Ashland Inc.

Thank you, Amber. Hello, everyone, and welcome to Ashland's second quarter fiscal year 2023 earnings conference call and webcast. My name is Seth Morozek, Director, Ashland Investor Relations. Joining me on the call today are Guillermo Novo, Ashland Chair and Chief Executive Officer, and Kevin Willis, Senior Vice President and Chief Financial Officer. We released results for the quarter, and on March 31, 2023, at approximately 5.15 p.m. Eastern Time, Yesterday, May 2nd, the news release issued last night was furnished to the SEC in a form 8K. During today'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. Please turn to slide two. As a reminder, during today's call, we'll be making forward-looking statements on several matters, including our outlook for fiscal year 23, 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 an 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 1A 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 on Ashland on an adjusted basis, which are non-GAAP financial measures. 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. Non-GAAP measures should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP. The most directly comparable gap measures as well as reconciliations of the non-gap measures to those gap measures are available on our website and in the appendix of today's slide presentation. Please turn to slide three. The video we played at the opening of the webcast today provides a peek at the truly immersive experience that Ashland provided customers when we launched eight new personal care products steeped in a foundation of environmental, social, and governance, or ESG, during the recent InCosmetics Global Trade Show in Barcelona, Spain. To learn more behind the range of these newly launched innovations, visit our webpage at www.ashland.com forward slash incause23. Guillermo will begin the call this morning with an overview of Ashland's performance and results in the second quarter. Next, Kevin will provide a more detailed review of results in the quarter. Guillermo will then provide additional commentary related to Ashland's financial outlook for fiscal year 2023. We will then open the line for questions. Please turn to slide five, and I will turn the call over to Guillermo for his opening comments. Guillermo?

Thank you, Seth, and hello, everyone. Thank you for your interest in Ashland and your participation today. Results in the March quarter were consistent with our expectations at the beginning of the quarter. Total sales for the quarter were consistent with prior year. Our global pharma business performed incredibly well, and the inflation recovery actions taken last year and early this year continue to benefit overall results. However, to state the obvious, we continue to operate in a challenging global environment with ongoing macroeconomic uncertainty and diminished demand visibility. The demand dynamics became even more pronounced in the second half of April. Themes for the quarter were China COVID lockdown and reopening, destocking, and the impact of the winter storm. The big question now is, what is happening to volume demand. Given the historic level of destocking activities, I'd reframe the question into two parts. How is consumer demand and how is customer demand? From our position in the value chain, the historic destocking reset has clouded visibility to the true underlying consumer demand. Consumer demand seems to be more robust than our customer demand given destocking. Customer destocking dynamics we saw during the December quarter have slowed but are still present in certain end markets and continued into April. The reopening of China has been slower than expected and visibility has also been muted given customer destocking. As a result, our demand has varied across segments. While demand for pharma products remains strong, we continue to see weak demand and destocking in other segments and markets like nutrition and construction. Margins and earnings were mostly impacted by the costs associated with the winter storm at the end of last year and the absorption impact of running plants at lower demand. And we completed $200 million of share repurchase during the quarter. I will discuss our outlook and the actions we're taking later in the call. Please turn to slide six. As you can see in the chart in the left, year-over-year sales growth in life science was very strong, while the top-line growth in personal care specialty additives was below prior year due to factors I referenced earlier. And despite the margin impact of the winter storm, underlying margins remain healthy. While there are many global uncertainties in the horizon, the Ashland team is performing well and executing on the actions that are within our controls. As you saw in our news release last night, we have adjusted our sales and EBITDA outlook for the fiscal year. I will discuss these changes in more detail at the end of the call, but I want to stress a few key takeaways about the changes. Our reductions to the outlook ranges is a proactive decision based upon the dynamics we saw unfold in April. We are taking inventory control actions which accounts for the EBITDA reduction at the midpoint. At the low end of the range, it presumes that additional inventory control actions are required later in the year. Let me turn over the call to Kevin to review our Q2 results in more detail, and then I'll come back. Kevin?

