Ashland (NYSE:ASH) held its second-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/.
The full earnings call is available at https://edge.media-server.com/mmc/p/oe5gsqsh/
Summary
Ashland reported second quarter sales of $482 million, a 1% year-over-year increase, with adjusted EBITDA at $98 million, down 9% due to operational disruptions.
Life Sciences segment saw steady demand driven by pharma, while Personal Care experienced strong volume growth in biofunctional actives and microbial protection.
The company updated its fiscal 2026 guidance to reflect sales between $1.835 to $1.87 billion and adjusted EBITDA of $385 to $400 million, citing geopolitical impacts and productivity challenges at Hopewell as key factors.
Operational highlights included completion of Calvert City repairs, ongoing manufacturing optimizations, and strong innovation momentum with new product introductions.
Management emphasized resilience in consumer-focused demand, execution of strategic pricing actions, and continued focus on operational reliability and cost management.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to Ashland’s second quarter 2026 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. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised to withdraw your question. Please press star. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Sandy Klugman, Director of Investor Relations. Please go ahead.
Sandy Klugman (Director of Investor Relations)
Thank you. Hello everyone and welcome to Ashland’s second quarter fiscal 2026 earnings conference call and webcast. My name is Sandy Klugman and I am Ashland’s Director of Investor Relations. Joining me on the call today are Guillermo Novo Chair and CEO William Whitaker, CFO, as well as our business unit leaders, Alessandra Fascini, Life Sciences and Intermediates Jim Minicucci, Personal Care and Dago Caceres, Specialty Additives. Please note that we will be referencing slides during today’s call. We encourage you to follow along with webcast materials available at ashland.com under Investor Relations, please turn to Slide 2. As a reminder, today’s presentation contains forward looking statements regarding our fiscal 2026 outlook and other matters as detailed on Slide 2 and in our Form 10-Q. These statements are subject to risks and uncertainties that could cause future results to differ materially from today’s projections. We believe any such statements are based on reasonable assumptions, but there is no assurance these expectations will be achieved. We will also reference certain adjusted financial metrics, both actual and projected, which are non-GAAP measures. We present these adjusted figures to provide additional insight into our ongoing business performance. GAAP reconciliations are available on our website and in the appendix of these slides. I’ll now hand the call over to Guillermo for his opening remarks.
Guillermo Novo (Chair and CEO)
Thanks Sandy and welcome to everyone joining us. I’ll start with a brief overview of our second quarter performance. Then William will review the financials and outlook followed by a deeper business unit detail with the team. Please turn to slide 5. Overall second quarter results reflect resilient underlying commercial performance amid stable demand conditions with pricing and portfolio mix action remaining a central focus across the organization. Life Sciences delivered steady results supported by resilient pharma demand. Injectables, tablet coatings and high purity excipients continue to drive growth, marking a fourth consecutive quarter of volume gains. Progress across our innovate and globalized pillars remains strong with continued adoption of differentiated new product introductions. Personal care generated broad based portfolio growth driven by strong volume gains and execution across bio-functional actives, care ingredients and microbial protection. Biofunctional actives delivered robust double digit year over year growth while microbial protection continued to gain share following our globalized investments. Specialty additives operated in a mixed market environment. Coatings volumes grew year over year reflecting share gains and new product traction while construction sales remained lower reflecting deliberate portfolio mix actions and slightly softer demand. Overall results returned to flat year over year which is an important step forward given that we have not yet fully lapped our prior year. China impact, Intermediates operated in a stable but trough level environment with results impacted by both commercial and operating effects of the Calvert City outage. The team will cover more later, but operational performance was impacted by specific issues during the quarter, all of which are internal and not reflective of underlying demand trends. Despite these headwinds, commercial execution across much of the portfolio was solid and we continue to see encouraging demand trends in Q3. Please turn to Slide 6. Now I’ll walk through our second quarter results which reflect disciplined execution across the portfolio in a mixed market environment. Teams remain focused on cost control, operating discipline and customer service while managing through operational headwinds during the quarter. Structural actions taken over the past several years continue to support the underlying economics of the business even as near term performance was pressured by temporary execution challenges. Working capital was a key strength in the quarter, driving strong operating cash flow and reinforcing our focus on cash discipline. Looking across the portfolio, the quarter demonstrated resilient underlying performance and continued progress in strengthening the business foundation with demand conditions generally stable across the portfolio and margin pressures primarily driven by specific operational issues rather than end market weakness. Please turn to Slide 7. First, our consumer focused businesses, principally life science and personal care, continue to provide stability supported by resilient end market demand. Second, innovation and globalization initiatives are gaining traction with accelerating momentum in higher value applications across the portfolio. Innovation has already exceeded our full year target after two quarters reflecting the strong pipeline execution and commercialization. Third, structural actions taken in prior periods are now embedded across the business, enhancing margin durability and positioning the portfolio to benefit as operating conditions normalize. Teams remain focused on disciplined execution and targeted corrective actions. Before turning the call over to William, I want to emphasize three themes for this resilient consumer focused demand, accelerating innovation and globalization momentum and continued commitment on improving execution. I’d like to now turn the call over to William to provide more detailed review of of our second quarter financial performance. William, thank you Guillermel. Please turn to Slide 9.
