Ashland Global Holdings Inc. (ASH) on Q3 2021 Results - Earnings Call Transcript
Operator: Good day. And thank you for standing by, and welcome to the Ashland Global Holdings Inc. Third Quarter 2021 Earnings Call. At this time, all participants' are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Seth Mrozek, Ashland Director of Investor Relations. Please go ahead. Seth Mrozek: Thank you, Justin. Good morning everyone, and welcome to Ashland's Third Quarter Fiscal Year 2021 Earnings Conference Call and Webcast. My name is Seth Mrozek, Director, Ashland Investor Relations. Guillermo Novo: Thank you, Seth, and good morning to everyone. Thank you for your interest in Ashland and your participation this morning. Before I start, I will like to clarify that we will not be making any comments or responding to any questions about our ongoing strategic review process for our Performance Adhesive business. For now, I would just comment that the process is well underway and going well with significant interest. As you will hear during the call, in line with our June 10th update, the major issues impacting our Q3 performance revolved around the supply chain challenges linked to shipping constraints and raw material availability as well as the pace of raw material cost inflation. For the most part, market dynamics for our underlying businesses or business performance behaved in line with our commentary from prior calls. Despite the supply chain headwinds, we continue to operate safely with a clear focus on the safety and wellbeing of our employees as we manage through the challenges of the pandemic. I'm also pleased by the progress our business units are making as we continue to execute our strategy. Before I comment on a Q3 performance, let me start by summarizing some of the tailwinds and headwinds we saw in the quarter. From the tailwind side, our self-help cost side savings activities progress as planned. We continue to see strong recovery in industrial and market demand and our nutraceuticals and nutrition business continue to deliver improved performance. We saw favorable impact of FX of the Schulke acquisition and BDO pricing. And our capital discipline also delivered strong free cash flow and pre-cash flow conversion. On the headwind side, global constraints on logistics and shipping continue to impact sales and cost. As an example, June confirmed orders for direct shipments to customers on ocean freight were impacted by the significant drop in on-time shipping liability. This has been like recurring theme for the last few months. For June, we had $20 million to $30 million of orders that were at warehouses ready to be loaded on ships but were not invoiced due to delays in shipping arrivals and loading. Most of these orders were invoiced in early July. Indications are that the shipping liability challenges will persist for the foreseeable future. Raw material availability continues to be a challenge causing on-plan shutdowns as well as inefficiencies in our manufacturing productivity that negatively impacted cost. For our Performance Adhesives business, volume was strong but the magnitude and pace of raw material inflation impacted margins. Kevin Willis: Thank you, Guillermo. And good morning, everyone. Please turn to Slide 08. Total Ashland sales in the quarter were $637 million up a 11% versus prior year. Favorable currency contributed 3% growth during the quarter. Excluding key items, SG&A, R&D and intangible amortization costs increased modestly to a $118 million in the quarter primarily reflecting increases to incentive accruals and differed compensation plus the addition of the Schulke & Mayr business. In total, Ashland's adjusted EBITDA was a $148 million a 4% increase compared to the prior year adjusted EBITDA of a $143 million. Ashlands adjusted EBITDA margin was 23.2%, a 170 basis point decline compared to prior year again reflecting the items discussed above. Adjusted EPS excluding acquisition amortization was a $1.22 per deluded share up 9% from the prior year. Now, let's review the results of each of our three business groups. Please turn to Slide 09. First, I'll begin with consumer specialties. Sales were $340 million down 1% from the prior year quarter. Currency favorably impacted sales by 3%. Within Life Sciences, pharma sales were down compared to the strong prior year quarter and our customers built inventory levels as the pandemic's impact on the global supply chain was in question. Nutraceutical sales were again up double-digits as the team has done an excellent job stabilizing and growing the business. Sales to nutrition and other end-markets also grew by double-digits reflecting improved trends for consumer dining behavior. In total, life science's sales increased 2% during the quarter inclusive of favorable currency. Sales to Personal Care end-markets were down 6% during the quarter due to several factors. The global pandemic continues to impact certain consumer behaviors related to hair styling, sun care and oral care in the context of social activities, leisure activities and mask wearing. In addition, demand for ingredients used in hand-sanitizer formulations have normalized at our below prior year levels. We also closed on the Schulke & Mayr acquisition during the quarter which contributed roughly two months of sales and earnings to personal care results. The integration is proceeding as planned and we're excited about the future growth opportunities that the team and technology bring to our portfolio. For all of consumer specialties, lower manufacturing and SARD expenses led to improve adjusted EBITDA margins of 27.1% a 90 basis point increase over prior year. Guillermo Novo: Thank you, Kevin. Please turn to Slide 14. As we look at our market demand outlook, we continue to see positive dynamics. Life Science demand is expected to remain strong for pharma, nutraceuticals and nutrition. Although there are still some uncertainty regarding the pace of COVID reopening in the U.S. where reopening has started to take place, our Personal Care business is starting to see some strengthening in demand. Although a small part of our portfolio, I would note that we do not expect to see any recovery in the hand-sanitizer application. Industrial demand is expected to continue to remain strong. And although it's a small part of our portfolio, I would also note that we are starting to see demand recovery in the energy end markets. Clearly the biggest risk and uncertainty to revenue and margins will continue to come from the supply-chain and raw-material challenges the world is experiencing. As a result, given