Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ASHLAND INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the accompanying Notes to Condensed Consolidated Financial Statements herein.
BUSINESS OVERVIEW
Ashland profile
Ashland is a global additives and specialty ingredients company with a conscious and proactive mindset for environmental, social and governance ("ESG"). The Company serves customers in a wide range of consumer and industrial markets, including architectural coatings, construction, energy, food and beverage, personal care and pharmaceutical. With approximately 3,200 employees worldwide, Ashland serves customers in more than 100 countries.
Ashland’s sales generated outside of North America were 72% for both the three and six months ended March 31, 2025, and 69% and 68% for the three and six months ended March 31, 2024, respectively. Sales by region expressed as a percentage of total consolidated sales were as follows:
Three months ended
Six months ended
March 31
March 31
Sales by Geography
2025
2024
2025
2024
North America (a)
28
%
31
%
28
%
32
%
Europe (a)
38
%
37
%
36
%
35
%
Asia Pacific
25
%
23
%
26
%
24
%
Latin America & other
9
%
9
%
10
%
9
%
100
%
100
%
100
%
100
%
(a) Ashland includes only U.S. and Canada in its North America designation and includes Europe, the Middle East and Africa in its Europe designation.
Reportable segments
Ashland’s reportable segments include Life Sciences, Personal Care, Specialty Additives and Intermediates. Unallocated and other includes corporate governance activities and certain legacy matters. The contribution to sales by each reportable segment expressed as a percentage of total consolidated sales was as follows:
Three months ended
Six months ended
March 31
March 31
Sales by Reportable Segment
2025
2024
2025
2024
Life Sciences
35
%
39
%
36
%
40
%
Personal Care
31
%
29
%
30
%
28
%
Specialty Additives
28
%
27
%
28
%
27
%
Intermediates
6
%
5
%
6
%
5
%
100
%
100
%
100
%
100
%
30
KEY DEVELOPMENTS
Uncertainty related to tariffs and global trade policy changes
The March quarter saw increased regulatory activity, including the imposition of tariffs and evolving global trade policies, which have resulted in retaliatory measures on U.S. goods. The extent and duration of the tariffs and the resulting impact on general economic conditions and on Ashland are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions that may be granted, availability and cost of alternative sources of supply and demand for Ashland's products in affected markets. Additionally, the uncertainty about trade policy, tariff rates, and other changes in practices affecting international trade, including whether such tariffs or other measures will be withdrawn, or modified in the future, may make it difficult to operate optimally. Ashland continues to monitor the rapidly evolving tariff and global trade policies and is working to mitigate potential impacts on its business.
Uncertainty relating to the ongoing Ukraine/Russia and Israel/Hamas conflicts
Business disruptions, including those related to the ongoing conflicts between Ukraine/Russia or Israel/Hamas continue to impact businesses around the globe. While it is impossible to predict the effects of the conflicts such as possible escalating geopolitical tensions (including the imposition of existing and additional sanctions by the U.S. and the European Union on Russia), worsening macroeconomic and general business conditions, supply chain interruptions and unfavorable energy markets, the impact could be material. Ashland is closely monitoring these situations and maintains business continuity plans that are intended to continue operations or mitigate the effects of events that could disrupt its business.
Ashland does not have manufacturing operations in Russia, Ukraine, or Belarus. Ashland sells (or previously sold) additives and specialty ingredients to manufacturers in these countries for their use in pharmaceuticals, personal care, and coatings applications. Sales to Russia and Belarus were previously limited and our products were primarily used in products and applications that are essential to the population's well-being and currently support our customers' humanitarian efforts. We have sales controls in place to ensure that future potential sales into the region are only to support critical pharmaceutical or personal hygiene products which are essential for the general population and in accordance with any applicable sanctions. Sales to Ukraine, Russia, and Belarus represent less than 1% of total consolidated sales and less than 1% of total consolidated assets (related to accounts receivable).
Ashland does not have manufacturing operations in Israel. Sales to Israel represent approximately 1% of total consolidated sales and less than 1% of total consolidated assets (related to accounts receivable).
Other items
Restructuring programs
As previously announced, Ashland initiated a new $30 million pre-tax restructuring plan to offset the impact from the Nutraceuticals sale, completed in fiscal 2024, and other portfolio optimization actions, which are expected to be realized 50 percent in fiscal 2025 and 50 percent in fiscal 2026.
Ashland is also advancing a multi-year manufacturing optimization restructuring plan to improve operational cost and strengthen its competitive position. This optimization plan is expected to generate pre-tax savings of $60 million once fully achieved, including savings of $5 million in fiscal 2025.
Ashland is also continuing to execute its fiscal 2024 portfolio and plant optimization actions to further strengthen Ashland’s resilience and improve margins and returns. These previously announced actions include initiatives focused on carboxymethylcellulose (CMC), methylcellulose (MC), Nutraceuticals and Avoca portfolio optimization (collectively, Portfolio Optimization). Overall, these portfolio optimization actions reduced sales and operating income (loss) by approximately $67 million and $9 million, respectively, for the three months ended March 31, 2025 and approximately $117 million and $14 million, respectively, for the six months ended March 31, 2025 as compared to the prior year. Adjusted EBITDA was also reduced by $13 million and $21 million for the three and six months ended March 31, 2025, respectively, as compared to the prior year.
31
The following table summarizes the expense impact of these restructuring actions:
Three months ended
Six months ended
March 31
March 31
(In millions)
2025
2024
2025
2024
Accelerated depreciation (a)
$
13
$
27
$
13
$
49
Restructuring, separation and other costs (b)
8
20
11
24
Other plant optimization costs (a)
6
1
9
1
$
27
$
48
$
33
$
74
(a) Recorded within the cost of sales caption within the Statements of Condensed Consolidated Comprehensive Income (Loss).
(b) Recorded within the selling, general and administrative caption within the Statements of Condensed Consolidated Comprehensive Income (Loss).
Avoca business sale
During the three months ended March 2025, Ashland completed the sale of its Avoca business to Mane SA. Proceeds from the sale were approximately $16 million, net of transaction costs.
The Avoca business was included within Ashland's Personal Care reportable segment.
Ashland determined this transaction did not qualify for discontinued operations treatment since it neither represented a strategic shift nor did it have a major effect on Ashland's operations and financial results.
Ashland recorded an impairment charge of zero for the three months ended March 31, 2025 and $183 million ($1 million allocated to goodwill, $134 million to other intangible assets, $33 million to property, plant and equipment, $14 million to operating lease assets, net and $1 million to other current assets) for the six months ended March 31, 2025, within the income (loss) on acquisitions and divestitures, net caption of the Statements of Condensed Consolidated Comprehensive Income (Loss). The tax benefit associated with the sale is included within the income tax expense (benefit) caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2025. See Note J of the Notes to the Condensed Consolidated Financial Statements for additional details. Ashland also recorded a pre-tax gain on sale of $8 million following the completion of this sale, mainly related to working capital movements, within the income (loss) on acquisitions and divestitures, net caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2025.
RESULTS OF OPERATIONS – CONSOLIDATED REVIEW
Consolidated review
Overview
Key financial results included the following:
Three months ended
Six months ended
March 31
March 31
(In millions except per share data)
2025
2024
Change
2025
2024
Change
Net income (loss)
$
31
$
120
$
(89
)
$
(135
)
$
147
$
(282
)
Diluted earnings per share net income (loss) (a)
0.65
2.39
(1.74
)
(2.88
)
2.88
(5.76
)
Income (loss) from continuing operations
30
121
(91
)
(136
)
149
(285
)
Diluted earnings per share income (loss) from continuing operations (a)
0.63
2.40
(1.77
)
(2.91
)
2.92
(5.83
)
Operating income (loss)
51
21
30
(128
)
4
(132
)
EBITDA (b)
100
74
26
(30
)
109
(139
)
Adjusted EBITDA (b)
108
126
(18
)
169
197
(28
)
Adjusted Diluted EPS from Continuing Operations Excluding Intangibles Amortization Expense (b)
0.99
1.27
(0.28
)
1.26
1.71
(0.45
)
(a) As a result of the loss from continuing operations attributable to Ashland during the six months ended March 31, 2025, the effect of the share-based awards convertible to common stock would be antidilutive and have been excluded from the diluted EPS calculation.
(b) These are non-GAAP financial measures. See "Use of Non-GAAP Financial Measures" section below for reconciliations to U.S. GAAP.
32
Business results current quarter
Ashland's net income of $31 million ($0.65 diluted earnings per share) and $120 million ($2.39 diluted earnings per share) included income from discontinued operations of $1 million ($0.02 diluted earnings per share) and a loss from discontinued operations of $1 million (loss of $0.01 diluted earnings per share) in the three months ended March 31, 2025 and 2024, respectively.
Results for Ashland’s continuing operations, diluted earnings per share from continuing operations and operating income for the three months ended March 31, 2025 and 2024 included certain key items that were excluded to arrive at Adjusted EBITDA and are quantified in the “Use of Non-GAAP Financial Measures” section below. These pre-tax key items totaled expense of $6 million and $42 million for the three months ended March 31, 2025 and 2024, respectively, impacting continuing operations. Continuing operations was also impacted by favorable tax specific key items for discrete tax items totaling $1 million and $105 million for the three months ended March 31, 2025 and 2024, respectively.