William Whitaker (Chief Financial Officer)
Second quarter sales were 482 million up 1% year over year, reflecting resilient demand conditions across much of the portfolio. Volumes were relatively stable overall, with growth in personal care offsetting softness in intermediates, while Life Sciences delivered steady performance. Pricing declined modestly year over year, primarily reflecting carryover impacts from prior period pricing actions supporting targeted share gain activity generally across the segments. Foreign exchange was a meaningful tailwind contributing approximately 16 million or 3% to reported sales. Adjusted EBITDA was 98 million, down 9% year over year, reflecting approximately 10 million of previously disclosed temporary impacts including the Calvert City startup delay and weather related operational disruptions during the quarter. Excluding these discrete items, underlying performance reflected softer pricing offset by disciplined cost control and Foreign Exchange benefits consistent with the resilience we are seeing across the portfolio. As previously discussed, Calvert City impacted results in the second quarter. Repairs are now complete and the facility is back online. Adjusted EBITDA margin was approximately 20%, down 220 basis points year over year, largely reflecting these temporary operational disruptions. Adjusted EPS excluding intangible amortization was $0.91 down 8% year over year, consistent with the EBITDA decline. Cash generation and conversion was notable strengths in the quarter. Cash flow provided by operating activities totaled 50 million, up from 9 million in the prior year driven by disciplined working capital management including meaningful inventory reductions. Ongoing free cash flow was 29 million, representing solid conversion driven by working capital improvements and reduced capital expenditures. We ended the quarter with total available liquidity of approximately 939 million and net debt just over a billion, resulting in net leverage of roughly 2.7 times. The balance sheet remains strong, providing flexibility to support operations, invest in strategic priorities and maintain disciplined capital allocation. With that, I’ll turn the call over to our business unit leaders for a closer look at segment performance. Alessandra, over to you for Life Sciences.
Alessandra Fascini
Thank you, William. Good morning everyone. Please turn to slide 10 for Life Sciences. Life Sciences sales were $172 million flat year over year. Results reflected resilient pharmaceutical demand partially offset by softness in select non pharma end markets and modest pricing pressure. Pharma delivered low single digit growth for a fourth consecutive quarter supported by strength across differentiated cellulose excipients, injectables and tablet coatings. Outside of Pharma, nutrition and other non pharma markets remained softer reflecting customer order timing rather than underlining market deterioration. Pricing declined modestly year over year, largely reflecting carryover impacts from prior period actions while remaining stable sequentially. Foreign exchange contributed approximately $6 million to sales during the quarter. Looking at our globalized initiatives, Injectables continued delivering quarter over quarter growth with a record second quarter results. Positive lead indicators on sales pipeline, new product uptake and new orders signal continued growth momentum in this high margin segment. Tim Coates continued its double digit growth trajectory with versus prior year fueling capacity release initiatives. Turning to innovation growth was supported by expanding adoption of low-nitrite oral solid dosage excipients and high purity injectable and bioprocessing products. New product success in this segment reinforced Ashland’s differentiation in regulated high value markets fully aligned with our growth strategy. Looking ahead, we have positioned the second half of the year for multiple new product launches across oral Solidose, Injectables and Crop care, supporting sustained growth and portfolio renewal. These initiatives continue to reinforce portfolio differentiation and long term growth opportunities. Turning to profitability, Adjusted EBITDA was $50 million down 11% year over year. Adjusted EBITDA margin was 29% reflecting the combined impact of modestly lower pricing and higher costs including approximately $5 million of weather related disruption and Calvert City startup delays during the quarter. These headwinds were partially offset by favorable mix, disciplined execution and foreign exchange which contributed approximately $3 million to EBITDA. Importantly, underlying pharma demand remains resilient and recently announced pricing actions are now being implemented across the portfolio. Life Sciences continues to benefit from durable end market fundamentals, strong customer engagement and sustained momentum across our innovate and globalized pillars. Please turn to Slide 11 for intermediates. Intermediates operated in a challenging but stable trough market environment consistent with expectations entering fiscal year 2026, demand conditions remained stable with sales and pricing at trough levels across the BDO value chain. Sales worth $35 million down 5% year over year reflecting continued pressure across the BDO value chain and commercial and operating impacts related to the Culvert City outage. Merchant sales were $26 million compared to $27 million last year as relatively steady volumes were partially offset by modest pricing pressure and disciplined commercial actions including controlled merchant activity. Captive BDO sales were down approximately $1 million year over year, primarily reflecting the covered Citi impacts during the quarter. Foreign exchange provided a modest $1 million benefit to sales in the quarter. Turning to profitability, adjusted EBITDA was $5 million up from $2 million in the prior year quarter. The improvement reflected disciplined cost management and favorable manufacturing input and actions which more than offset covered city related impacts and ongoing pressure across the BDO value chain. Now I will turn the call over to Jim to discuss Personal Care.
