Ashland Inc. (ASH)

Investor Day 2017

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May 1, 2017

Welcome to the twenty seventeen Ashland Global Holdings Investor Day. My name is Seth Morozzek, Director of Investor Relations for Ashland. As shown on Slide two, our remarks include forward looking statements as such term is defined by U. S. Securities law. We believe any such statements are based on reasonable assumptions but cannot assure that such expectations will be achieved. Please also note that today, we will be discussing adjusted results. We believe this enhances the understanding of our performance by more accurately reflecting our ongoing business. With that, please welcome to the stage and join me in welcoming Ashland's Chairman and CEO, Bill Wilson. Good morning. And first of all, you for coming in nice and early on a Monday morning. I think a number of you traveled in from some distance. And so again, we appreciate it. We are really excited to have the opportunity to talk about the new Ashland. And I think what you're going to see is that we really have a new orientation and a new focus as we emerge as a true operating company focused on being the premier specialty chemical company. And so with that, I'd like to clarify that our purpose today is to very quickly summarize our evolution and define who the new Ashland is. Now there may be some people who are new, and many of you have known us for many years. So I'm going to go through that section very quickly and get to the meat of the matter, which is what is our strategy for creating shareholder value? And equally as important, what are the levers that we are working on to ultimately drive those results. And to me, that's a very important part. We'll be spending, of course, close to three hours of it. We'll also talk about our capital allocation policies because it's important we effectively utilize that cash. And then we'll take a break, and we will return after the break and talk about our market strategies in great detail. I will just cover them in a summary fashion. But the respective business leaders will come up here and talk about their areas of responsibility and their strategies. So we'll do that after the break, and then we'll finish up with little discussion on execution, and then we'll take some of your questions, and then we'll have lunch. And while we're having lunch, there'll be the members of our team available for you to ask questions or interact with. So with that in mind, this is a chart I think many of you have seen, okay. So we don't have to spend time on it. It's not news, but it is amazing, the transformation that took place. And it started fifteen years ago from a chemical or excuse me, from an oil refiner to a chemical company. And moving on to the next page, and this is actually a very important page even though it's history because one of the things you're going to see is that we're going to speak very candidly about our business. And we have a lot of strengths, but we also have some areas where we see opportunity for significant execution and improvement. And what I want to make sure you understand is some of those things, you can say, well, why didn't you do those in the past? Well, this has been a very busy and focused team, Roughly divesting $2,000,000,000 worth of non core businesses, a lot of operational activities to drive the synergies and make this one company and ultimately get it to where we are today, which we're very proud of, and we'll talk about the portfolio and how it will further evolve. And then lastly, before we move on to the new Ashland, I think it's appropriate that we take just a moment to reflect upon the fact that I think it was a year ago in September, we met right here, and that's when we were talking about the separation into two great companies. And we set out some deliverables at that time. And I won't go through them one by one, but we executed on every one of those deliverables. And on May 12, we will be ultimately separated, and I truly believe we have created two great companies. And so we're very proud of the efforts and the achievements. The team worked extremely hard and it's been very smooth all things considered. We think we have two great companies. Of course, today we'll be speaking only to the new Ashland. And then finally, we'll talk about the main subject for today, which is pivoting to Premier. And what do we mean by that? Well, you'll see that we have moved not just a name from a financial sponsor to an operating company that's focused on execution, but taking what is a truly great portfolio of businesses and making sure they reach the full potential that you expect and we expect. And on a personal reflection, I've had the opportunity to be with different companies and different environments. And I can tell you every business has its own challenges. But as I sit here and as I came on board with the Ashland team, one thing which was very clear to me is that we have awesome people, and we are participating in great markets, very attractive markets. We have true technical differentiation and we have invested in our capabilities. So we have all the makings to be that premier specialty chemical company. And lastly, I'm just going to point out this 42 production plants because that's something that will come up and be relevant in a few minutes. So what's new? Well, first of all, we have a new leadership team here. And to put a little stars by, we're not going to take the time to do all the introductions this morning because we'd like to focus on much of the content. But if I could ask the operating committee and executive committee to just stand up, and there are biographies, very short biographies in the appendix, so you can listen to them later and learn a little more. Thank you. We also have some important members of our team, Linda Fotos, who helps us with our technology effort in the Personal Care area Eric Bona, I think many of you know from years and years Jack Joy, who's done a great job in the business development area and Karl Bostepp, who's responsible for manufacturing. I think I covered the team there. So we have a great team, but this is a very different team than it was even eighteen months ago when we met. And this talented team has worked very hard to bring together not just the new Ashland, but you see a new brand, a new brand promise. Okay. That's all nice. It's all very soft stuff. But what I'd like to make sure you understand is that Ashland, while integrated, had never fully integrated its culture. Everything was, I'm legacy ISP. I'm legacy Hercules. I'm legacy Ashland. We are now one team, and a big part of that process was going through and making sure it was clear what we stood for and why we are proud to say that we're from Ashland. So we'll talk about the brand promise as we go through a lot of great work done on that. We'll talk very briefly about our blueprint. And rather than go through that pillar by pillar, you'll see it referenced in the document. This is an internal tool that we use to talk about what are our priorities and make sure the organization is aligned. And as we talk about the objectives we've set in this Investor Day, you'll see later that we've tied those to the internal pillar priorities that we believe will focus the organization on execution. And then lastly, the Ashland Way, which is basically a team effort to define what we think are the key attributes from the way we operate to our leadership competencies to make sure we're the company we want to be. So okay, enough of the soft stuff, but you can't underestimate the importance of operating as one team, really essential to what we are and where we're going. Now one thing that has not changed with our movement to the new Ashland is an absolute fundamental unwavering commitment to safe and responsible operation. This is a point of pride for our organization. I think it's very important to our people, and it's a reason why we are one team. People share this value. Now we've been recognized, and I think it's an outstanding achievement as the ACC Responsible Care Initiative of the Year for our zero incident culture. But also as part of that, we're applying that across our quality systems. And that's important because customers' confidence and trust, our certifications and qualifications allow us to achieve and maintain positions, which are essentially barriers to other competitors. Okay. I defined the new Ashland. That was pretty quick, about ten minutes. We'll spend the next three hours talking about what's driving the business to create value in the future, okay? And with that, what we will do is we will talk specifically about our objectives and the levers. And later, I'm going to describe mathematically, because we've done this mathematically, how the levers connect to the financial targets that we've set for ourselves. Now it's up to you to determine whether you believe these financial targets are compelling, but it's up to us to convince you that we can execute and achieve those and ultimately for us to deliver on that. So these are the targets that we've laid out and of course there are 1,000 targets we've laid out, but we are focused on growing our EPS at well beyond double digit rates. And again, I will show the mechanisms for that in a while. Secondly, and we've gotten this question over and over again, ASI, EBITDA, 25% of sales, how is it that we're going to achieve that? So we'll walk through that. And I think what's really important is we, as an organization, we've had so much static, so many things coming in, going out, a lot of restructuring. It's time we focus on driving the cash flow potential that's within this business. And we believe over a four year period, we can generate $1,000,000,000 So that's important. And that's also why capital allocation is an important part of our message here today. So with that, how are we going to get that done? Well, the first part of that is we're a specialty chemical company. We need to have a premier mix of products. And we'll talk about the ways that we are, in the future, going to expand the degree of differentiation and also the premium nature of our business. I won't read them because we'll go through them one by one. And then secondly, and later in the presentation, we've got some new information for you, but we're going to talk about making sure that we are truly a competitive enterprise. And we're going to talk about some of the things that we can do to improve the competitiveness of our business while still investing back in our core competencies. And then lastly, we'll focus on making sure that we drive the cash flow, which, we believe if we achieve our objectives here mathematically and we manage our working capital plus CapEx mathematically, we achieve actually more than $1,000,000,000 worth of cash. So let's get into these levers, what they are and how they're operating. And the first thing I'd like to focus on, if we're going to talk about a premium mix, what the heck is a premium mix? That means something different probably to each company. And this is how we would define it. First of all, we compete in very attractive markets where we can leverage our core technologies, but technology, brand and quality are really key to the customer's success, okay? We like to be in spaces where frankly the barriers to entry are high. And one of the things that we'll talk about is we like to be in markets that have a lower degree of cyclicality. We'll touch on that later. And then the top right portion is really important. We want to be a small part of the cost with a big impact on the end product. And that's a nice thing to say, but when you hear the business leaders speak, they're going to describe for you the role of our products within their respective applications. You're going to see that this is actually a core part of our strategy. And of course, that gives us the leverage. And I mentioned the Ashland brand. Well, we did actually, Carolyn Brown, who I didn't introduce before, is here with us. She did an outstanding job leading an effort with external research, internal research, talking about who we are, what is credible to our team and in the marketplace, but what are the things that we can do and deliver on that really impact the customer? And these are the five areas that we focus on when we're always solving, and I'll touch on those thematically later on. Next, and you'll hear this through each one of the individual presentations, we need to be in spaces where we can customize. Now we'll talk about big platform innovation, and that's always great, and hybrid molecules that are patented and so forth. And every once in a while, you hit a home run on that, and of course, we're focused on it. But the reality is the great majority of our differentiated position comes from the thousands of variations that we put on our core platforms to make sure they work best in your line, in your line, in your application. And that's especially true these days as we really go from a global view where we're going to provide the same product everywhere to a focused regional view where we recognize that the different needs as well as the different production and substrate capabilities in different regions need to be reflected with derivatizing our products and technical service. Technical service is key to that, because ultimately this is about creating value for our customers. And last but not least, of course, financial returns, okay? These are areas, and this I mentioned the low cyclicality, that's going to weigh into some of our portfolio discussion as we go forward. And we'll talk about EBITDA as a percentage of sales, but there if we create the value that we believe we should and could with the right focus, it should be reflected in our margins. And as we are talking about a premium mix, of course, we just recently made the announcement that we are acquiring Pharmachem, and I can't tell you how excited and proud we are to have that team join us. And I know because it's a privately held company that there's not as much information, and you'll learn a little bit about it today. But this is just a brief profile. And I think what's important is they have very advanced manufacturing capabilities. They have differentiated products. It is extremely complementary to our portfolio and they sell with the same value proposition that we have. And culturally, it appears that we have a really good fit. So let's talk about that fit. And what I'd like to clarify is that, again, I'm going to go on this fairly briefly because the business leaders, when they tell their strategies, will tell you the specific connection points that we believe ultimately will drive value in their areas. But clearly their customization capability and niche, the ability to complement our existing product lines with new products that are very close in and move us and extend us into near end but very attractive markets is very important for us. I would before moving on from Pharmachem like to talk about and this is typically more of a capital allocation discussion, but it fits here and I think it's important. When we think about acquisitions, what are the things that really drive our thinking? Well, one of them is, does it fit with our specialty model? Okay. The second is, is it very close to the core? We think of degrees, if it's a new geography, it's a new product line, it's a new customer base, that is a degree and the more degrees from the core that you get, the more likely it is that you're going to have a challenge integrating. And then the economics, where we have not only the right returns on investment, but I think it's really important to focus on, we believe that we should drive acquisitions based upon cost synergies. And we justified in our modeling Pharmachem through cost based synergies. You're going to hear that we believe we have tremendous market and revenue synergies, but those are not built into the economics of the acquisition, because I think we've all seen that those are easy to dream of, but often difficult to deliver on. And now when you look at Pharmachem, and I won't go through each one of those, but I think what you can see is that there is a very nice fit with what we do today and what our target criteria is. So now let's look at our existing portfolio. It's obviously part of our premium mix. And this is a little more qualitative. So please just bear with me. You'll notice that up on the top, those are the same areas that we really have noted on our definition of specialties. And pharma, personal care, coatings, adhesives, those are green, green, green. You'll actually hear within those segments, there are some areas that are a little more challenging, areas that we're going to work on either changing our mix and enhancing our mix or being more competitive. So that's important. And then you'll notice other ASI, which for the most part, Suzanne will be speaking to briefly. And you'll notice that that's kind of fifty-fifty. Why is that? Well, because we provide really cool technology for things like lithium ion batteries. Okay, that's green. But we also supply stuff that goes into concrete and construction. Well, okay, that's a little harder to differentiate on, especially in a global market where there's a fair amount of capacity. And then composites, oh my goodness, we've got one quarter of that green. That is because the composites business, our composites business, I think you'll see is unlike any other composites business, and they really drive it with a double focus and a true specialty mindset, following the same strategy of differentiating and then ultimately managing their costs. And then I and S, and I'd like to talk about the I and S business for just a moment here, but it's important. It's actually a great business. And if you like commodity products, this is probably a great area for you to have invested in, okay, because you can look and it cycles up, it cycles down, your capital and your returns. But the reality is, it doesn't have the fit with the profile of what we think our specialty chemical makeup should be. And for those of you who are not as familiar with our business in the history, it originally was brought into the portfolio years ago because the ASI business uses its output to make sure it has producer based economics and continuity of supply. And so as we look forward, and I'd like to be very clear in what I'm saying that over this period, we're talking about over this three, four year period, it's very fair to say that the volatility that's associated with the I and S business will not be part of our end equation of earnings. Now what does that mean? Well, again, this is a business that has a high degree of cyclicality, and we are now at what we believe is a trough. In fact, we believe we're coming out of the trough, and that's reflected in our recent upgrade on our outlook for the APM business. And there's also a fair amount of asset intensity. So one of the things that I hope that you've seen and we expect to continue in the future is that this team is very responsible in terms of thinking about how, when and why to manage the portfolio. And so we have a bias for action in this area. But rather than do something fast, we're more focused on doing something smart. And that could be sooner than later or it might take some time. But we are working on it. And it's going to be very important that whatever we do retains the continuity of supply and the producer based economics. That's part of solving this equation. So that's all I'm going to speak to on I and S today because that's not really our focus. But I would like to share with you kind of an interesting slide, which just shows you when you include Pharmachem and you exclude the Intermediates and Solvents business, basically, ASI is roughly 80% of what we do. And even though it's composites, right, it's a different you're going to hear, we have some great margins on some very attractive