Ashland Global Holdings Inc. recently announced preliminary financial results for the third quarter of its 2019 fiscal year. Sales declined 4% to $641 million, compared to the 2018 fiscal third quarter, including a two percentage-point (ppt) impact from unfavorable currency.
“Ashland’s fiscal third quarter financial results are consistent with the updated outlook we provided on July 17, 2019,” said William A. Wulfsohn, chairman and CEO. “Solid gains in Pharma and Nutrition were offset by weakening demand in several of our key end markets as we progressed through the quarter. In this context, despite lower sales, we delivered Adjusted EBITDA consistent with the prior year due to strong pricing actions and significant SG&A reductions. The stability of our earnings in this difficult context speaks to the quality of our specialty businesses, the results of our portfolio transformation and the impact of taking actions in areas we can control.
“Furthermore, our team continues to make excellent progress executing on the cost reduction program, as we met our expectation for capturing approximately $85 million in annualized run-rate savings by the end of June, keeping us fully on track to achieve the $120 million in total run-rate savings by the end of calendar year 2019.”
Sales declined 4% in the Specialty Ingredients segment, to $613 million, as improved pricing was more than offset by the impact of a Colgate-Gantrez product reformulation, which reduced sales by one percentage point, and unfavorable foreign currency, which reduced sales by two percentage points in the period. Adhesives sales declined 2%, excluding the impact of currency, reflecting weak demand in certain end market applications. Coatings sales grew 1%, excluding the impact of currency, reportedly reflecting the team’s successful effort to grow share in emerging regions.
“For the remainder of fiscal year 2019, we expect market-demand weakness to remain similar to what we experienced in the fiscal third quarter,” said Wulfsohn. “Increasing momentum from our ongoing SG&A cost reductions will make a positive impact in the fourth quarter. In addition, as a result of our expanded focus on plant reliability, we expect reduced year-over-year plant-turnaround costs in the fiscal fourth quarter. We believe these combined efforts will enable Ashland to deliver earnings consistent with prior year in spite of weak demand and lower sales.
“As we look ahead, we will lap the impact of negative foreign currency and the Colgate-Gantrez reformulation in the first quarter of fiscal year 2020 and expect Ashland to return to year-over-year sales and earnings growth during the fiscal year. Furthermore, we have confidence that the current market weakness is temporary in nature and that when market conditions improve, we will return to more-normalized sales growth and mid-to-high single-digit percent EBITDA growth. In addition, we remain committed to achieving our 25-27 percent Adjusted EBITDA margin target for Specialty Ingredients through a combination of pricing actions, mix improvements, volume leverage and additional cost-productivity initiatives.”
For more information, visit www.ashland.com.