Q4 2024 Ashland Inc Earnings Call
So as you've done before earnings calls.
Speaker Change: That's have been placed on mute to prevent any background noise.
The speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you'd like to withdraw your question Press Star one again, thank you.
Speaker Change: I would now like to turn the call over to William Music. Please go ahead.
William Music: Hello, everyone and welcome to Ashland's fourth.
Speaker Change: Hello, everyone and welcome Ashland's fourth quarter fiscal year 2020 earnings conference call and webcast. My name is Wayne Politica, Vice President of Finance and director of Investor Relations.
Speaker Change: Joining me on the call today are chairman and Novo Ashland Chair, and Chief Executive Officer, and Kevin Willis Senior Vice President and Chief Financial Officer.
Speaker Change: In addition, I want to welcome our three general managers, which will cover the performance of their respective business units.
Speaker Change: Andre <unk> senior Vice President and General manager of Life Sciences, and intermediates gentlemen, at Gucci Senior Vice President and general manager of personal care.
Speaker Change: <unk> senior Vice President and general manager of specialty additives.
Speaker Change: <unk> released results for the quarter ended September 32024 at approximately five P. M. Eastern time yesterday November 6th.
Speaker Change: The news release issued last night was furnished to the SEC in a form 8-K.
Speaker Change: During today's call we will reference slides that are currently being webcast on our website Ashland Dot com under the Investor Relations section. We encourage you to follow along with the webcast during the call.
Speaker Change: Please turn to slide two.
Speaker Change: As a reminder, during today's call, we'll be making forward looking statements on several matters, including our financial outlook for full year fiscal 2025. These.
Speaker Change: 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.
Speaker Change: We believe any such statements are based on reasonable assumptions, but cannot assure that expectations will be achieved.
Speaker Change: Please refer to slide two of the presentation for an explanation of those risks and uncertainties and the limits applicable to forward looking statements.
Speaker Change: You can also review our most recent form.
Speaker Change: 10-K under item one a for a comprehensive discussion of the risk factors impacting our business.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: non-GAAP measures should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP.
Speaker Change: The most directly comparable GAAP measures as well as the reconciliation of those non-GAAP measures to those GAAP measures are available on our website and in the appendix of today's slide presentation.
Speaker Change: Let's turn to slide four.
Speaker Change: Guillermo will begin the call. This morning, with an overview of ashland's performance for the quarter and year.
Speaker Change: Next Kevin and the general managers will provide a more detailed review of financial results for the quarter, followed by a portfolio optimization update.
Speaker Change: Guillermo will then provide an update on <unk> financial outlook and priorities for the use.
Speaker Change: We will then open the line for your questions.
Speaker Change: I will now turn the call over to Guillermo for his opening comments Guillermo.
Guillermo: Thank you William and Hello, everyone. Thank you for your interest in Ashland and for your participation today.
Speaker Change: For today I would like to focus my update on three topics first.
Speaker Change: <unk> an overview of our Q4 performance as you will see market dynamics and business performance was generally in line with expectations.
Speaker Change: EBITDA performance gap for the quarter.
Speaker Change: It was driven by some operational challenges in one of our U S plants that impacted production and.
Speaker Change: The difficult market conditions for specialty habits in China.
Speaker Change: Second.
Speaker Change: As we planned Ashland has gone through a lot of portfolio changes through the year, we downsize CMC and empty industrial businesses and sold our nutraceutical business, we will share the underlying performance of our core portfolio in fiscal 'twenty four.
Speaker Change: We will also speak to the impact of the portfolio reset and the actions, we're taking to offset the associated earnings impact.
Speaker Change: Third we will provide an update on our guidance.
Speaker Change: This <unk> 25.
Speaker Change: You will see non bridging items that will impact our fiscal 'twenty five performance baseline.
Speaker Change: This includes items like improve absorption price erosion carryover the planned exit of our <unk> business compensation recess, and our planned restructuring and productivity actions from this baseline we will build our fiscal 'twenty five outlook as you will see we are taking a more cautious view.
Speaker Change: Developments in China, Please turn to slide six.
Speaker Change: Let's start with Q4 performance for the quarter clustered customer demand was generally consistent with our expectations.
Speaker Change: Our Q4 sales were up 1% from the prior year at $522 million.
Speaker Change: Inclusive of portfolio improvement actions and partial ownership of Nutraceuticals.
Speaker Change: Adjusted for the full quarter impact of the nutraceutical business and portfolio optimization actions revenue increased 8%.
Speaker Change: Sales volume increased for the third quarter in a row up 4% versus last year pricing was generally stable sequentially and down low single digits versus prior year, when excluding the impact of our intermediates business, which was down high single digits.
Speaker Change: The resulting overall outcome with sales in line with our outlook range adjusting or nutraceuticals.
Speaker Change: Production volumes were up significantly versus last year as we compare against last year's inventory reduction actions overall adjusted EBITDA for the quarter increased to $124 million up 68% versus prior year.
Speaker Change: As I indicated our major headwind for the quarter was generally isolated to our specialty additives business unit, where manufacturing challenges related to the startup of our Hec productivity investments resulted in under absorption versus expectations.
For the full quarter, impact of the Nutraceutical Business and Portfolio Optimization Actions, revenue increased 8%.
Sales volume increased for the third quarter in a row, up 4% versus last year. Pricing was generally stable, sequentially, and down low single digits versus prior year when excluding the impact of our intermediates business, which was down high single digits.
Speaker Change: The investments were part of an Hec optimization strategy and.
Speaker Change: And other production units at the site were not impacted.
Speaker Change: Adjusted EBITDA margins increased 950 basis points, highlighting a strong margin recovery from last year.
The resulting overall outcome was failed in line with our outlook range, adjusting for nutraceuticals.
Speaker Change: From a.
Speaker Change: Portfolio perspective, we completed the sale of the Nutraceuticals business at the end of August and we have also started the process of exiting our our book of business.
Production volumes were up significantly versus last year, as we compare against last year's inventory reduction actions. Overall, adjusted EBITDA for the quarter increased to $124 million, up 68% versus prior year.
Speaker Change: We repurchased shares in Q4 that will neutralize the EPS impact of a complete pharma Chem exit.
As I indicated, our major headwind for the quarter was generally isolated to our Specialty Analysis Business Unit, where manufacturing challenges related to the start-up of our HEC productivity investments resulted in under-absorption versus expectations.
Speaker Change: Please turn to slide seven.
Speaker Change: Sales volumes, excluding the portfolio optimization actions was up high single to low double digits and life science personal care and specialty additives.
Speaker Change: Improved organic volumes were partially offset with a portfolio optimization and lower pricing in some product lines.
The investments were part of an HEC optimization strategy and other production units at the site were not impacted.
Speaker Change: All businesses generated strong margin recoveries versus the prior year.
Adjusted EBITDA margins increased 950 basis points, highlighting a strong margin recovery from last year.
Speaker Change: The largest improvements when specialty additives and intermediates, which had the biggest inventory control actions during Q4 last year.
From a portfolio perspective, we completed the sale of the Nutraceuticals business at the end of August, and we have also started the process of exiting our Avoca business.
Speaker Change: Three of our four business units delivered adjusted EBITDA margins in the high Twenty's with an overall margin of 24%.
Speaker Change: Looking at the businesses life Science.
We repurchase shares in Q4 that will neutralize the EPS impact of a complete Pharmachem exit.
Speaker Change: His pharma business inflected positive with sales up 6%.
Speaker Change: The year over year headwinds and the share shift and VPN moderated and demand for our cellulose <unk> recipients was robust for.
Please turn to slide seven.
Sales volumes, excluding the portfolio optimization actions, was up high single to low double digits in life science, personal care, and specialty additives.
Speaker Change: For <unk>, we started to reestablish a share positions in Asia and Latin America.
Speaker Change: The Nutraceuticals divestiture supported margins during the quarter.
Improved organic volumes were partially offset with a portfolio optimization and lower pricing in some product lines.
Speaker Change: And we will see the field full benefit in fiscal 'twenty five.
All businesses generated strong margin recoveries versus the prior year. The largest improvements were in specialty additives and intermediates, which had the biggest inventory control actions during Q4 last year.
Speaker Change: Personal care had another strong quarter across most markets and regions as double digit sales growth continues strong demand continue in our largest personal care end markets skin and hair care.
Three of our four business units delivered adjusted EBITDA margins in the high 20s with an overall margin of 24%.
Speaker Change: Personal care continued to generate high quality EBITDA margins at 29% for the quarter.
Looking at the business's life science. His pharma business inflected positive with sales up 6%.
Speaker Change: For specialty additives overall sales volumes continue to recover.
Speaker Change: Versus last year up 5% demand was generally in line with expectations in most regions with some demand softening in China.
The year-over-year headwinds from the share shift in BPNE, moderated, and demand for our Cellulose-6 excipients was robust.
Speaker Change: Excluding low margin portfolio optimization actions the underlying performance of the core was strong with sales growing mid single digits.
For VPND, we started to re-establish our shared positions in Asia and Latin America.
The NutraCeuticals divestiture supported margins during the quarter.
Speaker Change: The regional recovery continues to be very mixed with pockets of increased price competition, partially offsetting the volume recovery.
and we will see the field poll benefit in fiscal 25.
Personal care had another strong quarter across most markets and regions as double-digit sales growth continued. Strong demand continued in our largest personal care and markets, skin and hair care. Personal care continues to generate high-quality EBITDA margins at 29% for the quarter.
Speaker Change: Please turn to slide eight.
Speaker Change: Next I'd like to briefly review our financial results for fiscal year 'twenty four.
Speaker Change: Organic sales volumes were up for the year characterized by slower start with the secondary second half recovery.
