Ashland Global Holdings Inc. ASH is set to change the way it manages the business from a functionally-led organization to a business-unit focused company starting second-quarter fiscal 2020.
Per management, the change acknowledges the fact that it has a diverse business portfolio with different value propositions, with respect to the markets served. The changes will allow the company to align its resources, cost structure and business models with each business unit’s specific needs.
Further, the change will enable Ashland to create greater accountability and ownership for both short-term and long-term results. Also, the company plans to align incentive rewards with the business units’ performance.
It will restructure the business into three primary external-reporting segments and a corporate reporting segment. Notably, the three primary external-reporting segments are Consumer Specialties, Industrial Specialties, and Intermediates & Solvent.
The Consumer Specialties segment will serve the Life Sciences business, and Personal Care & Household business units. Notably, Pharma and Health & Wellness will be part of the Life Sciences business unit.
The Industrial Specialties segment will serve the Specialty Additives and Performance Adhesives business units. Notably, Specialty Additives will include Coatings and Performance Specialties.
The Intermediates & Solvents segment is expected to report the results of its Lima, OH-facility.
The Corporate reporting segment will have corporate governance practices and some legacy issues.
The company plans to implement key improvements, resource management, leadership structures, processes and financial reporting during second-quarter fiscal 2020. Notably, the new teams will start evaluating and developing their respective plans, business models and cost structures throughout the quarter.
Shares of Ashland have gained 8.5% year to date against the industry’s 4.5% decline.
In November, Ashland stated that it expects demand dynamics in first-quarter fiscal 2020 to be similar to the fiscal fourth quarter. Ashland sees limited improvement in Oral Care and Pharmachem businesses in the near term. The company expects pricing and raw material price movements to remain balanced. Moreover, the temporary shutdown of the Nanjing plant is expected to affect its performance in the fiscal first quarter.
Ashland has completed its cost-reduction program. The company reduced costs by $115 million on a run-rate basis as of Sep 30, 2019. It expects to surpass $120 million run-rate by the end of 2019. The company envisions the carryover impact from the program in fiscal 2020 to be nearly $25 million of selling, general and administrative cost savings.
Ashland Global Holdings Inc. Price and Consensus
Zacks Rank & Stocks to Consider
Ashland currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks in the basic materials space are General Moly, Inc. GMO, Franco-Nevada Corporation FNV and Sandstorm Gold Ltd. SAND, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
General Moly has an expected earnings growth rate of 12.5% for the current fiscal year. The company’s shares have gained 9% in the past year.
Franco-Nevada has a projected earnings growth rate of 45.3% for 2019. The company’s shares have rallied 41% over a year.
Sandstorm Gold has an estimated earnings growth rate of 166.7% for the current year. Its shares have moved up 55.6% in the past year.
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