Ashland Q1 2025 Earnings Report

Ashland EPS Results

• Actual EPS: $0.28
• Consensus EPS: $0.79
• Beat/Miss: Missed by -$0.51
• One Year Ago EPS: $0.45

Ashland Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $429.04 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Ashland Announcement Details

• Quarter: Q1 2025
• Date: 1/28/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, January 29, 2025
• Conference Call Time: 9:00AM ET

Ashland (NYSE:ASH) provides additives and specialty ingredients in the North and Latin America, Europe, Asia Pacific, and internationally. It operates through Life Sciences, Personal Care, Specialty Additives, and Intermediates segments. The Life Sciences segment offers pharmaceutical solutions, including controlled release polymers, disintegrants, tablet coatings, thickeners, solubilizers, and tablet binders; nutrition solutions, such as thickeners, stabilizers, emulsifiers, and additives; and nutraceutical solutions comprising products for weight management, joint comfort, stomach and intestinal health, sports nutrition, and general wellness, as well as custom formulation, toll processing, and particle engineering solutions. Its Personal Care segment provides a range of nature-based, biodegradable, and performance ingredients; solutions for toothpastes, mouth washes and rinses, denture cleaning, and care for teeth; and household supplies nature-derived rheology ingredients, biodegradable surface wetting agents, performance encapsulates, and specialty polymers. The Specialty Additives segment offers rheology modifiers, foam control agents, surfactants and wetting agents, pH neutralizers, advanced ceramics used in catalytic converters, environmental filters, ingredients for the manufacturing of ceramic capacitors, plasma display panels and solar cells, ingredients for textile printing, thermoplastic metals, and alloys for welding. Its Intermediates segment produces 1,4 butanediol and related derivatives, including n-methylpyrrolidone. It offers its products to customers in a range of consumer and industrial markets, such as architectural coatings, construction, energy, food and beverage, nutraceuticals, personal care, and pharmaceutical. The company was formerly known as Ashland Global Holdings Inc. and changed its name to Ashland Inc. in August 2022. Ashland Inc. was founded in 1924 and is headquartered in Wilmington, Delaware.

Ashland Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good day and thank you for standing by. Welcome to the Ashland Inc. First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

[Operator]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, William Whittaker. Please go ahead.

[William Whitaker, Director of Investor Relations at Ashland]

Hello, everyone, and welcome to Ashland's Q1 fiscal year 2025 earnings conference call and webcast. My name is William Whitaker, Ashland Investor Relations. Joining me on the call today are Guillermo Novo, Ashland Chair and CEO Kevin Willis, Ashland's CFO and our business unit leaders, Alessandra Pessin, Jim Minicucci and Tyler Pessares. Ashland released results for the quarter ended December 31, 2024 at approximately 5 p. M.

[William Whitaker, Director of Investor Relations at Ashland]

Eastern Time yesterday, January 28. The news release issued last night was furnished to the SEC in a Form 8 ks. During today's call, we will reference slides that are currently being webcast on our website, ashland.com, under the Investor Relations section. We encourage you to follow along with the webcast during the call. Please turn to Slide 2.

[William Whitaker, Director of Investor Relations at Ashland]

As a reminder, during today's call, we will be making forward looking statements on several matters, including our financial outlook for full year fiscal 2025. These forward looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections. We believe any such statements are based on reasonable assumptions, but cannot assure that such expectations will be achieved. Please refer to Slide 2 of the presentation for an explanation of those risks and uncertainties and the limits applicable to forward looking statements. You can also review our most recent Form 10 ks under Item 1A for a comprehensive discussion of the risk factors impacting our business.

[William Whitaker, Director of Investor Relations at Ashland]

Please also note that we'll be referring to certain actual and projected financial metrics of Ashland on an adjusted basis, which are non GAAP financial measures. We will refer to these measures as adjusted and present them to supplement your understanding and assessment of the financial performance of our ongoing business. Non GAAP financial measures should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP. The most directly comparable GAAP measures as well as reconciliation of the non GAAP measures to those GAAP measures are available on our website and in the appendix of today's slide presentation. Please turn to Slide 3.

[William Whitaker, Director of Investor Relations at Ashland]

Irma will begin the call this morning with an overview of Ashland's performance for the quarter. Next, Kevin will cover the financial details for the quarter and our business unit leaders will share insights into their respective segments. Irma will then provide an update on Ashland's strategic priorities and outlook. Following brief closing comments, we will open the line for your questions. To kick things off, I'll hand the call over to Guillermo for his opening remarks.

[William Whitaker, Director of Investor Relations at Ashland]

Guillermo?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Thank you, William, and good morning to everyone. We appreciate you joining us today. I'll focus my update on 3 topics. First, I'll provide an overview of our Q1 performance, which generally align with the outlook we shared with you at last month's Strategy Day. While we saw some softening in European demand and inventory control actions from some of our pharma customers, the rest of the business performed generally as expected.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Maintenance shutdowns were proactively shifted to Q1 to ensure we can adapt quickly and effectively to changes in trade policy environment. 2nd, I'll reiterate our key priorities and our long term financial commitment we outlined at our recent strategy day. The team is making progress and we're confident that our portfolio of value creating opportunities position us well for success. We're committed to providing regular and transparent updates on our progress going forward. 3rd, we'll provide an update to our guidance for fiscal 2025.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We're proactively addressing anticipated challenges like soft demand in China and potential headwinds in Europe by taking decisive actions to deliver on our commitments. There are no significant changes to our underlying assumptions at this time. Our strong progress on self help initiatives reinforces our confidence in achieving our full year financial targets. We'll share with you more details later, but we're reaffirming our full year outlook. Please turn to Slide 5.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Let's begin with a recap of our Q1 performance. Customer demand was generally consistent with our update from last month's Strategy Day. We noted some additional softness in Europe across our business units. Although demand and overcapacity in China has increased competition, Overall pricing and volumes remain in line with our expectations. And pharma customers actively reduced their inventory at year end.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

The rest of the businesses performed largely as expected. Our Q1 sales were $405,000,000 down 14% from the prior year. This decline was primarily driven by portfolio improvement actions including the new pharmaceutical divestiture. Adjusting for these actions, revenue decreased 3%. Organic sales volumes were relatively steady, down 1% year over year.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

As I mentioned, the overall pricing environment has been largely consistent with our expectation. Pricing was generally stable sequentially and down 2% year over year. Now let's turn to key operational decisions we made in Q1. We proactively moved several plant maintenance turnarounds into the Q1. Given the heightened uncertainty on policy transitions, this move enables us greater operational flexibility going forward.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