Speaker Change: Portfolio optimization actions reduced lower margins.
For specialty additives, overall sales volumes continued to recover versus last year, up 5%. Demand was generally in line with expectations in most regions, with some demand softening in China.
Speaker Change: More volatile sales.
Speaker Change: There was softer pricing overall with the largest decrease in intermediates.
Speaker Change: And disciplined price versus volume management in the core businesses.
Speaker Change: Normal normalization of <unk> supply chains in pharma and related share shift weighted on life science results with trough impact in Q2 and Q3.
Excluding low margin portfolio optimization actions, the underlying performance of the core was strong, with sales growing mid-single digits.
The regional recovery continues to be very mixed with pockets of increased price competition partially offsetting the volume recovery.
Speaker Change: Overall results for the year was a sales decline of 4%.
Speaker Change: Now shifting to profitability normalized production level levels during the second half and raw material deflation improved overall cost position.
Please turn sliding.
Next, I'd like to briefly review our financial results for fiscal year 24.
Speaker Change: Product mix continues to improve as we focus our strategy on high value business lines.
Organic sales lines were up for the year, characterized by a slower start with a second-and-a-half recovery.
Speaker Change: Last year it started to increase.
Speaker Change: Driven by the reset of incentive compensation after a challenging fiscal 'twenty three.
Portfolio optimization actions reduce lower margins, more volatile sales.
Speaker Change: Yes.
There was softer pricing overall, with the largest decrease in intermediates, and disciplined price versus volume management in the core businesses.
Speaker Change: First half inventory control and softer pricing, we're offsetting headwinds.
Speaker Change: Resulting in a flat year over year, adjusted EBITDA of $459 million.
and many more. Thank you. Thank you.
Speaker Change: Normalization of BPNE supply chains in pharma and related share shift weighted on life science results with trough impact in Q2 and Q3.
Speaker Change: Yeah.
Speaker Change: Our <unk> our team stayed focus on managing their business in a more intense competitive environment.
Speaker Change: We use the year to enhance our business portfolio, while advancing our innovate and globalized strategy.
Speaker Change: The overall results for the year was a sales decline of 4%.
Speaker Change: We're also moving forward with our plans to exit the <unk> business. The last piece of the pharma Chem acquisition.
Speaker Change: Now shifting to profitability. Normalized production levels during the second half and raw material deflation improved overall cost position.
Speaker Change: In summary, the overall recovery trends remained positive, but more moderate than expected.
Speaker Change: Product Mix continues to improve as we focus our strategy on high-value business lines.
Speaker Change: Looking ahead, we're forecasting challenging market conditions in fiscal 'twenty, five and are executing accordingly.
Last year saw an increase.
Speaker Change: Driven by the reset of incentive compensation after a challenging fiscal 23.
Speaker Change: We are inkjet increasingly concern about the Chinese economy, and the spillover effect into other export markets, which I will cover in more detail and our outlook. During the year, we developed plans to reduce our costs improve productivity and strengthen our competitive position.
Speaker Change: First half inventory control and software pricing were offsetting headwinds, resulting in a flat year-over-year adjusted EBITDA of $459 million.
Speaker Change: Kevin will discuss in more detail, but ultimately the actions will improve our competitive position in core technologies and offset the remaining portfolio optimization EBITDA impact.
Speaker Change: Our team stays focused on managing their business in a more intense competitive environment.
Speaker Change: We use the year to enhance our business portfolio while advancing our innovate and globalized strategy. We are also moving forward with our plans to exit the Avoca business, the last piece of the Pharma Chem acquisition.
Speaker Change: And now let me turn over the call to Kevin to review, our Q4 in more detail dependents.
Kevin: Thank you Guillermo and good morning, everyone. Please turn to slide 10.
Kevin: Total Ashland sales in the quarter were $522 million.
Speaker Change: In summary, the overall recovery trends remain positive, but more moderate than expected.
Speaker Change: Up 1% compared to prior year.
Speaker Change: Year over year quarterly volumes increased 4% as demand recovered within the personal care and specialty additives segments. These volume gains were partially offset by unfavorable life sciences volumes sale.
Speaker Change: Looking ahead, we're forecasting challenging market conditions in Fiscal 25 and are executing accordingly.
Speaker Change: We are increasingly concerned about the Chinese economy and the spillover effect into other export markets, which I will cover in more detail in our outlook.
Speaker Change: Sales volume in life Sciences was lower due to the CMC and Nutraceuticals optimization initiatives.
Speaker Change: Overall portfolio optimization initiatives reduced sales by approximately $24 million.
Speaker Change: During the year, we developed plans to reduce our costs, improve productivity, and strengthen our competitive position. Kevin will discuss in more detail, but ultimately, the actions will improve our competitive position in core technologies and offset the remaining portfolio optimization EBITDA impact.
Speaker Change: For 5% during the fourth quarter, including a partial quarter of Nutraceuticals.
Speaker Change: Regional results continue to be mixed when compared to last year sales trends in North America are improving.
Speaker Change: And now, let me turn over the call to Kevin to review our 2.4 in more detail. Kevin? Thank you, Guillermo, and good morning, everyone. Please turn to slide 10.
Speaker Change: Absolute weakness in Latin America, and Middle East Africa linger.
Speaker Change: With moderation on sequential improvement and an easing prior year.
Kevin: Total Ashland sales in the quarter were $522 million, up 1% compared to prior year.
Speaker Change: Demand was stable in Europe, but off a lower base in the prior year.
Speaker Change: Overall demand in Asia was generally stronger with a specific weakness in China coatings.
Kevin: Year-over-year quarterly volumes increased 4% as demand recovered within the personal care and specialty additive segments. These volume gains were partially offset by unfavorable life sciences volumes.
Speaker Change: Gross profit margin increased 940 basis points to 34, 3% in the quarter.
Speaker Change: Several factors contributed to this improvement primarily a sales and production volume recovery as well as better mix.
Kevin: Sales volume in Life Sciences was lower due to the CMC and Nutraceuticals optimization initiatives.
Speaker Change: It was partially offset by unfavorable pricing versus raws, primarily in pharma as well as coatings.
Speaker Change: Overall, portfolio optimization initiatives reduced sales by approximately $24 million for 5% during the fourth quarter, including a partial quarter of nutraceuticals.
Speaker Change: SG&A R&D and intangible amortization costs were 100 $111 million down $5 million from the prior year, primarily reflecting reduced amortization.
Speaker Change: Regional results continue to be mixed. When compared to last year, sales trends in North America are improving.
Speaker Change: In total ashland's adjusted EBITDA for the quarter was $124 million.
Speaker Change: Absolute weakness in Latin America and Middle East Africa linger, but with moderation on sequential improvement and an easing prior year. Demand was stable in Europe, but off a lower base in the prior year.
Speaker Change: Up 68% from the prior year.
Speaker Change: Ashland's adjusted EBITDA margin for the quarter was 23, 8% up from 14, 3% in the prior year.
Speaker Change: Overall demand into Asia was generally stronger, with a specific weakness in China coatings.
Speaker Change: Adjusted EPS, excluding acquisition amortization for the quarter was $1 26 per share up 207% from the prior year quarter.
Speaker Change: Now I will turn the call over to our general managers to review the results of each of our four operating segments our saundra.
Speaker Change: Several factors contributed to this improvement, primarily a sales and production volume recovery, as well as better mix.
Speaker Change: This was partially offset by unfavorable pricing versus ROAS, primarily in pharma as well as codex.
Speaker Change: Thank you Kevin good morning, everyone.
Speaker Change: Please turn to slide 11 for a lifestyle.
Speaker Change: Pharma reached an important inflection in the quarter by returning to growth.
Speaker Change: SG&A, R&D, and intangible amortization costs were $111 million, down $5 million from the prior year, primarily reflecting reduced amortization.
Speaker Change: Pharma demand was resilient for our market, leading cellulosic Cts where share gains have.
Speaker Change: We have more than offset softer market conditions throughout the year.
Speaker Change: In total, Ashland's adjusted EBITDA for the quarter was $124 million, up 68% from the prior year.
Speaker Change: <unk> pharma business was down versus the prior year, but improved sequentially as the team executes on share gains or per kg.
Speaker Change: Ashland's adjusted EBITDA margin for the quarter was 23.8%, up from 14.3% in the prior year.
Speaker Change: Rob can demand recovering in the quarter and the comps are easing going forward.
Speaker Change: Crop care, we accelerated the rollout of our new simpler wedding technology platform.
Speaker Change: Adjusted EPS, excluding acquisition amortization for the quarter, was $1.26 per share, up 207% from the prior year quarter.
Speaker Change: Letting a biodegradable silicone free multifunctional wetting agent for crop care formulations in September.
Speaker Change: Life Sciences, globalized business lines, Injectables and noise the coatings.
Speaker Change: <unk> grew at double digits in the quarter.
Speaker Change: Thank you, Kevin. Good morning, everyone. Please turn to slide 11 for Lifestyles.
Speaker Change: Jack the books are investments in Stifel production and technology continue to accelerate our growth in this highly attractive end market.
Speaker Change: Farmer breached an important inflection in the quarter by returning to growth.
Speaker Change: Forma Demand was resilient for our market-leading cellulosic excipients where share gains have more than offset softer market conditions throughout the year.
Speaker Change: Guillermo mentioned, we divested the Nutraceuticals business, which was down double digits prior to the sale.
Speaker Change: We also executed our export exposure to low margin nutrition business in the quarter.
Speaker Change: Our VP&D formal business was down versus the prior year, but improved sequentially as the team executes on shared gains opportunities.
Speaker Change: Overall life Sciences sales declined by 5% to $192 million.
Speaker Change: Cost care demand recovered in the quarter and the comps are easing going forward.