Excluding these key items, the decrease in continuing operations, diluted earnings per share from continuing operations and operating income was primarily driven by portfolio optimization actions, which includes volume impacts, and lower organic sales. This was partially offset by favorable production costs and lower selling, administrative, research and development costs. In addition, diluted earnings per share from continuing operations was also impacted by common stock reductions from repurchases of Ashland common stock over the last twelve months. These common stock repurchases reduced the number of weighted average shares from 51 million diluted shares at March 31, 2024 to 47 million diluted shares at March 31, 2025.
Ashland’s Adjusted EBITDA was $108 million for the three months ended March 31, 2025 compared to $126 million for the three months ended March 31, 2024 (see U.S. GAAP reconciliation under “Use of Non-GAAP Financial Measures” below). The $18 million decrease in Adjusted EBITDA was primarily driven by portfolio optimization actions, which includes volume impacts, and lower organic sales. This was partially offset by favorable production costs and lower selling, administrative, research and development costs. Adjusted Diluted EPS from Continuing Operations (non-GAAP) Excluding Intangibles Amortization Expense was also impacted by these key factors along with the impact of common stock repurchases noted above.
For further information on the items reported above, see the discussion in the comparative Statements of Condensed Consolidated Comprehensive Income (Loss) caption review analysis.
Statements of Condensed Consolidated Comprehensive Income (Loss) – caption review
A comparative analysis of the Statements of Condensed Consolidated Comprehensive Income (Loss) by caption is provided as follows:
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Sales
$
479
$
575
$
(96
)
$
884
$
1,048
$
(164
)
The following table provides a reconciliation of the change in sales for the three and six months ended March 31, 2025 and 2024:
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Sales change
Divestiture
$
(41
)
$
(80
)
Volume
(36
)
(53
)
Price/mix
(13
)
(24
)
Foreign currency exchange
(6
)
(7
)
Change in sales
$
(96
)
$
(164
)
Current Quarter - Sales for the current quarter decreased $96 million compared to the prior year quarter. The decrease was driven by the unfavorable impact of divestitures, lower volume, unfavorable pricing and unfavorable foreign currency exchange. Portfolio optimization initiatives had an approximate $67 million impact on sales compared to the prior year quarter, primarily within divestiture and volume caption changes.
33
Year-to-date - Sales for the current year decreased $164 million compared to the prior year period. The decrease was driven by the unfavorable impact of divestitures, lower volume, unfavorable pricing and unfavorable foreign currency exchange. Portfolio optimization initiatives had an approximate $117 million impact on sales compared to the prior year period, primarily within divestiture and volume caption changes.
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Cost of sales
$
332
$
414
$
(82
)
$
626
$
789
$
(163
)
Gross profit as a percent of sales
30.7
%
28.0
%
29.2
%
24.7
%
The following table provides a reconciliation of the change in cost of sales between the three and six months ended March 31, 2025 and 2024:
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Cost of sales change
Divestiture
$
(34
)
$
(66
)
Operating costs
(19
)
(60
)
Volume
(30
)
(42
)
Foreign currency exchange
(3
)
(4
)
Price/mix
4
9
Change in cost of sales
$
(82
)
$
(163
)
Current Quarter - Cost of sales for the current quarter decreased $82 million compared to the prior year quarter. The decrease was primarily driven by the favorable impact of divestitures, lower sales volume, lower operating costs, and favorable foreign exchange currency, partially offset by unfavorable pricing. The current period operating costs were affected by $13 million of accelerated depreciation for product line optimization activities at a Life Sciences manufacturing plant and $6 million of other plant optimization costs while the prior year quarter included $27 million of accelerated depreciation for product line optimization activities at two Speciality Additives manufacturing plants and $1 million of other plant optimization costs. Gross profit as a percentage of sales increased 2.7% primarily due to production volume recovery versus inventory corrective actions and decreased accelerated depreciation compared to the prior year quarter.
Year-to-date - Cost of sales for the current year decreased $163 million compared to the prior year period. The decrease was primarily driven by the favorable impact of divestitures, lower operating costs, lower sales volume, and favorable foreign exchange currency, partially offset by unfavorable pricing. The current period operating costs were affected by $13 million of accelerated depreciation for product line optimization activities at a Life Sciences manufacturing plant and $9 million of other plant optimization costs while the prior year period included $49 million of accelerated depreciation for product line optimization activities at two Speciality Additives manufacturing plants and $1 million of other plant optimization costs. Gross profit as a percentage of sales increased 4.5% primarily due to production volume recovery versus inventory corrective actions and decreased accelerated depreciation compared to the prior year period.
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Selling, general and administrative expense
$
85
$
106
$
(21
)
$
162
$
189
$
(27
)
As a percent of sales
17.7
%
18.4
%
18.3
%
18.0
%
Current Quarter - Selling, general and administrative expense for the current quarter decreased $21 million compared to the prior year quarter with expenses as a percent of sales decreasing 0.7%. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year quarter were:
• $2 million and $3 million in net environmental-related expenses during the current and prior year quarter, respectively (see Note L of the Notes to the Condensed Consolidated Financial Statements for more information);
34
• Expense of $8 million and $20 million comprised of key items for severance, lease abandonment and other restructuring costs during the current and prior year quarter, respectively; and
• Lower stock-based compensation expense, favorable currency exchange and the favorable impact of divestitures between periods.
Year-to-date - Selling, general and administrative expense for the current year decreased $27 million compared to the prior year period with expenses as a percent of sales increasing 0.3%. Key drivers of the fluctuation in selling, general and administrative expense compared to the prior year period were:
• $3 million and $7 million in net environmental-related expenses during the current and prior year quarter, respectively (see Note L of the Notes to the Condensed Consolidated Financial Statements for more information);
• Expense of $11 million and $24 million comprised of key items for severance, lease abandonment and other restructuring costs during the current and prior year quarter, respectively;
• A $5 million charge associated with the impact of a currency devaluation in Argentina in the prior period; and
• Favorable currency exchange and the favorable impact of divestitures between periods.
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Research and development expense
$
14
$
14
$
—
$
28
$
26
$
2
Current Quarter - Research and development expense is generally consistent with the prior year quarter.
Year-to-date - Research and development expense is generally consistent with the prior year period.
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Intangibles amortization expense
$
15
$
20
$
(5
)
$
32
$
40
$
(8
)
Current Quarter - The lower intangibles amortization expense in the current quarter is driven by the impact of amortization related to the divested Avoca business in the current quarter and Nutraceuticals business in the prior year quarter.
Year-to-date - The lower intangibles amortization expense in the current year is driven by the impact of amortization related to the divested Avoca business in the current year and Nutraceuticals business in the prior year period.
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Equity and other income
$
—
$
—
$
—
$
1
$
2
$
(1
)
Current Quarter - Equity and other income was zero for the current and prior year quarter.
Year-to-date - Equity and other income is generally consistent with the prior year period.
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Income (loss) on acquisitions and divestitures, net
$
18
$
—
$
18
$
(165
)
$
(2
)
$
(163
)
Current Quarter - Ashland recorded a pre-tax gain on sale of $8 million associated with the sale of the Avoca business and a pre-tax gain on sale of a land property of $11 million during the current period. Additionally, Ashland incurred $1 million of charges related to the Nutraceuticals business sale completed in fiscal 2024. See Note B of the Notes to the Condensed Consolidated Financial Statements for more information.
Year-to-date - Ashland recorded a $183 million impairment charge and a pre-tax gain on sale of $8 million associated with the Avoca business during the current year. In addition, Ashland recorded a pre-tax gain on sale of a land property of $11 million during the current year. Additionally, Ashland incurred $1 million of charges related
35
to the Nutraceuticals business sale completed in fiscal 2024. Prior period primarily related to legal fees associated with ongoing divestiture activity and acquisitions related due diligence costs. See Note B of the Notes to the Condensed Consolidated Financial Statements for more information.
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Net interest and other expense (income)
Interest expense
$
15
$
13
$
2
$
30
$
26
$
4
Interest income
(1
)
(2
)
1
(3
)
(5
)
2
Expense (income) from restricted investments
(6
)
(12
)
6
7
(48
)
55
Other financing costs
3
3
—
5
6
(1
)
$
11
$
2
$
9
$
39
$
(21
)
$
60
Current Quarter - Net interest and other expense (income) increased by $9 million during the current quarter compared to the prior year quarter. Interest expense and interest income remained primarily consistent during the current quarter compared to the prior year quarter. Restricted investments income of $6 million and $12 million included realized gains of $3 million compared to $9 million for the three months ended March 31, 2025 and 2024, respectively, and was the primary change between quarters. See Note E of the Notes to the Condensed Consolidated Financial Statements for more information on the restricted investments.
Year-to-date - Net interest and other expense (income) increased by $60 million during the current year compared to the prior year period. Interest expense and interest income remained primarily consistent during the current quarter compared to the prior year quarter. Restricted investments expense of $7 million and income of $48 million included realized losses of $14 million compared to gains of $39 million for the six months ended March 31, 2025 and 2024, respectively, and was the primary change between periods. See Note E of the Notes to the Condensed Consolidated Financial Statements for more information on the restricted investments.
