US Ashland announces rise in Q1 net income, plans for restructuring

HOUSTON (ICIS)–Ashland’s net income increased 8.9% in fiscal Q1 2014 thanks to a net gain on divestitures and a small drop in financing expenses, the US specialty chemical producer announced on Monday.

Ashland also announced restructuring efforts that include realigning its businesses, trimming its payroll and moving jobs as part of a global office consolidation.

Net income for the quarter ended 31 December rose to $110m from $101m in fiscal Q1 2013.

Sales in fiscal Q1 2014 reached $1.87bn and cost of sales came in at $1.33bn, both relatively flat from a year ago.

But the company recorded a gain of $5m from divestitures and recorded $2m less in financing expenses that helped build the growth in net income year on year.

Earnings before interest, taxes, depreciation and amoritisation (EBITDA) increased about 2.9% to $288m from $280m in the year-prior period.

“We were encouraged by our overall financial performance in the first quarter, which is Ashland’s seasonally weakest period of the year,” said James O’Brien, Ashland chairman and CEO. “While overall sales were flat due to lower pricing in some of our more commoditized businesses, each of our four commercial units reported volume gains over the prior year.”

O’Brien pointed to increased volumes year on year in Ashland’s personal care, coatings, pulp and paper, industrial water, and adhesives businesses.

Also on Monday, Ashland outlined its restructuring plans as the company focuses on improving competitiveness and growth. The company expects the plans to generate annualised cost savings of $150m-200m and most of them to be in effect by fiscal H1 2015.

Once Ashland sells its water technologies division, which it plans to do this year, it will have three commercial units – specialty ingredients, performance materials and Valvoline lubricants.

Specialty ingredients will include personal care, pharmaceutical, coatings and adhesives. Performance materials will house composites, intermediates and solvents, and elastomers. The Valvoline business will be focused on that line of lubricants.

Also, the company said it expects to pare 800 to 1,000 employees from its payroll in 2014 as it “realigns its cost structure to be more competitive”. Ashland will do that through voluntary severance packages to US-based employees as part of the realignment, it said.

Ashland also said that it expects to move another 800 to 1,000 jobs “existing, lower-cost regional centres of excellence” in the US and overseas in conjunction with a planned global office consolidation.

“This global restructuring is squarely aimed at moving us closer to our customers so that we can provide highly customized service and technical expertise to help them grow,” O’Brien said. “We intend to be a smaller, more agile organization with better cost control, improved visibility and greater accountability. As a result, we will be better positioned to meet the evolving needs of the marketplace.”