ASH - Earnings call transcript Q2 2019

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Operator

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

Second 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 call is being recorded. to conference like host to now Mr. would turn over the your I of Relations. Mrozek, Investor Seth Director

Seth Mrozek

Thank Good and Quarter Investor Fiscal is you, Ashland's Mrozek, Relations. XXXX to Bella. Seth Earnings morning everyone, Conference of Call Director Webcast. name welcome My Ashland and Second

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

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

Bill Wulfsohn

Good this get going comments I'll against to lot happening progress your profile morning will us to we both questions externally, have everyone. my There has brief quarter. before quickly. us moment, I the the internally operating been and so allow and very to it's a that external to discuss I'm make initiatives, a in important In factors on solid do, worked quarter, which made important three but

continuing the $XX of and negatively million dollar, million the is by on $X first was in of over a by million and U.S. year-to-date EBITDA QX. EBITDA million strengthening of of which The ASI basis $X revenue revenue impacted $XX which

The the Emerging below our in in but continuing material second demand of inflation raw which we is expectations. adhesives our is demand. specialties, performance flat we performance peers, experienced experiencing. and consistent coatings, QX, with third and customers And end-market relatively the are is

which a context, million areas important With time that I markets in X% gains portfolio. in just Given the for to difficult solid of a gains offset X% was changes upon comp. that $XX like comments, in work referring team material From constant demand I'm the said, in that of $X a based sales inflation revenue throughout sold, I care cost year-over-year the impact versus care perspective, the on very increased did end we quarter entire HEC personal the Please team highlight made revenue great by grew areas that reformulation. year-over-year referenced. control. Colgate some a the in of a note team weak the could oil lag between basis team ASI basis, and In speak the over raw changes pharma on on has approximately excluding The experienced of to basis million QX. this and to the my price year-to-date our sales solid would the goods oral following to as to sales currency the by I

drove and And demand recall offset Asia high note markets, to not important markets achieving these by goods the gains with U.S. and of as mix year-over-year negative finally, regions America strong year, pharma a Europe. Latin the the to overall grow from ASI did in in this in gains end Putting way China remainder lowered our will leading energy the grew context and fiscal cellulosics of negative that the that single-digit volume was our note of by and Also sales in nutrition, regional in the in online. XX%, construction. coatings all double-digit quarter. QX end team sales the team coatings, in you in fully adhesives growth we the drove had specialty achieved of solid certainty the the and team business new capacity team. the year-over-year offset markets. America the was weakness this and inventory outside gains of had absorption. together, Also finished growth rest last profitable in perspective, we which mid- given As by achievement growth. in To performance on a a brought all share weaker-than-expected But We less year-over-year North impact also

year team once kept these reduced SG&A. inflation, the Now manufacturing prior again below total offset drove to above price and increases material substantially costs challenges, raw

Composites million the million overheard the to the QX rate our cost to businesses, a run transfer our versus of that and Marl These the When reduction on $XX Importantly, are of our quarter. program. implementation cost-reduction will a basis million. target with hit of run-rate are million program, and we sale million $XX $XXX year reduction over consider contributed over $XX on now through in we of SG&A basis $XXX XX% you relating roughly prior reductions the way substantially

significantly lower-profit That priced am I our lowered that be we with storm would said or team drove not do mix clear, SG&A. a the better keep we up, a team came very revenue ago two than and incremental I assets our happy in that So feel good difficult quarter. to over focusing that for strategy. adding our in gains on have far utilized, to below the context, the just weather control we this better years three the all albeit to prior what we enabled current ASI By establishing inflation to expectations

business in our we strategy, commence repurchase a of $XXX million in the remain Looking to cost the the emphasize results, working stock gross to begin forward, sales to markets we remain early believe this communicated adjusted demand target possible as I EBITDA. best strong as with our expectations will I leverage through confidence share that our debt-to-adjusted have we and a yesterday committed to investment quarter gears, in is QX is and want our To results solid previously weakness dollar reflect multiple we've such, we the this clear, given be context. our Switching team least our the to referenced. along last times current program previously at actions will to achieving May. and approximately intention outlook our action, in announced take achieve two

finish impending our Taken confidence debt the our into and fiscal strong XXXX on level. and account, Composites cash our targeted cash to Marl of year generation the sale expect in hand, businesses, close upcoming to we

over I'd changes to Earlier and Ashland year, important on to I made Before Craig Rogerson we the the like this Kevin, to turn reflect call Board. some to calendar Board. welcome recent our

we announced just Monday, consistent forward we outlined that with additional the path January, in addition, In changes.