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Other net periodic benefit loss
$
1
$
2
$
(1
)
$
3
$
4
$
(1
)
Current Quarter - Other net periodic benefit loss for the three months ended March 31, 2025 primarily included interest cost of $4 million which was partially offset by expected return on plan assets of $3 million. Other net periodic benefit loss for the three months ended March 31, 2024 primarily included interest cost of $3 million which was partially offset by expected return on plan assets of $1 million. See Note K of the Notes to the Condensed Consolidated Financial Statements for more information.
Year-to-date - Other net periodic benefit loss for the six months ended March 31, 2025 primarily included interest cost of $7 million and a $1 million curtailment loss partially offset by expected return on plan assets of $5 million. Other net periodic benefit loss for the six months ended March 31, 2024 primarily included interest cost of $8 million which was partially offset by expected return on plan assets of $4 million. See Note K of the Notes to the Condensed Consolidated Financial Statements for more information.
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Income tax expense (benefit)
$
9
$
(104
)
$
113
$
(34
)
$
(128
)
$
94
Effective tax rate
23
%
-612
%
20
%
-610
%
Current Quarter - Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results. The overall effective tax rate was 23% for the three months ended March 31, 2025 and was primarily impacted by jurisdictional income mix.
The overall effective tax rate was a benefit of 612% for the three months ended March 31, 2024 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $102 million primarily related to changes in foreign tax reform related activity.
Year-to-date - Ashland’s effective tax rate in any interim period is subject to adjustments related to discrete items and the mix of domestic and foreign operating results. The overall effective tax rate was 20% for the six months
36
ended March 31, 2025 and was primarily impacted by jurisdictional income mix as well as a net $7 million from unfavorable tax discrete items primarily related to final regulations issued in the United States during the year impacting the recognition of deferred taxes on certain unrealized foreign exchange gains and losses.
The overall effective tax rate was a benefit of 610% for the six months ended March 31, 2024 and was primarily impacted by jurisdictional income mix, as well as net favorable discrete items of $126 million primarily related to changes in foreign tax reform related activity.
Adjusted income tax expense (benefit)
Key items are defined as the financial effects from significant transactions that may have caused short-term fluctuations in net income (loss) and/or operating income (loss) which Ashland believes do not accurately reflect Ashland’s underlying business performance and trends. Tax specific key items are defined as the financial effects from tax specific financial transactions, tax law changes or other matters that fall within the definition of key items as previously described. The effective tax rate, excluding key items, which is a non-GAAP financial measure, has been prepared to illustrate the ongoing tax effects of Ashland’s operations. Management believes investors and analysts use this financial measure in assessing Ashland's business performance and that presenting this non-GAAP financial measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance enhancing their ability to compare period-to-period financial results.
The effective tax rate during the three and six months ended March 31, 2025 was significantly impacted by U.S. tax final regulation activity while the effective tax rate during the three and six months ended March 31, 2024 was significantly impacted by foreign tax reform related activity.
The following table is a calculation of the effective tax rate, excluding these key items.
Three months ended
Six months ended
March 31
March 31
(In millions)
2025
2024
2025
2024
Income (loss) from continuing operations before income taxes
$
39
$
17
$
(170
)
$
21
Key items (pre-tax) (a)
6
42
214
47
Adjusted income from continuing operations before income taxes
$
45
$
59
$
44
$
68
Income tax expense (benefit)
$
9
$
(104
)
$
(34
)
$
(128
)
Income tax rate adjustments:
Tax effect of key items (b)
2
10
52
12
Tax specific key items: (c)
Uncertain tax positions
3
—
4
—
Other and tax reform related activity
(2
)
105
(11
)
129
Total income tax rate adjustments
3
115
45
141
Adjusted income tax expense
$
12
$
11
$
11
$
13
Effective tax rate
23
%
-612
%
20
%
-610
%
Effective Tax Rate, Excluding Key Items (Non-GAAP) (d)
25
%
19
%
25
%
19
%
(a) See Adjusted EBITDA reconciliation table disclosed in this Management’s Discussion and Analysis of Financial Condition and Results of Operation for a summary of the key items, before tax.
(b) The tax rate specific to the jurisdiction in which the key item originates is used to calculate the tax effect of key items.
(c) For additional information on the effect that these tax specific key items had on EPS, see the adjusted diluted EPS table disclosed in this Management’s Discussion and Analysis of Financial Condition and Results of Operation.
(d) Due to rounding conventions, the effective tax rate presented may not recalculate precisely based on the numbers disclosed within this table.
37
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Income (loss) from discontinued operations, net of income taxes
Performance Adhesives
$
(1
)
$
—
$
(1
)
$
(1
)
$
(3
)
$
2
Composites/Marl facility
—
(2
)
2
—
(1
)
1
Valvoline
2
2
—
2
2
—
Distribution
—
(1
)
1
—
—
—
$
1
$
(1
)
$
2
$
1
$
(2
)
$
3
Current Quarter - The activity for Performance Adhesives in the current quarter represents subsequent adjustments that were made in conjunction with post-closing disputes and taxes. The activity for Valvoline represents subsequent adjustments that were made in conjunction with post-closing tax items during the current and prior year quarters. The activity for Composites/Marl facility and Distribution was related to post-closing adjustments in the prior year quarter.
Year-to-date - The activity for Performance Adhesives and Valvoline in the current and prior year periods represents subsequent adjustments that were made in conjunction with post-closing disputes and taxes. The activity for Composites/Marl facility was related to post-closing adjustments in the prior year period.
Other comprehensive income (loss)
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Other comprehensive income (loss), net of tax
Unrealized translation gain (loss)
$
49
$
(27
)
$
76
$
(45
)
$
27
$
(72
)
Unrealized gain on commodity hedges
2
1
1
3
—
3
$
51
$
(26
)
$
77
$
(42
)
$
27
$
(69
)
Current Quarter - Total other comprehensive income (loss), net of tax, for the current quarter increased $77 million compared to the prior year quarter primarily as a result of the following:
• For the three months ended March 31, 2025 and 2024, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in gains of $49 million and losses of $27 million, respectively. The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars.
• For the three months ended March 31, 2025 and 2024, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities. Commodity hedges resulted in unrealized gains of $2 million and $1 million for the three months ended March 31, 2025 and 2024, respectively.
Year-to-date - Total other comprehensive income (loss), net of tax, for the current year decreased $69 million compared to the prior year period primarily as a result of the following:
• For the six months ended March 31, 2025 and 2024, the change in unrealized gain (loss) from foreign currency translation adjustments resulted in losses of $45 million and gains of $27 million, respectively. The fluctuations in unrealized translation gains and losses are primarily due to translating foreign subsidiary financial statements from local currencies to U.S. Dollars.
• For the six months ended March 31, 2025 and 2024, the change in commodity hedges is primarily due to the fluctuations of the market prices of the underlying commodities. Commodity hedges resulted in unrealized gains of $3 million and zero for the six months ended March 31, 2025 and 2024, respectively.
Use of Non-GAAP Financial Measures
Ashland has included within this document the following non-GAAP financial measures, on both a consolidated and reportable segment basis, which are not defined within U.S. GAAP and do not purport to be alternatives to net income (loss) or cash flows from operating activities as a measure of operating performance or cash flows:
38
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
EBITDA is defined as net income (loss), plus income tax expense (benefit), net interest and other expense (income), and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for discontinued operations and key items. Adjusted EBITDA margin is Adjusted EBITDA divided by sales.
Management believes the use of EBITDA and Adjusted EBITDA measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance by presenting comparable financial results between periods. Ashland believes that by removing the impact of depreciation and amortization and excluding certain non-cash charges, amounts spent on interest and taxes and certain other charges that are highly variable from year to year, EBITDA and Adjusted EBITDA provide Ashland’s investors with performance measures that reflect the impact to operations from trends in changes in sales, margin and operating expenses, providing a perspective not immediately apparent from net income (loss) and operating income (loss). The adjustments Ashland makes to derive the non-GAAP financial measures of EBITDA and Adjusted EBITDA exclude items which may cause short-term fluctuations in net income (loss) and operating income (loss) and which Ashland does not consider to be the fundamental attributes or primary drivers of its business. EBITDA and Adjusted EBITDA provide disclosure on the same basis as that used by Ashland’s management to evaluate financial performance on a consolidated and reportable segment basis and provide consistency in our financial reporting, facilitate internal and external comparisons of Ashland’s historical operating performance and its segments and provide continuity to investors for comparability purposes.
Adjusted Diluted Earnings Per Share (EPS)
Adjusted Diluted EPS is defined as income (loss) from continuing operations, adjusted for key items, net of tax, divided by the average outstanding diluted shares for the applicable period. The Adjusted Diluted EPS metric enables Ashland to demonstrate what effect key items have on an earnings per diluted share basis by taking income (loss) from continuing operations, adjusted for key items after tax that have been identified in the Adjusted EBITDA table, and dividing by the average outstanding diluted shares for the applicable period. Ashland’s management believes this presentation is helpful to illustrate how the key items have impacted this metric during the applicable period.
Adjusted Diluted Earnings Per Share (EPS) Excluding Intangibles Amortization Expense
The Adjusted Diluted EPS Excluding Intangible Amortization Expense is adjusted earnings per share adjusted for intangibles amortization expense net of tax, divided by the average outstanding diluted shares for the applicable period. The Adjusted Diluted EPS, Excluding Intangibles Amortization Expense metric enables Ashland to demonstrate the impact of non-cash intangibles amortization expense on EPS, in addition to the key items previously mentioned. Ashland’s management believes this presentation is helpful to illustrate how previous acquisitions impact applicable period results.
