Chemical Week • July 3/10 • More companies see destocking, soft demand in Q2

Ashland Inc. and H.B. Fuller Co. both said second-quarter results were hit by customer destocking, with Fuller also citing soft industrial demand for its fiscal quarter ended June 3. The two companies are the latest in a string of chemical makers who have forecast second-quarter results to come in below expectations, as a normal seasonal uptick in volumes has failed to materialize.

Ashland forecasted second-quarter sales to total $545 million-$550 million, down about 15% from the prior-year quarter, and adjusted EBITDA to total $130 million-$135 million, down 22%-25%.

The forecast reflects “the continuation and intensification of customer destocking across many of the company’s end markets with continued uncertainty about when the de-stocking dynamics will end,” Ashland said. “Each of the company’s reportable segments are expected to report sales declines when compared to the prior-year period driven by lower volumes from rapid customer de-stocking and partially offset by favorable pricing.”

Ashland has also reduced its full-year fiscal 2023 outlook, with full-year sales expected to total about $2.2 billion, and full-year adjusted EBITDA expected to total about $500 million “if the prevailing fiscal-third quarter dynamics persist throughout the fiscal-fourth quarter,” according to the company. Previously, Ashland forecast full-year fiscal 2023 sales to total $2.3 billion-$2.4 billion, with full-year adjusted EBITDA totaling $580 million-$600 million.

“Previous expectations that de-stocking would conclude during our fiscal-third quarter have proven to be optimistic,” said Guillermo Novo, chair and CEO of Ashland.

H.B. Fuller on June 28 reported net income down 15.0% year over year, to $40.4 million, for its fiscal second quarter ended June 3, with net sales down 9.6%, to $898 million on lower volumes. Adjusted earnings totaled 93 cents per share, short of analysts’ consensus estimate of $1.04 per share, as reported by S&P Global Capital IQ.

Volumes were down 14.2% year over year due to slower industrial demand and customer destocking. Higher pricing boosted organic growth by 5.9% during the quarter.

“Global industrial activity has slowed, but underlying demand across the portfolio remains much stronger than our second quarter volume performance implies, due to the effect of customer destocking, which is significant, but not unique to us, or our industry,” said H.B. Fuller president and CEO Celeste Mastin. “This destocking is now tapering over a large portion of our portfolio, and we believe our year-on-year volume comparisons will be stronger in the second half of the year.”