Ashland reports Valvoline rebound

Ashland reports Valvoline rebound

	Published : Wed, 24 Jan 2007 21:44 By : Agencies Print this Story

LOUISVILLE, Ky. (AFX) - Chemical company Ashland Inc. reported lower first-quarter earnings on Wednesday because of the sale of its highway construction business last year, but said its slumping Valvoline division rebounded with sharply higher income.

Net income fell to $49 million, or 75 cents per share, from $66 million, or 91 cents per share, a year ago. The performance in the year-ago period included $31 million, or 43 cents per share, from discontinued operations, mainly from the APAC highway construction division that Ashland sold last August.

The Covington-based company said income from continuing operations totaled $53 million, or 81 cents per share, for the first quarter, compared with $35 million, or 48 cents a share, a year ago.

First-quarter revenue totaled $1.8 billion, compared with nearly $1.7 billion a year ago.

Analysts polled by Thomson Financial had expected a profit of 76 cents per share on $1.89 billion in revenue.

James J. O'Brien, Ashland's chairman and chief executive officer, said the just-ended quarter signaled a new era for the company, which has reshaped itself by shedding not only APAC but also selling its minority stake in Marathon Ashland Petroleum to longtime partner Marathon Oil Corp. in 2005.

It 'marks our first full quarter as a singularly focused, diversified chemical company,' he said.

Ashland's struggling Valvoline division posted first-quarter operating income of $18.2 million, easily beating the $1.1 million of income from the same period a year ago. Valvoline's sales and operating revenues rose 13 percent in the most recent quarter to $351 million. Valvoline -- which offers lubricants, oil change services and car appearance products -- had been struggling for the past year.

'During the quarter, Valvoline achieved a significant rebound in earnings, benefiting from stabilizing base oil costs and the effects of previously announced price increases, along with reductions in selling, general and administrative costs,' O'Brien said.

O'Brien was upbeat about Valvoline's outlook for the rest of the year, saying it should benefit from 'improved pricing relative to base oil costs and stabilized sales volumes.'

Ashland Performance Materials had operating income of $25.6 million in the first quarter, essentially matching its income from a year ago, the company said. Sales and operating revenues increased 4 percent over a year ago to $366 million. The division is a manufacturer and distributor of specialty chemical products.

Operating income for Ashland Distribution was $14 million, down sharply from $34.1 million a year ago when hurricane-related product shortages and robust demand spurred record operating income, the company said. It also attributed the first-quarter decline to the softening automotive and construction markets. Ashland Distribution is a supplier of chemicals, plastics and other materials.

Ashland's Water Technologies division reported operating income of $5.4 million for the first quarter, up from a year ago.

Meanwhile, the company said it offered voluntary severance packages last month to about 1,100 corporate employees in an effort to cut costs following the sale of APAC -- which has represented nearly a third of Ashland's overall revenues. Ashland said that 235 of the employees accepted the offer, and management is reviewing those requests. Ashland said it would incur an after-tax charge of about $20 million in the unlikely event that all 235 requests are approved.

Shares of Ashland were up a penny at $68.69 in afternoon trading on the New York Stock Exchange.