The turnarounds were planned for the year, but this proactive measure was a key factor in the lower than expected Q1 absorption. The turnarounds were slightly extended and incurred about $5,000,000 in unanticipated EBITDA due to lower absorption and higher maintenance costs. We expect to make up the lower absorption during the full year. Overall, adjusted EBITDA decreased to $61,000,000 down 13% year over year. Key drivers for the decline include lost gross profit from the sale of nutraceuticals and stranded costs from the portfolio optimization actions.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We're actively pursuing restructuring and manufacturing optimization initiatives to more than offset the impact and improve our overall performance, which I'll discuss later in the call. Excluding portfolio optimization, adjusted EBITDA was down 2% year over year. Finally, a quick update on our portfolio. We recently announced an agreement to sell our Avoca business with the transaction expected to close in the March quarter. By divesting Avoca and completing our $30,000,000 restructuring, we will have finalized our strategic transformation, enabling us to prioritize core businesses and drive profits over.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Please turn to Slide 6. And now I'll summarize the performance of the individual segments. Starting with a review of the organic sales volume. We generated growth in personal care, specialty additives and intermediates up mid single digits in total. Along with solid organic volume growth in several areas, we made strategic portfolio choices to optimize our business, which impacted overall sales.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We also experienced softer Life Science volume and lower overall pricing, primarily due to the 2024 carryover impact. It's worth noting that our EBITDA comparisons include $8,000,000 of portfolio optimization impact, which we plan to address with restructurings. This roughly had a 200 basis points impact to EBITDA margins in the quarter. With this impact and the turnarounds, overall EBITDA margins remain consistent year over year. Looking ahead, margins are expected to improve significantly throughout the year as our plants are now well positioned and cost savings are being realized.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

And now to the business units. Life Science navigated a challenging quarter, particularly in pharma. In EMEA, softer markets and customer inventory actions were a key contributor to the high single digit decline in pharma sales volumes. While pharma competitive intensity remains elevated, overall pricing trends were in line with our expectations following contract renewals. The team is focused on share gain initiatives globally to mitigate the impact of softer demand in Europe.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We also made great progress in our strategic priorities of execute, globalize and innovate, which we'll discuss later. Personal Care delivered another strong quarter achieving its 4th consecutive quarter of greater than 25% year over year EBITDA growth. We saw continued strong demand in our largest personal care end markets, skincare and hair care. While demand slowed in Europe, it was more than offset by strong performance in other regions, particularly in Asia. Last 12 months EBITDA margin is now up 27% and we expect further expansion driven by our strategic priorities.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Specialty Additives executed well with organic sales volumes up 1% year over year. Coatings demand was moderately weaker in China and EMEA, but this was more than offset by improving volumes in Performance Specialties. We are closely monitoring the spillover effect of China's low demand and excess capacity on other export markets. Our pricing remains consistent with our expectations. The team maintained pricing discipline with substantially stable pricing and significant narrowing of year over year decline to just 1%.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

With a mixed recovery, the specialty additives team is focused on operating operational discipline, optimizing our HCC network and pursuing share gain initiatives. To summarize, we're starting the year in an uncertain market environment like we expected. We factored much of the muted macro and competitive dynamics into our outlook. The clear agenda outlined at our strategy day continues to guide our efforts. Delivering and accelerating cost savings remain our top priority.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We can unlock substantial near term value through our productivity initiatives independent of the external factors. Beyond cost savings, the Ashland team is energized to deliver on our growth catalysts, making strategic progress and continuing to invest in innovation and global expansion. We have momentum here and I'll discuss more about this later. Now I'd like to turn the call over to Kevin to provide more detailed review of our Q1 financial performance. Kevin?

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

Thank you, Guillermo, and good morning, everyone. Please turn to Slide 8. Ashland's total sales for the Q1 were $405,000,000 down 14% year over year. This decline was largely driven by our portfolio optimization initiatives, which reduced sales by approximately $50,000,000 or 11%. Excluding the impact of these initiatives, sales declined 3% year over year.

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

Organic sales volumes were down 1% overall. We saw organic volume growth in Personal Care, Specialty Additives and Intermediates more than offset by declines in Life Sciences. Overall pricing was generally in line with our expectations, down 2% year over year, primarily in the Intermediates and Life Sciences segments. Gross profit margin increased 290 basis points to 28.1% in the quarter. This improvement was primarily due to a production volume recovery and portfolio optimization actions.

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

These positives were partially offset by lower pricing against the backdrop of stable raw material costs. SG and A, R and D and intangible amortization costs were $104,000,000 up modestly versus the prior year. The reset of variable compensation was mostly offset by lower amortization and the transfer of nutraceuticals employees. Ashland's adjusted EBITDA for the quarter was $61,000,000 down 13% year over year. This decline was largely driven by our portfolio optimization, which reduced adjusted EBITDA by approximately $8,000,000 Excluding this, adjusted EBITDA was down 2% due to the factors mentioned earlier.

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

Despite advanced plant turnarounds and stranded costs, Ashland's adjusted EBITDA margin for the quarter was 15.1%, up 30 basis points year over year. Adjusted EPS, excluding acquisition amortization, was $0.28 down 38% from prior year. Now let's hear from our general managers to review the results of each of our operating segments. Alessandra, let's start with Life Sciences.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

Thank you, Kevin. Good morning, everyone. Please turn to slide 9 for Life Sciences. As Guillermo mentioned, the Q1 was marked by both strategic progress and softer market conditions. Overall, Life Sciences sales declined 33% to $134,000,000 Our portfolio optimization initiatives were a major factor in the sales decline.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

We divested our nutraceuticals business line and added low margin nutrition business, which reduced sales by approximately $41,000,000 or 21%. These actions improve our long term profitability and focus, but impact year over year comparisons in fiscal year 2025. Organic sales were down 12% year over year primarily in pharma. As we shared last month, customers implemented stronger inventory control measures and the market for pharma is softer particularly in Europe. This led to high single digit declines in pharma sales volume year over year.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

While we experienced inventory adjustments of 4 to 6 weeks in many cases, we expect those actions are largely behind us. Echelon's global presence is a key strength, allowing us to strategically target pharma growth opportunities in many markets. While we navigate near term challenges in Europe, we are actively pursuing growth opportunities in Asia and Latin America, leveraging our reputation with local and generics manufacturers. Despite elevated competition in pharma, sequential pricing trends were generally stable and year over year pressure was in line with our expectations reflecting the carryover impact. We are pleased with our globalization progress for injectables and OSD film coatings, which achieved double digit sales growth in the quarter.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