would have As Neuberger anticipated, retire the will at for Ashland to over have Guillermo of Guillermo and the now the XX his Board and Michael the join outstanding consultation given Novo with Kevin. to Michael I'll shareholders, elected in join I service. extensive to we're seat, leadership to Board turn Ashland main industry. Ward call his like meeting experience from other and we To years Berman fill thank his in our excited

Kevin Willis

and Thank Bill, you, everyone. morning, good

$X.XX dollar in impact by including currency. per The the reported our to compares million, that basis, was were prior from impact down currencies from we the than February First, up from continuing negative including year-over-year The income $X.XX in Adjusted foreign led Sales share. an $X and to we also quarter in diluted early per regions. was prior was the and quarter, period. in $XXX continuing the quarter. we three million from On year-ago to the there significantly in points per unfavorable the in let's results Ashland's provided quarter start $X.XX operations prior $X.XX diluted EBITDA euro, negative lower period, the GAAP adjusted million, second period which U.S. $XXX emerging X% currency versus or the $XX share, of $X.XX year. currency from U.S. This outlook was share. impact. In operations of $X.XX X% negative the compared income reported of was a million stronger with

Our was several tax the of rate items. largely below discrete effective our in to expectation favorable well due X% XX%, quarter tax

year $X the Ohio the You'll are million, include of was amounts million XXXX of million Ingredients restructuring and flow earnings being the in $X cash prior in and plus Specialty fiscal from segment, include quarter now to our continuing in year. million $XX $XX negative in quarter compared recall negative our the period. operations. second in These costs Composites restructuring facility ago discontinued that from Free since results operations, reported BDO during Lima, Marl as

As of estimated majority expect $XX fiscal inclusive our of range you $XXX the of generate currently costs. the in restructuring flow million million separation the $XXX to and year. of half the will cash free in recall, cash million we related an this We second flow year, free of

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

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

We to track. for close transaction remain preparations continue and divestiture INEOS the working with on the closely

right We on by summer. to the await expect continue now, transaction Based approvals. late we we are to where close regulatory

to the use continue billion, proceeds, for net support reduction $X about leverage to roughly expect following X.X the our turns. We close commitment of to to the of our transaction, in reduce debt

Turning Specialty Ingredients. to

force down supplier may a As you and heard, have majeure. ethylene has large oxide been declared

cellulosics some a only for several perspective, and down one of week it our provide be to for been This more. facilities. plant to we about down this Just has impacts expect

the million $X of $X between is estimate impact the current during quarter and Our million.

fiscal we mentioned, have financial XXXX. for Bill revised outlook As our

of half ranges We second this to fiscal the during these will update year. continue

During currencies. key versus U.S. on quarter, strengthening emerging we market saw several the as continue pressure end earnings from demand several euro weakened well markets, and the as March dollar the in

While current we and they least items, at QX. are quarter these the actions through to taking potentially will offset persist internally we our into believe

the believe of we half, our could in second of Our If range potentially new see appropriate we EBITDA for through the range. the business. Otherwise, revised current continues we improvement expectation end fiscal the the year. end hit presumes middle of environment the the forecast high the an is an

believe Specialty Ingredients to While operations. especially satisfied existing X% are program we share repurchase also significantly share to X% fund by represent $X have to around cash performance, flow hand, on we actions not to as growth on it $XXX portfolio announced business billion this Ingredients night taken Specialty We We prior Ashland certainly the intend our repurchase. based level repurchase undervalued, a for of cash shares our over improve the approximately use the plus Bill remain free and generated with we authorization. and commence intention for year Last currency. million under our adjusted would indicated, this

our to closing impacts it's way think leverage X.X the to reducing Composites-Marl following that toward divestiture. the this important I commitment no about of re-emphasize turns in

call Now questions. and Thank operator I'll back your over to we'll you. take the the turn

Operator

question. [Operator follow-up one question Instructions] only you one Just may a ask and reminder,

from Your Credit from Suisse. first comes Christopher the Parkinson line question of

line Your open. is

Bill Wulfsohn

morning, Chris. Good Great.

Christopher Parkinson

you. Thank

more to the personal the well So during of but lashing good the Obviously, a are how I'm the various you? just that Thank and profile their showing? the on get to on next fiscal have even trying versus you care of comment quarter personal into side, care this, skin in How to – the care's years? few growth the and So personal processes, morning. on you. future. your On integral customers they're the can are just you materiality been growth growth sense the now, given importantly

Bill Wulfsohn

Personal sustainable really biofunctionals Care customers. to it's Yes. we've Skin care actually our our finding our and is part an significant with area a very of had business help solutions business, growth enable where important

growth seen over last we've year. So the

China, see happened, to them. we're meeting [ph] expect forward. we one our they Ajala This major a go to growth all of major was more and in We growing as customers I rapidly are and supplier with

to grow We solutions. really going on help to sustainable So of portion we are business. that to to looking believe focus continue us that's the