Free Cash Flow, Ongoing Free Cash Flow and Ongoing Free Cash Flow Conversion
Free Cash Flow is defined as operating cash flows less capital expenditures while Ongoing Free Cash Flow is operating cash flows less capital expenditures and certain other adjustments as applicable. Ongoing Free Cash Flow Conversion is Ongoing Free Cash flow divided by Adjusted EBITDA. These free cash flow metrics enable Ashland to provide a better indication of the ongoing cash being generated that is ultimately available for both debt and equity holders as well as other investment opportunities. Unlike cash flow provided by operating activities, Free Cash Flow and Ongoing Free Cash Flow include the impact of capital expenditures from continuing operations and other significant items impacting cash flow, providing a more complete picture of current and future cash generation. Free Cash Flow, Ongoing Free Cash Flow, and Free Cash Flow Conversion are non-GAAP liquidity measures that Ashland believes provide useful information to management and investors about Ashland's ability to convert Adjusted EBITDA to Ongoing Free Cash Flow. These liquidity measures are used regularly by Ashland's stakeholders and industry peers to measure the efficiency at providing cash from regular business activity. Free Cash Flow, Ongoing Free Cash Flow, and Free Cash Flow Conversion have certain limitations, including that they do not reflect adjustments for certain non-discretionary cash flows such as mandatory debt repayments. The amount of mandatory versus discretionary expenditures can vary significantly between periods.
39
Other disclosures on non-GAAP financial measures
Although Ashland may provide forward-looking guidance for Adjusted EBITDA, Adjusted diluted EPS and Ongoing Free Cash Flow, 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 measures to the most directly comparable U.S. GAAP measure because it is unable to predict with reasonable certainty the ultimate outcome of certain significant items that affect these metrics such as domestic and international economic, political, legislative, regulatory and legal actions. In addition, certain economic conditions, such as recessionary trends, inflation, interest and monetary exchange rates, government fiscal policies and changes in the prices of certain key raw materials, can have a significant effect on operations and are difficult to predict with certainty.
These non-GAAP financial measures should be considered supplemental in nature and should not be construed as more significant than comparable measures defined by U.S. GAAP. Limitations associated with the use of these non-GAAP financial measures include that these measures do not present all of the amounts associated with our results as determined in accordance with U.S. GAAP. The non-GAAP financial measures provided are used by Ashland management and may not be determined in a manner consistent with the methodologies used by other companies. EBITDA and Adjusted EBITDA provide a supplemental presentation of Ashland’s operating performance on a consolidated and reportable segment basis. Adjusted EBITDA generally includes adjustments for items that impact comparability between periods. In addition, certain financial covenants related to Ashland’s 2022 Credit Agreement are based on similar non-GAAP financial measures and are defined further in the sections that reference this metric.
EBITDA and Adjusted EBITDA
EBITDA totaled income of $100 million and $74 million for the three months ended March 31, 2025 and 2024, respectively, and loss of $30 million and income of $109 million for the six months ended March 31, 2025 and 2024, respectively. EBITDA and Adjusted EBITDA results in the table below have been prepared to illustrate the ongoing effects of Ashland’s operations, which exclude certain key items previously described. Management believes the use of such non-GAAP measures on a consolidated and reportable segment basis assists investors in understanding the ongoing operating performance by presenting the financial results between periods on a more comparable basis.
These operating key items for the applicable periods are summarized as follows:
• Avoca business impairment and sale – During March 2025, Ashland sold substantially all of the net assets of its Avoca business. As a result, Ashland recorded an impairment charge and gain on sale within the income (loss) on acquisitions and divestitures, net caption of the Statements of Condensed Consolidated Comprehensive Income (Loss) for the three and six months ended March 31, 2025. See Note B of the Notes to the Condensed Consolidated Financial Statements for more information;
• Accelerated depreciation – As a result of product line optimization activities at a Life Sciences manufacturing plant and two Specialty Additives manufacturing plants, Ashland recorded accelerated depreciation due to changes in the expected useful life of certain property, plant and equipment during the three and six months ended March 31, 2025 and 2024. See Note D of the Notes to the Condensed Consolidated Financial Statements for more information;
• Restructuring, separation and other costs – Ashland periodically implements company-wide and targeted cost reduction programs related to acquisitions, divestitures and other cost reduction programs in order to enhance profitability through streamlined operations and an improved overall cost structure. Ashland often incurs severance, facility and integration costs associated with these programs. See Note D of the Notes to the Condensed Consolidated Financial Statements for further information on the restructuring activities;
• Other plant optimization costs – During the three and six months ended March 31, 2025 and 2024, Ashland incurred inventory adjustments and production costs associated with product line optimization actions;
• Environmental reserve adjustments – Ashland is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively environmental remediation) at multiple locations. As a result of these activities, Ashland recorded adjustments during each year to its environmental liabilities and receivables primarily related to previously
40
divested businesses or non-operational sites. See Note L of the Notes to the Condensed Consolidated Financial Statements for more information;
• Argentina foreign currency devaluation – Following the enactment by the Argentina government of a 50% peso devaluation against the dollar, Ashland recorded a currency devaluation charge within the selling, general and administrative expense caption of the Statement of Condensed Consolidated Comprehensive Income (Loss) for the six months ended March 31, 2024;
• Held for sale depreciation and amortization – Represents the depreciation and amortization for the Avoca business assets during the three and six months ended March 31, 2025. See Note B of the Notes to the Condensed Consolidated Financial Statements for more information; and
• Income on divestitures, net – Ashland recorded income of $11 million during the three and six months ended March 31, 2025. The income was related to the pre-tax gains in connection with the sale of a land property. See Note B of the Notes to Condensed Consolidated Financial Statements for more information.
Non-operating key items affecting EBITDA
During the current and prior years, there were certain key items that were not included in operating income (loss) but were excluded to arrive at Adjusted EBITDA. These non-operating key items for the applicable periods are summarized as follows:
• Loss on pension plan remeasurements – During the six months ended March 31, 2025, Ashland recognized a curtailment loss for pension plan remeasurement for defined benefit pension plan. See Note K of the Notes to the Condensed Consolidated Financial Statements for more information.
Three months ended
Six months ended
March 31
March 31
(In millions)
2025
2024
2025
2024
Net income (loss)
$
31
$
120
$
(135
)
$
147
Income tax expense (benefit)
9
(104
)
(34
)
(128
)
Net interest and other expense (income)
11
2
39
(21
)
Depreciation and amortization (a)
49
56
100
111
EBITDA
100
74
(30
)
109
Loss (income) from discontinued operations, net of income taxes
(1
)
1
(1
)
2
Key items included in EBITDA:
Avoca business impairment and sale
(8
)
—
175
—
Accelerated depreciation
13
27
13
49
Restructuring, separation and other costs
8
20
11
24
Other plant optimization costs
6
1
9
1
Environmental reserve adjustments
2
3
3
7
Loss on pension plan remeasurements
—
—
1
—
Argentina currency devaluation impact
—
—
—
5
Held for sale depreciation and amortization
(2
)
—
(2
)
—
Income on divestitures, net
(10
)
—
(10
)
—
Total key items included in EBITDA
9
51
200
86
Adjusted EBITDA
$
108
$
126
$
169
$
197
Total key items included in EBITDA
$
9
$
51
$
200
$
86
Unrealized losses (gains) on securities
(3
)
(9
)
14
(39
)
Total key items, before tax
$
6
$
42
$
214
$
47
(a) Depreciation and amortization excludes accelerated depreciation of $13 million for Life Sciences for both the three and six months ended March 31, 2025, and $27 million and $49 for Specialty Additives for the three and six months ended March 31, 2024, respectively, which is included as a key item within this table as a component of Adjusted EBITDA. Depreciation and amortization includes $2 million for Personal Care associated with the Avoca business assets for both the three and six months ended March 31, 2025, which is included as a key item within this table as a component of Adjusted EBITDA.
41
Diluted EPS and Adjusted Diluted EPS
The following table reflects the U.S. GAAP calculation for the income (loss) from continuing operations adjusted for the cumulative diluted EPS effect for key items after tax that have been identified in the Adjusted EBITDA table in the previous section. Key items are defined as the financial effects from significant transactions that may have caused short-term fluctuations in net income (loss) and/or operating income (loss) which Ashland believes do not accurately reflect Ashland’s underlying business performance and trends. The Adjusted Diluted EPS for the income (loss) from continuing operations in the following table has been prepared to illustrate the ongoing effects of Ashland’s operations. Management believes investors and analysts use this financial measure in assessing Ashland's business performance and that presenting this non-GAAP financial measure on a consolidated basis assists investors in better understanding Ashland’s ongoing business performance and enhances their ability to compare period-to-period financial results.
In addition to the operating key items previously described, additional non-operating key items for the applicable periods are summarized as follows:
• Unrealized losses (gains) on securities – represents losses (gains) recognized on restricted investments related to the Asbestos trust and Environmental trust for each period. See Note E of the Notes to Condensed Consolidated Financial Statements for more information;
• Uncertain tax positions – represents the impact from the settlement of uncertain tax positions with various tax authorities for the three and six months ended March 31, 2025 and 2024; and
• Other and tax reform related activity – primarily represents tax specific key items associated with final tax regulations and tax reform related activity for the three and six months ended March 31, 2025 and 2024.
