WILMINGTON, DE — Ashland Inc. (NYSE: ASH) expects adjusted earnings to recover in fiscal 2027 after declining in 2026, as the specialty chemicals producer seeks to improve manufacturing productivity and capitalize on growing demand for pharmaceutical and personal care ingredients despite persistent weakness in parts of its industrial business.
The Wilmington-based company projected fiscal 2027 sales of $1.905 billion to $1.975 billion, representing growth of approximately 2% to 6%, and adjusted earnings before interest, taxes, depreciation and amortization of $405 million to $435 million.
The outlook follows a fiscal year in which revenue increased 2% to $1.863 billion, while adjusted EBITDA declined 4% to $385 million from $401 million. The company’s adjusted EBITDA margin narrowed to 20.7% from 22%.
Ashland’s fourth-quarter results showed improving demand across several higher-value product categories, although manufacturing inefficiencies and weaker performance in Specialty Additives continued to weigh on profitability.
Revenue for the quarter ended Sept. 30 rose 4% to $498 million from $478 million a year earlier, supported by a 3% increase in sales volumes and a 2% improvement in pricing. Foreign exchange movements reduced revenue by approximately $3 million, or 1%.
The company reported a quarterly net loss of $16 million, compared with net income of $32 million in the prior-year period.
Its loss from continuing operations was $17 million, or 36 cents per diluted share, compared with income of $33 million, or 73 cents per share, a year earlier.
On an adjusted basis, income from continuing operations excluding intangible amortization increased to $52 million, or $1.12 per diluted share, from $50 million, or $1.08 per share.
Adjusted EBITDA rose 2% to $121 million from $119 million, although the corresponding margin declined to 24.3% from 24.9%.
Adjusted operating income increased to $77 million from $71 million.
The divergence between revenue growth and margins reflected continued production challenges within Specialty Additives, partially offset by stronger profitability in Life Sciences, Personal Care and Intermediates.
Ashland’s Life Sciences business generated $180 million in quarterly sales, up 4%, with pharmaceutical revenue increasing approximately 6%.
Pharmaceutical sales volumes increased for the sixth consecutive quarter, supported by demand across major geographic markets and product categories, including cellulosics, injectables, film coatings and VP&D technologies.
Nutrition sales declined slightly because of lower volumes.
Life Sciences adjusted EBITDA increased 16% to $64 million from $55 million, while its margin expanded 3.8 percentage points to a record 35.6%.
Adjusted operating income rose to $50 million from $41 million.
Higher sales volumes, favorable product mix, pricing and cost performance contributed to the improvement.
Personal Care also recorded higher sales and profitability, with quarterly revenue increasing 8% to $163 million from $151 million.
Demand grew across North America, Europe, China, Latin America and the rest of Asia, led by double-digit increases in biofunctional actives, microbial protection and hair care.
Skin care sales increased by a high-single-digit percentage, while oral care and household products collectively declined by a low-single-digit percentage.
Personal Care adjusted EBITDA rose 14% to $49 million, and its margin increased to 30.1% from 28.5%.
Adjusted operating income advanced 25% to $35 million from $28 million.
The results contrasted with Specialty Additives, where quarterly sales remained unchanged at $131 million despite growth in coatings and performance-related products.
Coatings revenue increased 9%, while Performance Specialties sales climbed 14%, reflecting stronger volumes, pricing and market-share gains across regions.
China recorded its third consecutive quarter of year-over-year sales growth within those businesses.
Those gains were offset by weaker demand in Energy and Resources and lower Construction volumes following portfolio changes intended to emphasize higher-value applications.
Specialty Additives adjusted EBITDA fell 31% to $20 million from $29 million, while adjusted operating income declined to $5 million from $12 million.
Ashland attributed the earnings deterioration primarily to lower productivity at its Hopewell manufacturing operation and the resulting unfavorable absorption of production costs.
The company reported completing key productivity investments at the facility and is now focused on increasing output.
The Intermediates business generated $33 million in quarterly revenue, unchanged from a year earlier.
Merchant sales increased 4% to $24 million, supported by favorable product mix, including higher NMP sales, and pricing that offset lower BDO volumes. Captive sales declined by $1 million to $9 million.