Christopher Parkinson

Got pharma. it. to just quickly And turning

you comp. to little I'd just little You range healthy know us had in growth comment color -- pretty decent know, an still of especially But more upside any on in you're kind further any mid-single can result here? basis. But Just, give other you're no Thank digit see add industry's obviously take given a the can on fairly longer just you. constrained. the volume momentum optionality actions annualized you there grow poising I there? growth, just you Asia, drive I on, or to are capacity healthy say, a

Bill Wulfsohn

say line effectively increased Sure. Certainly, the on we've in the with the to product has additional that area and that's basis. us area understanding I can them, I now would more seen have that on interest growth, but enabled global only we would supply capacity brought say cellulosics continued that not a we've in customer

put we over press releases few months. last out the a four So three,

by to drive of product. innovation providing continue the new variants actually We

We are local capabilities. -- development have and established

growth So do us. of properties tablets, distribution, local and of weeks disintegration aspects. has needed past pound that paint China, enable with in There in we're do our marine market properties on ago, And beginning Klucel, that introduced I the products the meet particle a the the solutions, had was I changing that the subject where think in opportunity and with bullish or takes by really existing our In going pharma. of size it of that of to with just formula. would've we be whether And places isn't been in very for size, that's customers, other we part time. on working the every material really our that's certainly like supply blending our can customers, can it what's this applications with that out explore to at be while we some the they're drive related together, multiple to continue generic couple Once customers I often been technologies pharma markets. it question, the markets to I of and we're think used to And solutions that in India China had the that manufacturers. on dinner because but while to for again, has work as Klucel one and seeing the the is its other pharma,

about that have, we that good footprint grow products we we gives very the have, feel we that's we have, anyway what the our confidence So pharma team to and that the us that business. can continue

Kevin Willis

say we're from that well. I to relative as that also Chris seeing uptake space, And within the more packages also excipient would nutraceuticals our

in particular from we So in an perspective also continue globally, excipient U.S. to overall well. as we as growth market improvement should that nutraceuticals through and both the see end some growth see

Christopher Parkinson

Thank you very much.

Kevin Willis

You’re welcome.

Operator

comes Your with Markets. question of line McNulty next from John the BMO Capital

Your open. line is

John McNulty

Good question. for morning. taking Good my thanks Yes, morning.

seems than I a So what the guide the we obviously would light the bit bit little little guess maybe but XQ side, expected. a have fiscal on was worse

you with guess, the you're consider especially are the most rolling and about the us should what when conservatively you at to some cuts lines we of through or guide are worse business gets of think so as kind cost what that? markets sequentially have that this What so, been? And end how I point concerned

Bill Wulfsohn

Yes.

and in change represents what the and of results demand be adhesives of in that well, uptick see at and saw great. possible QX would a actually continuation coatings. an think, guidance, first when look that It's we'll the all, QX you I it’s in we

and I I'm important. we're guidance, to And want markets QX being when because any But in flat didn't it's there we out that the think not and I that, said help about to again, affected that impression. would changing those in in be point to Clearly, up assume to still a the so not I'm going the I want a just up us emphasize, recovery, talking results don't significant was that's of market I a of mean, with in important. demand happy be couple whether with of I I currency it spite to that mean, our and those and some would and these range. recovery -- And also think changes, like the the things, areas. there that growing sales, we're well. seeing weakness, yet raw say would push of material, I weakening mean I it's margin. we're in us has I Kevin mean, of out as as to dollar if of the would terms guidance help As earnings and us in give

do in we go we you've we what season. our ones spring drive followed otherwise what lot think to the of of So as volume be to yes, balanced there to we North to, saw that assumed especially forth putting That's contraction into and that us why make for need so a I in coatings have caution rest out terms places heard our we sure And is as and might will okay, have coatings area. to, expecting some continue that, extrapolated energy we think you additional in America, but India they would we're basically QX help the we customers, and of are the better, forward. what try that a it like to in I Asia,

John McNulty

clarity maybe sequential should that And run thinking how rolling guess, it. XQ little at, cuts in? as to cost opportunities. on bit cost far Got as the like the the you about XQ I When the rate of be benefit from cutting we a then just, think you're about

Kevin Willis

much quarter very and that. bit about a or get to to this of a still so Yes, on I a ahead we'll XXX% time, schedule the the of by in that amounts the our will QX of of end John, bit structure of little for get come we're we we our year, at or on roll but of again, lot the the fiscal of the talk the run go rates, that the it's quarter, fiscal that through. track should end cost XXXX to we quarter. see the amounts December the not to that next. end the month continue typical, pretty as final see have within typical time pretty improve at We'll to these say But we

so And more the impactful to tends the flow-through in quarter. following be

we quarter at $XX we're $XX ago were a million now. if million at So

the really start to $XX You'll of start quarter. next through to that see million the full impact in extra flow

so on And impact in way the of of to that's kind from perspective SG&A. about terms think a it overall the staging

John McNulty

Got very helpful. it. much. Very Thanks

Operator

comes Your next Deutsche question line David from of the Bank. Begleiter with

line open. Your is

David Begleiter

Thank Good morning. you.

