Ashland(ASH) - 2024 Q4 - Annual Results

Financial Results and Outlook Ashland's financial performance for Q4 and full fiscal year 2024, segment results, portfolio optimization, and fiscal year 2025 outlook are detailed Fourth-Quarter Fiscal 2024 Financial Highlights Ashland reported a 1% sales increase to $522 million in Q4 FY2024, with Adjusted EBITDA up 68% to $124 million, despite portfolio optimization impacts and operational issues Q4 FY2024 Key Financial Metrics (in millions) | Metric | Q4 FY2024 | Q4 FY2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $522 million | $518 million | +1% | | Income from Continuing Operations | $19 million | ($8 million) | N/A | | Adjusted EBITDA | $124 million | $74 million | +68% | | Diluted EPS from Continuing Operations | $0.39 | ($0.15) | N/A | | Adjusted Diluted EPS (excl. intangibles) | $1.26 | $0.41 | +207% | - Portfolio optimization initiatives, including the sale of the nutraceuticals business and curtailment of certain CMC and MC products, reduced overall sales by approximately $24 million, or 5%, compared to the prior-year quarter[1][2] - Adjusted EBITDA fell short of expectations, primarily due to HEC operating issues of about $5 million during the commissioning of productivity investments and weaker coatings demand in China[1] - The company repurchased 1.7 million shares in Q4, with $620 million remaining under its evergreen share repurchase authorization[1][4] - Cash flows from operating activities were $80 million, down from $130 million in the prior-year quarter. Ongoing free cash flow was $88 million[1][5] Reportable Segment Performance (Q4 2024) All business units achieved organic sales volume growth in Q4 2024, with varied sales performance across Life Sciences, Personal Care, Specialty Additives, and Intermediates segments Life Sciences Pharma revenue grew 6%, but overall segment sales declined 5% to $192 million due to portfolio optimization - Pharma generated 6% revenue growth, but overall segment sales were down 5% to $192 million, primarily due to a $15 million (7%) reduction from CMC portfolio optimization and the nutraceuticals divestiture[8] Life Sciences Q4 Performance (in millions) | Metric | Q4 FY2024 | Q4 FY2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $192 million | $203 million | -5% | | Adjusted EBITDA | $56 million | $48 million | +17% | Personal Care Sales grew 11% to $162 million, driven by strong demand in skin and hair care across most regions - Sales grew 11% to $162 million, driven by higher sales volume in skin care and hair care, reflecting improved demand in most regions. Globalization initiatives for biofunctionals and microbial protection also delivered strong growth[10] Personal Care Q4 Performance (in millions) | Metric | Q4 FY2024 | Q4 FY2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $162 million | $146 million | +11% | | Adjusted EBITDA | $47 million | $36 million | +31% | Specialty Additives Sales remained flat at $144 million, as volume growth was offset by portfolio optimization and lower pricing - Sales were flat at $144 million, as higher sales volumes in coatings and performance specialties were offset by portfolio optimization actions (reducing sales by $6 million or 4%) and lower pricing, particularly in China[11] Specialty Additives Q4 Performance (in millions) | Metric | Q4 FY2024 | Q4 FY2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $144 million | $144 million | 0% | | Adjusted EBITDA | $29 million | $8 million | +263% | Intermediates Sales decreased 3% to $36 million, primarily due to lower NMP pricing despite increased BDO volumes - Sales decreased 3% to $36 million, driven by lower n-methyl-2-pyrrolidone (NMP) pricing, which was partially offset by increased butanediol (BDO) volumes[13] Intermediates Q4 Performance (in millions) | Metric | Q4 FY2024 | Q4 FY2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $36 million | $37 million | -3% | | Adjusted EBITDA | $10 million | $3 million | +233% | Unallocated & Other Adjusted unallocated and other expense EBITDA was $18 million, a decrease from the prior-year quarter - Adjusted unallocated and other expense EBITDA was $18 million, compared to $21 million in the prior-year quarter[15] Fiscal Year 2024 Results Summary For fiscal year 2024, sales decreased 4% to $2.1 billion, while Adjusted EBITDA remained flat at $459 million, with margin expansion to 22% FY2024 Key Financial Metrics (in millions) | Metric | FY2024 | FY2023 | Change | | :--- | :--- | :--- | :--- | | Sales | $2.1 billion | $2.2 billion | -4% | | Income from Continuing Operations | $199 million | $168 million | +18% | | Adjusted EBITDA | $459 million | $459 million | 0% | | Diluted EPS from Continuing Operations | $3.95 | $3.13 | +26% | | Adjusted Diluted EPS (excl. intangibles) | $4.45 | $4.07 | +9% | - Adjusted EBITDA margin increased by 80 basis points to 22% compared to the prior year[18] - Ongoing free cash flow increased to $270 million from $217 million in the prior