Speaker Change: We're fully optimization initiative reduced life sciences sales by approximately $15 million or 7% during the fourth quarter.
Speaker Change: In CropCare, we accelerated the rollout of our new SuperWetting technology platform, launching a biodegradable, silicone-free, multifunctional wetting agent for crop care formulations in September.
Speaker Change: Adjusting for the full quarter impact of Nutraceuticals and portfolio optimization sales volume grew by 13%.
Speaker Change: Life Sciences Globalized Business Lines, Injectables, and OSD Codings, both grew at double digits in the quarter.
Speaker Change: Adjusted EBITDA increased by 17% to $56 million.
Speaker Change: Primarily reflecting higher production volumes.
Speaker Change: For Injectables, our investments in people, production, and technology continue to accelerate our growth in this highly attractive end market.
Speaker Change: Mix, partially offset by lower pricing and the Nutraceuticals divestiture.
Speaker Change: Adjusted EBITDA margin increased 560 basis points to 29, 2%.
Speaker Change: As Guillermo mentioned, we divested the Nutraceuticals business, which was down double digits prior to the sale.
Speaker Change: Please turn to slide 12 for intermediate.
Speaker Change: We also executed our exposure to low-margin nutrition business in the quarter. Overall, Life Sciences sales declined by 5% to $192 million.
Speaker Change: Auto Martin and captive sales were $36 million.
Speaker Change: Down 3% from the prior year quarter.
Speaker Change: Mark can sales totaled $24 million down from $25 million in the prior year quarter.
Speaker Change: The Portfolio Optimization Initiative reduced life sciences sales by approximately $15 million, or 7%, during the fourth quarter.
Speaker Change: Primarily by increased Martin BDO volumes more than offset by lower MMP pricing.
Speaker Change: Adjusting for the full quarter impact of NutraCerticals and portfolio optimization, sales volume grew by 13%.
Speaker Change: <unk> results are primarily due to weaker demand in the electric vehicle battery end market and delayed battery plant startup.
Speaker Change: Adjusted EBITDA increased by 17% to $56 million, primarily reflecting higher production volumes
Speaker Change: Captive internal video sales were $12 million.
Speaker Change: Flat compared to the prior year quarter.
Improved Mix, Partially Obsessed by Lower Pricing and Demetrophilic Divestiture.
Speaker Change: Intermediates generated adjusted EBITDA of $10 million or 27, 8% adjusted EBITDA margin compared to $3 million in the prior year.
Adjusted EBITDA margin increased 560 basis points to 29.2%.
Speaker Change: The profit increase reflects significant.
Please turn to slide 12 for intermediates.
Speaker Change: Higher production volumes and improved mix, partially offset by lower pricing.
Speaker Change: Total merchant and captive sales were $36 million, down 3% from the prior quarter.
Speaker Change: I will now turn the call over to Jim to review the results of our personal care business Jim.
Speaker Change: Merchant sales totaled $24 million, down from $25 million in the prior year quarter, driven primarily by increased merchant BDO vols, more than offset by lower NMP pricing.
Jim: Thank you Alessandro.
Jim: Everyone. Please turn to slide 13 for personal care.
Jim: Nearly all end markets experienced improved demand, marking the second consecutive quarter with double digit sales growth.
Speaker Change: Lower NMP results are primarily due to weaker demand in the electric vehicle battery and market and delayed battery plans to start up.
Jim: Skin care and hair care generated the highest growth as compared to the prior year with regional strength in both Asia and North America.
Captive internal video sales were $12 million.
Jim: Asia delivered strong revenue growth driven by share gains and our positioning with local customers.
flat compared to the prior year quarter.
Speaker Change: Intermediates generated adjusted EBITDA of $10 million, or a 27.8% adjusted EBITDA margin compared to $3 million in the prior year.
Jim: A softer market backdrop.
Jim: In addition, North America performed well versus prior year, driven by robust consumer demand.
Speaker Change: The profit increase reflects significant higher production volumes and improved mix, partially offset by lower pricing.
Jim: As we shared in the last earnings call oral care sales in the quarter were negatively impacted by key customer order patterns.
Speaker Change: I will now turn the call over to Jim to review the results of our personal care business. Jim?
Jim: For the full year oral care sales were up mid single digits.
Jim: And we expect to lap the order timing dynamics by the second quarter of fiscal 'twenty five.
Jim: Thank you, Alessandra. Good morning, everyone. Please turn to slide 13 for personal care.
Jim: The performance impact from of OCA moderate.
Jim: Nearly all end markets experienced improved demand, marking the second consecutive quarter with double-digit sales growth.
Jim: Collecting the start of our actions to sell or exit the business.
Jim: Personal care's globalized business line.
Jim: Skin care and hair care generated the highest growth as compared to the prior year, with regional strength in both Asia and North America.
Jim: Functional and microbial protection.
Jim: Both grew at double digits in the quarter.
Jim: Delivered outsized mix impacts.
Jim: These have delivered strong revenue growth, driven by share gains and our positioning with local customers.
Jim: Microbial protection accelerated the regional asset network programs <unk> functional continued good progress on customer expansion efforts.
amidst a softer market backdrop.
Jim: In addition, North America performed well versus prior year driven by robust consumer demand.
Jim: Pricing was stable in the quarter with modestly favorable raw materials.
Jim: As we shared in the last earnings call, oral care sales in the quarter were negatively impacted by key customer order patterns.
Jim: Personal care sales increased by 11% to $162 million.
Jim: The portfolio optimization initiatives reduced personal care sales by approximately $3 million.
Jim: For the full year, oral care sales were up mid-single digits.
Jim: Our 2% during the fourth quarter.
Jim: The team executed very well delivering an adjusted EBITDA of $47 million up 31% versus prior year, primarily reflecting the impact of higher sales and improved mix.
Jim: The performance impacts from Avoka moderate, reflecting the start of our actions to sell or exit the business.
The End
Jim: Personal care's globalized business minds, bio-functionals, and microbial protection both grew at double digits in the quarter and delivered outsized mixed impact.
Jim: Adjusted EBITDA margin increased 430 basis points to 29%.
Speaker Change: I will now turn the call over to Diego to review the results of our specialty additives business Thiago.
Jim: Microbial protection accelerated the regional asset network program, and BioFunctionals continues to make good progress on customer expansion efforts.
Diego: Thank you Jim Please turn to slide 14 for specialty additives.
Diego: Overall sales volumes were up 5% versus the prior year led by a continued recovery in coatings and performance specialties.
Jim: Pricing was stable in the quarter with modestly favorable raw materials.
Personal care sales increased by 11% to $162 million.
Jim: Low margin construction exits and moderating energy weakness, partially offset our overall sales volume growth performance specialties demand has broken recover very well versus the prior year.
Jim: We're seeing strength in areas, such as adhesives infant printing as well as the emission control and economies.
Jim: The team executed very well, delivering an adjusted EBITDA of $47 million, up 31% versus prior year, primarily reflecting the impact of higher sales and improved mix.
Jim: Our regional coins recovery continues to be mixed with improving sales in rest of Asia and stability in North America, and Europe overall pricing for coatings was lower with the largest impact in China for.
Adjusted EBITDA margin increased 430 basis points to 29%.
Jim: For the quarter specialty additives sales were in line with the prior year at $100 4 million.
Jim: I will now turn the call over to Dago to review the results of our specialty additives assessment.
Thank you.
Jim: The portfolio optimization initiatives reduce specialty additives sales by $6 million or 4% during the fourth quarter adjusted for portfolio optimization sales volumes were up 9% versus the prior year.
Dago: Thank you, Jim. Please turn to slide 14 for special realities.
Dago: Overall, sales volumes were up 5% versus the prior year, led by a continued recovery in coatings and performance specialties.
Jim: Low margin construction exits and moderating energy weakness partially offset our overall sales volume growth.
Jim: Adjusted EBITDA more than doubled to $29 million, primarily reflecting the impact of significantly higher production volumes, partially offset by lower pricing.
Jim: Performance Specialty Demand has broadly recovered very well versus the prior year. We're seeing strength in areas such as adhesives, ink and printing, as well as emission control and catalyst.
Jim: Again, I'll mention our results were lower than expected on Hec operating issues of approximately $5 million, while commissioning productivity investments.
Jim: Our regional coatings recovery continues to be mixed, with improving sales in rest of Asia and stability in North America and Europe. Overall, pricing for coatings was lower, with the largest impact in China.
Jim: Production at the site has normalized starting in early October adjust.
Speaker Change: Adjusted EBITDA margins improved nearly 500 basis points versus the prior year to 21%, including a 350 basis point headwind versus expectations from the discrete operating issues I will now turn the call back to Kevin Kevin. Thanks.
Jim: For the quarter, specialty additive sales were in line with the prior year at $144 million.
Jim: The Portfolio Optimization Initiative reduced specialty additive sales by 6 million or 4% during the fourth quarter. Adjusted for portfolio optimization, sales volumes were up 9% versus the prior year.
Kevin: Thanks, Doug Please turn to slide 15.
Speaker Change: <unk> continues to have strong financial position.
Speaker Change: As of the end of September we had cash on hand of $300 million.
Jim: Adjusted EBITDA more than doubled to $29 million, primarily reflecting the impact of significantly higher production volumes partially offset by lower pricing.
Speaker Change: With total available liquidity of $896 million.
Speaker Change: Our net debt was just over $1 million.
Speaker Change: Two three turns of leverage we have no floating rate debt outstanding no long term debt maturities for the next two years and all of our outstanding debt is subject to investment grade style credit terms.
Speaker Change: At Guillermo's mention, our results were lower than expected on HEC operating issues of approximately $5 million while commissioning productivity investments.
