What Ashland (ASH) Said on Its Q4 Earnings Call

Key Points

• Q4 results improved: Sales rose 4% to $498 million and adjusted EBITDA increased 2% to $121 million, with higher volumes and pricing partly offset by weaker productivity in Specialty Additives.
• Growth and margins strengthened in key segments: Life Sciences and Personal Care sales rose 4% and 8%, respectively, while adjusted EBITDA margins expanded to 35.6% and 30.1%. Specialty Additives EBITDA fell to $20 million as lower output at the Hopewell facility weighed on performance.
• Fiscal 2027 outlook: Ashland expects sales of $1.905 billion to $1.975 billion and adjusted EBITDA of $405 million to $435 million. The forecast includes foreign-exchange headwinds and up to about $140 million in capital spending, while management expects improving Hopewell output to support earnings.

Ashland NYSE: ASH reported higher sales and adjusted earnings for its fiscal fourth quarter, as growth in pharmaceutical and personal care products helped offset weaker manufacturing productivity in Specialty Additives.

The company forecast fiscal 2027 sales of $1.905 billion to $1.975 billion and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $405 million to $435 million. Management said the outlook assumes continued commercial growth and improving operations, while accounting for volatile input costs and a stronger U.S. dollar.

Chair and CEO Guillermo Novo said the company’s priority is to convert commercial momentum into stronger profitability, including by improving output at its Hopewell facility. “Our focus now is execution,” he said.

Quarterly growth led by volume

Fourth-quarter sales rose 4% from a year earlier to $498 million. Volume increased 3%, while pricing rose 2% and covered cost inflation across the business units, CFO William Whitaker said. Foreign currency reduced sales by approximately $3 million.

Adjusted EBITDA increased 2% to $121 million, as higher volumes, favorable mix and pricing were partly offset by unfavorable cost absorption in Specialty Additives and higher unallocated corporate expenses. Adjusted income from continuing operations, excluding intangible amortization expense, rose to $52 million, or $1.12 per diluted share, from $50 million, or $1.08 per share.

Operating cash flow rose to $90 million from $40 million, primarily because of lower working capital. Ongoing free cash flow increased to $74 million from $52 million. Ashland ended fiscal 2026 with $480 million in cash and net leverage of 2.3 times adjusted EBITDA.

Life Sciences and Personal Care margins expand

Life Sciences sales increased 4% to $180 million, with pharmaceutical sales up approximately 6%. Alessandra Faccin, general manager of Life Sciences and Intermediates, said the pharmaceutical business recorded its sixth consecutive quarter of year-over-year volume growth.

Life Sciences adjusted EBITDA rose 16% to $64 million, and its margin expanded to a record 35.6%. Faccin attributed the improvement to higher volumes, favorable product mix, pricing and cost performance. Nutrition sales declined slightly, partly because of the timing of new customer wins in Latin America that are expected to contribute in fiscal 2027.

Personal Care sales increased 8% to $163 million, while adjusted EBITDA rose 14% to $49 million. Its adjusted EBITDA margin expanded to 30.1%. General Manager Jim Minicucci said approximately seven percentage points of the sales growth came from volume, with gains spread across regions and major markets.

Minicucci said Ashland expects continued double-digit growth in its biofunctional actives and microbial protection businesses and is focused on moving the Personal Care margin toward the mid-30% range.

Intermediates sales were flat at $33 million, while adjusted EBITDA improved to $6 million from $5 million. Novo said a multiyear U.S. customer contract tied to batteries and energy storage should support the business, though the initial ramp will depend on the customer’s production schedule.

Hopewell weighs on Specialty Additives

Specialty Additives sales were flat at $130 million. Growth in Coatings and Performance Specialties was offset by softer energy and resources demand and lower construction volumes, the latter reflecting Ashland’s decision to prioritize higher-value applications.

Adjusted EBITDA in the segment fell to $20 million from $29 million, primarily because of lower productivity at Hopewell, General Manager Dago Caceres said. He said key process gaps had been addressed and critical investments completed, with the focus shifting to increasing output.

Whitaker said lower-than-planned cost absorption across operations amounted to approximately $17.5 million in fiscal 2026, the vast majority in Specialty Additives. About $5 million of that impact is expected to carry into the first quarter of fiscal 2027. The company expects improving Hopewell output to more than offset the carryover during the year, with greater earnings leverage expected in fiscal 2028.

Outlook calls for higher capital spending

Ashland expects ongoing free cash flow conversion of more than 40% of adjusted EBITDA in fiscal 2027, reflecting a modest inventory increase and capital expenditures of up to approximately $140 million. Whitaker said the company continues to expect conversion above 50% over time as capital spending normalizes.

Novo said Ashland is moving forward some capacity debottlenecking projects in its hydroxyethyl cellulose network so it can be ready for a potential recovery in demand. Whitaker described the $140 million figure as an upper limit that allows flexibility on project timing.

The fiscal 2027 outlook includes an estimated foreign-exchange headwind of $20 million to $25 million in sales and $7 million to $10 million in adjusted EBITDA. Whitaker said the first quarter is expected to remain the seasonal low, with planned maintenance on Cellulosics assets contributing to a greater weighting of Specialty Additives earnings later in the year.

Ashland is targeting approximately $65 million in combined incremental sales from its globalize and innovate initiatives in fiscal 2027, up from approximately $52 million in fiscal 2026. Novo said established, core innovations are expected to be a larger near-term driver, while newer technologies will take longer to scale.

Asked about a potential sale process, Novo declined to comment on speculation or rumors. He said management remained focused on operational execution and its growth strategy.

About Ashland (NYSE:ASH)

Ashland Inc is a global specialty materials company that develops and supplies functional ingredients, additives and solutions for industrial and consumer markets. Its products are used to enhance the performance, stability, texture, appearance and processing of finished goods.

The company serves a range of industries, including pharmaceuticals, personal care, coatings, construction, food and beverages, adhesives and specialty chemicals. Its portfolio includes polymers, cellulose-based ingredients, rheology modifiers, film-forming agents, preservatives and other specialty additives used in applications such as drug delivery, skin and hair care, architectural coatings and building materials.

Ashland traces its roots to 1924, when it was established as Ashland Refining Company in Kentucky.

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