Earnings call transcript Q3 2023

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Operator

Good day, and thank you for standing by. Welcome to the Ashland Inc.

Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. advised conference be being Please Instructions] that is today’s recorded. [Operator

the now Please to like would conference go to Mrozek. I Seth hand over today, your ahead. speaker

Seth Mrozek

fiscal welcome you, My webcast. Seth Ashland Ashland’s Thank everyone, of is earnings and Director Relations. Hello, third call Victor. name quarter Investor year Mrozek, and XXXX conference to

Joining me Executive are Chief and Willis, Kevin today Officer. Officer; President Financial Ashland’s and Novo, on Guillermo the Senior call Chief Chair Vice and

approximately ended last We Eastern Form X:XX to released at the XX, The p.m. issued quarter yesterday release June the results night XX. July a X-K. Time, XXXX for furnished SEC news in was

During ashland.com follow the webcast today’s currently website under are the that during the Investor along with call. We will call, to reference Relations slides you our being webcast on section. we encourage

Please Slide X. turn to

uncertainties we statements such reminder achieved. matters, several XXXX. our such statements a today’s statements As subject cannot differ believe results during on assumptions, assure materially are are be today’s to be but could These making expectations forward-looking projections. fiscal that any reasonable from on will and We will or events outlook that year forward-looking cause to for based future including call, risks

presentation the risks applicable an to Please Slide X forward-looking and the refer to of explanation those statements. uncertainties of for and limits

that which of review financial an adjusted be most will projected discussion impacting financial Ashland also are risk on the Item actual also we non-GAAP measures. comprehensive recent certain our a factors note can business. XA on You Form XX-K basis, referring for under metrics and our to Please

financial of and them these and our assessment ongoing to adjusted of refer present will to supplement We as business. your understanding performance the measures

slide GAAP the not GAAP for our in measures as website in to those considered appendix non-GAAP to and today’s measures, be measures comparable well measures The GAAP. or Non-GAAP on presentation. are calculated superior most reconciliations as the of substitute directly should of measures accordance with financial a available

turn morning in will of begin the fiscal XXXX. financial detailed then Please this to and additional Guillermo results third Then, of to then line outlook the Kevin for more call the will overview will an your questions. for financial review related performance Ashland’s year commentary in a results with quarter. X. quarter. open Guillermo the Slide provide Ashland’s provide

please turn Now, for X, Guillermo like Guillermo? call his to I’d to opening comment. Slide turn to and over the

Guillermo Novo

your issued Total you, hello, Thank Seth, Thank consistent participation XX% Results sales in June. you and the quarter the with in in the your for late Ashland for quarter to we for that pre-announcement everyone. year. interest were declined June and today. the prior compared

taken Our well, and year pharma inflation-recovery actions to business this overall results. to perform year early last the continued continued and benefit

However, to the impact reset we the of destocking impact actions serve. continues many chains unprecedented materially supply across from many customer markets

for us June, in customers will third our actions proved stated expectations significant remain previous be optimistic. to dynamics destocking until to control during these it our uncertainty we market difficult would quarter will the taken still subsided, end to As when that conclude as inventory have demand. by late the the true end gauge fiscal There’s

consumer from information our representative our which ingredients of on in not value customer order current do products volumes global used. as as the products, dynamics consumer Based retailers we customers’ of sales believe underlying are high for well are the demand

near-term or at priorities. presents longer-term detail our will challenges, does the of it these the discuss opportunities While this in call. not I uncertain change more environment end

turn to Please X. Slide

the in on sales left, see in declined to earlier. of segments the chart our each factors I can due the you As referenced

moments. of continuing quarter these our discuss impacted our Kevin impacted control few to the actions own will during margins how inventories. a are and we a These quarter. our pursued into As each consequence, the internal current segments actions in actions

to side, the Unfortunately, to serve. destocking resilient longer the industries it’s will is that clear also chains for we we continue of the markets On for that good serve. dynamics demand see the consumer positive persist core remains across it supply

in performing actions uncertainties that global well focus and the horizon, many on are our not team the on longer-term executing is opportunities the and Ashland are while growth. control, there profitable for the innovation While losing within

me in Kevin? back. over call and the Let to results detail, I’ll review QX turn be to our Kevin more then

Kevin Willis

million, X. down Thank Ashland you, Please to quarter were turn morning, the to everyone. good year. in prior Total XX% Slide Guillermo, and compared sales $XXX

dynamics Continued These inflation last our segments. carried business volume continued customer within by recovery, from declines growth partially and which reduced has all resulted for destocking pharmaceutical over sales volumes were in offset year.

impact a sales. negligible Foreign currency had on

Gross to be primarily slower destocking. to ran the sales we lower to plants driven segments lower XX.X%, by in since due our customer across margin declined with volumes line absorption,

levels. As by These profit gross the number the a million. intentional impacted products for we a negatively consequence customer continued of inventory of goods we actions approximately saw finished order destocking production throughout slowed to control own quarter, $XX our in

key in expectations items costs and million, million for SG&A, in lower the EBITDA late from quarter $XXX from was the largely prior June. accruals. million down and year were Ashland’s excluding When in incentive $XXX line XX% adjusted intangible million, the reflecting year prior with R&D compensation $XXX $XXX amortization in our down and In total,

discussed. year, quarter the again prior adjusted XX% I the was EBITDA for XX.X%, just the factors down in Ashland’s margin reflecting from

