Wilmington-based Ashland sees lower earnings ahead as customers reduce their inventories of its ingredients and additive products. The company also launched a more aggressive stock buyback program.
The company cited the following.
- The continuation and intensification of customer de-stocking across many of the company’s end markets with continued uncertainty about when the de-stocking dynamics will end;
- As previously communicated, proactive internal inventory-control measures for certain product lines resulted in approximately $15 million of reduced cost absorption during the quarter; and
- Limited visibility into underlying consumer demand given the magnitude of customer de-stocking actions.
The chemcal industry is seeing “destocking” in what one company calls a “manufacturing recession.” Destocking is tied to the supply chain returning to more normal conditions, leading customers to reduce inventories.
Sales in the quarter are expected to be in the range of $545 million to $550 million, down about 15 percent versus the prior-year period. Each of the company’s reportable segments is expected to report sales declines when compared to the prior-year period, driven by lower volumes from rapid customer de-stocking and partially offset by favorable pricing.
Ashland’s projected Adjusted EBITDA is expected to be in the range of $130 million to $135 million, down 225 to 25 percent versus the prior year driven primarily by much lower sales volumes and reduced cost absorption from inventory-control actions.
The Ashland board approved a new $1 billion share repurchase authorization. It replaces the previous $500 million evergreen authorization under which there was $200 million remaining. Since September 30, 2022, Ashland has repurchased approximately $300 million of its outstanding shares under a previous existing authorization.
“The unprecedented reset impact from customer de-stocking actions across many supply chains continues to materially impact many of the markets we serve,” said Guillermo Novo, CEO of, Ashland. “Previous expectations that de-stocking would conclude during our fiscal-third quarter have proven to be optimistic. There is still significant uncertainty as to when the de-stocking dynamics will end. Until the de-stocking is behind us, it will remain difficult for us to gauge the true end-market demand.”
“While this uncertain environment presents near term challenges, it does not change our longer-term priorities,” continued Novo. “Our objectives remain clear: focus on the things we can control to maximize our near-term performance, maintain disciplined capital allocation, and increase momentum on our longer-term growth opportunities, especially our innovation platforms. In light of current market conditions, we plan to take additional targeted restructuring actions to reduce costs over the coming quarters and refocus resources on innovation-driven growth opportunities.”
Ashland moved its headquarters to Delaware after spinning off its Valvoline motor oil business. Delaware was the home of Hercules Incoporated, which Ashland acquired more than a decade ago. The company was once a major player in the petroleum business but merged its operations with those of Marathon.
The former Hercules water treatment chemicals business was sold by Ashland to Solenis, based in north Wilmington. Solenis, backed by private equity capital, continues to buy chemical businesses worldwide.
