Ashland(ASH) - 2025 Q3 - Quarterly Results

Executive Summary & Financial Highlights Ashland reported a 15% sales decline and a significant net loss in Q3 FY2025 due to goodwill impairment, while management highlighted resilient performance and strategic cost initiatives Q3 FY2025 Overall Financial Performance Ashland's Q3 FY2025 sales declined 15% to $463 million, with a $742 million net loss primarily from a $706 million goodwill impairment, despite resilient Adjusted EBITDA Q3 FY2025 Key Financial Metrics | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Sales | $463 million | $544 million | -15% | | Loss from Continuing Operations | $(719) million | $31 million | N/A | | Diluted EPS from Cont. Ops | $(15.70) | $0.60 | N/A | | Net Loss | $(742) million | $6 million (Income) | N/A | | Adjusted EBITDA | $113 million | $139 million | -19% | | Cash Flow from Operations | $114 million | $128 million | -11% | - A non-cash goodwill impairment charge of $706 million was the primary driver of the significant loss from continuing operations and net loss[4][6] - Portfolio optimization initiatives, involving the divestiture of lower-margin products, reduced overall sales by approximately $53 million (10%) and Adjusted EBITDA by $13 million (9%); excluding these, sales declined 5% and Adjusted EBITDA declined 10%[4][5][6] CEO Commentary CEO Guillermo Novo highlighted resilient performance amid mixed demand, emphasizing cost savings and operational discipline, with varied segment dynamics across pharma, personal care, and specialty additives - Management characterized performance as resilient despite volumes falling short of expectations, underscoring the importance of cost savings and operational discipline in supporting strong margins[3] - Life Sciences maintained pharma growth momentum, positioning the segment for continued progress[3] - Personal Care operated in a stable but subdued demand environment, impacted by customer-specific softness in biofunctional actives[3] - Specialty Additives was impacted by a soft architectural coatings season and prior-year share loss in China[3] Reportable Segment Performance This section details the performance of Ashland's key segments, including Life Sciences, Personal Care, Specialty Additives, and Intermediates, highlighting sales, EBITDA, and key drivers for each Life Sciences Life Sciences sales fell 17% to $162 million, primarily due to portfolio optimization, though pharma applications showed growth, maintaining a strong 33% Adjusted EBITDA margin Life Sciences Q3 FY2025 Performance | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Sales | $162 million | $195 million | -17% | | Adjusted Operating Income | $40 million | $43 million | -7% | | Adjusted EBITDA | $54 million | $59 million | -8% | | Adjusted EBITDA Margin | 33% | 30.3% | +2.7 p.p. | - Portfolio optimization initiatives, including the divestiture of the Nutraceuticals business, reduced sales by approximately $32 million (16%)[9] - Pharma applications demonstrated strength, with organic sales volumes growing 4%, and "globalize" business lines delivered double-digit year-over-year sales growth[9] Personal Care Personal Care sales decreased 16% to $147 million, mainly due to the Avoca divestiture and customer-specific softness, yet maintained a strong 27.9% Adjusted EBITDA margin Personal Care Q3 FY2025 Performance | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Sales | $147 million | $175 million | -16% | | Adjusted Operating Income | $26 million | $32 million | -19% | | Adjusted EBITDA | $41 million | $51 million | -20% | | Adjusted EBITDA Margin | 27.9% | 29.1% | -1.2 p.p. | - Portfolio optimization, largely the divestiture of the Avoca business, reduced sales by approximately $18 million (10%) and Adjusted EBITDA by $7 million[12][13] - Excluding portfolio optimization, the sales decline was driven by customer-specific softness in biofunctional actives and a tough comparison for microbial protection, while care ingredients remained stable[12] Specialty Additives Specialty Additives sales fell 13% to $131 million, primarily due to lower coatings sales in China and competitive pressures, despite growth in performance specialties Specialty Additives Q3 FY2025 Performance | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Sales | $131 million | $150 million | -13% | | Adjusted Operating Income | $9 million | $22 million | -59% | | Adjusted EBITDA | $26 million | $38 million | -32% | - The sales decline was driven by weakness in the China coatings market and competitive intensity in export markets, partially offset by growth in performance specialties and energy markets[14] - The company's recently announced HEC manufacturing network consolidation is expected to support future margin improvement in this segment[3][15] Intermediates Intermediates sales decreased 8% to $33 million due to lower pricing, with Adjusted EBITDA falling 22% to $7 million, partially offset by tax credits Intermediates Q3 FY2025 Performance | Metric | Q3 FY2025 | Q3 FY2024 | YoY Change | | :--- | :--- | :--- | :--- | | Sales | $33 million | $36 million | -8% | | Adjusted Operating Income | $4 million | $6 million | -33% | | Adjusted EBITDA | $7 million | $9 million | -22% | Unallocated & Other Unallocated and other expense significantly decreased to $49 million, primarily due to a prior-year non-cash impairment charge, with Adjusted unallocated EBITDA at $15 million - The significant year-over-year decrease in unallocated expense was primarily due to a non-cash impairment on the nutraceuticals business in the prior-year quarter[18] Financial Outlook Ashland narrowed its full-year fiscal 2025 guidance, reflecting a subdued macroeconomic environment and ongoing strategic initiatives to enhance cost efficiency and margins Full-Year Fiscal 2025 Guidance Ashland narrowed its full-year fiscal 2025 outlook to sales of $1.825-$1.850 billion and Adjusted EBITDA of $400-$410 million, reflecting a cautious macroeconomic stance Updated Full-Year Fiscal 2025 Outlook | Metric | Guidance Range | | :--- | :--- | | Sales | $1.825 billion to $1.850 billion | | Adjusted EBITDA | $400 million to $410 million | - The updated outlook reflects a stable but subdued macroeconomic environment and continued caution across customer channels[19] - The company's guidance is weighted toward the lower end of the range, reflecting a prudent base-case stance amid ongoing uncertainty[23] Management's Outlook and Strategic Initiatives Management anticipates mixed demand, prioritizing a $30 million restructuring and $60 million manufacturing optimization to support margins and cash flow - The company is prioritizing controllable levers, including a $30 million restructuring program and a $60 million manufacturing network optimization initiative, to support margins[22] - The restructuring program is expected to generate approximately $7.5 million in savings in the fourth quarter[22] - Management remains committed to driving self-help initiatives to improve cost position and enhance operating consistency and efficiency[24] Financial Statements and Reconciliations This section presents Ashland's condensed consolidated financial statements and detailed non-GAAP reconciliations for Q3 FY2025, covering income, balance sheet, and cash flow Statements of Condensed Consolidated Income (Loss) The Q3 FY2025 income statement shows a significant operating loss of $708 million and a net loss of $742 million, primarily due to a $706 million goodwill impairment charge Q3 FY2025 Income Statement Highlights (in millions) | Line Item | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Sales | $463 | $544 | | Gross Profit | $132 | $186 | | Goodwill Impairment | $706 | $0 | | Operating Loss | $(708) | $(61) | | Net Income (Loss) | $(742) | $6 | Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2025, reflects a decrease in total assets to $4.62 billion from $5.65 billion, largely due to a goodwill impairment reducing the balance to $705 million Balance Sheet Highlights (in millions) | Line Item | June 30, 2025 | Sept 30, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,124 | $1,195 | | Goodwill | $705 | $1,381 | | Total Assets | $4,621 | $5,645 | | Long-term Debt | $1,382 | $1,349 | | Stockholders' Equity | $1,889 | $2,868 | Statements of Condensed Consolidated Cash Flows Ashland generated $114 million in operating cash flow for Q3 FY2025, a slight decrease from the prior year, with minimal investing activities and $69 million used in financing activities Q3 FY2025 Cash Flow Highlights (in millions) | Line Item | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Cash from Operating Activities | $114 | $128 | | Cash from Investing Activities | $1 | $(5) | | Cash from Financing Activities | $(69) | $(151) | | Increase (Decrease) in Cash | $39 | $(40) | Non-GAAP Reconciliations Detailed reconciliations from GAAP to non-GAAP metrics show Q3 FY2025 GAAP Net Loss of $742 million reconciled to Adjusted EBITDA of $113 million and Adjusted Diluted EPS of $0.78 Q3 FY2025 Reconciliation of Net Income (Loss) to Adjusted EBITDA (in millions) | Line Item | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Net income (loss) | $(742) | $6 | | Adjustments (Taxes, Interest, D&A, etc.) | $38 | $(40) | | EBITDA | $(683) | $(34) | | Operating key items (incl. goodwill impairment) | $773 | $148 | | Adjusted EBITDA | $113 | $139 | Q3 FY2025 Reconciliation of Diluted EPS | Line Item | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Diluted EPS from continuing operations (as reported) | $(15.70) | $0.60 | | Total key items adjustment per share | $16.48 | $0.58 | | Adjusted Diluted EPS from Continuing Operations | $0.78 | $1.18 | | Amortization expense adjustment (net of tax) | $0.26 | $0.31 | | Adjusted Diluted EPS Excl. Intangibles Amortization | $1.04 | $1.49 |