Ashland OKs $1B stock buyback as sales slip

Ashland, headquartered off Hercules Road near Wilmington, reported that sales are slipping as customers pare down their inventories. | DBT PHOTO BY JACOB OWENS

WILMINGTON – Ashland, the global additives and specialty ingredients company, announced Wednesday that it was authorizing a new $1 billion share buyback program while also warning investors that its product sales are expected to fall year-over-year this quarter.

A chemical manufacturer headquartered west of Wilmington in the Little Falls area, Ashland acquired the former Hercules chemical company in 2008 and today makes products for consumer-focused markets like pharmaceuticals, personal care and architectural coatings. It has several hundred employees working out of labs and corporate offices in Delaware.

The company told investors that sales in the quarter to end June 30 are expected to be in the range of $545 million to $550 million, down approximately 15% versus the prior-year period. That is primarily due to continued customer de-stocking, or the reducing of product inventories due to lessening customer demand or a change in sales strategy. That will also result in a projected adjusted EBITDA in the range of $130 million to $135 million, down approximately 22% to 25% versus the prior year.

“The unprecedented reset impact from customer de-stocking actions across many supply chains continues to materially impact many of the markets we serve,” Ashland Chair and CEO Guillermo Novo said in a statement. “Previous expectations that de-stocking would conclude during our fiscal-third quarter have proven to be optimistic. There is still significant uncertainty as to when the de-stocking dynamics will end.  Until the de-stocking is behind us, it will remain difficult for us to gauge the true end-market demand.”

On Wednesday, Ashland also announced that its board of directors has approved a new $1 billion evergreen share repurchase program that replaces and doubles an existing $500 million program that had already repurchased about $300 million in outstanding shares.

While share values fell about 2% overnight Wednesday as investors absorbed the news, Ashland’s value rose more than 6% on Thursday as 1.9 million shares were traded – the largest number in at least a year.

That upswing came in part due to a report from investment banking advisory firm Evercore ISI that downgraded the outlook on Ashland stock, but also “touted its thesis that Ashland’s transformation to a specialty additives company ultimately will drive multiple expansion, saying despite the low visibility, ‘this will likely prove a good entry point for someone,’” financial market outlet Seeking Alpha reported.

That view was supported by a comment from Novo in Wednesday’s announcement, who said, “In light of current market conditions, we plan to take additional targeted restructuring actions to reduce costs over the coming quarters and refocus resources on innovation-driven growth opportunities.”