Ashland Inc. reports preliminary
financial results for third quarter of fiscal 2015
-
Earnings from continuing
operations total $1.68 per diluted share
-
Adjusted earnings from
continuing operations grow 17 percent, to $1.91 per diluted
share
-
Adjusted EBITDA equals $290
million; EBITDA margin rises 260 basis points to 21.2
percent
-
Company completes previous
$1.35 billion share repurchase authorization
COVINGTON, Ky. - Ashland Inc. (NYSE: ASH), a global leader in
specialty chemicals and, through Valvoline, a premium
consumer-branded lubricant supplier, today announced
preliminary(1) financial
results for the fiscal third quarter ended June 30, 2015.
Quarterly
Highlights
(in millions except per-share amounts) |
|
Quarter Ended June 30 |
|
|
|
2015 |
|
|
2014 |
Operating income |
|
$ |
196 |
|
$ |
143 |
Key items* |
|
|
11 |
|
|
69 |
Adjusted operating income* |
|
$ |
207 |
|
$ |
212 |
|
|
|
|
|
|
|
Adjusted EBITDA* |
|
$ |
290 |
|
$ |
298 |
|
|
|
|
|
|
|
Diluted earnings per share (EPS) |
|
|
|
|
|
|
From net income |
|
$ |
1.56 |
|
$ |
1.25 |
|
|
|
|
|
|
|
From continuing operations |
|
$ |
1.68 |
|
$ |
0.90 |
Key items* |
|
|
0.23 |
|
|
0.73 |
Adjusted EPS from continuing operations* |
|
$ |
1.91 |
|
$ |
1.63 |
|
|
|
|
|
|
|
Cash flows provided (used) by operating activities from
continuing operations |
|
$ |
(255) |
|
$ |
211 |
Free cash flow* |
|
|
184 |
|
|
155 |
|
|
|
|
|
|
|
* See Tables 5, 6 and 7 for Ashland definitions and
U.S. GAAP reconciliations.
|
|
|
|
Ashland reported earnings from
continuing operations of $115 million, or $1.68 per diluted share,
on sales of nearly $1.4 billion. These results included three key
items that together reduced income from continuing operations by
approximately $16 million, net of tax, or $0.23 per diluted share.
For the year-ago quarter, Ashland reported income from continuing
operations of $71 million, or $0.90 per diluted share, on sales of
$1.6 billion. There were six key items in the year-ago quarter
that, on a combined basis, reduced income from continuing
operations by $58 million after tax, or $0.73 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 this
basis, Ashland's adjusted income from continuing operations in the
third quarter of fiscal 2015 was $131 million, or $1.91 per diluted
share, versus $129 million, or $1.63 per diluted share, for the
year-ago quarter. This performance marks the fifth consecutive
quarter of year-over-year growth in adjusted earnings per
share.
Ashland's results as compared to
the year-ago quarter were as follows:
-
Sales were negatively affected by macroeconomic
factors including foreign exchange rates and reduced demand in the
North American energy market. In addition, Ashland's strategic
decision to divest non-core product lines also negatively affected
sales. These factors reduced sales by a total of approximately $200
million;
-
As a result of the recent global restructuring
and foreign exchange rates, selling, general and administrative
(SG&A) costs declined 9 percent, to $231 million when adjusted
for key items; and
-
Adjusted EBITDA margin rose by 260 basis points,
to 21.2 percent. This strong EBITDA margin improvement was driven
by an increasingly differentiated product mix, combined with
disciplined cost control.