Speaker Change: As Guillermo noted we continue to believe Ashland's stock is an attractive use of capital and deployed $150 million in the quarter to repurchase one 7 million shares.
Jim: HEC Production at the site has normalized starting in early October.
Adjust the TBDOT margins in proofs nearly 1,500 basis points.
Jim: versus the prior year to 20.1%, including a 350 basis point headwind versus expectations from the discrete operating issues. I will now turn the call back to Kevin. Kevin? Thanks, Dr. Mrozek. Please turn to slide 15.
Speaker Change: Our balanced and disciplined capital allocation approach has deployed roughly one $3 billion to share repurchases during the last four fiscal years.
Speaker Change: We have $620 million remaining under the current share repurchase authorization.
Ashland continues to have a strong financial position.
Speaker Change: As we've demonstrated we will not hesitate to act when we see value in share repurchase activity.
Kevin: As of the end of September, we had cash on hand of $300 million, with total available liquidity of $896 million.
Speaker Change: We're continuing to invest in our existing businesses and technology platforms to grow organically, while pursuing our strategy of targeted bolt on M&A opportunities focused on pharma personal care and coatings.
Kevin: Our net debt was just over $1 million and about 2.3 turns of leverage.
Jim: We have no floating rate debt outstanding, no long-term debt in the two reviews for the next two years, and all of our outstanding debt is subject to investment-grade style credit terms.
Speaker Change: Please turn to slide 16.
Speaker Change: Cash flow prudently manage production and inventory levels throughout the quarter.
Speaker Change: Our actions should better position us for more resilient performance going forward.
Speaker Change: As Guillermo noted, we continue to believe Ashland stock is an attractive use of capital and deployed $150 million in the quarter to repurchase 1.7 million shares.
Speaker Change: Overall ongoing free cash flow was healthy for the quarter and the year at $88 million and $270 million respectively.
Speaker Change: Our balanced and disciplined capital allocation approach has deployed roughly $1.3 billion to share repurchases during the last four fiscal years.
Speaker Change: Ongoing free cash flow for the year grew by 24% with an ongoing free cash flow conversion.
Speaker Change: We have $620 million remaining under the current share repurchase authorization.
Speaker Change: 39% up from 47%.
Speaker Change: Our progressive dividend policy remains an important part of our capital allocation strategy and is reflective of our confidence in the company's long term profitable growth profitable growth and cash flow generation outlook.
Speaker Change: As we've demonstrated, we will not hesitate to act when we see value in share repurchase activity.
Speaker Change: We are continuing to invest in our existing businesses and technology platforms to grow organically while pursuing our strategy of targeted bolt-on M&A opportunities focused on pharma, personal care, and coatings.
Speaker Change: With that I will now provide an update on the execute pillar of our strategic priorities and the business portfolio reset of fiscal 'twenty for performance.
Please turn to slide 16.
Speaker Change: Ashland prudently managed production and inventory levels throughout the quarter. Our actions should better position us for more resilient performance going forward.
Speaker Change: Please turn to slide 17.
Speaker Change: First we committed to four portfolio actions to start the year.
Speaker Change: AMC NMC industrial optimization and consolidation.
Speaker Change: Overall, ongoing free cash flow was healthy for the quarter and the year, at $88 million and $270 million, respectively.
Speaker Change: Divesting Nutraceuticals and rebalancing, our global Hec production network.
Speaker Change: We completed three of the four and made significant progress on the fourth.
Speaker Change: Ongoing free cash flow for this year grew by 24%, with an ongoing free cash flow conversion of 59%, up from 47%.
Speaker Change: CMC and <unk> industrial optimization and consolidation is complete with carryover volume impact into fiscal year 2025.
Speaker Change: Our progressive dividend policy remains an important part of our capital allocation strategy and is reflective of our confidence in the company's long-term profitable growth and cash flow generation outlook.
Speaker Change: Our latest advancement is the sale of our Nutraceuticals business to turn aspire capital partners. The total expected value, including net proceeds and cash tax benefits is approximately $130 million.
Speaker Change: With that, I will now provide an update on the Execute pillar of our Strategic Priorities and the Business Portfolio Reset of Fiscal 24 Performance.
Speaker Change: Our actions improved margins Rona and consistency of earnings.
Speaker Change: Adjusting fiscal 2024 for the full year impact of our actions to date reduces revenue and adjusted EBITDA.
Please turn to slide 17.
Speaker Change: First, we committed to four portfolio actions to start the year.
Speaker Change: Proximately $164 million and $30 million respectively.
Speaker Change: CMC and MC Industrial Optimization and Consolidation, Divesting Nutraceuticals, and Rebalancing our Global HEC Production Network.
Speaker Change: Most of the EBITDA impact is due to the lost gross profit of Nutraceuticals and associated stranded costs in.
Speaker Change: We completed three of the four and made significant progress on the fourth.
Speaker Change: In summary, as we look at our 2025 planning, our starting point, which adjusts for completed portfolio changes is approximately $429 million of EBITDA.
Speaker Change: CMC and MC Industrial Optimization and Consolidation is complete with carryover volume impact into fiscal year 2025.
Speaker Change: Starting last quarter, we added another portfolio action of selling or exiting our book of business.
Speaker Change: Our latest advancement is the sale of our Nutraceuticals business to Turnspire Capital Partners. The total expected value, including net proceeds and cash tax benefits, is approximately $130 million.
Speaker Change: Our share repurchases in Q4 office for full year, adjusted EPS impact of our Nutraceuticals divestiture and the future exit of a broker.
Our actions improved margins, RONA, and consistency of earnings.
Speaker Change: We have eliminated approximately $50 million and stranded costs to date and will offset the remaining $30 million EBITDA impact.
Speaker Change: Adjusting fiscal 2024 for the full year impact of our actions to date reduces revenue and adjusted EBITDA to approximately $164 million and $30 million, respectively.
Speaker Change: Please turn to slide 18.
Speaker Change: To this end, we are initiating a $30 million restructuring plan with an expected impact of $15 million in fiscal 'twenty five.
Speaker Change: Most of the EBIDTA impact is due to the lost gross profit of nutraceuticals and associated stranded costs.
Speaker Change: We are also advancing a significant manufacturing productivity initiatives within our Hec and <unk> networks or.
Speaker Change: In summary, as we look at our 2025 planning, our starting point, which adjusts for completed portfolio changes, is approximately $429 million of EBITDA.
Speaker Change: Our target is $60 million of annual savings with $5 million in fiscal 'twenty five ramping significantly in fiscal 'twenty six and beyond.
Speaker Change: Overall, we continue to expect our portfolio optimization efforts will be EBITDA neutral and these initiatives go well beyond that to improve our overall performance.
Speaker Change: Starting last quarter, we added another portfolio action of selling or exiting our VOCA business.
Speaker Change: Our share repurchases in Q4 offset the full-year adjusted EPS impact of our Nutraceuticals divestiture and the future exit of Evoca.
Speaker Change: I'll now turn the call back over to Guillermo to discuss fiscal 'twenty outlook and priorities.
Speaker Change: We have eliminated approximately $50 million in stranded costs to date and will offset the remaining $30 million EBITDA impact.
Speaker Change: Kevin.
Speaker Change: Please turn to slide 20, as we look out to fiscal 'twenty five overall uncertainty remains high with changing macroeconomic.
We've turned to slide 18.
Speaker Change: To this end, we are initiating a $30 million restructuring plan with an expected impact of $15 million in fiscal 25.
Speaker Change: Macro dynamics potentially having very different impacts on our industry and markets.
Speaker Change: While changes always create opportunities and risks given the high level of uncertainty we feel it's prudent to take a more conservative outlook and focus on building resilience to minimize risk and capitalize on opportunities.
Speaker Change: We are also advancing a significant manufacturing productivity initiative within our HEC and VPND networks.
Speaker Change: Our target is $60 million of annual savings, with $5 million in Fiscal 25, ramping significantly in Fiscal 26 and beyond.
Speaker Change: Although the known dynamics impacting the global economy include elevated, but moderating inflation mixed demand recovery and uncertain policy transitions.
Speaker Change: Overall, we continue to expect our portfolio optimization efforts to be EBITDA neutral and these initiatives go well beyond that to improve our overall performance.
Speaker Change: As a result, we have very different regional expectations.
Speaker Change: In the U S. We expect consumer segments to remain strong.
Speaker Change: I'll now turn the call back over to Guillermo to discuss Fiscal 25 Outlook and Priorities. Guillermo?
Speaker Change: And see potential upside from a strengthening construction and real estate market.
Speaker Change: We expect Europe to remain stable off a low base risks in the region stems from geopolitical dynamics.
Guillermo: Thanks, Kevin. And please turn to slide 20. As we look out to Fiscal 25, overall uncertainty remains high, with changing macroeconomic
Speaker Change: <unk> manufacturing challenges and lower consumer confidence confidence.
Guillermo: macrodynamics potentially having very different impacts on our industry and markets.
Speaker Change: We are seeing assuming a meaningful downturn in China.
Speaker Change: Uncertainty uncertainty remains very high due to the oversupply, a distressed property market and waning consumer confidence these factors impact our view of supply demand balances locally and in other export markets.
Guillermo: While changes always create opportunities and risks, given the high level of uncertainty, we feel it's prudent to take a more conservative outlook and focus on building resilience to minimize risks and capitalize on opportunities.
Speaker Change: Some of the known dynamics impacting the global economy include elevated but moderating inflation, mixed demand recovery, and uncertain policy transitions.
Speaker Change: As a result, our assessment of the overall macroeconomic environment.
Speaker Change: Suggest muted demand.
Speaker Change: And increased competitive intensity.
Speaker Change: We recognize that.
Speaker Change: That this view, maybe cautious, but we feel that it's prudent to put in perspective for our planning.