niches within composites. And the composites business plays an important role. It covers a lot of our corporate overhead. It is a tremendous driver of cash. But the main point here is we see ourselves being roughly 80% of our sales in ASI, which we think is the most attractive part of our business, obviously, and the one we've been focused on. Wow, a lot of stuff on this page. Part of growing and improving our premium mix is to make sure that we operate our businesses well and that the premium nature of those businesses come through. And there's a lot on this page. I'm certainly not going to read it to you. And in fact, I'm not going to describe it in significant detail because that's what we'll spend over an hour after the break going through each one of these markets. What I would like to focus on, and by the way, just so everybody, we focused on volume in this equation. And the reason why we did that is because we want to take out static of raw material fluctuations and currency fluctuations, has the business grown or has it not? And we've been saying, and it's actually true, that over the last three, four years, each one of our targeted growth businesses have in fact been growing. And what we've been saying also true that we've had a couple of segments, energy is one of them, that have had a dramatic impact on our overall volume growth. And so with that, the business has been roughly flat. But as we go forward, I think you're going to hear that we've invested in our capabilities and positioned ourselves so that we believe we can maintain and accelerate the growth in these areas, and this has become a much smaller part of our overall equation. So recent developments, that's the keyword that I would like to use with you right now, recent developments, because these are changes that we have. We've invested in labs. We've expanded our footprint. We are globalizing our adhesives business. We have done things which we believe will be leverageable and accelerate our growth. But again, I'll leave that to the business leaders to discuss with you in a few minutes. What I think you will hear from each one of the business is a common theme that we are really focused on driving a differentiated mix. But as we're going to talk about in a few minutes, maybe a new element that's we haven't talked as much about is the importance of really driving a competitive cost structure, especially in those areas, which do have some degree of price sensitivity. And there are areas that we sell into, like any company in the world, that have some price sensitivity and of course, growing in emerging regions. Okay. If you are a specialty chemical company, innovation is your lifeblood. It's what drives you. And so back to our blueprint, which we showed earlier, as Osama likes to note, this is our number one pillar. This has to be front and center with everything we do. And we have amazing people, incredible infrastructure, and we have literally thousands of innovations. Now very briefly, we invest and we focus on four areas of, if you will, activity within our R and D group. And one of the things, you'll see the page numbers here, time doesn't allow us. We have case studies of examples where we have invested in these capabilities and attributes to deliver value because there's real substance behind that. It's not just nice things that we put up on paper. We have real projects. So I'd encourage you to go to the appendix and look at those. A couple of these like FiberHands will be spoken about later on in the business presentations, but we just don't have time here to go deep into those specific products. So I'm going to move on and show you that really applying our framework for Ashland is always solving, we really focus on the efficacy, the usability, the allure, the integrity and the profitability for our customers. And again, I think you're going to see with the examples as well as the business discussions that this is this comes to life in our focus and our activities. Okay, great. So where are we today and where are we going to go with R and D? Well, this next page here shows we've developed a little equation, right? Linear thinking, engineers, okay, pipeline times your hit rate times your sales impact and how fast you turn over your portfolio makes a big difference. And this is an area and by the way, I want to point out the legend because you're going to see this on a number of pages, things that we started a year ago, things that we still have to implement and things that are currently in implement. And the reason why I'm saying that is keep in mind that until late last year, as a corporation, we were focused first and fundamentally on the transaction related to separating the company. It has really been just essentially from the start of this year that we've really shifted our headset as a corporation to have a unified and full focus on driving operational execution. So yes, you're going see some things, a lot of things that are relatively new. And so that also means it's going to take a little time to get all these in place. We'll talk about that. But we're moving very quickly. And right now, we have 25% of sales, and we are looking to move to 30% of sales. We're also looking to make sure we get a 5% or more premium on those new products that we sell. We don't have a way of tracking that today. That's not a part of what we've historically tracked. So we're putting in place new metrics, new measures, so we can actually track the impact. And I think what's really important on this is the pipeline is now being driven by the business. Well, that's pretty obvious, but that was not the case in the past. We are being more local in our development efforts. You're going to hear about that. We've reestablished the product marketing and the business leaders own the project list. And so and we've engaged our regional AMs. So that is really important because these are products that the businesses own and are willing to take to the marketplace. And we have something down here, six reviews. What are stage six reviews? Well, historically, what we've done is we introduced a new product. Two years later, we debriefed how to go. Oh, it was great. Oh, it didn't work. Well, no. We're going to have very specific deliverables in terms of these new products that we implement. And we are going to, as an operating committee, be tracking those quarter by quarter to make sure we're making the progress and the impact that we need. And then the one that I'd like to highlight is up on the top right there is we're moving to what we call Inova Express and technical service work. What does that mean? Well, we put our innovation efforts into three tranches. And the first one is Inova. That's our way of developing new to the world technologies. Starts with a great idea. It takes a long time to get done, almost three years. We've got to go through a long process. And then there are other areas where frankly we start with existing technologies and we can move very quickly to really derivatize those products and make sure they're relevant in our marketplace. That takes about half the time. And then we have our TSR work, where we can do things in our local labs very quickly to make sure that they're relevant in a given space. We had a global launch of a product, which we did through R and D and I was recently in China and they were explaining, well, we don't sell that. They sell it everywhere else in the world, but we don't sell that. Well, why don't you sell it? Because the customer uses other materials and our formulation is not compatible with it. Well, that's not good. So why don't we have the TSR projects? And we do, and now we are selling it. So the time that it takes and the impact is much greater. So we are moving down this continuum. We are focusing more and more of our efforts on those things which will have a quicker impact, leveraging our capabilities that we already have in our system, okay? All right. So we've talked a little bit about the portfolio, getting to roughly 80% of our mix from ASI. The market strategies, which you'll hear will accelerate our growth and you'll hear much more about those. And then also what's changing in our R and D area. And by the way, as a follow-up to this discussion, we and we'd like to get your feedback, but we were thinking it might be worthwhile in a few months to have a follow-up session either in Bridgewater or Wilmington, we can show you how we go about technology development, see some of the infrastructure we have and see some of the new products that we brought to the market. So if you like that idea, please share that with Seth. We'd be looking forward to doing that. Okay. So moving on now, initiatives to improve our competitiveness. And I think this first slide may be a little bit of a shock for some of you because, we have small reactors and mixing tanks and things which are not asset intensive, right, so the specialty. But we start with precursors or main materials, which are made at facilities that if you drove by them, they would look like oil refineries. And we have $700,000,000 of fixed plant costs that we have to absorb every year, 700,000,000. And what's happened, and again, we're being very candid with our strengths and our opportunities, but, here, we have actually seen a lot of the divestitures that have occurred have come out of our existing facilities. So the production volume has gone down in those facilities. And guess what? We've done some activities to offset inflation, but not really a lot. So our fixed cost per unit has gone up, and we have stranded $70,000,000 worth of costs. So when you see a flat GP over a period, that means that we had to improve our earnings by $70,000,000 to offset that. This is a big deal for Ashland. And we have very specific actions. Again, we've got some examples here, but we have very specific actions that we are focused on to really drive the fundamental changes to get the utilization. And first of all, two comments I think are really important. One, the numbers on the right are theoretical and I'll explain what that means. And secondly, they're not all additive because some are doing the same thing or using the same assets, right? You can't shut down an asset and then use it at maximum potential, doesn't work. But and the reason why we say theoretical is only because in some cases, there isn't a big enough market in the globe to fill up the capacity. But the reality is actually that $125,000,000 we have the opportunity to fill and that 125,000,000 is not selling at a profit. That is selling at our fully absorbed cost as we have today, our fixed cost that we have on products today. That just by doing that and spreading the load across our capacity, we could improve our earnings by $125,000,000 Of course, if we sold them at our average margin, you'd get $100,000,000 on top of that. We have multiple plans, and we need to look at consolidation. This is actually something the Composites business has done an outstanding job, and you'll see their profitability has grown. We are focused on de tolling, and actually Pharmachem is really going to help with their advanced manufacturing. Improve, the network product mix, this is an example that Dave will show in his presentation where we're taking industrial assets and upgrading them so they're more pharma capable and we can get a higher margin. And also then we're going to talk about our, if you will, network that we have and how we optimize. So just as a small example, HEC, we have a global network and we produce for the local region. So we produce for the rest of Asia to China, kind of makes sense, right? Well, we pay $2,500,000 of value added taxes to export out of China. So maybe it actually makes more sense to send it out of The U. S. Or Europe, where we have available capacity. That would come into our network optimization. And so again, it's hard because we have limited time, but there's real substance behind these plans. And I think Brian and Karl can speak to some of these if you choose to have lunch with them. I wish I could go into it. Profit velocity, that's another one. I always use this example. If you can make $1 you can constrain, you can make $1 a pound by selling this or you can make $0.80 a pound in selling that, which one do you want to sell? Well, the $1 a pound one, right? Unless it takes three times the amount of resonance time in your reactors, in which case you should be selling all the $0.80 a pound stuff you can because you'll sell three times as much of it. That's $2.4 worth of contribution you get from that same capacity. So we are developing the benchmarks. Actually, we don't have them today, but we are developing the benchmarks so we can say for equivalent production and equivalent plants around the globe, what is the cost? And with that, either what's the practice that gives one an advantage or should we change our sourcing strategy to really maximize our network? So here are some of the changes that we are making and you'll see a lot of And in fact, in this area, this is one that we're really just currently implementing. This is a realization that has grown, I'd say, through this calendar year. But one of the first steps that was put in place a little while back and is that rather than just having HEC, which supports all our business, be out there, right? It's somebody's responsibility. No, we've assigned that to Suzanne because the majority of the HEC goes through her business. Now she has to work with her colleagues to make sure we maximize the effectiveness of it. And likewise, we've done that with some of our specialty assets for Vito and our PVP capabilities with Dave. And so we're aligning those with the commercial leadership team. We are focusing Osama is heavily engaged in helping us. We have facilities that have tremendous capabilities. The more we have extra capacity, we say, well, what else can we do with that capacity? And he provided a little list to me today. Again, time is short, but he's working now on projects that will help to fill those facilities. But mainly what we need is we need to have a model with metrics and a cadence of review. And we need to have a list of priorities, okay? I asked for Karl for a list of the top five priorities, he gave me 100. We have opportunities in this area. So we're changing the way we support this. Next, I'm going to move on to commercial excellence and that's just a nice term. Everybody likes that. It's kind of general. But in our case, while we believe that all of this is relevant and it's all stuff that we should do, we're focused on the pricing equation. And first part is pricing over raw material inflation. Businesses will talk a little bit about that. We talked about that in our earnings call. Secondly, we're going to talk about what we call pocket pricing, and then we're going to talk about understanding the true profitability of our business. So what back is pocket pricing? Well, what it is, is if you go back when all of our businesses and every corner of it were so differentiated that you can do anything for the customer, right? You want custom palettes, no problem. You want special, no problem, okay? You want special you want small lots, no problem. Well, no, in certain areas of the market, we have to charge our customers for those. They seem fairly obvious, but we have to do that. Order size, we are establishing order size quantities. And there was one example that just came up recently where customer kept ordering in small quantities. We said, okay, it's going to be a $500 upcharge for each one of those orders. They said, well, we'll just order a big batch then. That's huge. So we won't get the $500 for that, but we will produce at a larger batch size. And that has economic benefit to us. So we've got two eighty credit terms. Think of the complexity that comes with that. All right, this one we're just getting into now. We typically quote our products on full truckloads, okay? A lot of our customers, actually a majority of them like less than full loads, okay? It's very convenient for them, keeps their working capital down. It is an opportunity for us to make sure they're paying for it and or they're changing their behavior, okay? So we have substantive actions that are tied to our pocket price goals. It's not just go sell harder and speak value. The next is also very important and there's so much on this page that's under it. First of all, there's a tremendous job in integrating the businesses, okay, and putting it all in the common IT system. But actually, we lost visibility to substantial and important components of our profitability, okay, that as you go from globe to globe because of transfer pricing, what's the real cost? Fixed versus variable, what's the difference? Even cost by batch size. So we have put in place and are very close to having much better profiles that we can share with our team into what drives the economics of our operations. And with that, we're going to redesign our sales incentive plan. And that will help us to drive a more premium mix and really optimize our system. Next area of competitiveness, and I'm going to be really brief on this one because I'd like to think you've got some comfort confidence in our area is SG and A. Our goal is to keep SG and A flat, but it's also to reinvest back into R and D and commercial and areas that differentiate us. And instead of doing it through big reductions, we want to do it through well thought through in advance productivity improvements efforts and we're doing that. So I'll just give you a couple of examples here. And this is a picture of our Columbus plant from above. This is a facility that used to have 1,400 people on it, right? It was really a hub, right? A different company at that time. And now we have less than 500. They cost $20,000 per employee to house people there. 