ASH - Earnings call transcript Q1 2019

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Operator

Good day ladies and gentlemen, and welcome to the Ashland Global Holdings Inc.

First Quarter Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. to host like Mr. today's now would introduce for your call I Mrozek, Relations. of Seth Investor Director Mr. may you Mrozek, begin.

Seth Mrozek

call name Sherry. welcome Investor quarter conference to you, Relations. Ashland's webcast. Thank Good first fiscal morning XXXX Director, Seth Mrozek, is everyone, and and Ashland My earnings

Executive after and for Joining Chief shortly Chief XX, P.M. We preliminary call results Financial quarter yesterday, Chairman the Willis, ended February XXXX, Kevin on are Bill Officer. and me Ashland's Eastern Time Senior the December Wulfsohn, X:XX today and Officer; Vice President X. released

to we posted of website Additionally SEC Investor the Relations to documents and slides in each our furnished ashland.com Form X-K. under have a the section, these

also be such including reminder, will a could actual fiscal on call expectations for refer any that projected we yesterday's for to such to statements Please during are statements XXXX. financial to will limits and assumptions on projections. statements. achieved. Ashland will be These certain adjusted financial and a measures. based be presentation applicable forward-looking from forward-looking on reasonable results Please believe to future today's that are differ that financial of but uncertainties our an materially risks those we and non-GAAP today's the explanation slide uncertainties on statements referring guidance of fuller which to assure risks forward-looking metrics As events note matters, or and subject cause making cannot a are number basis, We

appendix business. financial measures calculated and performance superior them Bill. over your directly most to the a measures those not GAAP adjusted website present yesterday's order in non-GAAP that, I to of Non-GAAP the available assessment to measures measures to comparable be well call slide should the understanding or as considered of to refer accordance The will measures turn substitute the will and With GAAP. on GAAP financial in in our these the of presentation. reconciliations are ongoing We as supplement of as measures with and

William Wulfsohn

seven excluding everyone. into the for we each presented targets, acquisitions. financial driven That of has call. calling Thank by seventh Seth levers. specialty XXXX. year-over-year strategic first is three core become plan to chemical In in and organic fiscal any This good morning, operating Specialty had XXXX you, currency of company. performance quarter Thank earnings vision In May quarters since premier Investor XXXX benefit and the shared EBITDA those reported growth, quarter adjusted year you our Day our we Ashland’s core Ingredients

In year. addition, QX, we areas financial specifically, In prior we our last full And adjusted continued market and More so, year control QX on over other our we XXX core have basis by improved companies, to quarters. We We XXXX in the we flow we year each cash gains Specialty improved three Still currency improved EPS for unfavorable foreign delivered we outlook adjusted focusing deliverables. margins growth. the Ingredients experienced year-over-year some translation. In the to fiscal solid quarter adjusted conditions like trends. EBITDA our we relative saw those of four choppy margin by of could with drive EBITDA consistent points. did results. achieved the the significant each

by grew business our To growth demonstrated in our also call. And skin applications. gains have we in our strategy product share the outlined products. gains XX margins we strong plant of made Specialty plus for in our as Ingredients on impact basis on market fourth our for Now excluding care earnings team year-over-year points implemented of so, quarter the we The do do reformulation, beginning increasing so, continue we a hair We drive demonstrated stronger To implementing the adhesive double sales dollar. X% we gross substantially organically and pricing biofunctional utilization Pharma. with ingredients new for in we capitalized Specialty innovative by asset that business. Ingredients, absorption. Pharmachem by we digit discipline and spite We Colgate FX profit to grew growth the improved program

succeeded raw also in We over cost driving inflation. price material

Now as raw increases, last through we progress have towards and recall, the you we pricing will dramatic over year. rapid which price steady experienced made material

comprehensive cost value our we pricing To augment pricing that we these believe reduction new will actions, of in training. begin which fiscal gains to disciplined and falling of impact in expect pricing lingering The actions context important the raw impact practices, we the the area combined selling strongly result in practices us price benefit account implemented drive the new with from remainder quarter team drove above material for have year. and results our oil incentive governance, sales the material prices, in We this continuing year-over-year achieving of to inflation along program. year-over-year is of strong And planning raw with is QX the the inflation.

