Ashland Resumes Operations In Texas City And Germany Plants

Ashland Global Holdings Inc. (NYSE:ASH) announced that operations at its manufacturing facilities in Texas City, TX, and Marl, Germany, have resumed to normal. The facilities were shut down last month due to the impact of Hurricane Harvey in south Texas and an earlier announced fire outbreak at the Marl plant.

Update on Texas City Plant

The Texas City manufacturing facility, which makes PVP crosslinked and linear homopolymers, NMP and PVP/VA copolymers, recommenced full production last week. Adversely affected by the hurricane, this plant was shut down for nearly three weeks.

According to Ashland, local workforce and an additional team of experts followed a comprehensive recovery plan to ensure that all plant equipment remained safe and in proper working condition before restarting operations. The company noted that rail services to this facility have resumed and shipping operations are also back in full swing at the warehouse near the plant.

Ashland has witnessed remarkable improvements in the broader trucking, shipping and rail networks. However, there are some congestion issues and capacity bottlenecks for bulk trucks, as plants in the area have restarted and are working through pent-up demand. Further, domestic shipping, particularly for packaged goods, is improving. Although the Port of Houston has re-opened, the company expects some delays in shipments.

Based on the latest information, Ashland believes the above discussed event is unlikely to have any substantial impact on its adjusted results for the September quarter.

Update on Marl Facility

The manufacturing plant at Marl, Germany, which produces tetrahydrofuran (THF), 1.4 butanediol (BDO) and formaldehyde, has been restarted ahead of schedule. In August, the company had announced a force majeure in Europe, following a fire outbreak that led to the plant’s shutdown.

The incident has restricted supply of the aforementioned products in Europe in the short term as the company return to normal operations and rebuilds inventory. Ashland is working closely with customers who have been affected by this incident and is trying to lessen the impact to their respective businesses during the shutdown.

According to Ashland, faster-than-expected return to production has enabled the company to reduce its expected financial impact of fire and consequent shutdown by around $5 million, to an estimated impact of $10-$15 million. The company reaffirmed that there will be no impact on its adjusted results, given the unusual nature of the loss. It plans to include majority of the impact from the fire under key items in the financial statement when it releases earnings for the September quarter.

However, the adjusted results of its Intermediates and Solvents (I&S) segment will reflect the profitability lost associated with sales lost due to the incident. The company expects adjusted EBITDA of the I&S segment to be in the range of $5-$10 million in fourth-quarter fiscal 2017.

Price Performance

Shares of Ashland have declined 3.4% in the last three months, underperforming the 0.7% loss incurred by the industry.

Pharmachem Buyout to Drive Sales & Margins

Ashland, during third-quarter fiscal 2017 (ended Jun 30), witnessed a 7% year-over-year increase in revenues of the Specialty Ingredients unit while sales of Composites were up 20% on the back of disciplined pricing and robust volume expansion in various global end markets. The I&S unit also witnessed 9% growth in sales backed by the continued recovery in butanediol pricing and improving global demand.

In May 2017, Ashland closed the acquisition of Pharmachem Laboratories, Inc. — a leading provider of quality ingredients to wellness and health industries, and high-value differentiated products, including flavor and fragrance houses. The acquisition was a key contributor to Ashland’s sales in the fiscal third quarter. The company anticipates to achieve meaningful cost synergies from leveraging combined capabilities, along with tax synergies resulting from the Pharmachem integration.

Pharmachem added 2 cents per share to Ashland's adjusted earnings in the fiscal third quarter. The company expects the acquisition to contribute 3-4 cents per share to its earnings in the fiscal fourth quarter.

Ashland Global Holdings Inc. Price and Consensus

Ashland Global Holdings Inc. Price and Consensus | Ashland Global Holdings Inc. Quote

Zacks Rank & Key Picks

Ashland currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Sociedad Quimica y Minera de Chile S.A. (NYSE:SQM) , Koppers Holdings Inc. (NYSE:KOP) and Kronos Worldwide Inc. (NYSE:KRO) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Sociedad Quimica has an expected long-term earnings growth rate of 32.5%.

Koppers Holdings has an expected long-term earnings growth rate of 18%.

Kronos Worldwide has an expected long-term earnings growth rate of 5%.

4 Promising Stock Picks to Keep an Eye On

With news stories about computer hacking and identity theft becoming increasingly commonplace, the cybersecurity industry looks like a promising investment opportunity. But which stocks should you buy? Zacks just released Cybersecurity: An Investor’s Guide to Locking Down Profits to help answer this question.

This new Special Report gives you the information you need to make well-informed investment choices in this space. More importantly, it also highlights 4 cybersecurity picks with strong profit potential.

Get the new Investing Guide now>>