Three months ended
Six months ended
March 31
March 31
2025
2024
2025
2024
Diluted EPS from continuing operations (as reported)
$
0.63
$
2.40
$
(2.91
)
$
2.92
Key items, before tax:
Avoca business impairment and sale
(0.17
)
—
3.73
—
Accelerated depreciation
0.28
0.55
0.28
0.96
Unrealized losses (gains) on securities
(0.06
)
(0.18
)
0.31
(0.76
)
Restructuring, separation and other costs
0.17
0.39
0.23
0.47
Other plant optimization costs
0.13
0.02
0.19
0.02
Environmental reserve adjustments
0.04
0.06
0.06
0.14
Loss on pension plan remeasurements
—
—
0.02
—
Argentina currency devaluation impact
—
—
—
0.10
Held for sale depreciation and amortization
(0.04
)
—
(0.04
)
—
Income on divestitures, net
(0.21
)
—
(0.21
)
—
Key items, before tax
0.14
0.84
4.57
0.93
Tax effect of key items (a)
(0.04
)
(0.20
)
(1.11
)
(0.23
)
Key items, after tax
0.10
0.64
3.46
0.70
Tax specific key items:
Uncertain tax positions
(0.06
)
—
(0.08
)
—
Other and tax reform related activity
0.04
(2.07
)
0.23
(2.54
)
Tax specific key items (b)
(0.02
)
(2.07
)
0.15
(2.54
)
Total key items
0.08
(1.43
)
3.61
(1.84
)
Adjusted Diluted EPS from Continuing Operations (non-GAAP)
$
0.71
$
0.97
$
0.70
$
1.08
Amortization expense adjustment (net of tax) (c)
$
0.28
$
0.30
$
0.56
$
0.63
Adjusted Diluted EPS from Continuing Operations (non-GAAP) Excluding Intangibles Amortization Expense
$
0.99
$
1.27
$
1.26
$
1.71
(a) Represents the diluted EPS impact from the tax effect of the key items that are identified above.
(b) Represents the diluted EPS impact from tax specific financial transactions, tax law changes or other matters that fall within the definition of tax specific key items. For additional explanation of these tax specific key items, see the income tax expense (benefit) discussion within the Statements of Condensed Consolidated Comprehensive Income (Loss) caption review section above.
(c) Amortization expense adjustment (net of tax) tax rates were 21% for both the three and six months ended March 31, 2025, and 20% for both the three and six months ended March 31, 2024.
42
RESULTS OF OPERATIONS – REPORTABLE SEGMENT REVIEW
Ashland’s reportable segments include Life Sciences, Personal Care, Specialty Additives, and Intermediates. Unallocated and Other includes corporate governance activities and certain legacy matters.
Results of Ashland’s reportable segments are presented based on its management and internal accounting structure. The structure is specific to Ashland; therefore, the financial results of Ashland’s reportable segments are not necessarily comparable with similar information for other companies. Ashland allocates all significant costs to its reportable segments except for certain significant company-wide restructuring activities, certain corporate governance costs and other costs or activities that relate to former businesses that Ashland no longer operates. The service cost component of pension and other postretirement benefits costs is allocated to each reportable segment on a ratable basis; while the remaining components of pension and other postretirement benefits costs are recorded within the other net periodic benefit loss caption on the Statements of Condensed Consolidated Comprehensive Income (Loss). Ashland refines its expense allocation methodologies to the reportable segments from time to time as internal accounting practices are improved, more refined information becomes available and the industry or market changes. Significant revisions to Ashland’s methodologies are adjusted for all segments on a retrospective basis.
43
The following table discloses sales, operating income (loss), depreciation and amortization and EBITDA by reportable segment:
Three months ended
Six months ended
March 31
March 31
(In millions - unaudited)
2025
2024
Change
2025
2024
Change
SALES
Life Sciences
$
172
$
222
$
(50
)
$
306
$
422
$
(116
)
Personal Care
146
169
(23
)
279
298
(19
)
Specialty Additives
134
157
(23
)
249
279
(30
)
Intermediates
37
40
(3
)
71
73
(2
)
Intersegment sales (a)
(10
)
(13
)
3
(21
)
(24
)
3
$
479
$
575
$
(96
)
$
884
$
1,048
$
(164
)
OPERATING INCOME (LOSS)
Life Sciences
$
28
$
50
$
(22
)
$
42
$
82
$
(40
)
Personal Care
28
25
3
39
28
11
Specialty Additives
7
(18
)
25
2
(50
)
52
Intermediates
(1
)
9
(10
)
2
16
(14
)
Unallocated and other (b)
(11
)
(45
)
34
(213
)
(72
)
(141
)
$
51
$
21
$
30
$
(128
)
$
4
$
(132
)
DEPRECIATION EXPENSE
Life Sciences (c)
$
22
$
11
$
11
$
31
$
20
$
11
Personal Care
7
9
(2
)
15
17
(2
)
Specialty Additives (d)
13
40
(27
)
27
77
(50
)
Intermediates
3
3
—
6
6
—
$
45
$
63
$
(18
)
$
79
$
120
$
(41
)
AMORTIZATION EXPENSE
Life Sciences
$
4
$
5
$
(1
)
$
8
$
12
$
(4
)
Personal Care
8
11
(3
)
19
22
(3
)
Specialty Additives
3
4
(1
)
5
6
(1
)
Intermediates
—
—
—
—
—
—
$
15
$
20
$
(5
)
$
32
$
40
$
(8
)
EBITDA (e)
Life Sciences
$
54
$
66
$
(12
)
$
81
$
114
$
(33
)
Personal Care
43
45
(2
)
73
67
6
Specialty Additives
23
26
(3
)
34
33
1
Intermediates
2
12
(10
)
8
22
(14
)
Unallocated and other
(11
)
(45
)
34
(213
)
(72
)
(141
)
$
111
$
104
$
7
$
(17
)
$
164
$
(181
)
(a) Intersegment sales from Intermediates are accounted for at prices that approximate fair value. All other intersegment sales are accounted for at cost.
(b) Includes a $8 million gain on sale for the three and six months ended March 31, 2025 and a $183 million impairment charge for the six months ended March 31, 2025, both related to the divestiture of the Avoca business within the income (loss) on acquisitions and divestitures, net caption of the Statements of Condensed Consolidated Income (Loss).
(c) Depreciation includes accelerated depreciation of $13 million for Life Sciences for the three and six months ended March 31, 2025.
(d) Depreciation includes accelerated depreciation of $27 million and $49 million for Specialty Additives for the three and six months ended March 31, 2024, respectively.
(e) Excludes income (loss) from discontinued operations and other net periodic benefit loss. See the Statements of Condensed Consolidated Comprehensive Income (Loss) for applicable amounts excluded.
44
Life Sciences
Life Sciences is comprised of pharmaceuticals, nutrition, agricultural chemicals, diagnostic films (formerly known as advanced materials) and fine chemicals. Pharmaceutical solutions include controlled release polymers, disintegrants, tablet coating, thickeners, solubilizers, and tablet binders. Nutrition solutions include thickeners, stabilizers, emulsifiers and additives for enhancing mouthfeel, controlling moisture migration, reducing oil uptake and binding structured foods. Customers include pharmaceutical, food, beverage, hospitals and radiologists and industrial manufacturers. The Nutraceuticals business was sold in August 2024.
The following table provides a reconciliation of the change in sales for the Life Sciences reportable segment.
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Sales change
Divestiture
$
(31
)
$
(70
)
Volume
(9
)
(32
)
Price/mix
(7
)
(11
)
Foreign Currency
(3
)
(3
)
$
(50
)
$
(116
)
The following table provides a reconciliation of the change in operating income for the Life Sciences reportable segment.
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Operating income change
Cost
$
(10
)
$
(11
)
Price/mix
(8
)
(12
)
Divestiture
(2
)
(7
)
Volume
(1
)
(9
)
Foreign Currency
(1
)
(1
)
$
(22
)
$
(40
)
EBITDA and Adjusted EBITDA reconciliation
The following EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Life Sciences. The key items for the three and six months ended March 31, 2025 were $13 million and $2 million related to accelerated depreciation and other product line optimization activities associated with a Life Sciences manufacturing plant. Life Sciences had no key items for the three and six months ended March 31, 2024.
Life Sciences
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Operating income
$
28
$
50
$
(22
)
$
42
$
82
$
(40
)
Depreciation and amortization (a)
13
16
(3
)
26
32
(6
)
EBITDA
$
41
$
66
(25
)
$
68
$
114
(46
)
Accelerated depreciation
13
—
13
13
—
13
Other plant optimization costs
2
—
2
2
—
2
Adjusted EBITDA
$
56
$
66
$
(10
)
$
83
$
114
$
(31
)
Operating income as a percent of sales
16.3
%
22.5
%
-620 bps
13.7
%
19.4
%
-570 bps
Adjusted EBITDA as a percent of sales
32.6
%
29.7
%
290 bps
27.1
%
27.0
%
10 bps
(a) Depreciation and amortization excludes accelerated depreciation of $13 million for Life Sciences for the three and six months ended March 31, 2025, which is included as a key item within this table as a component of Adjusted EBITDA.
