Ashland Inc. gives guidance for fiscal second-quarter earnings

COVINGTON, Ky. – Ashland Inc. (NYSE:ASH) today announced guidance for its fiscal second quarter, ended March 31, 2007. Results for the quarter will include a $15 million after-tax charge, as previously disclosed, for a voluntary severance offer (VSO) extended to employees late last year, which will eliminate approximately 100 positions in various corporate functions. Ashland also will record $18 million of after-tax income from discontinued operations, reflecting the improved credit quality of its insurance receivable from Equitas Ltd., following Equitas’ transaction with Berkshire Hathaway. London-based Equitas provides a significant portion of Ashland’s coverage for asbestos claims.

Excluding the above items, Ashland expects to report operating income of $57 million to $65 million for the March 2007 quarter. Results will be driven primarily by significantly better earnings from Valvoline and Ashland Water Technologies, but will be tempered by results from Ashland Performance Materials and Ashland Distribution. By comparison, Ashland’s operating income in the prior-year quarter was $49 million and $58 million in the December 2006 quarter.

Valvoline’s operating income should moderately exceed the $18.2 million it earned for the December 2006 quarter. Water Technologies is expected to achieve second-quarter operating income above the $5.4 million it produced in the December quarter. It continues to benefit from improved performances in its marine and industrial businesses and the earnings contribution of the Environmental and Process Solutions business acquired last May. Performance Materials expects operating income to be between $20 million and $23 million, which is below the prior quarter’s $25.6 million. The decline in income is primarily due to inventory adjustments and increased reserves for accounts receivable. Additionally, the business has experienced some margin compression reflecting continued weakness in its key North American automotive and residential housing markets. Ashland Distribution’s operating income should significantly exceed the $14.0 million earned in the December 2006 quarter; however, results will also likely be significantly below the record $30.4 million earned in the March 2006 quarter. Unallocated and other costs, excluding the VSO, are expected to be in the range of $7 million to $10 million.

Ashland will announce preliminary* results for the second quarter on April 25, 2007, prior to the opening of the New York Stock Exchange, and will follow with an 8:30 a.m., EDT, conference call and webcast.