Adjusted inventory our down acquisition improvement a stemming million from and quarter, year lower changes amortization $XX free quarter flow the cash prior actions was XX% Ongoing share, the the quarter. working per year, reflecting sales. from EPS, internal control significant capital for was from prior excluding for primarily the in $X.XX

Within well, operating being the sales a each review year mid-single-digit period. four Sciences, our down business Please pharmaceutical up volumes for solid strong to delivered mix turn X. segments. Life of prior pricing compared results our to growth, held let’s was Slide despite Now, and

took and sales levels mix control to EBITDA pharma challenged inventory nutraceuticals X% strong EBITDA nutrition We impacting areas approximately continued nutraceuticals. to quarter, results by to reflecting The Overall, nutrition sales appropriate EBITDA due X% and Adjusted declined by remained weaker Sciences actions businesses margin while margin million. $XXX adjusted to to to by $X meaningfully Life million. million, customer increased due like destocking. increased during enhanced in and low nearly XX%, the segment $XX

to Slide XX. turn Please

Care negatively in quarter. destocking impacted customer Continued Personal the

For our to the volumes Sales care actions impacted Personal modestly customer meaningfully markets to year. lower Care were to quarter, XX% negatively EBITDA impacted to by Sales sales XX% more a but million, while a and inventory declined were adjusted the market sales continues by margins by control bright by million. with driven destocking, oral hair proactive actions. declined Pricing care $XXX $XX were to destocking skin the negative and compared only prior mix. care down into spot, hold, the

Specialty felt the primarily to Additives reduced continued XX. turn Please versus related to prior impact destocking. Pricing customer year. quarter demand, the also of in remained Slide positive

to the performance as impacted primarily team proactive construction and coatings, quarter. actions as However, destocking by $X volume in nearly profitability the of million declines specialties, due negatively in well inventory control

the declined $XX by to Specialty $XXX quarter, Additives million. to declined For million, XX% sales EBITDA while by adjusted XX%

while of of about reported and year NMP, value nearly the destocking to and Please down Internal sales sales THF pricing accounted decline, XX% XX% $XX were remaining the by sales of turn year-over-year prior our sales driven XX. million, BLO market of higher merchant decline. customer volumes. year-over-year for to lower the solvents XX% captive compared Slide Intermediates including

performance this margin pricing raw contributed high than which revenue, Although, the value a part offset in party in quarter. declines delinking solvents continued third BDO, business strong very to of tailwinds, more our small material from our represents of the

year Intermediates adjusted a and to reported of prior XX.X%. EBITDA decrease million, to declined margin adjusted EBITDA XX% compared $XX of

Please turn to Slide XX.

in authorization, replaced reported June, billion late existing authorization. Board we a of $X Directors As new share evergreen the Ashland’s repurchase which approved

share this million fiscal of $XXX previous repurchases completed year. the during had under Ashland authorization

of liquidity $XXX had June quarter on As about of billion. $X.X of total hand XX, million on the roughly available with close cash we

which was about debt X.X turns leverage. million, of net is Our $XXX

We debt the style of years, have all debt floating debt next for is terms. no and outstanding no to outstanding, subject credit our X investment-grade rate long-term maturities

enhanced coatings. pursue our growth M&A targeted strategy businesses on of care and We investing to organically grow in opportunities our through continue personal are existing profitable and pharma, to focused bolt-on

with a as as and with continued pursue well to balance share global policy Against dividend a repurchase. flexibility strong of has sheet shareholders a backdrop targeted strategy uncertainty, growth strong our reward our Ashland the

that, for outlook With our I’ll year fiscal discuss turn to the over Guillermo? back to Guillermo XXXX. call

Guillermo Novo

Thank Slide you, to XX. Kevin. Please turn

As we is look ahead question the volume into QX and fiscal major year XXXX, outlook. the

resilience customer volumes. sales As the that disconnect serve. volumes, good we suppliers’ indicate tends a the sales our and is customer for our continued we markets Clearly, volume sales big our mentioned volumes, sales between earlier, there’s to customer news

the of will state both impact peers industry and from example, actions our obvious, of and our us, their demand suppliers our for continued own to impact chain. when The challenge actions an When be actions. volumes? our bigger customer’s in destocking feel destocking end? volume production destocking supply sales will across To big with As a in our suppliers line customers and our question the the our continue is is, destocking

not Please view have end. destocking XX. Slide a turn clear to We will when do on

and have For we of billion in expect EBITDA $X.X performs of $XXX our June QX, to around update, if sales million. line QX with our

resilient preliminary results Although, volumes, our evidenced continued the consumer as by sales remains indicate global destocking. customers’ July

of up. expected by We control inventory internal actions. further customers not would will actions anticipate fiscal does Global be million levels may if inventory of QX. some indicate Reported demand actions further $XX potential our drive pick about trends currently in destocking demand

the come impacting in growth potential specific demand, actions China cost outlook regions, escalation recession and impact end versus consumer from on inventory extended global continues price need the markets if own the absorption. war. the changes, and of we destocking, something balances, would for added There’s or to a in Russia-Ukraine control in QX of our Risk customer

this As time before, is for I’ve caution. stated a

operate and our We position allocation in capital financial will to strong so we’re invest businesses. to with core a continue that discipline strong grow

in that positive the consumer resilient volumes. demand we is that our is see more and remains our line what sales with customers’ side, On

innovation, pricing, discipline, mixed in and will our remain on managing the capital We cost, productivity, focused maintaining operating control driving things allocation.

