January 25, 2016
Ashland Inc.
reports preliminary financial results for first quarter of fiscal
2016
-
Earnings from continuing
operations equal $1.38 per diluted share
-
Adjusted earnings from
continuing operations were $1.41 per diluted share
-
Adjusted EBITDA equals $247
million; adjusted EBITDA margin rises 240 basis points to 21.2
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 first quarter ended December 31, 2015.
Quarterly
Highlights
(in millions except per-share amounts) |
|
Quarter Ended Dec.31 |
|
|
|
2015 |
|
|
2014 |
Operating income |
|
$ |
151 |
|
$ |
169 |
Key items* |
|
|
13 |
|
|
8 |
Adjusted operating income* |
|
$ |
164 |
|
$ |
177 |
|
|
|
|
|
|
|
Adjusted EBITDA* |
|
$ |
247 |
|
$ |
262 |
|
|
|
|
|
|
|
Diluted earnings per share (EPS) |
|
|
|
|
|
|
From net income |
|
$ |
1.35 |
|
$ |
0.46 |
|
|
|
|
|
|
|
From continuing operations |
|
$ |
1.38 |
|
$ |
0.57 |
Key items* |
|
|
0.03 |
|
|
0.89 |
Adjusted EPS from continuing operations* |
|
$ |
1.41 |
|
$ |
1.46 |
|
|
|
|
|
|
|
Cash flows provided by operating activities from
continuing operations |
|
$ |
66 |
|
$ |
50 |
Free cash flow* |
|
|
13 |
|
|
7 |
|
|
|
|
|
|
|
* See Tables 5, 6 and 7 for Ashland definitions and
U.S. GAAP reconciliations.
|
|
|
|
Ashland reported income from
continuing operations of $91 million, or $1.38 per diluted share,
on sales of nearly $1.2 billion. These results included three key
items that together reduced income from continuing operations by
approximately $3 million, net of tax, or $0.03 per diluted share.
For the year-ago quarter, Ashland reported income from continuing
operations of $40 million, or $0.57 per diluted share, on sales of
nearly $1.4 billion. There were three key items in the year-ago
quarter that, on a combined basis, reduced income from continuing
operations by $62 million after tax, or $0.89 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 first quarter of fiscal
2016 was $94 million, or $1.41 per diluted share, versus $102
million, or $1.46 per diluted share, for the year-ago quarter.
Ashland's results as compared to
the year-ago quarter were as follows:
-
While the company achieved continued growth in
several core product lines, overall sales continued to be affected
by the divestiture of non-core product lines, foreign exchange
rates and weakening demand in the North American energy market.
Together these factors reduced sales by approximately $155 million,
to nearly $1.2 billion;
-
Selling, general and administrative (SG&A)
costs declined 4 percent, to $233 million, as a result of foreign
exchange rates, divestitures and employee-related expenses;
and
-
Adjusted EBITDA margin rose by 240 basis points,
to 21.2 percent. This improvement was driven by better business
mix, good pricing discipline and margin management.
"The Ashland team generated
another quarter of strong EBITDA margin growth in what is typically
our weakest period of the year, despite stiff economic headwinds
that reduced our overall results," said William A. Wulfsohn,
Ashland chairman and chief executive officer. "Our focus on growing
the higher-margin, differentiated product lines where we add more
value for customers - combined with another record quarter from
Valvoline and good cost discipline - helped drive this margin
improvement."
He continued: "Ashland Specialty
Ingredients (ASI) reported further sales gains in several of its
core growth end markets, including pharmaceutical, hair care and
coatings. However, these gains were more than offset by the
combined effect of persistent macroeconomic headwinds resulting in
lower-than-expected demand in other end markets. Within Ashland
Performance Materials, composites reported solid year-over-year
margin growth as a result of pricing discipline and its continued
focus on product innovation and application development. Valvoline
posted record first-quarter earnings, driven by good overall volume
growth, improved channel and product mix, strong same-store sales
growth at Valvoline Instant Oil ChangeSM (VIOC) and
continued margin management."
