Ashland Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Ashland Global Holdings first quarter 2020 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, please press star 1 on your telephone. Please be advised today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker, Seth Morozek, Director of Investor Relations. Please go ahead.

Thank you, Sydney. Good morning, everyone, and welcome to Ashland's first quarter fiscal 2020 earnings conference call and webcast. My name is Seth Morozek, Director, Ashland Investor Relations. Joining me on the call today are Guillermo Novo, Ashland's Chairman and Chief Executive Officer, and Kevin Willis, Senior Vice President and Chief Financial Officer. We released preliminary results for the quarter ended December 31st, 2019, at approximately 5 p.m. Eastern Time yesterday, January 27th. The news release issued last night was furnished to the SEC in a Form 8-K. During this morning's call, we will reference slides that are currently being webcast on our website, Ashland.com, under the Investor Relations section. The slides can also be found on the Investor Relations section of our website. we encourage you to follow along with the webcast during the call. Please turn to slide two. As a reminder, during today's call, we will be making forward-looking statements on several matters, including our outlook for fiscal year 2020. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections. We believe any such statements are based on reasonable assumptions but cannot assure that such expectations will be achieved. Please refer to slide two of the presentation for a more complete explanation of those risks and uncertainties and the limits applicable to forward-looking statements. Please also note that we will be referring to certain actual and projected financial metrics of Ashland on an adjusted basis, which are non-GAAP financial measures. We will refer to these measures as adjusted and present them in order to supplement your understanding and assessment of the financial performance of our ongoing business. Non-GAAP measures should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP. The most directly comparable GAAP measures as well as reconciliations of the non-GAAP measures to those GAAP measures are available on our website and in the appendix of today's slide presentation. Please turn to slide three. Guillermo will begin the call this morning with an overview of results in the first fiscal quarter. He will then provide an update on the work that has been done to realign the Ashland business structure. Next, Kevin will review financial results for the fiscal first quarter and discuss the debt offering redemption that was completed in January. Finally, Guillermo will close with key accomplishments that have been achieved over the past few months in addition to providing his thoughts on important next steps. We will then open the line for questions. Please turn to slide five, and I will now turn the call over to Guillermo for his opening comments. Guillermo?

Thank you, Seth, and good morning to everyone. It's an exciting and dynamic time here at Ashland, and I'm incredibly energized by what we have accomplished and the opportunities that lie ahead. I want to thank the Ashland team for the strong support and enthusiasm you have demonstrated during this transition. Today, I'll start with comments about the high-level drivers of our performance in Q1, then discuss the business realignment that continues as we speak. Following my remarks, I'll turn the call over to Kevin to take you through the details. Q1 performance was below prior year, driven by softer market demand, prior year carryover items, and our catalyst change at our Lima facility. We experienced no significant surprises in Q1 other than the extended turnaround costs at our Lima facility as a result of an unexpected need for additional maintenance work. We had another strong quarter in terms of EH&S performance, and we continue to advance our sustainability objectives in terms of innovation and operations. As expected, market demand remains soft in the quarter, in both the industrial and consumer markets. In pharma, we had a difficult comp relative to a very strong prior year Q1 and saw some customers adjust their inventory levels. In personal care, we continue to see demand softness in hair care. In oral care, results were stronger than planned, driven by some new product introductions by key customers. For adhesives, We saw general softness across most segments, especially transportation, but the construction market was strong. We continue to see deflationary pressures in both pricing and raw material costs. Coatings demand remained soft during the quarter. As we communicated, we also had the prior year carryover headwinds of business losses and tailwinds of improved costs. From a cost perspective, we continue to realize benefits from the cost reduction program and have begun taking additional cost improvement actions. I will talk more about these actions later in the call. Now I'd like to speak to you about the progress we have made realigning Ashland's business structure. Please turn to slide seven. As we discussed during the last call, we are moving from a functional model to a business-led one. As part of this change, we are putting in place a new business structure to better align strategy, resources, and capital allocation, and improve execution. This change recognizes that we have a diverse portfolio of specialty businesses with different profiles and requirements to drive success. This will move decision-making and accountability to the business units and their leaders. Incentive compensation will be heavily aligned to business unit results. In forming the teams, we are leveraging our internal talent and complementing it with targeted external talent. I'm very pleased with the progress we've made in such a short period of time. Please turn to slide eight. Our business will be made up of the following. The consumer specialties group will include our life science, and our personal care and household business units. Note that the Life Science BU will hold our current pharma and health and wellness businesses. The health and wellness business will include Ashland's core food additives business as well as Pharmachem's nutrition activities. Personal care and household BU will include Ashland's existing businesses as well as the Avoca fixative business from Pharmachem. The industrial specialties group will be made up of our specialty additives and performance adhesives business units. Specialty additives will contain our coatings, construction, and performance additives business lines. Performance adhesives will remain unchanged. We will continue to run our intermediates and solvents business as a separate segment and business. Although we will allocate to the business units some of the corporate managed costs linked to their operating activities, like IT, HR, EH&S, and other functions, we will have a corporate segment that holds all corporate governance costs. Note that in addition to aligning our resources to the businesses, we are also aligning our core assets to them. Each business will be accountable for the operations and performance of the assets in their business and for the supply of all the demand of the other business units. Please turn to slide nine. This business model change will be a fundamental change in how we run our businesses and the company. We expect these changes to increase our focus and in turn improve decision-making, our agility, and build ownership and Business units will own their strategies and be accountable for their operating performance. This is not a one-size-fits-all model. They will have the dedicated resources and full empowerment to make decisions, including their business models and cost structures. The intent is for the new business structures to better align strategy, resources, and capital allocation, and, of course, improve execution. Aligning our incentive compensation to the line of sight of our business units and their teams is also a significant change. Their decisions and actions drive our performance, and as such, BU Incentive Comp will be heavily aligned to the business unit's results. We have accomplished a lot in a short period of time. All the general managers have been selected and will all be in place starting February 1st. We have defined the business units, their teams, and aligned their assets. And we're now in the process of finalizing the financials. As part of the actions taken, we have started to reduce our cost structure. For this coming quarter, we will be focused on operationalizing the new business units. We expect them to update all their strategies and define their business models and cost structures. As the BU's take control of their operations, we will begin the process of rightsizing other corporate structures. Let me now pass the call over to Kevin to review our results, and then I'll come back with some closing comments.