Ashland to explore Nutraceuticals sale amid reduced revenue
© 2023 Delaware Business Times
GREENVILLE – Ashland, a public specialty materials company headquartered off Hercules Road, is exploring a divestiture of its Nutraceuticals business segment amid declines in revenue, officials reported this month.
Facing reduced sales resulting from “unprecedented and extended customer destocking,” or customers slow their buying to use up existing inventories accrued through the pandemic, Ashland reported that sales had fallen about $200 million compared to Fiscal Year 2022.
While the manufacturer reduced its own production levels to stem the losses, CEO Guillermo Novo announced that the company “will be taking additional portfolio and investment actions during Fiscal Year 2024.”
The biggest change is the planned sale of its Nutraceuticals business segment, which produces food-based products with health benefits, such as organic chewable bases for vitamins, caffeine and sports drink powders, and aloe vera concentrates.
“We are pleased with the progress our Nutraceuticals team has made to strengthen and grow the business. However, we have determined that it is not core to Ashland’s business model or longer-term strategy,” Novo told analysts on the company’s Nov. 9 earnings report call.
The divestiture of Nutraceuticals follows the consolidation plan that began with the $1.65 billion sale of Ashland’s performance adhesives business to Arkema, a growing French specialty chemicals company.
“The nutraceutical business is a good business. However, like the adhesive business that we divested last year, there are higher value owners in the marketplace than Ashland, where this business can thrive if it’s part of a core business and strategy,” Novo added.
The potential sale value of Nutraceuticals is not yet estimated, but Novo said the segment had estimated annual sales of $100 million and gross profit around 20%.
Outside of the divestiture, Ashland will also consolidate its carboxymethyl cellulose (CMC) and methyl cellulose (MC) industrial businesses to improve productivity while repositioning the ingredient toward specific growth markets. It also will “optimize” its global hydroxyethyl cellulose (HEC) manufacturing network for greater efficiency.
While pulling back from these underperforming segments, Ashland also plans to invest upward of $6 million in commercial and technical resources in its core segments: life sciences, personal care and industrial coatings.
“We are repositioning Ashland to further reduce our participation in lower profitability markets where we do not have strong leadership positions. We plan to redeploy assets to support productivity or growth in the new technology platforms we outlined at our Innovation Day in early September,” Novo said in a statement.
The news of Ashland’s impending restructuring comes just weeks after a smaller local deal saw the company sell its New Jersey powder processing facility in its Nutraceutical segment.
The Paterson, N.J., plant operated by Ashland subsidiary Pharmachem Laboratories was acquired by New Jersey-based Vitaquest International. The terms of the Oct. 2 deal were not disclosed in an announcement.
The facility has been recognized as an industry-leading developer and manufacturer of specialty granulated bulk ingredients since 1978, using fluid bed technology for granulation, agglomeration, microencapsulation, drying & blending of liquid and powder ingredients.
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