Ashland Inc. (NYSE: ASH) today announced financial results1 for the
fourth quarter of fiscal year 2023, which ended September 30, 2023,
together with its fiscal year 2023 results summary and
first-quarter fiscal 2024 outlook. The global additives and
specialty ingredients company holds leadership positions in
high-quality, consumer-focused markets including pharmaceuticals,
personal care and architectural coatings.
Sales were $518 million, down eighteen percent
versus the prior-year quarter. Results during the quarter reflect
market-demand dynamics and underlying business performance that
were generally consistent with previously communicated
expectations. Pricing remained favorable for all segments other
than Intermediates. Volumes during the quarter continued to be
negatively impacted by customer inventory destocking across most
end markets. Foreign currency favorably impacted sales by
approximately two percent.
Net loss was $4 million, down from $57 million
of income in the prior-year quarter. Loss from continuing
operations was $8 million, down from $60 million of income in the
prior-year quarter, or a loss of $0.15 per diluted share, down from
income of $1.09. Adjusted income from continuing operations
excluding intangibles amortization expense was $21 million, down
from $80 million in the prior-year quarter, or $0.41 per diluted
share, down from $1.46. Adjusted EBITDA was $74 million, down fifty
percent from $147 million in the prior-year quarter, driven
primarily by continued customer inventory destocking across most
end markets and additional inventory-reduction actions taken to
better position the company for more conservative demand
scenarios.
Average diluted shares outstanding totaled 51
million as of September 30, 2023, down from 55 million in the
prior-year quarter, following the company’s share repurchase
activities during the fiscal year. Earlier in fiscal year 2023,
Ashland’s Board of Directors approved a new $1 billion evergreen
share repurchase authorization.
Cash flows provided by operating activities
totaled $130 million, down from $179 million in the prior-year
quarter. Ongoing free cash flow2 totaled $104 million compared to
$93 million in the prior-year quarter, reflecting the company’s
efforts to reduce its inventory balances.
“Results in the September quarter were
consistent with the earnings update we issued last week,” said
Guillermo Novo, chair and chief executive officer, Ashland.
“Customer demand was generally consistent with our expectations in
the fourth quarter. While we are seeing certain signs of
stabilizing demand and reduced destocking actions by customers,
there continues to be limited visibility regarding the timing of
demand normalization.”
“As a result, we proactively took additional
inventory-control actions to manage production, reduce inventory
levels and drive stronger free cash flow generation,” continued
Novo. “Although these actions will better position Ashland to
operate in an uncertain and potentially lower demand environment,
they resulted in Adjusted EBITDA for the quarter and full year that
were below our original expectations. To drive improved
performance, we are taking portfolio and investment actions during
fiscal year 2024.”
Reportable Segment
PerformanceTo aid in the understanding of Ashland’s
ongoing business performance, the results of Ashland’s reportable
segments are described below on an adjusted basis. In addition,
EBITDA and adjusted EBITDA are reconciled to operating income in
Table 4. Free cash flow, ongoing free cash flow and adjusted
operating income are reconciled in Table 6 and adjusted income from
continuing operations, adjusted diluted earnings per share and
adjusted diluted earnings per share excluding intangible
amortization expense are reconciled in Table 7 of this news
release. These adjusted results are considered non-GAAP financial
measures. For a full description of the non-GAAP financial
measures used, see the “Use of Non-GAAP Measures” section that
further describes these adjustments below.
Life SciencesSales were $203
million, down five percent from the prior-year quarter. Sustained
pricing was more than offset by customer destocking in most end
markets. Pharma demand remained healthy, though volumes declined
compared to a strong prior-year period. Sales to nutrition
customers remain weak due to persistent customer destocking. Sales
of Nutraceuticals products demonstrated a solid recovery compared
to a weak prior year. Foreign currency favorably impacted sales by
$5 million or two percent.