growth XX. the turn our Please Slide of challenges, long-term In unchanged. to remain spite drivers near-term

X our we’re and Klucel, leadership were all capacity the Aquaflow, we we last First, HEC, where key out of years. segments sold Benecel, technologies, expanding have over positions where

will And globalize be like Innovation business, We’re opportunities. M&A our things injectables our bolt-on businesses value business. our our said, high our preservatives, oral dose solid as central going coatings growth. biofunctionals, Kevin to and our to

will to our central losing cases, maximize these We longer-term opportunities. actions while our Innovation a focus performance, In on long-term accelerating of focus. be take point to initiatives. growth growth our not focus will on is many continue near-term exciting

growth Innovation on campus how September host research headquarters to XX, strategy event pleased remarks innovation that Day playbook is leadership profitable long-term scalable turn will Q&A presentations, and This of Ashland’s include portfolio playing and highlight technologies. a critical at technology The Ashland’s I’m our will a live members executive moderated will the sessions announce in to with role XXXX. company’s Slide showcase and prepared Please Ashland team. of Wilmington, Delaware event XX. and

development poster event attendees. The include guided also Ashland’s sessions tours laboratories will for in-person of research and and

later to will We driven registration information growth with exciting September. and our look details be in Additional innovation sharing provided this you forward week. strategy

in in Slide turn XX. resilience Despite environment, confident business the Ashland the to want of markets and the quality the to and of challenging proactive their for again uncertain Please the team serve their future. and leadership environment. I we we thank an ownership remain

attention Q&A. Thank to move And you today. Victor, let’s for

Operator

Deutsche will Bank. from of Our from Begleiter first Instructions] question [Operator the come line David

Your line is open.

David Begleiter

destocking as think Thank into operating earnings how the and you. leverage company Guillermo, heading morning. of should XXXX? Good ends, power about we

Guillermo Novo

If The well, is volume said, thank as first, look big question, the you and question. is. the Dave where demand I – at you it, for

volumes delta. the delta where sales the customers’ suppliers a between the in at look it’s and you big are, our all If us industry,

up when customers trend our the away, would production volumes would destocking back to demand. to So be come issue normalize and is, goes the we be where the

a leverage. there’s of So lot

tomorrow. the things positives All be you’re will today that negative the seeing of

evolve. like that then, is I on return, this think, gross assumption we go reset, items we’ll to But comp terms quarter in things the really lot based volume there’s there’s So for going incentive how as as the start of to outlook. profit be be well our what the will try a that will XXXX, going both year. full of and to absorption. be get leverage volume the go we the reset through important talking like about And, next when see things But to call, in

David Begleiter

Very you good. in you, about for Kevin, think perhaps next just QX share both buybacks And how year? and should

Guillermo Novo

No, we’ve ahead, Kevin. been – go

Kevin Willis

Go ahead, Guillermo.

Guillermo Novo

our on very was continue shareholders. say I going rewarding No, to our balanced going to approach to we’re to be

primary that I focus our said, is on out. those initiatives As that Kevin and growth, innovation, on laid

the several bringing we’re on Brazil on well and globalization investments to think equally a that our of we’re solid Those biofunctionals all there’s and oral are in India. going on asset-light in coatings I production for up areas putting that’s our degree. we’re dosing within businesses, China more in we’re where investing facilities. well-defined and CapEx, that plan the But our and

is So the real about question, talk it and innovation. in we’ll September,

exciting product, here’s a just, a what nice It’s portfolio really They’re technology. about product, technologies think not here’s a have HEC. We These and scalable of it a not cool does. are them product, it’s technologies.

make markets. multiple can multiple products You for

significant we the next launch to these as So years, going potential X, over XX there’s be technologies X, growth there.

terms doing? in So for need of invest allocation we our more? the be very we’re high of R&D one be because investments capital, increasing our number we Should is, So priority should that’s that’s shareholders. return our asking to question do

and our shareholders both Kevin, given invest want the in position today, in to to even some But, flows our where business. we reward a other we’re are cash color? good if give But and do you

Kevin Willis

a just so little $XXX far. We’ve million bit. done this Yeah, year

we’ve XX the as we and in what to is think, billion and we’ve over repurchase. can do can that important past, years, of Over future along with that And, demonstrated $X done point of mentioned, us you into the well. I share all the just expect demonstrate that the Guillermo last

our as now for shares balance going repurchase, the and policy do it’s strong balance. we’ll in well we think as that invest strike a them We dividend sheet a in undervalued, don’t think promote We’re up to to remain wise lever but to continue the future. share and

David Begleiter

you. Thank

Kevin Willis

Sure.

Operator

question the line moment Thank Mizuho come you. next our Parkinson question. One for Christopher from from Group. our of will next And

Your line is open.