For injectables, our recently established R and D center of excellence is already delivering results. Centralized collaboration is accelerating innovation and we are forecasting 4 product launches in 2025, more than tripling than 3 year efforts. These efforts are positioning us for success in attractive new adjacent markets within the high growth injectables space. Overall, adjusted EBITDA decreased by 42% to $28,000,000 Excluding portfolio optimization, EBITDA was down $12,000,000 or 25%. Adjusted EBITDA margin decreased 3 10 basis points to 20.9%.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

This decrease reflects lower pharma volumes, carryover pricing and an $8,000,000 impact from portfolio optimization. As Guillermo mentioned, turnaround encouraged unanticipated costs and absorption due to longer timelines and higher expenses which totaled $3,000,000,000 for Life Sciences. As outlined at our strategy day, we have cost saving initiatives underway to offset this impact at the Echelon lab. Please turn to Slide 10 for intermediates. Intermediate sales were $33,000,000 in line with prior year quarter.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

This consistent performance was delivered across both merchant and captive sales. Captive internal video sales were $11,000,000 and merchant sales were $22,000,000 Despite challenging global market conditions, the team secured additional volumes of NMP during the quarter. Demand in the electric vehicle and battery markets remained soft due to delays in battery plant startups. Gains were offset by lower year over year merchant pricing. Intermediate generated $6,000,000 in adjusted EBITDA representing an 18.2 adjusted EBITDA margin.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

This compares to $10,000,000 in the prior year. Lower pricing and unfavorable product mix driven by large volume customers reduced profitability. This was partially offset with higher year over year production volumes. Now, I will turn the call over to Jim to discuss the performance of Personal Care. Jim?

[James Minicucci, Senior Vice President and General Manager, Personal Care at Ashland]

Thank you, Alessandra. Good morning, everyone. Please turn to Slide 11 for Personal Care. Personal Care continued its strong momentum, achieving its 4th consecutive quarter of year over year revenue and EBITDA growth. Organic volumes increased by mid single digits driven by strong demand in hair care, skincare and bio functions.

[James Minicucci, Senior Vice President and General Manager, Personal Care at Ashland]

While Europe experienced some weakness, demand improved in most other regions, particularly in Asia, where our focus on local and regional customers generated positive momentum. Portfolio optimization streamlines our oral care offering, focusing on higher margin products. The portfolio optimization initiatives reduced personal care sales by approximately $2,000,000 or 2% in the Q1. As Guillermo mentioned, we have an agreement to sell the Evoca business and the appendix provides details on the financial impact of this divestiture going forward. Our globalized strategy drove biofunctional growth in Asia even with some customer specific weakness.

[James Minicucci, Senior Vice President and General Manager, Personal Care at Ashland]

Despite a recent slowdown in EMEA, we see significant potential in the sales pipeline for microbial protection. By commissioning a new production capacity for microbial protection products in Brazil this quarter, we are getting closer to our customers in this growing market and enhancing our ability to serve their needs. Overall, Personal Care sales increased by 4% to $134,000,000 and organic sales were up 6%. Pricing and raw materials remained stable year over year. Adjusted EBITDA grew an impressive 36% to $30,000,000 This quarter's profit improvement reflects both higher sales and production volumes.

[James Minicucci, Senior Vice President and General Manager, Personal Care at Ashland]

Similar to life sciences, turnarounds incurred unanticipated costs in absorption due to longer timelines and higher expenses at our shared site, which totaled $2,000,000 for Personal Care. Adjusted EBITDA margin expanded by 5.30 basis points to 22.4%. Last 12 months EBITDA is up 35%, highlighting the robust recovery from destocking. Now I'll hand it over to Dago to review the results of Specialty Additives. Dago?

[Dago Caceres, Senior Vice President and General Manager, Specialty Additives at Ashland]

Thank you, Jim. Please turn to Slide 12 for Specialty Additives. Our first quarter results were generally in line with our expectations. Sales volume was down mid single digits year over year, primarily due to our portfolio optimization initiatives. Portfolio optimization streamlined our construction offerings focusing on higher margin products.

[Dago Caceres, Senior Vice President and General Manager, Specialty Additives at Ashland]

Organic sales volumes improved low single digits driven by continued growth in Performance Specialties. This growth was partially offset by slightly weaker demand in coatings, primarily in China and EMEA. As expected, low demand and overcapacity in China is driving increased competition impacting both volume and pricing in local and export markets. We're taking steps to partially mitigate the impact on local operations. Pricing remained relatively stable, down 1% year over year, reflecting our disciplined pricing strategy.

[Dago Caceres, Senior Vice President and General Manager, Specialty Additives at Ashland]

This represents a significant improvement from the mid single digit declines we saw in fiscal year 2024. Overall, specialty additive sales declined by 6% to 115,000,000 dollars Excluding the $7,000,000 impact of our portfolio optimization actions, sales were roughly flat year over year. Adjusted EBITDA more than doubled to $13,000,000 primarily due to higher production volumes compared to last year's inventory corrective actions. Adjusted EBITDA margins improved 6 40 basis points year over year to 11.3%. In addition, last 12 months EBITDA is up 39%, highlighting our strong overall recovery.

[Dago Caceres, Senior Vice President and General Manager, Specialty Additives at Ashland]

I will now turn the call back to Kevin. Kevin? Thanks, Thiago.

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

Please turn to Slide 13. Ashland continues to have a strong financial position. As of the end of December, we had cash on hand of $219,000,000 $815,000,000 in total available liquidity. Our net debt was $1,100,000,000 representing a leverage ratio of approximately 2.4 times. We have no floating rate debt, no long term debt maturities for the next 2 years and all outstanding debt is subject to investment grade style credit terms.

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

As Guillermo mentioned, we shifted several plant turnarounds into Q1, stabilizing sequential inventory and enhancing operational flexibility going forward. Reflecting typical Q1 earnings seasonality, ongoing free cash flow was negative $26,000,000 We remain committed to our free cash flow conversion target of greater than 50% for the full year. Our disciplined capital allocation has enabled $280,000,000 in share repurchases over the last year and $1,300,000,000 over the last 4 years. We have $620,000,000 remaining under our current share repurchase authorization. As demonstrated, we will opportunistically repurchase shares while investing in our business to drive organic growth.

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

With certain growth projects now commissioned, Ashland anticipates fiscal 2025 capital expenditures to be around $120,000,000 We're also pursuing targeted bolt on M and A opportunities in pharma personal care and coatings. Our progressive dividend policy remains an important part of our capital allocation strategy. It reflects our confidence in the company's long term profitable growth and cash flow generation outlook. We have increased our annual dividend every year for the last 15 years at a 17% compound annual growth rate. Now I'll turn the call back over to Guillermo to discuss our strategic priorities and fiscal year 2025 outlook.

