Ashland Inc.

Good day, and thank you for standing by, and welcome to the Ashland Global Holdings Inc. Third Quarter 2021 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. To ask a question during the session, you'll need to press star 1 on your telephones. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Seth Morozek, Ashland Director of Investor Relations. Please go ahead.

Thank you, Justin. Good morning, everyone, and welcome to Ashland's third quarter fiscal year 2021 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 June 30th, 2021, at approximately 5 p.m. Eastern Time yesterday, July 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. We encourage you to follow along with the webcast during the call. As a reminder, during today's call, we will be making forward-looking statements on several matters, including our outlook for fiscal year 2021. 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. You can also review our most recent Form 10-K under Item 1-A for a comprehensive discussion of the risk factors impacting our business. 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 Ashland's results in the third fiscal quarter. Next, Kevin will provide a more detailed review of financial results for the quarter. Finally, Guillermo will close with key priorities and planning in the current economic environment in addition to providing his thoughts and important next steps. We will then open the line for questions. On a final note, we continue to work on planning for an upcoming Investor Day. Our intent is to host this event during the back end of the calendar year. Please turn to slide five, and I will turn the call over to Guillermo for his opening comments. Guillermo?

Guillermo Diaz- Thank you, Seth, and good morning to everyone. Thank you for your interest in Ashland and your participation this morning. Before I start, I would like to clarify that we will not be making any comments or responding to any questions about our ongoing strategic review process for our performance adhesive business. For now, I would just comment that the process is well underway and going well with significant interest. As you will hear during the call, in line with our June 10th update, the major issues impacting our Q3 performance revolved around the supply chain challenges linked to shipping constraints and raw material availability, as well as the pace of raw material cost inflation. For the most part, market dynamics for our underlying businesses business performance behaved in line with our commentary from prior calls. Despite the supply chain headwinds, we continue to operate safely with a clear focus on the safety and well-being of our employees as we manage through the challenges of the pandemic. I'm also pleased by the progress our business units are making as we continue to execute our strategy. Before I comment on our Q3 performance, let me start by summarizing some of the tailwinds and headwinds we saw in the quarter. From the tailwind side, our self-help cost savings activities progressed as planned. We continue to see strong recovery in industrial and market demand, and our nutraceutical and nutrition business continue to deliver improved performance. We saw favorable impact of FX, of the Shopee acquisition, and BDO pricing. And our capital discipline also delivered strong free cash flow and free cash flow conversions. On the headwind side, global constraints on logistics and shipping continue to impact sales and cost. As an example, June confirmed orders for direct shipments to customers on ocean freight were impacted by the significant drop in on-time shipping reliability. This has been a recurring theme for the last few months. For June, we had $20 to $30 million of orders that were at warehouses ready to be loaded on ships but were not invoiced due to delays in shipping arrivals and loading. Most of these orders were invoiced in early July. Indications are that these shipping reliability challenges will persist for the foreseeable future. While material availability continues to be a challenge, causing on-plan shutdowns as well as inefficiencies in our manufacturing productivity that negatively impacted costs. For a performance-adhesive business, volume was strong, but the magnitude and pace of raw material inflation impacted margins. The business continues to act on pricing to cover these cost increases, but the incremental inflation has impacted the timing of margin recovery. Personal care dynamics have not changed much as the pandemic-related impact on consumer behaviors continues to delay demand recovery. Additionally, as we discussed in the last call, we continue to see demand weakness in hand sanitizers and Avoca. Clearly, although the longer-term dynamics remain favorable, managing through these near-term supply challenges and cost inflation dynamics is a critical priority and focus for all businesses. Please turn to slide six. This quarter presented new challenges for our teams and our customers. However, regardless of these near-term challenges, we continue to deliver growth and improve performance. Sales of $637 million were up 11% by continued recovery of our industrial businesses and continued resilience of our consumer businesses. We're also starting to see the benefits of the Shulke acquisition. For INS, the strength was driven by strong BDO pricing. Currency was favorable by 3%. Life sciences continues to perform well. Pharma sales were down compared to a strong prior year period as customers worked to build inventory as the global pandemic took hold. Sales in the quarter were also impacted by ocean freight shipping challenges. Nutraceutical demand remained strong, and the team has demonstrated strong year-over-year growth thanks to the concerted efforts to change the business trajectory. In personal care, the global pandemic continues to impact some market segments linked to consumer social and recreational behavior. We have not seen the global demand recovery to date, but we're confident that it will develop once there is broader vaccination across the globe. Specialty additives continues to see strong demand recovery across all markets except energy. Global architectural coatings business demonstrated significant volume recovery driven by both DIY and contractor segments. Our performance adhesive business also saw broad-based growth across applications. However, the availability of certain raw materials continues to constrain sales. EBITDA of $148 million was up 4%. The impact of strong sales And our self-help actions were offset by higher costs from supply chain and raw materials impacting logistics and manufacturing costs, as well as raw material costs and mix. Although we took significant pricing actions, they were offset by additional incremental raw material cost inflation. More pricing actions are already being implemented. Our free cash flow conversion focus continues to deliver strong results generating $210 million of free cash flow in the quarter. Despite these challenges during the quarter, our business priorities remain unchanged, demonstrating organic growth, expanding margins, and improving free cash flow. I'm pleased by the progress made by the Aspen team during the quarter. They managed very well during another difficult external crisis, a challenge ensuring the safety of all our employees, that our customers were supplied, and that we maximize our performance. Let me now pass it over to Kevin for the financial update. Kevin?