20,000, we can have them build in addition to their home. We're moving and consolidating. That's going to save us $6,000,000 next year. We're going to move into from the whole complex into there. The next is Global Business Services and we put in Lean Six Sigma. We now have a leader of Lean Six Sigma. We're putting those programs in place, that thought process. And what you'll see, and this is just an example, by doing a fundamental assessment of our processes globally and consolidating them and moving them into a global business services network. And with that, moving to often low cost countries, we have substantial productivity opportunities. And this is just one which can not only improve the cost by eliminating 40% of our waste activities, but it also improved the service that we can provide to our team. So that is, in essence, the core levers. And I told you mathematically that we had a connection and we didn't put it in your documents because we know how those can be used every quarter and every call. And like I said, we're sharing specific details. But I'd like to give you some rule of thumbs here because I think it's really important. If we get the 3% growth rate we're talking about in the businesses at a breakeven cost, okay, keep our SG and A flat, we will meet our targets for EPS and also our margin targets. If we fell at our average margins, we will essentially double that. And if we can't grow the business at all, the impact of having 30% of our sales at a 5% premium and pricing to value at our $30,000,000 mix gets us to our equation to drive the EPS and EBITDA growth. So we have multiple avenues and we're committed to all of them. And we have the plans that would in fact exceed that 15% rate and would exceed the margin expansion goals. We just have to execute on that very focused agenda. Mathematically also with the 6.5%, which we're using and it's an internal metric that we think is important because we can challenge our team to rally around those numbers. When you talk about cash conversion, well, hey guys, let's go get 60% cash conversion. Okay, fine. Well, what the heck 60% cash conversion? But if we say that, Carl, you have $175,000,000 of capital and that's it, okay, I think he understands that. If Brian, we say you got to keep 95% on time performance, but you got to take $20,000,000 out of working capital, any confusion on that one? No. I mean we got to do the work, but we can align our team and mathematically with the actions we're talking about, it drives over $1,000,000,000 worth of cash. So how realistic is this type of activity? Well, this is a profile of what our capital investment has been. And what's important here is that we spent, well, not quite, but close to a quarter of that on growth capital, and we will still spend money on growth capital because we are out of capacity in some areas. And some areas, we're going to upgrade the mix, right, to enable growth. But the point is, I just showed you that we have hundreds of millions of dollars of opportunity to leverage our existing assets. Let's leverage our assets before we start throwing more and more money into expanding our infrastructure, we've got a great infrastructure, okay? And in terms of working capital, there was a very specific strategy, which I happen to think was a really good strategy. When the businesses came together a few years ago, there were issues of service and because we're putting people on different systems and getting teams to work. And our service level went down and that was impacting our credibility with our customers and our ability to drive the growth that we wanted. And so there was a lot of fundamental work done to improve our forecasting, to include our processing capabilities in terms of the data, to better manage our inventory. And you can see that in our on time delivery performance. But while those things were being put in place, well, actually we use working capital as a buffer. I think that was a smart thing to do. But I think it's really important to notice that we have okay, we would say just to get back to where we were, we have about $60,000,000 of inventory that we can bring down. And we have actually an action plan to do that, okay? There are very specific actions. And if we had all day, we'd go through what those are. We just don't have the time this morning to do that. So with that, I hope that you've gotten a good sense that we are committed to delivering what we think is a strong financial equation. And with that, we are tying those to very specific levers. Later on, I will talk about how we really tie those to our incentives, our cadence of review, to the metrics we use. But we have very specific actions and very specific opportunities and we are committed to driving that. And so now what I would like to do is turn the discussion over to Kevin Willis, so he can speak to how we're going to utilize that cash. Kevin? Good morning, everybody. Good to see you. Welcome. Thanks for taking your time out to spend half a day with us and learn a little bit more about the business, what we're trying to do to improve it, drive value, to drive growth, profitability. And at this point, I'm going to talk a little bit about capital allocation. We've a lot of questions about that in terms of what are our priorities, what's going to change, what hasn't changed, what are we doing differently, what are we doing the same. What hasn't changed, what's not going to change is the fact that we have been and we'll remain disciplined. We're going to remain focused and very analytically driven in terms of how we invest the capital that the business generates. If you think about what we've done in the relatively recent past, paid down almost $2,000,000,000 of debt, and that's primarily through the Valvoline IPO, the Valvoline borrowing and cash on the balance sheet. We've also returned over $2,000,000,000 to shareholders. Bill mentioned noncore asset sales. That was a primary driver of that also through just regular dividend payments. But the vast majority of that has been share repurchase over the past couple, three years. We also established an asbestos trust, and we don't talk a ton about that externally. But as you are probably well aware, if you are an investor, we do have an asbestos liability on our books from the past. And we've got two things in place: number one, the asbestos trust, which was established after we reached a settlement with a couple of large insurers number two, we have insurance receivables on the books. We believe that between the trust and its earnings along with the insurance receivable over the course of time essentially negates the cash flow that's required to service that liability. So while we can't call it a defeased liability because there is the potential for volatility going forward, we do believe that the assets we have in place in the form of the trust and the insurance effectively offsets the liability and the cash flow related to it. Clearly, as part of the separation, we've assigned most of The U. S. Pension assets and liabilities to Valvoline. And most recently, we've signed an agreement to acquire Pharmachem. Bill has talked about that. You'll hear the commercial leaders talk about that in terms of how that fits into their business. I want to talk about it just a little bit from a financial perspective. Dollars $660,000,000, it's meaningful but relatively low risk given the size of the company and the fit that we see with Pharmachem. We're going to fund that with a term loan as well as cash on the balance sheet. The purchase price represents on its own a pretty attractive multiple given the transactions that we've seen in the space. If you add on to that the synergies that we've identified just by operating the business together, along with our global tax footprint that we'll be able to leverage, It's an incredibly attractive multiple for this asset for us, for our shareholders, and we're quite pleased with that. It will be accretive pretty much immediately. Cost of debt is still low. It's a good business. Generates a lot of cash, low capital intensity, which is really important. Bill mentioned we do have some high capital intensity assets in the system. The Pharmachem assets are pretty small and pretty lean. And so cash conversion in that business will be quite strong. And we plan to close it by the June. So what are our capital allocation priorities? Well, first and foremost, we're going to reduce debt. We think it will take a couple of years based on the cash flow profile of New Ashland to eliminate the Pharmachem debt. But what you should expect us to do over the next couple of years is really focus on that debt reduction equation, so delevering the balance sheet down to, on a gross basis, about 3.5x EBITDA. In addition to that, obviously, we'll continue to invest in the business. Bill mentioned 6.5% of sales. Roughly, that equates to around $200,000,000 a year, which is pretty close to what we spend on CapEx today. The kicker to that is we have to obviously manage working capital, that's net neutral if we spend the $200,000,000 on CapEx. We'll continue to invest in good organic projects just like we have. But at the same time, we're going to be very, very focused on meeting that 6.5% of sales objective because that's going to be key to actually driving the cash flow metric that will be so critical to ultimately driving value going forward. Acquisitions. Pharmachem, again, it's a meaningful transaction for us. It's a good sized bite. We're going to have to take some time to ensure that we extract the right value from that, be very focused on that. It impacts a lot of the ASI business from a commercial perspective in terms of how it fits and where it fits. That said, to the extent that we have some small bolt on opportunities out there that are attractive, we'll certainly continue to look at those. Again, disciplined, focused, analytically driven, not emotional. That's been a very successful recipe for us in the past, and we'll continue to do that. We pay a dividend today. Obviously, we'll continue to do that. And over the course of time, when we get the leverage to the level where we think it's appropriate, we'll take a fresh look at share repurchase. But frankly, you shouldn't expect us to be doing any of until we get the leverage where it should be. So you've seen these three numbers, and you're going to see these three numbers a lot. If you think about anything to take away from this, a word that we use a lot internally these days is accountability. Who's accountable for this? Who's accountable for that? Who's the name what's the name that goes beside this number? Who do I go to if this is not performing the way that it should? Well, from your perspective and from where you sit today, these are the things that you need to hold us accountable for. These are the things we're going to be talking about going forward. This is what you should expect us to do. There's 1,000,000 moving parts behind all of this. And as Bill said, we're not going to get into every one of those every time we talk about this stuff. But clearly, these are the three things that will matter to us going forward, what we believe ultimately creates value if we can achieve these or better said, when we achieve these. So with that, again, thank you for your time. And I believe we're going into a break at this point. Is that right, Seth? Make sure you can hear me here. Okay. So we are going to switch gears here. If you recall, if you were here at the last Investor Day, we were really explaining who the company was and we had these kind of cool platform areas. Well, we're really taking a different look at the business. We're looking at managing the assets as a system. I think that came through and the opportunities associated with it. But we're running as focused businesses in our respective marketplaces. We think it's important for you to understand the history and the opportunities for those respective businesses. And when that's done, then we'll have a nice opportunity for Q and A. And I know there were a number of questions coming out of this morning's session. So in transitioning, I would just like to highlight again that you see the presence of the brand, you see this is really integral to us becoming a forward looking new company. We just have a short video on that, and then Dave Neuberger will come up to speak to you about the Farm and Nutrition business. I'm Dave Neuberger, Head of the Ashland Farm and Nutrition Specialties business. I've been a part of Ashland for a little over ten years, serving in a variety of roles and functions, most of that time spent within the pharmaceutical groups. Last time I did one of these was about five or six years ago when I was the head of the Ashland Investor Relations group, and it's great to see a lot of familiar faces out there in the audience. I look forward to connecting with you guys again over lunch. Today, I'm responsible for a $520,000,000 business unit with most of the sales and the vast majority of the profit coming from pharma. This is a great business, and it will continue to be a great business in the future. Given time limitations and your likely interest, we're really going to deep dive on that pharma piece here today. The pharma business is roughly $350,000,000 representing 12% of Ashland's total sales. For those who don't know, we sell excipients. Excipients are highly functional ingredients that allow drug makers to launch safe, effective and consistent products. Typical excipients include binders, which hold the drugs together that would account for a fair majority of our total sales as well as controlled release excipients, which precisely manage the delivery of the active over time. We are predominantly an oral solid dosage player. That means pills and tablets. If you swallow it, we're usually in it. What's in a pill? Pills are made up of three things: actives, excipients and fillers. Actives are the medicine. This is where a lot of the R and D money goes and a lot of the customer interest. Excipients make the medicine work better. This is what Ashland sells. Pillars give the pill the right bulk. These are the more price sensitive products we don't play here. If you look at the typical branded drug on the marketplace, a rough breakdown of the full cost of the pill is shown on the left. The biggest piece of the cost of a pill, as you can see, is the marketing and R and D dollars dollars to develop, launch and promote the product. That's an important point. We'll talk a little more about that later. The excipient contribution from the top half of that pill can literally be measured in pennies or sometimes fractions of a cent, typically far less than 5 percent of the total. If you switch that chart around a little bit, again, I mentioned that's the branded. If you take a look at the generics, the functional excipients piece would not change that much. It would still be less than 5%. You'd see a little bit more of an even weighting between the marketing, R and D and then the actives and everything else. Off to the right of the chart, we're giving you a visual indication of the excipients market. The total market that we play in is $6,400,000,000 The highly functional areas where we compete are a little over 2,000,000,000 That's the light blue there in the middle. On the bottom, that's where we purposely don't compete, as I mentioned earlier, colorants, fillers, typically less differentiated, more price sensitive, those areas that we're not looking to invest in or enter. In addition to our existing markets, you can see that dark blue area at the top. This represents the injectables or the biologics. This segment is growing in the range of 10% to 15% per year and has some of the highest margins in the marketplace. There's a lot of potential there and we're figuring out how best to enter. We have four key strategic themes that we're going to dig into over the course of this morning. Pharma is a growing profit engine. We have a winning strategy. We're investing to accelerate growth. We'll talk about some of the investments that are coming online over the course of this year that we're excited about. And then certainly, the expansion into nutraceuticals that Bill had mentioned earlier and the overall fit of Pharmachem within the overall Ashland portfolios. First, pharma is a growing profit engine. Over the last three years, we've grown volumes at a compound annual growth rate of 2.4%, expanding our overall margins and driving gross profit dollars and operating income. We've done that against the backdrop of a solid underlying market and particularly strong performance from what we call cellulosics, one of our core chemistry platforms. Cellulosics are a greener, more natural excipient based on wood or cotton. We've been focused on that part of the market given their margins and efficacy, and you can see how we've changed our mix over time. Today, over half of our profit comes from this growing strong margin category as compared to 2013 where that number was closer to 40%. We've done a good job growing our share versus competition and more broadly growing the share of these highly functional chemistries versus less sophisticated options. This growth is particularly impressive given recent capacity constraints in some of our core cellulosics chemistries and capabilities in certain products that have limited our available markets. More on that a little later. We've also had our challenges. It's not all roses. Acetylinics are synthetic excipients, sometimes more broadly referenced as PVPs, polyvinyl pyrrolidones. These have gotten more competitive with smaller entrants gaining share, particularly in some of the emerging regions. This has put some downward pressure on our volumes as we retain our premium position in the marketplace and focus on the customers that value the quality, consistency and performance that Ashland provides. The net effect is solid overall results and a great platform for future growth. Here's how we win. Ashland has one of the broadest portfolios out there. We have a wide range of chemistries with unique attributes targeting various areas of the market. That's important. If you remember that slide earlier that had the picture of the pill, all the R and D dollars that go into the cost of it. Well, every day, every week, every month that you can shave off your launch timing leads to significant savings in revenue. When customers partner with Ashland, they know that our portfolio enables us to develop an optimal formulation that quickly meets their needs. A quick example of that is shown on the right, where we leverage the breadth of our portfolio to allow one of our major customers to differentiate their offering in the marketplace. That particular active, metformin, that is the most widely prescribed active for diabetes, tends to be one of the most high growth areas. And again, that's an area where customers will continue to innovate and leverage the excipients that an Ashland would provide. In addition to our current portfolio, we are continually tailoring and expanding our product offerings. This is necessary given our customers' constant innovation and the need for specialized products that help meet their needs. We create these new products in close collaboration with our customers, who work hand in hand with roughly 75 Ashland pharmaceutical scientists stationed in laboratories throughout the world. Today, roughly 25% of our excipients revenue comes from these new products. One example of this type of innovation is our DC HPMC products. These products were specifically engineered to support large volume drug manufacturers. These are customers that are trying to maximize throughput at their facility, and they require products with extremely high flow rates that can work in tandem with their high speed equipment. The product that Ashen developed and launched offered a 150% increase in flow without sacrificing any other critical product properties. From our customers' perspective, this saves them time and money. It also helps them avoid future capital costs as they make the best out of their existing equipment. As I look ahead, we are taking a number of actions to accelerate growth. As shown on the slide, the Asia pharmaceutical market is growing at rates roughly 2x the global average. This is driven by two main factors. First, you have the usual specialty chemicals story, more disposable income, emerging middle class. You have a second factor that's a little bit more unique for the pharmaceutical business. That relates to Asia becoming a major manufacturing hub for the rest of the world. As one indication, the industry estimates that roughly 80% of prescriptions filled in The U. S. Are filled today using Asian produced generics. To capture that growth, we've opened a Chinese manufacturing facility in late twenty sixteen. This facility solves historical issues in China, which only allowed Ashland to sell a small portion of our overall product line. We can now offer all of our major product lines for local sale. In addition, we recently opened and expanded our two pharmaceutical technical centers in the region. These two sites are becoming real showpieces for Ashland, broadening our technical capabilities and further strengthening our customer intimacy. Today, Asia represents roughly 30% of our sales, and we expect future growth in line with these broader market trends. We're also taking steps to further improve our mix. I mentioned earlier that more than half of our gross profit today comes from cellulosics. We're taking action to expand that even further. This includes a significant capacity expansion of our industry leading Klucel product lines, one of the world's premier binder offering. These products are currently at full capacity, limiting our shorter term options for growth. We're also improving our capabilities on Benecel, a controlled release excipient produced in Dole Belgium. At that site, we have been at or near full capacity for the last several years, given high demand in both industrial and the pharmaceutical markets. Starting earlier this