Ashland Inc. : Ashland Inc. reports preliminary financial results for second
quarter of 2013
Earnings from continuing operations equal $0.68 per diluted share; adjusted
EPS, excluding key items, is $1.78 per diluted share
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 quarter ended March 31, 2013, the
second quarter of its 2013 fiscal year.
(in millions except per-share amounts) Quarter Ended
Operating income $ 205 $ 179
Key items* 23 42
Adjusted operating income* $ 228 $ 221
Adjusted EBITDA* $ 339 $ 329
Diluted earnings per share (EPS)
From net income $ 0.66 $ 1.10
From continuing operations $ 0.68 $ 1.13
Key items* 1.10 0.39
AdjustedEPSfromcontinuingoperations* $ 1.78 $ 1.52
Cash flows provided by operating activities
from continuing operations $ 158 $ 210
Free cash flow* 144 155
* See Tables 5, 6 and 7 for definitions and U.S. GAAP
Ashland reported income from continuing operations of $55 million, or $0.68
per diluted share, on sales of $2.0 billion. These results included several
key items that together reduced income from continuing operations by
approximately $88 million, net of tax, or $1.10 per diluted share. The two
largest key items were related to debt refinancing during the quarter. The
company incurred a $34 million after-tax cash expense related to the
termination of interest-rate swaps and a $32 million after-tax non-cash charge
related to accelerated debt issuance and other costs. Excluding all key items,
Ashland's adjusted earnings per share rose 17 percent, to $1.78, when compared
to the year-ago quarter.
For the year-ago quarter, Ashland reported income from continuing operations
of $90 million, or $1.13 per diluted share, on sales of $2.1 billion. The
year-ago results included three key items that had a combined negative effect
of $31 million, net of tax, or 39 cents per diluted share. Excluding these
items, adjusted income from continuing operations was $121 million, or $1.52
per diluted share. (Please refer to Table 5 of the accompanying financial
statements for details of key items in both periods.)
For the remainder of this news release, financial results 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 were $2.0 billion, a decline of 5 percent;
*Operating income increased 3 percent to $228 million;
*Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 3 percent to $339 million; and
*EBITDA as a percent of sales increased 140 basis points to 17.2 percent.
"We faced a number of challenges in the second quarter, including economic
weakness in several key regions, particularly Europe," said James J. O'Brien,
Ashland chairman and chief executive officer. "Each of our four commercial
units reported year-over-year declines in sales in the face of soft demand.
From a sequential standpoint, our performance was more encouraging. Sales at
Ashland Specialty Ingredients grew 10 percent compared to the December
quarter. Ashland Water Technologies' performance has stabilized, and we expect
continued improvement going forward. Ashland Performance Materials improved
from the December quarter, with gains in sales and volumes consistent with
seasonality. Ashland Consumer Markets turned in another strong earnings
performance, both sequentially and year-over-year, as lower raw-material costs
drove significant gains in EBITDA. During the second quarter, we also
strengthened our capital structure by restructuring our debt to lock in
attractive interest rates, extend our maturity schedule and put in place
Business Segment Performance
In order 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.
Ashland Specialty Ingredients' sales totaled $682 million, a decline of 6
percent when compared to a year ago. EBITDA declined 16 percent, to $156
million, while EBITDA as a percent of sales was 22.9 percent, down 280 basis
points versus the year-ago quarter.
The EBITDA decline was driven primarily from selling straight-guar inventory,
which was written down to market value in the first quarter and sold at no
margin in the second quarter. In addition, Specialty Ingredients experienced
lower volumes in the intermediates and solvents business, which accounted for
the majority of Specialty Ingredients' overall decline in the quarter.
Specialty Ingredients' non-guar energy business performed well with a 33
percent increase in sales versus the prior-year quarter. Sales and volumes in
personal care were flat year over year, with growth in hair and oral care
offset by home and skin care. On a sequential basis, Specialty Ingredients'
EBITDA rose 34 percent and EBITDA margin increased 430 basis points.
Ashland Water Technologies reported sales of $424 million in the March 2013
quarter, a decline of 1 percent from the year-ago quarter. Normalizing for
currency effects and adjusting for divestitures, sales would have been up 1
percent. EBITDA was flat at $39 million. EBITDA as a percent of sales was 9.2
percent, up 10 basis points. On a sequential basis, EBITDA rose 15 percent and
EBITDA margin increased 110 basis points. During the second quarter, Water
Technologies' paper business reported improved results. Two-thirds of the
paper business' sales come from the growing tissue and towel and packaging
markets, where Ashland is a global leader. However, Water Technologies'
industrial water business, which includes both utility water and municipal
wastewater treatment, has faced continuing challenges. A new management team
with proven success in this space has been brought in to drive top-line growth
and improved execution. In March, Water Technologies reorganized into two
global business units - pulp and paper chemicals, and industrial water - to
simplify the organization, sharpen the strategic focus and improve execution.