45
Three months ended March 31, 2025 compared to three months ended March 31, 2024
Life Sciences' sales, operating income and Adjusted EBITDA decreased in the current quarter due to the divestiture of the Nutraceuticals business, higher costs, including the effects of portfolio optimization activities and accelerated depreciation, unfavorable pricing, lower volume and unfavorable foreign currency exchange.
Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date
Life Sciences' sales, operating income and Adjusted EBITDA decreased in the current period due to the divestiture of the Nutraceuticals business, lower volume, higher costs, including the effects of portfolio optimization activities and accelerated depreciation, unfavorable price/mix actions and unfavorable foreign currency exchange.
Personal Care
Personal Care is comprised of biofunctionals, microbial protectants (preservatives), skin care, sun care, oral care, hair care and household solutions. These businesses have a broad range of natural, nature-derived, biodegradable, and high-performance ingredients for customer driven solutions to help protect, renew, moisturize and revitalize skin and hair, and provide solutions for toothpastes, mouth washes and rinses, denture cleaning and care for teeth. Personal Care supplies nature-derived rheology ingredients, biodegradable surface wetting agents, performance encapsulates, and specialty polymers for household, industrial and institutional cleaning products. Customers include formulators at large multinational branded consumer products companies and smaller, independent boutique companies. The Avoca business was sold in March 2025.
The following table provides a reconciliation of the change in sales for the Personal Care reportable segment.
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Sales change
Divestiture
$
(10
)
$
(10
)
Volume
(10
)
(5
)
Foreign Currency
(2
)
(2
)
Price/mix
(1
)
(2
)
$
(23
)
$
(19
)
The following table provides a reconciliation of the change in operating income for the Personal Care reportable segment.
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Operating income change
Cost
$
8
$
11
Volume
(3
)
—
Price/mix
(2
)
(2
)
Divestiture (site closure)
—
2
$
3
$
11
46
EBITDA and Adjusted EBITDA reconciliation
The following EBITDA and Adjusted EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Personal Care. The key items for Personal Care for the three and six months ended March 31, 2025 related to $1 million and $2 million of plant optimization costs, respectively and $2 million from held for sale depreciation and amortization. Personal Care had no key items for the three and six months ended March 31, 2024.
Personal Care
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Operating income
$
28
$
25
$
3
$
39
$
28
$
11
Depreciation and amortization
17
20
(3
)
36
39
(3
)
EBITDA
$
45
$
45
—
$
75
$
67
8
Held for sale depreciation and amortization
(2
)
—
(2
)
(2
)
—
(2
)
Other plant optimization costs
1
—
1
2
—
2
Adjusted EBITDA
$
44
$
45
$
(1
)
$
75
$
67
$
8
Operating income as a percent of sales
19.2
%
14.8
%
440 bps
14.0
%
9.4
%
460 bps
Adjusted EBITDA as a percent of sales
30.1
%
26.6
%
350 bps
26.9
%
22.5
%
440 bps
a) Depreciation and amortization includes $2 million for Personal Care associated with the Avoca business assets for the three and six months ended March 31, 2025, which is included as a key item within this table as a component of Adjusted EBITDA.
Three months ended March 31, 2025 compared to three months ended March 31, 2024
Personal Care's sales decreased in the current quarter primarily due to lower volume, including the divestiture of the Avoca business and other portfolio optimization actions, while operating income increased mainly due to lower costs partially offset by unfavorable price/mix. Adjusted EBITDA remained relatively consistent compared to the prior quarter.
Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date
Personal Care's sales decreased in the current period primarily due to lower volume, including the divestiture of the Avoca business and other portfolio optimization actions, while operating income and Adjusted EBITDA increased primarily due to lower costs partially offset by unfavorable price/mix.
Specialty Additives
Specialty Additives is comprised of rheology- and performance-enhancing additives serving the architectural coatings, construction, energy, automotive and various industrial markets. Solutions include coatings additives for architectural paints, finishes and lacquers, cement- and gypsum- based dry mortars, ready-mixed joint compounds, synthetic plasters for commercial and residential construction, and specialty materials for industrial applications. Products include rheology modifiers (cellulosic and associative thickeners), foam control agents, surfactants and wetting agents, pH neutralizers, advanced ceramics used in catalytic converters, and environmental filters, ingredients that aid the manufacturing process of ceramic capacitors, plasma display panels and solar cells, ingredients for textile printing, thermoplastic metals and alloys for welding. Products help improve desired functional outcomes through rheology modification and control, water retention, workability, adhesive strength, binding power, film formation, deposition and suspension and emulsification. Customers include global paint manufacturers, electronics and automotive manufacturers, textile mills, the construction industry, and welders.
The following table provides a reconciliation of the change in sales for the Specialty Additives reportable segment.
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Sales change
Volume
$
(18
)
$
(23
)
Price/mix
(3
)
(5
)
Foreign Currency
(2
)
(2
)
$
(23
)
$
(30
)
47
The following table provides a reconciliation of the change in operating loss for the Specialty Additives reportable segment.
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Operating loss change
Costs
$
28
$
57
Volume
(3
)
(4
)
Price/mix
—
(1
)
$
25
$
52
EBITDA and Adjusted EBITDA reconciliation
The following EBITDA and Adjusted EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Specialty Additives. The key items during the three and six months ended March 31, 2025 related to $3 million and $5 million of other plant optimization costs, respectively. The key items during the three months ended March 31, 2024 related to $27 million of accelerated depreciation and $1 million of other plant optimization costs. The key items during the six months ended March 31, 2024 related to $49 million of accelerated depreciation and $1 million of other plant optimization costs.
Specialty Additives
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Operating income (loss)
$
7
$
(18
)
$
25
$
2
$
(50
)
$
52
Depreciation and amortization (a)
16
17
(1
)
32
34
(2
)
EBITDA
23
(1
)
24
34
(16
)
50
Accelerated depreciation
—
27
(27
)
—
49
(49
)
Other plant optimization costs
3
1
2
5
1
4
Adjusted EBITDA
$
26
$
27
$
(1
)
$
39
$
34
$
5
Operating income as a percent of sales
5.2
%
-11.5
%
1670 bps
0.8
%
-17.9
%
1870 bps
Adjusted EBITDA as a percent of sales
19.4
%
17.2
%
220 bps
15.7
%
12.2
%
350 bps
(b) Depreciation and amortization excludes accelerated depreciation of $27 million and $49 million for Specialty Additives for the three and six months ended March 31, 2024, which is included as a key item within this table as a component of Adjusted EBITDA.
48
Three months ended March 31, 2025 compared to three months ended March 31, 2024
Specialty Additives sales for the quarter decreased primarily as a result of lower volume and unfavorable pricing while operating income increased primarily due to lower costs as a result of higher production volumes when compared to the inventory corrective actions in the prior year which included accelerated depreciation associated with portfolio optimization actions. Adjusted EBITDA remained relatively consistent compared to the prior quarter.
Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date
Specialty Additives sales for the current period decreased primarily due to lower volume and unfavorable pricing while operating income and Adjusted EBITDA increased mainly due to lower costs as a result of higher production volumes when compared to the inventory corrective actions in the prior year which included accelerated depreciation associated with portfolio optimization actions.
Intermediates
Intermediates is comprised of the production of 1,4 butanediol (BDO) and related derivatives, including nmethylpyrrolidone. These products are used as chemical intermediates in the production of engineering polymers and polyurethanes, and as specialty process solvents in a wide array of applications including electronics, pharmaceuticals, water filtration membranes and more. BDO is also supplied to Life Sciences, Personal Care, and Specialty Additives for use as a raw material.
The following table provides a reconciliation of the change in sales for the Intermediates reportable segment.
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Sales change
Price/mix
$
(4
)
$
(8
)
Foreign Currency
(1
)
—
Volume
2
6
$
(3
)
$
(2
)
The following table provides a reconciliation of the change in operating income for the Intermediates reportable segment.
Three months ended
Six months ended
(In millions)
March 31, 2025
March 31, 2025
Operating income change
Price/mix
$
(6
)
$
(18
)
Cost
(5
)
1
Volume
1
3
$
(10
)
$
(14
)
EBITDA reconciliation
The following EBITDA presentation is provided as a means to enhance the understanding of financial measurements that Ashland has internally determined to be relevant measures of comparison for the results of Intermediates. Intermediates had no key items for the three and six months ended March 31, 2025 or 2024.
Intermediates
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Operating income
$
(1
)
$
9
$
(10
)
$
2
$
16
$
(14
)
Depreciation and amortization
3
3
—
6
6
—
EBITDA
$
2
$
12
$
(10
)
$
8
$
22
$
(14
)
Operating income as a percent of sales
-2.7
%
22.5
%
-2520 bps
2.8
%
21.9
%
-1910 bps
EBITDA as a percent of sales
5.4
%
30.0
%
-2460 bps
11.3
%
30.1
%
-1880 bps
49
Three months ended March 31, 2025 compared to three months ended March 31, 2024
Intermediates' sales, operating income and EBITDA decreased primarily due to unfavorable price/mix and higher costs.
Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date
Intermediates' sales, operating income and EBITDA for the current period decreased primarily due to unfavorable price/mix, partially offset by higher volume and lower costs.
Unallocated and other
The following table summarizes the key components of the Unallocated and other’s operating loss between the three and six months ended March 31, 2025 and 2024.