Adjusted operating income was $31 million
compared to $40 million in the prior-year quarter. Adjusted EBITDA
was $48 million compared to $57 million in the prior-year quarter,
primarily reflecting the impact of favorable pricing, lower volumes
and $6 million of inventory-control actions. Foreign currency
favorably impacted adjusted EBITDA by $5 million, or nine
percent.
Personal CareSales were $146
million, down twenty-two percent from the prior-year quarter.
Customer destocking across end markets more than offset sustained
pricing. Foreign currency favorably impacted sales by $5 million or
three percent.
Adjusted operating income was $14 million
compared to $35 million in the prior-year quarter. Adjusted EBITDA
was $36 million compared to $56 million in the prior-year quarter,
primarily reflecting the impact of lower volumes and $5 million of
inventory-control actions. Foreign currency favorably impacted
adjusted EBITDA by $3 million, or five percent.
Specialty AdditivesSales were
$144 million, down twenty-three percent from the prior-year
quarter, primarily reflecting customer destocking across end
markets, with architectural coatings less impacted by comparison.
Foreign currency favorably impacted sales by $3 million or two
percent.
Adjusted operating loss was $12 million,
compared to income of $24 million in the prior-year quarter.
Adjusted EBITDA was $8 million compared to $43 million in the
prior-year quarter, primarily reflecting the impact of lower
volumes and $38 million of inventory-control actions. Foreign
currency favorably impacted adjusted EBITDA by $1 million, or two
percent.
IntermediatesSales were $37
million down forty-two percent from the prior-year quarter, driven
by lower pricing and volumes for both merchant and captive sales.
Captive internal butanediol (BDO) sales are recognized at
market-based pricing which was down compared to the prior-year
quarter.
Adjusted operating income was zero compared to
$14 million in the prior-year quarter. Adjusted EBITDA was $3
million, including $9 million of inventory-control actions,
compared to $17 million in the prior-year quarter.
Unallocated &
OtherUnallocated and Other expense was $43 million
compared to $34 million in the prior-year quarter. Adjusted
Unallocated and Other expense EBITDA was $21 million compared to
$26 million in the prior-year quarter, primarily reflecting lower
incentive compensation accruals.
Fiscal Year 2023 Results
SummarySales were $2.2 billion, down eight percent from
the prior year. Sustained pricing and resilient demand for
pharmaceutical products was more than offset by persistent customer
inventory destocking across most other end markets since early in
the fiscal year.
Net income was $178 million, down from $927
million in the prior year. Net income in fiscal year 2022 included
income from discontinued operations related to the sale of the
Performance Adhesives business. Income from continuing operations
was $168 million, down from $181 million in the prior year, or
$3.13 per diluted share, down from $3.20. Adjusted income from
continuing operations excluding intangibles amortization expense
was $218 million, down from $322 million in the prior year, or
$4.07 per diluted share, down from $5.70.
Adjusted EBITDA was $459 million, down
twenty-two percent from $590 million in the prior year. Adjusted
EBITDA margin decreased to twenty-one percent, a 380 basis-point
decrease compared to the prior year.
Cash flows provided by operating activities
totaled $294 million, up from $193 million in the prior year.
Ongoing free cash flow2 totaled $217 million compared to $127
million in the prior year, primarily driven by improved working
capital inflows driven by inventory-reductions actions taken during
the second-half of the year.
Financial OutlookAs part of its
regular financial planning process and in concert with extensive
customer discussions, the company has analyzed numerous
demand-recovery scenarios for fiscal year 2024. While there is
evidence that customer destocking across many end markets is
slowing, a great deal of uncertainty remains. The company’s view is
that recovery is likely to be back-end loaded into the second half
of the fiscal year. In addition, consideration for the impact in
fiscal 2024 of the announced portfolio-optimization actions is
being layered into forecast models as the commercial teams engage
with customers. Given the overall uncertainty, at this time the
company is not issuing an outlook for fiscal year 2024 but will
provide an update regarding its financial outlook during its
fiscal-first quarter earnings call.
