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Ashland sets out speciality-based growth strategy

Ashland has outlined its three-year growth strategy at a conference for analysts and investors in New York, following on from the completion of its acquisition of ISP.

GLOBAL

Ashland has outlined its three-year growth strategy at a conference for analysts and investors in New York, following on from the completion of its acquisition of ISP. Earlier in the month, the company had made two more acquisitions that further its move into speciality chemicals.

Key targets for fiscal 2014 include raising EBITDA from a pro forma $1.2 billion in 2011 to $1.7 billion and the EBITDA margin from 14.2% to 17-18%, while earnings per share are to increase from $3.902 to $9.50-10.50. The company also expects to increase capital expenditures from $201 million to $350 million in this period.

"Ashland today is a fundamentally different company than we were several years ago," said James O'Brien, chairman and CEO. "Since 2004, we have completely transformed our business portfolio, divesting most of the cyclical businesses and focusing on higher-margin, faster-growing segments comprising speciality ingredients, water technologies, performance materials and consumer markets."

With this process complete, he added, the focus is on "driving top-line growth and earnings expansion through organic volume growth, margin expansion, cost efficiencies and strategic capital allocation". The acquisition of ISP was the concluding part of this. Pro forma EBITDA has nearly doubled since 2004 and over half of sales come from outside the US, as opposed to 12% in 2004.

O'Brien - Ashland  has transformed itself since 2004

The new Ashland is divided into four business units: Ashland Specialty Ingredients, Ashland Water Technologies, Ashland Performance Materials and Ashland Consumer Markets. Specialty Ingredients is the most attractive in growth terms, accounting for about 30% of sales but over 50% of EBITDA. Ashland sees strong growth opportunities for it in pharmaceuticals, personal care and coatings.

Water Technologies, meanwhile is the world leader in speciality chemicals and services for the pulp and paper industries. Openings are seen in such vast industrial markets such as mining and beverages, as well as pulp and paper.

Performance Materials mainly supplies resins, speciality adhesives and elastomers and is targeting growth in areas such as wind energy and mining. Consumer Markets, finally, is best known for the Valvoline brand of vehicle and is targeting continued international growth and new product launches.

Earlier, Ashland had sold two non-core businesses. Terms were not disclosed in either case and both deals should close by early January at the latest. The company said on both occasions that it was making the sale "in order to better focus its resources on more strategic assets and product lines".

The aviation and refrigerant lubricants business of the Hercules subsidiary, which makes polyol- and polyester-based synlubes and turned over about $50 million last year, is to be sold to Monument Chemicals. The transaction includes a manufacturing facility in Louisiana, Missouri, which Monument will continue to operate.

Meanwhile, the PVA homopolymers and copolymers business within Performance Materials has been sold to Celanese. The deal does not include any real estate or manufacturing facilities. The business, which had sales of about $45 million in 2010, makes the Flexbond and Vinac emulsion brands. It will toll manufacture for Celanese until the transaction is complete.

 

 

From Online Issue: December 2011