Ashland Inc. reports preliminary
financial results for second quarter of fiscal 2015
-
Earnings from continuing
operations total $1.39 per diluted share
-
Adjusted earnings from
continuing operations grow 33 percent, to $2.03 per diluted
share
-
Adjusted EBITDA rises nearly 11
percent, to $301 million; adjusted EBITDA margin climbs 470 basis
points to 22.3 percent
-
Substantially all of the $200
million in annual run-rate savings from global restructuring now
captured
-
Board approves new $1 billion
share repurchase authorization
COVINGTON, Ky. - Ashland Inc.
(NYSE: ASH), a global leader in specialty chemical solutions for
consumer and industrial markets, today announced
preliminary(1) financial
results for the fiscal second quarter ended March 31, 2015.
Quarterly
Highlights
(in millions except per-share amounts) |
|
Quarter Ended Mar. 31 |
|
|
|
2015 |
|
|
2014 |
Operating income (loss) |
|
$ |
193 |
|
$ |
(64) |
Key items* |
|
|
25 |
|
|
247 |
Adjusted operating income* |
|
$ |
218 |
|
$ |
183 |
|
|
|
|
|
|
|
Adjusted EBITDA* |
|
$ |
301 |
|
$ |
272 |
|
|
|
|
|
|
|
Diluted earnings (loss) per share |
|
|
|
|
|
|
From net income |
|
$ |
3.26 |
|
$ |
(0.57) |
|
|
|
|
|
|
|
From continuing operations |
|
$ |
1.39 |
|
$ |
(0.78) |
Key items* |
|
|
0.64 |
|
|
2.31 |
Adjusted EPS from continuing operations* |
|
$ |
2.03 |
|
$ |
1.53 |
|
|
|
|
|
|
|
Cash flows provided by operating activities
from continuing operations |
|
$ |
47 |
|
$ |
175 |
Free cash flow* |
|
|
4 |
|
|
124 |
|
|
|
|
|
|
|
* See Tables 5, 6 and 7 for Ashland definitions and
U.S. GAAP reconciliations.
|
|
|
|
Ashland reported earnings from
continuing operations of $95 million, or $1.39 per diluted share,
on sales of $1.35 billion. These results included five key items
that together reduced income from continuing operations by
approximately $43 million, net of tax, or $0.64 per diluted share.
Excluding the five key items, Ashland's adjusted income from
continuing operations was $138 million, or $2.03 per diluted share.
(Please refer to Table 5 of the accompanying financial statements
for details of key items.)
For the year-ago quarter, Ashland
reported a loss from continuing operations of $61 million, or $0.78
per diluted share, on sales of $1.5 billion. There were five key
items in the year-ago quarter that, on a combined basis, reduced
income from continuing operations by $181 million after tax, or
$2.31 per share. Excluding those five items, Ashland's adjusted
income from continuing operations was $120 million, or $1.53 per
share.
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 this
basis, Ashland's results as compared to the year-ago quarter were
as follows:
-
Sales revenue fell 13 percent, largely as a
result of divestitures and foreign exchange rates; excluding these
headwinds, sales declined 3 percent;
-
Despite this revenue decline, mix improvements
resulted in profit growth;
-
Selling, general and administrative (SG&A)
costs declined 9 percent, to $239 million, as a result of the
global restructuring and foreign exchange;
-
Operating income grew 19 percent to $218
million;
-
Earnings before interest, taxes, depreciation
and amortization (EBITDA) increased nearly 11 percent to $301
million; and
-
EBITDA as a percent of sales increased 470 basis
points to 22.3 percent.
"Since I joined the Ashland team
in January, we have focused on three core priorities," said William
A. Wulfsohn, Ashland chairman and chief executive officer. "Our
first priority has been to deliver our near- and mid-term financial
targets. In the quarter, the Ashland team continued to execute at a
high level as is evidenced by our solid earnings and margin growth.
Ashland's strong EBITDA growth was driven by aggressive cost
control, by taking focused actions to improve sales mix and by
maintaining a disciplined approach to pricing in the context of
considerable input cost volatility. After much difficult work over
the past year, the team has now captured substantially all of the
expected $200 million in annualized run-rate cost savings from the
global restructuring program."
He added: "Our second core
priority has been to continue the journey to reposition our
portfolio to focus on the core segments where Ashland delivers
highly differentiated, value-added products to
customers."