year, and as Bill described earlier, we instituted an optimization program to further shift the available capacity over to pharmaceutical, ultimately allowing Ashland to more effectively compete in a $150,000,000 marketplace. On the acetylenics side, we're focused on improving our cost position and executing a segmented approach to the broader market. While these chemistries remain high margin in pharma, we must take these actions to better combat competitive pressures and maintain our overall profitability goals. As part of that approach, we're pushing hard to regain share in non pharmaceutical markets, where we've lost share, which have in turn led to higher cost on the pharmaceutical side of the business. Our segmentation has also identified niches of the market identified in ultra high purity products to enable the delivery of more sensitive actives. While that portion of the market is small today, we expect the never ending regulatory march toward better, safer, more trusted ingredients to lead to more growth over time. The third major lever for growth is the need for improved bioavailability. When you swallow a drug, it needs to dissolve in your body and get through the intestinal wall. With certain actives, that doesn't happen. Either they don't dissolve and simply pass through your body or they do dissolve and they can't get through your gut. Neither of those are good. Take a look at the graphic on the left. Today, on the left hand side there, you'll see 40% of the drugs on the marketplace today, something that you'll go get a prescription for. Forty percent of those are classified as poorly soluble. If you look at the drug development company's pipeline, essentially the drugs that will be launched over the course of the next five to ten years, that number jumps to ninety percent. So nine out of 10 drugs that will be launched in the future will likely require more advanced excipient solutions. That's a big deal. And National has made significant investments over the last few years to develop patented products and technologies that solve these issues, allowing drug companies to launch their latest innovations. To elaborate that and the importance of it in a little more detail, you may have heard referenced in the past how much it costs to launch a drug. You've heard a number of $1,000,000,000 Drug companies will get far through clinical testing when they get to the stage of figuring out how they'll solve bioavailability. If they can't solve that, their options are either to shelf the drug, lose all the R and D money that's been invested or partner with a company like Ashland to drive these more advanced solutions. This is the innovation frontier within pharma, and Ashland's strengths will continue to meet these industry challenges. As part of the broader strategic work in my group, we've been focused on two primary adjacencies: injectables, which I mentioned earlier, and nutraceuticals. Nutraceuticals is a large, high growth market that is targeted by both our pharmaceutical and nutrition businesses today. On the pharma side, we're selling our excipient portfolio into minerals, vitamins, supplements, essentially any oral solid application. On the nutrition side, we're selling stabilizers and rheology modifiers going into powders and drinks. While we've done okay in nutraceutical markets, we've historically lacked the critical mass and portfolio to make this a real platform for growth. Pharmachem solves that problem. PharmaChem is a leader in custom and branded nutraceutical formulations with total sales of roughly $300,000,000 40% of that is going into nutraceutical markets. Pharmachem is a great business, and it gives Ashland critical mass to finally capture that growth. Regarding the possible upsides, which Bill briefly described, we see three primary areas listed on the slide for upside sales potential. First, we will leverage the Pharmachem channel and customer intimacy to grow the Ashland excipients and food additives business, essentially cross selling the Ashland portfolio through their team. Second, we will leverage the Ashland global channel and tech service expertise outside The U. S. And in the broader food and personal care markets. Vito will give you some ideas on the personal care piece a little later. Third, the business combination creates a very unique technical offering. Ashland is great at advanced delivery methods and maximizing product efficacy. Similar to what we do in pharma, we can help the nutraceutical actives perform better. Pharmachem is an expert in developing and co processing the nutraceutical actives and ingredients and offering tailored solutions to customers to help meet their needs. The combination of the two allows us to deliver more advanced, fully formulated solutions to the marketplace, something that's really never been done before. The timing is right for that approach given the increasing sophistication of the nutraceutical market and customers' desire to improve and validate the functionality of their products. We are very excited about this acquisition, and I will note that none of those potential upsides were included in the original acquisition economics. In closing, pharma is a great business. It will continue to be a profitable engine for growth in the future. We have a winning strategy. We're investing to accelerate growth. Very excited about a number of these investments coming on over the course of 2017. We really figure we have the great platform to help meet the overall objectives as part of this broader plan. And then the expansion into nutraceuticals, again, one of our two targeted adjacencies, very exciting marketplace, huge global market, massive opportunities outside The U. S. That Pharmachem has not really focused on historically. It's an exciting time for the company. We've got a great team, great market, a lot of opportunities for growth. Thanks for everybody's time this morning, and I look forward to answering your questions a little later in the day. And with that, I'll turn the presentation over to Vito Consiglio, who will walk us through Personal Care. Okay. Welcome. Good morning. I'm extremely excited to be here today and to speak to all of you. My name is Vito Consiglio. I'm the Vice President for Personal and Home Care at Ashland. It's a little bit about my background. I've spent twenty three years in Specialty Chemicals. I've worked in joint ventures throughout the world. I've worked for Fortune 500 companies, and I've also worked in private equity. I'm delighted to speak to you about Personal Care, which represents about 19% of Ashland's 2016 sales. I'm going to talk to you today about who we are, what we do along with some historical insight. I will outline how and where we'll focus our efforts as well as what actions we're going to take to move this business forward. So what are we? We are a solutions provider with capabilities in a wide array of specialty ingredient technologies. We represent $566,000,000 of a $6,000,000,000 specialty ingredient market that has been growing and is predicted to continue to grow annually by 3% in 2020, driven by strong emerging economies, increased discretionary income, growing middle class and in The U. S, an aging baby boomer segment who cares deeply about improving their health as well as their appearance. We compete in three key segments of the market, those being hair care, oral care and skin care, which I will outline on the following slides. For example, in hair care, we have a leadership position in fixatives and rheology modifiers, and we have continued to innovate and grow in conditioning polymers. I'll talk a little bit more about that today. In oral care, we're recognized as the industry standard in bioadhesive polymers, and we have pioneered the whitening technologies to drive significant market growth. In skincare, where we pioneered waterproofing technology and a leadership position in UV absorbers, the bottom line is that we have led or pioneered the technology that enabled the definition and emergence of new categories that drive significant value. Now that we've talked about the overall marketing position, I'm going to talk to you about some of the key strategic themes that will carry throughout the presentation moving forward: number one being our ability to maintain a strong focus on a new, highly differentiated application. We talked about this a little bit earlier in Bill's presentation accelerating our growth for Naturals and emerging market trends improving our margins in competitive segments of the market as well as the actions that will drive the performance. Bill talked about this earlier. We're going to talk about asset optimization. We're going to look at some things that we're doing to drive those markets that are more difficult for us and segments that have been a challenge. And then finally, leveraging synergies from Pharmachem, which will provide additional growth opportunities for us. So let's talk about what the new highly differentiated applications mean. So let's think about this as three key competencies that drive our competitive advantage, okay? Let's call these our strengths per se. Unique technologies based on some of the things that we're doing at our regional centers of excellence. This is a core. Number two is our formulation expertise, which differentiates us from our competition. And I'll show you that in some of the product examples if I go through those. Number three is our customer enablement, which is built on our go to market expertise, which is absolutely instrumental in driving significant value in the marketplace. I'm going to give you an example of a very unique technology that we just launched in hair care. FiberHands. What's what is this? What's the product? Well, it's a highly differentiated technology that puts us into a new space with an ingredient that actually gets into the hair fiber itself. And why is that differentiated? Well, we just launched it in London at the In Cosmetics Show, which happens to be the largest industry trade show for all of personal care, and it earned the Gold Award for Best Functional Ingredient. FiberHance represents for our customers an opportunity to provide a product to the marketplace that is highly differentiated, gives them the ability to generate more profitability and allows us to gain profitable share. And there's a lot of interest from the global market as well as the biggest MNCs out there. This product follows down a path of success that we've had a short time ago with another hair care product called ChromaHance 113. This hybrid technology provides color and conditioning protection for hair, a unique technology that enables you to retain the color in between the applications and also give you conditioning to protect the hair. It gives you that silkiness feeling and that enhanced combability. For myself, not too valuable. For those that have hair and it's long, there's a great value to it. These are examples of growth platforms that we're going to continue to build upon in the marketplace. Okay. Our expertise, though, it's just not limited to hair, right? Hair is nice, but there's other opportunities as well. In oral care, our technology is the leading solutions in over the counter whitening and is able to grow a premium toothpaste category. Our collaborative work with this customer led to a new category to emerge in the market that is now the fastest growing segment of the market, period. Additionally, it commands a pricing premium of 2x per ounce versus traditional toothpaste offering, and it continues to grow dramatically. Now let's transition to Sun Care Solutions and Skin Care, where we have some unique technologies that enable customers to provide, what I would call, is provide sensory rich solutions that drive pricing premium. We've got a couple of products here. So if you go into your retailer, you'll notice that this is a segment of Sun Care Solutions that there's a lot of options, right? Much of this is price sensitive. But what I'm showing you here is a bottle of Coppertone Clearly Sheer that you can find, again, at any of your local retails that stem from a brainstorming session with Bayer that was initiated to create a unique product in a price segment price sensitive segment saturated with offerings such as this, okay? Now why do we care? Here's why we care. This is it's not just the differentiated solutions and the formulations and the ingredients that range from, for instance, the feeling that you get that sensory second skin feeling that you get when you put this on. It's not just the ingredient that gives you the stability of the whip. So when you spray this, you get that greasy, wet, clear feeling, right? When you spray this, it comes out like a cream. It lays. It stays stable. You don't waste as much. And then there's the waterproofing benefit. If you look at those attributes, it enables a pricing premium ranging from 30% to 40%. This is critical. Why does that premium exist? It's because we've addressed the key areas of customer dissatisfaction, right? Do any of us like putting sunblocks on that have that greasy and sticky feeling? Because they all do. That waste of the aerosol when you're spraying it, you won't get that here. And the waterproofing performance that's actually going to work. The takeaway here is that there's a $10,000,000,000 market in Sun Care. We're enabling 30% to 40% premiums for our customers that drive significant value for us. But it's not just the unique ingredients. It's the formulation acumen. It's the expertise in go to market strategies that drives these pricing premiums. And I'd implore you to go buy this. This is really good stuff. Okay. So I'm going to talk about another example in skincare. I've brought a product for you to I'll talk about today. And there's been a lot of interest from my internal team of wanting to know who's actually going to bring this home. We haven't decided that yet. There's a lot of friends out there today. I've noticed that. Okay. So I've talked about some of the things that we're doing in the products. I've talked about how we're highly differentiated. Let's talk about some of the creams that are in the marketplace currently. So our expertise in testing, claim support, marketing enable premier brands to reinforce their unique solutions and substantiate their inherent value claims. So this is an example of a close collaboration and a subsequent brainstorming session that enabled the creation of a signature ingredient for Estee Lauder. This is Estee Lauder's ultimate diamond transformative energy cream, which has an entire line of products that are built upon it. This wonderfully shaped, aesthetically pleasing offering retails for $375 for 1.7 ounces. And I can tell you that there's a whole product of families that are built upon this same platform. Similar cream, some of the same claims. Why should you care as an investor? Who cares? You should care because it's the enablement of significant value enhancement that commands a 50x pricing premium. That's why. It's the allure that's created from the base science. That's what's in here. It goes well beyond the unique extracts and the efficacy of the multifunctional ingredients that we manufacture. We bring to life the soil to bottle by leveraging our expertise in the creation and development of products and the substantiation of the label claim. We still forgot who's going to get that later. Okay. I've provided you with a lot of examples of how and where we're doing a great job in developing highly differentiated technology. Now let's talk about the work that we need to do to continuously improve our commercialization of innovation, which contributes greatly to our financial performance. Bill showed you some slides earlier that said our NPI is growing from 25% to 30%. Let's talk about some things that we're doing in the other areas, for instance, where we've got to look into how we can be more successful. So this is something that's new in terms of our approach and discipline. We took the action to review in painstaking details our innovation and commercialization pipeline for the last five years. To understand why we win as well as why we lose and the key factors that influence the success in commercializing innovation. We found that there was four key areas that determine our outcome, and this is absolutely critical, right? When we have a strong value proposition, okay? When we're engaging with the customer in beta testing, have a very close collaboration, we have a lot of success. When we focus on our core, and what I mean by core is not only the chemistry, it's the competencies, right? When we decipher from that, when we drift from that, we're not as successful, right? And then moving quickly to the market. I'm going to talk about our regional centers of excellence. This is a huge competitive advantage. Now let's talk about the second key initiative, which is accelerating growth from naturals and emerging market trends, and I'll make this specific to what the naturals represent. We have a natural portfolio that offers unparalleled sustainable footprint with our ZetaFraxins technology. These products provide the standard for green technology and redefine farm to bottle. We have a platform that is so natural, there is no additional water that's consumed in the manufacturing process, and products created with this platform exhibit the logical endpoint of natural trend in Personal Care products, which is no solvents, no chemical modifications and no MAD made components. In just over one year from the time of the acquisition of Zetifractions from Axo Nobel, we have launched our first global ingredient in Harmonian, which is receiving heightened interest from the global market. We are ahead of the curve in terms of the shift from artificial to natural ingredients in a segment that is positioned to outgrow the market 3x by 2020, and we are ready now. Further on to our second strategic theme, I'm going to talk now about the emerging markets and the importance of the emerging markets and how we're positioned there. Our regional centers of excellence provide a huge differentiated approach that accelerates route to market efficiencies and enables rapid commercialization. In this example, we've highlighted the development of a target controlled toothpaste in India. Why this is critical is you have to look at how the speed that we can get to the market. You've got to look at the channels that are developing in these marketplaces and how fast and how quickly we can get there. There is a window of opportunity. Sitting back and thinking about it doesn't get you the business. We move quicker, we move faster, we collaborate much quicker in those specific regions. Another area I'd like to highlight is within the global hair care market, where we're creating solutions specific to the hair types of the regions and the environmental conditions in those regions, right? When you consider that 85% of end growth will come from emerging markets, it's important to note that we are ready today. Now let me talk about our third strategic theme, which was the focus to improve margins in competitive spaces. In some of our segments, we faced the challenge of product maturation and value add with the purchase for resale products. And as Bill has noted earlier, there's an asset optimization that is key to our focus to drive value in the future. We're focusing heavily on this through our manufacturing asset base. And to that end, it's important for us to focus on controlling our cost and what I would say is owning our own destiny. So how are we going to do that? We're going to do that through increased asset utilization, better engineering processes, which I think we've got a great opportunity there because there are a lot of highly sophisticated processes right now that we can standardize and then partnering with our suppliers and leveraging our global procurement capabilities. This is what's going to enhance our margins. It's