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Ashland (ASH) Releases Update on Fiscal 2019 Financial View

Zacks Equity Research

Ashland Global Holdings Inc. ASH provided fiscal 2019 financial view and reaffirmed business outlook. The latest projections reflect the adoption of discontinued operations accounting for the Composites unit and butanediol (BDO) manufacturing facility in Germany due to the pending divestiture to INEOS Enterprises in a deal valued at roughly $1.1 billion.

Notably, the company reiterated the business outlook for each operating segment as provided in the fourth quarter of fiscal 2018 (ended Sep 30, 2018) earnings release. Moreover, the updated outlook mainly reflects the pending divestiture and related debt reduction from net proceeds of the deal.

Ashland projects adjusted earnings per share (EPS) for fiscal 2019 in the range of $3.10-$3.40, down from the prior view of $4.20-$4.40. The reduction was caused by the removal of the full-year adjusted EBITDA of the Composites and the Marl BDO facility. This is partly offset by interest expense savings from the deal’s related debt repayment along with the removal of the related stranded costs throughout fiscal 2019.

Notably, adjusted EBITDA expectations for the Specialty Ingredients unit are unchanged at $610-$635 million and the same for the Composites business is not applicable. For the Intermediates & Solvents business, adjusted EBITDA is projected to be $20-$30 million, down from previous expectation of $55-$65 million. Free cash flow for fiscal 2019 is projected around $175 million, down from roughly $230 million expected earlier.

Adjusted EPS for first quarter of fiscal 2019 is projected in the band of 5-15 cents, down from 55-65 cents expected earlier. The capital expenditure projection has fallen to around $160 million from roughly $200 million. Ashland expects interest expense in the range of $85-$95 million, down from $115-$125 million expected earlier. The latest projection reflects debt reduction at end of the June 2019.

Per the company, the full benefit of interest expense savings and restructuring activities from strategic debt reduction is likely to be realized during fiscal 2020. Moreover, the restructuring program is on schedule and the removal of all stranded costs is likely to transpire by the end of calendar year 2019.

Shares of Ashland have inched down 1.4% in the past year compared with the industry’s 10.8% decline.


Zacks Rank & Stocks to Consider

Ashland currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are Ingevity Corporation NGVT, The Mosaic Company MOS and Israel Chemicals Ltd. ICL, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ingevity has an expected long-term earnings growth rate of 12%. The company’s shares have gained 16.5% in the past year.  

Mosaic has an expected long-term earnings growth rate of 7%. The company’s shares have moved up 12.3% in the past year.

Israel Chemicals has expected long-term earnings growth rate of 9.5%. Its shares have rallied 39.8% in a year’s time.

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