effort last this had perspective recall, year core objectives. two is from a off program will the we this you kicked Ingredients and As Specialty

this resulted EBITDA in basis represents the in quarter, of basis reduced Ingredients X% In to was XX% first adjusted become of core markets. a our XXX costs fixed realized profit target competitive, quarter, accelerate our SG&A on in which SG&A, ASI margins. points also adjusted growth clear, XX% full. in increasing delivering revenue, To EBITDA, margins, and enable organization cost Specialty is reducing while the ASI points in Putting point achievement deduction to be improvement completed target. Specialty a The more increased our to basis improved to the as gross that in The in leaner, Ingredients improvement we accelerate approximately sales. EBITDA will XXX together margin program reduction be targeted nimble by included percent ability our all and the time to and XXX

the ASI currency, you have growth assume quarter. EBITDA would if Now constant X% adjusted been in for

increased EBITDA up these also the Ashland, SG&A to for improved XXX to year, disciplined we X% earnings compared basis million. gain, $XXX points EBITDA was were For programs, all adjusted combination And in $X flow cash margins leveraging year-over-year. down company expenditures and performance with capital million the year-over-year. prior of adjusted

on and year commitments us fiscal So team the fiscal one reaffirm these in quarter given adjusted summary, year Ashland to its outlooks delivered EPS confidence have target of in XXXX. flow EBITDA, And adjusted for free XXXX. cash gains

and Specialty we gains on limited we continued deliver but growth our More control. FX leverage this, our continuing margin be top-line QX, of rather and to on certain in to aggregate targeted to and objectives, executing improvement FX introductions. demand said profit markets and we by industrial due drive focused than negative new we softness are growth can expect that through the margin dollar soft, to quarter we we But the focused head rather on in As in and gross remain committed substantial innovation into expect Ingredients, dollar specifically, to within markets. on mix several are to positive industrial EBITDA drive ensure product we

quarter, raw QX. gains, from expect Specialty and reduce the asset Lima of earnings also in We to utilization also expect we program, we to growth manufacturing Augmenting resulting more from Ingredients price context material year-over-year continued discipline return favorable benefit a cost, to in reductions our environment. expect of the million achieved nearly to SG&A lower planned pricing run intend the of course, In by as down the And rate $XX run cost entire we behind QX, expect targeted to $XX end rate, with QX shut across increase drive million our we our we us. organization. we that to

the we on combined So Ashland provided guidance December. as for end a company, of the at track remains

As are forecasting $X.XX part of EPS this, of in to the we $X.XX QX. in adjusted range

progress stay sale important to of and on track make In facility. we Composites the strong to Marl addition, the to planned for that it is BDL business continue note the

deliver focused in And our confident of that, financial the over reduction we So the facility. turn and sale million BDO business planned to $XXX you. to the the I'll of the Thank remained Marl cost summary, with and call targets, our on Kevin. and Composites ability

Kevin Willis

morning, Thank you, and Bill good everyone.

inclusive results Ashland's was were Sales first the per In GAAP up a quarter, unfavorable year-over-year. diluted million, the the reported $X.XX currency. we the share. down of quarter in quarter from Adjusted and quarter. million, $XXX in negative points X% U.S. First, start period in operations X% of EBITDA let's from year the ago loss with continuing $XXX X from

at during on plus flow However, in compared that our to costs continuing compared the we the $XX being the These of and reported of XXXX Composites $XX basis, December the income as period. results results Ohio in per $X.XX and prior as Free in Lima, This provided year operations operations negative the includes compares Marl ago segment, from Remember an year. include in in restructuring quarter diluted per discontinued outlook reported adjusted quarter to now cash million our share. of operations. of Specialty million to fiscal first BDO $X.XX $XX end Ingredients we of restructuring that share of prior are to $XX continuing amounts from our million the $X.XX was negative million $X.XX year. in facility the

compared after Our to items one-time than key was items. our was This period. primarily adjusting in first the the for original rate to some effective rate for year forecast XX% prior discrete due quarter tax higher XX%

of BDO Composites Now Marl on divestiture the for an update and the facility.

sell November, the in announced for definitive agreement we a to business we $X.X billion. INEOS Enterprises with As signed

We to the close are working INEOS transaction by XXth. with Enterprises June

our X.X expect tax $X we We fiscal us which for for to to gross of approximately following the except full billion change the the debt turns targeted outlook full year will proceeds debt-to-EBITDA. expected continue for reduction roughly use year an net ratio Last our leverage of transaction, rate. night, to effective close reaffirmed to the get the

more the As fiscal slightly we’ve with reform, rate we Consistent do tax ranges a higher plan year the and full these outlook going year. implementation gained of expect to clarity XXXX update throughout forward. we this around

the other As to divestiture constituencies. facility presentation Marl we of closer continue results the its and to investors and planned business evaluate of to we and our the Composites move

complete pure possible clarity to is as chemicals a objective to our provide Our specialty much as company. play transparency transformation and as we

the options evaluate we’ll to and the a Operator? continue near-term. to With the that, in expect make decision up for call questions. We open