that simple. Pharmachem. Building upon what Bill and Dave have already mentioned, I believe that there is an extremely well established sales channel in Personal Care that we'll be able to leverage and bring Pharmachem's unique to market. We have a strong direct sales presence outside of North America, which will also enable additional opportunities to grow our market share for the rest of the world. And Personal Care will greatly benefit from the access to the fragrance market as well as the unique differentiated botanical solutions like the aloe vera as well as the extraction expertise that Pharmachem has developed. We're extremely excited about the to add to the breadth of solutions that Pharmachem has to offer to our current portfolio, and we believe it will further assist us in controlling our own destiny. What I mean by that is if we control the value chain, if we control the development, we can move quicker, we can move faster and we can extract greater profitability from that. The acquisition of Pharmachem will strengthen all the existing initiatives that I have talked about with you today. It will accelerate our growth within both businesses, and I'm excited to move forward with this acquisition. So now let me go back to where I began. I've outlined how we're going to maintain our focus on highly differentiated applications. And I've explained to you how we're going to accelerate our growth in Naturals and Emerging Marketing trends regarding our botanical platforms and our regional centers of excellence, which I believe are a significant competitive advantage. I shared with you how we'll improve our margins in competitive segments and finally, how we will leverage our synergies with the acquisition of Pharmachem. As you can clearly see, we are positioned for success. I thank all of you today for being here. I look forward to speaking with you. And now I would like to introduce Suzanne Rolland, Group Vice President for Industrial Specialties. Thank you. Good morning. I am Suzanne Rowland, and I lead the Industrial Specialties business, which is a third of Ashland. In my prior life, I have had responsibility for other coatings, adhesives and construction businesses and have known and admired these Ashland businesses for many years. Having now been at Ashland for the last ten months, I am thrilled to be leading these excellent businesses, and I'm particularly impressed by our innovation and technical depth. Industrial Specialties is almost $1,000,000,000 business. Our products provide high performance in many different applications. While it is easiest to understand what they do for paint, our products are also used for solids handling, liquid handling, shaping, refining and finishing in many applications from colored pencils to lithium ion battery. Our products are typically a small percentage of the end product, but provide a much higher value in use. While we participate in over 30 industries, at the core, we have the same business model across the portfolio. First, we focus on the premium areas in these industries where we can add real value. We are successful because we understand our customers' applications in every part of the world, and we tailor our solutions to meet their needs. We drive disciplined price and cost management, whether it's a premium segment or a more price sensitive one. For our high acid intensity product lines, we ensure high asset utilization. Our new tagline, Always Solving, is a perfect fit for what we do in Industrial Specialties. This $1,000,000,000 business is split a third coatings, a third adhesives and a third other industries. I'll talk briefly about other industries and then focus the rest of the time on coatings and adhesives. At $337,000,000 in revenue, Other Industries is quite sizable. Your heads would spin if I took you through the industries we touch. We sell the entire product range of the Ashland Specialty Ingredients reported segment. The Performance Specialties team focuses on unique applications, which require complex solutions. We are very selective and choose our targets carefully. Our scientists are best in class and have an insatiable curiosity to deeply dive into finding customer solutions in these many applications. Energy. As we are all painfully aware, our energy business has declined significantly, and it's now a much smaller percent of the portfolio. The dedicated small team we have in this area still remains fired up, and I've got to give them a lot of credit because that's hard to do in that kind of environment. And we are seeing now an uptick in business. Finally, our construction business is the most challenged in our portfolio, so we have taken significant actions to reduce costs. And even in this highly competitive environment, we have developed unique products, which our customers value because they improve customer productivity or end user productivity. On to our $321,000,000 coatings business. Architectural coatings is a great stable market, growing at 3% a year. We participate in the $2,800,000,000 additives market and provide leading industry leading rheology products as well as an excellent line of surfactants and deformers. While we're only 2% to 4% of the volume of a paint can, our products provide benefits, which have a much higher value in use to the painter or the property owner. Although you may consider paint to be a simple product, the complexity in formulating paint globally continues to astound me. The different raw materials, different substrates, different painter preferences, different painting practices and different consumer economics in terms of afford to spend create our opportunity. We segment and sub segment the market, and that allows us to drive growth in the premium segment of the market while capitalizing on the whole market by constantly managing our cost position. There are three things about coatings I want you to take away. We are the premier global rheology provider with our Natrosol and AquaFlow brands, and we have been so for many years. We're driving a more premium mix through innovation and close technical collaboration with our customers. And we are strengthening our leadership position in hydroxyethylcellulose. We are the premier rheology provider. We are the leading hydroxyethylcellulose supplier and the only one with manufacturing capabilities in three regions. With our two types of rheology agents, we are also the only supplier that truly spans the paint range from low end paints to premium paints. We continually innovate in rheology chemistry. While we're only the small volume of the paint can, our products greatly affect application properties and how a paint applies really matters to our customers. It is why we have invented a patent pending device to measure the forces a painter uses when painting a wall. We put more science behind the art of painting. Close collaboration with our customers is embedded in our DNA. The best paint quality outcomes are with those customers who engage fully and share openly with us. In the example on the left, we help this customer to create many paint formulations utilizing a more efficient rheology agent. In the second example on the right, we work closely with this customer to create a new solvent free paint line. It is not enough to have technical expertise in one region of the world, and Dave and Vito have talked about this extensively. It's important for industrial too. Customers use different raw materials, substrates differ and painting practices differ around the world. So we have six regional labs servicing customers' ongoing needs and three of those six labs have R and D scientists, and we develop new products there. We have tight seamless cooperation between our customers' technical teams and our technical team. Skillful rheology and additive design plays a critical role in the coatings business. We are the market leader in hydroxyethyl cellulose with the largest global network, as I've said previously. While we have healthy demand, growth in the premium product grade and strong relationships, the industry has been challenging in the last several years. Additional capacity came on stream at the same time as the energy market dropped off. And despite one competitor closing a plant, the market remains oversupplied in a rising raw material environment. Our focus is on managing our product mix, increasing prices and continuing to drive cost improvement. We are in the process of implementing a new asset optimization strategy, which will align more closely with our commercial strategy. We are increasing our research focus in the area of process technology, and we are accelerating our ongoing manufacturing cost reduction. Our goal is to remain competitive in any market environment. Whether it's innovation or ensuring global supply, we are always solving with our adhesives with our customers in the coatings market. Our $332,000,000 adhesives business is a niche player in the $22,000,000,000 adhesives market, also growing at 3% a year. This is the second adhesives business I've had responsibility for in my career. And frankly, adhesives businesses are always a challenge to explain. The rest of Industrial Specialties is an ingredients business. In coatings, we sell ingredients, which our customers buy and blend with other ingredients to make a can of paint. The adhesives business is better classified as a materials business. We sell adhesives, which are used in one of two ways. They directly bond customers' materials such as our Plyogrip transportation adhesives or our adhesives are to be coated on high speed lines and then converted into a tape, label or graphic or film product. Our products must work as a material directly out of our containers and typically on some form of fast moving equipment. Being a materials business is important because it means this business is typically stickier than other industries. And there is more optionality available to an adhesive supplier as long as the supplier has the capability to respond. I can unequivocally say that we have that capability to respond in adhesives. Our adhesives team is top notch. They are nimble and therefore capture a premium in niche applications throughout the market. There are three points to remember about adhesives. First, it's a significant profit contributor to Ashland. We have a really strong value proposition, disciplined pricing cost management and a strong leadership position in pressure sensitive adhesives. We win with great customer collaboration and extremely strong innovation and technical service team. Our scientists work on fundamental chemistry and then they go out on our customers' line and figure out how to make the products on high speed equipment. 30% of our adhesives revenue or $110,000,000 comes from new products. While the business is still predominantly North American, we started organically in EMEA several years ago and have now gained enough critical mass to grow strongly. We have added capacity in The UK for our premium technology. We have a very specific success model in Adhesives. We play in niche applications such as graphics. You might see those on buses. We also play in specialty tapes and labels, and you'll see those on automotive engine parts or on food packaging. We are using our many years of experience in auto adhesives to capitalize on the trend to lightweighting, which requires more adhesives. We are constantly upgrading our product mix because of these high performance demand. We have deep technical expertise and strong customer collaboration, which allow us to innovate quickly. And you'll see that's a theme. Obviously, Bill presented, the way we do our innovation from long term products to short term projects really matters. And in adhesives, we do all of that. Finally, we are disciplined in pricing cost management, also critically important when you're in these kind of markets. Through this model, we have established a clear leadership position in water based and solvent based pressure sensitive adhesives and great niche positions in other segments. Here are some examples of how our Adhesives team is always solving. The first one on the left is a familiar yogurt product. This three sixty degree packaging is quite challenging. The team developed a product that enables the food customer to run at high line speeds with little waste. The middle example is a new more environmentally friendly packaging that you might see here in New York in a Pret a Manje or in Europe. The team developed a low migration coding for the label and for the film, which meets the highest standards of food safety compliance. And those standards are Nestle's criteria as well as the Swiss ordinance for food safety. This is a very difficult task to meet those standards. Finally, the third example is a house wrap tape. I'm sure all of you have seen the White House tape that is used on new construction. When this tape must perform in various weather conditions and adhere easily to the hard to stick to housewraps. In addition, this product must run well on the customer's high speed line. Once again, our adhesives team solved the problem. Our nimble adhesives team has generated 30% of revenue from new products. We are clearly focused on growth in adhesives. We recently expanded our capacity in Kidderminster in The U. K. To service our customers with our premium technology. We've also created new transportation products for Europe and are very excited that for the first time, we will be on twenty eighteen Porsche and Mercedes models. We have an extensive R and D and technical service center in Dublin, Ohio. And in Dublin, Ohio, we also have incredible analytical capabilities, which are very important for things like food safety. We have a second R and D team and technical team in Kidderminster, U. K, and they are rivaling our U. S. Team in developing new products. In Shanghai and Mumbai, we have smaller technical service labs. We are expanding and investing to enable faster growth. Industrial Specialties is set up for success. We have strong profit generation in coatings, adhesives and other industries. We are growing above the coatings industry in higher margin premium synthetics. We are growing in our profitable adhesives business, and we have selective growth areas in other industries. We are also driving excellent profit improvement opportunities across the portfolio. Our customer collaboration on technology is truly something to be envied. We continuously improve our marquee rheology products along with our customers. We innovate with our adhesive customers, and our local service and customized solutions earn us a premium across the portfolio. Our global growth will be driven by process improvements and cost reductions in hydroxyethylcellulose, by exciting advances in our synthetic rheology technology and by pioneering new applications and markets in adhesives. In addition, I am leading our Ashland work to optimize our assets across the entire specialty portfolio, which will more strongly align our commercial strategies to our asset utilization. In industrial specialties, we are always solving. Thank you. And now I will turn this over to Andy Johnston. Okay, good morning. It's my pleasure to be here. A couple of comments. I do appreciate everybody's time and attention. This will be the last business update for this morning, and then I will hand things back to Bill. Before I do that, though, let me introduce myself and Andy Johnston. I'm the Group Vice President for the Performance Materials business at Ashland, and it's my pleasure to be here this morning. I've been with Ashland for twenty three years. I'm based in the Dublin, Ohio facility, And I've been involved in a lot of businesses within Ashland over the last twenty three years, both composites, adhesives, but also in our coatings business as well. So I am excited to be here today. I'm going to tell you a little about our global adhesives business. We are an important part of Ashland with 2016 sales of around $670,000,000 And we believe that we have the most profitable and best composites business in the world. So we're very proud of that. We have market leading technology and brands and we create value by working closely with our customers to solve their problems. We segment our business into specialties. That's typically our high margin epoxy vinyl ester, also called Ever resins and gel coat. And then the second segment would be our core UPR or core unsaturated polyester resin business. Over the last few years, we have had a good track record of improving our profitability. You'll see that in a few slides. And we've done that through aggressive cost reduction, but also by being focused on margin management, making sure we capture the value that we also create for our customers. So as we move forward, let's talk about our strategic themes for this business. We have three core strategic themes, all focused on improving the margin profile and improving the cash generation in the business. Frankly, it's a pretty simple strategy. There's no magic here, okay? It's all about continuing to do what we've been doing with respect to cost control and judicious capital spending, but at the same time, we're going to realign our resources to accelerate the growth in our premium specialty segments. Our non specialty core UPR business is a cost competitive business, and we must manage our costs aggressively to compete. And we will do that through footprint optimization and cost out initiatives. Last but not least, as we improve and drive our margin profile, we also must be vigilant to manage our working capital and capital spending to continue to drive that cash generation. So let's talk about the specialty segment and how we're going to accelerate growth in that segment. Today, composites is roughly about a $9,000,000,000 global segment and we are focused in that specialty segment. The attractive aspect of that is the specialty segment accounts for about 30% of the sales of that €9,000,000,000 but it actually accounts for about 45% of the profit. So you can see it's a much higher margin segment and one of the key reasons why we want to focus in that segment. As you can see from the chart here, the upper right hand quadrant is that specialty. We call it the high spec segment, typically a high degree of specification and high performance requirements. And our goal is to focus our sales, marketing and technology resources to accelerate growth in that segment around the world. And really, we're focused on corrosion, automotive and marine. Those would be three of the core segments where we will focus those resources to exploit our leading vinyl ester resin and gel coat technology. Frankly, we've already started down this path and we've actually realigned a fair amount of the resources within the business. I've appointed a global specialties leader to drive this effort and the approach is starting to pay off. We have a very attractive North American business in automotive and we have put together a global team to actually accelerate the growth of that business around the world and we're actually starting to get traction with that effort both in Europe and in China. So we're excited about that. The other thing I do want to point out on this chart is there are segments of the UPR market where we can differentiate and get a price premium through product customization. So even on the left hand side of the chart, there still are opportunities for differentiation and driving those applications up into that upper right hand quadrant. And one example I will talk about later is some of our work in the engineered stone market. So let's talk about some of these key growth segments. The first one is corrosion. We are the brand naming Corrosion Resistance, okay? This is a key segment for Ashland's. We have the leading technology in this area as well as the leading brand in our Dericaine epoxy vinyl ester resins. With over fifty years of history and around 500 unique case studies supported