"While a number of factors have
affected our top-line results, the Ashland team executed at a high
level in the third quarter to drive strong earnings and margin
growth," said William A. Wulfsohn, Ashland chairman and chief
executive officer. "While foreign currency and the weak North
American energy market reflect broad economic trends, our decision
to divest or exit certain non-core product lines also affected
Ashland's top line. These actions were taken in an effort to focus
on higher-margin opportunities, where we deliver industry-leading
innovation to help our customers succeed. You can see the positive
impact from this strategy within Ashland Specialty Ingredients,
where the consumer division continues to grow as we focus more
technical resources and available capacity to support increasing
demand for our value-added pharmaceutical, hair and oral-care
product lines. Within Ashland Performance Materials, composites
posted strong year-over-year margin growth as a result of improved
product mix and good cost management. The Valvoline team continued
to drive premium-branded sales growth. In addition, Valvoline
Instant Oil ChangeSM (VIOC) store
expansion and strong promotions helped drive record profits in the
quarter."
He added: "At the same time,
Ashland's global teams have succeeded in taking out costs across
the organization as part of a broader plan to improve our
competitive position. We are now focused on sustaining those cost
reductions and improvements. These efforts, together with our focus
on generating improved business and product mix, led to a
significant increase in EBITDA margin. We remain committed to
achieving Ashland's near- and mid-term EBITDA margin targets."
He also said Ashland has
prioritized the effective allocation of capital through targeted
investments to support its core product lines and share
repurchases. Among the recent targeted investments were capacity
expansions for hydroxyethylcellulose (HEC) production. In addition,
the company recently announced an agreement to acquire AkzoNobel's
Zeta Fraction* technology, which will strengthen Ashland's position
in personal care while continuing its expansion into sustainable,
natural-based specialty ingredients. Ashland also continued to
return cash to shareholders through the recently completed $1.35
billion share repurchase authorization. Under this authorization,
which was announced in February 2014, the company bought back
approximately 11.8 million shares at an average volume-weighted
price of $115 per share. In late April, Ashland announced a new $1
billion share repurchase authorization that will expire December
31, 2017.
"We believe Ashland stock is
undervalued and we see share buybacks as an attractive capital
allocation opportunity," Wulfsohn said.
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.
Specialty Ingredients reported its
fifth consecutive quarter of year-over-year EBITDA margin
improvement, driven by better business and product mix, good cost
control and positive price over cost. EBITDA margin increased 200
basis points to 23.7 percent. Good cost management led to lower
SG&A expenses, excluding the impact of foreign exchange, which
totaled $12 million. Sales declined 11 percent, largely as a result
of currency, weak energy markets and exited product lines.
The Consumer Specialties division
continued to perform well on higher demand for Ashland's unique,
higher-value-added product lines as sales grew a currency-adjusted
2 percent. Pharmaceuticals led the way with currency-adjusted sales
growth of 5 percent. Personal-care sales grew 4 percent, after
currency adjustment, on continued strength in oral- and hair-care
applications. These results were offset by a currency-adjusted 13
percent decline in Industrial Specialties, due largely to continued
weakness in the energy and construction markets. Ashland has taken
steps to mitigate the reduced demand for energy-related products by
suspending a portion of its manufacturing capacity. Ashland is
seeing good growth for coatings-related products as a result of
recent manufacturing capacity increases. The company is supporting
that growth through the ongoing expansion at its manufacturing
plant in Nanjing, China, and a recently announced plan to expand
production capacity in Hopewell, Virginia.
Looking ahead to the fiscal fourth
quarter, Specialty Ingredients expects continued growth in the
high-value-add, higher-margin areas of the business. However, the
business unit expects to face headwinds from currency, continued
weakness in energy markets and exited product lines. Specialty
Ingredients expects fourth-quarter sales to be in the range of
$550-$560 million, in line with normal seasonality, and EBITDA
margins to be in the range of 23-23.5 percent.
Within Performance Materials,
composites posted strong year-over-year margin growth from improved
product mix and solid pricing discipline. As previously disclosed,
Performance Materials completed both a planned turnaround and an
unplanned shutdown at its two intermediates and solvents (I&S)
plants during the quarter. The estimated impact from these
temporary closures was approximately $14 million, or roughly $6
million better than Ashland's previous expectations. Of note,
EBITDA in the prior-year quarter included approximately $13 million
from the elastomers division and the ASK Chemicals joint venture,
which were divested in order to focus on higher-margin product
lines. On an as-reported basis, sales for the third quarter of
fiscal 2015 declined 34 percent. However, the impact of
divestitures and currency headwinds reduced sales by $107 million,
with pricing adjustments from lower raw-material costs within
composites driving the majority of the remaining decline.
