Ashland Global Holdings Inc. (NYSE: ASH) today announced financial
results1 for the second quarter of fiscal year 2022, which ended
March 31, 2022. The global additives and specialty ingredients
company serves customers in a wide range of end markets.
Sales were $604 million, up 19 percent versus
the prior-year period. Each of the company’s reportable
segments achieved double-digit sales growth compared to the prior
year. Demand remains strong across the company’s resilient end
markets. The year-over-year sales growth was driven primarily by
disciplined pricing leading to cost recovery in a high-inflation
environment and improved product mix. Foreign currency negatively
impacted sales by three percent.
Net income was $786 million compared to $41
million in the prior-year quarter. The current period net income
includes a gain on sale of $732 million from the divestiture of the
Performance Adhesives business, which is included in discontinued
operations. Income from continuing operations was $38 million
compared to $25 million in the prior-year quarter, or $0.66 per
diluted share compared to $0.40 in the prior-year quarter. Adjusted
income from continuing operations excluding intangibles
amortization expense was $86 million compared to $52 million in the
prior-year quarter, or $1.50 per diluted share, up from $0.84 in
the prior-year quarter. Average diluted shares outstanding totaled
57 million as of March 31, 2022, down from 62 million in the
prior-year quarter, following the implementation of the company’s
share repurchase programs under the existing Board of Directors
share repurchase authorization. Adjusted EBITDA was $163 million,
up 41 percent from $116 million in the prior-year quarter.
Cash flows provided by operating activities
totaled $16 million compared to $38 million in the prior-year
quarter. Ongoing free cash flow2 totaled $(5) million compared to
$42 million in the prior-year quarter primarily due to an increase
in working capital reflecting higher raw-material costs impacting
both inventories and accounts receivable balances, in addition to
the ongoing rebuild of inventory levels.
“As we indicated in our earnings update on April
12, we are encouraged by the strong demand in each of our segments
and the exceptional discipline throughout our global organization,
especially the pricing and product mix actions being demonstrated
by our commercial teams to offset widespread cost inflation,” said
Guillermo Novo, chair and chief executive officer, Ashland. “The
Ashland team is executing well across the globe. Our size and
global footprint, discipline, agility and the empowerment of our
people deeper into the organization is reflected in our results. A
record number of planet-positive new product introductions in the
first and second fiscal quarters reinforce our innovation-driven
growth strategy. These launches further the sustainability of our
portfolio and enable our customers to meet consumers’ dynamic
demand for high-performing, sustainable products.”
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 $204
million, up 10 percent from the prior-year quarter, driven by
double-digit sales growth to pharmaceutical customers reflecting
improved product mix and cost recovery. Foreign currency negatively
impacted sales by two percent.
Adjusted operating income was $43 million,
compared to $35 million in the prior-year quarter. Adjusted EBITDA
was $58 million, up from $50 million in the prior-year quarter,
primarily reflecting disciplined pricing leading to cost recovery
and favorable product mix.
Personal CareSales were $172
million, up 26 percent from the prior-year quarter. Sales excluding
the Schülke & Mayr acquisition and exited low-margin product
lines were up 16 percent. Disciplined pricing, improved product mix
and strong customer demand led to organic sales growth across core
personal-care end markets, exclusive of the previously disclosed
product exits for skin care applications. Foreign currency
negatively impacted sales by three percent.
Adjusted operating income was $28 million, up
from $19 million in the prior-year quarter. Adjusted EBITDA was $49
million, up from $38 million in the prior-year quarter, primarily
reflecting cost recovery through pricing, improved mix and the
contribution from the acquisition.
Specialty AdditivesSales were
$182 million, up 15 percent from the prior-year quarter, primarily
reflecting improved product mix and disciplined pricing leading to
cost recovery across all end markets. While demand for
architectural coatings and other additives remains strong,
global-supply chain challenges impacted deliveries to customers
during the quarter. Foreign currency negatively impacted sales by
three percent.