As examples, he pointed to Ashland
Specialty Ingredients, where higher-margin pharmaceutical and
hair-care lines grew volume by 7 percent and 12 percent,
respectively. Meanwhile, Ashland Performance Materials reported
another quarter of good volume growth in composites, including
unique products such as DerakaneTM epoxy vinyl
ester resin. At Valvoline, continued growth in premium-brand
lubricant sales, store expansion at Valvoline Instant Oil
ChangeSM and lower
raw-material costs helped drive record profits.
Wulfsohn said Ashland's third core
priority, given its strong balance sheet, has been to effectively
allocate capital through targeted investments in organic growth
opportunities and through share repurchases. For example, the
company recently announced an important capacity expansion at its
manufacturing facility in Hopewell, Virginia, to support increased
demand from customers in the high-growth personal care and coatings
end markets, where Specialty Ingredients' products add considerable
value. In addition, Ashland continued to return cash to
shareholders in the second quarter through its previously announced
$270 million accelerated stock repurchase (ASR) program. The
company received 1.9 million shares up front and expects to receive
the remaining shares prior to the program's expiration on July 31,
2015. Upon completion of the ASR, Ashland will have finished its
previously announced $1.35 billion share repurchase authorization.
As a result, Ashland today announced that its board has approved a
new $1 billion authorization that expires December 31, 2017.
"This new stock repurchase
authorization reflects the board's continued confidence in
Ashland's strategic direction and the cash-generating capabilities
of the assets," Wulfsohn said. "At this time, we believe Ashland
stock remains undervalued and represents an attractive investment
opportunity."
Business Segment
Performance
To aid understanding of Ashland's ongoing business performance, the
results of Ashland's business 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.
Within Specialty Ingredients,
improved business and product mix, as well as continued strong cost
discipline, led to a 9 percent increase in EBITDA, to $142 million.
EBITDA margin increased 370 basis points, to 24.4 percent. Savings
from the global restructuring program contributed to a 10 percent
decline in SG&A expenses. Overall sales declined 7 percent, to
$583 million, primarily due to currency headwinds, weak energy
markets and exited product lines. Within consumer, Ashland's sales
grew a currency-adjusted 2 percent as good demand for Ashland's
patented oral- and hair-care applications was partially offset by
weakness in skin care. Pharmaceutical volumes grew 7 percent. On
the industrial side, excluding energy, overall volumes were flat
and currency-adjusted sales fell 1 percent. However, adhesives
posted another good quarter, with volumes increasing 2 percent from
prior year. In addition, we continue to see increased demand within
the coatings market, where volume grew 2 percent, primarily due to
the completion in late February of the first phase of expansion at
our hydroxyethylcellulose (HEC) facility in Nanjing, China.
Looking ahead to the fiscal third
quarter, Specialty Ingredients expects continued growth in the
high-value-add, higher-margin areas of the business. However, the
commercial unit expects to face headwinds from currency, continued
weakness in energy markets and exited product lines. Specialty
Ingredients expects third-quarter sales to be in the range of
$600-$620 million. Continued mix improvement, higher margins and
cost discipline should lead to estimated EBITDA margin of 24-24.5
percent.
At Performance Materials, good
growth in composites volume, combined with lower input and
manufacturing costs, helped drive a 350-basis-point increase in
EBITDA margin, to 15.4 percent. It is important to note that the
prior-year quarter included a combined $13 million in EBITDA from
the elastomers division and the ASK Chemicals joint venture that
were divested later in the year. Sales declined 31 percent, to $286
million, as a result of divestitures, currency headwinds and lower
butanediol (BDO) volume and pricing within intermediates and
solvents (I&S). Adjusting for these factors, sales declined 5
percent. Composites volume grew in most major regions of the world,
including Europe, where the company is beginning to see signs of
improvement. I&S sales declined from prior year due to lower
volumes, softer butanediol pricing and currency headwinds.
Looking to the fiscal third
quarter, Performance Materials expects to see continued growth in
composites volume, although some margin compression is likely due
to rising raw-material costs in some regions. In addition, the
combination of declining BDO prices, a planned turnaround at one of
Ashland's I&S plants, and an unplanned shutdown at another
I&S plant, is expected to reduce EBITDA margin in the third
quarter.