their broadened uncertain nature, it's very difficult for us to forecast their impact. As we did last year at the beginning of COVID, rather than trying to predict the unknown, we're focussing on building resilience so that we can respond quickly to developments maximizing the positive and minimizing the negatives. Please turn to Slide 15. With that context in mind, we continue to maintain our full-year guidance for sales of $2.4 billion to $2.5 billion and EBITDA of $570 million to $590 million range. This outlook is based on expected continued demand in industrial segments, continued stable demand in life science and no significant acceleration of global demand recovery in Personal Care. No changes in our underlying operating performance, pricing actions continue to be implemented to offset higher raw material costs and the acquired Schulke business will contribute favourably to the business. Although we have factored in some of the impact of the current supply chain dynamics on our business, we cannot forecast unique one-off events that are unknown. To qualify our guidance, excluding the Schulke acquisition, our outlook would be in the lower end of the range. With the Schulke acquisition results included, our outlook would be in the middle of the range. We are not forecasting any major one-off items caused by supply-chain issues such as plant shutdowns or major raw material shortfalls. Additionally, quarter-end logistics uncertainty could have a positive or negative 3% to 5% impact on revenue in the quarter. Please turn to Slide 16. In summary, I'm pleased to report that regardless of the supply chain and raw material headwinds, our business units are performing well, continue to drive improvement and execute their strategy. We are maintaining our long-term focus on growth, business resilience, margin expansion and free cash flow conversions. However, we do recognize the added focus and urgency on managing through these near-term supply-chain challenges. Managing pricing and raw material dynamics to recover margins and building operating resilience through improved planning, communication with our suppliers and customers and cost management. We manage through higher levels of uncertainty and change during 2020 and I am confident that our business units and teams are ready to manage through the current supply-chain challenges. Please turn to Slide 23. In closing, I want to thank the Ashland team once again for the leadership and for active ownership of their business in an uncertain environment. We're fortunate to be a premier specialty materials company with high-quality businesses that have leadership positions in defensive markets. I am pleased with the resilience demonstrated by our people and businesses and look forward to the opportunities that lie ahead. Thank you for your attention and operator let's open up for Q&A. Operator: And thank you. And our first question comes from John McNulty from BMO Capital Markets. Your line is now open. John McNulty: Yes, thanks for taking my question. So, I guess a question on how to think about the fourth quarter because I think based on where 3Q ended you're looking for what should be EBITDA that kind of improves by $20+ million kind of even at the low-end of the range. And yet, it sounds like a lot of these freight issues that kind of plagued you in the rest of the industry, it sounds like a lot of these are still really kind of reeking habit on things. So, I guess what confidence do you have that you can kind of get that incremental improvement and start this kind of catch up when it comes to the freight side. Can you help us to think about that? Guillermo Novo: I think the important perspective to have is unlike another situation, most of the discussion and most of the outlook is based on what does demand what or how our customers positioning in terms of their needs for products. And the fact as it's still very strong across the board. We have a lot of orders in hand, so we're confident what we have at hand. The issue now the question is how do we forecast some of these uncertainties. We have factored in some of the items that impacted our demand of especially around raw material availability. We had some plant closings, those kinds of things that we don’t expect to be repeated. So, we factored that in. I think as we felt qualified in our guidance, we do recognize that there's going to be some degree of uncertainty, we cannot plan for a major force measure by supplier like we have this quarter. Things are improving, so we expect some of these things to ease off. For us, I think one of the unique things for us, it's about the shipping. Really, that's the biggest problem for us. We had constraints in supply chain availability but we actually were able to produce and deliver a lot of our core demand that we had planned. The shipping is the part that really is out of our control. As I said in the example, we have the material ready and ready to ship. So, I think we've captured that in some of the outlook. And then, and frankly there's potential upside, it's not just downside that we could see in the quarter. We're talking about what's going to happen at the end of the quarter, September the last two weeks of September is what's going to define things. So, it's very hard for us to forecast that and it's easy to be very negative. If you want to pile all that but there's no real foundation for that negativity in terms of concrete facts that we have at our disposal at this point-in-time. So, we'll provide additional update if we need to but this is our best estimate at the time. Kevin Willis: Yes, I completely agree with that, Guillermo. The only thing I would add is the teams across the board have been taking significant pricing actions and John we would expect some positive impact during Q4 from pricing actions that have been taken during Q3 and early end of Q4. So, that should provide us with some improved momentum. And there were some one-off items from the operating cost perspective that could also be a net positive also. And but it's really it really is about the ship. John McNulty: Okay. Guillermo Novo: Current -- and to just build on Kevin's outlook. Current outlook would be especially in the Adhesive business that margins would recover by the end of the quarter. Like the part that we don’t know is there are more incremental inflation that will come, we'll have to react to that as it comes. John McNulty: Got it. And that's helpful colour. And that actually goes to kind of the final question that I had. When you think about the raw material inflation that you