Kevin Willis

morning. Good

David Begleiter

what of absorption Kevin the and Bill was the the in plant quarter? reduced impact

Bill Wulfsohn

Yes.

$X I'm -- be So it of going was mean million to $X million kind here. directional like I range. in was the to the It

it in We here I up that market. potentially come So, some us we appropriate that's not the mean, see it thought a yes. market operations opportunity laundry recovery to enough. We're gives of And enough was recover seen mentioning was roughly the but significant was things also to but if trying that it given with significant we're we've drive the it. to that our list

Kevin Willis

about. Bill's the the related to down other inventories -- really about to compression around we've million. overall Sequentially And of we $X earnings million piece for number of Yes, absorption mix talked million mix as took was correct. is $XX $X directionally

David Begleiter

what And Kevin actually ASI helpful. the quarter? in was just in pricing very That's

Kevin Willis

dollars raws a We is of very actually couple encouraging. were an which basis the overall quarter on ahead of in million

excellent seen of of several And team cost the that up an not to over -- trying for quarters margin for years inflation. job compression I'd we've it's a that fair some the in the the has a say bit only catching of us recover lot that time seen as As past. but we've really last material done of to couple taken raw you know curve of last have particularly, we, climb

by very encouraged we're So that.

David Begleiter

Thank you.

Operator

with next Your KeyBanc. Mike Sison from line question the of comes

is line Your open.

Mike Sison

guys. Hey,

maybe mostly In walk in terms in outlook? Pharmachem that a half better to product obviously cellulosics second or need the your meaning in growth. or second us of Can through -- needs is by PVP really it you to you recover EBITDA the hit half

Bill Wulfsohn

coatings half see I grow I part at markets to performance a to the the adjusted Yes. but of that reflection really mean, the you'll Well, that year. I good the was would of outlook What a markets of results Pharmachem mean estimating areas. matter. second soft with are that and for people our that's recover. And think year of the remain and what before the referenced we because But specialties I perspective business. least is QX number all we've the by continue are those these the the begin adhesives

we sell which much leverage our those I personal businesses while which running strategy, keep are a marketplace, which so construction as our adhesives to a available pharma, of as slower when coatings, the into little and example the to and we have efficiently. try aware love energy bit that care, for cellulosics into We allows know sell us capacity in can markets you're forth, products is we'd facilities to to

so It's on a segments watch already segments. it's those we've really end So much really areas -- not of that the It's identified. markets. not in but out

Kevin Willis

towards more better. which middle end why high my the the would require I providing presuming a the get the to adhesives end look markets that growth end is recovery than those currently the up the half those specialties forecasting, and indicated that demand stage doing you game. end if for of at the we're somewhere and they'll around we're to of upside, that second the we're guidance return around what guiding half extent but but of potentially range, as at that performance Mike remarks, like is half rates There is that to more coatings in normalized And we're probably to our it markets second

Mike Sison

Right.

growth year? but areas XXXX, maybe back cost will savings. we're what your Can drive any Okay. the which then about help not if walk give for that leverage know us fiscal got think comes specific XXXX? you in given maybe through normalized too more away when you you And EBITDA state? year. some I organic What guidance be you don't other far growth a drive next would And to growth You've you deliberately

Bill Wulfsohn

Yes.

job couple outlined that there question we're a the So look factors, at raw you material seeing you with you of good prices as the did And mean answer. a I really -- when is the inflation We down further it's of at thought abating. but that come a The might becomes little from up given drop currency level. the oil go similar really back kind but year-over-year end quarter get comparison that a place. as for price the bit fiscal which We've essentially out in on hang-on part unless a have will the And dynamic lapped year. first again put dollar next year. of of changes a of this non-issue be the may that. over will you we by had just into the we little Colgate the but most There the play a

Colgate you with personal when market rate, the excluding that's put consistent So our growth and you the the if I we're growth that mean seeing in care impact. will, currency together

would with has the that would very consistent be we'd and that that solutions market. to it providing marketplace. Adhesives to we growing expect good So expect continue these grower grow. Coatings coatings some of been would a we're we the continue, Biofunctionals,

aside on the of or So reformulation see in change one. kind Colgate Again, we disruption fundamental don't leaving market. a that the I'm

experienced price place as raw And we'll based inflation We've upon SG&A the the cost-reduction been so have put carryover significant we've those. material in today. programs able be We'll to we've above think timing. we lapping that from

Trifecta where in So in We've to pricing. the I things upon good come the bullish going to whether continue thing I'm said, based strategy we work different business not right the to levers about context aspects the of our bullish the the because of a that's still It's driving in excuses job deliver in And remain really not on our SG&A, and other to business one I'm terms here I is, on improvements we're get it's pleased. and like results. we're do challenged that us. goes. strategy had as the operations those, that the focus, have to do feel our

us gives return consider So get confidence growth earnings normalized that's what of rate fiscal as can more what into we would a and to XXXX. we year we sales that

Kevin Willis

Yes.

