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Ashland (ASH) Lowers FY'21 EBITDA View on Logistics Woes

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Ashland Global Holdings Inc. (ASH - Free Report) recently updated its preliminary fiscal 2021 (ended Sep 30, 2021) view stating that supply-chain and logistics constraints, as well as related costs, will somewhat negate the improved demand in its end markets.

The company has been witnessing strong demand in its Life Sciences, Personal Care and Household, Specialty Additives, and Performance Adhesives end markets on the back of the economic revival, particularly in the United States. Despite the demand being healthy, ongoing challenges in the shipping, logistics and packaging procurement areas have been impeding the company from meeting the overall customer demand. The negative impact arising from these bottlenecks is expected to be reflected in the fiscal fourth-quarter results.

Given the situation, Ashland expects fiscal 2021 adjusted EBITDA to be $10 million below the low-end mark of the previous range of $570-$590 million. It noted that though it has had a satisfactory pricing and operating strategy, the cost and logistics constraints are primarily holding it back from delivering the previously anticipated performance.

In the fiscal fourth quarter, Ashland announced that it has entered into an agreement to sell its Performance Adhesives business to Arkema for $1.65 billion. It also announced its plan to set up a renewable annual environmental trust. Beginning the fiscal fourth quarter, it intends to report the results of the Performance Adhesives business as discontinued operations and any environmental-related expenses as key items. Prior to the release of the quarter’s earnings, Ashland intends to issue restated historical financial statements reflecting these changes. Also, before its fiscal fourth-quarter earnings call, it plans to issue all restated historical financial statements with the changes.

Shares of Ashland have jumped 27% in a year compared with the industry’s rise of 21.2%. The estimated earnings growth rate for the company for the current fiscal year is 54.6%.

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Zacks Ranks & Stocks to Consider

Currently, Ashland has a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the basic materials space include AdvanSix Inc. (ASIX - Free Report) , flaunting a Zacks Rank #1 (Strong Buy) and Atotech Limited (ATC - Free Report) and The Chemours Company (CC - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AdvanSix has a projected earnings growth rate of 160.4% for the current year. The company’s shares have appreciated 171.6% in a year.

Atotech has a projected earnings growth rate of roughly 122% for the current year. The company’s shares have rallied 24.4% in a year.

Chemours has a projected earnings growth rate of 86.4% for the current year. The company’s shares have rallied 38.7% in a year