Operator

Our Bank. Deutsche Begleiter with first question you. David Instructions] from Thank comes [Operator

David Begleiter

your work tax you Hey, EPS change good a on Bill, guidance, did rate guidance, your did question but didn’t how out? just morning. that raise EPS, quick you

William Wulfsohn

at EPS to there’s with, point keep the this our like. tax overall be in David, increase. range think do year low pretty increase this it’s we’re the range still rate modest in full we and begin feel this confident to we We’ll that going with in

And on there operational through reason a we spirit within the add increase expect fact commitments that again within follow as business to is little comfortable I we’ll of levers So of I regardless to bit of there our the would rate. will just is. the the we’re tax that very corporate work the with it say range continue the in cost structure that an in in

David Begleiter

just ASI, can the back to that And growth between Bill through X% half trend would how Got year? and the you passed it. and on expect out you Kevin, QX price? as the And get into organic volume you and mix of break

Kevin Willis

growth we volume will and from the we’ll rate have standpoint a wasn’t and on forward there we expect QX significant FX a we to related really or there better from stay standpoint QX. comparative bigger And our growth FX So this that from business. QX, same a growth into reported standpoint exchange a excluding that we going saw in into that as dynamic a assuming move was revenue not get

as with And ASI of growth the enhance higher of this organic drive forward. what year we and well as again, business focus at we’re part of earnings level move is growth potentially profit And and is so, expectation as a we X% start our we’re that that do I the to selling also would to the X% our started for in as improve of trying that as products EBITDA gross to so mix rate. obviously rate

consistent we’ll we with other very beginning put the forward very outlook than what at our think FX say is I of the year. So

William Wulfsohn

obviously businesses quarter We perspective. our quarter the called also business in end driver market mix being strong situation really already some oral two highest really from big being Care -- that And as saw within that we think care skin. it’s about, also Those worth particularly in I big is the Adhesives from an a as helps gains, were. was aside Pharma they Personal and contributors. we’ve clearly out performer nice And the were talked margin in noting

really serve all quarter. those to us together put help pretty So good

David Begleiter

Thank much. you very

Operator

Thank you.

comes Our from Credit next Christopher question with Parkinson Suisse.

Unidentified Analyst

Hi. Karen morning. for Good is This Chris. on

William Wulfsohn

morning. Good

Unidentified Analyst

but FX the of also and some Colgate the saw impact reported and of outlooks. Care business, strong the mix Personal loss a pretty of your with customers have quarters

like that Personal you. growth you business how for the about you replace rest you taken As the of loss? have about discuss And we Colgate-Gantrez the Care, then, initiatives year? think normalized to any can think Thank in

William Wulfsohn

Certainly. did in performance I’ll And as Kevin skin we strong care. QX, have say mentioned, in

Personal We richer or loss we’re the really business. essentially growth go business Colgate say would in against in impact the and last improving the focusing parts And as rate negative this Care X% so across year of really business. we a reformulation would year. on profitability mix, that of same also their I driving We’ve that had At and that growth targeting X% our business. that consumer the we time, had the other are highlighted just of the

by we Colgate a our biofunctional And driven targeting as move and ingredients. And and X% new of much so, mix we’re targeting forward. the overall excluding really richer really technology that’s introductions, lot a that growth

Kevin Willis

And because mix stronger is areas biofunctionals especially really gain in much other profitability those accompanied and like care a of applications. X% top-line by Yes. that shifts, gain skin

Unidentified Analyst

Pharma And How go on annualized Pharma, lot then, of pull business quarter, at I expansions, Thank levers think helped normalized also this to capacity growth by we should had the Great. quickly which throughout a year? rest that key the about to was again as guess, another the we point. seem forward? you of then, have you in growth could going touching just late you. accelerate what And strong

William Wulfsohn

have was a a one the of of benefit customers that now product capacity. that as amount we’ve our business. that What -- we grades. I of Klucel had demand we strong the the pent-up each the more for great to product readily and expanding We available seen our also applications Benecel new Pharma interested the and would say as introducing certainly though of number in There the relates it is we’ve is are have have been seen new in is run quarters

our forward. So least at really are are as position continue of remainder will and technology that X% foreign we year between market, without that to we be the the seeing you on if in move the and would overall focused exchange for and gains