Wulfsohn also said Ashland
continues to prioritize the effective allocation of capital through
targeted investments in core product line growth and in return of
cash to shareholders. During the first quarter, the company entered
into a $500 million accelerated share repurchase agreement, with an
initial delivery of approximately 3.9 million shares. Separately,
Ashland announced in mid-December a definitive agreement to acquire
OCH International, Inc. (Oil Can Henry's), which operates and
franchises a total of 89 quick-lube stores in six states. This
acquisition, which is expected to be completed in the second
quarter of fiscal 2016, will expand Valvoline's store base by
nearly 10 percent and mark Valvoline's entry into the quick-lube
space in several Pacific Northwest markets.
"The acquisition of Oil Can
Henry's is consistent with Valvoline's strategy of investing in
higher-return opportunities within its core lubricants business. We
believe the continued expansion of the quick-lubes store footprint,
via both organic growth as well as acquisitions, is among the most
attractive investments for Valvoline," Wulfsohn explained.
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 achieved volume and share
gains in several core growth end markets such as pharmaceutical,
hair care and coatings. These gains were more than offset by weak
energy markets, foreign currency and exited product lines. In
total, ASI's sales declined 15 percent, to $476 million. Overall
results were lower than expected due to weaker demand in certain
end markets, with customer destocking contributing to the
shortfall. As expected during the quarter, ASI also completed
maintenance turnarounds at numerous manufacturing facilities, which
added $10 million in incremental costs. This work largely completes
the planned turnarounds at ASI manufacturing facilities for fiscal
2016. The combination of the aforementioned headwinds totaled
approximately $25 million - equal to the decline in ASI's adjusted
EBITDA during the quarter. Adjusted EBITDA margin fell 150 basis
points, to 19.7 percent.
Within the Consumer Specialties
division, sales revenue declined 7 percent, or a currency-adjusted
2 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 rising 3
percent. ASI continues to gain share in key technology platforms by
capitalizing on its more differentiated controlled-release
chemistries. Overall results within personal care were mixed. Sales
declined by a currency-adjusted 7 percent on lower demand from our
sun- and oral-care customers. These results were partially offset
by improved demand for Ashland's hair-care products, where the
company reported robust volume growth, driven by recent product
introductions. Within the Industrial Specialties division, sales
declined 23 percent, or a currency-adjusted 21 percent, largely due
to continued weakness in the North American energy market and the
combined impact from exited product lines and foreign currency.
Within coatings, Ashland is seeing good volume growth supported by
a recent increase in manufacturing capacity. In addition, Ashland
recently completed an expansion of its paint and coatings
application lab in Wilmington, Delaware, to help customers create
new formulations and accelerate product development. The new
facility provides paint formulators with expansive resources for
testing new or modified formulations, understanding consumer
preferences, and optimizing their products for success.
Looking ahead to the second
quarter of fiscal 2016, ASI expects sales to increase sequentially,
in line with normal seasonality. Second-quarter sales are expected
to be in the range of $515-$535 million and EBITDA margins to be in
the range of 23.5-24.5 percent.
Ashland Performance Materials
(APM) reported strong margin growth in the first quarter, driven by
good pricing discipline amid a volatile raw-material environment
within Composites and a continued focus on product innovation and
application development. Overall EBITDA margin rose 360 basis
points, to 16 percent. This performance was offset by weaker
results within Intermediates & Solvents (I&S), where
volumes and pricing negatively affected sales and earnings.
These factors, combined with the effects of divestitures and
foreign exchange, led to a 12 percent year-over-year decline in
EBITDA, to $37 million. Within Composites, volumes in Europe
continued to grow as we achieved better penetration of our
value-added products into residential construction markets. Volume
strength in Europe was offset by softness in other regions, notably
China and Brazil, where industrial growth is slowing. Sales to
North American energy markets also remained weak. Overall
composites sales declined 23 percent for the quarter. The majority
of this decline was due to lower pricing reflecting lower raw
material costs, and unfavorable foreign currency translation.
Within I&S, overall results reflected lower volumes and pricing
for butanediol (BDO), consistent with previous expectations. When
compared to the prior-year period, total I&S sales declined 20
percent.
For the second quarter of fiscal
2016, APM expects sales to increase sequentially, in line with
normal seasonality. Second-quarter sales are expected to be in the
range of $235-$255 million and EBITDA margins to be in the range of
10-11 percent. Weaker BDO volumes and pricing, coupled with a
scheduled I&S plant shutdown, are expected to drive the
sequential margin decline.