saw in the quarter and the price difference from that, I guess can you quantify that and maybe just answered it a little bit on the last answer. But how much of that do you think you actually get back as we look into 4Q? Kevin Willis: Yes. I think in raw material, I mean I would look at some what are the core drivers and then there's noise across the board if you look at the broader things on smaller items. But the two big items are the Adhesives and that's pretty very you know it's very clear across the industry and it's really about the pass on the ability to pass on and the speed, more than the ability the speed of passing on. We have in moving on pricing, we've recovered most of the past increases, it's just that the pace of these new pricing raw material increases we just need to catch up with that. So, that's being played out. I think the other big impact and it impacts mostly Life Science and Personal Care but mostly Life Science is BDO which is a core raw material and we are transferring at market. So, we're seeing the inflation coming through and they're moving on pricing too. Obviously we're seeing the benefit in the I&S segment at this point-in-time. But those are the two areas that are the biggest drivers. The rest, I would classify as just broad-based inflation on secondary raw materials and freight and those kinds of things which we're also managing through. John McNulty: Great. Thanks very much for the colour. Kevin Willis: Thank you. Operator: Thank you. And our next question comes from John Roberts from UBS. Your line is now open. John Roberts: Thank you. I know you're not taking questions on the adhesive review process but what would be the priority for the proceeds? Guillermo Novo: John, we'll be communicating all that once we have our plans for next year and once there's clarity on what's going to happen. But obviously growth is a major priority for us as we look at where we want to invest and our capital allocation to where we order shareholders is also going to be a big part of what we do. So, more to come there but this that is a very important part of our longer-term plans for the portfolio. John Roberts: Okay. And although some of us I guess would like to see I&S at least deconsolidated, this was probably a pretty good quarter to have it in the fold. What's the outlook for that business, I mean you had the highest earnings I think since you've been reporting that segment. Does it stay up for one more quarter or does it spike back down? Guillermo Novo: I think we will. We see continued strength at least during the fourth quarter, I think we'll see how things play out starting 2022. I think some of the shipping dynamics and things like that is when we look at global supply-chains, we'll have an impact to how that does the pricing evolves. But I think into 2022 we'll see some softening on pricing there. John Roberts: Okay. But not in this September quarter? Guillermo Novo: Not in the September quarter. John Roberts: Thank you. Guillermo Novo: It should continue to be strong. Operator: Thank you. And our next question comes from Jeff Zekauskas from JPMorgan. Your line is now open. Jeff Zekauskas: Thanks, very much. Can you talk about the pricing trends in your industrial businesses, what were prices up in the quarter, what are the price increases that you're trying to put through? How much more raw materials up, can you supply some granularity of the tale. Kevin Willis: So, we've been moving on pricing across the board. I would say the biggest area obviously is the Adhesive side of the equation. And the issues I said is not the recovery, it's reacting to the new inflation that has come through in the quarter but we've been moving very aggressively on pricing. I think we dint cover all of the pricing in the quarter if you look at but a lot of it I would say 90% of it we were able to cover in the quarter and the same thing for Q4. So, we -- our expectation right now unless there's another wave of raw-material inflation is that we'll be caught up by the end of the fourth quarter on the pricing side. As I said, in the prior -- go ahead. Guillermo Novo: Yes. No, that does correct and again just to reiterate, most of that is in -- most of that's in Adhesives, there's a little bit in some of the other businesses but it's mostly Adhesives. And the team there is doing a great job on the pricing front. It's just margin recovery, it's going to be the question. Jeff Zekauskas: Okay. Right. Guillermo Novo: And by the end of the Q4, we should be there. Kevin Willis: And the other one is as I mentioned in the prior question is BDO. We've moved on pricing and it'll be very favorable, it was favorable this quarter. We expect it could be very favorable next quarter. In the I&S side, on the consumer side we're passing on, there is a little bit more of a lag there just the way our contracts are set up and how we pass on pricing. So, that will take a little bit longer than the fourth quarter too to catch up on pricing. Those are the main two. I think broader base you know freight cost, secondary raw materials and all that. We are moving on pricing as needed but that's much more specific to product lines, specific product lines. So, it's hard to make the generic or high level comments there. Jeff Zekauskas: What was your organic volume growth in consumer specialties and industrial productions in the quarter? Of volume. Guillermo Novo: The organic growth -- yes, so for total volume growth, Kevin do you have the just the organic side of it because we had the let's call the exits and we had a few other the other items. And I will get back to you with this specific volume number. Jeff Zekauskas: All right. Guillermo Novo: The majority, I mean the majority if you look at it versus prior year as we said in the call, the nutraceutical and nutrition were the parts that were up organically and in the double-digit. So, very strong. The pharma, I think it's much more of the comp versus prior quarter, it's not demand per se, it's with the inventory building that occurred last year. I think that you'll see the next quarter will be much stronger versus the prior year comp for us. I mean, in the Personal Care, most of the businesses if you look at hair care, skin, oral, they were slightly down, it's we're talking basically the marks have been fairly flat. The biggest headwinds for us in volume really although it was small, it's what's been a just a significant drop is the hand-sanitizers and the Avoca. So net-net, we didn’t have a lot of organic growth but within each segments we had significant variation by segment. Kevin Willis: That's right, Guillermo. In total company volume growth is organic volume growth is up 10% year-over-year with the industrial piece being up more than 10% and like you said do is some hand-sanitizer or focus some other items on the consumer side driving that part of the equation. But overall up 10% year-over-year. Jeff Zekauskas: Thank you, very much. Operator: Thank you. And our next question comes from David Begleiter from Deutsche Bank. David Begleiter: Thank you, good morning. Guillermo, as we approach 2022, do you have an early view on how we should think about next year the earnings cadence versus this year? Guillermo Novo: I think overall demand and overall conditions are still very favorable. As you've heard in the call, I mean, we're really talking about reacting to some of these current dynamics. If I look at the longer-term dynamics for each of the business they are all very positive. So, that the -- as we look at 2021, we'll have to see how the supply-chain situation especially the ocean freight I think that's going to take the longest to clarify how it improves. I think raw-materials buying a big storm or something that causes a supply disruption across the entire industry. We should continue to see recovered in that part of it. So, our focus are going to be more on normalizing our business activity around the growth. And that means organic growth is the top priority and it's about innovation and what we're going to be launching. That's going to be a lot of the focus of what we want to cover in on Investor Day. But it's really focusing on some of these longer-term dynamics. And we're very excited and that side we've been making significant progress. Look at the R&D portfolio change that we made as we go into the backend of the fourth quarter and into the early part of 2022, we're going to be making a lot of significant launches of new products and that's when a new second time comes. Promote it from there but we're very positive overall in terms of the longer-term outlook. I think the supply chain is the part like everybody else, we're going to have to manage there. David Begleiter: Very good. And just on Schulke, what did it add in Q3 and what do you think will add in Q4 on both sales and EBITDA? Guillermo Novo: Yes. So, Kevin you may want to provide the numbers out. What I would qualify, this first quarter obviously we had a two months but just the normal transitions, it wasn’t the ongoing run rate impact that was slightly lower just in terms of inventory transitions and all that the normal integration activities but for the next quarter, it should be a more of a normal quarter. But Kevin, you want to provide a little bit of color there? Kevin Willis: Yes. On the EBITDA front, Dave, it'll be high-single digits for the five months that we bounded. Again, as Guillermo indicated, you've got some initial costs on an upfront basis there that we've been dealing with just normal transition stuff but then more normalized been in Q4 from an overall perspective. But do you think high-single digits for this full-year impact. David Begleiter: Thank you. Kevin Willis: And Q4 revenues are going to be call it mid-to-high 20's probably for that business give-or-take. David Begleiter: Great. Thank you very much, Kevin. Kevin Willis: Uh-huh. Operator: And thank you. And our next question comes from Mike Sison from Wells Fargo. Your line is now open. Mike Sison: Hey guys, how are you doing? Guillermo Novo: Hey, Mike. Mike Sison: In terms of your guidance for 2021 the 575 98, and maybe I apologize if I didn’t understand your comments but does that include some degree of negatives and the key risk I recall that, it was something like $5 million to $10 million in the third, so are you including sort of a negative hit in that 70 to 590? Kevin Willis: Yes. So, the $5 million to $10 million was a Q3 comment and you saw we have the actual results. I would say for Q3, the actual was slightly higher than the top of the range that we communicated in June 10th, maybe a million worse. We have been and it's offsets we had little positives and better costs and things that offsetted but that's included in the numbers. So, the 575 90 is the range. Without Schulke, it would be in the lower end of the range. With Schulke, which will a lot of the numbers now and consensus are more built with Schulke. So, the Schulke would be more in the middle. And as I said, the part that we are not forecasting because it's very difficult to predict the unknown is any major force major shutdowns and major raw material availability issue that's not on the radar screen would not be included there. And I do think there is a up plus minus potential on the revenue side because of the supply-chain challenges. And we'll monitor that during the quarter-end and report out if there is any need to give any communication. But we have a lot of pent up demand and as we saw this month, it's not we didn’t have a lot of raw material availability issue for a little missed orders. It was sitting in warehouses ready to load and frankly they were the material was in warehouses by mid-month and did not get invoiced and it really shows I think ocean shipping reliabilities drop to less than 25%. And that's the biggest impact and there's no way we can forecast that. Mike Sison: Got it. And then, for the fourth -- got it -- sorry. Kevin Willis: And so, the teams -- look Mike, the teams are taking into account what new knowledge we have. So, as this has progressed over the last several months, each of the business units has tweaked their processes to do what they can to offset mitigate some of these unknowns. And that said, the unknown unknowns we still don’t know when looking at forecast. But we have forecasted for Q4 what we believed to be our best estimate of what's going to happen. And to Guillermo's point, if we see some big negatives or big positives either of which could happen coming out of the hatch, we'll let you know. I mean, we'll update as if it's appropriate to do so. Mike Sison: Got it. And then, in terms of consumer specialties for the fourth quarter, excluding the 25 or mid-20's in Schulke, will organic sales go term positive and then if you think about that business into '22, now how do you feel about sort of turning the quarter and generating some organic growth? Guillermo Novo: Yes. So, if you look at just to give some color on the lot of the longer-term outlook for the consumer side and I'll go segment-by-segment. I think Personal Care, pharma never really dropped, so there is the recovery here is just the continued growth market plus several 100 basis