Kevin Willis

to to forward. move look we as business X% you you for If the Pharma the at run to growth. case see And X% fully what business expect that year-over-year is long the X% historically, that be over typically we X%

of So that was certainly this our expectation for year. the rest

Unidentified Analyst

very Great, thank much. you

Operator

Thank you.

with next question SunTrust. Sheehan Our from comes Jim

Jim Sheehan

starting and morning. you raw going Can you margins margins. a talk see tailwind gross Good help How forward? the the your raws could you to bit in expect about get to from would materials; mentioned quantify benefit to this that ease ASI you’re you

William Wulfsohn

year. say of of QX note Right. actually of fiscal this we’ll year, in Great that cost actually you question. in above if oil QX and QX that at is it raw the of was last to important material And price the look drivers primary price that’s our the one our

about cost delivering so talk of context over inflation. that material in the we’re sustained when doing price inflation, And raw we so, raw material

said, where substantially it QX the year for was price being that basis is and was average on last in below current it know us. QX an that in where oil below Now for we

Now it goods because for to inventory. rolls quarter through cost takes a roll into roughly through that it of our our sold

see strong same. second material year expect worked because as benefit we to of year to up assuming remain the oil And we And would that, as so we catch raw the good get the half with hard you prices into that inflation. with know, last from that's

caution year round for make to And more lower million to $X price year increase year-over-year in understand need for But to I our just roughly through. positive an a that saw could $X it lever would while you in terms we it little you contributing in QX that's a actually estimate growth. over we again, a last that oil. of and roll takes to Now terms

as a year half So of that kind opposed of think full you a in terms year to benefit. benefit of may more

Kevin Willis

Yes. time Maybe in terms costs thing. saying point based the And without it's on that on of quarter doing calculation. year-over-year that of that crude a kind that in well. average the really you focused quarter during the do It's to goes average not in weighted as need of

Jim Sheehan

you more could some also, you of case? maybe discuss, the primary destocking did, your you demand we're health -- be end markets? And versus of you you that on can think helpful. see certainly quarter, of headwinds any signs Very appears the exceeded comment the like why seems last where in this It maybe suffering your might performance in that, then that

William Wulfsohn

a selling ultimately and destocking really an I share the I to estimate has Yes, have think and outstanding with and some a inventory It's the their at conservative of that. look over to more there we believe opposite want job consumption. consistent which that with word selling that short-term build see going is they that believe demand as and as we done that. technology, something team time. move the I our hard customers' and some value effects because of We gaining the we result innovating or we control to happens become maybe don't can't can out

that focus So and we're to the lowering share manufacturing managing costs control. SG&A. our we to that our certainly can shift, facilities going is and And pricing, innovation, related things on

a results then good business. But that I on So, I I you thinking. really was coatings coatings at up flat team really them able of in but example who year-over-year, large Clearly to make the results. And have I that lot of a is spite a some of of a relatively was look if coatings mean really doing think bit have team and you're customers struggled what our of reported had our I of nice think think product or is quarter wouldn't by our some job be for guiding that's maybe a could that subject coatings a have just a applauded that. word looking our the there on getting I to for and they mean, really and point moving selling been the for the should as out broader difficult answer, specifically destocking. guiding value the and

Kevin Willis

just to coatings Yes. to if to you by at that, look And region. were add our

we North in that growth America, we different to the we coatings we much heard us in the that reported. what that Still our you had In in America. You'd this did quarter. was than our coatings this North not And numbers Asia, business. helped in case, particular offsets double-digit focused see in rest dynamic of there's

into not I’m then grow region, strong specifics the to below strong, run each business, do here, if we're be focus it's to trying line going to So if as that the going the below the going line. are but other very that. And on not isn't to as revenue the of top-line things we we focus we're --

Jim Sheehan

Thank very much. you

Operator

you. Thank

Zekauskas with Jeff Our next JP question Morgan. comes from

Jeff Zekauskas

Thanks.

William Wulfsohn

Good morning, Jeff.

Jeff Zekauskas

you’ve is level Hi. to companies, morning. look Good versus that in I get there of an Ingredients you benchmark competitors. were, efficiency? strong at imagine your you SG&A what's the a SG&A when When very full you their ratio ASI Specialty efficient target really