Christopher Parkinson

so helpful want on Great. breakdown. XX, you care. Slide I give Guillermo, a focus you on personal Thank much. to very

market here, now, given right given mid-single-digits. and portfolio Just everything with down in right customer trends your your the dynamics volume

I are you you just that looking simple XXXX ultimately and terms the bioactives, Just Schülke, have hair very year comfortable love update and right an everything would question, across in thinking and your in are But a process portfolio, at. about specifically normalization fiscal how that long-term there. XXXX, – – of skin biofunctionals holders

gives that snap time? confidence what share Just portfolio and you to ultimately grow over and you have the you. right gain Thank the in back that tools ultimately

Guillermo Novo

thanks for So, Chris, first, the for thanks joining and us question.

separate very been what’s quarters. very the I I’ve price the growth go that did year well for we year, strong think, last I about last back early and strong we had And help did moved short-term we year, need equally. our last or and year to Having opportunities not They year. a open the we happening to long-term, X last are different dynamics. our innovation and on very a

they to destocking, we in need opportunities do but in we challenges a we take perform, the not of that from the have. short-term, long-term the Some it’s challenge need to detract action

two. the separate do really I So

are it’s other or broad and versus this is and category before or issues never It’s we segments. They’re that see one as customer’s event an seen not an a product destocking the all the And, the a to the industry, our industry ours, and will based. we in as I that one clearly short-term we suppliers education overcome volume industry later. think thing. sooner impacting everybody that have

to going is be a of September. innovation our the this side, part On in discussion central

the we’re will scalable. see innovations that We’re really excited. they’re All on, you working

by ingredients, markets. If we back and or then model additives XXXX you applications of Day of you scale talked more innovate our of around more go products of to you Investor it developing sort November the and that

elegant. XX% They’re not either ESG to greener very get focus. and bring launching to Most going opportunities feel excited is ESG solutions. these be natural we’re green derived, our that We advance them They’re for or advantage. functional that we performance can are chemistries, we natural have. about of both They’re but green, very biodegradable. just going This performance

excited very very in how little efficient very than other some technologies that cases We’re we’ve clean from manufacturing even them. perspective, make processes we seen, waste, very many a in

don’t existing using that XXXX, a to lot going invest empty leverage We lot for the of these technologies. had most lot a more. we’re have from we A start capacity And, can we of assets. importantly, to

it’s not going I great technologies care, these think say have personal I just and for fit. for are all care, a So, pharma. would coatings for to And personal for

it’s decade innovation coming growth really is market see just to energize that and just very us. are pretty separate technologies. for us. add-on that You’ll our our for broad-based. to for platforms exciting It’s growth opportunity improvements normal this can with the growth relative traditional And These a

Christopher Parkinson

standards, as you core about think the do your just we up response forming And could on ability you’ve indoor towards the of is something bit well. current hit TheStreet markets How your of like assets, towards continues been core running you out, the a facilitate be about not that quick you of been markets taking should more away your And pharma to it. laid November of business and obviously, a the you’re and repurpose transfer end to Got a your little ultimate those those But seems Obviously, technologies In from just to essentially portfolio? businesses. kind bit to have cash. end an thank XXXX, corollary you. said substrates thinking for situation some of of pretty and a more it when end opportunity that?

would very be helpful? color any there So

Guillermo Novo

No. Okay.

the and acetylenics, in, that the additives we multiple today, the but technologies Investor they back not that I we across ingredients. cellulosic, had integrated additive you sell we related these other and core businesses we bring segments. all ingredients technologies to Most we of look our have that have. we to And, if Day, two were highlighted, and So, go businesses again the at say would

are keep those we core integration. and want So that to

We think, business. our we’ve is business, PVP I our done which trying but better. our separate Intermediates resins, integration what it back for a have supports it strategy And, is make to

well any in lot at we it. in what’s We future, that choose keep that The that. is to exciting BDO. BDO. not have point has of the for can market to years do little merchant But that we is about the created last what to a very do. want to want where We And time want change we us. in the if sell We we Intermediates are few business positioned value

said, Kevin it’s BLO. As NMP,

those into ingredient production and active into semiconductors, and are we’re markets. market, for U.S. focused ag on And our of Europe EV going core pharma coatings. All as and

We’re one the players few merchant capacity. of with

When all they and the NMP, need EV for come investments need example, production for local they battery content. in,

ones the We’re capacity with only right now.

These a separate seen technologies historically. separated. and than BDO you’ve there’s business positivity We’ve is the had we separate priced going when it ever markets, plants, is through this lot we done focus of like and we’ve lot performing load what that just a even don’t has everything So actually price better we much BDO We that BDO. are them of – is And separate. the in accordingly. that and was downturn

So optionality. we feel that very that good we have and about

The we’re are which at the second assets are all underperforming. We’ve portfolio we it to to do long-term The integrated, valuable, what we we And, make the portfolio. our the investing businesses it. we what’s decide the there. that improved of In again, we’ve it, business stabilized is have, we’ll more issue fit is, and improve nutraceuticals. business looking into key want

of return As we’re haven’t versus part at performing those we’re before, you areas. as we sales capital a big we’ve investments the The many looking and think, at better. change of our is and and that’s on look that – if well been growth, I’ve metrics, performed peers, said I our some margin,

industrial of are two businesses, And do of looking what enough. last our where can those are our have you’ll repurpose assets? these as valuable. because performing part those it we to below some CMC we assets wasn’t businesses, do year, had businesses are we Innovation And very And day, MC we want business expectations. is at we for our We that peak what those performance Even hear good that’s to our and in want with business. how

capital. growth discipline. are them can very are just of our sites, these if U.S., have about It’s XXXX. of not September we about revenue if the also and we hear replace about are in allocation And capital. be how old a growth, we significant Many these earnings part now to There for those not of the assets returns. assets launching technologies in invest how these old in maybe but example, new new to can it, that call. we’re the going we just technologies like we very we’re is valuable; manage hear return we It’s use that And capital going some valuable can we – very that teams assets the we business of from plants growth September, those you’ll lot repurpose lost you’re very, get earnings using experienced that in businesses, and in as in