points that we feel that we can achieve. I think the dynamics and outlook is that that's going to continue. Obviously, the comp this year because of COVID dynamics last year, we're going to have several quarters that might the behaviors of when inventory was built was different but we see continued momentum there. As Kevin mentioned, the nutraceuticals business is this the market has remained strong, the issues we had last year with were are I think you're starting to see just a good recovery, the teams have really got new business. Its margins are improving. This is just hard work from the team and it's starting to payoff. And we do see recovery in the nutrition side of the equation. So, outlook seems very good but I wouldn’t say it’s a recovery of the market, it's the markets are good and it's really how we play them. In Personal Care, I do think we're going to start seeing unless something turns around from the pandemic side, if the vaccination and that was continues to rollout and we still continue to see just a phase the opening, we will see recovery. We're as I mentioned we already starting to see it in the U.S. Hair care for example demand in the U.S. is strengthening and that it is as a result of the opening. So, we hope that will continue, Europe probably will be the next and then it'll carry around. So, more positive momentum for us. I think we will have would behind us the hand-sanitizer dynamics of last year and this year, next year will not be there. So, that won't be a headwind for us. So, it's really going to be more about the demand recovery and the new product launches. We have a lot of new products that we're going to be launching, so we feel very good about the Personal Care side of the equation. And Industrial, I think the big question for Industrial, demand continues to be strong is as we hit the seasonal low that usually comes in our Q1 and Q2 will be stronger than normal because there is a lot of pent up demand in project. So, my outlook right now would be that it will probably be stronger than normal because of that pent up demand. So, overall it's really going to be dependent on the supply-chain questions. Remember, our supply for a lot of these products come out of the U.S. and Europe. So shipping, the issues from China to U.S. or not would impact us. It's more shipping U.S. out and Europe out. This quarter, the biggest challenge in shipping was Europe and the European ports were the biggest problem for us. So as those things open up into next year that will be favorable for us. Mike Sison: Thank you. Operator: And thank you. And our next question comes from Mike Harrison from Seaport Research. Your line is now open. Mike Harrison: Hi, good morning. Guillermo Novo: Hi Mike. Mike Harrison: I wanted to ask a couple questions on your coatings business. You've mentioned that for now DIY and contractor demand remains pretty strong in architectural coatings. Are your additives used more intensively in the types of higher end paints that are used by DIYers such that if we are expecting to see DIY demand come off and contractor activity improve that could actually drag on your additive sales into the coatings market? Guillermo Novo: Yes. So, if you look at our additive coatings the rheology is the biggest one and that's both the cellulose-based being the major driver and then in the synthetics, it would be the Aqua Flow. Aqua Flow goes more into the DIY is broad based across the board. Demand continues to be very strong. We are seeing the DIY market starting to stabilize relative to a very strong prior year. It's still very strong. We are pretty global and we're very broad base in terms of the customer base. Some customers are more DIY focus others are mixed, some are more contractor focus. So, we'll see a little bit of that dynamic of the contractor market probably being the stronger part of the portfolio as we go into next year. I will say HEC as an example the entire market is very tight running out of capacity. So, pricing is going up. So we are going to be investing for added capacity and incremental and more fundamental capacity additions in that area. But the industry is tight and especially given the strong demand for cellulosic both from the recovery of the markets as well as cellulosic in many of the consumer markets obviously more natural based products the demand and interest from new applications is still very high. Mike Harrison: All right, then not really a question on the adhesives process. But just wondering if there will be any stranded costs associated with a potential divestiture there? Can you quantify that and maybe discuss what actions you would be taking in order to counteract those costs? Guillermo Novo: Right. So we are taking actions in terms of our transformation of our portfolio. That's the big theme for our Investor Day as we look at it becoming much more of additive ingredient company, less petrochemical based, more natural based. So this is going to become a much different company with different dynamics. We are factoring all these issues into smaller plants. If you look at actions we're taking the Schulke acquisition, we're planning to grow and replace the impact. So all that will be factored in and we'll communicate more at the appropriate time. But we want to present the full picture of what we want to do and what the company is becoming as we do this transformation. Mike Harrison: All right, thanks very much. Operator: And thank you. And our next question comes from Laurence Alexander from Jefferies. Your line is now open. Laurence Alexander: Good morning. Two questions first. How are you thinking about lumpiness for the next four to eight quarters compared to your normal lumpiness in incremental margins? And secondly as we think about the innovation tailwind in 2022, is it kind of setting a new cadence for the firm or is it going to be significantly above or below normal? Guillermo Novo: So, to your first question on just the demand outlooks and I'm assuming from your question. It's more around plant load and some of the lumpiness – Laurence Alexander: If it helps them really just getting at the level of unpredictability sort of it used to be sort of you'd have like a 2% lumpiness, I think you called out like 3% to 4% just . So, how do you think about the total swing factors quarter by quarter in the current environment and what it normalizes? Kevin Willis: Okay. So the bigger lumpiness that we're seeing right now would have been manufacturing and loading of our plants more than the supply chain costs, logistics costs, I think that's not going to be as lumpy