William Wulfsohn

match Sure, bit board because so it, companies realize we we do a course. as don't it challenging little our extensive be benchmarking up you exactly. that with And can discuss and of

that that to we’ve we standpoint. And out part ASI, our I XX% like the now get the get end from focus a we strong effort. we Right However which are said, that done put we is and on of a we XX% will it. XX%. target say to have us would very type that focused have on would to there cost to the range lower executing calendar range that's we be the reduction XXXX and do believe of before million is for $XXX perspective that What

that that points And see to through and that that all and So do a technology from curve the on there's fixed continued you and X volume really I three can cost that, you of those. achieve three to mix do reduction. will leverage, that move can can up can additional ways do focus you obviously we do believe growth you through

our been between as of doing hit see programs, us volume part so, percent and think you will today, I XXXX continued of but identified as implemented and really sales. leverage help being have a lower the are won't to SG&A we're what that And which before

gives very So you I throwing hope it. a specific sense without out number a that on

Kevin Willis

number to little get And Jeff maybe specific itself. just a the more on

that. the about aware got investors the As side running our with we've points time numbers. the program to done about this once SG&A But or top-line. business current if amortization lot most what of of better maybe you're that deal baked of that's through And set we'll kind a be you you into sales running aware, bake are related program at more of to the we're little by should X.X that where is be A depends than of the less that's on XX% growth fully in. this

to be peers. But think eye a the is you can beholder. But again by improve not a be so as comparisons and -- I all is the the of objective those relative of that is us indicated. pretty to that said, good three executing number the often to to continue tough that really puts do of spot Bill on beauty levers if in like feel the in we objective to static, and Bill

all on enough. quo three never is going I Status we on execute have continuing basis. a be to good think to

Jeff Zekauskas

in for losses? you $XX And that. unrealized million what the thank securities Okay, was

Kevin Willis

you I'll that. Yes, take through

we million. and the And the trust XX. approximately assets of the proceeds really of That's So fixed markets with ongoing to the to the from a much And of refer trust that to an asbestos as combination quarter liability. those basically genesis arrangement of a settlement XX- invested we offset we asbestos the couple downturn proceeds majority December recall, you what of asbestos And trust that into that did. took and invested a our entered related help liability. our the like insurers kind during settlement of experienced rest the $XX costs may and those in income are risk of large as that pension the our same

new recovered where that are we markets but a experiencing half have through accounting we P&L are now at as to the losses and and recovered. think comprehensive have now, gains nearly those to just related so far the look run this you has right I comply pronouncement the is that other this through kind trust month of of If this. which unrealized they with, previously companies actually have ran income, many to And

And this more quarter going be discussion transparency those we'll assets. a point. to may it, and so same that it's around you're and see which the thing on we'll be call the doing around more But loss each or whether out gain specifically

Jeff Zekauskas

great. you Okay, Thank so much.

Kevin Willis

Sure.

Operator

you. Thank

comes from next with Our Roberts question UBS. John

John Roberts

merge you can do on Thank I&S swaps Do that and INEOS some you. INS so the external BDO eventually into at earnings away smaller go the with point? Or now sales segment ASI? you

Kevin Willis

the think looking course, sale manage for. looking the complete report business insights we're but and not doing looking the here of at at as you're is, we and Yes, also clarity to only Composites business, provide of are best what Marl, the way I we that the to

would we as and will move say So we then business our will total in blend we more forward. our share I that business about it into

William Wulfsohn

in we of still obviously indicated pretty we're decision forward, time comments, distant this should not my some on with path, about be far going I prepared got a but report this. to as future. down have make And the too Yes, we how the in that in to think we're we're analysis go phase public and going to

John Roberts

there substantially lower business the so then, but BDO. done the your assumed no self-manufactured international restated pricing you've Or because whatever your that don't you've approximate ASI difference. now I -- in the report there U.S. the regionally, of results margins in in you higher is of transfer because essentially market BDO is pricing purchased And markets in and or is know the

Kevin Willis

the and from is So those Kentucky part is a the a BDO around BDO which in that of production that use all material City, then shipped Texas as done powders products raw And perspective, Calvert are primarily manufacturing Texas. are we captive world. our City,

have the as at well? same profile what heard that margin virtually the question questions your as everywhere. a I it is your one that as transfer material, BDO we So the To was of pricing is least of

John Roberts

Yes, or customer there that's large is your you apply to really discount use? it internal close is to big market own that enough

Kevin Willis

We cost. at transfer

John Roberts

At cost.

Okay, thank you.

