Ashland Inc. Q2 FY2026 earnings call

• Good day and welcome to Ashland's second quarter 2026 earnings call. Sandy Klugman handed over to Guillermo for opening remarks. • Guillermo provided brief overview of second quarter performance, then William reviewed financials and outlook, followed by business unit detail. • Overall, second quarter results reflect resilient underlying commercial performance amidst stable demand conditions, with pricing and portfolio mix action remaining a central focus. • Life Sciences had steady results with resilient pharma demand. • Personal care had broad-based portfolio growth. • Specialty additives operated in mixed demand environment. • Intermediates impacted by Calvert City outage. • Progress across innovate and globalized pillars, with innovation exceeding full-year target. • Working capital was a key strength, driving strong operating cash flow. • Balance sheet remains strong with flexibility. • Business unit leaders discussed segment performance in detail, including growth in certain areas and impact of various factors.

Life Sciences: Sales $172 million flat year over year. Results reflected resilient pharmaceutical demand, partially offset by softness in select non-pharma end markets and modest pricing pressure. Pharma delivered low single-digit growth for a fourth consecutive quarter, supported by strength across differentiated cellulose excipients, injectables, and tablet coatings. Outside of pharma, Nutrition and other non-formal markets remained softer, reflecting customer order timing rather than underlying market deterioration. Pricing declined modestly year over year, largely reflecting carryover impacts from prior period actions while remaining stable sequentially. Foreign exchange contributed approximately $6 million to sales during the quarter. Injectables continues delivering quarter-over-quarter growth with a record second-quarter results. Concotes continues its double-digit growth trajectory versus prior year, fueling capacity release initiatives. Innovation was supported by expanding adoption of low nitrite oral solid dosage excipients and high purity injectable and bioprocessing products. Intermediates: Operated in a challenging but stable trough market environment, consistent with expectations entering fiscal year 2026. Demand conditions remained stable, with sales and pricing at trough levels across the BDO value chain. Sales were $35 million, down 5% year-over-year, reflecting continuous pressure across the BDO value chain and commercial and operating impacts related to the Calvert City outage. Merchant sales were $26 million compared to $27 million last year, as relatively steady volumes were partially offset by modest pricing pressure and disciplined commercial actions, including controlled merchant activity. Captive BDO sales were down approximately $1 million year-over-year primarily reflecting the Calvert City impacts during the quarter. Foreign exchange provided a modest $1 million benefit to sales in the quarter. Adjusted EBITDA was $5 million, up from $2 million in the prior year quarter. The improvement reflected disciplined cost management and favorable manufacturing input actions which more than offset Calvert City-related impacts and ongoing pressure across the BDO value chain. Personal Care: Delivered resilient results supported by broad-based demand and strong execution across the portfolio. Sales were $150 million, up 3% year-over-year or 4% on a comparable basis, driven by growth across all three business lines. Biofunctional Actives delivered another quarter of double-digit growth, supported by continued adoption of Colopepto and customer expansions across Europe and North America. Microbial Protection delivered robust growth across the portfolio and geographies, driven by new customer wins and continued share expansion. Within care ingredients, the portfolio remained resilient with strong growth across hair and skin care categories, particularly in Asia Pacific and Latin America. Previously reported customer-specific outages from the prior quarter have now returned to more normalized levels. Foreign exchange contributed approximately $5 million to sales during the quarter. BioFunctional Actives recently launched Eternite, our 2026 flagship ingredient. Care Ingredients launched a new hair care conditioning polymer from our GWAR technology, which is already gaining customer adoption. Adjusted EBITDA was $43 million compared to $44 million in the prior year quarter. A slight decline was driven by operational outages from weather-related events, which were predominantly offset by volume growth and mix. Adjusted EBITDA margin was approximately 29%, demonstrating the strength of the portfolio and benefit of ongoing commercial and productivity efforts. Foreign exchange contributed approximately $2 million to EBITDA. Specialty Additives: Operated in a mixed demand environment during the second quarter with performance varying by end market and region. Overall results reflected disciplined commercial execution with targeted pricing actions supporting share gains and specific operational headwinds. Sales were 134 million flat year over year as volume growth for the second consecutive quarter was largely offset by softer pricing and the lapping of a difficult prior year comparison following share losses in China. Breaking down the segments, architectural coatings returned to year-over-year growth supported by share gains and new product traction. Volume trends improved relative to prior quarters as commercial initiatives gained momentum. while underlying demand remains generally flat with continued regional variability. Construction volumes were lower, reflecting deliberate portfolio mix management actions associated with network optimization and relative muted end market demand. Other end markets were mixed, with volumes growth in performance specialties offset by softer energy demand tied to customer-specific impacts in the Middle East. Pricing declined modestly year over year, reflecting targeted share gain opportunities. Foreign exchange contributed approximately $4 million to reported sales. Adjusted EBITDA was $16 million, down from $26 million in the prior year quarter. Adjusted EBITDA margin was 11.9%, reflecting softer pricing and higher manufacturing-related costs. including approximately $2 million from weather-related disruptions, a discrete bad debt reserve related to a Middle East energy customer, as well as productivity challenges associated with the Hubwell scale-up. Notably, regarding the HEC scale-up, product quality and customer service levels have been maintained, and achieving profitable scale remains a key operational focus.

• For fiscal 2026, updated sales guidance $1.835 to $1.87 billion, adjusted EBITDA $385 to $400 million. • Adjusted EPS growth mid-single to high single-digit. • Ongoing free cash flow conversion approximately 50% of adjusted EBITDA. • Outlook reflects softer energy-related demand, reduced EV-driven demand, slower Hopewell productivity, but offset by resilient demand in core markets, price actions, and growth across globalized and innovate platforms. • Performance second-half weighted.

• Geopolitical developments in Middle East, limited direct exposure but some impact. • Energy-intensive inputs represent roughly 15% of sales, with potential cost volatility. • Hopewell HCC scale-up issues impacting performance, including productivity, yield, and cost performance not ramping as expected. • Uncertainty in macro market and demand outlook.

Q: Josh Spector of UBS asked about price-cost dynamics and life science nutrition demand.

A: Pricing is moving, with upside potential. Nutrition demand timing issue but seeing improving traction.

Q: Lawrence Alexander of Jefferies asked about revised outlook and what needs to go right.

A: Upside in pricing and macro demand outlook, especially in specialty additives and intermediates.

Q: Jeffrey Zoukakis of JP Morgan asked about one-time events and specialty additives operating income.

A: Big impacts from Calvert City and Hopewell, specialty additives operating income expected down in second half.

Q: Michael Sazon of Wells Fargo asked about 2027 direction.

A: High level, life science and personal care resilient, specialty additives stable, coatings volume growth, Globalize and Innovate momentum, cost structure changes beneficial.

Q: Steven Haynes of Morgan Stanley asked about price-cost magnitude.

A: Energy-intensive and petchem-linked raw materials and freight ~20% of sales, manageable exposure.

Q: Chris Parkinson of Wolf Research asked about customer acceptance of price increases and personal care market.

A: Pricing moving, personal care seeing momentum with base performance and new product adoption.

Q: David Begleiter of Deutsche Bank asked about price-cost tailwind and incentive comp.

A: Pricing timing issue, not significant change to incentive comp accruals.

Q: John Roberts of Mizuho asked about Hopewell ramp-up issues and personal care growth unevenness.

A: Hopewell mix change driving productivity issues. Personal care growth uneven due to product mix.

Q: Mike Harrison of Seaport Research Partners asked about life science market share and innovation run rate.

A: Opportunities due to customer BCP plans, innovation progress with strong momentum.