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

Guillermo?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Thanks, Kevin, and please turn to Slide 15. I'll start by highlighting that we're nearing the end of our portfolio optimization journey. Dashlane team did a remarkable job reducing our exposure to the low return, volatile, pharmachem, CMC and MC businesses positioning us for a more stable and profitable growth. Our actions should deliver 200 basis points to 2 50 basis points of margin expansion when complete.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

By selling the EvoCA business and fully implementing our $30,000,000 restructuring program, we will finalize our strategic transformation and position ourselves for future growth. Please turn to Slide 16. Our execute, globalize, innovate and invest priorities continue to serve as a roadmap and guide to our actions. At our strategy update last month, we outlined clear financial commitments aligned with our strategic priorities. While some of these efforts will take time, we believe regular transparent updates will demonstrate our commitment and progress on these important initiatives.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Please turn to Slide 17. Let's start with Execute, which focuses on the controllable factors that will drive near term performance. As mentioned, we recently signed the agreement to divest the EvoCA business. This is a key step in exiting a non core business line, improving our financial profile and fully unwinding the Pharmachem acquisition. In connection with the signing, we'll recognize a non cash impairment that was a key item in the quarter.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We repurchased shares in Q4 of last year to neutralize the ongoing EPS impact from the exit of nutraceuticals and Evoqua. We are now focusing on offsetting the EBITDA impact. The highest priority is delivering on our $90,000,000 cost saving target. First, our $30,000,000 restructuring. Our efforts are well underway with $21,000,000 of opportunities identified and $12,000,000 annual run rate already achieved.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We are confident this momentum will continue generating further restructuring savings in the upcoming months. 2nd is the $60,000,000 of manufacturing optimization. As a reminder, the majority of the focus is on strengthening HEC and VpND. Initial focus has been on consolidation of manufacturing activities with process productivity improvements coming later. Actions will be taken include the consolidation of some manufacturing operations from our Texas City plant to Calvert City.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Executed initiatives have already generated $88,000,000 of annual run rate EBITDA improvement. There's a timing element of the flow through on productivity initiatives through fiscal 2025 and we will be communicating those as we have more data. Overall, we're on track to achieving at least $20,000,000 in savings in fiscal year 2025. Please turn to Slide 18. At our strategy day, we introduced ambitious yet achievable revenue targets for our Globalize and Innovate initiatives, each aiming to generate $100,000,000 in additional revenue by fiscal 2027.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

This slide highlights the near term growth trajectory and expectations for fiscal 2025. Starting with Globalize, we're investing in assets, people and technology to accelerate growth. Our revenue targets translate to growing them by roughly 50% over the next few years. While microbial protection, our largest globalized business had a slow start to the year, partially offsetting a strong start in injectables, we remain confident that these business lines given of these business lines given their strategic progress and strong historic track record. The team is confident to achieve our fiscal 2025 goal of $20,000,000 in higher sales.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Now let's move to our most impactful long term strategy, innovation. This initiative is projected to generate $100,000,000 in incremental sales by 2027 and significantly enhance our long term growth trajectory. While growth in innovation takes time, we're targeting $10,000,000 in incremental sales in fiscal 2025. As you heard last month, the team is incredibly enthusiastic about innovation. Our ambitious growth aspirations are supported by a robust 2025 platform launch plan, which includes 7 new product introductions, up from 3 last year.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We'll share more details at the upcoming months and we'll likely host an innovation update in calendar year mid-twenty 25 to bring this game changing chemistry to life. In the meantime, our progress is in line with plans with $3,000,000 in incremental sales during the quarter. Now let's please turn to Slide 19. Now let's turn to our outlook for fiscal 2025. While we face a dynamic global landscape and uncertainty in China, Europe and policy transitions, we are committed to adapting and delivering on our commitments.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Of course, the coming months will provide more clarity on the impact of policy transition and other macroeconomic factors. As noted in our press release yesterday, we are affirming our full year sales and adjusted EBITDA outlook. Several key factors are supporting this. While we saw pockets of weakness in the quarter, much of it was already contemplated in our full year guidance. As anticipated, increased competition from Chinese exports is impacting pricing, but largely in line with expectation.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

As Alessandro mentioned, the recent inventory adjustment by pharma customer is largely a Q1 dynamic. It's been mixed, but the overall raw material environment is expected to remain stable. We're also watching the FX markets. The dollar has strengthened considerably over the past 3 months. Our $500,000,000 Eurobond provides a partial hedge, but it still impacts our EBITDA.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Lastly, our strategic focus is threefold. First, selling the Evoca business this quarter. 2nd, accelerating the restructuring and productivity initiatives to achieve at least $20,000,000 of savings this year. And lastly, that we maintain momentum in our growth catalyst initiatives for 2025 and for building our trajectory for the future. For the full fiscal year, we continue to expect sales in the range of $1,900,000,000 to $2,050,000,000 and adjusted EBITDA in the range of $430,000,000 to 470,000,000 dollars Please turn to slide 21.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

In closing, I want to restate the key takeaways from today. Our Q1 performance was generally in line with the expectations we shared at our strategy day. The signing of the Evoca divestiture agreement marks another milestone in Ashland's portfolio transformation. Fiscal year 2025 is expected to be a choppy year for the market and we are focused on 1st, delivering and accelerating our $90,000,000 in cost savings initiatives, maintaining a balanced approach to managing our business including pricing and market share, globalizing 4 high quality business lines, advancing the commercialization of new technology platforms, ensuring operational excellence across our manufacturing facilities and maintaining disciplined capital allocation. Our healthy balance sheet and strong profitability provide us with the flexibility to continue to invest in a long term growth catalyst, while proactively addressing the challenges of today.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We remain committed to our fiscal 2025 goals and remain confident in the long term growth potential of our business. I want to thank the Ashland team once again for their leadership and proactive ownership of their businesses in a dynamic environment. Operator, let's go to Q and A.

[Operator]

Thank you.

[Operator]

Our first question comes from Michael Sison of Wells Fargo. Your line is open.