Composites volume declined 2 percent from prior year, although
product mix was favorable. I&S sales declined 21 percent from
prior year due to lower volumes, softer butanediol pricing and
currency headwinds.
For the fourth quarter,
Performance Materials expects overall results to decline
sequentially, in line with normal seasonality. The business unit
expects another quarter of solid performance within composites to
be offset by continued pricing weakness within I&S. As a
result, Performance Materials expects sales to be in the range of
$255-$265 million and EBITDA margin of 8-8.5 percent.
Valvoline reported record
quarterly earnings driven by continued improvement in product mix,
strong same-store sales growth at VIOC and good overall volume
growth. EBITDA rose 17 percent, to $116 million, marking the
seventh consecutive quarter of year-over-year growth. EBITDA as a
percent of sales was 22.7 percent, an increase of 410 basis points
versus the prior year. Total sales declined 4 percent, to $510
million, primarily as a result of pass-through pricing from lower
raw-material costs and currency headwinds. Successful promotions
led to 4 percent volume growth in the Do-it-Yourself (DIY) channel.
VIOC reported same-store sales growth of more than 9 percent at
company-owned sites. In total, VIOC sales grew 11 percent versus a
year ago. Within Valvoline's international channel, volume grew 8
percent and currency-adjusted sales rose 5 percent. Valvoline's
overall mix continued to improve, with U.S. premium-branded
lubricant sales volume increasing to 40.8 percent, up from 37.8
percent a year ago.
For the fourth quarter, Valvoline
expects continued strong performances across each channel. Sales
are expected to decline sequentially by 5-7 percent, to
approximately $475-$485 million, in line with normal seasonality.
DIY results are expected to normalize from a very strong third
quarter, leading to EBITDA margin declining by slightly more than
what is reflected by typical seasonality. Valvoline's EBITDA margin
is expected to be in the 19-20 percent range.
Ashland's effective tax rate for
the June 2015 quarter was 22 percent when adjusted for key items.
For the full 2015 fiscal year, the company now expects its
effective tax rate to be in the range of 23-25 percent.
Outlook
Looking ahead, Wulfsohn said he expects Ashland to sustain its
disciplined approach to capital allocation. In addition to
returning cash to shareholders, the company will continue making
targeted investments in higher-margin, highly differentiated core
product lines that add value for customers. He also sees
opportunities to strengthen the company's market leadership through
product innovation, commercial excellence, and world-class
operations.
"Ashland is fortunate to have two
outstanding business platforms with attractive growth opportunities
and experienced leadership teams. Since early this year, both our
Chemicals Group and Valvoline have been developing their respective
strategic plans to drive profitable growth and take the actions
required to maximize shareholder value. A great deal of time and
effort has been invested by our global business teams to better
understand our markets, our customers and the opportunities where
we can deliver the most value to Ashland's stakeholders. We expect
to finalize this work in the current quarter, in conjunction with
the completion of Ashland's fiscal 2016 strategic plan. We look
forward to sharing more information with investors later this
year," Wulfsohn said.
Ashland today announced plans to
host an Investor Day on Wednesday, November 11, 2015, at the
Marriott Essex House in New York City. The event will begin at 7:30
a.m. More information about the event will be shared next
month.
Conference Call
Webcast
Ashland will host a live webcast of its third-quarter conference
call with securities analysts at 9 a.m. EDT Thursday, July 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 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 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,"
"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 achieve
the anticipated benefits from such transactions), the global
restructuring program (including the possibility that Ashland may
not realize 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
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 event 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.
*Trademark owned by AkzoNobel
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
Q3 2015 Earnings Release Slides -
Final
Q3 2015 Earnings Prepared Remarks
Q3 2015 Earnings Release & Financial 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
HUG#1942305
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