For the fiscal-first quarter, demand in October
has demonstrated some sequential improvement, though customer
destocking continues across many end markets. First-quarter
financial results will include carryover impacts from internal
inventory-control actions that will negatively impact results
compared to prior year. Customer order lead times have returned to
more normalized levels and November orders are consistent with
expectations. At this time, visibility into December demand is
limited and uncertainty remains as to whether some customers decide
to take year-end inventory control actions. Taking these factors
into account, for the fiscal-first quarter the company expects
sales in the range of $470 million to $490 million and adjusted
EBITDA in the range of $55 million to $65 million.
“As I stated last week, we are repositioning
Ashland to further reduce our participation in lower profitability
markets where we do not have strong leadership positions. We plan
to redeploy assets to support productivity or growth in the new
technology platforms we outlined at our Innovation Day in early
September,” continued Novo. “These actions further enhance focus on
our pharmaceuticals, personal care and coatings businesses and
position the company well for improved performance and
profitability. I look forward to discussing our fiscal-fourth
quarter financial results and outlook in more detail during our
earnings call and webcast tomorrow morning,” concluded Novo.
Conference Call WebcastThe
company’s live webcast with securities analysts will include an
executive summary and detailed remarks. The live webcast will take
place at 8 a.m. ET on Thursday, November 9, 2023. Simultaneously,
the company will post a slide presentation in the Investor
Relations section of its website at
http://investor.ashland.com.
To access the call by phone, please go to this
registration link and you will be provided with dial in details. To
avoid delays, we encourage participants to dial into the conference
call fifteen minutes ahead of the scheduled start time.
Following the live event, an archived version of
the webcast and supporting materials will be available for 12
months on http://investor.ashland.com.
Use of Non-GAAP MeasuresAshland
believes that by removing the impact of depreciation and
amortization and excluding certain non-cash charges, amounts spent
on interest and taxes and certain other charges that are highly
variable from year to year, EBITDA, adjusted EBITDA, EBITDA margin
and adjusted EBITDA margin provide Ashland’s investors with
performance measures that reflect the impact to operations from
trends in changes in sales, margin and operating expenses,
providing a perspective not immediately apparent from net income,
operating income, net income margin and operating income margin.
The adjustments Ashland makes to derive the non-GAAP measures of
EBITDA, adjusted EBITDA, EBITDA margin and adjusted EBITDA margin
exclude items which may cause short-term fluctuations in net income
and operating income and which Ashland does not consider to be the
fundamental attributes or primary drivers of its business. EBITDA,
adjusted EBITDA, EBITDA margin and adjusted EBITDA margin provide
disclosure on the same basis as that used by Ashland’s management
to evaluate financial performance on a consolidated and reportable
segment basis and provide consistency in our financial reporting,
facilitate internal and external comparisons of Ashland’s
historical operating performance and its business units, and
provide continuity to investors for comparability purposes. EBITDA
margin and adjusted EBITDA margin are defined as EBITDA and
adjusted EBITDA divided by sales for the corresponding period.
Key items, which are set forth on Table 7 of
this release, are defined as financial effects from significant
transactions that, either by their nature or amount, have caused
short-term fluctuations in net income and/or operating income which
Ashland does not consider to reflect Ashland’s underlying business
performance and trends most accurately. Further, Ashland
believes that providing supplemental information that excludes the
financial effects of these items in the financial results will
enhance the investor’s ability to compare financial performance
between reporting periods.
Tax-specific key items, which are set forth on
Table 7 of this release, are defined as financial transactions, tax
law changes or other matters that fall within the definition of key
items as described above. These items relate solely to tax
matters and would only be recorded within the income tax caption of
the Statement of Consolidated Income. As with all key items,
due to their nature, Ashland does not consider the financial
effects of these tax-specific key items on net income to be the
most accurate reflection of Ashland’s underlying business
performance and trends.
