjusted EBITDA are reconciled to operating income in
Table 4. Free cash flow and adjusted operating income are
reconciled in Table 6 and adjusted income from continuing
operations, adjusted diluted earnings per share and adjusted
diluted earnings per share excluding intangible amortization
expense are reconciled in Table 7 of this news 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 below.
Discontinued operations
accountingAs a result of the previously announced
agreement to sell the Performance Adhesives business and plans to
report the results of that business as discontinued operations
beginning with the fourth quarter results, Ashland has restated its
income statement results for fiscal years 2019 and 2020 with the
Performance Adhesives business reflected as discontinued
operations. The restated income statement was filed with the SEC
via a Form 8-K on November 1, 2021. Ashland currently expects the
sale of the business to close in the March quarter of 2022.
Life SciencesSales were $189
million, up five percent from the prior-year quarter. Sales growth
was driven by strong demand within pharma and nutrition end
markets, in addition to enhanced pricing. Foreign currency
favorably impacted sales by one percent.
Adjusted operating income was $31 million,
compared to $36 million in the prior-year quarter. Adjusted EBITDA
was $48 million, down six percent from the prior-year quarter,
primarily reflecting unfavorable product mix and raw-material
inflation, particularly from higher BDO transfer pricing.
Personal Care and
HouseholdSales were $183 million, up twelve percent from
the prior-year quarter. Demand and sales growth remained healthy
across core personal care end markets. Results for Avoca also
improved. The Schülke & Mayr acquisition contributed positively
to sales growth in the quarter. This core growth was partially
offset by the continued exit from low-margin product lines and
reduced sales of hand sanitizer ingredients compared to the
prior-year period. Foreign currency had a negligible impact on
sales.
Adjusted operating income was $29 million,
compared to $26 million in the prior-year quarter. Adjusted EBITDA
was $51 million, up eleven percent from the prior-year quarter, as
sales growth was partially offset by raw-material inflation,
particularly from higher BDO transfer pricing.
Specialty AdditivesSales were
$181 million, up 13 percent from the prior-year quarter, reflecting
strong demand for architectural coatings additives and growth
within Performance Specialties. Pricing was also favorable across
the segment. Foreign currency favorably impacted sales by one
percent.
Adjusted operating income was $25 million,
compared to $23 million in the prior-year quarter. Adjusted EBITDA
was $47 million, up seven percent from the prior-year quarter, as
strong sales growth was partially offset by general operating cost
inflation.
Intermediates &
SolventsSales were $60 million, up 114 percent from the
prior-year quarter, driven by higher pricing and volumes for both
merchant and captive sales. Captive sales were much higher than the
prior-year period reflecting improved demand and the
inventory-control measures that occurred last year.
Adjusted operating income was $18 million, up
from $3 million in the prior-year quarter. Adjusted EBITDA was $21
million, up from $6 million in the prior-year quarter, reflecting
the higher pricing and volumes and partially offset by higher
raw-material cost.
Unallocated &
OtherUnallocated and Other expense was $27 million,
compared to $47 million in the prior-year quarter which included
$22 million of restructuring costs. Adjusted Unallocated and Other
expense was $18 million, compared to $16 million in the prior-year
quarter.
Fiscal Year 2021 Results
SummarySales were $2.1 billion, up five percent compared
to the prior fiscal year. Demand trends improved throughout the
year following the onset of the global pandemic in fiscal year
2020. Sales growth was driven primarily by improved demand,
enhanced pricing and the contribution of the Schülke & Mayr
acquisition. Foreign currency favorably impacted sales by two
percent.
Net income was $220 million compared to a loss
of $508 million in the prior year which included a goodwill
impairment charge of $530 million. Income from continuing
operations was $173 million compared to a loss of $555 million in
the prior year, or $2.82 per diluted share compared to a loss of
$9.16 in the prior year. Adjusted income from continuing operations
excluding intangibles amortization expense was $230 million
compared to $179 million in the prior year, or $3.75 per diluted
share, up from $2.93 in the prior year. Adjusted EBITDA was $495
million, up from $449 million in the prior year.
Cash flows provided by operating activities
totaled $466 million compared to $227 million in the prior year.
Free cash flows totaled $361 million which includes a $92 million
inflow associated with the U.S. Accounts Receivable Program and $44
million of cash restructuring payments. Free cash flows in the
prior year totaled $94 million which included $30 million in cash
restructuring payments.