[Michael Sison, Managing Director at Wells Fargo Securities]

Hey, good morning. I guess, can you help us sort of think about the walk in EBITDA heading into 2Q, 3Q, 4Q? You do sort of need a big jump from the Q1 to get to your range guidance.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Mike, thanks for the question. Hope you're doing well. So remember, Q1 is our weakest quarter. So we don't read too much into the Q1 positive or negative and how it's going to set for the year. The real volumes given seasonality and just the historic patterns really start from March to September.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

So at this point in time, that's usually when we expect a lot more of the pickup. I think you've been in your modeling, you can continue to assume that that pattern is normalizing. I think a lot of what we're seeing now is a lot of the what we've seen last few years of COVID and stocking, destocking, all that things are behind us. So things are normalizing a lot more. And as we said in the call, I think we'll see specialty pharma and personal care market demand normalize even in a recessionary environment.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

They should behave more normal. We're hearing that from some of our customers. And in the coatings, it's going to be a mixed by region. So we'll be talking more as we move forward. But really in terms of changing our outlook and models, frankly speaking, it's from now February till May, I think we're starting to see the new administration taking positions.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Things are going to play out and I think that's when we're going to be updating our models.

[Michael Sison, Managing Director at Wells Fargo Securities]

And then I think in Q1, you said organic volumes are down 1%. How do you think volumes sort of progress for the rest of the year? Did you will you see some positive organic volume growth? Or is the guidance sort of based on kind of this flattish type of cadence?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We'll hear and I'll maybe ask each GM to sort of comment a high level on their specific segments. But in general, volumes, we see them flattish to up. That's what we're hearing from our customers. It's not a market that's taking off in terms of volume, but it is starting to pick up depending on the business and the region. So it's much more positive.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

I think in Q1, it's our down season, but it's also the end of the fiscal year for a lot of our customers. So sometimes we depending on how the environment is, we see a lot more inventory actions that can move shift around orders between Q1 and Q2. So we'll start seeing that. If we look at our outlook right now in terms of orders for the Q2, I would say normal. There's nothing no big surprises at this point in time.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

But, Dago, do you want to comment maybe just walk through each of the regions in terms of demand outlook?

[Dago Caceres, Senior Vice President and General Manager, Specialty Additives at Ashland]

Sure. And thank you, Guillermo, and thank you for the question. So yes, so if I think about coatings and industrial in general, I think the story is pretty much by region. So what we're seeing in North America, we do expect sequential improvement in volumes in North America. So we do expect the Q2 to be better than Q1, the Q3 to be better than the Q2.

[Dago Caceres, Senior Vice President and General Manager, Specialty Additives at Ashland]

Of course, there is a lot of uncertainty in the market, the new administration, etcetera, but I think that will be the expectation. In case of Europe, we have a very solid position, but we don't see a whole lot of activity going on in the market, especially in new construction, which drives according sales. So we say for Europe, our position is a little bit more flat, I will say, moving forward. China is and we've been consistently mentioning China in the past, China continues to be obviously an area that is challenging to us. That's included in our numbers.

[Dago Caceres, Senior Vice President and General Manager, Specialty Additives at Ashland]

But we do not expect any recovery from China, I would say, this year. Kind of on the bright side, I would say Latin America. Latin America is actually doing better than expected. And last, I would say Middle East, Africa, India, that's the area where we see volumes actually doing okay. Now the concern in that area is the excess capacity that we see from China that is making its way into other geographies.

[Dago Caceres, Senior Vice President and General Manager, Specialty Additives at Ashland]

So we're monitoring that closely. So back to Guillermo's comment, I would say overall, this is how we are expecting we were expecting the year to play out. It's kind of playing out as we anticipated a few months back. Okay.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Thank you, Doug. And Jim, do you want to do all the same walk for Personal Care?

[James Minicucci, Senior Vice President and General Manager, Personal Care at Ashland]

Sure. Thanks, Guillermo and thanks, Mike. So Mike, I think as we laid out at the Strategy Day, as we laid out at the strategy day last month, the algorithm for personal care, it's quite straightforward. Core additives, we're expecting to grow low to mid single digits in the 3% to 4%. And then our globalized businesses, Biofunctional Microbial Protection in double digit.

[James Minicucci, Senior Vice President and General Manager, Personal Care at Ashland]

And if we look at Q1, I would say Q1 came in line as we had anticipated. We saw mid single digit volumes up across most geographies. Europe is the one area that we highlighted that was not as robust as we had expected. And so that's something that we're monitoring now as we go into our Q2 of the recovery there.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Thanks. And Sandra, if you could comment focus on life science, which I guess is where everybody has the most questions.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

Sure. So in life science, so we expect the 2nd quarter sales volume to be flattish and we expect to see growth in the 3rd Q4 especially in Latin America and Asia as we re leveraging our reputation with local and generics manufacturers and we are seeing the growth momentum. We're seeing the growth momentum in the cellulosics and injectables and tube coatings as we mentioned. Europe, mean, we talked about being soft in the Q1 and that is the expectation for

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

the

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

Q2. And then outside of volume, FX will be a headwind and prices are also expected to be down, but that was in our plan.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Okay.

[Michael Sison, Managing Director at Wells Fargo Securities]

Thank you.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

I hope that helps.

[Operator]

Thank you. Our next question comes from Christopher Parkinson of Wolfe Research. Your line is open.

[Christopher Parkinson, Senior Research Analyst at Wolfe Research, LLC]

Great. Thank you so much. Just perhaps a little bit more of a longer term question, but when you take a step back just giving everything you've divested in nutraceuticals out of life sciences, the pricing dynamics, market share, everything that you've gone through over the last 18 months. At the end of the day, over the next, let's say, 2 fiscal years, do you still believe the life sciences segment can run rate around 30% plus EBITDA margins? Just how should we think about that, kind of that longer term line of sight into the margins of that segment?

[Christopher Parkinson, Senior Research Analyst at Wolfe Research, LLC]

Thank you so much.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Nothing has changed in terms of our outlook on the core businesses. Obviously, the dynamics that we're seeing in VP and D is driven by 2 factors and one of them is the same for HEC. But of the two factors, it's a competitor coming back in that was out that caused some disruption. So that's normalized already. And it's a competitor that's been there for a long time.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

So I don't expect any difference from historic. I think what is creating the most noise for both the VPMD business and our HEVC business is the overcapacity in China and impact on some of the export markets, especially those that are more price sensitive. And that's where we're seeing the impact. But everything has stabilized as Sarush mentioned in her prepared comments, all the negotiations we've completed mostly. I think we just have very few left and everything came in line with pricing and volume expectations in our plan.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

I think the big area that we we're not assuming life is staying normal. It's a competitive environment. It's all these actions that we're taking on the productivity side and it's focused on Bp and D. If you just apply $60,000,000 is a lot of value for those businesses. So we think we can reinforce them either improve margins or if there's any changes in the market dynamics that we continue to have healthy margins.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

The rest of the portfolio is doing well. And as a reminder, all our globalized initiatives are above average margins, above our company average, significantly above and all the innovations that we're working on, which impact all the businesses and are opening up significant markets. A. B. To your question, it might be beyond the 2 year timeframe.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

I think all those will also be accretive to both margin and to cost because a lot of them use the same plants that we use today.