Jim Minicucci (Leader of Personal Care)
Thank you Alessandra. I’ll now highlight our personal care results. Please turn to Slide 12 for Personal Care. Personal Care delivered resilient results supported by broad based demand and strong execution across the portfolio. Sales were $150 million up 3% year over year or 4% on a comparable basis. Driven by growth across all three business lines. Biofunctional Actives delivered another quarter of double digit growth supported by continued adoption of colopepto and customer expansions across Europe and North America. Microbial Protection delivered robust growth across the portfolio and and geographies driven by new customer wins and continued share expansion within Care Ingredients. The portfolio remained resilient with strong growth across hair and skin care categories, particularly in Asia Pacific and Latin America. Previously reported customer specific outages from the prior quarter have now returned to more normalized levels. Foreign Exchange contributed approximately $5 million to sales during the quarter. Turning to innovation, Bio-functional Actives recently launched Etranite, our 2026 flagship ingredient. Etranite targets key skin longevity markers and was recognized with an industry award at the IN Cosmetics Global event earlier this month. Care Ingredients launched a new hair care conditioning polymer from our GWAR technology which is already gaining customer adoption. Overall, Personal Care continues to benefit from strong momentum across our globalize and Innovate platforms, reinforcing growth in consumer focused applications. Turning to profitability, adjusted EBITDA was $43 million compared to $44 million in the prior year quarter. The slight decline was driven by operational outages from weather related events which were predominantly offset by volume growth and mix. Adjusted EBITDA margin was approximately 29% demonstrating the strength of the portfolio and benefit of ongoing commercial and productivity efforts. Foreign Exchange contributed approximately $2 million to EBITDA. In summary, personal Care delivered robust sales growth across all three business lines demonstrating strong margin resilience, disciplined execution and meaningful progress across its Innovate and globalized initiatives. With that, I’ll turn the call over
Dago Caceres (Leader of Specialty Additives)
to Dago to review the results of Specialty Additives. Thank you Jim. Please turn to Slide 13 Specialty additives operated in a mixed demand environment during the second quarter with performance varying by end market and region. Overall results reflected disciplined commercial execution with targeted pricing actions supporting share gains and specific operational headwinds. Sales were 134 million flat year over year as volume growth for the second consecutive quarter was largely offset by softer pricing and the lapping of a difficult prior year comparison. Following share losses in China. Breaking down the segments, architectural coatings returned to year over year growth supported by share gains and new product traction. Volume trends improved relative to prior quarters as commercial initiatives gained momentum while underlying demand remains generally flat with continued regional variability. Construction volumes were lower reflecting deliberate portfolio mix management actions associated with network optimization and relative muted end market demand. Other end markets were mixed with volumes growth in performance specialties offset by softer energy demand tied to customer specific impacts. In the Middle east, pricing declined modestly year over year reflecting targeted share gain opportunities. Foreign Exchange contributed approximately 4 million to reported sales. Turning to profitability, adjusted EBITDA was 16 million down from 26 million in the prior year. Quarter adjusted EBITDA margin was 11.9% reflecting softer pricing and higher manufacturing related cost including approximately 2 million from weather related disruptions, a discrete bad debt reserve related to a Middle east energy customer as well as productivity challenges associated with the hubwell scale up. Notably regarding the HEC scale-up, product quality and customer service levels have been maintained and achieving profitable scale remains a key operational focus. While near term performance has been impacted, these actions are expected to enhance long term reliability and cost efficiency across our cellulosic network. All other sites continue to operate reliably and our global network supported uninterrupted customer supply. Overall, the focus remains on targeted actions to improve operational performance, strengthen cost control and and advanced differentiation across the applications, positioning the business to benefit as market conditions normalize. With that, I’ll turn the call back to William.