I I'll to stand-alone points. things cost-out. the get impact percentage being mid single and digit you organically you several -- going growth we'd basis, to basis. equal layer the expect more of And carryover think business EBITDA on generate That's all a in

equal, unreasonable So again, to all X%, be think to things wouldn't the X%, in ingredients XXXX. I being business it expect X% grow

Bill Wulfsohn

if it, we our did this look to you And year. It last this intention was at do year. that

year. As at that. against lap this to things can't mentioned, get have weighed why we anticipated And last some we that had we've believe those things that would we them, back have we as we the and start reason no what beyond achieved and there's get of year what we

Mike Sison

thank you. Great,

Operator

Jefferies. from Your of Laurence line with next the question Alexander comes

open. is line Your

Laurence Alexander

work-down I also is that guess or that inventory to first is in QX? clarify over just you've that the morning. Good done,

Bill Wulfsohn

I demand, And mean in that's EO adjustments our we're on inventory. bit market, say it's some quarter-to-quarter. our a cellulosics little will Kevin parts of would I that this seeing so heavy there for be of part, fluctuate to our over. most inventories the it. with kind referenced pulling outage

ensure challenge the the be think in will right production to drive actually I locations. have that increased right to inventory we the levels

part while of getting like We're inventory product lower out so a core help more support our year. really that's sales. the of levels not strategy to always focused on the for to we'd really see And rest

Kevin Willis

as do falling possible it. to as is plans the of one hard And

Laurence Alexander

to a early we you're that next the next you standpoint utilization decade? margins three or comment last two can about how think into guess you out say effect should utilization mix into look asset be and capacity I And trending tie thinking where from mix years over if and

Bill Wulfsohn

Sure.

assets. good filling situation, simple that's response you potent focused of to job it's primary give that a up that. two And done and We've when cellulosic points. a in hard to very So our really or question get a concise you're on

year And added One recall, our the in to tons debottleneck output the by with which our way. the last and expand done you we dryer system. about as is to we've change facility of them Nanjing XXXX

biofunctionals then more certain upgrading more So cellulosics be down to or and really products The secondly may facility selling more mix, is times, but at products, Pharma easier Lima can over the capacity in would that the the the be challenged so comes nutrition products. full, there. the area. to be selling cellulosics. the That it adhesives construction incrementally essentially which area, it's add we capacity differentiated and over In

going on part focused of drive to we'd I area and that capacity think to we leverage. our we address extra technically, more some through that volume system that commercially in have like and something to do have is we're because opportunities which

Laurence Alexander

then just going it thinking into around that is forward, the to basis you dynamics is and out, XXXX? north effects the of understand XXX this margin to the the we're in businesses And differential if call basket about take lumpiness of points quarter mix then lower-margin the or

Bill Wulfsohn

more and those fill have would top-end more much It the is in you'll products we'll that. so product a versus a be really perspective a in difference that capacity. pharma communicating future more between the be better products XXX significant around energy points say, And near but an the than basis much, than between there

quarter, why what is spite impact. saw revenue of of because but this it part you we to mix mix the the volume at costs. an unfavorable certainly let's So saw those is say, say want really It is an In why which in the strand profitability of that's profitable did lower thing we context a we wind-up manufacturing what we upgrading don't to us, do. important that we is FX-constant right

Kevin Willis

Yes.

and to supports also important role serves So remember it's construction in business is the important and portfolio to business pharma but our it's -- that, also Belgium. Benecel function business particularly important that's it's and construction -- very that very, the Doel lowest-margin out our a coming in that remember probably our it of line

out priority to of and market. first to balance pharma-grade that with as sell the end there there primary cellulose going facility optimize is the produce then to So coming construction Benecel the possible as the of and much material

operate mind symbiosis we a all of too have facilities. So that in in to there's those involved we as keep these

Operator

UBS. with Roberts John of line the from comes question next Your

is Your open. line

Josh Spector

on Hey, Josh good is This morning. for John. Spector

past would you stable just just terms kind higher So to been the there or is around was top a couple next of expecting longer-term the growth the years? that were since acquire you've low in business. line about single-digits the over expectations I level quarters of question be expect you potentially of Pharmachem, few wondering over has

A –Bill Wulfsohn

Yes.

