Slide 1: Earnings conference call fourth-quarter fiscal 2023
earnings conference call — fourth-quarter fiscal 2023 November 9, 2023 I 8:00 am ET
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities — Exchange Act of 1934, as amended. Ashland has identified some of these forward-looking statements with word
Slide 3: Agenda
agenda — o Q4 performance summary o Q4 and FY23 financial results o priorities for 2024 o outlook o closing comments o Q&A 3
Slide 4: Performance summary
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Slide 5: Proactive inventory control impacted Q4 results
proactive inventory control impacted Q4 results — adj. EBITDA bridge : Q4-FY22 to Q4-FY23 1 US $ in millions o proactive inventory control actions drove most of year-over-year reduction in adjusted EBITDA o inventory reduced by $86 million compared to June 30, 2023 o volume/mix was modestly weaker t
Slide 6: Fiscal 2023 year in review
fiscal 2023 “year in review” — major factors impacting results volume down 18%, significant customer inventory destocking price / mix up $178MM or +7%, FY22 carryover and FY23 actions sales down $200MM or (8%) up, higher unit-production cost from lower volume (lower demand and inventory- unit costs
Slide 7: Q4 and FY23 financial results
Q4 and FY23 financial results 7
Slide 8: Customer destocking had a significant impact
customer destocking had a significant impact — sales by fiscal quarter (USD MMs) fiscal year 2023 sales progression $700 • carryover pricing more than offset soft volumes in $600 Q1 and Q2 $500 • destocking began early in the fiscal year, primarily among distributors in Europe and China $400 custome
Slide 9: Fiscal-fourth quarter adjusted results
fiscal-fourth quarter adjusted results1 — operating results summary Ashland ($US in millions, except percentages) Q4 FY23 Q4 FY22 change sales $518 $631 (18) % gross profit margin 24.9 % 33.1 % (820) bps SG&A / R&D costs / intangible amortization $116 $123 (6) % operating income $14 $87 (84) % EBITD
Slide 10: Life sciences
life sciences — adjusted results summary1 highlights ($US in millions, except percentages) Q4 FY23 Q4 FY22 change o sustained pricing sales $203 $213 (5) % o pharma demand resilient compared to gross profit $63 $72 (13) % strong prior year gross profit margin 31.0 % 33.8 % (280) bps o strong recover
Slide 11: Personal care
personal care — adjusted results summary1 highlights ($US in millions, except percentages) Q4 FY23 Q4 FY22 change o global consumer demand remains sales $146 $188 (22) % resilient gross profit $53 $74 (28) % o continued customer destocking across end gross profit margin 36.3 % 39.4 % (310) bps marke
Slide 12: Specialty additives
specialty additives — adjusted results summary1 highlights ($US in millions, except percentages) Q4 FY23 Q4 FY22 change sales $144 $187 (23) % o continued customer destocking across end gross profit $11 $47 (77) % markets gross profit margin 7.6 % 25.1 % (1,750) bps o architectural coatings less imp
Slide 13: Intermediates
intermediates — adjusted results summary1 highlights ($US in millions, except percentages) Q4 FY23 Q4 FY22 change sales $37 $64 (42) % o merchant: lower pricing and volumes gross profit $2 $16 (88) % o captive: lower transfer gross profit margin 5.4 % 25.0 % (1,960) bps pricing and volumes operating
Slide 14: Fiscal year 2023 adjusted results summary
fiscal year 2023 adjusted results summary1 — ($US in millions, except %s and per-share data) FY23 FY22 change sales $2,191 $2,391 (8%) EBITDA $459 $590 (22) % EBITDA margin 20.9 % 24.7 % (380) bps EPS (excluding intangibles amortization)2 $4.07 $5.70 (29) % ongoing free cash flow3 $217 $127 +71 % 1
Slide 15: Strong balance sheet
strong balance sheet — strong financial position with increased flexibility strong balance sheet1 o cash and liquidity available of ~$1.1 billion o net debt2 of $913 million; net leverage3 of 2.0x; no long-term debt maturities for the next three years proactive inventory management and free cash flo
Slide 16: 2024 priorities
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Slide 17: Fiscal year 2024 challenges
fiscal year 2024 challenges — limited visibility with multiple variables concerns about global recession or innovation: launching new innovation economic slowdown platforms with major impact starting in 2025 • economic headwinds in US, Europe and China • investing to accelerate impact • geopolitical