Operator

Thank you.

from Market. comes John Capital question BMO with next Our McNulty

John McNulty

say thanks Yes, the material it you guess, value more pricing that? I cost questions is tied were for taking versus my be the how that of practices you for raw appropriately level we the regard thinking through effectively. question. see pricing just to improved With much And more to higher passing we to subside, I highlighting, is to raw guess push the premise off see how should pricing start continue we or for if material can about would

William Wulfsohn

you materials, a recognized to would Yes, issue I year say had our we But actually growth not serious business. Investor as leverage last we but the with of the to so back and -- the value to that of differentiate if the pricing, differentiate the or course go core Day and ability over improving only that pricing ultimately a margins component of the contend technology and identified the in we terms raw inflation. skills, of material drive

selling will the we I our and focus that negotiating with look innovation, I practices, a to we have in training. provide we to last with our it from say extend need value inflationary on customers. and if say our at with value And the that our customers that. when we helps year. an course, urgency of value standpoint to you're would period, we recognize So and it's that -- we associated continue that continue as you would But And

sales programs. We incentive we have account tools, have and better changed management

drive the that on of from see to the the value pricing that focused of continuing some products we fact our full marketplace, materials So raw the make providing independent softer. and and sure we're that's getting get to we we're

Kevin Willis

with programs with consistent comes mix value and the Those continue that. Yes, price in levered we towards driving that shifts would along that pricing tend higher really we're to it's And with products expect business. we to shifts have. be the mix

John McNulty

for Great, the thanks very color. much

Operator

Thank you.

Global Seaport with Our next Mike Harrison question Securities. comes from

Mike Harrison

morning. good Hi,

William Wulfsohn

Good morning, Mike.

Mike Harrison

you're kind as in you Bill, January, could seeing through I coatings the market your months. of that the key into in some October-November interested the that was wondering trends over walk particularly those ASI of trends walk December were and four care you through in personal and we if seeing timeframe in

William Wulfsohn

trend Right our big to results, of I’d with a the we fairly the relative quarter end end saw quarter. of saw say we up I see the that was for didn’t at we off consistent level pick drop a think see the demand big results didn’t quarter. we our that ultimate

Mike Harrison

was about more if then, even if just ASI, it And pretty you in detail gross wondering, talk also growth little decent on bit interplay and through materials can versus the And rest you was the cost fixed expect How margin trend we volume to wondering fiscal right. like the performance great. factors impact can if a wasn’t All of absorption margin asset XXXX? give those utilization. can pieces of mix, of the pricing in or terms the raw gross among

Kevin Willis

Right.

discussed an quarter, material volume we’ve even did we from though saw pricing were improvement the see relatively was volume was above and actually raw So we mix that a that flat in standpoint cost. sales in that

our positive as negative go within we FX. said, That We a see did one to saw fairly expect expand we impact the being in that manufacturing absorption as of a facilities. year. will We then forward relates that substantial impact it of

all and about negative percent. and terms to end It’s point But shine drive I gains FX. say seen the the have numbers relative the on we when really that would basis if we there both basis in so, that dollar even the in did great you with GP think weren’t always that’s altogether on FX GP a put GP the you for had in those the margins. end of And it’s

William Wulfsohn

no quarter. at call And real that those amongst helped was there I standout various necessarily what to of for and It a the look make you if think really components solid them. pretty contributed -- would I a each components was

Kevin Willis

year. for cost this Yes, make year focused of little we to And a those course being we’ll on that’s but when forward we look that the all our we of how working them the SG&A in weaker, we’re a of positive it’s think earnings essentially or so and we’ll stronger levers about little -- drive same them the and those levers plus some quarter the plans were different reduction. it’s all that see growth those

Mike Harrison

All right, thanks much. very

Operator

you. Thank

Research. Our Gabelli next comes Morbelli with Rosemarie from question

Rosemarie Morbelli

Good morning, everyone.

William Wulfsohn

Good morning, Rosemarie.

Rosemarie Morbelli

markets some Asia more location I if of were as you slowed down? give rather China that us coatings source little in could soft your of wondering has the a considering in growth that that mentioned or was and industrial on as the You the well details

Kevin Willis

Sure.

in mix neutral gains primarily so we China saw you see referring when fairly I that the to area in So did And in referenced offset to revenue care, standpoint was look substantial see rest the before. China. of a down it’s and stronger one so that some by performance that’s type see that the we Actually we’ve energy at where which applications of performance in that good the was coatings, did you weak. relatively a year-over-year and industrial our business saw growth when saw can from gains construction was and help We that Pharma was we it in specialty driven growth in get and we skin Asia.

also strong. which in of particularly We were rest the Asia, gains revenue saw

William Wulfsohn

we mean literally way think except all the And Asia rest China. Asia of is of I

so it’s a And etcetera. region, India, big etcetera, that’s of but inclusive pretty Japan,

growth saw that that frankly most of in the sell we just end And nice so really there markets in region. those into we

Rosemarie Morbelli

percentage are incentive the about program? the linked of sales could if then could and value Okay, what thank to ASI talk And targets? the you. value your you that changed in you that, are the you focusing And is products, about what you overall on then high talk high

William Wulfsohn

Sure.