by our Corrosion Science Center in Dublin, Ohio. This is a business we are by far the global leader in this area. We have by far the strongest team. Our dedicated tech service and end user selling team between them has around three hundred years of experience. Nobody else in this segment comes close to that level of experience. This is important in getting specified around the world in engineered applications such as chemical tanks or pollution control equipment where failure is not an option. Ultimately, we recommend the product for the job, the right product for the job, and the engineer ends up with a product that will last decades, thereby lowering the over lifecycle costs for the engineer. Let's talk about gelcoats and how we create value there. So we create value in the gelcoat segment by delivering high performance coatings with quality cosmetics. You can see from the example here, clearly, the marine market is a large segment for us. And if you're buying a boat, you walk into the showroom, the first thing you see is our gel coat. So it's a key part of the boat, both in terms of the look and the feel, but also in the performance. So it's a small part of the cost, but it plays an extremely high part in the look and performance of the boat. And we also generate value in this segment through our on-site technical service and support. So basically, we provide we spend a lot of time showing our customers how to use our products and how to make sure they get that best quality surface finish on the part. I mentioned our unsaturated polyester resins earlier and how we can drive value in that segment. So there are specialty segments even in the core UPR business. And in the engineered stone market, for example, this is a large growing market, consumes a lot of unsaturated polyester resin. And we have built a dedicated engineered stone lab in our Porvoo, Finland facility to support that segment. This has allowed us to create value through multigenerational product planning, allowing us to customize products to improve the surface finish, reduce scrap and improve the performance of our customers and products. So that's the Specialty segment. So let's talk about cost structure, key aspect of our strategy here. And we have a multi pronged strategy to stay very cost competitive. So in the non specialty core UPR segment, we have to be cost competitive. It's a very, very competitive market, frankly. And as such, we spend a significant amount of time and energy trying to figure out how we can take out costs and remain efficient. Over the last five years, we have been able to maintain a very efficient network globally through footprint optimization, and we have closed three facilities over the last five years to really enable that. I think most of you are probably also aware of the announced acquisition of Rycodes plant in Etane, France and the associated business with that. So we initiated business with that. So we announced that a few weeks ago. We expect to complete that by the June. We're very excited about that as well because it really plays into our strategy here in driving down our costs. Through that acquisition, which by the way, we got at a very attractive price, we expect to anticipate benefits both in terms of logistics optimization in Europe, but also we will avoid significant capital expenditures at our Spanish plant in Barcelona, Spain. And in addition, the efforts to accelerate growth of our automotive business in Europe, we actually believe we can leverage this deal and their position in that segment to drive our efforts in that area, too. So we're very, very excited about that deal and look forward to getting that closed. So let's talk about other initiatives to drive out costs. We are working this year on about $3,000,000 of cost reduction opportunities that we have identified in our manufacturing network, things like better use of energy, lower energy costs and waste reduction. Those are the types of efforts we continue to do on an annual basis to offset inflation. Bill also mentioned earlier this morning the fact that we are going to consolidate our footprint in Dublin, Ohio. We will achieve that over the next twelve months and that will generate an annualized cost savings for the business of around $6,000,000 a year. So we're really taking action here to maintain our very competitive cost position. Regionally, we also have teams focused on asset utilization. And you can see from our chart here on the upper right hand corner that we have done a good job of driving asset utilization over the last few years and driving down our unit manufacturing costs. And again, that's an effort we stay very focused on and we'll continue to drive progress on. And ultimately, this will all drive cash generation. You can see from the chart here that strong focus on cost reduction, cost control. We've improved our product mix over time as we've taken out assets. You can see we've driven significant profitability growth in this business. We expect to continue to do that. However, as we do, we need to ensure we keep a real focus on our working capital. We're typically around 7% in composites. We anticipate we can maintain that level as well as maintaining a low capital spending level. This is a low capital intensity business, so we don't spend a lot of money on capital equipment, thereby allowing us to cover a significant amount of Ashland overhead and generate significant cash contribution for Ashland. So in summary, we're set up for success in this business. We've got a good track record. And frankly, I'm excited about the future of composites, but I'm also excited about the future of Ashland. And I'm going to ask Bill to step back up and wrap that up. Thank you. Okay. Well, thank you for patience and listening to not just our story as a company, but also hopefully have a much better sense of our businesses and the approach and positions we have. We have great positions. I mean and we really have well honed strategies. I think what you're hearing is that we've got a much more laser focus on sub segmenting our market and dealing with the imperatives as is needed segment by segment because they are different. So I'm going to speak just very briefly to the issue of driving strong execution. And again, this is a soft subject, but I think this is an important one for Ashland because we are fundamentally trying to change our ability to enhance our, as Kevin would say, say do ratio. And we have a very brief video we want to show you and it just one of the things I mentioned before and encountered in joining Ashland is how the company really had different cultures and people work together, but they're always going to the past. And we wanted to make sure the company was looking forward. So we have just a couple of comments here and then we'll be wrapping up in a moment and take your questions. Over the last several years, Ashland essentially reinvented itself. That's not a small deal. That's a big deal. We're more integrated as a company. People are more comfortable with each other. We've overcome a lot of the hurdles. All that change does open up your eyes and make you appreciate and recognize things you're doing well and things that maybe you need to do better. It's also been good to get new blood into Ashland, new people bringing new fresh ideas and creativity. It's actually exciting because you're getting to see how the different technologies of the companies are providing a wider variety of solutions to problems. We are trying to always be better, and that is important, especially to our customers. Coming from community company to a specialty chemical company was a lot of changes. And I think this new branding, new color, the solving aspect as well is very important to us and to the market. When I saw the Always Solving logo, it really connected with me because it makes us more intentional about solving. I love the Always Solving platform for us. I'm really excited about it because we are now one company with one culture, one brand. Always Solving means the continuous improvement that gives us credit for who we are. We are now underscoring who we are, the true nature of who we become as new Ashland. And we are passionate, we are tenacious and we are solid. So I think the rebranding actually brings us into focus on who we are today and where we want to be in the future versus what we were in the past. It's not just another go through the motions of rebranding. We are a different company, and we will be successful in becoming the premier specialty chemical company in the world. Never underestimate the importance of culture and alignment in culture in terms of execution. That being said, there are other aspects of what we think are important. And I actually have a matrix, which at one point I had in the document and it was just too much to read through, but here are the areas that we're focused on, right? We talked about those. But what I'd like to emphasize is from my perspective, to drive execution, these are the core levers. One is leadership and organization. We have changed our organization structure. We have changed the leadership. Our strategy and approach is different. The market strategies you've heard here, the segmentation that we've done is much different. The acknowledgment that the imperatives within those segments and clearly as a company managing the system, the broad range of assets as a system, it's a different strategy. Metrics, each one of these is tied to very specific metrics and we have those with the keyword that was mentioned before, accountability. So yes, we are one team, but it's very clear that Carl, as an example, has responsibility for making sure that our cost per unit gets better and better. And leading the charge over there with Osama will be working with the commercial teams to make sure our new product success is at that 30% range. The other thing that I'd say about the metrics is we are tying those to the financials. What do I mean by that? I mean, I was talking to a group shortly during the break. I asked Karl a a couple of weeks ago, I said, how are doing in production of BDO because the market's picked up a little bit? He said, oh, we're doing pretty well. We're doing about 84%. We have a little turnaround, but we're doing about 84%. Well, what does that mean? Well, what if we were running at 97% utilization? How much absorption will we get? If we didn't have the $3,000,000 of costs associated with a temporary turnaround, what would that mean? What would be the incremental contribution that's associated with those sales? So don't come in and say we've got 84% utilization and that's up from 82%. Say we are $7,000,000 off of what we can contribute in this quarter and take responsibility for making that go away. So we're trying to change the accountabilities and the metrics while still operating as a new team. We have Lean Six Sigma. We have a project management office so that we can actually keep track of what I think is a fairly complex but robust agenda. We have a whole new operating committee cadence. And in fact, this is a team that because of legacy reasons has come from different facilities. We've had each one of our leadership establish offices in our Wilmington location. It's not our headquarters, but we work together as a team. And we're tying our performance to compensation. We are expanding my ability and our ability to not just get a bonus if we do well, but to be rewarded for doing a particularly good job and frankly if you didn't carry the weight to have a reduction on that. And that's actually new. We are changing our long term incentive metrics. This year, we've moved for the primary metric for our long term incentive is tied to EPS. We have had a portion of our incentives which have been tied to working capital. You could take a wild guess that next year 6.5% of sales will be that metric that will really drive our incentives along with operating income, which ties to our EPS targets closely connected. So we're connecting our compensation directly to the goals that we've set. And here's the one point where I'm going to show our blueprint. And really what I'd just like to highlight is that what we've done is we've taken these and we have what we call pillar priorities. We've made it very simple for the organization. This is what when we have a town hall, this is what we share with our team. This is what we're driving and these are our pillar priorities. And if you notice, that's a very shortened list of direct deliverables that we talk about and communicate with our teams, okay? So we're aligning the organization internally and throughout the organization along with our blueprint to drive the results. And so this is our strategy. We believe we have a compelling financial equation. We think we have a great business and this what we're talking about today was the true vision, not just to bringing these businesses together, but when we said to you a year and a half ago, we want to move from a financial sponsor to an operating company because there's real potential in these businesses and we're doing a nice job today, but we clearly can do better. And that's what we're stepping up and saying we can and we will do. So that is our message for this morning, at least the formal part. And I think there may be some questions. If there are some questions, we're going to ask the team to come up here and join us and we'll take your questions. With that. Is everything so clear? No question. Sure. And if you can turn up the microphone just a little bit because it was a little hard to hear the questions. But I think I heard the mute. You were questioning the volume through our cellulosic system. And I think, frankly, some of this is a reflection of dynamics in the broader marketplace and the way we've been operating. So what do I mean by that? Well, as I mentioned before, we see the total cost within our system. And we've also seen that as the energy market has contracted that there's been a little bit of extra capacity out there in places like the construction market. And when you can only see your fully absorbed cost, then you begin to say, well, that's not necessarily something that's of interest to us. You move away from it. And then your costs get burned a little bit more. Say, well, that's not as interesting either. And that is a cycle, which is not a healthy cycle. Now that doesn't mean we're going to go out there and target low ball business that's at low, low margins or something like that. But we need to understand where we're strategic. We're talking about glue sticks. We're not fundamental in glue sticks, but glue sticks can use some of our product. We can help to do that. I was somebody came back and they were talking about a competitor and they said, the competitor is really being very aggressive in South America. And I said, yes, makes sense. What they're trying to do is that's not a strategic market for them. They're moving capacity. They're keeping their facilities full and optimized. And so what we need to do is we need to grow the quality parts of our business that are truly differentiated. We need to manage our cost structure down. We need to look at consolidating assets if we can't sell at a premium price in all those areas. And we need to understand that running the system robustly is really important to our success. Now as for the baseline, I know that's something that's a little bit, I won't say, frustrating, but we're going through a lot of changes here now. And I think Kevin can speak to it. By the time we get to the end of this quarter, we'll have completed the separation, and it will be much easier for us to talk about the baseline that we're starting from. And so Yes. I'll add to that. The team is currently going through the process now do the work necessary to move Valvoline to discontinued operations. That work will be done prior to the full separation. And ultimately, we'll be filing an eight ks with those financials in there. That will provide the plan is to provide, on a GAAP and an adjusted basis, a baseline. I will say that there's going to be some noise in those numbers, so we're going to work to help you through that noise in terms of doing the overall calculation so that we can all have kind of a common baseline to start from to ultimately measure how that 15% compound growth works. I can tell That's forthcoming. That an objective that we have is and it's all been appropriate and right and logical because we've done doing some things. We want our numbers to just be cleaner. And what I mean by cleaner is so that they're more transparent, they're easier to see, not as many callouts and things like that. We want to we just want to drive it towards numbers without as many things to the side. Okay. Thank you. It appears that Asia is really the crux of some of the key themes across the pharma and nutraceutical markets. While it's a fairly small portion of pharma chem space revenues, Can you just comment on the overall size, the longer term potential synergy opportunity here, the rough cadence of the effort and any longer term margin implications? You. David, Peter, do you want to I'll start. In terms of upside synergy potential, it's too early to say. I mean we just announced it a couple of weeks ago. Hopefully, we'll close it, I think, by the end of this quarter is the target. But in terms of the potential, it's definitely there. If you remember the slide from my presentation, we talked about $40,000,000,000 in total nutraceutical market. About 60% of that is outside of The U. S. And a lot of that is in some of the niche areas of Asia. Korea, China, even India these days have these increasingly large nutraceutical markets that are growing at quite accelerated rates. In the case of those regions I just mentioned, we have excellent, excellent sales coverage today. I'll tell you from the discussions that I've had with Pharmachem over the course of the due diligence process, they're excited about being able to move towards that channel, both on the pharma and nutrition as well as in Vito's personal care piece. Yes. All I would add to that is that there's a lot of growth in personal care, and I would say, the premium brand, and being able to promote the technologies that we're getting from Pharmachem into those channels, which we have that are extremely well established, is going to enable a lot of profit to be generated for us in terms of growth. So we look for that as Evolve is a smaller portion of our portfolio, so that we think that's a profitable segment for growth for us. And maybe the last comment that I'd make on your margin question. So it's below what I operate at today for pharma, but certainly higher than nutrition. It does fit kind of nicely in the middle there. It would be accretive to the overall Ashland perspective. And what I would say is also, I mean, as excited as we are, we've done our due diligence. We're looking to close shortly, and we'll be getting in. And as we get in a little closer and have a chance for our commercial teams to talk more, I think we'll be able to, within maybe two quarters, be much clearer about what we think some of the upside in terms of the revenue based synergies are and do so with the specific examples and initiatives that will drive that. As we mentioned, we didn't justify the acquisition on any of those. So we view that as upside, as I hope you do. But we need to get in there and have that two way dialogue once we close. So it's just a little bit premature. Great question, but a little bit premature to give you the specific answer that you're looking for. But we will. Sure. So for the composites business, I think we've been very clear that, first of all, it actually has run very well. You saw the profit improvement. It's been relatively similar in volume, but the profit growth has been significant based upon running the specialty and running also with that lean footprint and optimization. And it contributes cash. It contributes cash