Slide 18: Scenario planning
scenario planning — impact key variables • wide range of results • risk of lower sales volumes • pricing / raw material cost misalignment recession risk resulting in margin compression demand-recovery timing • plant cost absorption volatility resulting in higher manufacturing unit costs pricing/marg
Slide 19: Strategic priorities
strategic priorities — shape and grow the portfolio execute globalize innovate acquire o expand leading o high-value product o existing technology o drug delivery technology segments in key platforms technologies capacity geographies o new technology o natural & biotech o exit select product o expan
Slide 20: Execute: four primary portfolio actions
execute: four primary portfolio actions — strengthen our base and improve profitability 1. divest nutraceuticals business 2. optimize & consolidate CMC business 3. optimize & consolidate MC-Industrial business 4. rebalance global HEC production network 20
Slide 21: Execute: impact of our actions
execute: impact1 of our actions — build resilience and strength to grow impact o optimize plant network loading o reduce direct cost lower sales $200 – 225 MM o restructure to offset stranded allocated cost lower gross profit ~$20 MM o reduce working Capital and CAPEX o reallocate resources to growt
Slide 22: Strategic priorities
strategic priorities — shape and grow the portfolio execute globalize innovate acquire o expand leading o high-value product o existing technology o drug delivery technology segments in key platforms technologies capacity geographies o new technology o natural & biotech o exit select product o expan
Slide 23: Investing in our future
investing in our future — passion to win and act with urgency o 4 businesses (biofunctionals, preservatives, injectables, OSD film coatings) globalize o all are high-growth and high-margin o adding commercial / technical resources to accelerate growth (>$5MM) o existing tech platforms: focus on high
Slide 24: Proactive and balanced approach
proactive and balanced approach — coherent strategy and business model build resilience and drive long-term improve performance profitable growth of core 24
Slide 25: Fiscal year 2024 outlook
fiscal year 2024 outlook 25
Slide 26: FY2024 roadmap
FY2024 roadmap — our base-line performance (2023) o merit and incentive comp reset: ~$40 million o demand recovery and plant loading: key scenario • compensation reset variables: no recovery, recovery in fiscal Q3, recovery • 2024 demand recovery in mid to end of fiscal Q2 • plant loading • margin d
Slide 27: Fiscal Q1 outlook
fiscal Q1 outlook — limited visibility to timing of demand recovery sales $470 – $490 million o seasonality has returned, performance driven by second half of the fiscal year o too much uncertainty to define probabilities of each scenario adjusted EBITDA o actively engaging stakeholders on portfolio
Slide 28: Closing comments
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Slide 29: Our approach: build resilience, clarity vs. certainty
our approach —build resilience: focus on building clarity vs. certainty act on what we can control develop plans assuming the worse case be positioned to capitalize on upside • stay on strategy • maintain operating and capital allocation discipline • take action to maximize fiscal year 2024 pe
Slide 30: Thank you and Q&A
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Slide 31: Appendix A: adjusted results summary and balance sheet
appendix A: adjusted results summary and balance sheet 31
Slide 32: Q4 adjusted results summary
Q4 adjusted results summary1 — ($US in millions, except percentages and per share data) Q4 FY23 Q4 FY22 change sales $518 $631 (18) % gross profit $129 $209 (38) % gross profit margin 24.9 % 33.1 % (820) bps SG&A / R&D costs / intangible amort. $116 $123 (6) % operating income $14 $87 (84) % depreci
Slide 33: FY 2023 adjusted results summary
FY 2023 adjusted results summary1 — ($US in millions, except %s and per-share data) sales: FY23 FY22 change life sciences $869 $815 +7 % personal care $598 $678 (12) % specialty additives $600 $719 (17) % intermediates $185 $256 (28) % intersegment sales ($61) ($77) (21) % sales $2,191 $2,391 (8%) E
Slide 34: Q4 business unit consolidation