Unallocated and other
Three months ended March 31
Six months ended March 31
(In millions)
2025
2024
Change
2025
2024
Change
Restructuring activities
$
(8
)
$
(20
)
$
12
$
(11
)
$
(24
)
$
13
Environmental expenses
(2
)
(3
)
1
(3
)
(7
)
4
Income (loss) on acquisitions and divestitures, net
18
—
18
(165
)
(2
)
(163
)
Argentina currency devaluation impact
—
—
—
—
(5
)
5
Other expenses (primarily governance and legacy expenses)
(19
)
(22
)
3
(34
)
(34
)
—
Total expense
$
(11
)
$
(45
)
$
34
$
(213
)
$
(72
)
$
(141
)
Three months ended March 31, 2025 compared to three months ended March 31, 2024
Unallocated and other recorded expense of $11 million and $45 million for the three months ended March 31, 2025 and 2024, respectively. The current and prior year quarter included expense of $8 million and $20 million, respectively, for restructuring activities mainly comprised of severance, lease abandonment and other restructuring costs related to company-wide cost reduction programs during the current and prior year quarter, respectively.
The current quarter and prior year quarter included $2 million and $3 million for environmental expenses, respectively.
The current quarter also includes gains of $18 million from acquisitions and divestitures primarily related to the sale of the Avoca business and excess corporate land property. See Note B of the Notes to the Condensed Consolidated Financial Statements for more information.
Other expenses between periods were driven by changes in governance and legacy expenses primarily associated with fluctuations in foreign currency, deferred compensation and variable incentive compensation.
Fiscal 2025 year-to-date compared to fiscal 2024 year-to-date
Unallocated and other recorded expense of $213 million and $72 million for the six months ended March 31, 2025 and 2024, respectively. The current and prior year period included expense of $11 million and $24 million, respectively, for restructuring activities mainly comprised of severance, lease abandonment and other restructuring costs related to company-wide cost reduction programs during the current and prior year period, respectively.
The current and prior year period included $3 million and $7 million for environmental expenses, respectively.
The current year period included a loss on divestiture of $165 million, primarily related to the $183 million impairment of the Avoca business during the December quarter, $8 million pre-tax gain on the final sale of the Avoca business, and $11 million gain on the sale of a property, compared to a loss of $2 million on property sale during the prior year period.
The prior year period also included expense of $5 million related to the devaluation of the currency in Argentina during the prior year. See Note B of the Notes to the Condensed Consolidated Financial Statements for more information.
50
Other expenses between periods were driven by changes in governance and legacy expenses primarily associated with fluctuations in foreign currency, deferred compensation and variable incentive compensation, including stock compensation expense in the current period.
FINANCIAL POSITION
Liquidity
Ashland believes that cash flow from operations, availability under existing credit facilities and arrangements, current cash and investment balances and the ability to obtain other financing, if necessary, will provide adequate cash funds for Ashland’s foreseeable working capital needs, capital expenditures at existing facilities, dividend payments and debt service obligations. Ashland’s cash requirements are subject to change as business conditions warrant and opportunities arise. The timing and size of any new business ventures or acquisitions that the Company may complete may also impact its cash requirements.
During April 2024, Ashland authorized a financing program offered through JP Morgan and Taulia Alliance. Under this program, JP Morgan and its affiliates may purchase certain confirmed receivables directly from suppliers pursuant to the terms of a separate arrangement entered into between JPMorgan and Taulia Alliance and such Suppliers. There were no changes to Ashland's standard payment terms with its suppliers in connection with this program. Ashland provides no guarantees to JP Morgan and Taulia Alliance under this program. As of March 31, 2025, the program is still in implementation with no active supplier participation.
Cash flows
Ashland’s cash flows from operating, investing and financing activities, as reflected in the Statements of Condensed Consolidated Cash Flows, are summarized as follows:
Six months ended
March 31
(In millions)
2025
2024
Cash provided (used) by:
Operating activities from continuing operations
$
(21
)
$
255
Investing activities from continuing operations
(1
)
(49
)
Financing activities from continuing operations
(91
)
(159
)
Discontinued operations
(18
)
(27
)
Effect of currency exchange rate changes on cash and cash equivalents
(1
)
2
Net increase (decrease) in cash and cash equivalents
$
(132
)
$
22
Cash and cash equivalents decreased $132 million for the six months ended March 31, 2025 compared to an increase of $22 million for the six months ended March 31, 2024.
The $132 million decrease for the six months ended March 31, 2025 was primarily driven by payment of cash dividends, additions to property, plant and equipment and stock repurchase activity of $38 million, $44 million and $100 million, respectively. Operating cash flows from continuing operations were outflows of $21 million, while discontinued operations cash flows were outflows of $18 million. These outflows were partially offset by inflows from short-term debt, proceeds from the sale of Avoca, and proceeds from the sale of a land proprerty of $50 million, $16 million and $11 million, respectively.
The $22 million increase for the six months ended March 31, 2024 was primarily driven by operating cash inflows from continuing operations of $255 million partially offset by payment of cash dividends, additions to property, plant and equipment, and stock repurchase activity of $39 million, $70 million, and $100 million, respectively. Discontinued operations cash flows were outflows of $27 million.
The change in cash flows from operating activities from continuing operations was primarily driven by U.S. and Foreign Accounts Receivable Sales Program activity, $139 million negative impact between periods, as well as unfavorable working capital, primarily related to changes in inventory and incentive compensation payouts between periods.
See the Statements of Condensed Consolidated Cash Flows for additional details.
51
Free Cash Flow and other liquidity resources
The following represents Ashland’s calculation of Free Cash Flow and Ongoing Free Cash Flow for the disclosed periods. Free Cash Flow does not reflect adjustments for certain non-discretionary cash flows such as mandatory debt repayments.
Six months ended
March 31
(In millions)
2025
2024
Total cash flows provided (used) by operating activities from continuing operations
$
(21
)
$
255
less:
Additions to property, plant and equipment
(44
)
(70
)
Free Cash Flow
(65
)
185
Cash (inflows) outflows from U.S. Accounts Receivable Sales Program (a)
11
(15
)
Cash inflows from Foreign Accounts Receivable Sales Program (b)
(9
)
(122
)
Restructuring-related payments (c)
17
7
Environmental and related litigation payments (d)
13
15
Ongoing Free Cash Flow
$
(33
)
$
70
Net income (loss)
$
(135
)
$
147
Adjusted EBITDA (e)
$
169
$
197
Operating Cash Flow Conversion (f)
Not meaningful
173
%
Ongoing Free Cash Flow Conversion (g)
-20
%
36
%
(a) Represents activity associated with the U.S. Accounts Receivable Sales Program impacting each period presented.
(b) Represents activity associated with the Foreign Accounts Receivable Sales Program impacting each period presented.
(c) Restructuring payments incurred during each period.
(d) Represents cash outflows associated with environmental and related litigation payments which will be reimbursed by the environmental trust.
(e) See Adjusted EBITDA reconciliation.
(f) Operating Cash Flow Conversion is defined as Cash flows provided by operating activities from continuing operations divided by Net income (loss).
(g) Ongoing Free Cash Flow Conversion is defined as Ongoing Free Cash Flow divided by Adjusted EBITDA.
Working capital (current assets minus current liabilities, excluding long-term debt due within one year) amounted to $612 million and $705 million as of March 31, 2025 and September 30, 2024, respectively. The $93 million decrease in working capital was driven by lower cash due to share repurchases and increased accounts receivable sales primarily related to sales of foreign accounts receivable under the Foreign Accounts Receivable Sales Programs, and an increase in short-term debt, partially offset by an increase in refundable income taxes and lower other payables and accrued expenses and other liabilities. See Note H of the Notes to the Condensed Consolidated Financial Statements for additional information on the Foreign Accounts Receivable Sales Programs. Liquid assets (cash, cash equivalents and accounts receivable) amounted to 85% and 111% of current liabilities as as of March 31, 2025 and September 30, 2024, respectively. The decrease in Ongoing Free Cash Flows was driven by lower Adjusted EBITDA, higher variable compensation payouts and increased inventory reductions in the prior year due to inventory control measures during that period offset by lower additions to property, plant and equipment.
52
The following summary reflects Ashland’s cash, unused borrowing capacity and liquidity as of:
March 31
September 30
(In millions)
2025
2024
Cash and investment securities
Cash and cash equivalents
$
168
$
300
Restricted investments (a)
345
368
Unused borrowing capacity and liquidity
Revolving credit facility
546
596
U.S. Accounts Receivable Sales Program
—
—
Foreign Accounts Receivable Sales Program
—
—
(a) Includes $222 million and $248 million related to the Asbestos trust and $123 million and $120 million related to the Environmental trust as of March 31, 2025 and September 30, 2024, respectively.
The borrowing capacity remaining under the 2022 Credit Agreement was $546 million, which reflects the $550 million undrawn balance of the $600 million Revolving Credit Facility less a reduction of $4 million for letters of credit outstanding at March 31, 2025. In total, Ashland’s available liquidity position, which includes cash and cash equivalents and the revolving credit facility, was $714 million at March 31, 2025, compared to $896 million at September 30, 2024. Ashland had no available liquidity under the U.S. and Foreign Accounts Receivable Sales Programs as of March 31, 2025. Ashland also maintained $345 million of restricted investments to pay for future asbestos claims and environmental remediation and related litigation.