as it's inflating, and we're managing through that. But with regards to our manufacturing side a lot of our demand is very strong in many of our products and we're running the plants fill out. is a great example. I mean the market is very tight at this point in time. So from an operating and some of the lumpiness that used to come from that that'll level off because we'll be producing as much as we can across the year. So, the issue is really going to be more about the demand side of the equation in terms of revenue and as I said, especially on the industrial side I do think that we're going to see continued strength into the first and second quarter which tend to be from the lumpiness perspective where a lot of the seasonality comes in and we might not see as much seasonality this year. And the second question on innovation, I think that the issue now is the pace of launches that we've talked in last calls, we've changed the portfolio. There is a lot of activity. What we're focusing right now is accelerating how do we, which are the areas that we can accelerate, launch a lot of new products. If you look at some of the trends in personal care, especially around ESG it is starting to get more – apologies and most of what we're doing is really in that lane. So it's about launching them and then working it through customer. So a lot of new innovations. Very excited about the portfolio there. Laurence Alexander: Okay. Thank you. Operator: And thank you. And our next question comes from Vincent Anderson from Stiefel. Your line is now open. Vincent Anderson: Yes, good morning. Thanks for taking my questions. So I just wanted to touch on quickly. How much of that drag currently is a fixed cost issue? And at what point does it make more sense to maybe just walk away from clearly stage for a while contract and compare the other capacity out and then and find a better long term solution? Guillermo Novo: Right. So I would say the issue is as you point out, it's on the side of the portfolio. The team is developing new business, new application. So that part of the equation is going well. I think the issue actually last year, it was more of the production loading this year. That actually we've worked off inventory. So production to stabilize. The issue is more it's a lumpier order pattern and bigger customers that place bigger orders. As an example the fourth quarter there is some very strong orders in that part of the portfolio. So we're monitoring those very closely especially around shipping. A lot of that goes to Europe, and other regions. So it's really about monitoring that. No, I think that's stabilizing, I think the longer term view is growth and innovation is going to come through new applications. And that's what the team is working on and we are making very good progress there. Vincent Anderson: Okay, great. So yes, just more of an order timing perspective. And then I guess they're just quickly to end on feeling a bit more forward looking in the flavors world as an example there's some pretty obvious products you kind of need just to have a seat at the table in customer conversations. Is there anything like that in nutrition that you're lacking and that your product pipeline, development pipeline is specifically geared towards trying to address? Guillermo Novo: Yes. So if you look at the nutrition side of it, a lot of the growth that we're focused on right now is on plant based protein. So a lot of the cellulosic products and other additives that we have for that area that's growing very well. So this is sort of as we look at our markets, pharma, personal care coatings are like the major ones. This would be that second tier of markets where we leveraged the additive and innovation activities from these bigger parts of the portfolio. So we continue to see good opportunities there. But this is not our major business. It is a secondary market. We're not in the food and flavors. That's not the core of what we do. Vincent Anderson: Right. All right. Well, thank you. I appreciate it. Operator: And thank you. And I'm showing no further questions. I would now like to turn the call back over to Guillermo Novo for closing remarks. Guillermo Novo: Okay, thank you. Well, I want to thank everyone for your interest. As I hope you've seen the challenges for this quarter and for the near term is about some of these external dynamics. But if you look at the some of the longer term trends and outlooks we're very excited. I think we're in very good position. And as I said the teams are really doing a great job in managing through this continued uncertain environment. Thank you very much and we look forward to talking to you in the coming weeks. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Ashland Inc. (NYSE: ASH) Price Target and Market Outlook
Ashland Inc. (NYSE:ASH) is a global leader in providing specialty ingredients and additives, with operations spanning four main segments: Life Sciences, Personal Care & Household, Specialty Additives, and Intermediates and Solvents. Founded in 1924 and headquartered in Wilmington, Delaware, Ashland offers a diverse range of products, including pharmaceutical solutions and chemical intermediates.
The consensus price target for Ashland has seen a notable decline over the past year, dropping from $94 to $60. This downward trend suggests a shift in analysts' expectations, possibly influenced by market conditions and company performance. Despite this, J.P. Morgan has set a higher price target of $105, indicating a more optimistic outlook for the stock's future.
Market conditions and company performance are key factors influencing Ashland's price target. The anticipated decline in Q2 earnings, as noted by analysts, suggests that Ashland may not meet expectations in its upcoming report. This could be due to a lack of key factors necessary for an earnings beat, as highlighted by J.P. Morgan. Industry trends and strategic decisions also play a role in shaping analysts' perceptions.
The specialty chemicals and additives industry is highly competitive, and any shifts in innovation or competition could impact Ashland's growth prospects. Additionally, strategic changes within the company could influence future performance expectations. Investors should stay informed about Ashland's financial performance and strategic initiatives.
The company's upcoming earnings release on April 30, 2025, and the subsequent webcast on May 1, 2025, will provide valuable insights. Monitoring these developments will help investors understand the factors affecting Ashland's stock performance and analysts' target prices.
