Ashland Swings To 1Q Loss On Charges, Demand Slump

Ashland Inc.'s (ASH) swung to a fiscal first-quarter loss amid restructuring costs and auction-rate securities losses, as demand for chemical products plummeted in recent months.

Although falling oil and natural-gas prices have eased some margin pressures, dangerously low demand is forcing chemical makers to scramble as they cut inventory and scale back elsewhere.

Ashland's $2.6 billion acquisition of Hercules in November gave it exposure to some less-cyclical specialty chemical operations, but it loaded the company with debt. Ashland is working to quell fears about its liquidity, having slashed its dividend 73% in late November and set its 2009 capital expenditures budget at $200 million, the low end of its earlier projection.

Meanwhile, the company on Tuesday reported a net of $119 million, or $1.73 a share, for the period ended Dec. 31, compared with year-earlier net income of $33 million, or 52 cents a share. The latest period included $90 million in charges related to its Hercules acquisition and a $32 million realized loss on auction-rate securities.

Revenue increased 3.2% to $1.97 billion as Ashland recorded half a quarter of Hercules' results. Assuming the buyout was completed before the year-earlier quarter, revenue dropped 9%.

Analysts polled by Thomson Reuters expected per-share earnings of 15 cents on $2.08 billion in revenue.

Chairman and Chief Executive Officer James J. O'Brien said, "We would expect declining raw material costs and continuing cost-reduction actions in our organization to benefit our results in the second quarter, although volume declines and selling price decreases will likely temper the benefits."

The distribution segment, which accounts for nearly half of Ashland's revenue, reported a 13% decline in volume per day. Lubricant volume at the Valvoline oil business fell 17%.

Meanwhile, Ashland unveiled additional cost-cutting plans including a year-long wage freeze, a two-week furlough program for most salaried employees in the U.S. and Canada, closing its aviation department and curtailing travel and entertainment spending.

Shares closed Monday at $9.51 and didn't trade pre-market. The stock has tumbled84% since peaking in May.

-By Melissa Korn, Dow Jones Newswires; 201-938-5400 [e-mail]

-By Tess Stynes, Dow Jones Newswires; 201-938-2473; [e-mail]

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