Ashland Inc. · NYSE:ASH
Ashland — Q2 2011 Earnings Presentation
32 slides from Ashland's earnings presentation, Apr 26, 2011
Slide 1: Second-Quarter Fiscal 2011 Earnings
Second-Quarter Fiscal 2011 Earnings James J. O'Brien, Chairman and Chief Executive Officer Lamar M. Chambers, Sr. Vice President and Chief Financial Officer Paul C. Raymond, President, Ashland Hercules Water Technologies David A. Neuberger, Director, Investor Relations April 26, 2011 ® Registered tr
Slide 2: Forward-Looking Statements; Regulation G: Adjusted Results
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward- looking statements are based upon a number of assumptions, including those mentioned
Slide 3: Fiscal Second Quarter 2011 Highlights
Fiscal Second Quarter 2011 Highlights1 Completed sale of Ashland Distribution for $979 million in cash Reported EPS from continuing operations of $1.20 Adjusted EPS of 86 cents versus 84 cents in 2010 March quarter Achieved 9% sales growth over March 2010 quarter, to $1.6 billion Maintaine
Slide 4: Key Items Affecting Income
Fiscal Second Quarter – Continuing Operations Key Items Affecting Income ($ in millions, except EPS) Operating Income Total Preliminary Ashland Ashland Ashand Aqualon Hercules Ashand Consumer Unallocated Functional Water Tech- Performance Markets and Earnings 2011 Ingredients nologies Materials (Val
Slide 5: Adjusted Results Summary
Adjusted Results Summary1 ($ in millions) Fiscal Second Quarter Three months ended Preliminary Three months ended March 31, Dec. 31, 2011 2010 Change 2010 Change Sales $ 1,557 $ 1,423 9 % $ 1,433 9 % Gross profit as a percent of sales 27.5 % 30.3 % (280) bp 27.9 % (40) bp Selling, general and admin.
Slide 6: Recent Volume Trends
Recent Volume Trends1 120.0% 110.0% 100.0% 90.0% 80.0% 70.0% Functional Ingredients Water Technologies Performance Materials Consumer Markets 60.0% Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar '07 '08 '08 '08 '08 '09 '09 '09 '09 '10 '10 '10 '10 '11 Quarter ended 6 1 Excludes volumes assoc
Slide 7: Factors Impacting Adjusted EBITDA
Q2 FY 2010 vs. Q2 FY 2011 Factors Impacting Adjusted EBITDA ($ millions) Preliminary 1 31 (21) (6) 199 (12) 192 Q2 2010 Volume/Mix Margin SG&A Currency Other Q2 2011 Expenses Translation Strong volume growth over prior-year quarter Significant raw-material cost increases compressed margins Off
Slide 8: Liquidity and Net Debt
Liquidity and Net Debt ($ in millions) Scheduled Debt Repayments by Fiscal Year At March 31, $650 Liquidity 2011 Cash $ 1,129 Available revolver capacity 448 Liquidity $ 1,577 Interest At March 31, Debt Expiration Rate Moody's S&P 2011 1 Revolver drawn 03/2014 L+250 Baa2 BBB $ - 2 9.125% senior note
Slide 9: Hercules Water Technologies Adjusted Results Summary
Ashland Hercules Water Technologies Adjusted Results Summary1 ($ in millions) Fiscal Second Quarter Three months ended Preliminary Three months ended March 31, Dec. 31, 2011 2010 Change 2010 Change Sales $ 471 $ 449 5 % $ 451 4 % Gross profit as a percent of sales 31.3 % 34.5 % (320) bp 31.6 % (30)
Slide 10: Water Technologies: Factors Impacting Adjusted EBITDA
Ashland Hercules Water Technologies Factors Impacting Adjusted EBITDA ($ millions) Preliminary Q2 FY 2010 versus Q2 FY 2011 0 1 3 1 52 47 (10) Q2 2010 Volume/ Margin SG&A Currency Other Q2 2011 Mix Expenses Translation Negligible volume effects – Sales growth primarily driven through pricing Raw
