Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ashland Inc (ASH, Financial) delivered strong personal care sales growth across markets.
- Specialty Additives volumes improved by 5%, with a notable 22% growth in Personal Care.
- Adjusted EBITDA margin increased sequentially by 370 basis points to 25.6%.
- Ashland Inc (ASH) repurchased $130 million of shares and increased the dividend.
- The company has a strong financial position with $399 million in cash and total available liquidity of roughly $1 billion.
Negative Points
- Lower US Life Science volumes, particularly in Europe, impacted overall performance.
- Specialty Additives volume momentum was softer than expected, with increased price pressure.
- June sales were weaker than expected, and this trend continued into July.
- Life Science segment faced significant headwinds, with an 11% decline in sales and an 18% decrease in adjusted EBITDA.
- Merchant business continues to see weak demand in EV battery and crop care markets, with a 16% decline in sales.
Q & A Highlights
Q: Can you help us think about the fiscal year 2025 EBITDA bridge, considering factors like fixed cost absorption, destocking, and market growth?
A: The key issue for us in the quarter is VP&D and pharma. The biggest issue is about the share dynamics. For 2024, the only thing that's changed is our VP&D market share outlook. Everything else remains unchanged. We're managing through a transition in pricing and volume, ensuring we maintain a healthy strategy for the long term.
Q: What are the markets seeing a downtick in June and July?
A: It's mostly in Specialty Additives, particularly coatings. North America and Europe were expected to be stronger but have not materialized as anticipated. China has also slowed down significantly. In pharma, particularly in Europe, there's some destocking, but we're cautious about reading too much into it at this point.
Q: Can you provide more color on the price weakness in Personal Care and Specialty Additives?
A: The price weakness is due to both deflationary trends in raw materials and competitive dynamics, especially in Asia. Raw materials are coming down, and we're managing margins in a deflationary environment. Competitive dynamics, particularly in China, are also a factor.
Q: Can you size the impact of the VP&D issue for us?
A: The biggest delta in the quarter was around $14 million in sales. The issue is a combination of share loss and aggressive pricing dynamics from competitors. We're managing through this transition, balancing pricing and volume gains.
Q: How is the portfolio optimization progressing within CMCMC and HGC?
A: The optimization is progressing well. Most direct changes have been implemented, and we're on track to achieve EBITDA neutrality by 2025. We're also repurposing assets to support new novel cellulosics, which is very promising for future growth.
Q: Can you talk about the divergence in performance between cellulosics and PVP within Life Sciences?
A: The cellulosics market is stable and growing, with a rich portfolio of innovations. The issue with PVP in pharma is more about competitive dynamics and rebalancing supply within the industry.
Q: What actions are you taking in VP&D beyond pricing?
A: We're managing mix, focusing on cost productivity, and looking across our entire supply chain. We're taking actions to strengthen our business as market leaders, ensuring we maintain our leadership position in quality, reliability, and cost.
Q: Can you provide more details on the volume growth outlook for Q4 and fiscal 2025?
A: For Q4, we expect mid-single-digit organic volume growth. For fiscal 2025, we'll provide more specifics in our Q4 earnings call. The key factors will be managing VP&D and overall market recovery dynamics, particularly in China.
Q: How are you managing inventory levels, particularly in BDO?
A: We're managing inventory levels prudently, ensuring they are under control. We're not building inventory to unsustainable levels and are managing our balance sheet carefully.
Q: Can you elaborate on the impact of portfolio optimization on fiscal 2025?
A: We'll provide more granularity in our Q4 earnings call. The optimization actions are expected to be EBITDA neutral by 2025, allowing us to allocate resources to more positive activities and innovations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