So should positive that returns. to our very be

Christopher Parkinson

Thank much. Very helpful you color. so

Operator

question. next come Fargo. from for of And Sison our will Michael our from the line next moment Wells question One

Your line is open.

Michael Sison

guys. Good morning. Hey,

Guillermo Novo

Mike. Hi,

Michael Sison

Could back? the you’re else you us were XXXX, close you to but this initially this What building on back to be think track year? do necessarily million get how if the doesn’t do destocking about going that help beginning just at It have from EBITDA $XXX that of $XXX you to up sort of the can maybe – get year. we million ends, in to

think time? upward us back could walking about just help So maybe you over

Guillermo Novo

All right.

So, And I the Mike, future. volume are the right? for mentioned, as implications the that’s question, the question it’s what

talk and evolved about few will in I about that time. is out being as a We expected call, I way we than bigger the say longer first we comp would would nobody numbers, call ones It’s is, destocking at look more incentive expected. I has the that. we But do and about reset, What specifics that there’s a can just over next XXXX. – as everybody things what say that thing of pleasure said, in the the talk we talk this we one the have there’s of to of in like

the the At well, it questions a goes get lot away. action you as we and beginning of took this

going to all that get You’re back.

I we’re now is actions protracted. It’s is take. look what just think, we more seeing this not

of a slower. We’re There’s plants here. running noise lot

what look you go that at volume itself think volume question rather that’s I before and year? away, what we your you they this of and I was got I can what is, the the leverage, math. than do to happen the events had what’s question think think

every our If be our volume what the indication think what really line were very that’s volumes would a you in customers, with would when that – different what I mean? would give And it look And I does is, normalizes, that number. And what need For well, destocking to I estimate and industry will that’s, of when you right is, volume the think, for now, that timing recovery volume recovery. that mean? entire the end? And question like? then does big what month,

Michael Sison

do a inventories Any be And about follow-up. there feel event your How that Could customers in near-term? to has forward? it. well. then the How Got just continued do there Pharma thoughts? there? a you destocking going quick business

Guillermo Novo

Yeah, said we demand quarter, last as normalize we to seeing that. and to to quarter expected start fourth this and we’re

continued they’ve little I their some a to of other while taking move we adjust they’ve level built other but forward. they normal industries. continued. safety as think don’t industries same were the going stocks, see, can actions, it’s because growth And increase you the not now can industry bit, what to back little go think going is rates – bit to as it’s a I that they you’re see

So see you that but will the don’t actions we’ve industries. seen to level of see other moderation, in the we expect

Michael Sison

you. Thank Great.

Operator

our for next moment question. One

Our question from next McNulty come from BMO. the of will line John

Your open. line is

John McNulty

taking my for thanks Yeah, question.

guess, seeing to of solid trends they they color can of the a that kind the volume and still? been us Have the down? with bit Can pricing destocking that? up? give you speak on quarter-over-quarter? they So of little pressure, you’re you I level Are Are

Guillermo Novo

is pricing So holding.

cost in you look thing our at a dynamics, question volume. dynamics at look I earnings is lot same Pricing think our the without basically case, petrochemical. of the we’re if the the our performance commentary, customers’ margins, our if less you

petrochemical I get down much our a So, we as them call, chain. mentioned exposed impact more a we feeling a talk and volumes swing suppliers, to And important downstream because of our I the to than think They’re going these lot, are are. as up suppliers. to it they’re much more our

So we’re working with them.

gas coming The significantly. but acetylenics, the petrochemicals cellulosic a down, so we’re down dynamics bit, prices are not are same vary. of little coming see stable. change. They’re raw little. coming really obviously, a we the natural significant see it’s in more down are we a In But where going some the and as ones, But price other not holding the they’re materials to improving

We’re stable on equation. that side of the more

question going is well, saying, with there I think come the The everybody’s is down. volumes, prices no issue volume. these to

of try going for You’re not to prices share. there. and out go it’s drop lot out what? a There’s Nobody volume – to get not like you can

going if destocking we until the So, destocking price? more issue pricing the ends, has think, any are for now product to why somebody is work So at through product, holding. they buy I are

as very the to that’s question, ability it sticky margin, goes the back move maintain more as we’re margins the But volume movement, some forward. be raw to next we our on If tend our prices there’s biggest material confident our few to Our issue adjusts. months. for

John McNulty

it. think speed it Got given were the in I of if just how I guess seems accounted destocking bunch middle we’re the or Are can that is of. quarters bump out some the enough. we product guess what I and expansions And thinking Fair come lines, in for et you demand a Klucel, capacity, they perspective? you I largely been not, know can speak whole perspective you that? from these And like to, had of I first other a startup all, up as about of it pushing on. some you? guess, out the just bringing delaying be a few a about and cetera. these HEC question Benecel, customer have sold do then, of you guess or you should