Slide 11: Water Technologies: Pricing Recapture
Ashland Hercules Water Technologies Pricing Recapture Significant margin declines versus year-ago quarter Roughly $30 million increase in raw material costs Pricing improvements made in March quarter Modified pricing process Improved tools to provide more detailed price and cost analysis
Slide 12: Water Technologies: Path to Midcycle Performance
Ashland Hercules Water Technologies Path to Midcycle Performance Midcycle EBITDA margin target of 16% to 18% Areas where we’ve done well: Focus on Growth markets Growth in emerging geographies StreamLink sales channel Cost management Additional steps being taken: New product offering
Slide 13: Aqualon Functional Ingredients Adjusted Results Summary
Ashland Aqualon Functional Ingredients Adjusted Results Summary1 ($ in millions) Fiscal Second Quarter Three months ended Preliminary Three months ended March 31, Dec. 31, 2011 2010 Change 2010 Change Metric tons sold (in thousands) 42.8 41.9 2 % 38.5 11 % Sales $ 270 $ 240 13 % $ 216 25 % Gross pro
Slide 14: Functional Ingredients: Factors Impacting Adjusted EBITDA
Ashland Aqualon Functional Ingredients Factors Impacting Adjusted EBITDA ($ millions) Preliminary Q2 FY 2010 versus Q2 FY 2011 15 (6) (2) 0 (1) 64 58 Q2 2010 Volume/ Margin SG&A Currency Other Q2 2011 Mix Expenses Translation Significant volume gains driven by growth in all end markets Margin de
Slide 15: Performance Materials Adjusted Results Summary
Ashland Performance Materials Adjusted Results Summary1 ($ in millions) Fiscal Second Quarter Three months ended Preliminary Three months ended March 31, Dec. 31, 2011 2010 Change 2010 Change Pounds/day (in millions) 4.4 4.4 - % 4.5 (2) % Sales $ 325 $ 304 7 % $ 326 (0) % Gross profit as a percent o
Slide 16: Performance Materials: Factors Impacting Adjusted EBITDA
Ashland Performance Materials Factors Impacting Adjusted EBITDA ($ millions) Preliminary Q2 FY 2010 versus Q2 FY 2011 8 2 0 (1) 18 (7) 20 Q2 2010 Volume/ Margin SG&A Currency Other Q2 2011 Mix Expenses Translation Strong volume gains driven by double-digit gains in all end markets Effects of ASK
Slide 17: Consumer Markets (Valvoline) Adjusted Results Summary
Ashland Consumer Markets (Valvoline) Adjusted Results Summary1 ($ in millions) Fiscal Second Quarter Three months ended Preliminary Three months ended March 31, Dec. 31, 2011 2010 Change 2010 Change Lubricant gallons (in millions) 44.8 43.7 3 % 40.4 11 % Sales $ 491 $ 430 14 % $ 440 12 % Gross profi
Slide 18: Consumer Markets: Factors Impacting Adjusted EBITDA
Ashland Consumer Markets (Valvoline) Factors Impacting Adjusted EBITDA ($ millions) Preliminary Q2 FY 2010 versus Q2 FY 2011 8 0 78 (7) (6) (2) 71 Q2 2010 Volume/ Margin SG&A Currency Other Q2 2011 Mix Expenses Translation Volume gains more than offset margin declines Increased SG&A expenses due
Slide 19: Stranded Costs
Stranded Costs Ashland Distribution divestiture completed on March 31, 2011 ASK Chemicals joint venture began operations on Dec. 1, 2010 Combined stranded costs of approximately $10 million per quarter Plans to address these costs being finalized Costs should be largely eliminated by calen
Slide 20: Corporate Items
Fiscal Second Quarter Corporate Items Capital expenditures of $30 million in quarter Adjusted net interest expense of $27 million Payoff of Term Loan A results in approximately $8 million of yearly savings Effective tax rate of 32% during March quarter Excludes key items Quarterly pensio
