WILMINGTON, DE — Ashland Inc. (NYSE: ASH) this week provided an update for preliminary fiscal 2023 fourth-quarter results, full-year sales and Adjusted EBITDA.1 Ashland’s financial results during the quarter reflect market-demand dynamics and underlying business performance that were generally consistent with previously communicated expectations. Earnings for the quarter were most directly impacted by additional inventory-reduction actions taken to better position the company for more conservative demand scenarios.
Key preliminary results are as follows:
- Fiscal fourth-quarter and full-year sales of $518 million and $2.19 billion, respectively;
- Net loss (including discontinued operations) of $4 million for the quarter; net income (including discontinued operations) of $178 million for the full year;
- Adjusted EBITDA of $74 million for the quarter and $459 million for the full year including approximately $58 million of inventory-control actions during the fiscal fourth quarter;
- Inventory reduction of $86 million compared to June 30, 2023;
- Ongoing free cash flow of $104 million in the quarter.
Sales in the quarter were approximately $518 million. Pricing remained favorable for all segments other than Intermediates. Volumes during the quarter continued to be negatively impacted by customer inventory destocking across most end markets. Foreign currency favorably impacted sales by approximately two percent.
“Customer demand was generally consistent with our expectations in the fourth quarter,” said Guillermo Novo, chair and chief executive officer, Ashland. “While we are seeing certain signs of stabilizing demand and reduced destocking actions by customers, there continues to be limited visibility regarding the timing of demand normalization.”
“As a result, we proactively took additional inventory-control actions to manage production, reduce inventory levels and drive stronger free cash flow generation,” continued Novo. “Although these actions will better position Ashland to operate in an uncertain and potentially lower demand environment, they resulted in Adjusted EBITDA for the quarter and full year that were below our original expectations. To drive improved performance, we will be taking additional portfolio and investment actions during fiscal year 2024.”
Portfolio-optimization actions
Ashland is taking the following portfolio-optimization actions to further strengthen the company’s resilience and improve margins and returns in this uncertain environment:
- Commencing a divestiture process for the company’s nutraceuticals business;
- Optimizing and consolidating our carboxymethyl cellulose (CMC) and methyl cellulose (MC) industrial businesses and related capacity to improve productivity and mix;
- Developing plans to repurpose the impacted CMC and MC assets to support other longer-term growth initiatives;
- Optimizing the company’s global hydroxyethyl cellulose (HEC) manufacturing network for greater efficiency.
- Increasing resources and investments to drive our higher-value “globalize and innovate” strategy.
“We are pleased with the progress our Nutraceuticals team has made to strengthen and grow the business,” said Novo. “However, we have determined that it is not core to Ashland’s business model or longer-term strategy. As we saw with the sale of our Adhesive business, we believe Nutraceuticals will be better positioned to thrive as part of an organization where Nutraceuticals is a core to their model and future investment strategy.”
When completed, these portfolio actions are expected to result in improved Adjusted EBITDA margins of approximately 200 basis-points and returns on net assets of 150 to 200 basis-points. These actions will also reduce volatility, improve focus and decrease working capital and maintenance capital expenditures. The impact of these portfolio actions is expected to reduce annual sales by approximately $200 million to $225 million. Ashland plans to take actions to fully offset the approximately $100 million of stranded costs and lost gross profit that is expected to result from these actions.
At the same time, the company plans to increase its investments and resources for the core growth businesses consistent with the “globalize and innovate” strategy that was outlined at the company’s recent Innovation Day. During fiscal year 2024 the company plans to deploy an incremental $4-6 million in commercial and technical resources to support this growth.
“We are repositioning Ashland to further reduce our participation in lower profitability markets where we do not have strong leadership positions. We plan to redeploy assets to support productivity or growth in the new technology platforms we outlined at our Innovation Day in early September,” continued Novo. “These actions further enhance focus on our pharmaceuticals, personal care and coatings businesses and position the company well for improved performance and profitability. I look forward to discussing our fiscal-fourth quarter financial results and outlook in more detail during our upcoming earnings call and webcast,” concluded Novo.
The information from the Company’s announcement is preliminary, based upon information available at the time of its release, and actual results may differ.
For additional information, visit http://investor.ashland.com.
1 Financial results are preliminary until Ashland’s Form 10-K is filed with the SEC.
™ Trademark, Ashland or its subsidiaries, registered in various countries.
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