Market outlook: Ashland emphasises specialties and solutions

Ashland
Ashland’s acrylic functional components improves the quality of paints

US-based Ashland’s rebranding after the Valvoline initial public offering (IPO) delivers the message that it is focused on specialty chemicals and providing solutions for customers, the head of its chemicals group said.

“This brand effort gives us a consistent way to present Ashland to the market. It was clear we needed to tell the world that we are a different Ashland with our transformation,” said Luis Fernandez-Moreno, senior vice president of Ashland and president of the Chemicals Group, in an interview with ICIS.

“We are 100% focused on specialty chemicals, and our people and technologies enable us to provide solutions to customers to help improve their products’ usability, efficacy, allure, integrity and profitability. We call these the five Ashland Effects,” Fernandez-Moreno added. The new Ashland has a unique combination of technologies – in cellulosics, vinyl pyrrolidones, acrylates, polyurethanes and bio-functionals, said the executive.

And this set of competencies allows it to provide solutions to key markets in personal care, pharmaceuticals, coatings and adhesives, automotive and construction materials, as well as nutrition, food and beverage and composites, he noted.

“All of our businesses have a strategy for understanding their customers. It is very different servicing a pharmaceutical company, providing products that preserve the integrity or quality, than creating a composite for a boat. But our goal is to help our customers improve their profitability,” said Fernandez-Moreno.

Ashland’s specialty ingredients segment, which comprises cellulose ethers, vinyl pyrrolidones and biofunctionals, generated sales of $2.1bn and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of $478m in the 12 months through June 2016. This translates to an EBITDA margin of 22.8%.

Ashland’s performance materials segment includes unsaturated polyester resins (UPR) and vinyl ester resins. It has two divisions – composites and intermediates/solvents. This segment generated sales of $1.0bn and EBITDA of $133m in the same period. The EBITDA margin of 13.8% was much lower compared to the specialty ingredients segment.

On 23 September, Ashland separated its Valvoline lubricants and automotive chemicals business in an IPO.

FOUNDATIONAL BUSINESSES

Within Ashland’s performance materials, its butanediol (BDO), maleic anhydride (MA) and UPR businesses are not specialties, but considered “foundational” – providing reliable low-cost supply for downstream businesses, he noted.

“We produce a lot more BDO than what we need for internal use. In the future, this business could be subject to a different strategic perspective. However, we are comfortable and very happy with our current portfolio,” said Fernandez-Moreno.

Around one-quarter of Ashland’s BDO production is consumed internally, with much of it going into vinyl pyrrolidones. The rest is sold on the merchant market, he said.

Ashland has two BDO plants – one in Lima, Ohio, with 65,000 tonnes/year of capacity, and one in Marl, Germany, with 100,000 tonnes/year of capacity, according to the ICIS plants and projects database.

For maleic anhydride, the vast majority of Ashland’s production is consumed internally for UPR. While Ashland sells some maleic anhydride on the merchant market, it is a net purchaser, as its needs vary depending on geography. Ashland has 54,500 tonnes/year of maleic anhydride capacity at its plant in Neal, West Virginia, according to the ICIS plants and projects database.

M&A STRATEGY

As a pure-play specialty chemical company, Ashland is seeking mergers and acquisitions (M&A) opportunities to complement its technologies and build out geographically.

“We are always looking and have a pipeline of opportunities that could enhance our capability to provide solutions to our core or niche market segments. We look for complementary technologies as well as geographic expansion,” said Fernandez-Moreno.

However, he maintains that Ashland remains “incredibly disciplined” when it comes to M&A, even in today’s hot deal mar ket.

“With current deal multiples, it is a tough task to make a strategic acquisition that will drive shareholder value,” said Fernandez-Moreno.

The highest priority for M&A efforts will be in core businesses where Ashland already has robust product lines such as personal care, pharmaceuticals and coatings. That is followed by niche businesses such as nutrition, adhesives, and food and beverage, where it can find complementary products. M&A will be “less likely” in foundational businesses, he said.

“It is an exciting time for our company, which is focused on specialty chemicals. It allows us to be more operationally focused and present our new brand to provide solutions to customers,” said Fernandez-Moreno.

NEW LOGO AND TAGLINE

Ashland’s new logo and tagline, “always solving”, emerged from both qualitative and quantitative market research that highlighted a need to signal a clear change after all the acquisitions and divestitures Ashland has undertaken through the years.

The three “molecules” connected with lines forming a triangle connote the “therefore sign”, which is used in logic arguments in mathematical proofs, explained Carolmarie Brown, director of global marketing and business communications at Ashland.

If customers are looking for help solving their greatest challenges in applied chemistry and want to amplify the efficacy, refine the usability, add to the allure, ensure the integrity, and improve the profitability of their products and applications, they “therefore” go to Ashland, she added.

The triangular logo is tipped on its side to denote the passion and tenacity of Ashland’s employees always being in motion, always solving, while the colours of the dots are fresh and point to a sustainable future. The colours represent air, water and land, said Brown.

And the traditional font for “Ashland” pays homage to its century old founding, while the font in the lower tagline “always solving” is more modern, she noted.