[Christopher Parkinson, Senior Research Analyst at Wolfe Research, LLC]

Got it. And just a similar question on the per cell care side. I mean despite the fact that the market seems still pretty choppy based on some of your primary customers' market commentary. You are doing pretty well in hair care and skin care on a revenue basis. Is this are these trends kind of an initial reflection of potentially, let's say, higher content or some of your new initiatives in the R and D targets beginning to pay off?

[Christopher Parkinson, Senior Research Analyst at Wolfe Research, LLC]

And should we expect that momentum in terms of market outperformance to continue? Just if you could just give a couple of thoughts on that, that would also be very, very helpful. Thank you.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

On a high level, and I think what I'm going to say applies to all the businesses. We are completing our portfolio optimization. The last step assuming Avoca closes as planned is the $30,000,000 Once we finish that, I think most of the developments have been in line with plan. From that moment forward, it's really about executing our strategy. We need to get the momentum.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

What's going to change? It's the growth catalyst, the productivity to expand margins, strengthen our businesses and these growth catalysts. At the current time, like most companies right now, if you don't have growth for catalysts, you are riding the market. When things get better in the market, we do better and when they get worse, we get and we have to explain ourselves. I think that's the part that we're trying to move.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Now we are riding the market, market is improving. We want to make sure that we have discipline and I think this productivity actions and other things we're doing as we reinforce, we're strengthening our business units, adding new talent, operating manufacturing, process capabilities, all these things strengthening our core so that we can ride the market better, we can get share, we can price, we can do the day to day activities. That's what's going to be the most impactful in the next 2 years. That's why we're putting a lot of emphasis on the $90,000,000 That is core, core to what we need to do. What we're excited about is we do have critical catalysts and that is what we're focusing on changing the game for us.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We're in the near term, we're putting $100,000,000 in the next 3 years, but really the markets that we're going after are much bigger than that. And that's really where we start transforming not just growth rates, but we really start transforming the mix of our portfolio. We're enriching it with newer technologies, with more differentiated technologies, and with higher margin technologies. So there's a clear roadmap for the next 1, 3 and 5, 10 years that we're playing to and game on, this is now 100% of our attention at this point in time.

[Christopher Parkinson, Senior Research Analyst at Wolfe Research, LLC]

Thank you for the color.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

Thank

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

you.

[Operator]

Our next question comes from John Roberts of Mizuho. Your line is open.

[John Roberts, Managing Director at Mizuho Financial Group]

Thank you. One of the reasons you pulled forward maintenance was to have optionality if customers change their trade patterns. Have you seen any adjustments being planned by customers?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We're not seeing changes to our expectations, but we're seeing the stability that I think the stability that we're seeing is sort of a testament to people being careful. As an example, North America, Europe, although we're seeing lower priced imports from China, we're hitting some markets. In other markets, people are being much more stable in the decision making that they're doing because depending on trade, depending on a lot of things, it could put them in a difficult situation. We are a major supplier to all these players. And I think that stability is a signal of people being careful in terms of a choppy market and an uncertain market.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We have taken our besides the turnarounds, we have moved inventory into certain regions. We're looking at and as part of the productivity, even if we don't change our footprint, can we make some of the products in more regions? Our cellulosics is a good example, just looking at our product mix. So we're doing a lot of things and we're working with our customers because they want to understand how we stand. I would say as an example, I mean we're critical to the paint guys, to the personal care, but pharma risk management is a critical part of our customers' DNA and how they manage inventories is very critical.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

The actions for example, they might be taking in Europe aren't necessarily what they're doing in other regions because they're looking at region by region.

[John Roberts, Managing Director at Mizuho Financial Group]

And then you called out currency as a risk factor, but I think you only reported $1,000,000 of impact from currency in the quarter. Does it get much more material going into the March quarter?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Kevin, why don't you take that?

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

Yes, sure. We saw primarily the euro, but also Chinese yuan and Brazilian real depreciated in the quarter, but they depreciated throughout the quarter to the levels where they have more or less bounced around to where they are right now. And really the comment is around if those currencies stay weak against the dollar at their current levels, it will be a headwind for the remainder of the fiscal year. The way to think about that from a quantum perspective is probably in the neighborhood of $7,000,000 to $8,000,000 of EBITDA impact if we see those 3 currencies in particular stay where they are pretty much right now.

[John Roberts, Managing Director at Mizuho Financial Group]

Thank you.

[Operator]

Thank you. Our next question comes from David Begleiter of Deutsche Bank. Your line is open.

[David Begleiter, Managing Director at Deutsche Bank]

Thank you. Good morning. Guillermo, looking at Q2 consensus EBITDA is roughly 125. Is that a good starting point do you think? Or could that be either a bit too high or maybe a bit too low?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

So David, we're commenting on the full year. We're not giving specific guidance on the Q2. I'm sure William will be following up with you with providing color on specifics so you can do your modeling. But we do expect a bigger pickup, which is normal in the year. Just a reminder, as I said earlier, March really March on is really where we start seeing the pickup.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

I think January is turning up to be a normal ish month. We'll see February, we don't at this point in time unless some trade issue or something that starts changing quickly at this time we don't see any changes. So we are we do expect to see a good pickup. Our plants, we've done all the turnarounds are running normally. We're trying to run-in some areas a little bit stronger to recover the absorption impact of the turnarounds in the Q1.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

So those things will drive a little bit more strength. But we'll provide you more specific details as we do some of the follow-up calls that we'll share with everyone.

[David Begleiter, Managing Director at Deutsche Bank]

Very good. And just on the Chinese export competition, Guillermo, which products in particular are you seeing that? Any reason would get better or worse going forward?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Yes. I think we're the ATC, I think as Dago mentioned is the bigger one. And it's mostly in Middle East and Africa that we're seeing that a little bit in India. But I would say that's not the highest one on VP and D less so. The players are known.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

You got to have much more regulated to more regulated environment. So there's a little bit more noise. I would say in the VP and D, we're seeing more I mean, we have our big market in pharma is the OSD, the pill markets, but we participate in some Vp and D markets in membranes for blood or in disinfections, iodine based PVPs. Those are a little bit those are lower margin areas and we see a little bit more that's probably where we see the pressure. But in the core OSD, it's been a little bit more stable.

[David Begleiter, Managing Director at Deutsche Bank]

Thank you.