Speaker Change: We have taken actions to position Ashland to performed in a more uncertain environment, we have strong balance sheet and cash flow, which will afford a disciplined balanced approach to capital allocation.
Speaker Change: Our core markets are focused on service, serving resilient customer focused end markets.
Speaker Change: The recent portfolio actions will reduce our business volatility.
Speaker Change: We are taking actions to drive several high impact self help opportunities to improve our cost position strengthened.
Speaker Change: Our competitive position and drive results, we are well positioned to manage through a prolonged slowdown in China.
Speaker Change: Sales in China represented 10% of the company our largest exposure is in the coatings business line more.
Speaker Change: <unk> of our coatings activities in China are driven by local supply from our Nanjing HC plant and local tolling operations.
Speaker Change: That this view, maybe cautious, but we feel that it's prudent to put in perspective for our planning.
Speaker Change: We have taken actions to position Ashland to performed in a more uncertain environment, we have strong balance sheet and cash flow, which will afford a disciplined balanced approach to capital allocation.
Speaker Change: Our AUC improvement activities are globally focused and will enable us to rebalance our global supply network as needed.
Speaker Change: Please turn to slides 21.
Speaker Change: Our core markets are focused on service, serving resilient customer focused end markets.
Speaker Change: In line with my earlier comments, we are taking a more cautious position on our national outlook for fiscal 'twenty five.
Speaker Change: The recent portfolio actions will reduce our business volatility.
Speaker Change: Given our portfolio optimization actions are starting point for the year is our portfolio reset for 2024.
Speaker Change: We are taking actions to drive several high impact self help opportunities to improve our cost position and strengthen our competitive position and drive results.
Speaker Change: And known bridging items that will impact our fiscal 2005 baseline.
Speaker Change: We are well positioned to manage through a prolonged slowdown in China.
Speaker Change: For our fiscal 'twenty five baseline is as follows.
Speaker Change: Sales in China represent 10% of the company our largest exposure is in the coatings business line.
Speaker Change: First we start with the fiscal 'twenty, four EBITDA business portfolio reset of $429 million.
Speaker Change: <unk> of our coatings activities in China are driven by local supply from our Nanjing HC plant and local tolling operations.
Speaker Change: For Kevin's comment this is our based on our fiscal 'twenty for actual results, our port $59 million less $30 million impact from the nutraceutical lost gross profit and portfolio optimization stranded costs.
Speaker Change: Our Hec improvement activities are globally focused and will enable us to rebalance our global supply network as needed.
Speaker Change: Please turn to slides 21.
Speaker Change: Second we adjust for known changes impacting our fiscal 'twenty five performance, we add back about $45 million of fixed cost absorption.
Speaker Change: In line with my earlier comments, we are taking a more cautious position on our national outlook for fiscal 'twenty five.
Speaker Change: Given our portfolio optimization actions are starting point for the year is our portfolio reset for 2024.
Speaker Change: And add about $20 million of expected restructuring and productivity improvement realization.
Speaker Change: We then adjust for $20 million of negative price carryover.
Speaker Change: And known bridging items that will impact our fiscal 2005 baseline.
Speaker Change: And $15 million of EBITDA erosion from the <unk> business.
Speaker Change: For our fiscal 'twenty five baseline is as follows.
Speaker Change: Lastly, we expect $10 million of variable of reset of variable incentive compensation.
Speaker Change: First we start with the fiscal 'twenty, four EBITDA business portfolio reset up $429 million.
Speaker Change: Compensation.
Speaker Change: This puts our fiscal 'twenty five baseline at $449 million.
Speaker Change: For Kevin's comments. This is our based on our fiscal 2000 and for actual results, our port $59 million less $30 million impact from the nutraceutical lost gross profit and portfolio optimization stranded costs.
Speaker Change: From this number we then build our outlook for fiscal 'twenty four.
Speaker Change: Factors impacting our outlook include.
Speaker Change: We're starting the year in a stable position.
Speaker Change: Second we adjust for known changes impacting our fiscal 'twenty five performance.
Speaker Change: Our outlook does not reflect potential changes.
Speaker Change: Through the current economic policy.
Speaker Change: Add back about $45 million of fixed cost absorption.
Speaker Change: Overall volumes are expected to increase mid single digits.
Speaker Change: And add about $20 million of expected restructuring and productivity improvement realization.
Speaker Change: Our portfolio optimization actions should reduce the volatility and support continued mix and margin improvement throughout the year.
Speaker Change: We then adjust for $20 million of negative price carryover.
Speaker Change: Raw materials are expected to remain stable.
Speaker Change: And $15 million of EBITDA erosion from the <unk> business.
Speaker Change: Momentum in our globalized and innovate strategies are expected to be maintained.
Speaker Change: Lastly, we expect $10 million of variable of reset of variable incentive compensation.
Speaker Change: Our outlook assumes more negative developments in China coatings.
Compensation.
Speaker Change: Overall results will be driven by the balanced performance in China.
Speaker Change: This puts our fiscal 'twenty five baseline at $449 million.
Speaker Change: Our performance in other regions.
Speaker Change: In light of the elections some of the above assumptions may change.
Speaker Change: From this number we then build our outlook for fiscal 'twenty four.
Speaker Change: We will update our outlook accordingly.
Speaker Change: Factors impacting our outlook include.
Speaker Change: Taking these factors into account.
Speaker Change: We're starting the year in a stable position.
Speaker Change: Our outlook for 2025 is sales of $1 9 billion.
Speaker Change: Our outlook does not reflect potential changes.
Speaker Change: Through the current economic policy.
Speaker Change: <unk> two point.
Speaker Change: Overall volumes are expected to increase mid single digits.
Speaker Change: There are $5 billion.
Speaker Change: Adjusted EBITDA of $430 million to $470 million.
Speaker Change: Our portfolio optimization actions should reduce the volatility and support continued mix and margin improvement throughout the year.
Speaker Change: Please turn to slide 22.
Speaker Change: Although there is a high level of uncertainty we have clarity on the issues, we need to focus on while delivering controllable and sustain our strategy.
Speaker Change: Raw materials are expected to remain stable.
Speaker Change: Momentum in our globalized and innovate strategies are expected to be maintained.
Speaker Change: Our priorities for the next year follow our strategic pillars of execute globalize and innovate to enable profitable growth in the coming years.
Speaker Change: Our outlook assumes more negative developments in China coatings.
Speaker Change: Overall results will be driven by the balanced performance in China.
Speaker Change: If we look at execute we have a unique set of internal opportunities to strengthen our core businesses and improved performance maintaining disciplined price volume management is also critical.
Speaker Change: Our performance in other regions.
Speaker Change: In light of the elections some of the above assumptions may change.
Speaker Change: We will update our outlook accordingly.
Speaker Change: Taking these factors into account.
Speaker Change: As we address the challenges of today, we will continue to invest.
Speaker Change: Our outlook for 2025 is sales of $1 $9 billion.
Speaker Change: And our globalized and innovate strategy, which are critical long term growth catalysts if.
Speaker Change: <unk> two point.
Speaker Change: There are $5 billion.
Speaker Change: We will continue to improve our operating and planning processes and systems to enable our business teams to better navigate and manage our business portfolio. Please.
Adjusted EBITDA of $430 million to $470 million.
Speaker Change: Please turn to slide 22.
Speaker Change: Please turn to slide 24.
Speaker Change: Although there is a high level of uncertainty we have clarity on the issues, we need to focus on while delivering controllable and sustain our strategy.
Speaker Change: As you may have noticed in our earnings release, our Investor Day in December was rebranded to a strategy update we recognize in a challenging market conditions, improving near term performance and focused execution and controllable is critical.
Speaker Change: Our priorities for the next year follow our strategic pillars of execute globalize and innovate to enable profitable growth in the coming years. If we look at execute we have a unique set of internal opportunities to strengthen our core businesses and improved performance maintaining disciplined price volume managed.
Speaker Change: So that and we are preparing a focused agenda for this event with an emphasis on fiscal 'twenty five.
Speaker Change: The date has not changed December 10, beginning at nine a M. Eastern time in New York.
Speaker Change: <unk> is also critical.
Speaker Change: As we address the challenges of today, we will continue to invest.
Speaker Change: We are looking forward to sharing the details of our execution focus initiatives and 2025 commitments to.
Speaker Change: And our globalized and innovate strategy, which are critical long term growth catalysts.
Speaker Change: You'll have the opportunity to hear directly from Kevin our Gm's and meet with a moderated Q&A.
Speaker Change: We'll continue to improve our operating and planning processes and systems to enable our business teams to better navigate and manage our business portfolio. Please.
Speaker Change: Q&A session.
Speaker Change: We will also host alive breakout discussion on key business lines and technology platforms. So you have opportunity to interact with Ashland leaders driving these efforts.
Speaker Change: Please turn to slide 24.
Speaker Change: As you may have noticed in our earnings release, our Investor Day in December was rebranded to a strategy update we recognize in a challenging market conditions, improving near term performance and focused execution and controllable is critical.
Speaker Change: In closing I want to restate the key takeaways.
Speaker Change: From a market perspective, Q4 was generally in line with our expectations.
Speaker Change: We are finalizing our portfolio transformation, we have a healthy and well positioned portfolio focused on high quality markets.
Speaker Change: So that and we are preparing a focused agenda for this event with an emphasis on fiscal 'twenty five.
Speaker Change: We expect fiscal year 'twenty five to be another challenging year and the focus will be on balanced maintain a balanced management of our business, especially around share and price.
Speaker Change: The date has not changed December 10, beginning at nine a M. Eastern time in New York.
Speaker Change: We are looking forward to sharing the details of our execution focus initiatives and 2025 commitments to.