Ashland Inc. (NYSE: ASH) Price Target and Market Outlook
Ashland Inc. (NYSE:ASH) is a global leader in providing specialty ingredients and additives, with operations spanning four main segments: Life Sciences, Personal Care & Household, Specialty Additives, and Intermediates and Solvents. Founded in 1924 and headquartered in Wilmington, Delaware, Ashland offers a diverse range of products, including pharmaceutical solutions and chemical intermediates.
The consensus price target for Ashland has seen a notable decline over the past year, dropping from $94 to $60. This downward trend suggests a shift in analysts' expectations, possibly influenced by market conditions and company performance. Despite this, J.P. Morgan has set a higher price target of $105, indicating a more optimistic outlook for the stock's future.
Market conditions and company performance are key factors influencing Ashland's price target. The anticipated decline in Q2 earnings, as noted by analysts, suggests that Ashland may not meet expectations in its upcoming report. This could be due to a lack of key factors necessary for an earnings beat, as highlighted by J.P. Morgan. Industry trends and strategic decisions also play a role in shaping analysts' perceptions.
The specialty chemicals and additives industry is highly competitive, and any shifts in innovation or competition could impact Ashland's growth prospects. Additionally, strategic changes within the company could influence future performance expectations. Investors should stay informed about Ashland's financial performance and strategic initiatives.
The company's upcoming earnings release on April 30, 2025, and the subsequent webcast on May 1, 2025, will provide valuable insights. Monitoring these developments will help investors understand the factors affecting Ashland's stock performance and analysts' target prices.
Ashland Inc. (NYSE: ASH) Earnings Report Analysis
- Ashland Inc. reported an EPS of -$3.51, significantly missing the estimated EPS of $0.79, with revenue also falling short at $405 million.
- The company's adjusted EBITDA was $61 million, a 13% decrease from the previous year, impacted by portfolio optimization initiatives.
- Financial ratios indicate moderate leverage and strong short-term stability, despite challenges highlighted by a negative price-to-earnings ratio.
Ashland Inc. (NYSE: ASH) is a prominent player in the global additives and specialty ingredients market, serving sectors like pharmaceuticals, personal care, and architectural coatings. On January 28, 2025, ASH reported an earnings per share (EPS) of -$3.51, significantly missing the estimated EPS of $0.79. The company's revenue was $405 million, falling short of the estimated $427 million.
For the quarter ending December 2024, Ashland's revenue of $405 million marked a 14.4% decline from the previous year. This shortfall was influenced by portfolio optimization initiatives, which reduced sales by approximately $50 million.
The company's adjusted EBITDA was $61 million, a 13% decrease from the previous year. The portfolio optimization initiatives reduced adjusted EBITDA by about $8 million. Excluding these initiatives, the adjusted EBITDA saw a 2% decline. This highlights the impact of strategic decisions on financial performance.
Ashland's financial ratios provide insight into its valuation and financial health. The price-to-sales ratio is approximately 1.64, and the enterprise value to sales ratio is about 2.23. The debt-to-equity ratio of 0.55 indicates moderate financial leverage, while a current ratio of 2.52 suggests strong short-term financial stability.
Despite these metrics, Ashland faces challenges, as indicated by a negative price-to-earnings ratio of -222.97 and an earnings yield of -0.0045. These figures suggest potential financial difficulties, yet the company remains committed to its fiscal year 2025 outlook, focusing on its core markets and strategic initiatives.
Ashland Inc. (NYSE: ASH) Earnings Report Analysis
- Ashland Inc. reported an EPS of -$3.51, significantly missing the estimated EPS of $0.79, with revenue also falling short at $405 million.
- The company's adjusted EBITDA was $61 million, a 13% decrease from the previous year, impacted by portfolio optimization initiatives.
- Financial ratios indicate moderate leverage and strong short-term stability, despite challenges highlighted by a negative price-to-earnings ratio.
Ashland Inc. (NYSE: ASH) is a prominent player in the global additives and specialty ingredients market, serving sectors like pharmaceuticals, personal care, and architectural coatings. On January 28, 2025, ASH reported an earnings per share (EPS) of -$3.51, significantly missing the estimated EPS of $0.79. The company's revenue was $405 million, falling short of the estimated $427 million.
For the quarter ending December 2024, Ashland's revenue of $405 million marked a 14.4% decline from the previous year. This shortfall was influenced by portfolio optimization initiatives, which reduced sales by approximately $50 million.
The company's adjusted EBITDA was $61 million, a 13% decrease from the previous year. The portfolio optimization initiatives reduced adjusted EBITDA by about $8 million. Excluding these initiatives, the adjusted EBITDA saw a 2% decline. This highlights the impact of strategic decisions on financial performance.
Ashland's financial ratios provide insight into its valuation and financial health. The price-to-sales ratio is approximately 1.64, and the enterprise value to sales ratio is about 2.23. The debt-to-equity ratio of 0.55 indicates moderate financial leverage, while a current ratio of 2.52 suggests strong short-term financial stability.
Despite these metrics, Ashland faces challenges, as indicated by a negative price-to-earnings ratio of -222.97 and an earnings yield of -0.0045. These figures suggest potential financial difficulties, yet the company remains committed to its fiscal year 2025 outlook, focusing on its core markets and strategic initiatives.