Guillermo Novo

that. on things several So,

doing we’re our – First the is bullet on investments. first investing bullets where two

the On globalization, independent stopping They’re not real of It’s we’re of dynamics. asset-light. these about growth real, second some bullet, growth, these them.

next So it’s and out, the needed online, some and HEC. it’ll to them, investing On Benecel, of project the be we’re China, The coming were investing that. in sold going in so Brazil basically so we of coming core India, assets, through continue well we HEC, capacity advanced in that. is managing in doing we’re year.

stopping that. not We’re

a In pharma, it need is Aquaflow, come again, little slow ongoing, in to can market that we high our push so back value, And Klucel very and customers. down very because a DIY we’ve few is that we and capacity paced it’ll quarters, support bit. the

not stop to we’re So it. going

important that doing. But resilient. go we’re short-term is, point What’s I me but the for they’re is is the customer’s really the I volume all destocking to That volumes issue. us, a to a question, be our it’s is major long what one exciting leave the for eventually challenge okay, if message, of back going I most can important are they’re as back to as think

the HEC question, separate minus industry customer just need industry to if needed to up X%, and to real the was is from and in that single digits the biggest is now. the the demand be Well, out. X% capacity are That us, out. destocking is. HEC? volume got to depending going So, Not volume, but We was coatings sold sold that going on they’re your what to if or we plus

be level Based needed. we we and that to demand, of be on quarter real destocking, or off capacity two on the can’t manage based could will a So specificity.

John McNulty

for much color. it. Got very Thanks the

Guillermo Novo

Thanks.

Operator

moment One next our for question.

question next Spector of from Josh the line from UBS. will Our come

Your line is open.

Joshua Spector

wondering of for mix line if could taking between my some volumes. Thanks Hi. Yeah. you separate and was I the question.

the here challenges saw we’ve But a a think, last is over couple I mix talked improvement. really big that years. the one volume of of never lot uplift of about Ashland So,

there way versus year. is an this XX% to might margin built? margin a at some there look on volumes relative for basis example, is my year I if just XX%, your down be there this care math XXXX a been how full to as So product personal from to has that maybe And And tons volumes or much frame a where a higher went is inventory lower product?

there a means back all of a away of because is don’t the Which come is the volume mix at So volume from percent we as mix part margin, but that we that you’ve some back, higher improvement? get that better. might walked

Guillermo Novo

a different so and all hard it’s products explanation. very to do, not one simple because It’s technologies the

You technology technology. go got by to

in I you at mix improvements look margin think the are our architectural care, if higher personal general, stuff. pharma, coatings

had where that’s product So negative specific view, categories a of maybe we that. not in

absorption our back, the If more value impacted margin our volume you lower those secondary high high are than businesses our has Unfortunately, step businesses. also businesses. and businesses destocking

the lot The impacted, see which energy which a you of impact negativity disproportionately. average heavily our number and below way for repurpose company. way margins goes This returns CMC. very we we and a the are of company into and other it our markets. below for where assets? nutrition, had there that’s the the The goes where is the average one big CMC, questions into that to want So of are wins was the before, was

mostly areas. it’s at margins impact if way impacted. those has than same Our in heavily a in been And our margin heavily But you as impact construction, thing, the again, in average, look below the construction impacted. segment Europe MC absorption Europe; bigger industrial is mostly

So the – say, would I those are Intermediates. and areas

impact a Our of That’s big the where asset. BDO plants, majority it’s the was.

one next would The be HEC.

we impact, – a we I’m as Last had. year where core better through improvement. will ever enough. than about. they’re the wasn’t areas. we’ve MC, worried much a year as And of year that’s plants. and come CMC was was did very It but open. an as any and big markets. mix good have not lot I’m We not It it’s It’s We can something Volumes back other have the manage it. in many quickly

we have Day, doing. building things we’re very leverage this. we So how that’s a valuable to that those we’re strategic million where are work And really talk are September Innovation are about these in plant investments. the $XXX These plus assets like the going can

us a get we But segments for leverage value. are quality challenge quarter, can would be technologies, end we of were lot businesses the doing higher lower those in disproportionately. these if bigger The can So fine. this for them other

Joshua Spector

Yeah, obviously of Sciences’ bright quarter, thanks. a mean, Life spot. just within a And I the margins bit on

is pharma versus of much of that in there. nutraceuticals better holding Just curious just structural mix versus improvement down how

Guillermo Novo

to is it good. good, continuing expect good, Pharma has be been is to

one impacted. margin of less seeing selling that the We’re and you’re the of core nutrition and the to improvement got Therefore, is stuff that’s more the lower nutraceuticals, pharma. mix

Joshua Spector

Okay. you. Thank

Operator

our for question. moment One next

the will question line from Suisse. come Credit next Our of Roberts John from

line open. is Your

John Roberts

Hello?

Guillermo Novo

Hi, John.