Speaker Change: Delivering on our self help actions.
Speaker Change: And building resilience to drive performance in a challenging environment, while maintaining capital allocation discipline.
Speaker Change: You'll have the opportunity to hear directly from Kevin our Gms and meet with a moderated Q&A.
Speaker Change: Q&A session.
Speaker Change: We will also host alive breakout discussion on key business lines and technology platforms. So you have opportunity to interact with Ashland leaders driving these efforts.
Speaker Change: Despite the near term challenges, we remain very excited about the long term potential of our business portfolio, we continue to invest and advance our long term growth catalysts I want to thank the Ashland team once again for their leadership and proactive ownership of their businesses.
Speaker Change: In closing I want to restate the key takeaways.
Speaker Change: In a dynamic environment.
Speaker Change: From a market perspective, Q4 was generally in line with our expectations.
Speaker Change: For now operators, if we can go to Q&A.
Speaker Change: We are finalizing our portfolio transformation, we have a healthy and well positioned portfolio focused on high quality markets.
Speaker Change: At this time I would like German everyone.
Speaker Change: To answer question first Star then the number one on your telephone keypad.
Speaker Change: We expect fiscal year 'twenty five to be another challenging year and the focus will be on balanced maintain a balanced management of our business, especially around share and price.
Speaker Change: Chris.
Speaker Change: For today's session that you please limit to one question and one follow up only.
Speaker Change: They will quest for Joseph a moment to compare the Q&A roster.
Speaker Change: Delivering on our self help actions.
Speaker Change: And building resilience to drive performance in a challenging environment, while maintaining capital allocation discipline.
Speaker Change: Your first question comes from the line of Michael Hoffman with Wells Fargo. Please go ahead.
Speaker Change: Despite the near term challenges, we remain very excited about the long term potential of our business portfolio, we continue to invest and advance our long term growth catalysts I want to thank the Ashland team once again for their leadership and proactive ownership of their businesses.
Speaker Change: Yes.
Speaker Change: Hey, good morning.
Speaker Change: In terms of your outlook for fiscal 'twenty five.
Speaker Change: I think there was a lot.
Speaker Change: And the dynamic environment.
Speaker Change: A bit more negative than we had thought.
Speaker Change: They started the work to the positive so so.
Speaker Change: For now operator, if we can go to Q&A.
Speaker Change: So I guess can you maybe give us a little bit of thoughts on.
Speaker Change: At this time I would like to remind everyone.
Speaker Change: Where the upside could be and then longer term.
Speaker Change: To ask a question first Star then the number one on your telephone keypad.
Speaker Change: What type of EBITDA do you think you'll assets had get too we've sort of been stuck here below 500 million.
Chris.
Speaker Change: For today's session that you please limit to one question and one follow up only.
Speaker Change: For a little bit so just maybe a longer term beyond that as Bob Guillermo.
Joseph: The real question for Joseph a moment to compare the Q&A roster.
Speaker Change: Yes. Thanks.
Speaker Change: Thanks for the question.
Speaker Change: First when you look at the at the year.
Speaker Change: Your first question comes from the line of Michael Sison with Wells Fargo. Please go ahead.
Speaker Change: Sure Mor.
Speaker Change: Data.
Speaker Change: Sure.
Speaker Change: Modeling points than we've done in the past obviously, we recognize there's a lot of changes within Ashland of all the portfolio changes and also I think theres a lot of just structural global changes that are happening, especially around Europe with.
Yes.
Speaker Change: Hey, good morning.
In terms of your outlook for fiscal 'twenty five.
Speaker Change: Yes, I think there was a law.
Speaker Change: A bit more negative than we had thought.
Speaker Change: Just manufacturing competitiveness and some shifts there and now more importantly in China. So that baseline we're starting at $4 50 sort of takes everything into account and then we can start moving forward. If you look at the range that we've looked at our model has not changed we believe the portfolio can deliver mid single digit grow.
Speaker Change: <unk> started the work to the positive so.
Speaker Change: So I guess can you maybe give us a little bit of thoughts on.
Speaker Change: Where the upside could be and then longer term.
Speaker Change: What type of EBITDA do you think.
And should get too we've sort of been stuck here below 500 million.
Speaker Change: The margins that we've been talking about so if you just do.
Speaker Change: Some scenarios if you take the midpoint that we've that we're giving and put 5% growth.
Speaker Change: A little bit so just maybe a longer term beyond that as Bob Guillermo.
Speaker Change: Yes, Mike Thanks for the question.
Speaker Change: 3% to 3% to 6% growth that'll take you to the higher end of our portfolio most of our businesses and most of the regions are performing in that range.
Speaker Change: First when you look at the at the year I mean, we've shared more.
Speaker Change: Data more.
Yes.
Speaker Change: Modeling points than we've done in the past obviously, we recognize there's a lot of changes within Ashland of all the portfolio changes and also I think theres a lot of structural global changes that are happening, especially around Europe.
Speaker Change: What we're bringing back down as we think that China is going to go through a period of prolonged period and this is not something thats going to change overnight.
Speaker Change: And that we need to factor in that it's going to become a more hyper competitive market. There is going to be a lot of oversupply.
Speaker Change: Just manufacturing competitiveness and some shifts there and now more importantly in China. So that baseline we're starting at $4 50 sort of takes everything into account and then we can start moving forward. If you look at the range that we've looked at.
Speaker Change: That we should be prudent on that were wrong. There is more upside if we're right. We're prepared so thats whats, bringing it down to us what what would take it to the downside is that the global economy doesn't perform as well and then the growth isn't as high but you get the negative side in China.
Speaker Change: Our model has not changed we believe the portfolio can deliver mid single digit growth the margins that we've been talking about so if you just do some.
Speaker Change: The part that's how we've laid it out and I think it's more about being more prudent about.
Scenarios.
You take the midpoint that we've that we're giving and put 5% growth.
Speaker Change: Outlook.
Speaker Change: So we would expect if you think of all the cost savings right now one of the headwinds is it is the portfolio optimization, we sold the nutraceutical business in August.
Speaker Change: 3% to 3% to 6% growth that'll take you to the higher end of our portfolio most of our businesses and most of the regions are performing in that range.
Speaker Change: That impacted gross profit loss in.
Speaker Change: We're bringing back down as we think that China is going to go through a period of prolonged period and this is not something thats going to change overnight.
Speaker Change: Some stranded costs.
Speaker Change: We have taken action on from an EPS.
Speaker Change: And that we need to factor in that it's going to become a more hyper competitive market. There is going to be a lot of oversupply.
Speaker Change: S perspective to neutralize it through share buybacks, but we are committed to trying to get our EBITDA back to <unk>.
Speaker Change: We should be prudent on that were wrong. There is more upside if we're right. We're prepared so thats whats, bringing it down to us what what would take it to the downside is that the global economy doesn't perform as well and then the growth isn't as high but you get the negative side in China, that's the part.
Speaker Change: A good portfolio range. If you look the last two years the sales drop versus the EBITDA drop.
Speaker Change: The EBITDA has been flat and we have had a significant.
Speaker Change: Reduction as we shed some of these businesses.
Speaker Change: So I think we're managing through that well, but we have to recognize we have almost $30 million that we're committed to take off but it's a timing issue.
Speaker Change: How we've laid it out and I think it's more about being more prudent about our outlook.
Speaker Change: And we will get about $10 million next next year and then the rest in 2006. So as you look at 2006 Youre going to get so offset of all the portfolio actions and then all these productivity actions, which we were hoping would be upside to our plan I think given some of the pricing dynamics they will hold.
Speaker Change: So we would expect.
Speaker Change: Think of all the cost savings right now one of the headwinds is it is the portfolio optimization, we sold the nutraceutical business in August.
Speaker Change: That impacted gross profit loss and and.
Speaker Change: Some stranded costs.
Speaker Change: Us.
Speaker Change: We have taken action on.
Speaker Change: In the range of performance that we want and we'll move from there moving forward. So we expect 26 to really get back into the ranges that we haven't been talking about the back over 500.
Speaker Change: From an EPS perspective to neutralize it to share buybacks, but we are committed to trying to get our EBITDA back to <unk>.
Speaker Change: A good portfolio range. If you look the last two years.
Speaker Change: And Mike I think it's also important to note that in terms of the optimization items that we've talked about this $90 million, we have very clear visibility into the vast majority of that $90 million today, it's about timing and execution around the activities that have to have.
Speaker Change: Sales drop versus the EBITDA drop.
The EBITDA has been flat and we have had a significant.
Speaker Change: Reduction as we shed some of these businesses.
Speaker Change: So I think we're managing through that well, but we have to recognize that we have.
Speaker Change: Almost $30 million that we're committed to take off but it's a timing issue.
Speaker Change: And some of these are fairly complex and they do involve our manufacturing footprint and that we're managing through all of that but again, we do have very clear visibility into the vast majority of the $90 million that we're talking about.
Speaker Change: And we will get about $10 million next next year and then the rest in 2006. So as you look at 'twenty six youre going to get.
Speaker Change: The offset of all the portfolio actions and then all these productivity actions, which we were hoping would be upside to our plan I think given some of the pricing dynamics they will hold us in.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: And the range of performance that we want and we will move from there moving forward. So we expect 26 to really get back into the ranges that we haven't been talking about the back over 500.
Speaker Change: Your next question comes from the line of John Spector with UBS. Please go ahead.
Speaker Change: And Mike I think it's also important to note that in in terms of the optimization items that we've talked about this $90 million, we have very clear visibility into the vast majority of that $90 million today, it's about timing and execution around the activities that have to happen.
Speaker Change: Hey, guys. This is James Cameron on for Josh.
Speaker Change: I just wanted to follow up on.