Adjusted EBITDA increased 20% to $6 million, while its margin improved three percentage points to 18.2%.
Adjusted operating income doubled to $4 million.
Ashland also reported higher corporate and other expenses, including restructuring charges and a cumulative foreign currency translation adjustment associated with the liquidation of its Argentine entity.
Unallocated and other expenses increased to $44 million from $11 million, while adjusted unallocated EBITDA expense rose to $18 million from $13 million, primarily because of higher incentive and stock-based compensation costs.
Despite the quarterly net loss, Ashland’s full-year reported earnings improved substantially from fiscal 2025, when major impairment charges weighed on results.
Fiscal 2026 net income totaled $4 million, compared with a net loss of $845 million a year earlier.
Income from continuing operations was $25 million, or 55 cents per diluted share, compared with a loss of $822 million, or $17.74 per share, in fiscal 2025.
The improvement primarily reflected the absence of a $706 million noncash goodwill impairment and $175 million in impairment and sale adjustments associated with the Avoca business recorded in the prior year.
Adjusted income from continuing operations excluding intangible amortization declined to $153 million, or $3.31 per diluted share, from $157 million, or $3.38 per share.
Excluding the previously announced Avoca divestiture, organic sales increased 3% during fiscal 2026. Revenue growth accelerated in the second half, when sales increased approximately 6% year over year.
For the full year, sales volumes contributed approximately two percentage points to revenue growth, while foreign exchange contributed about one percentage point. Pricing had a negligible overall effect, although increases strengthened during the second half to offset inflation.
Cash generation improved more substantially than adjusted earnings.
Fourth-quarter operating cash flow increased to $90 million from $40 million, while ongoing free cash flow rose to $74 million from $52 million.
Quarterly ongoing free cash flow conversion increased to 61% from 44%, primarily because of lower working capital requirements.
For fiscal 2026, operating cash flow reached $385 million, compared with $134 million in fiscal 2025. Ongoing free cash flow increased to $232 million from $127 million, supported by inventory reductions and lower capital expenditures.
Ashland ended September with approximately $480 million in cash, total liquidity of $976 million and net debt of $891 million.
Its net leverage ratio of 2.3 times remained within the company’s long-term target range.
Chief Executive Officer Guillermo Novo identified manufacturing execution, pricing discipline and continued expansion into higher-value applications as priorities for fiscal 2027.
“We have completed the critical investments needed to support improved productivity at our plants,” Novo stated. “We also generated healthy cash flow, further strengthening our financial flexibility as we enter fiscal 2027.”
Ashland’s fiscal 2027 guidance assumes continued demand for pharmaceutical and personal care ingredients, with further growth in coatings and performance specialties.
The company also expects its Intermediates business to benefit from new customer volumes in energy storage.
Management anticipates continued volatility in raw material and freight costs and plans to use pricing increases to offset inflation.
Foreign exchange is expected to create an additional headwind, with a stronger U.S. dollar projected to reduce fiscal 2027 revenue by approximately $20 million to $25 million and adjusted EBITDA by $7 million to $10 million.
The company expects ongoing free cash flow conversion to exceed 40% of adjusted EBITDA, while capital expenditures could reach approximately $140 million and inventory levels are expected to increase modestly.
Ashland is targeting approximately $10 million in incremental productivity and manufacturing optimization benefits during fiscal 2027.
Its geographic expansion initiative, known as Globalize, is expected to generate approximately $20 million in additional sales by expanding customer adoption of biofunctional actives, microbial protection products, injectables and tablet coatings.
The initiative generated approximately $26 million in incremental revenue during fiscal 2026, exceeding its $20 million target.
Ashland’s Innovate program also generated approximately $26 million in incremental fiscal 2026 sales, surpassing its $15 million objective.
The company is targeting $45 million in innovation-driven incremental revenue in fiscal 2027 through new product commercialization, expansion of recently introduced technologies and increased customer adoption.
Together, the initiatives are intended to support growth in higher-margin markets while improvements in manufacturing operations address profitability pressures elsewhere in the portfolio.
Ashland’s fiscal 2027 outlook therefore depends on sustaining commercial momentum in its pharmaceutical and consumer-oriented businesses while restoring productivity at manufacturing operations that constrained earnings during fiscal 2026.
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