John Roberts

Personal destocking. own care business from looks like it was didn’t have your any that? earnings Why hit

Guillermo Novo

you the sorry, repeat personal question? could that care? I’m Is

John Roberts

have didn’t hit earnings own destocking? it like from any looked your it Yeah,

Guillermo Novo

point mean, the would I some two said calls, way just I in, I but the one it and did impacted Yeah, we’ve get they last areas, item out, important. but on think,

Additives Specialty cellulosic way of we business, it. most do own They the Our the plants.

of, it’s lot SA, absorption and a like, impact, all for in example, Specialty HEC captured Additives. So CMC

that other do SA. but of would the we businesses, some way to it, flow just it’s an So really

So of way the another impact, sort do is in an it’s captured it’s there not – it’s we just it. business

Kevin Willis

P&L absorption probably a was million flowed perspective. it John, personal of through then, couple an dollars from that care And the

John Roberts

And because correction? this then talk you product rates? And win the a new are customers little pulling back on could initiatives new of bit any of about

Guillermo Novo

Yeah, excited of these trying lot And more and qualified these, getting getting some awards, with of to we’re that. very you’ll to innovations videos launch of we’re these but A been conferences started the product. of we’re the all products to at stories. new a We’ve XXXX. a we end launch last lot the hear transparent do we’ll everybody of really on be

momentum. them, that So coding them. we’re getting People qualifying are

technologies. very It new all time. of about excited takes just We’re the

of received, with visibility that not the one happening ESG show the these And but when that we’re innovative doing, to from of feedback you investors the it revenue, well specifically, just very what we of have what’s customers it’s have indicators some that products. little is a But players, care what wanted personal we’re all biodegradable. comes as of more bit to innovations so especially being been natural-derived natural,

technologies, you’ll of discussion the of in itself at you opportunities. can see lends if a And be significant look really it these technologies decade, our central next the portfolio generate over some growth to some but newer part Our that that’ll September. of they that we’re at looking

just sell X scalable, launching When product million. nice that can million, XX XX we say million, we’re not a

$XXX a the $XXX significant And million provide portfolio million, very markets We’re impacts, targeting share. engine if it’ll than we can really $XXX are profitable looking growth at more technologies. nice and only that of million, get platforms part that current our

John Roberts

Thank you.

Operator

Thank question. for you. our next moment One

Our Jeff from next come line question Zekauskas from JPMorgan. will of the

Your line is open.

Jeff Zekauskas

are or this operations Great. flows? year cash flow looking cash free from either How your cash flows

Guillermo Novo

one? to this want you take Kevin,

Kevin Willis

of going Jeff, Sure. our capital driven. from drives our which receivable Unfortunately, and in terms changed, numbers are because down. lot it’s quarter, working It strong was receivables that really was a the sales, lower of part lower but haven’t

cash the full year, looking conversion. free to XX% we’re at flow XX%, probably For EBITDA

expect number a the course back percent with to in XX%, the it would we maybe time, which of bit creep normalize, target. is things over XX%, or line to call As that more better up our little

probably capital you’ll last it pretty the to As recall, of in because build year, inflation. XX%s due was significant working just

it it as some and normalize demand expect to due the to normalize. bounced we’d But around has volumes just So external environment.

Jeff Zekauskas

$XXX efficiently, million? for can million? guess, right would they follow-up, Would as be million. $XXX my number they where you Would at you’re were they I be as at So inventories be the And, Would What’s $XXX $XXX operations tell? your at at million? running be? your if far

Guillermo Novo

not we’re plants, What demand producing the we’re We are value significantly or our how the It’s think based varies inventory now. issue by right days the tend days, we it’s not of our to need run much the I Yeah, dollar demand. is on how outlook. what because technology. it’s what running

And safety in If the and And global world, shipping high. we That’s of it issue. the assets, to production days at the you look that’s these basically stock our so sales gives big that’s areas you country? in of take a HEC does all what’s long driving example, have some that around for that producing you’re certain are the other need you adjustments. and of days how What do really ship? number. And

Kevin Willis

to I you demand be back to If or and Guillermo everything a again, numbers range $XX in as else, the – of in mean, million that call U.S. plus minus bit, but guess. either our back of that’s it, – be manufacturing that probably, anywhere $XXX volumes said, on you million would global. the and were do could expand my on we’re probably very we normalized side where, little to but than more

right going some does inflation on what think of again, day’s And, that’s doesn’t a tend than we might longer number. vary do So perspective, but our to depending just peers et from little be the do, be, about to a we or cetera. that’s

Jeff Zekauskas

Thank Great. you much. Okay. so

Operator

our next for One moment question.

from the Seaport will Harrison Our Research line next come question Mike of Partners. from

Your is open. line

Mike Harrison

morning. good Hi,

about follow-up guys you Just are those of in wanted near-term. to on addition talked that have product where the forward lines moving capacity you some

about You guys us lot of those the volumes. haven’t really given additional of a magnitude detail whole

to presumably should volume in So, like are I guess, XXXX? that’s you how be additional in much thinking coming early moving going areas about forward we contribute and Benecel, where

Guillermo Novo

Yes.

early part one’s the stream, of HEC And XXXX, coming this QX of be finished coming early QX, probably So will calendar XXXX. so on year.

