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Good day, ladies and gentlemen, and welcome to the Ashland Global Holdings' Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded.
I would now like to turn the call over to Seth Mrozek, Director, Investor Relations. Sir, you may begin.
Thank you, Grace. Good morning, everyone, and welcome to Ashland's second quarter fiscal 2018 earnings conference call and webcast. My name is Seth Mrozek, Director, Ashland Investor Relations. Joining me on the call today are Bill Wulfsohn, Ashland's Chairman and Chief Executive Officer; and Kevin Willis, Senior Vice President and Chief Financial Officer.
We released preliminary results for the quarter ended March 31, 2018 shortly after 5:00 PM, Eastern Time, yesterday, May 1. Additionally, we posted slides to our website, ashland.com, under the Investor Relations section and have furnished each of these documents to the SEC in a Form 8-K. As a reminder, some of the matters discussed today and included in our presentations may include forward-looking statements as such term is defined under 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 we will be discussing adjusted results during this call. We believe this enhances understanding of our performance by more accurately reflecting our ongoing business.
With that, I will turn the call over to Bill. Bill?
Thank you, Seth, and good morning, everyone. Ashland's financial results in the second quarter exceeded our expectations as sales and earnings growth in Specialty Ingredients drove strong results in the quarter. In fact, all three of our operating segments generated robust growth in sales and adjusted EBITDA.
Within Specialty Ingredients, the team continues to focus on driving organic and volume mix gains. Year-to-date, we have averaged over 3% in this critical area, excluding currency and acquisitions. Notably, these gains are increasingly driven by volume growth, which totaled 3% in the second quarter. As a result, Specialty Ingredients delivered 19% sales growth in the quarter, including 5% organic growth from strong volumes, improved product mix and continued pricing actions. All end markets improved, with pharma leading the way, delivering 17% sales growth year-over-year. This was driven largely by increased capacity from our asset utilization initiatives.
In addition, we again saw strong growth in the Personal Care segment, with sales up 7%, driven by continued gains in biofunctional ingredients. On the industrial side of the business, Adhesive sales rose 7%, Coatings sales climbed 4%, and Construction and Energy improved 8%.
In addition, Pharmachem results improved sequentially as expected and made a strong contribution in the quarter. Together, this broad-based growth contributed to a 20% increase in adjusted EBITDA within Specialty Ingredients and a 40 basis point increase in adjusted EBITDA margin. At the same time, we reduced the price war gap in Q2 with aggressive pricing actions. These actions are expected to help us achieve gross margin improvement year-over-year in the second half of our fiscal year.
We are achieving our initial target of keeping company SG&A flat, excluding the impact of acquisitions and currency. In total, with rising organic revenues driven across flat spending, SG&A as a percentage of sales declined 160 basis points compared to the prior year.
Next, the Composites team continued to deliver strong sales and earnings growth from price discipline, volume mix improvements and contributions from the plant we acquired in France. Within Intermediates and Solvents, the team delivered an 18% increase in sales through strong pricing and favorable currency. As a result, in total, for the quarter, Ashland increased its sales by 21%, grew adjusted EBITDA by 30% and adjusted EBITDA margins by 130 basis points, and delivered adjusted EPS of $1.06, which is well above our previous guidance of $0.80 to $0.90 per share.
In summary, the Ashland team is generating broad-based sales and earnings momentum as we enter the second half of the fiscal year, with all three of our operating segments on track to meet or exceed their original financial targets for the year.
As a result, we have increased our outlook for the year and now expect adjusted earnings per share growth of 35% to 45% for fiscal year 2018, which is well above the 15% outlined at our Investor Day last year, and above our initial forecast at the beginning of this year. This momentum is being driven by specific actions to sustain and grow Ashland's premium mix, such as through new market strategies and successful product introductions that reinforce our always solving brand promise for our customers.
As mentioned, we have also taken action to enhance our competitiveness by focusing on improved asset utilization, value selling and cost management. We've made important progress in many of these areas and we expect these initiatives to gain greater traction beginning in the third quarter and continuing thereafter.
Notably, I want to highlight a few achievements by the Specialty Ingredients team during the quarter. We achieved a record quarter for total sales of our consumer specialty end markets. In addition, improved asset utilization not only led to an increase in pharma production and sales specifically of Klucel and CMC, but it also enabled the highest quarterly HEC volume in the past five years. The Adhesive sales and product management teams have been disciplined in raising price and continued to make strong contributions to sales and earnings growth.
And finally, one of our new product launches in Coatings is off to a very strong start, with 14 customers purchasing the product in the first few months since its introduction. I'm proud of the achievements of the Ashland team and look forward to more exciting developments over the coming quarters.
Even with these gains, to reach our full potential, we have initiated several important actions. Earlier in the second quarter, we announced a plan to review strategic alternatives for our Composites segment, as well as for the BDO manufacturing facility in Marl, Germany. The expected divestiture of these businesses will benefit Ashland by concentrating our portfolio on Specialty Ingredients.
And secondly, as we work to position Ashland with a more streamlined portfolio focused on Specialty Ingredients, we're also taking important actions to create a more competitive cost structure. Specifically, we are committing to a program to eliminate $120 million of costs from: one, corporate SG&A; two, Specialty Ingredients SG&A; and three, manufacturing facility-related costs. Under this program, approximately $70 million of corporate costs allocated to the Composites business and the BDO facility in Marl are expected to be eliminated through transfers and reductions. In addition, approximately $50 million of costs are expected to be eliminated to drive improved profitability in Specialty Ingredients and accelerate achievement of our EBITDA margin target of 25% to 27%.
Under this program, we have engaged our leadership team to drive fundamental change across our global organization, and redefine how our teams work together. These actions, in addition to lowering our costs, will speed decision making, improve operating efficiency, and drive a more customer-centric organization.