Ashland Inc. (NYSE:ASH) Quarterly Earnings Overview
- Ashland Inc. (NYSE:ASH) reported a revenue of $522 million, surpassing the Zacks Consensus Estimate.
- The company's EPS of $1.26 fell short of the consensus estimate, indicating a negative EPS surprise of 5.26%.
- Ashland's financial health is reflected in its P/E ratio of 28.01 and a strong current ratio of 2.98.
Ashland Inc. (NYSE:ASH) is a specialty chemicals company known for its innovative solutions across various industries. As a key player in the Zacks Chemical - Specialty industry, Ashland competes with other chemical companies by focusing on high-performance materials and specialty additives. The company is set to release its quarterly earnings on November 7, 2024, after market close, with Wall Street analysts estimating an EPS of $1.28 and projected revenue of $524.07 million.
In the recent quarter ending September 2024, Ashland reported a revenue of $522 million, marking a 0.8% increase from the previous year. This figure surpassed the Zacks Consensus Estimate of $518.74 million, resulting in a positive surprise of 0.63%. Despite this revenue success, the company's EPS of $1.26 fell short of the consensus estimate of $1.33, leading to a negative EPS surprise of 5.26%.
Ashland's financial performance is crucial for investors as they evaluate the company's ability to meet Wall Street expectations. The reported EPS of $1.26, although below estimates, shows a significant improvement from the $0.41 reported in the same quarter last year. This indicates a positive trend in earnings growth, despite the recent shortfall against analyst predictions.
The company's valuation metrics provide further insight into its financial health. Ashland's price-to-earnings (P/E) ratio of 28.01 suggests that investors are willing to pay a premium for its earnings. The price-to-sales ratio of 1.72 and enterprise value to sales ratio of 2.14 reflect the market's valuation of the company relative to its sales. These figures are important for understanding how the market perceives Ashland's growth potential.
Ashland's financial stability is also highlighted by its debt-to-equity ratio of 0.45, indicating a moderate level of debt compared to equity. The current ratio of 2.98 suggests a strong ability to cover short-term liabilities with short-term assets. These metrics, along with an enterprise value to operating cash flow ratio of 10.84, provide a comprehensive view of Ashland's operational efficiency and financial health.
Ashland Inc. (NYSE:ASH) Quarterly Earnings Overview
- Ashland Inc. (NYSE:ASH) reported a revenue of $522 million, surpassing the Zacks Consensus Estimate.
- The company's EPS of $1.26 fell short of the consensus estimate, indicating a negative EPS surprise of 5.26%.
- Ashland's financial health is reflected in its P/E ratio of 28.01 and a strong current ratio of 2.98.
Ashland Inc. (NYSE:ASH) is a specialty chemicals company known for its innovative solutions across various industries. As a key player in the Zacks Chemical - Specialty industry, Ashland competes with other chemical companies by focusing on high-performance materials and specialty additives. The company is set to release its quarterly earnings on November 7, 2024, after market close, with Wall Street analysts estimating an EPS of $1.28 and projected revenue of $524.07 million.
In the recent quarter ending September 2024, Ashland reported a revenue of $522 million, marking a 0.8% increase from the previous year. This figure surpassed the Zacks Consensus Estimate of $518.74 million, resulting in a positive surprise of 0.63%. Despite this revenue success, the company's EPS of $1.26 fell short of the consensus estimate of $1.33, leading to a negative EPS surprise of 5.26%.
Ashland's financial performance is crucial for investors as they evaluate the company's ability to meet Wall Street expectations. The reported EPS of $1.26, although below estimates, shows a significant improvement from the $0.41 reported in the same quarter last year. This indicates a positive trend in earnings growth, despite the recent shortfall against analyst predictions.
The company's valuation metrics provide further insight into its financial health. Ashland's price-to-earnings (P/E) ratio of 28.01 suggests that investors are willing to pay a premium for its earnings. The price-to-sales ratio of 1.72 and enterprise value to sales ratio of 2.14 reflect the market's valuation of the company relative to its sales. These figures are important for understanding how the market perceives Ashland's growth potential.
Ashland's financial stability is also highlighted by its debt-to-equity ratio of 0.45, indicating a moderate level of debt compared to equity. The current ratio of 2.98 suggests a strong ability to cover short-term liabilities with short-term assets. These metrics, along with an enterprise value to operating cash flow ratio of 10.84, provide a comprehensive view of Ashland's operational efficiency and financial health.
Ashland Global Holdings’ Shares Up 7% Following Q2 Earnings Preannouncement
Ashland Global Holdings Inc. (NYSE:ASH) shares closed more than 7% higher today following the company’s preannounced Q2 results, expecting EBITDA to be $163 million, up 41% year-over-year, and 22% above the consensus estimate.
Strong demand and pricing more than offset higher costs for raw materials, freight and energy. Supply chain and labor challenges continued to affect shipments and on-time order delivery during Q2.
Prior to this quarter, the company had missed 3 consecutive quarters due to similar supply chain and labor shortage challenges and higher costs.
Also noteworthy was that EBITDA margins expanded for the first time since Q2/21 (up 460 bps year-over-year) driven by higher sales and pricing ahead of cost inflation.