So really through substantial the gotten when I from last it representative saw percentage EBITDA of -- our as dramatically that the you why in year to initially we We've although went of mix what roughly changed last growth year we the was end our after stated a the would say we that is it -- reported a of as pickup out fact see that's low-margin running sales. that I of you couple with some have XX% business. business above think at fiscal up and It XX%. of percent

So the contribution greater. is much

so objective America then will over North are through Now the and way said, terms is And there. the and of there. its kind be of growth. on focus of carryover have that a business profitable time in from impact There globally to in improvement to growth our opportunities grow both that the and the worked that being mix very accelerate will growth

Kevin Willis

Yes.

process. that to it given And grow the we go through more of Pharmachem business the one North acquired opportunity opportunity the for global globalize that be way. time. the business, -- mean, in America to with footprint a we expect that growth our to lumpy, over that for mean shouldn't globalize vast that the opportunities Given reason global a business persist of there's mid-single-digit I will see be would to no could that majority is rates that And given I period us. I the end that's to leverage is as in time well It of but as globalization opportunity

Josh Spector

Okay.

to in that And how down or $XX wanted check paydown, $X paydown two, much Just that's if One, is after like EPS of in a is you the seems And like assuming interest I there debt you I higher some other of think some just reflects updated a originally be is terms million of bit later. than reasonable had guide later it thought. divestment guidance could number the little being that terms to? billion time interest right. you've number the then

Kevin Willis

how mix $XX kind the pays versus we and good might the that depends estimate presuming presumption. do pretty how current paydown debt we entire But and quickly retire. bottom of Yes. I'd of in out a $XX say million the variable portfolio that is be million to to rates billion goes $X which it's would our some closer probably maybe that on stuff our

Josh Spector

Okay. Thanks.

A –Bill Wulfsohn

that so process. regulatory timing for on really just We're from the I'd complete Yes. standpoint, we we say waiting as can remain we just And track. said approvals a the

Kevin Willis

thing look above to below lines. at you -- to Right. note is, And you have look both have another to the and

have through operations. several interest We discontinued expenses going

part down think the to you about take sheet well peek your you'll the as So need how much of is as modeling, understand down to in there. balance a

Operator

question of next JPMorgan. from comes of Your the Jeff Zekauskas line

Jeff Zekauskas

or your up Thanks Were volumes in very much. down April? morning. Good ASI flat

A –Bill Wulfsohn

of be days month, takes couple of course that's so got April, what we we kind so say was we QX what would to forecast to and saw kind directionally I better really But in that we've consistent the In close getting saw us the It in still that we'll of that reflected a have. get of out with information. clarity.

Kevin Willis

North probably as two mean, a saw top were are for drivers impact, was what markets QX our only big was adhesives. pretty portfolio. in the it particularly the in a we really businesses volume sizable construction that America, a And I end and And we line and or well. Those volume profitability not impact pressure highest-volume saw there. in but

Bill Wulfsohn

well. Which is as in we saw what QX

volume And the closed me, is we volume know, -- in the essentially. trend saw or but mix tend from focus extend. haven't excuse seen May as we on which but yet we a So QX were on that's standpoint, April we what you to we've down that

Jeff Zekauskas

why the the should Okay. quarter? be same quarter should the that fourth third remainder decreases Ingredients was SG&A $XXX expense year? the Is in a in the larger of your Or be SG&A through there And the number was any -- that or your the million. stays or reason in Specialty number which

Kevin Willis

terms a estimates have on in an to impact It would bit of decline. will SG&A basis I the should indicate FX continue should that, on mean flow-through, see overall we the cost-out probably through of but year. rest continue the an current that. that's decrease our to

Jeff Zekauskas

you. Thank Okay.

Bill Wulfsohn

it line. the at FX we SG&A a gross look at actually a you context, you significant in currency When when impact very benefit the line. get obviously -- profit and look it the on In was had in from the do the sales line current

Jeff Zekauskas

you Okay. so Good. Thank much.

Bill Wulfsohn

Sure.

Operator

comes Mike line Securities. Global from of Harrison from question next Your the Seaport

is line Your open.

Mike Harrison

All right good morning.