Capital resources
Debt
The following summary reflects Ashland’s debt as of:
March 31
September 30
(In millions)
2025
2024
Short-term debt
$
50
$
—
Long-term debt (less debt issuance cost discounts) (a)
1,336
1,349
Total debt
$
1,386
$
1,349
(a) Includes $11 million and $12 million of debt issuance cost discounts as of March 31, 2025 and September 30, 2024 , respectively.
Debt as a percent of capital employed was 35% and 32% at March 31, 2025 and September 30, 2024, respectively. At March 31, 2025, Ashland’s total debt had an outstanding principal balance of $1,423 million, discounts of $26 million, and debt issuance costs of $11 million. Ashland has no long-term debt (excluding debt issuance costs) maturing within 2025 and 2026, $4 million due in fiscal 2027, $541 million due in 2028, $97 million in 2029, and zero in 2030.
Ashland credit ratings
Ashland’s corporate credit ratings remained unchanged at BB+ by Standard & Poor’s and Ba1 by Moody’s Investor Services. As of March 31, 2025, both Moody’s Investor Services and Standard & Poor's outlook remained at stable. Subsequent changes to these ratings or outlook may have an effect on Ashland’s borrowing rate or ability to access capital markets in the future.
Ashland debt covenant restrictions
Ashland's current credit agreement (the "2022 Credit Agreement") contains usual and customary representations, warranties and affirmative and negative covenants, including financial covenants for leverage and interest coverage ratios, limitations on liens, additional subsidiary indebtedness, restrictions on subsidiary distributions, investments, mergers, sale of assets and restricted payments and other customary limitations. As of March 31, 2025, Ashland is in compliance with all debt agreement covenant restrictions under the 2022 Credit Agreement.
The maximum consolidated net leverage ratio permitted under the 2022 Credit Agreement is 4.0. The 2022 Credit Agreement defines the consolidated net leverage ratio as the ratio of consolidated indebtedness minus unrestricted cash and cash equivalents to consolidated EBITDA (Covenant Adjusted EBITDA) for any measurement period. In
53
general, the 2022 Credit Agreement defines Covenant Adjusted EBITDA as net income (loss) plus consolidated interest charges, taxes, depreciation and amortization expense, fees and expenses related to capital market transactions and proposed or actual acquisitions and divestitures, restructuring and integration charges, noncash stock and equity compensation expense, and any other nonrecurring expenses or losses that do not represent a cash item in such period or any future period; less any noncash gains or other items increasing net income (loss). The computation of Covenant Adjusted EBITDA differs from the calculation of EBITDA and Adjusted EBITDA, which have been reconciled above in the “consolidated review” section. In general, consolidated indebtedness includes debt plus all purchase money indebtedness, banker’s acceptances and bank guaranties, deferred purchase price of property or services, attributable indebtedness and guarantees. At March 31, 2025, Ashland’s calculation of the consolidated net leverage ratio was 2.9.
The minimum required consolidated interest coverage ratio under the 2022 Credit Agreement is 3.0. The 2022 Credit Agreement defines the consolidated interest coverage ratio as the ratio of Covenant Adjusted EBITDA to consolidated interest charges for any measurement period. At March 31, 2025, Ashland’s calculation of the consolidated interest coverage ratio was 7.0.
Any change in Covenant Adjusted EBITDA of $100 million would have an approximate 0.5x effect on the consolidated net leverage ratio and a 1.6x effect on the consolidated interest coverage ratio. The change in consolidated indebtedness of $100 million would affect the consolidated leverage ratio by approximately 0.2x.
Additional capital resources
Total equity
Total equity decreased by $309 million since September 30, 2024 to $2,559 million at March 31, 2025. The decrease of $309 million was due to net loss of $135 million, stock repurchase activity of $101 million (includes $1 million in excise tax), $45 million of deferred translation losses, and dividends of $38 million partially offset by common stock issued of $6 million, $3 million for unrealized gains on commodity hedges and other activity of $1 million.
2023 Stock Repurchase program
On June 28, 2023, Ashland's board of directors authorized a new evergreen $1 billion common share repurchase program (the "2023 Stock Repurchase Program"). The new authorization terminated and replaced the 2022 Stock Repurchase Program, which had $200 million outstanding at the date of termination. As of March 31, 2025, $520 million remained available for repurchase under the 2023 Stock Repurchase Program.
Stock repurchase program agreements
The following table provides the common stock repurchase activity for the three and six months ended March 31, 2025 and 2024:
Three months ended
Six months ended
March 31
March 31
(In millions, except per share data)
2025
2024
2025
2024
Number of shares repurchased
1.50
—
1.50
1.20
Weighted-average price per share (a)
$
64.90
$
—
$
64.90
$
80.78
Aggregate purchase price (a)
$
100
$
—
$
100
$
100
Program
2023 Stock Repurchase Program
NA
2023 Stock Repurchase Program
2023 Stock Repurchase Program
(a) Includes transactions costs.
Stockholder dividends
Ashland paid a dividend of 40.5 cents per share for the first and second quarters of fiscal 2024 and 38.5 cents per share in the first and second quarters of fiscal 2024.
Capital expenditures
Capital expenditures were $44 million for the six months ended March 31, 2025, compared to $70 million for the six months ended March 31, 2024.
54
CRITICAL ACCOUNTING POLICIES
The preparation of Ashland’s Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses, and the disclosures of contingent assets and liabilities. Significant items that are subject to such estimates and assumptions include, but are not limited to, long-lived assets (including goodwill and other intangible assets), income taxes, other liabilities and receivables associated with asbestos litigation and environmental remediation. These accounting policies are discussed in detail in “Management’s Discussion and Analysis – Critical Accounting Policies” in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ significantly from the estimates under different assumptions or conditions. Management has reviewed the estimates affecting these items with the Audit Committee of Ashland’s Board of Directors. No material changes have been made to the valuation techniques during the six months ended March 31, 2025.
OUTLOOK
Tariffs
Ashland recognizes the current economic headwinds and uncertainties created by tariffs and global trade policies. The company is closely monitoring changes in tariff policies and adjusting its strategies to optimize performance. To navigate this evolving landscape, Ashland is focused on maintaining flexible operations and actively managing risks for financial resilience while pursuing growth opportunities.
Key tariff exposures (as of April 30th):
• Raw materials: Ashland has limited direct exposure to US or China tariffs on raw materials due to the company’s localized sourcing strategy. Ashland’s estimated tariff impact for fiscal year 2025 is $3 to $5 million for the second half, modestly increasing to $5 to $7 million annually after mitigation actions;
• US finished goods: The vast majority of Ashland’s US sales are domestically sourced. A small portion is imported from the European Union and mostly benefits from current Annex II exemptions. Ashland is closely monitoring the recently initiated Section 232 investigation to assess potential future impacts. For context, without the current Annex II exemptions, the annual tariff exposure is projected to be $4 to $6 million, and approximately $1 million in fiscal year 2025;
• China finished goods: While most China sales are produced outside the US, approximately $70 million of US-produced China sales, generating company average gross profit, are mostly in scope for tariffs. The primary exposure within these exports is in the Life Sciences and Personal Care segments, with the majority being intercompany transactions. Ashland’s tariff response plan includes measures to offset a significant portion of this business-at-risk. Approximately one-third of Ashland's gross profit is derived from products where the company is the sole supplier. With approximately 90 days of finished goods inventory currently held in China, any potential impact on fiscal year 2025 is anticipated to occur in the fourth quarter;
• Tariff response plan: Ashland is evaluating and executing several mitigation strategies, including optimizing production, sourcing, logistics, intercompany trading strategies, relative competitive positioning, share gain opportunities, customer and vendor negotiations, and pricing actions where appropriate.
Financial Outlook
Ashland is adjusting its full-year fiscal 2025 outlook to reflect a weakening macroeconomic environment that is dampening consumer sentiment and demand globally. This shift is evident in the following key areas:
• Reduced consumer sentiment: growing global macroeconomic and geopolitical uncertainties are negatively impacting consumer confidence, leading to decreased demand from Ashland’s customer base, particularly for architectural coatings;
• Challenging intermediates market: a persistent supply-demand imbalance continues to pressure the intermediates market. Despite ongoing pricing adjustments, overall pricing remains below expectations;
55
• Subdued European demand: while European markets have stabilized at a low level, the anticipated moderate recovery has not yet materialized.
Ashland now anticipates flattish organic sales volume growth for the full fiscal year. This revision reflects the company’s expectation of a positive inflection in organic sales volumes in the second half, led by Life Sciences, which Ashland anticipates will offset the organic sales volume declines experienced in the first half. Year-over-year pricing headwinds are expected to lessen in the second half of the fiscal year as the company moves beyond comparable periods with prior pricing actions.
Excluding the tariff impact detailed earlier above, overall raw material costs are expected to remain generally stable year-over-year. The outlook reflects Ashland’s assessment of the direct financial impact from global trade policies in the second half of fiscal 2025. In response to this evolving demand landscape, Ashland is proactively focusing on its strategic priorities. The completed portfolio optimization initiative and accelerating cost savings programs are expected to enhance business mix and improve profitability throughout the remainder of the fiscal year.
Based on these factors, Ashland now projects full fiscal year sales in the range of $1.825 billion to $1.9 billion and adjusted EBITDA in the range of $400 million to $420 million.
56
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Ashland’s market risk exposure at March 31, 2025 is generally consistent with the types of market risk exposures presented in Ashland’s Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.