Q4 business unit consolidation1 — specialty intercompany unallocated ($US in millions, except percentages) life sciences personal care Intermediates Ashland additives eliminations2 and other3 sales $203 $146 $144 $37 ($12) - $518 gross profit $63 $53 $11 $2 - - $129 gross profit margin 31.0 % 36.3 %
Slide 35: Liquidity and net debt
liquidity and net debt — ($US in millions) expiration interest rate Moody’s rating S&P rating 9/30/23 balance cash $417 revolver and A/R facilities availability 698 cash, A/R and revolver availability1 $1,115 US A/R sales program1 - debt 2.00% notes (EUR) Jan. 2028 2.000% Ba1 BB+ $528 3.375% notes S
Slide 36: Appendix B: non-GAAP reconciliation
appendix B: non-GAAP reconciliation1 1 Although Ashland provides forward looking guidance for adjusted EBITDA in this presentation, Ashland is not reaffirming or providing forward-looking guidance for U.S. GAAP reported financial measures or a reconciliation of forward-looking non-GAAP financial mea
Slide 37: Reconciliation of Non-GAAP Data
Ashland Inc. and Consolidated Subsidiaries Reconciliation of Non-GAAP Data for the 12 Months Ended September 30, 2023 — ($ millions, except percentages) Sales1 Q4 23 Q3 23 Q2 23 Q1 23 Total Q4 22 Life Sciences $ 203 $ 219 $ 240 $ 207 $ 869 $ 213 Personal Care 146 146 167 139 598 188 Specialty Additi
Slide 38: Segment Components of Key Items for Applicable Income Statement Captions
Ashland Inc. and Consolidated Subsidiaries Segment Components of Key Items for Applicable Income Statement Captions — for the 3 Months Ended September 30, 2023 In millions - preliminary and unaudited) ($ millions) Three Months Ended September 30, 2023 Personal Specialty Unallocated Life Sciences Car
Slide 39: Segment Components of Key Items for Applicable Income Statement Captions
Ashland Inc. and Consolidated Subsidiaries Segment Components of Key Items for Applicable Income Statement Captions for the 3 Months Ended September 30, 2022 — In - preliminary and unaudited) ($ millions) millions Three Months Ended September 30, 2022 Personal Specialty Unallocated Life Sciences Car
Slide 40: Reconciliation of Non-GAAP Data – Free Cash Flow and Adjusted Operating Income
Ashland Inc. and Consolidated Subsidiaries Reconciliation of Non-GAAP Data – Free Cash Flow and Adjusted Operating Income — for the 3 and 12 Months Ended September 30, 2023 and 2022 Three months ended Year ended ($ millions) September 30 September 30 Free cash flows 2023 2022 2023 2022 Total cash fl
Slide 41: Reconciliation of Non-GAAP Data – Adjusted EBITDA
Ashland Inc. Reconciliation of Non-GAAP Data – Adjusted EBITDA for the 3 Months Ended September 30, 2023 and 2022 — ($ millions) Three months ended September 30 Adjusted EBITDA - Ashland Inc. 2023 2022 Net income (loss) $ (4) $ 57 Income tax expense (benefit) (30) 1 Net interest and other expense 28
Slide 42: Reconciliation of Non-GAAP Data – Adjusted EBITDA
Ashland Inc. Reconciliation of Non-GAAP Data – Adjusted EBITDA for the 3 Months Ended September 30, 2023 and 2022 — ($ millions) Three months ended September 30 2023 2022 EBITDA - Life Sciences Operating income $ 31 $ 40 Add: Depreciation and amortization 17 17 EBITDA $ 48 $ 57 EBITDA - Personal Car
Slide 43: Reconciliation of Non-GAAP Data – Adjusted EBITDA
Specialties Additives and Intermediates Reconciliation of Non-GAAP Data – Adjusted EBITDA — for the 3 Months Ended September 30, 2023 and 2022 ($ millions) Three months ended September 30 2023 2022 EBITDA - Specialty Additives Operating income (loss) $ (12) $ 24 Add: Depreciation and amortization 20
Slide 44: Reconciliation of Non-GAAP Data – Adjusted Income from Continuing Operations
Ashland Inc. and Consolidated Subsidiaries Reconciliation of Non-GAAP Data – Adjusted Income from Continuing Operations — for the 3 and 12 Months Ended September 30, 2023 and 2022 Three months ended Year ended September 30 September 30 ($ millions) 2023 2022 2023 2022 Income (loss) from continuing o
Slide 45: Reconciliation of Non-GAAP Data – Adjusted Diluted EPS from Continuing Operations
Ashland Inc. and Consolidated Subsidiaries Reconciliation of Non-GAAP Data – Adjusted Diluted EPS from Continuing Operations — for the 3 and 12 Months Ended September 30, 2023 and 2022 Three months ended Year ended September 30 September 30 2023 2022 2023 2022 Diluted EPS from continuing operations
Slide 46: Ashland always solving
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