Ashland Inc.'s (ASH) swung to a fiscal first-quarter loss amid
restructuring costs and auction-rate securities losses, as demand
for chemical products plummeted in recent months.
Although falling oil and natural-gas prices have eased some
margin pressures, dangerously low demand is forcing chemical makers
to scramble as they cut inventory and scale back elsewhere.
Ashland's $2.6 billion acquisition of Hercules in November gave
it exposure to some less-cyclical specialty chemical operations,
but it loaded the company with debt. Ashland is working to quell
fears about its liquidity, having slashed its dividend 73% in late
November and set its 2009 capital expenditures budget at $200
million, the low end of its earlier projection.
Meanwhile, the company on Tuesday reported a net of $119
million, or $1.73 a share, for the period ended Dec. 31, compared
with year-earlier net income of $33 million, or 52 cents a share.
The latest period included $90 million in charges related to its
Hercules acquisition and a $32 million realized loss on
auction-rate securities.
Revenue increased 3.2% to $1.97 billion as Ashland recorded half
a quarter of Hercules' results. Assuming the buyout was completed
before the year-earlier quarter, revenue dropped 9%.
Analysts polled by Thomson Reuters expected per-share earnings
of 15 cents on $2.08 billion in revenue.
Chairman and Chief Executive Officer James J. O'Brien said, "We
would expect declining raw material costs and continuing
cost-reduction actions in our organization to benefit our results
in the second quarter, although volume declines and selling price
decreases will likely temper the benefits."
The distribution segment, which accounts for nearly half of
Ashland's revenue, reported a 13% decline in volume per day.
Lubricant volume at the Valvoline oil business fell 17%.
Meanwhile, Ashland unveiled additional cost-cutting plans
including a year-long wage freeze, a two-week furlough program for
most salaried employees in the U.S. and Canada, closing its
aviation department and curtailing travel and entertainment
spending.
Shares closed Monday at $9.51 and didn't trade pre-market. The
stock has tumbled84% since peaking in May.
-By Melissa Korn, Dow Jones Newswires; 201-938-5400
melissa.korn@dowjones.com
-By Tess Stynes, Dow Jones Newswires; 201-938-2473;
tess.stynes@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front
page of today's most important business and market news, analysis
and commentary. You can use this link on the day this article is
published and the following day.