Wednesday, October 22, 2003

Unit's sale pumps up Ashland

By Mike Boyer
The Cincinnati Enquirer

Ashland Inc.'s fourth-quarter earnings almost tripled, thanks to the gain on the sale of a chemical unit and higher profits from its refining and marketing joint venture.

For the three months ended Sept.30, Ashland reported net income of $137 million, or $1.99 a share, compared with earnings of $47 million, or 68 cents a share, a year ago.

For the fiscal year, the Covington-based company, which owns Valvoline and specialty chemical and highway construction businesses, said net income declined to $75 million, or $1.10 a share, from $117 million, or $1.67 a share, in the prior fiscal year.

James J. O'Brien, who is wrapping up his first year as chairman and CEO, said record September quarter results from Valvoline and a recovery by Ashland Distribution also helped fuel a 49 percent increase in income from continuing operations.

Those gains were offset by an operating loss at its Atlanta-based APAC highway construction business and lower operating income at Dublin, Ohio-based Ashland Specialty Chemicals.

Excluding an $81 million gain on the sale of Ashland's Electronic Chemicals group and $22 million in pretax charges for severance costs, Ashland's fourth-quarter earnings were about $1.10 a share, less than the consensus estimate of about $1.30 a share, said Fadel Gheit, analyst with Oppenheimer & Co.

Ashland's shares, up almost 40 percent in the past year, closed down 54 cents Tuesday at $36.20.

Gheit said O'Brien, who a year ago announced an eight-point profitability improvement plan after succeeding former CEO Paul Chellgren, has done a good job. The biggest disappointment in the fourth quarter was the loss by APAC, much of which was due to bad weather, he said.

Jacques Rousseau, analyst with the investment firm Friedman, Billings, Ramsey, said O'Brien has been aggressive about cutting costs, eliminating 500 jobs company wide. That includes a handful at its Covington headquarters earlier this month.

"A lot's being done - but, at some point, we have to see some improvement in earnings,'' he said.

Another uncertainty facing Ashland is how it will handle Marathon Oil's option in 14 months to buy out Ashland's 38 percent equity in Marathon Ashland Petroleum, their refining and marketing joint venture, analysts say.

Most expect Marathon will buy out Ashland, but it's unclear whether it will be paid for in cash or stock and whether the proceeds will go directly to shareholders or be reinvested by the company.


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