April 26, 2016
Ashland Inc.
reports preliminary financial results for second quarter of fiscal
2016
-
Earnings from continuing
operations equal $1.38 per diluted share
-
Adjusted earnings from
continuing operations total $1.83 per diluted share
-
Adjusted EBITDA totals $274
million and adjusted EBITDA margin is 22.0 percent
COVINGTON, Ky. - Ashland Inc. (NYSE: ASH), a global leader in
differentiated specialty chemicals and, through Valvoline, a
premium consumer-branded lubricant supplier, today announced
preliminary(1) financial
results for the fiscal second quarter ended March 31, 2016.
Quarterly
Highlights
(in millions except per-share amounts) |
|
Quarter Ended March 31 |
|
|
|
2016 |
|
|
2015 |
Operating income |
|
$ |
147 |
|
$ |
193 |
Key items* |
|
|
46 |
|
|
25 |
Adjusted operating income* |
|
$ |
193 |
|
$ |
218 |
|
|
|
|
|
|
|
Adjusted EBITDA* |
|
$ |
274 |
|
$ |
301 |
|
|
|
|
|
|
|
Diluted earnings per share (EPS) |
|
|
|
|
|
|
From net income |
|
$ |
1.38 |
|
$ |
3.26 |
|
|
|
|
|
|
|
From continuing operations |
|
$ |
1.38 |
|
$ |
1.39 |
Key items* |
|
|
0.45 |
|
|
0.64 |
Adjusted EPS from continuing operations* |
|
$ |
1.83 |
|
$ |
2.03 |
|
|
|
|
|
|
|
Cash flows provided by operating activities from
continuing operations |
|
$ |
184 |
|
$ |
47 |
Free cash flow* |
|
|
134 |
|
|
4 |
|
|
|
|
|
|
|
* See Tables 5, 6 and 7 for Ashland definitions and
U.S. GAAP reconciliations.
|
|
|
|
Ashland reported income from
continuing operations of $87 million, or $1.38 per diluted share,
on sales of more than $1.2 billion. These results included three
key items that together reduced income from continuing operations
by approximately $28 million, net of tax, or $0.45 per diluted
share. For the year-ago quarter, Ashland reported income from
continuing operations of $95 million, or $1.39 per diluted share,
on sales of more than $1.3 billion. There were five key items in
the year-ago quarter that, on a combined basis, reduced income from
continuing operations by $43 million after tax, or $0.64 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 in the second quarter of fiscal
2016 was $115 million, or $1.83 per diluted share, versus $138
million, or $2.03 per diluted share, for the year-ago quarter.
During the second quarter:
-
Each of our business units reported results that
either met or exceeded the outlook provided at the beginning of the
quarter. The chemicals group reported continued growth, and notable
business wins from new technology applications, in several core end
markets. In addition, Valvoline reported a record March quarter,
with strong volume and earnings growth.
-
As expected, headwinds from currency, weak
energy markets and exited product lines began to recede. The
year-over-year effect on sales fell from $155 million in the first
quarter of fiscal 2016 to approximately $60 million in the second
quarter. Ashland continues to expect these headwinds to recede
further in the third quarter as the company largely laps the
impact.
-
Ashland generated adjusted EBITDA of $274
million. Adjusted EBITDA margin remained strong at 22.0 percent,
with both Ashland Specialty Ingredients (ASI) and Valvoline
delivering 24.0 percent margins.
"Our teams continued executing at
a high level in the second quarter as we prepare to separate into
two great companies," said William A. Wulfsohn, Ashland chairman
and chief executive officer.
"Our first priority this year has
been to drive the operational and strategic gains needed to meet
our financial expectations. To that end, within Ashland's chemicals
group we continue to focus on growing the higher-margin,
differentiated product lines where we add value for our customers.
Sales pipeline initiatives led to several new business wins during
the quarter. Within ASI, the team has worked hard to offset
headwinds through these initiatives and productivity improvements.
We continue to gain share in our key technology platforms and core
growth end markets, including pharmaceutical, hair care and
coatings. Within Ashland Performance Materials (APM), composites
reported solid year-over-year margin growth as a result of pricing
discipline amid falling raw-material costs and its continued focus
on product innovation and application development," he said.
Wulfsohn continued: "At the same
time, Valvoline turned in another outstanding performance. The team
notched its tenth consecutive quarter of year-over-year EBITDA
growth driven by higher volumes, improved channel and product mix,
robust same-store sales growth at Valvoline Instant Oil
ChangeSM (VIOC), and
continued margin management."
He said the second core priority
has been effectively converting earnings to cash. In the second
quarter, Ashland generated $134 million of free cash flow.
Ashland's third priority has been
the effective allocation of capital through targeted investments in
higher-margin core product line growth and in return of cash to
shareholders. During the quarter, Ashland completed its previously
announced $500 million accelerated share repurchase (ASR)
agreement. The company repurchased a total of approximately 5
million shares at an average volume-weighted price of approximately
$99 per share. In addition, the company completed the previously
announced acquisition of Oil Can Henry's, which expanded VIOC's
store base by nearly 10 percent and marked the brand's entry into
several Pacific Northwest markets.