[Operator]

Thank you. Our next question comes from Jeff Zekauskas of JPMorgan. Your line is open.

[Jeffrey Zekauskas, Analyst at JP Morgan]

Thanks very much. Can you remind me what the turnaround costs were in the Q1 and what they were in each segment?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We didn't share by segment because they're plants and they service everybody. But we said at the Investor Day was that we had moved forward and our planning was around 20,000,000 dollars and we had about $5,000,000 of extra costs. So for now, I put the comment. And of the $5,000,000 I would say 50% of it was higher expenses in the maintenance. These turnarounds, you do them every 2, 3 years.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

When you open up things, you got to whatever you find. So we did find things in our utilities, the electrical systems, things that took a little bit time and kept the tire plants down a little bit longer. So that was about half of the $5,000,000 and the other half is just absorption because the plants were down a little bit longer than expected.

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

We would actually expect to recover the lost absorption piece of that $5,000,000 throughout the course of the year.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

And we're trying to push on, as I said, on the cost reductions accelerate things, because for the year anything extra will cover other costs and it still will be an incremental for the full year next year in the sense that the maintenance costs will go away on a year on year thought.

[Jeffrey Zekauskas, Analyst at JP Morgan]

So in terms of the $20,000,000 in turnarounds, is there any segment that was affected disproportionately?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Yes. It was mostly BP and D, the 2 big our plants in Texas City and Calvert City were the bigger hits. I think in the other plants they ran pretty much the turnaround impacted, but they had they didn't have as many extensions or anything. Net, the other ones I think were positive. So it was really those 2 VP and D plans, VP and D and intermediates.

[John Kevin Willis, Senior Vice President and Chief Financial Officer at Ashland]

And Jeff, those get split between life sciences and personal care primarily. There are some other impacts business unit wise, but the VP and D impacts mostly go to Life Sciences and Personal Care.

[Jeffrey Zekauskas, Analyst at JP Morgan]

And in intermediates and solvents, from what you can see, are prices remaining stable? Or are they a little bit under pressure? And is that a business where the trajectory of EBITDA for the remainder of the year is more flat or down as a base case?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

The prices have been stable. Overall, I think most of the impact we saw was more in the Q3, Q4 for most of our businesses. Intermediates is not that different. I think it's more of a 2 things volume. The big areas we're focusing a lot on U.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

S, Europe. So in the U. S, it's the NMP, it's the battery market, the semiconductor market, ag and pharma active ingredient production. So those as they pick up, the batteries probably that been the one that a lot of the projects are delayed. So the upswing is a little bit lower.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

I think the bigger pressure we've seen is in Europe where again more of the Asia and China exports are impacting. We are hearing of some of the European players starting at antidumping and doing some other actions. So we're tracking that to see how those events change. So where we but where we're going to see more of noise that we're trying is 1, get our costs. We're making a lot of the changes that we're making in the productivity.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We're calling it Vp and D, but will also impact intermediate, so that we can get much more competitive in those areas. And 2 is the mix that we can do some spot sales here and there to move product. The margins aren't great. So that could create a little bit of noise. But overall, most of the business is pretty stable at this point in time.

[Jeffrey Zekauskas, Analyst at JP Morgan]

And

[Jeffrey Zekauskas, Analyst at JP Morgan]

lastly, you've got various stranded costs and you've got a cost cutting program. As far as you can see for 2025, are the cost cuts larger than the stranded costs or the stranded costs larger than the cost cuts and by how much?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

So we're trying to offset is stranded costs and lost. I mean, we have neutralized just to be very clear, the nutraceutical sales, we've neutralized the EPS, the earnings and EPS impact, the EPS impact on that sale. We want to offset the EBITDA. So the biggest issue of the $30,000,000 is not stranded costs. It's gross profit loss with the sale.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

So we want our cake and eat it too. We want to make sure that this action is EBITDA neutral. So the $30,000,000 offset around $20,000,000 We had said that business was about $100,000,000 20 percent gross profit that we want to offset that and the rest is stranded costs. So we're in as we said in our prepared remarks and in the slides, we're well underway to get to the $30,000,000 I think we'll probably be able to do a little bit more than that. But the most important thing for us is how can we accelerate it to hit our target.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We split it 15 this year, 15 next year. Obviously, to hit the run rate, we want to make sure that by mid year we get most of it done.

[Jeffrey Zekauskas, Analyst at JP Morgan]

Great. Thank you very much.

[Operator]

Thank you. Our next question comes from Mike Harrison of Seaport Research Partners. Your line is open.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

Hi, good morning. I was wondering if you could go into a little bit more detail about the trade policy impact that you are concerned about or citing as maybe an area of potential uncertainty going forward. Is what you're concerned about related more to the direct impacts of potential input costs effects? Or is it more of the indirect effects that you could see from trade policies on trade flows and other things that you might be watching?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

I think the bigger impact for us is trade flows. I mean we buy some raw materials in China, but it's not a significant part of our portfolio. So that is not going to be the biggest driver. So for us it's really more how does that impact supply, the duties they're putting in, if you got issues in shipping from certain production countries to customers. So that's really where we're looking at.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

So if you look at our portfolio right now, obviously HEC is the most global. So we have in every region. So So that gives us a lot of flexibility. U. S.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Already has duties. Are they going to increase them or not? We'll monitor that obviously. Europe does not. And I think that's where we're seeing some movement from a lot of local producers on trying to get some level of protection given the overcapacity and the pricing that they're seeing from China.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

So I think those are the issues that will probably change things around. We make things in the U. S. We're selling them in China. We're looking at our footprint on what things we can change so that we have an optimal sourcing depending on the scenario that evolves.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

But it's a lot of scenario planning.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

Right. And I guess just following up on that, we've heard from some companies that there have been some increased December purchasing activity. Customers may be trying to get out ahead of potential tariff impacts. Did you see any demand during your Q1 here that would suggest that you were seeing some pre buying volumes?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Not really. I don't think we can make that statement and at least for our portfolio. On the contrary, we saw a little bit of inventory controls in Europe, but the rest has been more normal.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

All right. And then last one for me is just as it relates to winter weather. I think the last time we had a meaningful freeze in the South, you guys had some plant disruptions. Any issues with some of the snow or maybe more adverse weather this winter impacting your plants so far in the Q2?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We did. Texas and Houston bond, Texas City was down 2 days just during the freeze boiler. So we had a little bit of impact, but we're planning to offset that just with production. We have plenty capacity where this is one of the areas that we're making a lot of changes anyway. In terms of production, we're shifting in our productivity, we're shifting a lot of our intermediate production to Calvert City to maximize our loading of our plants, improve our costs.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

So we're doing a lot of other changes. So it had an impact not as big, but we expect to recover. But that's it. The rest was fine.

[Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners]

All right. Thanks very much.

[Dago Caceres, Senior Vice President and General Manager, Specialty Additives at Ashland]

Thanks, Mike.

[Operator]

Thank you. Our next question comes from John McNulty of BMO Capital Markets. Your line is open.

[Bhavesh Lodaya, Equity Research - Chemicals, Energy Infrastructure & Midstream at BMO Capital Markets]

Good morning, Girma. This is Bhavesh Lodaya for John. In your press release, you noted pricing impacts as moderating. How did pricing move sequentially in the Q1 versus the 4th? I'm curious if you expect to see positive pricing power this year or what are you building into the guide?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

No. In our outlooks, we captured most of the pricing is rollover. As we said, the contracts came in per our expectations. So I think we're not forecasting an improvement in pricing and we've already captured a lot of the erosion. So there is a year on year that's probably our biggest year on year headwind, but that factored into our points.

[Bhavesh Lodaya, Equity Research - Chemicals, Energy Infrastructure & Midstream at BMO Capital Markets]

Got it. And then in Life Sciences Pharma, apologies if I missed it. Did you quantify the EBITDA impact from your customer inventory control actions? And would you say all of those actions are behind us at this point?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Most of it the Q1 is where we saw most of it. I mean there could be a little bit of stragglers or whatever in January, February, but the majority is done. I think of the GAAP pricing, year on year comparison pricing to be simplistic on it, a third pricing, a third volume, weaker demand in Europe and that inventory. And another third is just business issues like I was saying share shifting or actions in some of these other pharma non OSD markets like in the iodine, the disinfections, the membranes, those are a little bit more competitive markets that we see some of that change. So simplistically a third, a third, a third.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

But we can't it's hard to say what softer market, what was inventory control in terms of specific customers. We're just going by what they're telling us that they are controlling inventory, they're bringing it down and when they expect to start increasing the order levels moving forward, which is in a lot of it is in the Q2.

[Bhavesh Lodaya, Equity Research - Chemicals, Energy Infrastructure & Midstream at BMO Capital Markets]

Got it. Thanks.

[Operator]

Thank you. Our next question comes from Josh Spector of UBS. Your line is open.

[Joshua Spector, Analyst at UBS Group]

Yes. Hi, good morning. First, I wanted to clarify just on what you're seeing in terms of orders. I think in December when you gave the update and said that the Q1 would be slightly weaker, you hedged that a bit and said you thought order rates were looking more positive into the Q2 for you guys. Now you're kind of talking we're not sure we need to wait until March, see what that looks like.

[Joshua Spector, Analyst at UBS Group]

Is that the right interpretation that that visibility has declined? Or is that not the right read on what you're trying to say?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

That's not the right read on what I'm trying to say. What I was saying is March through September are when the high, high volumes

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

are for

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

our business. So that's really what I'm looking for, for the full year outlook is what's happening March through September. And I think what we said we'll have visibility between now May. A lot of these policy things that are just starting being lobbed over the fence one side or other. How and what actually is going to happen, we'll need to see how that plays out before we change that part of the outlook.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

For Q2, which is mostly January February, we haven't seen any major changes in our

[Joshua Spector, Analyst at UBS Group]

outlook. Okay. And just thinking about the full year and I guess it more comes down to the back half is a lot of conversations about share gains. I mean that hasn't changed from last quarter, but I guess now, I mean that's 1 to 2 quarters out. I think particularly in pharma, we think about your products as more specified into applications.

[Joshua Spector, Analyst at UBS Group]

So is that something you have visibility to? Do you know you've won share in Latin America and Asia with local regional generic customers? Or is that still a toss-up that we're not uncertain of?

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Okay. Alessandra, do you want to take this one?

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

Yes, sure. So first of all, as Guillermo mentioned, right, the contract negotiations have been mostly finalized and that was in line with our expectations. So specifically, as we are regaining business in Asia and Latin America, yes, that's happening. So we are seeing that. And of course, as that happened, I mean, customers have to work on the inventory of the existing product and then the ramp up with the new wins.

[Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates at Ashland]

But that's happening and also the share gains in cellulosics that we see that happening across the globe.

[Joshua Spector, Analyst at UBS Group]

Okay. Thank you.

[Operator]

Thank you. I'm showing no further questions at this time. I'd like to turn it back to Guillermo Novo for closing remarks.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

Well, I want to thank everyone for participation. I think the big headlines for everybody to take away is no big new news. Things are playing out as we expected. The only issue that we've seen is a little bit of more softness in Q1 in Europe. Other than that, everything is in line with our plans and expectations.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

As we said, number 2, the next few months we'll start seeing what if any impact trade or macroeconomic actions have on demand and we'll update. I think the next call will be an important one if there's any changes to update. But the big message is, look, we are now behind in our in finalizing our portfolio optimization. Our strategy, I hope, is clear. Our priorities are very clear to everybody.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

This is really now about executing in a difficult uncertain market. And I think we're doing that. The teams are doing that well. But more importantly, positioning ourselves for the future. And I think we're very excited.

[Guillermo Novo, Chair of the Board and Chief Executive Officer at Ashland]

We have growth catalysts, margin expansion catalysts that are significant for a company like Ashland and we're totally committed in driving them for the coming years. So thank you for your attention and participation and we look forward to talking to you in the coming weeks.

[Operator]

This concludes today's conference call. Thank you for participating and you may now disconnect.

Participants

Executives

• William Whitaker, Director of Investor Relations
• Guillermo Novo, Chair of the Board and Chief Executive Officer
• John Kevin Willis, Senior Vice President and Chief Financial Officer
• Alessandra Faccin Assis, Senior Vice President and General Manager, Life Sciences and Intermediates
• James Minicucci, Senior Vice President and General Manager, Personal Care
• Dago Caceres, Senior Vice President and General Manager, Specialty Additives

Analysts

• Michael Sison, Managing Director at Wells Fargo Securities
• Christopher Parkinson, Senior Research Analyst at Wolfe Research, LLC
• John Roberts, Managing Director at Mizuho Financial Group
• David Begleiter, Managing Director at Deutsche Bank
• Jeffrey Zekauskas, Analyst at JP Morgan
• Mike Harrison, Managing Director and Senior Chemicals Analyst at Seaport Research Partners
• Bhavesh Lodaya, Equity Research - Chemicals, Energy Infrastructure & Midstream at BMO Capital Markets
• Joshua Spector, Analyst at UBS Group