Financial OutlookFor fiscal
year 2022, the company expects sales in the range of $2.25 billion
to $2.35 billion and adjusted EBITDA in the range of $550 million
to $570 million.
“We anticipate improving demand across our
businesses and no changes to our underlying operating performance
for fiscal year 2022,” continued Novo. “While we are seeing
meaningful cost inflation for raw materials, freight and energy in
addition to persistent supply-chain challenges, our teams are
working diligently to implement appropriate pricing actions to
offset these dynamics. This is an important year for us to continue
executing our strategy and demonstrate consistent organic growth,
improving margins and enhanced free cash flow generation. I look
forward to sharing more insight into our outlook for fiscal year
2022 on the conference call webcast with securities analysts
tomorrow morning,” concluded Novo.
Conference Call WebcastAshland
will host a live webcast of its fourth-quarter conference call with
securities analysts at 9:00 a.m. ET on Wednesday, November 10,
2021. The webcast will be accessible through Ashland’s website at
http://investor.ashland.com and will include a slide presentation.
Following the live event, an archived version of the webcast and
supporting materials will be available for 12 months on
http://investor.ashland.com.
Investor Day reminderAshland
will hold a live, virtual investor day on Friday, November 12,
2021 beginning at 9 a.m. ET.
The presentations will outline expectations for
Ashland's future performance followed by a live question and answer
session and a virtual innovation tradeshow. The virtual tradeshow
will allow participants to experience an array of new technologies,
innovations and applications that Ashland solvers around the world
are contributing to meet customers’ needs. During the live event,
additional Ashland leaders will be available to participate in
virtual question and answer chat sessions. By the start of the live
event, Ashland will post the presentation and supporting materials
and make them available for 12 months on
http://investor.ashland.com.
To participate in Ashland’s virtual investor
day, please register here.
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, EBITDA, adjusted EBITDA, EBITDA margin
and adjusted EBITDA margin 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,
operating income, net income margin and operating income margin.
The adjustments Ashland makes to derive the non-GAAP measures of
EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin
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,
adjusted EBITDA, EBITDA margin and adjusted EBITDA margin 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. EBITDA margin
and adjusted EBITDA margin are defined as EBITDA and adjusted
EBITDA divided by sales for the corresponding period.
Key items, which are set forth on Table 7 of
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.
Tax-specific key items, which are set forth on
Table 7 of this release, 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 earnings and diluted earnings per share metrics that
exclude the effect of the identified key items and tax specific key
items.
Adjusted diluted earnings per share, excluding
intangibles amortization expense metric enables Ashland to
demonstrate the impact of non-cash intangibles amortization expense
on earnings per share, in addition to key items previously
mentioned. Ashland’s management believes this presentation is
helpful to illustrate how previous acquisitions impact applicable
period results.
About Ashland
Ashland Global Holdings Inc. (NYSE: ASH) is a premier additives and
specialty ingredients company with a conscious and proactive
mindset for sustainability. The company serves customers in a wide
range of consumer and industrial markets, including architectural
coatings, automotive, construction, energy, food and beverage,
nutraceuticals, personal care and pharmaceutical. Approximately
4,100 passionate, tenacious solvers – from renowned scientists and
research chemists to talented engineers and plant operators –
thrive on developing practical, innovative and elegant solutions to
complex problems for customers in more than 100 countries.
Visit ashland.com and Ashland | Sustainability Overview
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
U.S. Securities and Exchange Commission (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 condition, and expected effects of
the COVID-19 pandemic on Ashland’s business, 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 realize further cost
reductions.
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 (including the current COVID-19 pandemic),
cyber events and legal proceedings and claims (including product
recalls, environmental and asbestos matters); the effects of the
COVID-19 pandemic 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. The extent and duration
of the COVID-19 pandemic on our business and operations is
uncertain. Factors that will influence the impact on our business
and operations include the duration and extent of the pandemic, the
extent of imposed or recommended containment and mitigation
measures, and the general economic consequences of the pandemic.
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.
1Financial results are preliminary until
Ashland’s Form 10-K is filed with the U.S. Securities and Exchange
Commission.
™ 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) 995-3158samrozek@ashland.com
ccbrown@ashland.com
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