Speaker Change: Do you think of the release, you talked about some incremental pricing pressure offsetting volumes versus IV in the.
Speaker Change: And the outlook Victor Guillermo just gave he talked about mid single volume growth.
Speaker Change: Are you expecting further volume for further pricing pressure to offset that or does that volume growth comment imply.
Speaker Change: And some of these are fairly complex and they do involve our manufacturing footprint and now we're managing through all of that but again, we do have very clear visibility into the vast majority of the $90 million that we're talking about.
Speaker Change:
Speaker Change: Organic growth overall.
Speaker Change: So overall, we are expecting organic growth.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: I'd break it down into two separate issues.
Speaker Change: <unk>.
Speaker Change: Put China aside.
Speaker Change: In the overall portfolio, we expect overall gross volumes are.
Speaker Change: Outlook.
Speaker Change: Your next question comes from the line of John Spector with UBS. Please go ahead.
Speaker Change: <unk> seen strong to us across most of the regions. We do see some some pressures on pricing around the world more specifically for our call in the fourth quarter. There are still a lot of negotiations in the PND business in pharma as an example.
Speaker Change: Hey, guys. This is James Cameron on for Josh.
Speaker Change: I just wanted to follow up on.
Speaker Change: Think of the release, you talked about some incremental pricing pressure offsetting volumes versus IV and the <unk>.
Speaker Change: We've been able to reposition in Asia, and Latin America, the prices already reflective in the volumes are coming back or the middle of negotiations in.
Speaker Change: In the outlook Victor Guillermo just gave he talked about mid single volume growth.
Speaker Change: Are you expecting further volume for further pricing pressure to offset that or does that volume growth comment imply.
Speaker Change: In Europe, which is another big market for us.
Speaker Change: Don't want to comment about that too much because they are in progress.
Sure.
Speaker Change: Organic growth overall.
Speaker Change: But that should all work out through now and now through January which should have most of those those negotiations down. So we expect it's going to be a trade off of price versus versus <unk>.
Speaker Change: So overall, we are expecting organic growth.
Speaker Change: I'd break it down into two separate issues.
Put China aside.
Speaker Change: Volume and we're managing through that I think if you look at the China side, there's two dimensions to it one.
Speaker Change: In the overall portfolio, we expect overall gross volumes are.
Speaker Change: Outlook.
Speaker Change: One is what's happening in China.
Speaker Change: Seems strong to us across most of the regions. We do see some some pressures on pricing around the world more specifically for our call in the fourth quarter. There are still a lot of negotiations in the PND business in pharma as an example.
Speaker Change: Although it's been stable from a volume perspective for us.
Speaker Change: We have seen price erosion there.
Speaker Change: I think the part that we're looking at and it has not happened. This is more of our outlook is saying look if the demand in China.
We've been able to reposition in Asia, and Latin America, the prices already reflective in the volumes are coming back more in the middle of negotiations.
Speaker Change: If you look at China, and maybe I'll ask <unk> to make some comments here, but most of the business in China and coding specifically is.
Speaker Change: In Europe, which is another big market for us I wouldn't want to comment about that too much because they are in progress.
Speaker Change: And.
Speaker Change: 40% is repaint.
Speaker Change: That should all work out through now and now through January we should have most of those those negotiations down. So we expect it's going to be a trade off of price versus versus.
Speaker Change: No.
Speaker Change: 60% to 70% is as new construction in the U S and other parts of the world. It's the other way around where the market is repaint versus new construction. So if you step back and you look at China.
Speaker Change: Volume and we're managing through that I think if you look at the China side, there's two dimensions to it.
Speaker Change: The repaint market will probably remain stable. The question is going to be if there's a significant downturn in the property market in construction.
Speaker Change: One is what's happening in China.
Speaker Change: Although it's been stable from a volume perspective for US we have seen price erosion there.
Speaker Change: How much is that market contracting and how fast will it recover our view right now is to re to reignite the property market.
Speaker Change: I think the part that we're looking at and it has not happened. This is more of our outlook.
Speaker Change: If you require two things one restructuring all the debt.
Speaker Change: Saying look if demand.
Speaker Change: Demand in China.
Speaker Change: And to consumer confidence confidence.
Speaker Change: If you look at China, and maybe I'll ask Doug to make some comments here, but most of the business in China and coding specifically.
Speaker Change: There's too much well.
Speaker Change: <unk> of individuals in property.
Speaker Change: Property is not moving up so to convince people to buy it's also going to be so those two things aren't going to happen overnight.
Speaker Change: And.
Speaker Change: 40% is repaid.
Speaker Change: The stimulus is that can come I think will help personal care will help other things than normal spending. These are bigger spending items. So we're assuming that the next two years, probably will be a transition and this is where we expect some changes happening and they're not clear to us how theyre going to play, but we're looking at.
Speaker Change: Bill.
Speaker Change: 60% to 70% is new construction in the U S and other parts of the world. It's the other way around where the market is repaint versus new construction. So if you step back and you look at China.
Speaker Change: The repaint market will probably remain stable. The question is going to be if there's a significant downturn in the property market in construction.
Speaker Change: Price and volume adjustments.
Speaker Change: And in that market and Thats, what we are sort of factoring into into our outlook at this point in time.
Speaker Change: How much is that market contracting and how fast will it recover our view right now is to re to reignite the property market.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Just Doug.
Speaker Change: If you could comment a little bit on what youre seeing on the Dynamo in China from supplier. Thank you Guillermo yes, what I would say that definitely.
Speaker Change: If you require two things.
Speaker Change: One restructuring all the debt.
Speaker Change: And to consumer conference confidence.
Speaker Change: There is too much.
Speaker Change: Construction drives the coatings market in China.
Speaker Change: <unk> of individuals in property.
Speaker Change: Property is not moving up so to convince people to buy it's also going to be so those two things aren't going to happen overnight.
Speaker Change: More than repair and remodel that scale and kind.
Speaker Change: And from that perspective as long as they are property sector remains depressed, while we're going to see soft demand and that's why we're seeing that today.
Speaker Change: The stimulus is that can come I think it will help personal care will help other things than normal spending. These are bigger spending items. So we're assuming that the next two years, probably will be a transition and this is where we expect some changes happening and they're not clear to us how theyre going to play, but we're looking at.
Speaker Change: We saw demand you have oversupply and then you have <unk>.
Speaker Change: And pricing pressures.
Speaker Change: So to <unk> point.
Speaker Change: I actually was in the region a couple of months ago.
Speaker Change: The stimulus package was welcome I think is a stepping it up in the right direction, but we don't believe it's going to have an effect in 2025, I think it's going to be more 2026 and 2027.
Speaker Change: Both price and volume adjustments.
Speaker Change: And in that market and Thats, what we are sort of factoring into into our outlook at this point in time.
Speaker Change: Because these are really structural issues that China is dealing with so we're taking a conservative approach with total customers, we do see demand softness and Thats why we are forecasting today, where we are.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: Just Doug maybe you could comment a little bit.
Doug: You are seeing on the dynamic in China from supply. Thank you Guillermo yes, what I would say that definitely new construction drives the coatings market in China.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Doug: More than repair and remodel.
Doug: And from that perspective as long as the property sector remains depressed, while we're going to see soft demand and that's why we're seeing that today of course with soft demand you have oversupply and then you have pricing pricing pressures.
Speaker Change: Your next question comes from the line of John Yogurts with Mizuho. Please go ahead.
Speaker Change: Thank you we're about halfway through the December quarter or is there anything you can talk about in terms of bridging December quarter EBITDA to September quarter results.
Speaker Change: Two yen was point.
Speaker Change: I actually was in the region a couple of months ago.
Speaker Change: Yes, I think right now.
Speaker Change: The stimulus package was welcome I think is a stepping in the right direction.
Speaker Change: The quarter and we'll see what what the the recent elections due to some of the the.
Speaker Change: We don't believe its going to have an effect in 2025, I think it's going to be more 2026 and 2027.
Speaker Change: Demand behaviors from from customers, we are seeing the quarter, starting a little bit softer lots some of our customers, especially in Europe, indicating that theyre, taking more inventory control actions.
Speaker Change: Why because these are really structural issues that China is dealing with so we're taking a conservative conservative approach, we've talked to customers, we do see demand softness and Thats why we are forecasting today, where we are.
Speaker Change: I think this will be more or is some of the volume is going to shift in December.
Speaker Change: Okay. Thank you.
Speaker Change: So January depending on the actions they take so thats the one signal most of where we're hearing it is in Europe.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of John Roberts with Mr.
Speaker Change: We're not seeing a lot of changes and the rest of the world.
Speaker Change: Please go ahead.
Speaker Change: And China is the one that we are looking at and I think depending on some of the dynamics right now.
John Roberts: Thank you we're about halfway through the December quarter or is there anything you can talk about in terms of bridging December quarter EBITDA to September quarter results.
Speaker Change: I would expect starting end of this quarter and most likely more heavily into Q Q2, that's what we're going to start seeing some of the bigger changes.
Speaker Change: Yes, I think right now.
Speaker Change: The quarter and we'll see what what the the recent elections due to some of the.
Speaker Change: And then is there a dollar amount of buyback that we should think about for 2025 or how should we think about thinking about that.
Speaker Change: Demand behaviors from from customers, we are seeing the quarter, starting a little bit softer some of our customers, especially in Europe, indicating that theyre, taking more inventory control actions.
Speaker Change: Yes, I think and ill, let me comment in.
Speaker Change: Kevin you might want to talk more I think we've shown that we have a strong balance sheets, we have the capability depending on.
Speaker Change: So I think this will be more or is some of the volume is going to shift in December.
Speaker Change: We are very bullish on the long term.
Speaker Change: You.
