Ashland posts 27% increase in Q2 operating profits

29 April 2008 16:23  [Source: ICIS news]

TORONTO (ICIS news)--Ashland posted a 27% increase year on year in its fiscal second-quarter operating income on a 7.5% increase in sales, the US chemicals producer and distributor said on Tuesday.

 

Operating income for the three months ended 31 March was $52m, up from $41m in the year-earlier quarter.

 

Sales were $2.05bn and net income was $72m, up 47%.

 

Results benefited from a $23m gain on the partial resolution of tax issues related to Ashland’s transfer of its interest in the Marathon Ashland Petroleum business to Marathon Oil in 2005, it said.

 

Also, the year-earlier quarter contained a one-off $25m charge to account for the costs of a voluntary severance offer, Ashland said.

 

Ashland’s Valvoline-brand lubricants business continued to perform well during the quarter, despite some margin pressures, the company said.

 

The division reported operating income of $24.1m, up from $22.4m in the year-ago quarter.

 

Operating income in Ashland’s distribution and performance chemicals businesses were below prior-year results but improved sequentially from the fiscal first quarter, it said.

 

Performance materials' operating income was $19.5m, down from $22.7m year on year, reflecting weak margins in the specialty polymers and adhesives business unit, Ashland said.

 

Distribution's operating income declined to $13.1m, from $20.1m in the year-earlier period, as volumes declined, partly due to the termination of a plastics supply deal by Dow Chemical.

 

Ashland’s water technologies business recorded a $2m operating loss - compared with a $6.2m operating profit in the prior-year quarter - due to higher selling, general and administrative costs and lower margins during the quarter.

 

"While we are reasonably pleased with Ashland's progress in a difficult economic environment, we are obviously disappointed with water technologies' results,” said CEO James O'Brien.

 

Ashland had started measures to improve the water technologies business over a year ago but progress was slower than expected, he said.

 

“This business [water technologies] provides significant upside potential once these improvements are made,” he added.

 

"Although we face a challenging economic environment, we believe our businesses are generally well-positioned to compete,” O’Brien said, commenting on Ashland’s overall business outlook.

 

“Our solid balance sheet enables us to strengthen our competitive position in the quarters ahead, and we look to the remainder of the year with measured optimism."

 

Ashland’s share price was up 3.21%, at $53.99, in Tuesday morning trading in New York.

By: Stefan Baumgarten
+1 713 525 2653

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