Just been you wondering response to have any additional weakness. the cost market if incremental taking end actions in

new of expense pulling that or exiting So instead of see I'm initiating wondering QX? G&A Did back action even maybe you if you're some or taking that. in programs like more like anything temporary programs or accelerating any or some the comp of on

Bill Wulfsohn

Yes.

to end, for that I we've working We're that the we are the mentioned through get need business. to taking -- transfer need as cost and we So and and been team. XX% through to certainly that with reduction on we the about action existing program

in we that. progress that what looking accelerate do So at on area can the we're we've to some and had cost-outs

relates within sell of plant. relates as it as a of together our hiring, we to we've to quite it have as put to relates aspects it We things what travel, list that

this negatively incentive We performance, working it try impact the to compensation. on results have we're of best that this And to of our in an achieve context. extensive list does level things yes, at

year-to-date that continue we basis, go through Some as of that's reflected but would on through. a

like up, to up, you if have we can that only go go expense deliver Now a expense shareholders. will the would better result but that we for

aligned we're So that in regard.

Mike Harrison

of be weakness little to bit more or we're questions America. in you you how related other if I guess more And be? should about guys of the North words markets North lot And and a coatings the your into then to efforts expand all on selling also in can to a opportunity outlook Yet comment be hearing of weather a cautious a -- on little maybe the could maybe coatings. be couple temporary. that your first wondering seem on related coatings that America emerging big more for more on detail appeared

Bill Wulfsohn

Yes.

that dynamics to the I for factors and customers so best of speak So, are there. the our who can hard the seeing or comment and mean, they're to specifically weather people impact me it's other

If and does, we We it internal that's hope but range the something to have to out put sunny to we assumes range. would that's we and on why part have count to spring we'll that is now to upper that. a expression go we that a But that want an for, strategy, through there good That's awesome. will trickle demand. can't thing of a don't not that think that a so for hope us the have that a help high

Secondly, it world. relates parts as to the other of

We in manufacturer develop coating. many back needs. smooth this important stone China is been or a to I and for that keep on been that few China. to I customer trip plant relevant I in specific think going grades the The there different of coatings texture there to look developments it's for effort. I type more very trying have they number a had instances largest met manufacturer than a there. focused with focus things the most very are a back. weeks And very are

products and the we are differences different. radiology, the So have

more like to creates formulations So for we're to localized The us. of the which enabling is needs. Europe importance places increasing, opportunity sustainability those meet team develop in

sure So leverage it. infrastructure the it's effort make of part regional been have the needs that's we focusing a a have really to focused big local the and and customers we're on that been

working we gain programs a that That got in some think construction. don't groundswell over or the share of time, we've has in change really but context may I have that been place. are and -- of a ton to China you still great team see in

So that's offset what to it. we're doing

Mike Harrison

much. right. Thanks very All

Operator

of the Silversteyn question Dmitry line next from Buckingham Research. comes Your with

Your line open. is

Dmitry Silversteyn

my call. for you taking Good morning. Thank

couple wanted a clarify Just of things. to

products? you growing margin First the you are in talked in as what on about portfolio it of, take all nutritional wasn't on your absorption. to to get of higher your not and of products amongst put sort volumes was quarter something mean I that growing, leaned discussing, your nutrition you that what --

Bill Wulfsohn

which chips niche course, a of our can more mean, as imagine of tortilla that. and of sausages parts and go go I our CMC correct. of it the have that's we like and you into into some in that's fillers globe, go products. differentiated have some can other would But less Yeah, literally in And have the can spectrum meat very you'd that nature. specialized products, into things than

Kevin Willis

on much other be our hand, more beer you've Whereas that like things to specialized for clarifiers wine juices the tend in got and margin.

energy. it referencing, than on end we're would say than markets construction, if to look we of from it third an lower you think better overall overall be markets three an in I profitability and better put at perspective. end would tends nutrition the call our But certainly I basis marginally

Dmitry Silversteyn

Got you, okay. That's helpful.

sales good that Secondly, being your the of the you weak. HEC at a as was one yet coatings was came and mentioned least market of chunk market coatings the up X%. were My HEC from growth markets identified that you understanding

So can for please? reconcile you those me

Bill Wulfsohn

so HEC hair as really in are into as always we've a we believe, was record month a a using look seen difference growth where We don't of that care of how platform assets a a this amount one and standpoint a the what allocate and series dependent our one greater as the a just across across sale most say trying dynamic use. product of full may across can on with that the the difference making have products of we done because gains to meet are the we from relevant that into is consistent bigger is just is system we and making by on But team CMC, markets all and for that's allocate from got difference HEC have sensing biggest flat What home of I have production the The result the had I’m because and just product Yeah. teams coatings we our opportunities? technology technical that so to it's performing? key March, not relatively going that established we've investment, or capacity, progress, across HEC. what these up product that market drive of and mind HEC skin market of HEC, the the strategy. digression can though as we've you if needs. me to really can is PVP, development when be all So some be look, time needs of allocate are primary all we that and all even that example, asset and of we is the assets