Valvoline turned in another strong
performance, with volume growing 4 percent and EBITDA climbing 10
percent, to $101 million. This marks the ninth consecutive quarter
of year-over-year EBITDA growth. EBITDA as a percent of sales was
22.1 percent, an increase of 340 basis points versus the prior
year. Total sales declined 7 percent, to $456 million, primarily as
a result of pass-through pricing from lower raw-material costs and
currency headwinds. Within the Do-it-Yourself (DIY) channel, volume
was largely flat although mix improved due to well-executed
promotions with a number of key customers. At VIOC, same-store
sales rose nearly 6 percent at company-owned sites. Over the past
year, VIOC has added 26 stores, bringing the total of company-owned
and franchise sites to 956 at the end of December. Within
Valvoline's international channel, volume grew 8 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 43.0 percent, a 460-basis-point improvement
from the year-ago period.
For the second quarter, Valvoline
expects continued strong performances across each channel. Sales
are expected to be approximately $480-$490 million while EBITDA
margin is expected to be approximately 23 percent.
When adjusted for key items,
Ashland's effective tax rate for the December 2015 quarter was 25
percent. For the full 2016 fiscal year, the company continues to
expect its adjusted effective tax rate to be in the range of 24-26
percent.
Separation
Update
Last September, Ashland announced a plan to separate into two
independent, publicly traded companies - one focused on specialty
chemicals and the other focused on high-performance lubricants. The
new Ashland will be a global leader in providing specialty chemical
solutions to customers in a wide range of consumer and industrial
markets. Valvoline will focus on building the world's leading
engine and automotive maintenance business by providing hands-on
expertise to customers in each of its primary market channels. Each
company will be a leader in its respective industry, with the
capital structure, financial resources and capital allocation
strategies to drive revenue and earnings growth.
Ashland remains on track to
complete the separation consistent with its previously stated
timeline. Separation planning and key work streams are continuing,
with the work being led by a project management team composed of
business and resource group leaders from around the world.
"Over the past four months, we
have worked as one team to prepare these two strong, but distinctly
different, business platforms for success as independent, publicly
traded companies," said Wulfsohn. "Each of these businesses has a
tremendous foundation on which to build, as well as attractive
growth opportunities and experienced leadership teams. The new
Ashland will be positioned to drive continued growth in
higher-margin, value-added core product lines and build on its
reputation for industry-leading innovation, while optimizing its
business and product portfolio and maintaining a disciplined
approach to capital investment. At the same time, Valvoline will
continue expanding its network of Valvoline Instant Oil Change
stores, pursuing opportunities to capture new market share by
leveraging the Valvoline brand across multiple channels, and
growing its international presence."
Outlook
Wulfsohn added: "Looking ahead, we should begin to lap some of the
headwinds we have been facing as we enter the June quarter. In
addition, Valvoline expects continued year-over-year earnings
growth and margin improvement. We expect ASI to continue expanding
its positions in higher-margin, core growth end markets. At the
same time, in line with recent global dynamics, we are seeing
lower-than-expected March quarter demand in Industrial Specialties
markets in emerging regions. In this context, ASI is accelerating
productivity and sales pipeline initiatives."
He concluded: "We have a great
team, aligned around a clear strategy and vision, with a proven
track record of taking the actions required to drive operating and
financial results that will create value for our shareholders. We
are making important gains within ASI's core growth end markets,
Valvoline and with the separation into two great companies."
Conference Call
Webcast
Ashland will host a live webcast of its first-quarter conference
call with securities analysts at 9 a.m. EST Tuesday, January 26,
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 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, including the proposed
separation of its specialty chemicals and Valvoline businesses, the
expected timetable for completing 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 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 separation; the potential that the new Ashland
and Valvoline do not realize all of the expected benefits of the
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); 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
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.
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
Q1 2016 Earnings Prepared Remarks -
FINAL
Q1 2016 Earnings Release Slides - FINAL
Q1 2016 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#1981067
Ashland (NYSE:ASH)
Historical Stock Chart
From Mar 2024 to Apr 2024
Ashland (NYSE:ASH)
Historical Stock Chart
From Apr 2023 to Apr 2024