year[19] Portfolio Optimization Actions Ashland is optimizing its portfolio through strategic reviews, a $150 million share buyback, and restructuring plans to generate $90 million in savings - The company is taking the following actions to strengthen its core and offset the impact of portfolio optimization[19] - Reviewing strategic alternatives for the Avoca business line - Completed a $150 million share buyback to offset the earnings impact from the nutraceuticals divestiture and future exit of Avoca - Initiated a $30 million restructuring plan, with savings realized over fiscal years 2025 and 2026 - Advancing a multi-year manufacturing optimization plan expected to generate $60 million in pre-tax savings, with $5 million expected in fiscal 2025[19] Fiscal Year 2025 Financial Outlook Ashland projects FY2025 sales between $1.90 billion and $2.05 billion and Adjusted EBITDA between $430 million and $470 million, factoring in economic uncertainties and cost reductions FY2025 Guidance (in billions/millions) | Metric | FY2025 Outlook | | :--- | :--- | | Sales | $1.90 billion to $2.05 billion | | Adjusted EBITDA | $430 million to $470 million | - Key assumptions for the FY2025 outlook include: - Continued geopolitical and economic uncertainty, with lower overall growth - A challenged Chinese economy, especially the property market - Volume growth partially offset by price erosion from competitive intensity - A net negative impact from portfolio actions (nutraceuticals sale, Avoca exit) and price carryover, partially offset by improved absorption and cost reductions[20] - The company is increasing its focus on controllables, initiating restructuring to reduce costs and improve manufacturing productivity, especially in its HEC and VP&D businesses[22] Upcoming Events Ashland will host an earnings conference call on November 7, 2024, and a strategy update event on December 10, 2024, in New York City - An earnings conference call is scheduled for 9 a.m. ET on Thursday, November 7, 2024[23] - A strategy update event will be held on Tuesday, December 10, 2024, in New York City, to review strategic priorities and key initiatives[25] Financial Statements and Reconciliations This section provides detailed consolidated financial statements, including income, balance sheets, cash flows, and reconciliations of non-GAAP financial measures Statements of Consolidated Income (Loss) This table presents the consolidated income statement for fiscal years 2024 and 2023, highlighting sales, gross profit, and net income Fiscal Year Income Statement Highlights (in millions) | Line Item | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Sales | $2,113 | $2,191 | | Gross Profit | $618 | $668 | | Operating Income (Loss) | ($26) | $172 | | Income from Continuing Operations | $199 | $168 | | Net Income (Loss) | $169 | $178 | Condensed Consolidated Balance Sheets This table details the company's consolidated balance sheets as of September 30, 2024 and 2023, showing assets, liabilities, and equity Balance Sheet Highlights (in millions) | Line Item | Sept 30, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | Total Current Assets | $1,195 | $1,506 | | Total Assets | $5,645 | $5,939 | | Total Current Liabilities | $490 | $456 | | Long-Term Debt | $1,349 | $1,314 | | Total Liabilities | $2,777 | $2,842 | | Stockholders' Equity | $2,868 | $3,097 | Statements of Consolidated Cash Flows This table outlines the consolidated cash flows from operating, investing, and financing activities for fiscal years 2024 and 2023 Fiscal Year Cash Flow Highlights (in millions) | Line Item | FY 2024 | FY 2023 | | :--- | :--- | :--- | | Cash from Operating Activities | $462 | $294 | | Cash from Investing Activities | ($51) | ($109) | | Cash from Financing Activities | ($479) | ($371) | | Decrease in Cash | ($117) | ($229) | | Cash at End of Period | $300 | $417 | Reconciliation of Non-GAAP Data These tables provide detailed reconciliations of GAAP measures to non-GAAP measures, including Adjusted EBITDA, Ongoing Free Cash Flow, and Adjusted Diluted EPS FY2024 Reconciliation of Net Income to Adjusted EBITDA (in millions) | Line Item | FY 2024 | | :--- | :--- | | Net Income | $169 | | Adjustments (Taxes, Interest, D&A, etc.) | +123 | | Key Items (Impairments, Restructuring, etc.) | +167 | | Adjusted EBITDA | $459 | FY2024 Reconciliation of Operating Cash Flow to Ongoing Free Cash Flow (in millions) | Line Item | FY 2024 | | :--- | :--- | | Cash from Operating Activities | $462 | | Additions to property, plant and equipment | ($137) | | Free Cash Flow | $325 | | Adjustments (A/R Programs, Restructuring, etc.) | ($55) | | Ongoing Free Cash Flow | $270 | FY2024 Reconciliation of Diluted EPS to Adjusted Diluted EPS | Line Item | FY 2024 | | :--- | :--- | | Diluted EPS from continuing operations | $3.95 | | Total key items adjustment | ($0.75) | | Adjusted Diluted EPS | $3.20 | | Amortization expense adjustment | $1.25 | | Adjusted Diluted EPS (Excl. Intangibles) | $4.45 |