I think the capacity HEC about improvement. XX,XXX? XX%

Kevin Willis

right. That’s

Guillermo Novo

XX,XXX much tons.

little there. plant and Mike, on the put with a it some new and Aquaflow we different can you, of follow-up bit The specifics So a site. share we more a is in

more more security, that customers were supply our make also sites, of to for an product Some sure important from it’s there them. a wanted just since

it’s will where volume, it’s I locating some these So also not investments say in also existing just all of we’re are these assets. facilities.

plants. new, So production just not within new, building plant. we’re a They’re new units

to So that will also bring plants. productivity these

Mike Harrison

simple? MC expected or would maybe I is near-term All those a about talk you’re of the CMC be. taking that but margins weakness the right some industrial right. specific broad response that missed more now. want of you to if that the then, can And take I below business What help returns and businesses whether as as this, not cost actions in or I’ve you kind you’re seeing where question additional being any specifically it And, you apologize a guess, about actions to

Guillermo Novo

side, think, we the some two are One taking reallocate costs, to structure are on resources. also So, doing. to things I that reduce we actions, is but not just cost

to these increase new platforms. of and resources As investments, some I commercial and R&D, especially mentioned, marketing we’d like

resources there about our that talking restructuring were So around? realigning to businesses. like we critical asset less just we than side, of can some the been of are add, that and shift on rather some So have us we initiatives the are

the reporting So into now as we moved, business. Life leader Intermediates Science same the for is example,

doing. what So see can point-to-point that the chain entire by is group we’re that acetylenic one owned

putting shift We’re share can consolidating the we some and free some to then And drive that really team you where growth. support we’re of to care a resources looking resources September. at and resources some that really that’s some really that a these the platforms of be hearing we new a more will personal and management want of in about so really to technologies person we specialty together. the added in announced had up that’s portfolio We additives, lot efficiently

technologies move multiple to that scale that’ll want, these we that around. allow both we a a these And us really by in it. business on help areas, coordinate getting clarity build is a How shift that we with introducing really drive, do I not cross selling and around so we plan of resources so things when lot to segment have need cost because product mean, and just across a businesses, certain forward deliver

the we’re news the think part leverage. not on is And, that the working just we valuable and it’s things shutting good other on are you down. mentioned part about clearly, assets. can is is I still These assets

very super an high surface in wetter. changing very wedding silicones. technology multiple new This is goes example, September end, a around high with we are launching markets, As end a competes

the planning we we in oral of to We’re make the to care where that asset make in lost XXXX. for used some this products

very – So limited limited not – we’re assets. no

all now technology. a into of in products whole but oil it markets, exciting We of very oil-based category segments, already to that other can launched our vegetable go There’s personal taking polymers. kind we’re care,

we as but assets, things. existing we grow do them can out, using We’re

cellulosic do that technologies hear at, at We mean, about we’re in there’s can we an and EO-free. just around You’ll but of that at a in that products, we’re need way. or technologies look – I CMC but looking [HEC-type] can that organized starches make MC to EO-free ton we our assets looking

drive. value of going we’re we creation And in if will that and We’re a discipline. not to of what innovation There’s going that’s lay down pace going. shut opportunity And depend real terms on that we’re the of you out we then got to to move all just around. that where for things with this agenda do

Mike Harrison

All the you for there. color right. Thank

Operator

for our One next question. moment

Our next come Estok question from Jefferies. from the of Kevin will line

is open. line Your

Kevin Estok

the and Most is little This on Asia, regional Kevin maybe a my bit of talk for between Hi. taking North for were differences maybe actually but Laurence about actually like asked, Europe, seeing question. Thank you’re them maybe Estok Alexander. could you in guess, America, Thank you you. anything destocking on maybe I customers? that specific

Guillermo Novo

the the probably Europe one demand selling numbers, also demand. still They’re down end in coatings we example, look reflective is time that Europe softer. you at bit softest, see in that’s their an think, that is their market Clearly, I frankly. of as the if And, pretty our demand. more terms is at I’m customers, looking – step is my of Where spending a

of customers. ability So smaller in some China not to volumes players the in and that by gain doing variability of expected. of actually surprise better everybody the significant terms there’s recovered this are We rate in no see kind big there. do China, Example players their than the environment. to has share

players both uniform as pharma Pharma as well generics is around big pretty pretty and world. are the the global, [ph] the

dynamics we’re business, for that Europe and specific customer least. at our the more really it’s think I So, seeing the

Kevin Estok

Got it. very Thank much. you

Operator

turn any to conference I showing I’m Thank Guillermo the you. remarks. closing want in to back further And queue. for questions the not

Guillermo Novo

I for end if all you very dynamics, more Okay. healthier I will really show guess, we important two destocking And Victor. the messages; we serve. leave Thank one, one, the resilience know But the sales thank much, with all can messages, work our big are participating. two and the we volumes you through customers’ them. you of markets

day, the going but good are the really still perspective, to think, own demand drive about mid- markets our the really, to very healthy. work short-term, a that. excited the at the that long-term? We’ll in is of that We’re That’s I through end what’s

regardless not opportunities have long-term that And, two, of this short-term growth changed. the situation,

to about energy. We’re we really them, time and spend that’s where want very really and excited our

to performance near-term continue momentum losing we’ll manage important the initiative. short-term of on these to traction term without longer some So maximize and

attention, look So thank in Wilmington. forward for and September you we in many you seeing to of

thanks, So everyone.

Operator

Thank conference concludes call. today’s participating. This for you

have great You a day. may now Everyone disconnect.

Ashland (ASH) 26 Jul 232023 Q3 Earnings call transcript