Ashland Inc. (NYSE: ASH) is a global additives and specialty ingredients company with a strong focus on environmental, social, and governance (ESG) initiatives. The company serves a diverse range of consumer and industrial markets, including architectural coatings, construction, energy, food and beverage, nutraceuticals, personal care, and pharmaceuticals. With approximately 3,800 employees worldwide, Ashland operates in more than 100 countries, generating annual revenue of $2.191 billion and net income of $178 million in its latest fiscal year.
Business Overview
Ashland's reportable segments include Life Sciences, Personal Care, Specialty Additives, and Intermediates. The company's sales generated outside of North America were 69% and 68% for the three and six months ended March 31, 2024, respectively, highlighting its global reach.
Financials
In the second quarter of fiscal 2024, Ashland reported revenue of $575 million, a 5% decrease compared to the prior year quarter. This decline was primarily driven by unfavorable pricing, particularly within the Intermediates segment, as the company worked to strike a balance between moderating costs and increasing competitive activities. Excluding Intermediates, lower prices were largely consistent with favorable raw material costs.
Ashland's net income for the second quarter of fiscal 2024 was $120 million, or $2.39 per diluted share, compared to $91 million, or $1.67 per diluted share, in the prior year quarter. The increase in net income was partially offset by a loss from discontinued operations of $1 million in both the current and prior year quarters.
The company's adjusted EBITDA, a non-GAAP measure, decreased 13% to $126 million in the second quarter of fiscal 2024, primarily due to the unfavorable pricing in Intermediates and higher selling, general, and administrative expenses, driven by increased variable compensation expense.
Segment Performance
Ashland's Life Sciences segment reported sales of $222 million, an 8% decrease compared to the prior year quarter. This decline was primarily due to normalized competitive dynamics in the pharma PVP business, which more than offset stable demand in pharma cellulosics. Adjusted EBITDA for the Life Sciences segment decreased 12% to $66 million.
The Personal Care segment reported sales of $169 million, a 1% increase compared to the prior year quarter. This growth was driven by stronger demand in most end markets and regions, partially offset by continued challenges in the Avoca business. Adjusted EBITDA for the Personal Care segment increased 29% to $45 million.
Specialty Additives sales decreased 2% to $157 million, primarily due to lower pricing, which was mostly offset by favorable raw materials. Adjusted EBITDA for the Specialty Additives segment decreased 21% to $27 million, reflecting unfavorable production costs and the variable compensation reset.
The Intermediates segment reported sales of $40 million, a 22% decrease compared to the prior year quarter, driven by broadly lower pricing and captive volumes. Adjusted EBITDA for the Intermediates segment decreased 30% to $12 million.
Liquidity
Ashland's balance sheet remains strong, with cash and cash equivalents of $439 million and total available liquidity of approximately $1 billion as of March 31, 2024. The company's net debt was $889 million, representing a leverage ratio of 2.2x. Ashland has no floating-rate debt outstanding and all of its outstanding debt is subject to investment-grade-style credit terms.
The company's capital allocation strategy remains balanced, with $1.05 billion deployed to share repurchases and the retirement of 11.1 million shares since June 2021. Ashland also continues to invest in its existing businesses and technology platforms to drive organic growth, while pursuing targeted bolt-on M&A opportunities focused on the Pharma, Personal Care, and Coatings industries.
Outlook
Looking ahead, Ashland provided guidance for its fiscal third quarter, expecting sales in the range of $560 million to $580 million and adjusted EBITDA in the range of $138 million to $148 million. For the full fiscal year 2024, the company now expects sales in the range of $2.150 billion to $2.225 billion and adjusted EBITDA in the range of $470 million to $500 million.
Recent Developments
The company's strategic priorities, which include Execute, Globalize, Innovate, and Acquire, are expected to drive future growth and profitability. Ashland's portfolio optimization actions, such as the consolidation of its carboxymethylcellulose (CMC) and industrial methylcellulose (MC) capacity and the rebalancing of the hydroxyethylcellulose (HEC) network, are on track to deliver a more resilient portfolio with stronger performance by the end of calendar year 2024.
Ashland's innovation pipeline is also a key focus, with the company launching new products and engaging customers across its Pharma, Personal Care, and Coatings segments. The company's transformative technologies, such as super wetters, liquid cellulose+, bioresorbable polymers, and transformed vegetable oil (TVO), have garnered significant interest from customers and are expected to serve as growth catalysts in the coming years.
Furthermore, Ashland's globalization efforts in its Pharma and Personal Care businesses, including the expansion of its injectable and OSD film coatings capabilities, as well as the growth of its biofunctionals and preservatives businesses, are expected to contribute to the company's future performance.
Conclusion
Overall, Ashland's diversified portfolio, strong financial position, and strategic initiatives position the company well to navigate the current market environment and capitalize on future growth opportunities. The company's focus on innovation, globalization, and portfolio optimization, combined with its resilient end markets, make Ashland an attractive investment proposition for investors seeking exposure to the specialty chemicals industry.