15:20 PM | July 25, 2013 | Vincent Valk
Ashland today reported fiscal third-quarter income from continuing operations down 26.9% year-on-year (YOY), to $117 million, on sales down 4%, to $2.1 billion. The declines were driven by a $17 million write-down of elastomers inventory due to sharply lower butadiene prices. Adjusted earnings, which include the elastomers write-down but exclude some environmental charges, totaled $1.66/share, well short of analysts’ consensus estimate of $1.84/share. Ashland’s fiscal third-quarter ended on 30 June.
The company has also announced that intends to sell its elastomers business, and is “exploring options,” including a possible sale, for its water technologies business. The elastomers business, part of Ashland’s performance materials segment, recorded about $330 million in sales for the year ended 30 June, the company says. The business mostly sells to the tire replacement market in North America, and operates a facility at Port Neches, TX with 250 employees.
The water business, which is one of Ashland’s four reporting segments, recorded sales of $1.73 billion during fiscal 2012, a 9% decline from fiscal 2011. The business has been challenged for some time, although results have improved in recent months. “While water technologies’ performance has improved this year, we believe that evaluating strategic options, including a possible sale, will help us determine the best path forward for this business,” says Ashland chairman and CEO James O’Brien. Ashland has retained Citi to advise on options for the water technologies business.
Ashland’s specialty ingredients sales fell 10% YOY, to $716 million, while segment Ebitda declined 35%, to $145 million. The declines were mostly due an $86 million drop in guar sales, which have been challenged since late last year. Pharmaceuticals and personal care sales were up 9% and 5%, respectively, Ashland says, due to rising growth in emerging markets.
Consumer markets, or Valvoline, sales fell 1% YOY, to $513 million, while segment Ebitda rose 26%, to $86 million, as volumes rose for premium lubricants. Volumes also increased in Asia and Latin America, Ashland says.
Water technologies sales were up 2% YOY, to $435 million, while segment Ebitda rose 4%, to $41 million. Pulp and paper sales were up 7%, while industrial and municipal water treatment sales were down 4%.
Performance materials sales were down 2% YOY, to $395 million, while segment Ebitda declined 39%, to $30 million, with both declines mostly due to the elastomers write-down. Volumes were up 3%, with YOY increases in adhesives and composites, as market conditions improve in North America.
Ashland expects conditions to improve in the fiscal fourth-quarter, which ends on 30 September. “Market demand and volume trends have begun to improve in several areas of our business, providing momentum as we head toward the end of our fiscal year. Although we face difficult YOY comparisons in guar sales and profitability in the fourth quarter, this will be the final quarter of that effect,” O’Brien says.