Adjusted operating income was $26 million,
compared to $19 million in the prior-year quarter. Adjusted EBITDA
was $48 million, compared to $40 million in the prior-year quarter,
primarily reflecting cost recovery through pricing and improved
product mix.
IntermediatesSales were $66
million, up 78 percent from the prior year quarter, driven by
significantly higher pricing across all product lines. Captive
internal butanediol (BDO) sales were $20 million, a large increase
over the prior year, driven by higher internal transfer pricing and
strong demand from Ashland’s other business segments. Captive
internal BDO sales are recognized at current market-based pricing.
Merchant sales were $46 million, an increase of 59 percent, driven
by higher pricing across all product lines.
Adjusted operating income was $27 million, up
from $3 million in the prior-year quarter. Adjusted EBITDA was $30
million, up from $7 million in the prior-year quarter, reflecting
the higher pricing and improved mix and partially offset by overall
cost inflation.
Unallocated &
OtherUnallocated and Other expense was $31 million,
compared to $28 million in the prior-year quarter. Adjusted
Unallocated and Other expense was $23 million, compared to $19
million in the prior-year quarter.
Financial OutlookFor fiscal
year 2022, the company continues to expect sales in the range of
$2.25 billion to $2.35 billion and adjusted EBITDA in the range of
$550 million to $570 million.
“We expect underlying demand to remain strong
for our focused ingredients and additives product portfolio and
continue to build inventories to mitigate supply-chain and shipping
challenges,” continued Novo. “Pricing and mix-improvement actions
should cover current cost inflation. The Ashland team is prepared
to take further action to recover any additional cost inflation.
The war in Ukraine and its potential impact to the global economy,
additional pandemic-related lockdowns, energy cost and availability
in Europe which could impact customer and supplier operations,
foreign currency exchange rates and continued cost-inflation
pressures are the greatest areas of uncertainty currently. Despite
these uncertainties, our outlook for sales and Adjusted EBITDA in
this fiscal year remains unchanged due to the resilient nature of
our portfolio and the end markets we serve. I look forward to
discussing our results and outlook in more detail on the earning
call and webcast tomorrow morning,” concluded Novo.
Conference Call WebcastAshland
will host a live webcast of its second-quarter conference call with
securities analysts at 9:00 a.m. ET on Wednesday, April 27, 2022.
The webcast will be accessible through Ashland’s website at
http://investor.ashland.com and will include a slide presentation.
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 has certain limitations, including that
it does not reflect adjustment 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 Global Holdings Inc. (NYSE: ASH) is a global additives and
specialty ingredients company with a conscious and proactive
mindset for sustainability. The company serves customers in a wide
range of consumer and industrial markets, including architectural
coatings, automotive, construction, energy, food and beverage,
nutraceuticals, personal care and pharmaceutical. Approximately
3,800 passionate, tenacious solvers – from renowned scientists and
research chemists to talented engineers and plant operators –
thrive on developing practical, innovative and elegant solutions to
complex problems for customers in more than 100 countries.
Visit ashland.com and Ashland | Sustainability Overview
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
U.S. 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, financial condition, and expected effects of
the COVID-19 pandemic on Ashland’s business, 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 realize further cost
reductions.
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 sale of its Performance Adhesives business to
Arkema SA (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 (including the current COVID-19
pandemic), cyber events and legal proceedings and claims (including
product recalls, environmental and asbestos matters); the effects
of the COVID-19 pandemic, and the ongoing Ukraine-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. The extent and duration
of the COVID-19 pandemic on our business and operations is
uncertain. Factors that will influence the impact on our business
and operations include the duration and extent of the pandemic, the
extent of imposed or recommended containment and mitigation
measures, and the general economic consequences of the pandemic.
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-Q 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 |
- Q2 2022 Earnings Release with Financial Tables - vFinal
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