Ashland Performance Materials reported sales of $374 million, an 8-percent
decrease compared to a year ago. EBITDA declined 6 percent to $33 million,
while EBITDA as a percent of sales grew 20 basis points to 8.8 percent.
Overall volumes were down 6 percent from the year-ago quarter, primarily due
to lower demand for elastomers resulting from a weak North American
replacement tire market. During the quarter, volume in adhesives and
composites increased 9 percent sequentially, primarily reflecting seasonal
improvement in North America.
Ashland Consumer Markets reported record second-quarter income driven by lower
raw-material costs and improved results across nearly every segment of the
business, with particularly strong results in Valvoline Instant Oil Change^SM
and in Valvoline's International business. Although lubricant volumes declined
4 percent on a year-over-year basis, they rose 6 percent on a sequential
basis. While year-over-year sales decreased 5 percent to $494 million, EBITDA
rose 33 percent to $88 million. EBITDA as a percent of sales was 17.8 percent,
an increase of 510 basis points versus the year-ago quarter.
After excluding the effects from key items, Ashland's effective tax rate for
the March 2013 quarter was 24 percent. Ashland now expects the effective tax
rate for the full 2013 fiscal year to be in the range of 25-27 percent.
"Despite facing soft demand and economic challenges in a number of markets, we
were able to increase adjusted earnings per share by 17 percent and generate
$144 million in free cash during the quarter," O'Brien said. "Overall, our
Specialty Ingredients business held up well during a tough economic
environment and Water Technologies has stabilized. Performance Materials'
adhesive and composites businesses benefited from an increase in seasonal
demand and Consumer Markets turned in another great quarter."
In late 2011, Ashland outlined a plan to increase earnings to a range of
$9.50-$10.50 per share and to grow EBITDA to $1.7 billion by fiscal 2014. That
three-year plan was based on business forecasts as well as a variety of
assumptions related to global economic growth, market demand and other
"We are now halfway through that three-year plan and the reality is that some
of those expectations, particularly those related to growth in emerging
markets, have not materialized. As a result, our recent performance has been
below target," O'Brien explained. "In light of the broader economic challenges
and market softness Ashland is facing in a number of key regions around the
world, it is now unlikely that we will be able to achieve that range for
earnings per share or EBITDA."
He said that while fiscal 2013 is shaping up to be more challenging than
originally expected, Ashland's strategic focus has not changed.
"We will continue to look for ways to drive improvements that will lead to
sustained sales and earnings growth. Since beginning our transformation into a
specialty chemical company in 2004, we have executed our strategy of acquiring
higher-margin businesses with strong growth potential, while divesting
cyclical or underperforming businesses and returning capital to our
shareholders. As a result, we have dramatically reshaped the company and
positioned Ashland for long-term success. We remain fully committed to
unlocking value and generating significant returns for Ashland shareholders,"
Conference Call Webcast
Ashland will host a live webcast of its second-quarter conference call with
securities analysts at 9 a.m. EDT Wednesday, April 24, 2013. 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.
In more than 100 countries, the people of Ashland Inc. (NYSE: ASH) provide the
specialty chemicals, technologies and insights to help customers create new
and improved products for today and sustainable solutions for tomorrow. Our
chemistry is at work every day in a wide variety of markets and applications,
including architectural coatings, automotive, construction, energy, food and
beverage, personal care, pharmaceutical, tissue and towel, and water
treatment. Visit ashland.com to see the innovations we offer through our four
commercial units - Ashland Specialty Ingredients, Ashland Water Technologies,
Ashland Performance Materials and Ashland Consumer Markets.
- 0 -
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," "may," "will," "should" and "intends" and the negatives of these
words or other comparable terminology. In addition, Ashland may from time to
time make forward-looking statements in its 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),
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. Ashland undertakes no obligation to subsequently update any
forward-looking statements made in this news release or otherwise except as
required by securities or other applicable law.
^(1) Preliminary Results
Financial results are preliminary until Ashland's Form 10-Q for the quarter
ended March 31, 2013, is filed with the SEC.
^SMService mark, Ashland or its subsidiaries, registered in various countries
FOR FURTHER INFORMATION:
+1 (859) 815-4454
+1 (859) 815-3047
Ashland Financial Tables
This announcement is distributed by Thomson Reuters on behalf of Thomson
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other
applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of
information contained therein.
Source: Ashland Inc. via Thomson Reuters ONE
Press spacebar to pause and continue. Press esc to stop.