Thank you, Guillermo, and good morning, everyone. Please turn to slide eight. Total sales in the quarter were $603 million, essentially flat with prior year, driven by continued inflation recovery and strong demand for pharma ingredients, mostly offset by continued customer destocking. Sales increased by 2% on a constant currency basis. Gross margin declined to 32.7% as cost recovery by the commercial teams was offset by increased input costs and the $13 million of cost impact from the winter storm in December. When excluding key items, SG&A, R&D, and intangible amortization costs were $110 million, down from $119 million in the prior year. In total, Ashland's adjusted EBITDA for the quarter was $145 million, down 11% from $163 million in the prior year. Note that unfavorable foreign currency negatively impacted adjusted EBITDA by $8 million during the quarter. Ashland's adjusted EBITDA margin for the quarter was 24%. Adjusted EPS, excluding acquisition amortization for the quarter, was $1.43 per share, down roughly 5% from the prior year. Ongoing free cash flow was $37 million for the quarter, a large improvement from the prior year, primarily reflecting changes in working capital. Now let's review the results of each of our four operating segments. Please turn to slide nine. As Guillermo referenced at the beginning of today's call, life sciences delivered another very strong quarter, driven by our global pharmaceutical ingredients business. Pharma demand remained strong. Product mix was favorable. The team executed on discipline, cost recovery, all contributing to margin expansion. Unfavorable currency impact was a partial offset to the strong performance in life sciences. In total, life sciences sales increased by 18% to $240 million, while adjusted EBITDA increased by 29% to $75 million. This includes $5 million of cost related to the winter storm. Adjusted EBITDA margin increased meaningfully to more than 31%. Please turn to slide 10. Personal care sales were impacted by continued inventory destocking actions by certain customers. As with Life Sciences, the team continued to realize disciplined cost recovery through pricing. For the quarter, personal care sales declined by 3% to $167 million, while adjusted EBITDA declined 29% to $32 million. This includes $6 million of costs related to the winter storm. Adjusted EBITDA margin also declined to roughly 21%. Unfavorable currency impact was also a headwind to personal care results in the quarter. Please turn to slide 11. Specialty additives also felt the impact of reduced demand primarily related to continued inventory destocking by certain customers, particularly in the construction and performance specialties businesses. The reduced demand more than offset improved cost recovery for the segment. For the quarter, specialty additive sales declined by 12% to $161 million, while adjusted EBITDA declined by 29% to $34 million. This includes $1 million of costs related to the winter storm. Adjusted EBITDA margin also declined to about 21% for the quarter. Please turn to slide 12. Intermediates reported sales of $51 million down 23% compared to the prior year, driven by consistent merchant market pricing, lower volumes of higher value derivatives. Intermediates reported adjusted EBITDA of $20 million, a decrease of 33% compared to prior year, and adjusted EBITDA margin declining to 39.2%. Please turn to slide 13. As we reported last night, during the quarter and into early April, Ashland completed a total of $200 million of share repurchases under two separate programs. The combined programs reduced our outstanding share count by approximately 1.95 million shares, or roughly 3.6%. Ashland now has $300 million remaining under the existing Evergreen share repurchase authorization that was approved by Ashland's Board of Directors last year. As of the quarter close on March 31st, we had cash on hand of about $400 million with total available liquidity of roughly $1.1 billion. Our net debt is $929 million, which is about 1.6 turns of leverage. We have no floating rate debt outstanding, no long-term debt maturities for the next four years, and all of our outstanding debt is subject to investment grade style credit terms. we're investing in our existing business to grow organically and continue to pursue our strategy of enhanced profitable growth through targeted bolt-on M&A opportunities focused on pharma, personal care, and coatings. Against the backdrop of global uncertainty, Ashland has a strong balance sheet with the flexibility to pursue our targeted growth strategy. With that, I'll turn the call back over to Guillermo to discuss our outlook for fiscal year 23. Guillermo?