Ashland Inc.'s (ASH) fiscal third-quarter earnings fell 41% as
high raw-material costs hurt margins and offset the chemical
company's increased revenue.
"Our principal challenge in the near term continues to be
recovery of raw-material cost increases," Chairman and Chief
Executive James J. O'Brien said. "While Ashland has recovered these
cost increases on an overall basis through pricing, our commercial
units have had varying degrees of success. We will remain focused
on and continue to take appropriate pricing actions to recover our
costs and ultimately restore margins."
O'Brien said raw-material costs increased nearly $60 million
sequentially, roughly double the average increase in the prior
three quarters, and the company essentially offset all of these
increased costs sequentially.
Ashland has benefited from an industrywide resurgence in demand
and earlier multiyear restructuring efforts. The company has raised
prices over the past year to keep up with rising raw-material
costs.
Ashland has also been selling assets to reduce its debt load
after its $2.6 billion takeover of Hercules in 2008. In May,
Ashland announced plans to buy specialty-chemicals supplier
International Specialty Products Inc. for $3.2 billion, a move to
expand its personal-care, pharmaceutical and energy businesses.
Ashland reported a profit of $87 million, or $1.09 a share, down
from $148 million, or $1.85 a share, a year earlier. The latest
period included $5 million, or 6 cents a share, in charges on
write-downs and expenses related to environmental reserves
associated with legacy sites unrelated to continuing operations.
The year-earlier period included a 45-cent a share gain. Excluding
earnings from its discontinued Ashland Distribution unit and other
charges, Ashland's earnings from continuing operations fell to 92
cents from $1.01.
Revenue increased 13% to $1.67 billion.
Analysts polled by Thomson Reuters most recently forecast
earnings of 84 cents on revenue of $1.65 billion.
Operating margin narrowed to 7.2% from 9.4%.
Sales at the consumer business, which includes Valvoline and
accounts for nearly a third of the company's sales, were up 13%,
despite a 3.7% decrease in lubricant sales. Consumer markets
operating income declined 30%.
Shares closed at $68.50 Wednesday and were inactive premarket.
The stock is up 20% over the past 12 months.
-By Nathalie Tadena, Dow Jones Newswires; 212-416-3287; nathalie.tadena@dowjones.com