ASI great to of what and the value answer we question, high majority believe is very differentiated we sell within just your So materials.

innovation. So I that we stay forward relevant there now from going trying would start to we're and of expand sure more make stronger that and course continued

from our margin And a so products XX% that, we with target of higher our to average. sales come that profile new with than and

request we system. line. have we more have we've focused customer working to are to our that X,XXX pipeline, which those application in we moving more resources And in activities. innovation active call on TSR put through over innovation and been have and a specific better towards of very work really And on a customer’s service have those are perspective, products reformulating we what We just an

done than upon raw past, based they're contribution of inflation. a conversely that incremental profile was it it's what So this the very factoring that's our different the also related mix we've said improving driving last something a incentive and their their revenue we a profit a doing. absorption from plans assured we’re from core if and is on From part standpoint, the come come to impact. profitability and over year. reward would then, bit pricing sales benefits the we of having in and delivering could to their plan. what comes volume commercial nice it's from that relative material above team that in And to put sales or we And basically in that, And from that what incremental that

team to they with so, see their visibility incentive has on compensation. And in that directly sales mind, focus that the the the impact activities

Rosemarie Morbelli

helpful. very you, Thank

Operator

comes Instructions] [Operator you. Our Jefferies. with Thank Laurence next question from Alexander

Dan Rizzo

morning, Rizzo good for on is this Laurence. Hi Dan

in change that year? force turnover incentives, the months or decreased increased or the past With has sales past few sales over

William Wulfsohn

tools materials that think No, can team impact that think have perspective, control I and it's giving far. anything don't if And so to our and think the sales visibility also they a programs that from understand been higher I and better the we're the in through real innovation -- see value I positive a to work. their sell respect them of has

I've in strengthened we've that any had shouldn’t So trends any, not area. turnover that think noted I will say you if I but

Kevin Willis

has destiny more where our with we've past, mean actually shifts to salesforce.com them, I force there are seen that that in changes have sales tools much force, the regard, been still able process But sales there, we've opportunity the with control along sales the the some all if look Yes, to company our I that individualized some think [ph]. faster service large is you feel Like at available our incentives and than look made of people it in of sales really regarding them for low. been we've salesforce.com use And of the their much the to provide really do which force in frontend. for pretty make And much frankly job. it's turnover been mix our the that sales overall incentive is helps much the we've improved more one give we their customers. we've as that because team based many out and to easier the teams to

our spend so the to time commercial and And helping in on is winning right it’s timing particular I'll were those and leadership area. for our think we're And as to a the most you I customers drive better now. less results say, that strong in that's [ph] changed in And very the of also in and of and in organization exists, to is putting So through more markets overall, the referencing stuff. and more coming terms markets that if ownership. a market I pricing attitude believe our better that it, there commercial we've flatten clear sights -- line speak particularly

Dan Rizzo

of Pharma I year, of needed, in in was wondering you mentioned Okay some and meet your there be pent-up capacity expansion to not -- is going that XXXX to thank there expansion you. application? expansion and of if demand. kind additional And capacity this the but is application products was then XXXX maybe for in

Kevin Willis

and issues. that our XXXX lot addition think a or space. Klucel, a while XXXX the put takes We’ve of a don’t head really in cellulosics we capacity really tremendous I areas had a to debottlenecking of give us of In capacity in will in have major Yes, new to periods it done we’ll some those place.

commitment that. sense to for window plus capital in forward, debottlenecking at in or think may outside activities, our less. you’re we’ve our expansion understand some And And referencing going working be fundamental us X.X% it we’ll flow. At expansions our keep the strategies we CapEx what of for be in that cash the targeted we make as that, same or engage there. time, about sales may to So deliver of to Klucel relevant to an eye change to do

our expand our over I fundamental mentioned That’s things a that further spending as and time flow. cash to So may capacity. outlook term view do Klucel we and wouldn’t it change longer some on

William Wulfsohn

they our make And also Yes. be proactively expansions Klucel to Hopewell. would terms manufacture that the Hopewell. there extent last in at expansion we needed, Hopewell, further facility. obviously to is that at did in the And we which And Virginia of we we’ll do need as

much that, do footprint. do leveraging than more and to existing So, had whole you When a it really if which an takes footprint. to expand while new CapEx it’s efficient obviously, facility existing you

Dan Rizzo

Because just line don’t in, expect you’re new that that correct? an using you the capacity brownfield it’s need same -- needed, are a make facility, additional there’s expansion does like not to that not existing qualifications then sure if that of

William Wulfsohn

we on there number a worked year the qualifications Well new are through last and capacity. of those

would and increase new is be and think a clearly manufacturing our have infrastructure infrastructure much the obviously what components lines, which Kevin referencing more plant base ability we add brand to build expensive. which of leverage output the is footprint a would having to dryers, that additional to I without

Dan Rizzo

much. you right. very Thank All

William Wulfsohn

Sure.