The company's fourth priority is
to complete the previously announced separation into two
independent, publicly traded companies. As outlined in Ashland's
recent announcement about a planned initial public offering (IPO)
of Valvoline stock, and summarized later in this news release,
Ashland continues to make good progress toward the separation.
Reportable
Segment Performance
To aid understanding of Ashland's ongoing business performance, the
results of Ashland's reportable segments are described below on an
adjusted basis and EBITDA, or adjusted EBITDA, is reconciled to
operating income in Table 7 of this news release.
ASI reported continued volume and
share gains in core growth end markets such as pharmaceutical, hair
care and coatings, where its differentiated products and technical
expertise deliver value to customers. In addition, good cost
control and strong price discipline contributed to earnings results
that were at the upper end of the outlook provided at the beginning
of the second quarter. ASI's sales totaled $529 million, down 9
percent, with the aforementioned headwinds accounting for more than
half of that decline. However, on a sequential basis sales grew 11
percent, reflecting normal seasonality patterns and receding
headwinds. Adjusted EBITDA totaled $127 million and adjusted EBITDA
margin remained strong at 24.0 percent.
Within Consumer Specialties, sales
declined 6 percent, or a currency-adjusted 4 percent, versus the
prior year. ASI continued to see good penetration of its
value-added products sold into the pharmaceutical market, with
currency-adjusted sales flat against a strong comparison in the
year-ago quarter. Within personal care, sales declined a
currency-adjusted 9 percent. This decline was due to some consumer
trading down to lower-cost materials and customer destocking,
particularly within oral and skin care, in emerging regions.
However, customer demand in these regions began to improve as the
quarter progressed. Hair care reported another solid quarter.
Within Industrial Specialties,
sales declined 13 percent, or a currency-adjusted 12 percent. The
previously mentioned headwinds accounted for the majority of the
decline. The commercial team saw steadily improving end-market
demand in the developed regions as the quarter progressed, offset
by continued weakness in emerging regions. Energy sales declined 57
percent versus the prior year, but volumes appear to have
stabilized. As previously outlined, ASI expects to begin lapping
the energy headwind in the June quarter. Within the core
architectural coatings end market, ASI captured new business from
several large customers in North America and Asia driven by new
technologies and applications. As expected, adhesives returned to
growth in the quarter.
Looking ahead to the third quarter
of fiscal 2016, which is typically ASI's strongest seasonal period,
the company expects sales to increase sequentially reflecting these
seasonal patterns, receding headwinds and sales pipeline gains.
Third-quarter sales are expected to be in the range of $555-$575
million and EBITDA to be slightly above a year ago.
APM reported solid results in the
second quarter. While composites volumes were generally soft,
overall margins were better than expected, reflecting pricing
discipline amid favorable raw-material costs. Composites volumes in
Europe continued to rise as customers increasingly adopt Ashland's
value-added products for residential construction markets. Volume
strength in Europe was offset by slowing industrial growth in other
regions, notably China and Brazil. Sales to North American energy
markets also continued to be weak. Lower pricing, driven by reduced
raw-material costs, led to a 14 percent decline in overall
composites sales during the quarter. Within Intermediates and
Solvents (I&S), overall results were generally consistent with
the company's expectations, as butanediol (BDO) volumes and pricing
were headwinds to sales and earnings. When compared to the
prior-year period, I&S sales declined 19 percent.
These factors led to a 25 percent year-over-year decrease in APM's
EBITDA, to $33 million. Sales totaled $239 million, down 16 percent
from prior year.
For the third quarter of fiscal
2016, APM expects sales to be in the range of $235-$250 million and
EBITDA margin to be in the range of 12-13 percent.
Valvoline reported continued
strong results, with volume growing 8 percent and EBITDA also
rising 8 percent, to $115 million. EBITDA margin was 24.0 percent,
a 200-basis-point increase over the prior year, as Valvoline
continued to execute its strategy of investing in higher-return
opportunities within its core lubricants product lines. Total sales
were flat at $479 million, as strong lubricant volumes and product
mix were offset by pass-through pricing from lower raw-material
costs and currency headwinds. Volume to customers serving the
Do-it-Yourself (DIY) market grew by 8 percent, driven by strong
seasonal promotions and expanded distribution arrangements with
national retail accounts at Walmart and Menards. At VIOC,
same-store sales rose nearly 10 percent at company-owned sites. At
the end of the second quarter, VIOC had a total of 1,052
company-owned and franchised stores within its network, a gain of
120 stores versus a year ago after including the 89 Oil Can Henry's
stores. Within Valvoline's international channel, volume grew 10
percent, driven by good execution of channel-building efforts.
Valvoline's overall mix continued to improve, with U.S.
premium-branded lubricant sales volume increasing to 44.6 percent,
a 390-basis-point improvement from the year-ago quarter.
For the third quarter, Valvoline
expects continued strong performances across the business. Sales
are expected to be approximately $500-$510 million in what is
typically Valvoline's seasonally strongest quarter. EBITDA margin
is expected to be in the range of 23-24 percent.
