Ashland Inc.

Good day and welcome to the Ashland Inc. fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Seth Morozak, Director of Investor Relations. Please go ahead.

Thank you, Abigail. Hello, everyone, and welcome to Ashland's fourth quarter fiscal year 2023 earnings conference call and webcast. My name is Seth Morozak, 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 ended September 30th, 2023 at approximately 5 p.m. Eastern time yesterday, November 8th. The news release issued last night was furnished to the SEC in a Form 8-K. 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 will be making forward-looking statements on several matters, including our financial outlook for fiscal year 2024. 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 in 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 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 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 performance and results in the fourth quarter and fiscal year. Next, Kevin will provide a more detailed review of financial results for the quarter. Guillermo will then provide additional commentary related to Ashland's financial outlook for fiscal year 24. We will then open your line for questions. Now, please turn to slide five, and I will turn the call over to Guillermo for his opening comments. Guillermo?

Thank you, Seth, and hello to everyone. Thank you for your interest in Ashland and for your participation today. The results in the September quarter were consistent with a pre-announcement that we issued last week. Customer demand was generally in line with our expectations. Although the stocking has stabilized relative to prior year, we continue to feel the impact across several markets. Pricing remained favorable compared to prior year across all our core segments in the integrated business. However, intermediates did experience price declines in both the merchant business as well as the internal BDO transfer price. By far, the biggest factor impacting Q4 earnings was the proactive inventory control actions we took. These actions are above our original expectations. Given the uncertainty in the outlook and the different scenarios we considered, we took the approach to assume a more conservative scenario for our planning action. The resulting lower inventory position and improved cash flow will position us better for better operating of resilience across multiple scenarios over the next couple of quarters. These inventory control actions resulted in lower production volumes and nearly $60 million in cost impact. The resulting benefit was a reduction in inventory of about 86 million compared to June 30th and a generation $4 million in ongoing free cash flow during the quarter. While the $74 million of adjusted EBITDA was below our original expectations, these actions were necessary to meet our commitment to maintain operating, balance sheet, and cash discipline during times of uncertain customer demand. Please turn to slide six. Fiscal 2023 was a challenging year. As I indicated, Reduced volumes resulting from the unprecedented and extended customer destocking was the largest single factor impacting top line results during fiscal 23. Volumes were down 18% during the year due to these impacts. The lower volumes impacted both sales and gross profit, as well as plant costs and unit costs. And while pricing was favorable for the year, it was not enough to fully offset the significant reduction in volume. The net result for the year was sales down roughly $200 million, or about 8%, and adjusted EBITDA was down about $131 million, or roughly 22%. The lower demand and inventory destocking was clearly very challenging and disruptive for our manufacturing operations. although the timing of some of the inventory control actions varied across the year. In hindsight, if we average the timing of these actions across the year, the net result would not have changed. The bottom line of production and manufacturing unit costs for the year increased significantly due to the lower production volumes and resulting lower cost absorption. Discipline, SARD, variable expense management helped. but the broader underlying costs were in line with our original plans. The only meaningful cost reduction resulted from the reduced incentive compensation based on the lower performance. Let me close my fiscal 2023 comments with some reflections. On the positive side, it's good to see that consumer demand remains resilient for the core markets we serve. As our customers' destocking actions end, our demand to the line with their underlying production needs to meet demand. We are seeing this dynamic starting to flow through with many customers. Unfortunately, it's also clear that the stocking dynamics will continue to persist for longer across some of the supply chains of the industries we serve. If we look at the first half of the year, the expectation was that the stocking would be shorter-lived and demand would normalize sooner. Unfortunately, things did not play out that way. The inventory build across many of the many supply chains in fiscal year 21 and 22 was much greater than anyone realized, and it's taking much longer than expected to work out. There's still significant uncertainty as to when these dynamics will end. Until the inventory control action taken by customers have subsided, it will remain difficult for us to gauge the true end market demand. Waiting for improvements is not a reliable option. Given the continued uncertainty, it is vital that we move proactively to take actions to build resilience, reduce volatility, and maximize performance across a range of scenarios. We also recognize that while near-term uncertainties of the current environment present challenges, they do not change our exciting long-term opportunity for Ashland. We need to act on both dimensions to improve near term performance, and invest on our long-term profitable growth opportunity. I will discuss even more details later in the call. Let me now turn the call over to Kevin to review our two core and fiscal year results in more detail. Kevin?