Ashland Accelerates Sales Growth as Volumes Recover
Fiscal third-quarter sales reached $497 million as stronger demand replaced currency as the main growth driver.
Ashland Inc. (ASH), the specialty-materials maker, returned to volume-led growth in its fiscal third quarter, extending a sequential recovery while profitability remained below the prior-year level.
Sales rose 7% from a year earlier, accelerating from 1% growth in the second quarter and reversing a 5% decline in the first. Volumes increased 6% and pricing added about 1%, while favorable currency contributed 1%. In the preceding quarter, volumes were flat, pricing fell 2% and currency supplied 3% of the growth.
Adjusted income excluding intangibles amortization was $47 million, or $1.02 a share, compared with $48 million, or $1.04 a share, a year earlier. Adjusted EBITDA increased sequentially to $109 million from $98 million in the second quarter and $58 million in the first, though it declined 4% year over year. The adjusted EBITDA margin narrowed to 21.9% from about 24.4% as inflation, earlier production reductions and normalized incentive compensation outweighed higher volume and pricing.
Life Sciences led the expansion, with sales rising 11% to $180 million and adjusted EBITDA increasing 11% to $60 million. Pharma recorded a fifth consecutive quarter of year-over-year volume growth, helping the segment produce a 33% margin. Personal Care sales increased 5% to $155 million as skin care, hair care and microbial protection volumes grew; adjusted EBITDA rose to $45 million from $41 million despite lower pricing.
Specialty Additives remained a drag on the profit recovery. Sales rose 4% to $136 million as gains in coatings and performance specialties offset weakness in construction and energy, while adjusted EBITDA fell 23% to $20 million because of lingering operational problems and lower production rates. Intermediates sales increased 12% as stronger demand from North American electric-vehicle battery and energy-storage customers reversed the softness reported in the second quarter.
Plant performance improved sequentially after the Hopewell productivity ramp, Calvert City startup delays and weather disruptions weighed on the second quarter. Ashland expects another sequential profitability improvement in the fourth quarter as pricing realization increases.
Ashland reaffirmed its full-year sales outlook of $1.835 billion to $1.870 billion and adjusted EBITDA guidance of $385 million to $400 million. The EBITDA range remained below the $400 million to $420 million forecast issued after the first quarter because of the slower Hopewell ramp. The company lowered its adjusted EPS outlook to low-to-mid-single-digit growth from mid-to-high-single-digit growth after discrete tax items raised its expected tax rate.
Operating cash flow rose to $121 million from $50 million in the second quarter, while ongoing free cash flow increased to $103 million from $29 million. Net leverage ended the quarter at 2.4 times, returning to Ashland's long-term target range as the operating recovery restored cash generation.