Speaker Change: So January depending on the actions they take so thats the one signal most of where we're hearing it is in Europe.
Speaker Change: Heard I mean, our globalized segments are growing at double digits. We have a lot of innovation that were so nothing has really changed the long term. It's we have to go through this transition of the.
Speaker Change: We're not seeing a lot of changes and the rest of the world.
Speaker Change: The Ashland changes of our portfolio in a dynamic of structural changes in Europe, and China, and we will work through that that does not change our long term perspective, so evaluations great opportunities. We've shown that we will take action and I don't think that has changed but Kevin can you comment a little bit sure I mean, I think we demonstrated in fiscal 'twenty.
Speaker Change: And China is the one that we are looking at and I think depending on some of the dynamics right now.
Speaker Change: I would expect starting end of this quarter and most likely more heavily into Q Q2, that's what we're going to start seeing some of the bigger changes.
Speaker Change: And then is there a dollar amount of buyback that we should think about for 2025 or how should we think of that think about that.
Speaker Change: For that we're very bullish on the company and on the stock.
Speaker Change: We repurchased nearly $4 3 million shares.
Speaker Change: Yes, I think and ill, let me comment in.
Speaker Change: Spent approximately $380 million to do that.
Speaker Change: Kevin you might want to talk more I think we've shown that we have a strong balance sheets, we have the capability depending on.
Speaker Change: Very comfortable.
Speaker Change: With what we've done there from an execution perspective, the beauty of maintaining a strong balance sheet is that we have the flexibility to do a lot of different things, we can invest in the business.
Kevin: We are very bullish on the long term.
Kevin: You.
Kevin: Heard I mean, our globalized segments are growing at double digits. We have a lot of innovation that were so nothing has really changed the long term. It's we have to go through this transition of.
Speaker Change: We can continue to repurchase shares we can support a strong and growing dividend and you should expect us to do in the future of the things that we have been doing in that regard.
Kevin: The Ashland changes of our portfolio in a dynamic of structural changes in Europe, and China, and we will work through that that does not change our long term perspective, so evaluations create opportunities. We've shown that we will take action and I don't think that has changed but Kevin can you comment a little bit sure I mean, I think we demonstrated in fiscal 'twenty.
Speaker Change: So we do have the flexibility to do that.
Speaker Change: We look at fiscal 'twenty five there is there is no reason that the company shouldn't generate north of 50% free cash flow conversion to EBITDA.
Speaker Change: And that will help support the activities that we've been doing and that we will continue to do.
Speaker Change: For that we're very bullish on.
Speaker Change: Thank you.
Speaker Change: On the company and on the stock.
Speaker Change: Okay.
Speaker Change: We repurchased nearly four 3 million shares.
Speaker Change: Your last question comes from the line of Mike Harrison with Seaport Research Britton. Please go ahead.
Kevin: Spent approximately $380 million to do that.
Kevin: Very comfortable.
Mike Harrison: Hi, good morning.
Kevin: With what we've done there from an execution perspective, the beauty of maintaining a strong balance sheet is that we have the flexibility to do a lot of different things, we can invest in the business.
Speaker Change: Doug I was wondering if you could give us a.
Speaker Change: Regional breakout of what the coatings business. It looks like I, just think it would be helpful for you understood how big.
Kevin: We can continue to repurchase shares we can support a strong and growing dividend and you should expect us to do in the future of the things that we have been doing in that regard.
Speaker Change: The China coatings business is.
Speaker Change: And maybe also talk a little bit about your expectations for other regions, particularly North America, if we're seeing some relief on mortgage rates.
Kevin: So we do have the flexibility to do that.
Kevin: We look at fiscal 'twenty five there is theres no reason that the company shouldn't generate north of 50% free cash flow conversion to EBITDA.
Speaker Change: Yes.
Speaker Change: You for the question.
Speaker Change: We're seeing today I would say the market in North America, it's pretty stable.
Kevin: And that will help support the activities that we've been doing and that we will continue to do.
Speaker Change: Now with the interest rates coming down and some of the predictions that we see out there, but we expect the growth rates into 3% to 4% that's what the American Coatings Association is insane.
Speaker Change: Thank you.
Kevin: Okay.
Speaker Change: Your last question comes from the line of Mike Harrison with Seaport Research Britton. Please go ahead.
Speaker Change: Europe has its challenges, but Europe is growing well for us I would say so I would say Europe looking into 2025 I will also consider it a stable market. There are some interesting focus of growth for us last year, So middle East Africa, India. That's that's a very interesting one in USA a country that continues to grow and.
Mike Harrison: Hi, good morning.
Speaker Change: Doug I was wondering if you could give us a.
Speaker Change: Regional breakout of what the coatings business. It looks like I, just think it would be helpful for you understood how big.
Speaker Change: The China coatings business is.
Speaker Change: And we're actually.
Speaker Change: We feel optimistic about that one risks.
Speaker Change: And maybe also talk a little bit about your expectations for other regions, particularly North America, if we're seeing some relief on mortgage rates.
Speaker Change: Rest of Asia, I would say it is social stable for us a slightly growing I think really the issue keeps going back to China.
Speaker Change: We have the structural fundamental issue and and ask why do we have to deal with in 2000.
Speaker Change: Yes. Thanks.
Speaker Change: For the question.
Speaker Change: We are seeing today I would say the market in North America, it's pretty stable.
Speaker Change: 25, but overall the rest of the market I would say stable.
Speaker Change: Now with the interest rates coming down and some of the predictions that we see out there and we expect that growth rate to 3% to 4% that's what the American Qantas Association is insane.
Speaker Change: Stable.
Speaker Change: Producing ahead of the paint season, so where we are.
Speaker Change: Don't expect anything other than really dealing with the China issue and Mike to your question, China is about 25% of the coatings business. So if you look at our footprint, we have a very well balanced footprint.
Speaker Change: Europe has its challenges, but Europe is growing well for us I would say so I would say Europe looking into 2025 I will also consider it a stable market. There are some interesting pockets of growth for us last year. So immediately stop again and yet that's a very interesting one.
Speaker Change: Clients in Europe, and the U S and China.
Speaker Change: So until now most all of our production in China State in China.
Speaker Change: Part of our options, obviously says we rebalanced and this is all the work we've been doing on our HFC network is that we can rebalance and export change where we export.
Speaker Change: A country that continues to grow and we're actually.
Speaker Change: We feel optimistic about that one.
Speaker Change: Rest of Asia, I would say, it's stable for us a slightly growing I think really the issue it keeps going back to China.
Speaker Change: What we ship from where.
Speaker Change: But we're going to wait and see how some of these comments that we're seeing have not happened yet.
Speaker Change: There we have the structural fundamental issue and and that's why we have to deal with in.
Speaker Change: These are our expectations, we're looking forward and we're taking this concern more conservative view.
Speaker Change: 2025, but overall the rest of the market I would say.
Speaker Change: But we have flexibility to respond depending on what happens I think the bigger question right now is going to be.
Speaker Change: Table.
Speaker Change: Producing ahead of the paint season, so where we are.
Speaker Change: We don't expect anything other than really dealing with the China issue.
Speaker Change: With the recent elections, what does that do to trade policies. This is.
Speaker Change: For us the one business, probably see sees a lot more impact because of some of these dynamics.
Speaker Change: Alright. Thank you for that and then just making sure that I understand what was going on with the operational issues that you incurred during.
Speaker Change: The fourth quarter. It sounds like that was related to fixed cost absorption within specialty additives and I guess my question is if we're going to see some prolonged weakness in China coatings in particular could we potentially see some lower utilization rates and some weaker fixed cost.
Speaker Change: Option.
Speaker Change: In the first part of fiscal 'twenty, five as if thats something thats potentially baked into your <unk>.
Speaker Change: And to your guidance.
Speaker Change: If you look at from a volume first what happened in <unk>.
Speaker Change: In the U S.
Speaker Change: A plant.
Speaker Change: We're investing to make some changes for future productivity. So that we have more flexibility of.
Speaker Change: What we make where as we as we move forward, we had issues in the startup and Thats really what caused it's an absorption issue the plant did not run.
Speaker Change: As expected during the month.
Speaker Change: During the quarter and then.
Speaker Change: No not not related we had another issue or just an equipment failure is as we were starting up so just prolonged a little bit longer.
Speaker Change: The delay so it is an absorption issue and the plants running in.
Speaker Change: <unk> will run to the normal production plants that we have so.
Speaker Change: Expectation, we will recover some of this into into the year.
Speaker Change: No.
Speaker Change: The issue in China is all our production in China is for China.
Speaker Change: So depending on what happens there that's the one area that we will adjust and that is factored into our guidance range upside downside.
Speaker Change: Is it not happen, but we are factoring if we needed to do that in the scenarios.
Speaker Change: Guide this rich.
Speaker Change: Alright, thanks very much.
Speaker Change: There are no other questions.
Speaker Change: I'll now turn the call back over to <unk> for closing remarks.
Speaker Change: Well. Thank you everyone for your participation I know that there is a lot of data on a lot of outlook comments that we have we look forward and in a few weeks, we will see everybody in New York and also calls in the coming days. So I'm sure that we'll have a chance to go in more detail.
Speaker Change: I can give you a little bit more color I do want to and just say we have.
Speaker Change: Although we are taking.
Speaker Change: Our conservative view on one region of the World and specifically one business that gets impacted the most the majority of the portfolio. We're very excited where we're going everything that we have been executing has been working for our plans.
Speaker Change: And the future really is now about staying focus we got a deal with the reality of.
Speaker Change: The current situation in terms of the business.
Speaker Change: But we need to perform both in the long term stay focus we're investing we're growing and manage the near term and that's what we'll do look forward to talking to you in.
Speaker Change: Few weeks thank you.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.