Ashland (NYSE:ASH) reported higher sales across all four business units in its fiscal third quarter of 2026, supported by volume growth, pricing actions and demand in its Life Sciences and Personal Care operations. The company reaffirmed its full-year sales and adjusted EBITDA outlook, while lowering its adjusted earnings-per-share growth forecast because of a higher tax rate tied to unfavorable discrete items.
Third-quarter sales rose 7% year over year to $497 million, including 6% volume growth, approximately 1% higher pricing and a roughly $3 million foreign-exchange benefit. Adjusted EBITDA declined to $109 million from $113 million a year earlier, while adjusted EBITDA margin fell to 21.9% from 24.4%.
Cash Flow, Inventory and Balance Sheet
Adjusted earnings per share, excluding amortization expense, were $1.02, compared with $1.04 in the prior-year quarter. Ongoing free cash flow totaled $103 million, versus $108 million a year earlier, representing conversion above 90% of adjusted EBITDA.
CFO William Whitaker said inventory declined nearly $80 million year to date. While lower production rates reduced fixed-cost absorption and weighed on earnings, the inventory reduction supported cash generation and should help reduce inventory-related margin headwinds going forward.
Ashland ended the quarter with $936 million in available liquidity and net leverage of 2.4 times, returning to its long-term target range. The company also refinanced its credit agreement during the quarter, extending maturities and increasing financial flexibility, according to Whitaker.
Segment Results
- Life Sciences: Sales increased 11% to $180 million, driven by broad pharmaceutical demand, including high-purity excipients and injectables. Adjusted EBITDA rose 11% to $60 million, while margin held at 33%. Senior Vice President Alessandra Faccin said pharma posted its sixth consecutive quarter of year-over-year volume gains. The business also broke ground on a tablet-coating manufacturing facility in India.
- Personal Care: Sales increased 5% to $155 million, aided by volume growth, commercial wins and favorable mix. Adjusted EBITDA rose to $45 million from $41 million, and margin expanded 110 basis points to 29%. Biofunctional Actives recorded nearly 30% growth in the quarter, while skincare grew at a high-single-digit rate and hair care rose at a mid-single-digit rate. The company also commissioned a new Microbial Protection production facility in Europe.
- Specialty Additives: Sales rose 4% to $136 million, reflecting share gains, pricing and commercial execution in coatings and performance specialties. Adjusted EBITDA declined to $20 million from $26 million, and margin fell to 14.7% from 19.8%, primarily because of lower fixed-cost absorption tied to earlier operational issues and reduced production rates at Hopewell. The company completed a planned Hopewell turnaround and added process-control and productivity improvements.
- Intermediates: Sales rose 12% to $37 million, as merchant sales increased to $26 million from $23 million. Demand for NMP from North American electric-vehicle battery and energy-storage customers supported results ahead of planned fourth-quarter shutdowns. Adjusted EBITDA declined to $4 million from $7 million, largely due to lower advanced manufacturing tax-credit benefits compared with the prior year.
Operational Improvement Efforts
Ashland said progress in its hydroxyethyl cellulose, or HEC, network optimization has been slower than originally anticipated. Novo told analysts that production-related issues, including an earlier equipment failure at Calvert City, weather impacts and Hopewell productivity challenges, reduced fiscal-year EBITDA margin by about 200 basis points.
The company expects benefits from its Hopewell improvements to build over time as production rates increase. Novo said some operational benefits could begin to emerge during the second quarter of fiscal 2027, although the timing of the earnings impact will depend on production and inventory absorption.
Elsewhere, Ashland expects its VP&D manufacturing optimization program to provide approximately $12 million of benefits in fiscal 2026. Its small-plant consolidation effort, completed in the third quarter, is expected to contribute about $3 million of EBITDA benefit this year. Whitaker said the combined $15 million represents structural run-rate savings rather than one-time gains.
Outlook and Strategy
Ashland reaffirmed fiscal 2026 sales guidance of $1.835 billion to $1.87 billion and adjusted EBITDA guidance of $385 million to $400 million. It continues to expect ongoing free-cash-flow conversion above 50% of adjusted EBITDA.
The company now expects adjusted EPS growth in the low- to mid-single digits, down from its prior expectation of mid- to high-single-digit growth, reflecting a higher tax rate associated with unfavorable discrete items.
Management said its Globalize initiative has already reached its full-year growth target through the first nine months, while the Innovate program has exceeded its full-year objective. Ashland plans to provide further details on its technology platforms and innovation pipeline during a webinar scheduled for Sept. 17.
Separately, Novo said Ashland reached a cooperation agreement with shareholder Ancora and will add Peter Thomas and Allen Spizzo as independent directors. The board is also forming a capital allocation advisory committee. Novo said the company and its board remain focused on execution, improving operating performance and preserving strategic options to create shareholder value.
About Ashland (NYSE:ASH)
Ashland Inc is a global specialty chemicals company that develops, manufactures and supplies a broad range of performance and process-critical additives, ingredients and technologies. Its portfolio spans performance additives for coatings, adhesives and sealants; specialty ingredients for personal care and pharmaceutical applications; and process aids used in water treatment and other industrial processes. Ashland aims to address customer challenges by delivering tailored solutions that improve product performance, processing efficiency and sustainability outcomes.
Founded in 1924 as the Ashland Oil & Refining Company, the firm gradually expanded into the specialty chemicals sector over the second half of the 20th century.