The free cash flow metrics enable Ashland to
provide a better indication of the ongoing cash being generated
that is ultimately available for both debt and equity holders as
well as other investment opportunities. Unlike cash flow provided
by operating activities, free cash flow and ongoing free cash flow
include the impact of capital expenditures from continuing
operations and other significant items impacting free cash flow,
providing a more complete picture of current and future cash
generation. Free cash flow, ongoing free cash flow, and free
cash flow conversion are non-GAAP liquidity measures that Ashland
believes provide useful information to management and investors
about Ashland’s ability to convert Adjusted EBITDA to ongoing free
cash flow. These liquidity measures are used regularly by
Ashland’s stakeholders and industry peers to measure the efficiency
at providing cash from regular business activity. Free cash flow,
ongoing free cash flow, and free cash flow conversion have certain
limitations, including that they do not reflect adjustments for
certain non-discretionary cash flows such as mandatory debt
repayments. The amount of mandatory versus discretionary
expenditures can vary significantly between periods.
Adjusted diluted earnings per share is a
performance measure used by Ashland and is defined by Ashland as
earnings (loss) from continuing operations, adjusted for identified
key items and divided by the number of outstanding diluted shares
of common stock. Ashland believes this measure provides
investors additional insights into operational performance by
providing earnings and diluted earnings per share metrics that
exclude the effect of the identified key items and tax specific key
items.
Adjusted diluted earnings per share, excluding
intangibles amortization expense metric enables Ashland to
demonstrate the impact of non-cash intangibles amortization expense
on earnings per share, in addition to key items previously
mentioned. Ashland’s management believes this presentation is
helpful to illustrate how previous acquisitions impact applicable
period results.
About Ashland
Ashland Inc. (NYSE: ASH) is a global additives and specialty
ingredients company with a conscious and proactive mindset for
environment, social and governance (ESG). The company serves
customers in a wide range of consumer and industrial markets,
including architectural coatings, construction, energy, food and
beverage, nutraceuticals, personal care and pharmaceutical.
Approximately 3,800 passionate, tenacious solvers thrive on
developing practical, innovative and elegant solutions to complex
problems for customers in more than 100 countries.
Visit ashland.com and ashland.com/ESG to learn
more.
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,”
“objectives,” “may,” “will,” “should,” “plans” and “intends” and
the negative of these words or other comparable terminology.
Ashland may from time to time make forward-looking statements in
its annual reports, quarterly reports and other filings with the
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, financial, operating cash
flow and liquidity, as well as the economy and other future events
or circumstances. These statements include but may not be limited
to Ashland’s expectations regarding its ability to drive sales and
earnings growth and manage costs.
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
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 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); severe weather, natural disasters, public
health crises, cyber events and legal proceedings and claims
(including product recalls, environmental and asbestos matters);
the effects of the ongoing Ukraine and Russia conflict, on the
geographies in which we operate, the end markets we serve and on
our supply chain and customers, and without limitation, risks and
uncertainties affecting Ashland that are described in Ashland’s
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. Various risks and uncertainties may cause
actual results to differ materially from those stated, projected or
implied by any forward-looking statements. 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.
1Financial results are preliminary until
Ashland’s Form 10-K is filed with the U.S. Securities and Exchange
Commission.
2The ongoing free cash flow metric excludes the
impact of inflows and outflows from U.S. Accounts Receivable Sales
Program and payments related to restructuring and environmental and
litigation-related matters in both the current-year and prior-year
periods.
™ Trademark, Ashland or its subsidiaries,
registered in various countries.
FOR FURTHER INFORMATION:
Investor Relations: |
Media Relations: |
Seth A. Mrozek |
Carolmarie C. Brown |
+1 (302) 594-5010 |
+1 (302) 995-3158 |
samrozek@ashland.com |
ccbrown@ashland.com |
- Q4_2023_Earnings_Release_ 20231108
- Q4_2023_Earnings_Release_ with Tables_20231108
- ER Tables Q4 FY23 FNL 11.3.23
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