William Whitaker (Chief Financial Officer)
Thanks Dago. Please turn to slide 15. Given recent geopolitical developments in the Middle East, I want to briefly highlight how Ashland is positioned in this environment, starting with exposure. Ashland’s direct exposure is limited and manageable. The Middle east and North Africa represent approximately 5% of total sales, largely concentrated in Turkey and Egypt, and we have no manufacturing footprint in the region which significantly reduces operational risk. From a cost perspective, Ashland is structurally advantaged.. We are less reliant on petrochemical and energy intensive feedstocks across our portfolio. Energy intensive inputs represent roughly 15% of sales with the majority source from North America supporting lower cost volatility and more resilient margins as energy prices fluctuate. The team is advancing pricing actions to address cost escalation and given the additives represent a relatively small share of our customers overall cost structure. We expect to be able to recover these increases from a demand standpoint. Visibility remains solid supported by a strong order book and a portfolio concentrated in resilient consumer facing end markets including pharma and personal care. Finally, based on prior dislocations, we expect security of supply to become increasingly important to our customers Ongoing geopolitical disruptions, anti dumping actions and reassessments of single region sourcings are reinforcing the value of reliable, diversified supply chains, positioning Ashland as a preferred partner for critical applications. Taken together while the environment remains dynamic, Ashland’s limited exposure, advantaged cost structure, resilient demand profile and supply chain reliability position us well to manage volatility. Please turn to Slide 16. I’d like to spend a few minutes on our execution agenda with a specific focus on manufacturing, including the challenges we encountered at Hopewell, our progress across the broader commitment and how this ties to our longer term cost savings targets. Starting with Hopewell, our HCC scale-up has progressed more slowly than planned which impacted second quarter performance. As Dago mentioned, our product quality and customer service have been maintained. However, productivity yield and cost performance did not ramp as expected. These challenges are execution related and internal and we have taken targeted actions to address them including tightening operating discipline, increasing leadership focus on the site and advancing specific technical workstreams. While productivity has been below expectations, results have stabilized and we are seeing sequential improvement. We continue to take targeted actions, though the financial benefits will take time to flow through the results. Importantly, the issues at Hopewell do not change the strategic rationale for the consolidation. The site remains critical to simplifying the network and lowering the structural cost base of our cellulosex platform. Outside of Hopewell, manufacturing optimization efforts continue to progress in line with expectations. VPND and small plant consolidation initiatives remain on track. with benefits weighted towards the second half of fiscal 2026. As a result of timing delays at HopeWell, our fiscal 2026 manufacturing optimization benefit has been reduced by approximately 10 to 12 million. That reflects delayed realization, not a reduction in the underlying opportunity. Stepping back, our longer term manufacturing optimization targets remain intact. We continue to expect 50 to 55 million of sustainable annual cost savings with an opportunity to reach approximately 60 million as China volumes recover. Execute remains a core pillar of our strategy focused on simplifying the footprint, improving reliability and strengthening cost competitiveness. While near term execution has been uneven, the actions underway are designed to ensure we deliver the full value of the program over time. I’ll address how this translates into our outlook and expectations for the remainder of fiscal 2026. In a moment, please turn to slide 17. I’d now like to briefly update you on the progress across our Globalize and Innovate platforms. Starting with Globalize, performance has accelerated year over year with incremental contribution increasing approximately 8 million to $11 million fiscal year to date. Globalized businesses delivered double digit year over year Growth in the quarter and incremental sales are ahead of plan to date, reflecting continued traction from prior investments across our regions. Turning to Innovate, momentum has been even stronger. Innovate has already exceeded its full year target after just two quarters, reflecting accelerated commercialization across the portfolio. Performance has been …
This post was originally published here