When adjusted for key items,
Ashland's effective tax rate for the March 2016 quarter was 22
percent. For the full 2016 fiscal year, the company continues to
expect its adjusted effective tax rate to be at the upper end of
the range of 24-26 percent.
Separation into
Two Independent, Publicly Traded Companies
Earlier this month, Ashland provided an update on the previously
announced plan to separate Ashland into two independent, publicly
traded companies: the new Ashland, composed of Ashland Specialty
Ingredients and Ashland Performance Materials, and Valvoline,
composed of Ashland's Valvoline business segment.
As previously announced, the
separation process and timeline remain on track; the preparatory
work for the separation, including the carve-out audit and the
creation of standalone operating entities, is proceeding on the
expected timetable. Subject to sufficiently attractive market
conditions, Ashland plans to pursue an IPO of up to 20 percent of
the common stock of Valvoline as a first step in the separation.
The company expects to complete the proposed offering during the
fourth quarter of calendar year 2016. Any such offering will be
made only by a prospectus filed with the Securities and Exchange
Commission, and this news release shall not constitute an offering
of Valvoline common stock. Ashland currently expects that it would
distribute the remaining common stock of Valvoline to Ashland's
shareholders upon expiration of the IPO lock-up (typically six
months after completion of the proposed offering).
As noted earlier in this release,
Ashland completed the previously announced $500 million ASR
agreement in the second quarter. At this time the company has no
current plans to pursue any additional share repurchases under the
existing $1 billion share repurchase authorization expiring in
December 2017.
Looking
Ahead
"Our outlook for the second half of Ashland's fiscal year remains
unchanged. We expect our earnings trajectory to improve as we begin
to lap some of the headwinds we have been facing and the underlying
strength of our business becomes more evident. We remain focused on
expanding our positions in core growth end markets by leveraging
Ashland's strong technology development and applications expertise.
As a result, we expect ASI to improve its earnings momentum. While
we remain cautious about customer destocking and evidence of
trading down in emerging markets, we are encouraged by the relative
strength we are seeing in the developed regions and the improving
trends demonstrated throughout the course of the second quarter. We
believe Valvoline is well positioned to sustain its operational and
financial momentum as it builds on the success of Oil Can Henry's,
leverages the Valvoline brand to capture new market share across
multiple channels and expands its global presence," Wulfsohn
said.
"This is an exciting time for the
Ashland team as we prepare to separate into two great companies,"
he concluded.
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 27,
2016. The webcast and supporting materials 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
This news release includes certain non-GAAP (Generally Accepted
Accounting Principles) measures. Such measurements are not prepared
in accordance with GAAP and should not be construed as an
alternative to reported results determined in accordance with GAAP.
Management believes the use of such non-GAAP measures assists
investors in understanding the ongoing operating performance of the
company and its segments. 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 Inc. (NYSE: ASH) is a global leader in providing specialty
chemical solutions to customers in a wide range of consumer and
industrial markets, including adhesives, architectural coatings,
automotive, construction, energy, food and beverage, personal care
and pharmaceutical. Through our three business units - Ashland
Specialty Ingredients, Ashland Performance Materials and Valvoline
- we use good chemistry to make great things happen for customers
in more than 100 countries. Visit ashland.com to learn more.
- 0 -
C-ASH
Forward-Looking
Statements
This news release contains forward-looking statements. 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 status of the separation process,
the plan to pursue an IPO of up to 20 percent of the common stock
of Valvoline and the expected completion of the separation through
the subsequent distribution of Valvoline common stock, the expected
timing of filing of a registration statement for the registration
of common stock of Valvoline in the IPO, the anticipated timing of
completion of the planned IPO and subsequent distribution of the
remaining Valvoline common stock, and Ashland's and Valvoline's
expected ratings profiles, capital structures, future financial
flexibility and ability to pursue their long-term strategies. In
addition, Ashland may from time to time make forward-looking
statements in its annual report, quarterly reports and other
filings with the 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 and financial condition,
including the proposed separation of its specialty chemicals and
Valvoline businesses, the proposed IPO of its Valvoline business,
the expected timetable for completing the IPO and the separation,
the future financial and operating performance of each company,
strategic and competitive advantages of each company, the
leadership 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: the
possibility that the proposed IPO or separation will not be
consummated within the anticipated time period or at all, including
as the result of regulatory, market or other factors; the potential
for disruption to Ashland's business in connection with the
proposed IPO or separation; the potential that the new Ashland and
Valvoline do not realize all of the expected benefits of the
proposed IPO or separation or obtain the expected credit ratings
following the proposed IPO or separation; 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
possibility that Ashland may not realize the anticipated benefits
from such transactions); Ashland's ability to generate sufficient
cash to finance its stock repurchase plans; 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 its 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.
SM Service
mark, Ashland or its subsidiaries, registered in various
countries.
(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
ASH Q2 2016 Earnings Slides
ASH Q2 2016 Prepared Remarks
ASH Q2 2016 Release and Tables
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX 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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