in North America where we pay our debt. So that's important to us. And we like our business. We like the way it's run. It does. As we evolve our portfolio years down the road, we it gives us some flexibility to think about because we're going to continue to optimize our portfolio. But I don't want to imply anything too strong there because we believe this is part of our critical mass. As it's roughly 20% of our company, We don't want to strand 20% of our corporate overhead. That brings the weight of the whole system down too. So it's a very positive contributor, a very strong return. And we think it plays a very important role. And like I said, it does, over time, give us some optionality. But this is the issue. And because if you start looking at every business and you say, well, okay, for composites. And then, well, part of coatings. And then next thing you know, you can rationalize yourself out of your entire business by stranding all the costs that you have within your system. We think that it's a great contributor, well run. And so yes, we're we feel good with it in our portfolio and it has its role. This isn't where we're throwing a bunch of capital. We're not telling you that we're going to be twice the size of it. Andy will try, and he's got good strategies to do it, but he knows. They know their role, and they do it really well. And as for the sunscreen portion, I think, Vito, you can give some commentary. But I think that is in action what you heard us discussing when you talk about certain product lines maturing. When you're doing a purchase for resale, you're not adding a lot of value. You might be adding value by putting our name on it or by providing an array of products. But then as that begins to mature, we have to replace that kind of business with the kind of technology that Vito showed, which is really differential. And so I think that's been some of the kind of rocky waters I've seen. And I apologize, I probably took away some of what you were going to say there, Vito. I'll add what is left. There you go. No, I think it's a great question, right, because you come in, and it's a challenge, right? There's been a lot of things that are happening that are dynamic in the market. And in that area, of those subsegments of the market, we don't control our destiny. So if it's purchased for resale, what real value can we extract out of that? Is there a channel side of that that gives us access to something we wouldn't have? There really isn't. So one of the ways to look at that side that we've shed some of that revenue, but again, not a lot of profit, that revenue, is that let's work on differentiating and enhancing the products that are out there. And that's why I brought the example today for you of the Bayer work that we've done, okay? And again, I'd suggest all of you even grab the bottle here and spray it out and see the differences. That enables us to drive a lot of value so that we don't have to stay in that product maturity purchase through resale side. Now the other side of this is if it's core to our assets, which we have technology that is core our current assets, that's a great opportunity for us, right? So I'm sure someone is going to ask about what's the status of the FDA approvals and some of the sunscreen technology there. We're continuing down that path. It's not included in any of our estimates moving forward. But those are areas where we think that we provide highly differentiated technology that provides a lot of value to not only our customers, but the end use consumers. So those are areas that we're focusing. But again, less on the area where we don't control our destiny, more on the area where we can innovate and drive value and really solve issues that drive dissatisfaction in consumers, right? What are the biggest things in that area that drive consumer dissatisfaction? I think we've got great solutions there. And something I'd just like to emphasize because it's really more of a thought process or approach or philosophy. We as a team I mean we're part of the globe, things happen in the globe, and they affect us. And we can talk about some of those things that do impact us. You might want to talk about those. But we have outlawed that word headwind. That's not a headwind. That is what every business faces is certain parts of your product line will mature over time. So the question is, what do you do to make it better? What are our actions? Who's accountable? And what is it that's going to make sure that we grow that business and we grow the profitability of the business in the face of that? And so that's the formula that we're trying to get to. And it may seem like we're talking a little bit about more competitive areas. The bulk majority of what we do is very highly differentiated. But by us acknowledging that there's a range of products within our portfolio, then we don't get surprised when some of those go against us. We say we anticipate that some of those and it's our job to renew ourselves. I think Andy has got a great example when he talked about the engineering stone. We provided some of the materials to make that stone happen. That's great. But then guess what? Other people came in. So then we provided some stain resistant stuff to make that stuff better. Well, then somebody did that. And then we came out with UV resistant stuff so you could put it outside. So this is the mindset that we have to have, and this is why we're segmenting our business, And this is why we're going to make sure we're more competitive in those areas that we're a business like any other business in that regard. And while we're focusing a little more discussion around it, I want to make sure also we keep in mind that the real core of the strategy is premium and that is really the majority of what it is we do. John Roberts, UBS. Two questions. I think of coatings, sealants, adhesives, gelcoats is all kind of related markets. Are you giving up some cost savings or integration opportunities by Maybe I'll take the first churn. So pharma, it's almost nonexistent, right? That concept doesn't really apply. The churn is when you go from the branded over to generics, which often is an opportunity for us given the volumes that can increase. One of the pieces that I like about Pharmachem, Pharmachem and the broader nutraceuticals market does have that type of activity, where you see we'll see some churn over the course of a five, six, seven year product life cycle. From my perspective, that's a great opportunity to continue to get in there with the latest innovations and the latest products. It's actually like bringing that type of opportunity within my part of the business. Yes. I think for I look at it in three different ways because of the segments of the businesses that are in the portfolio. For oral, there's not as much, right? There's not as much churn in oral, but we've got a leadership position there with some platforms that are fantastic, and we're enhancing that with the shift to more of the Naturals technologies. When you look at hair, it's the same thing there. Now there's a big concern in hair in terms of what goes down the tank and the affluence of into the water affluence that has to be treated. And we see opportunities there to promote a lot of new products. And I talked about two of them today. So there's a great opportunity to enhance our margins and enhance our position in the marketplace. And I think when you look at skin, it's another area where we've got a great opportunity, where there's a the churn is not as much as, for instance, as we have in here, but there's some great opportunities there as well because of the concern about sustainability in botanicals. So when I showed you earlier, we talked about the sunscreen, we just launched another product called Organic Sensory Plus, which from a waterproofing standpoint, a lot more of it stays on your water when you're actually moving the water, right? And that drives the sustainability side of it. That drives inherent value to a new channel out there that's looking for those types of products. So we're going to see probably the most in hair, a little less in skin and then oral just because of the breadth of the market, a little bit less there. I think Great opportunities to enhance. The thing and we should come back to the gel coat part. But I think about the churn is there's not a lot of churn, as you say, in those markets. But there is a huge trend that's happening, which is that local manufacturers within region are getting to be a bigger and bigger part of the market, so in China and in India. And we have really shifted our focuses and our resources to make sure that we're aligning of course, we want to support the multinationals. Of course, we do. And they're great customers. But we also recognize that those companies that are emerging within region with very specific needs, we support them with local labs, local formulation. That's a bigger area where there'll be churn, but it will be churn in the marketplace. And that doesn't mean churn. And for us, it can be an opportunity. And so we don't want to talk about consumer preferences in a given region changing and how that impacts our business. That's an opportunity for us, right? We need to be ahead of that. As for the gelcoat, it's not a codeine, and we don't sell codeines really. It's they're discrete operations that leverage some of the infrastructure and technology that we have. You could put it, I suppose, in the Industrial business, but there are some natural reasons for it to be within the Composites business. And so I don't know that there are any big synergies by moving to maybe some dis synergies. Andy, I don't know if anything comes think you said it well. I mean those are very, very discrete markets. The customer base and the segments I play in are very different from Suzanne's manufacturing assets are very different as well. I don't think you have any marine business to speak No. Other industries, we service Marine and the smaller industrial coatings area, but it's not it's very small and it's completely fragmented. And really when you look at Andy's business, his assets are all together, just like Adhesives assets are distinct assets. And then the other part of Industrial Specialties leverages the whole all of cellulosic products as well as the acetylenics network, as well as having some other small lower asset intensity businesses. So if you just look at it from an asset basis or a customer basis, there's not a of synergy. We do collaborate. Andy's business in composites and the transportation adhesives business collaborate quite extensively. And so on, for example, the Honda Ridgeline truck, the bed Andy's business doing the composites and we're doing the adhesives on that. So we do collaborate there. But all those but those teams are perfect fit for collaboration because they all sit in Dublin, Ohio. So they're right next to each other. So that's a very easy natural thing to do. So I'm answering more questions than you're but it's important, and this is Investor Day to share what's going on. Actually, as we went through the business reviews, the composites business and the adhesives business are two of the businesses that had made tremendous progress in terms of the profitability of their business, the efficiencies of their business. The I think you might be the leader in the company. 35% of our sales come from, if you will, new products. And it's because they're very tightly linked business units with very clear connections to R and D and very clear connections to the asset. They don't leverage a big system. They're focused businesses. And that's, in essence, what we're trying to do across the three businesses within ASI. You don't just have a commercial team over here and an R and D team over here and manufacturing is over here. You have a team. We have put it's a small change, so it might seem trivial. When Suzanne came in, one of the first things she said is, Oh my god, I need a financial resource that works for me that can tell me what's going on in my business. Let's play it as corporate accounting, but I need a financial we put those resources in so she could run her business. We've done that across all the businesses, making us operate as a team, even though we're leveraging a broader system, that's okay, it gives us scale, but make these real businesses. These are not commercial leaders, These are business leaders. And that's what we need to organize around and empower our team to do. So back to the composites and the bill code, they got that already. And I don't want to see that blended off something less focused. Hey, Bill. Mike Sison, KeyBanc. Just in case I missed it this morning, I was on United, it was delayed. I didn't get beat up, so that's good. But in terms of your EPS growth of 15%, I saw that you talked about 3% volume growth. I can imagine that levers up to 15% EPS growth. But can you walk through the other components that drive that? How much does come from kind of EBITDA growth, cost savings, maybe deleveraging? And actually, we did talk briefly, and we've done this mathematically. So this isn't just whatever throwing stuff out. But actually, if you take the 3% growth, okay, 3% volume growth, and you do it at a breakeven level, in other words, our fully absorbed cost today, that $70,000,000 that we lost in absorption comes back into the system. That improves the profitability. That's 2% right there that moves the ASI business forward, okay? Of course, you've got to keep SG and A flat there, right? So that's another core deliverable. If you do it at the margins that we typically have, that gives you greater leverage and greater upside on that deliverable. If you get 30% of your sales at a 5% premium and you get $30,000,000 from our price to value initiative, that actually bridges to get you the EPS growth that we're targeting as a company, excluding what I referenced before. So we have multiple mechanisms and levers. And if you add up our targets in all those levers, we would be substantially higher than the target we've set. But at the same time, the world goes wrong. There's going to be something that will come at us. We know that. It comes at every business. Nobody likes big targets that are based upon aspirational. If everything goes perfectly, we'll be at some crazy number. So we built a little bit of redundancy into our math. And that's why we're confident. And to a certain extent, that may seem like, wow, is that really enough? Well, keep in mind that we do have we've got a fair amount of appreciation and amortization in there. So as we lever up in our lever up in our EBITDA, you get a nice effect on the EPS. So we can kind of walk through the math in a little more detail, if it would be helpful with everybody, of course, but just to share those in a little bit more detail, so you can see how the math works there. I had one quick follow-up for Vito. In terms of naturals, a lot of consumer product companies on the food side have said, look, we 100% of our stuff natural at some point in time. Is there a similar kind of drive within the consumer product companies for skincare? And what's the kind of the opportunity in terms of what's natural now and what it could be? Yes. I think there definitely is that drive to naturals. And I think the younger generation is really driving the sustainability and the global footprint. And so those are things that we're seeing more and more of. And what we also see in that is that there is a regional flavor to that to where we've got to act quickly to address those needs. So I think with what we do right now and what we call our avantience division as well as what we do at Beta Fractions, that gives us that enables us to meet those demands. But I think as this market continues to grow, that is the largest growth component within all of skincare and within personal care in general is that shift to natural. So we are I think we're well positioned right now, and we're going to continue to put the resources we need to continue to grow that business. So that's definitely one of the biggest growth factors. And we see that recently at the In Cosmetics show in London that I referenced earlier. There was a big shift from what the consumer preferences are and to our customers about what they're looking for in their products and how we can help them in that claim substantiation, which is really a core competency for us, right? You can't make the claim. You've got to substantiate it. You've to provide the efficacy, and you've got to provide everything else that's associated with that. And for us, I think it's a great opportunity. Jim Sheehan from SunTrust. Two quick questions. First, on the you provided some compound annual growth rates on some of your end markets. And I'm wondering about some of the ones that you didn't include like nutrition, energy, some of the industrial specialties. Do we assume that these are growing GDP plus or minus or whatever? And second question is on on your innovation engine, what percentage of new products today for the portfolio, what percentage of your products are new products that you would define as being new products in the last few years? And where do you see that metric going in the next three years? So let's start with the new products. Right now, we're at and by the way, we say new products and proprietary products. And the reason why we say that is some of these are longer cycle pharmaceuticals where we have differential technology. Just want to make sure that's clear. That's included in our metric. So we're at about 25% right now. And in terms of the profitability of that, we don't know, okay? That's just not something we measure. To get to the 25%, we've actually had to do a fair amount of manual work on that because we haven't historically tracked the impact of those new products. And now we have within our systems the ability to track those new products to tag them. And so we're targeting 30% at a 5% premium over our standard margins that we have today. And I apologize, the first question was about The first one was on the growth rates you're assuming for some of the others in such segments. Yes. So actually in that area and as Suzanne said, we have a wide range really in this other part of Industrial Specialties. I can tell you that we basically in putting our math together, we are not assuming a recovery in energy or construction. We just are not doing it. And as it comes, we may not I have to be careful here because we will participate, but I don't know that we want to get to 8% of our sales coming from the energy market, okay? If it's at 1.5%, it goes to 2.5 and it helps fill our system a little bit, okay, that's great stuff. But I don't know that we want to so we basically took that part, which had a negative component to it, And we actually extrapolated that and we put a negative number on that going forward. Now that we did that to be very conservative, okay, because we're focusing on these other areas. And I think the growth rates within the business, we have those, They would be very consistent and we believe potentially a little bit better than the overall market growth when you look at coatings and you look at the Personal Care segments and the pharma. Composites, not as much because we're going to be focused on cost optimization and mix optimization. Jeff Zekauskas at JPMorgan. It sounds like over time you wish to separate your intermediate deposits, whether it's sooner or later, is it the case that the vertical integration into video now is just much less important and you can buy your material from other parts the market equally well? Or is it the case that even if you didn't separate it, there would still need to be a link because of the importance of the vertical integration and the importance of your cost structure. Could you reflect on that? Sure, sure. And my colleague is here because I don't have as much history, but I understand, I believe I understand well what's