Valvoline turned in a strong
performance as improved mix and lower raw-material costs led to
higher profitability and margins in the second quarter. EBITDA rose
18 percent, to $106 million, and EBITDA as a percent of sales was
22.0 percent, an increase of 410 basis points versus the prior
year. Although three of Valvoline's four channels to market
reported year-over-year volume gains, total sales declined 4
percent, to $481 million, primarily as a result of currency
headwinds. Successful promotions drove volume growth in
Do-it-Yourself (DIY). Valvoline Instant Oil Change (VIOC) reported
same-store sales growth of nearly 7 percent at company-owned sites.
Across the broader VIOC network, the total number of oil changes
rose 7 percent, with 9 percent growth in premium oil changes.
Within Valvoline's international channel, growth appeared to return
as distributor destocking issues abated. Both volume and
currency-adjusted sales in the international channel rose 2
percent. On a global basis, Valvoline's overall mix continued to
improve, with premium-branded lubricant sales volume increasing to
40.7 percent from 37.1 percent a year ago.
Earlier this month, Ashland agreed
to sell Valvoline's car-care products assets to Highlander Capital
LLP. These assets include brands such as Car BriteTM, Eagle
OneTM and
PyroilTM. Also
included in the sale are Valvoline-branded and private-label
maintenance chemicals sold into the DIY channel. Proceeds from the
sale of this non-strategic asset will be reinvested in generating
more rapid, profitable growth within Valvoline's core lubricants
business, such as through the continued expansion of the VIOC store
base.
For the third quarter, Valvoline
expects to continue benefitting from strong promotions across its
U.S. channels as the summer driving season approaches. Good product
and business mix should drive strong margins, although continued
price adjustments will likely offset some of that strength.
Ashland's adjusted effective tax
rate for the March 2015 quarter was 21 percent, or 300 basis points
below the low end of our previous guidance due to discrete tax
adjustments in the quarter. Ashland continues to expect its
effective tax rate for fiscal 2015 to be in the range of 24-26
percent.
Asbestos
Insurance Settlement
In January 2015, Ashland entered into a settlement agreement
concerning certain insurance coverage for asbestos bodily injury
claims. The company received $398 million in cash. As a result of
the settlement agreement, Ashland recorded an after-tax gain of
$120 million within discontinued operations. In addition, Ashland
placed $335 million of the settlement funds received into a
renewable annual trust restricted for the purpose of paying for
ongoing and future litigation defense and claim settlement costs
incurred in conjunction with asbestos claims.
Looking
Ahead
As Ashland enters the second half of fiscal 2015, Wulfsohn said he
is pleased with the company's progress.
"Ashland's performance through the
first half of the fiscal year is the result of sound execution.
Looking forward, we will continue to focus on cost control and
prioritizing highly profitable, differentiated growth segments
while sustaining effective capital allocation. We are playing to
our strengths by focusing on the products and markets where we
provide the most value to our customers. We continue to make
incremental capital investments to expand product manufacturing
capacity for some high-growth end markets. We also have divested
less strategic segments, such as Valvoline's car-care products
assets. We are pleased to have board authorization to continue our
stock repurchase program as we believe this is currently the best
use of our strong balance sheet and cash flow," Wulfsohn
said.
Conference Call
Webcast
Ashland will host a live webcast of its second-quarter conference
call with securities analysts at 9 a.m. EDT Thursday, April 30,
2015. 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 architectural coatings, automotive,
construction, energy, food and beverage, personal care and
pharmaceutical. Through our three commercial 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 within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Ashland has identified
some of these forward-looking statements with words such as
"anticipates," "believes," "expects," "estimates," "is
likely," "predicts," "projects," "may," "will," "should" and
"intends" and the negative of these words or other comparable
terminology. 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, 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:
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); the global
restructuring program (including the possibility that Ashland may
not achieve the anticipated revenue and earnings growth, cost
reductions, and other expected benefits from the program),
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 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:
Jason
Thompson
+1 (859) 815-3527
jlthompson@ashland.com
Media Relations:
Gary
Rhodes
+1 (859)
815-3047
glrhodes@ashland.com
Ashland Q2-15 Earnings Release
& Financial Tables - Final
Ashland Q2-15 Earnings Prepared Remarks - FINAL
Ashland Q2-15 Earnings Release {Slides Only} - FINAL
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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