Kevin Willis

just care profitability we run through it that have run perfect to difference what makes than smaller market. And -- tend than I that in areas that much, personal think like and commentary, the to to pretty we sense add the they'd be volumes well. to end tend coatings much much, what through be the smaller But much significant is as

care will see the mix. more that it won't consequential Whether the improve the different which pharma can and HEC numbers much those company will pharma more maybe we're HEC of certainly to moves HEC personal to actually through to move be the the space, impacted continue you us be extent or volume numbers -- the only that overall through in as So because the we not grades that by help coatings. space space volume

that solutions for in So a drive customer and develop to and us really niche we're trying technologies have differentiation, HEC regard. is the play nice we for advantage that

Dmitry Silversteyn

demand seldom construction is business semi-permanent packaging asked. And towards goes One is the understanding weather-related, and in If sort the related Got My adhesives more kind related. you. this construction adhesives what it North if Got not just adhesives of the that leaning American you. labels was final to? will perhaps the is I question earlier to tapes much weakness you question and may. if your of

Bill Wulfsohn

Yeah.

that into mean, we First of I important here. adhesives do all, have go construction. that's

result, important but I as market, a right assessment, I-beams. so part not that It will the And yeah, it's laminated an demand. your grows, primary goes into you're think in market it it. is of as

front in other I hard the is been point pressing think pricing market. the that on we've

business of historical adhesives get and what quickly I be consider good, that's that to timing we'll issues, growth And think -- progress back the I I I like we to strong fairly feel but we've the think because so, mean, rates. made. more is business the continue And some we've to got

Dmitry Silversteyn

Okay.

margin then if pushing were I you attrition some on just there impact also I heard payoff weren't just recovering customers So, willing and but correctly you to was as construction, some there to guess that side? volume was intent from the

Bill Wulfsohn

it forth. and of I nothing of in mean, it and timing wouldn't have to so comes we mind What affect loss. do But to there's sometimes. loss. I that share can win every loss go terms can any share this Yeah. to is through attribute any I'd have

buy by terms raising may when material signal a more. they price, Or purchasing the before in Sometimes little they customers price will send some be you're of increase. a cautious

And So, as mentioned, that's the it's with see have the a it majority, we negative business. construction the structural dynamic, the impact which shift. associated isn't but it had but I part as don't impact I does a

Dmitry Silversteyn

Okay. you. Fair enough. thank Bill,

Bill Wulfsohn

Thank you.

Operator

next Your question of Jim SunTrust. comes with from the line Sheehan

Your line is open.

Jim Sheehan

markets morning. markets you than across Good coatings and basically Thank those seeing -- or North your On referenced you. are I one But you think or others? it weakness the the end is in America is adhesives, weaker region end weak. North America being coatings board

Bill Wulfsohn

not say -- end Yeah. end region North I -- we the that that as is would probably have. really America I market, market that it out, end or would turns we weakest but say in that

Asia. of good rest seen growth we've We've America, had Latin mentioned, growth. Europe, China, As in good

of in America. been whole this negative equation And so kind the spot North has in

Jim Sheehan

oil-based over raw And you couple more raw Are materials? relief Okay. And raw materials. the cellulosic? you your is about then quarters? cellulosic you about getting what outlook Can materials, next of for talk on any talked that

Bill Wulfsohn

Yeah.

a as So little We cost, right now, pulp nearly just Wood be will we much see down we stable. see don't a it but use linters. don't terms in cotton being as of the as change. bit big

that has into QX. in we stable, see QX so as we now right as it both and And been look pretty

Jim Sheehan

out that the visibility in would you have normalize. Okay. And that fourth the demand far? on that Do thought your any you confidence fiscal comments What on said comment? quarter, you you on orders gives making

Bill Wulfsohn

orders that far. limited on out We have visibility

we have that discussions customers. our basis with ongoing an the just in really is on confidence Our

you time We we see sense some the turn we something -- more again why You've system. and on that way that the a have will lower that what But towards come talk stay range as top. is the if would just markets down, pickup or you the that. talk our of and that's Conversely, work indicating back customers confident be our seen customers And QX with stronger. But on our the range. we have suppliers to moves once fundamentally this that substantially more same and not out some customers of us we're leaves through see a that will But the there. it less us of fundamental indicating to if optimism sooner don't as stronger have dialogue is we're anything demand you our them us. that to are say need that our we that to and end we its

Jim Sheehan

Thank you.

Operator

this at like turn further time. now questions no would conference I showing back to I'm to Seth the Mrozek.

Seth Mrozek

Thank you, everyone morning for great interest day. you all I for and in Bella. hope your your a time this Thank Ashland. has

Operator

and gentlemen, today's this your have Thank wonderful a day. for concludes and you participation Ladies conference.

all may disconnect. You

Ashland (ASH) 1 May 192019 Q2 Earnings call transcript