happened is that back in a period a while back when it was ISP as an example, there was a potential inability to get the material and the quantity and quality that was needed. And there was a need to get the producer based economics. And because of the dependability and reliability of the supply, having redundant capacity was a good thing. And market was at a good part of the cycle and everything felt pretty good. In reality, what we've seen is as the business cycles, it's very important that we maintain producer economics, pure and simple and the quality of supply. But as we also talked about, there's a lot more supply in the globe. So we believe that whatever structure we choose to take, whatever actions, we can maintain the integrity and the producer based economics. Last thing we want to be doing is coming in and saying, well, earnings would be this, but BDO prices are commodities, so they went up and we're no longer in the BDO business. So we're a very cyclical business. We're really a carrier of BDO profitability. No. We're going to keep the producer economics. And that's part of solving for the right answer. But when you have two thirds of your production going to a commercial market that cycles up and cycles down, and I believe if I understand correctly, has roughly $100,000,000 worth of EBITDA volatility peak to trough, give or take, give or take, that kind of messes with the whole consistent specialty earnings profile, and that's really the issue. So I think the answer to both of your questions is yes. You. Andrew Silverstein with Longbow Research. A couple of questions for Suzanne. Number one, it sounds like HEC needs to get some work done in terms of improving what has been a very nice growth trajectory for the business. In light of the consolidation in the coatings and the paint industry and raw materials, synergies being the key deliverable for all these consolidating companies, do you see that as being somewhat difficult in the next two to three years? Or if the environment really hasn't changed that much and it's always been difficult, which you're still going to do? And then the second question on the Adhesives side of the business, dollars 300,000,000 adhesives business, again, in a consolidating industry. Are you looking to be a participant and grow that business beyond organic? Or is this something where it's going to get to a certain point and become an attractive acquisition target for somebody who's doing the consolidation? Okay. So first, your coatings question. The coatings industry consolidation is really astounding. I had run a coatings business back in the early 2000s, and we talked about consolidation. And now sitting here fifteen years later, you can't even believe how much it's consolidated. But I don't worry about that because we've managed our product lines and our relationships with all those customers, all those top customers. So yes, will we get pressure? Absolutely yes on the pricing thing. But we're in pretty good shape. It's not something I really lose a lot of sleep over. We need to service them all as well as the remaining smaller coatings customers out there. And we do a really good job here at Ashland at managing that. And I could stand up with any CEO and prove to them that we're in good shape of the coatings companies, right? But then when you go when I go to an ATC, we think about in a couple of ways. The way I think about ATC, we have to have a we have a significant presence in that marketplace. And it really matters scale really matters for the long term, right? What also really matters is we have to be consistent in the company with our commercial strategies clearly linked to our asset utilization strategies. So Vito sells AGC, Dave sells AGC, and I have the bulk of it. We have to get crystal clear on that and pick and choose our targets. And that has not been necessarily the case on the ASI side of the portfolio with the cellulosic acid nor with the PVP and vinyl acid. So we're looking to really create a mental model for all of us to use commonly across Ashland. So that sort of ties clearly, we're going to start with ATC. That's the first part of this work and create that for the whole company. So we'll be very, very targeted. I believe there's a tremendous amount of opportunity here Ashland to maximize the assets, while continuing to grow in the right places and consciously choosing where and how we grow. So that's on the asset side. On the adhesive side, this is really a great business, and we are definitely looking to grow it. And through organically, we've got a clear strategy for that and also inorganically with other acquisitions. So we would definitely entertain. One thing I would say I don't want to sell it. Okay. And I don't think Bill does either or the Board. But one thing I would say on the adhesives because adhesives is such a wide train. Go back to our acquisition criteria. We'd look to be kind of a degree from the core. So if it expanded our geographical footprint, that's great. If it provided another solution for similar customers, that would be great too. If it's just getting into adhesives because I mean that's a multibillion dollar industry, we're not just looking to grow indiscriminately within the broad train of adhesives. Yes. There are good and bad places in there. Close to the core. Mike Harrison with Seaport Global. A couple of questions for you. First of all, on the Pharmachem deal, in an environment where you're seeing Sure. Sure. So on Pharmachem, Pharmachem is a great business, and I know it was a new name to many of you. Obviously, we knew about it, but we learned a lot more through the due diligence process. I don't think it could be underestimated the capability of the Ashland team to work in a process of that sort with a degree of diligence, doing the diligence appropriately to move contractually forward in terms of making sure we're easy to transact with and being proactive in terms of driving, if you will, the acquisition and being aggressive to bring the process to a close. I mean the team worked tirelessly, and I think they're very good at it. You've seen it over the years. And it is a niche kind of product area. So as attractive as it is, it doesn't fit for every business. And you'd even say, well, how about flavor and fragrance companies? Well, part of what's done in this business supplies those companies. That might then end up being your owning what's now do the competitors want to buy from you. And so I think that that was a big part of it was our ability to execute and kind of the pool of people that were out there. And frankly, are other transactions. We're really excited about Pharmachem, but if it had gotten 14 handle on it or something like that, you wouldn't be hearing us talk about it right now because we would have just self selected from the process as we've done in other cases. So I think the Pharmachem, I think they came up pretty well on this in the end as well. So I think it's good for everybody. And these things tend to be pretty serendipitous, and this is a really good example of that. This is a business that, with the exception of the flavor and fragrance part, which I think we have good capabilities to operate and ultimately grow that business along with the Pharmachem team, it just really fits well into the end markets and industries that we serve. And it was just a really good natural fit for us. I think the size of the business, revenue and transaction value also fit really, really well. And again, for a lot of the large global chemical companies out there that are looking to buy growth, frankly, it wouldn't have moved the needle for a lot of them. And so it didn't necessarily get that kind of attention, I think. And then to your second question about kind of getting that balance between profitability and filling the system. Again, takes discipline and the thought process. But what I can tell you is that our business of premium products is a full 2% to 2.5% lower in terms of EBITDA as a percentage of sales because we don't have that business in house today. I mean, we stranded $70,000,000 worth of cost. And so getting that back improves the margins on the rest of the business because you're basically spreading the overhead across a broader base. And then the answer comes, well, what's that right point? We need an economic model, which drives our activities that we'll call our strategic supply chain management, and that will be part of the metrics and the cadence. And you can get to the point where you say, this just is going to be dilutive and it's going to not be good business for us, in which case then we really have to look at do we need as many assets. And maybe there's a better solution. Or maybe we should do what Dave's doing at Dual and say, you know what, let's get out of the industrial stuff here, not that the industrial stuff is bad, but in that particular case, and let's see if we can't migrate it to a higher mix. And so to me, this is and you know other companies do this, if this becomes and it will become a core competency for us, we will be a much stronger company because you can see how important it is in our cost structure. We are not aloof of this. And I've been in other businesses, and I was in coatings for a long time, and there's a lot that goes into that. But I mean if you need to add an extra mixer, you buy a pot in the mixer, okay? I mean it's not and if you don't need as many, you put it to the side. I mean and I know it's more complex. I'm not trying these are big plants. So we've got to think about it with a system view. And a lot of this information is new to you. A lot of this information is really our self realization as we have a greater operating focus. And so that's why this isn't just like an idea. This is a discipline that we are building, the competency that we're going to build. And so it's not a simple yes or no. We really need to operate it with a system mentality. Yes. We are shareholders of Ashland, so but I'm a we're shareholders of Ashland, I'm a generalist, so. And I'm just going to go back to that question, wondering if you all can discuss in more detail the comment that Susan made, which is that, so what we're seeing here is business heads that will be the front end in terms of product development and taking to market. Yes, they are all feeding off a common asset base. And we have stranded costs, we have a fixed cost structure. So what are we putting in place in terms of the organization and then in the systems that you just said you're all working on that will allow for whoever it is to say, okay, your product gets preference to whatever you want to sell or whatever in addition to the absorption So metrics that you're trying the first thing is we do, and I think this group works very well, we are one team. In the end, we are one team, okay? We all have individual accountabilities, individual responsibilities. I'll lead this, you lead that, but we need to work together as one team, and there is a strong spirit of that. So okay, that's the first thing. And I think what you also need is this idea of Suzanne, for example, with the HCC network. Since she has a majority of that, she can really keep a closer focus on the commercial side because in the end, you can't push the product through. You've got to commercially decide that this is what you want and should do. And the second is we need to build the base infrastructure. And that's why, if you remember on that chart, it said we're working on this right now because we will have very specific metrics, very specific lists, very specific cadence of review given to specific owners, leveraging specific tools, and we will meet on it every month to make sure that we are driving results. So I'm going to give one example here. And it's not the best example, but Dave came in and he said, I got a problem with production that's really impacting my position in the marketplace. And so I asked Osama. I said, Osama, can't you help there? And he said, Well, I'm not familiar with that problem. And we went around the table. And yes, we're one team, but Dave was trying to deal with this on his own. A week later, we had how many people has it been? About thirty, thirty five people from across the company to say, we're going to get that done. And Dave and I are going to go back in about three weeks' time, and we're going to tick and tie and make sure that, that thing is closed off and done. It's that kind of focus and effort. But I'm a big believer in accountability and cadence of review. But does it have to be a matrix like structure where, for example, if design is the primary user of or seller of ATC, I apologize, I'm not sure. So she takes ownership for how ATC gets loaded, I guess, or the asset gets utilized. If David is primarily the user of semi low fixed or something like that, he also has a role around that, the utilization of that. Is that how that works? And what role should someone like the and then the gentleman on the supply works we really do have a tight team. And so Carl over there and Brian McGrath and the business leaders and with Osama's help and Keith Silverman also, we really just have to look across the assets. So what we're putting in place is Bill talked about in his presentation about financial visibility at a granular level, that we're improving that. And that's what has been missing at Ashland. And so now we're getting that. Once we get that, we'll all operate off a common fact base, right? And so that will allow us so it's that common fact base of where we're making money and why and how much and how profitable is pharma, because obviously the pharmaceutical companies have much higher standards and requirements than some of the industrial businesses, right? So there's a higher cost. Is that really being taken into account in Dave's products? Once we have that and we're we have some information, believe me, we're not a successful business as we are without information, but the opportunity is getting incredibly granular with that. So it's not I wouldn't call it matrix, it's really we are working as one leadership team. And then but once we have a common fact base, it will be so much easier to hold people to account and have a deeper level of understanding for what we want to produce where and why. And from the outside, how are we going to be able to evaluate how we are progressing in that, what kind of milestones going to speak outside of the aspiration of Sure. The 25 So I think that, one, I think you'll be able to see some actions that we'll talk about, okay? And I think it's reasonable for us to talk about our cost per unit, okay? But I would also say that we're not going to do that every quarter, right? Because you're going to have, well, an outage and then well, their cost per unit is up by 3% and now it's last year, you're down by 2%. What is the rolling average? Because it's a very simple formula. It's kind of like that you've got your cost and you have your units and then you multiply the number of units and that's your aggregate expense. And so we know the aggregate expense, we know the units and we have drive that. And when the number of units and that's your aggregate expense. And so we know the aggregate expense, we know the units and we have to drive that. And when you you see that chart, that $70,000,000 very simple. And we had the numbers on before, it just seemed like too much. But literally, we know the spend was up a little bit, but not a great deal. And it was all the reduction in units. And that's why and we looked, and it was largely because of the divestitures. So we can do the math and break it down and understand it. And I think we can talk to you over time just to show that we're making progress on that front. Seth didn't cut my microphone, so that's good. One more, one more. So let's we've got a few moments. We'll take a couple more. Yes. Well, I think there will be over time, there will be specific efforts to consolidate or rationalize facilities, that won't be free. And we will discuss those. But I don't know that, that fundamentally changes our cash flow or economic equation. And so I'm just being straight. If we shut down a big plant, you can't do that and say, well, hey, this is free. But that's not our primary lever as it is. And what I mean by that is we have great assets. We have great technology. We have great markets. I go back to the comment I made before with Osama, where Osama came up with a whole list of things we could use in a plant that was severely underutilized. That's our strategy of success. Now in composites, they went and they reduced three facilities. And I don't know what they're I I do know, but that may be a continued formula for success. But I would say that our primary strategy on this is not just to go around shutting assets. We've got to grow the business, okay? And we've got to improve the mix, but also understand and manage the economics of the system. So there could be some callouts related to that, but that's not going to be our primary lever. I mean we just have to manage it better, and there are opportunities. Kevin, you have one of the lowest tax rates in the chemical sector. How durable do you think that is? Trump aside, because nobody knows how that's going to turn out. We feel pretty good about it in terms of sustainability. The team has done a really good job in terms of organizing us from a legal entity perspective. It's not free by any means. It is a low tax rate, but it's not free to do. It's how we run the business, and it's how we document how we run the business. And there's a lot of record keeping that goes into that, a lot of work. And as I would tell anybody, it is audited to death, both by our external auditors as well as the IRS and other jurisdictions. One of the real risks, and this is true of any global company, is the fact that every jurisdiction is getting more aggressive in terms of trying to generate tax revenue. And so it's an ongoing body of work, and it's not going going to stop or slow down even, I don't think, in the near term. And so I think now we will just take one more. But we are going to be heading over, if you have time for lunch, and we'll be spread out through tables and give an opportunity to ask some more questions that might be on your mind. Thank you, guys. Sure. One I had was on the status of the Fusel expansion that you talked about in the past, just when you'll be selling commercial volumes and get Hopewell in the NJ? And then second one is you talked about numerous pricing increases over the last year or two and just the status of those, any update you can provide there? I'll take the Klucel piece. So Klucel is actually made out of Hopewell. That's the only global manufacturing facility of that product. It is a significant expansion, capital S on Significant. I wouldn't give you the exact capacity for competitive reasons, but that will see us with our expected growth for a number of years. The project is going well, should be online by the end of our fiscal year. And in terms of pricing, just that's a broad subject. I think in the Personal Care and the Pharma Nutrition, there's been a little bit less impact, but they've done a nice job of being able to move through that. In the composites business, there was some a quick uptick in styrene, and the team did a nice job of responding. So we've said that we feel good about the second half of year related to that. The I and S business has been, we think, at the right part of the cycle where prices are going back up. And in the industrial business, I think it's a little bit mixed. In some of those areas that are a little bit more price sensitive, it's more difficult. Some of those areas where it's more differentiated, we're able to move forward and sell the value proposition. So that's the quick answer there. Okay? Well, thank you all for the time and the attention, and hopefully, you'll join us for lunch here. Thank you.

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