Operator

you. Thank

Our Sison with next question Mike from comes KeyBanc.

Mike Sison

think first any I is XQ, growth seeing In of lot a looks growth. you terms you EBITDA strong see not for companies, and And could of said year-over-year your quarter outlook organic growth. calendar which positive guys

can and calendar So, as are the can here struggling you you first maybe where see little growth most quarter? bit the flush why out a in

William Wulfsohn

Yes.

what as And same that be that could hair of be growth. Pharma continued be -- those that in I growth. there Energy we move see we Pharmachem move can So think markets. where of areas will in strength. driver would business is We help the good are continued we say care continued And a will us we’ve had driver forward. We think growth a think

in some help the of weakness number some you’re offset are that see referencing. that to markets of markets the of there can you might that So

the It And projecting don’t think growth plants, I back us the on not revenue mix, so, that markets counting dynamic running change, for be ourselves to big will the be that’s SG&A have earnings and growth markets great. to favorable in targets the be we’re the positive But would will our cost meet we’re reduction. some price And within to to why driver the commenting for more QX. setting of we’re that that quarter. that change in a extent substantive demand show

Kevin Willis

lot a that that things see overall can of trying on that to things to this we to in the would the drive for due is shift part is we continue -- opportunities, to there we're year. areas And thing be certainly things mix there drive. just resilience a to only we Bill’s can continue But can control, add the the of that those. business Mike, I we and that control year an going And And business the the commentary other a Adhesives mid-single basis, case to on would years full take to grow growth. kind of over than of that has to expect opportunities that digit. the be is a nice contributor also to and to expect have are advantage That’s going We're we the grown where globe and those where we business capitalize consistently we're QX. of in basis would we on the

Mike Sison

if area by think XXXX the where growth product that -- what you could And noted, Pharmachem giving more Great. for and year view your data, unfolds us about you as you an by helpful about think give PVP, adhesives, to sort be like? and think the by product? that market was is about when tended looks cellulosics, I now us outlook us to wondering you more And is of then as

William Wulfsohn

So element a several markets a do At those. solutions an we at discussed, how these we it’s time, platforms. major lot same we the as specific product and the have focus of end it's our we've great about we within important be to relevant talk because and of look question business

of across as so both optimization we programs. those And dimensions. asset do And company, drive have a we

because profitability, will enhance I where how we think do that monthly. the look about review as we we executive think at as have. adding we that that tend business other would that we going we I profitability the you. more report aggregate, of and by So forward, our of team and don't to I we focus in with kind do value the that drive managing to results mix, markets We leadership capacity that think, we the can share that the talk of need the areas. relative proposition shifting things the do our part more to would And we in that inventory

to those, growth of are have for across stronger that to which going innovate, in have going a to We you referenced to planning this to the we're planning do there. and on which little we're Pharmachem markets, year, cellulosics all really growth we're drive platforms to offset in so, are growth softer. a are And in little

Mike Sison

you. thank Great,

Operator

you. our Buckingham with Dmitry comes question Silversteyn from final Thank Research. And

William Wulfsohn

Hi, Dmitry. Dmitry. you still on Good mute morning. Are

Dmitry, Sorry, hear we can't you.

Dmitry Silversteyn

Now?

William Wulfsohn

Yes, we can.

morning. Good can. we Now

that You're thing taking mute really seriously.

Now hear we can can't not? you or still. Operator, Dmitry connect with we

Operator

is unmutes his line His end. open our Unless line. on he

William Wulfsohn

operator. ahead go Okay. call the Why and up wrap we

Kevin Willis

bad Yes. He a may connection. just have

Operator

any closing turn for back Okay. you to I'll over the remarks. Speakers, call

William Wulfsohn

Thank your all a Ashland. Hope and everyone great has very day. interest time much. your you Thank you in this for for morning

Operator

and gentlemen, thank conference. program. participating in This concludes you for Ladies the today's

may disconnect and You have all wonderful day. a

Ashland (ASH) 6 Feb 192019 Q1 Earnings call transcript