Ashland (ASH) expects goodwill impairment charge in Q2

Ashland Global Holdings Inc. (NYSE: ASH) today provided an update for preliminary fiscal 2020 second-quarter financial results, its response to the COVID-19 pandemic, and strong financial position. Additional information regarding second-quarter fiscal earnings will be shared during a conference call webcast with securities analysts on May 6, 2020.

Preliminary fiscal 2020 second-quarter financial results

The Ashland portfolio performed well during the quarter, despite the global macroeconomic uncertainty brought on by the COVID-19 pandemic. Sales were approximately $610 million, down 9 percent versus the prior-year period. Our legacy Pharmachem business and previously communicated prior-year business losses in oral care represented approximately half of this decline. The overall results in the quarter are reflective of the defensive nature of the products we produce and the markets we serve. We did not experience significant demand issues, consistent with our performance during past economic downturns.

Ashland expects a loss from continuing operations during the second fiscal quarter of approximately $580 million, or approximately -$9.56 per diluted share, driven primarily by a goodwill impairment charge following the business unit realignment during the quarter (see Table 1 for estimated significant key item amounts and descriptions). Adjusted earnings from continuing operations are expected to be approximately $52 million, or $0.84 per diluted share, including an effective tax rate of approximately 18 percent. Net loss (including discontinued operations) is expected to be approximately $587 million. Ashland’s Adjusted EBITDA is expected to be approximately $142 million.

(Consensus sess Q2 EPS of 0.75 on revenue of $617 million)

“Ashland is well positioned to meet the operating and financial challenges of the global pandemic,” said Guillermo Novo, chairman and chief executive officer, Ashland. “Our priorities are the health and safety of our employees and the continued supply of products to customers in the critical industries which we serve. From the beginning of the crisis in January, we have implemented our global and regional incident management response plans and teams, which include significant new safety protocols throughout our operations. We are also taking broader actions designed to help further prevent the spread of the COVID-19 virus, including limiting domestic and international travel and implementing work-from-home arrangements, among others.”

“We understand how critical our supply reliability is to our customers in the industries they serve, and we are considered an essential supplier by many government agencies around the world,” continued Novo. “Thanks to the rapid engagement and active management by our teams, our global manufacturing facilities and supply chain capabilities have not been significantly impacted at this point, and we are well positioned to remain a reliable technology and solutions provider to our customers.”

The rapidly evolving pandemic has created significant uncertainty around future demand and supply dynamics across the globe. The extent and duration of the pandemic’s impact on our business remains uncertain. We are evaluating the expected effect of the pandemic and the policy responses of governments on our financial results for the remainder of the year and will provide an update during our second quarter earnings conference call.

Strong financial position and focus on cash generation

Ashland’s balance sheet and cash position remained strong at the end of the second fiscal quarter, with ample liquidity and resilient cash flows.

“In today’s highly uncertain macro environment, we recognize the importance of cash and liquidity. We are closely monitoring our business performance in addition to reducing our working capital, capital spending and operating costs so that we will be well positioned to continue to generate strong free cash flow,” continued Novo. “We are adjusting our manufacturing operations to match the current demand outlook for each of our businesses and rebalance high inventory levels. These actions will improve our cash position but negatively impact fixed-cost absorption in the short term.”

“Ashland has adapted quickly to the current dynamic and challenging conditions,” concluded Novo. “We expect to safely and successfully navigate the challenges the pandemic creates, and I am confident our high-value technologies, leading market positions in critical industries, and deep customer relationships will put us in a position to capture new opportunities in the recovery expected to follow. I want to thank the entire Ashland team for their dedication and unwavering commitment to each other, to our customers and to the communities in which we operate.”

Ample liquidity: At the end of the second fiscal quarter, available liquidity was over $1 billion including approximately $350 million of cash-on-hand, revolver availability and other long-term investments. The outstanding balance on our $600 million revolving credit facility was approximately $250 million.

Resilient cash flows: Our cash position was strong at the end of the second fiscal quarter, and we are taking proactive actions to further support free cash flow. We are aggressively managing operating costs, reducing net working capital, and targeting at least a $20 million to $25 million reduction to our $175 million planned capital expenditures for fiscal year 2020.

Limited debt service: Ashland’s balance sheet is well positioned with no significant maturities related to our term loans, revolving credit facilities or bonds until August 2022. As of March 31, our net debt was $1.7 billion. Our credit agreement includes only leverage and interest coverage covenants that are not expected to impact our ability to access the full amount of our revolving credit facility if needed.

Committed to our dividend: Ashland increased its quarterly dividend by 10 percent in May 2019 and paid the most recent dividend on March 15, 2020. We plan to maintain our dividend of at least $0.275 per share per quarter.

Share repurchase: Ashland maintains an $800 million share repurchase authorization. We do not plan on utilizing the share repurchase authorization in the present financial environment.

The information in this release is preliminary, based upon information available at the time of this news release, and actual results may differ. Ashland plans to provide a further update on its second-quarter financial results and financial outlook on its upcoming Conference Call Webcast on May 6, 2020.

Conference Call Webcast
Ashland plans to issue its second-quarter earnings release at approximately 5 p.m. ET on May 5, 2020. The live webcast with securities analysts, which will include an executive summary and detailed remarks, will take place at 9 a.m. ET on Wednesday, May 6, 2020. At the same time, the company will post a slide presentation in the Investor Relations section of its website at http://investor.ashland.com.

Among those participating in the webcast presentation will be:

• Guillermo Novo, chairman and chief executive officer;
• Kevin Willis, senior vice president and chief financial officer; and
• Seth Mrozek, director of investor relations.

The webcast will be accessible through the Investor Relations section of Ashland's website at http://investor.ashland.com, along with supporting materials. Following the live event, an archived version of the webcast and supporting materials will be available on the Ashland website for 12 months.

You May Also Be Interested In

• Tesla plans 'flying' Roadster stunt at SpaceX Texas site as early as August
• JD.com (JD) Reiterated at Buy by Benchmark Amid Earnings Recovery
• Pro Diversity Network (IPDN) Reports Q2 Loss of $0.15