Ashland rebounds with 1st-qtr profit on stronger demand, aggressive cost cuts

Ashland posts 1Q profit on high demand, cost cuts

COVINGTON, Ky. — Chemical maker Ashland Inc. reported a profit Tuesday for its first fiscal quarter, driven by recovering demand, higher margins across all commercial units and aggressive cost cuts. Its shares climbed more than 8 percent in afternoon trading.

Ashland’s CEO James O’Brien said he expects raw material costs to rise in 2010, but vowed to continue focusing on pricing and cost management as the economy recovers.

The maker of the Valvoline line of lubricants said it earned $86 million, or $1.10 per share, in the three months ended Dec. 31 in contrast to a loss of $119 million, or $1.73 per share, a year ago when its results included hefty severance charges, write-downs and the acquisition of Hercules Inc.

Excluding special items such as a one-time tax gain and discontinued operations in the latest quarter, adjusted earnings amounted to 89 cents per share.

Analysts polled by Thomson Reuters estimated a profit of 72 cents per share, on average. Analysts typically exclude one-time items.

Revenue rose 3 percent to $2.02 billion from $1.97 billion in the prior-year period. Analysts expected revenue of $2 billion.

Sales across every segment declined, except for the consumer markets’ division, which sells automotive lubricants, chemicals and appearance products. The segment saw lubricant volumes increase 22 percent.

Ashland’s other business segments make plastics and resins, along with chemicals for papermaking, water treatment plants, and mining.

Jefferies & Co analyst Laurence Alexander reiterated a “Buy” rating for the stock based the company’s strong position to gain from a recovery and its significant free cash flow. His 12-month price target is at $51.

Shares of the company jumped $3.41, or 8.6 percent, to $43.04 in afternoon trading.