Slide 21: Performance Summary
Fiscal Second Quarter Performance Summary Good quarter considering significant amount of raw material inflation As compared with March 2010 quarter: Volumes up 5% Sales up 9% EBITDA down 4% to $192 million Free cash flow of $72 million in quarter 21
Slide 22: Outlook
Outlook Raw material costs remain high Ongoing pricing actions are being implemented Stranded costs are being addressed $400 million share repurchase program authorized Board also announced intent to increase dividend to 70 cents per share annually Well-positioned to return value to shar
Slide 23: Appendix A: Business Profiles
Appendix A: Business Profiles 12 Months Ended March 31, 2011
Slide 24: Corporate Profile: Sales
Corporate Profile 1 Sales : $6.0 billion By commercial unit By geography Ashland Aqualon Functional Europe Ingredients 24% Ashland 16% North Consumer Ashland Hercules America Markets Water Technologies 58% Asia Pacific 31% 30% 13% Ashland Performance Latin Materials America/ 23% Other - 5% 42% of
Slide 25: Corporate Profile: Adjusted EBITDA
Corporate Profile Adjusted EBITDA1: $735 million Ashland Aqualon NYSE Ticker Symbol: ASH Functional Ingredients 27% Total Employees: ~12,500 Ashland Ashland Hercules Consumer Water Technologies Outside North America ~40% Markets 23% 37% Number of Countries Ashland More Performance in Which Ashland t
Slide 26: Aqualon Functional Ingredients
Ashland Aqualon Functional Ingredients A global leader in managing rheology of water-based systems Coatings Trailing 12 Months Ended March 31, 2011 Additives 33% Sales: $1.0 billion Adjusted EBITDA: $208 million1 Regulated Energy & Industries Specialties Adjusted EBITDA Margin: 21.8%1 30% Solutions
Slide 27: Hercules Water Technologies
Ashland Hercules Water Technologies A major global supplier of process and functional chemicals Trailing 12 Months Ended March 31, 2011 Sales: $1.8 billion Growth 51% Adjusted EBITDA: $180 million1 Adjusted EBITDA Margin: 9.9%1 Base 31% Business Overview Sales Growth by Market - Commercial and - P
Slide 28: Performance Materials
Ashland Performance Materials A global leader in specialty chemicals Trailing 12 Months Ended March 31, 2011 Business Overview Sales: $1.4 billion Auto manufacturers; foundries; pipe Adjusted EBITDA: $96 million1 and tank fabricators; packaging and Adjusted EBITDA Margin: 7.1%1 converting; bathwar
Slide 29: Consumer Markets
Ashland Consumer Markets: A leading worldwide marketer of premium-branded automotive lubricants and chemicals Trailing 12 Months Ended March 31, 2011 Business Overview Sales: $1.9 billion Adjusted EBITDA: $288 million1 Retail auto parts stores and mass merchandisers who sell to consumers Adjusted
Slide 30: Appendix B: Reclassifications and Regulation G Reconciliations
Appendix B: Reclassifications and Regulation G Reconciliations
Slide 31: Reconciliation of Non-GAAP Data for the 12 Months Ended March 31, 2011
Ashland Inc. and Consolidated Subsidiaries Reconciliation of Non-GAAP Data for the 12 Months Ended March 31, 2011 ($ millions, except percentages) Sales Q2 11 Q1 11 Q4 10 Q3 10 Total Functional Ingredients 270 216 239 227 952 Water Technologies 471 451 462 431 1,815 Performance Materials 325 326 353
Slide 32: ™ Trademark, Ashland or its subsidiaries, registered in various countries
32 ™ Trademark, Ashland or its subsidiaries, registered in various countries