Actions are already underway to achieve cost reductions, and we expect a meaningful impact in fiscal year 2019 with a full run rate savings by the end of calendar 2019. As Kevin will describe later, we intend to update you on our progress by sharing regular updates on our quarterly earnings calls beginning in Q3.
I will now turn the call over to Kevin, who will share some additional financial details from the quarter.
Thank you, Bill, and good morning, everyone. Adjusted EBITDA in the quarter was $179 million, up 30% from the year-ago period. In the quarter, we reported GAAP earnings from continuing operations of $1.04 per diluted share. On an adjusted basis, we reported income from continuing operations of $1.06 per diluted share, compared to $0.70 in the prior year.
Ashland's capital expenditures were $36 million during the quarter, compared to $41 million in the prior year period. Free cash flow during the second quarter was a negative $13 million compared to a positive $17 million in the prior year. These amounts include $6 million in restructuring costs in the second quarter of fiscal 2018 and $11 million of restructuring in the year-ago period.
Our effective tax rate for the quarter, after adjusting for key items, was 9%, which was below our expectation at the beginning of the quarter. The lower tax rate was due to income mix geography and has led us to reduce our fiscal year 2018 effective tax rate range by a few hundred basis points. We expect our cash tax rate for the year to be around 20%.
We've made good progress delevering our balance sheet. We started the year with gross debt to EBITDA of 4.9 turns and are currently at 4.1 turns due to a combination of debt reduction and EBITDA growth during the first half of this year. We remain committed to reducing leverage to 3.5 turns.
Regarding the Composites and Marl divestiture that we announced in March, we have received significant interest in the business. We expect to distribute initial offering materials by the end of this month. We continue to be on track to have an agreement signed by the end of this calendar year. And, of course, we will provide additional updates when we have more to share.
I would also like to make a few comments regarding the Cost Out & Organizational Effectiveness Initiative that Bill referenced a few moments ago. There is no question that the Composites and Marl divestiture represents a true catalyst to create a leaner, more competitive Ashland. To provide some clarification around the Cost Out program, let me walk you through the pieces.
The corporation provides services to these businesses such as finance, IT, human resources, legal and others, and we allocate approximately $70 million to the businesses annually. As has been the case historically, we expect that a portion of this cost will transfer with the sale. Any allocated costs that doesn't transfer with the business will be labeled stranded and will need to be managed out as part of this Cost Out program. This will be required to keep the remaining business from bearing any of this cost. Rounding out the $120 million program is a $50 million improvement within ASI. With the likely sale of Composites and the Marl facility, it's a perfect time to right-size the overall cost structure.
We are confident that by improving our cost structure, streamlining our decision-making and creating a more customer-centric organization, we will not only enhance the growth and margin profile of the company, but also create enhanced value for our customers, employees and shareholders. We are in the early stages of this process and, as we have done in the past, we are committed to executing and providing you with quarterly progress updates.
The long and short of this is that we have a proven track record with this type of initiative. We've done it many times with great success and we anticipate we will do it again this time. We look forward to providing specific details on the plan and ultimately driving the results that you and we expect.
Turning back briefly to the outlook for this year, we have raised our adjusted earnings guidance for fiscal 2018 to a range of $3.30 to $3.50 per share based on a strengthening outlook for our businesses as well as a lower tax rate. For the third quarter, we expect adjusted earnings in the range of $0.95 to $1.05 per diluted share, compared to $0.83 per share in the prior-year period. This estimate assumes an effective tax rate of 17% for the quarter.
We also reiterated our outlook for more than $220 million in free cash flow for fiscal 2018. As you're aware, we typically generate most of our free cash flow in the second half of the year.
Now, I'll turn the call back over to Bill.
Thank you, Kevin. We are excited about the building momentum in our core business and believe the actions announced in March and today will accelerate our journey towards becoming the premier specialty company.
With that, I say thank you for listening and for your interest in Ashland. Grace, please open the line for questions. Thank you.
Thank you. And our first question comes from Christopher Parkinson with Credit Suisse. Your line is now open.
Great. Thank you.
Good morning.
Given the volume growth in ASI, especially in pharma and consumer, it seems like you're getting some pretty solid mix benefits. Can you also talk a little bit more about pricing efforts, just how they're ongoing, and how you think about the gross margin during the balance of the fiscal year and into next? Is it safe to say that it's still challenging but you're making inroads to further improvement? Thanks.
Yeah. Thank you for the question. And we are very pleased, of course, by the growth that we're seeing in pharma and the Personal Care. I think it's a combination of items that are allowing us to deliver improved gross margins as we anticipate in the second half of our fiscal year. One is the improved mix, which we've seen, and our asset utilization programs are helping us to achieve that. And we have made progress in raising price across really all of our Specialty Ingredients end markets. And, in fact, we closed the gap considerably between raw and price in Q2, and we expect that we're going to continue to make further progress in Q3 and Q4. So, with that in mind, between the mix, the asset utilization and the pricing actions, we feel good about our gross margins in the business year-over-year.
Good. And just regarding the new cost initiatives, can you just quickly hit on the cadence of the $50 million in savings in ASI? But – and I apologize, because I know Kevin went over this a little bit, but also, can you just decompose the implications of the $70 million of cost cuts in Composites and Marl? Just based on the new cost reduction target and your segment EBITDA guidance for this fiscal year, how much EBITDA roughly, when you're going through the sell processes, are you actually looking to sell and what other considerations need to be made? So, I apologize if you went over that a little bit, just further clarification would be appreciated. Thank you.
Sure. And I'll hand the question over in just a second to Kevin as he's gone through the numerous sale processes in the past and he can comment on the cost that typically get transferred. But essentially the way we are looking at this is, as we become a very focused and streamlined company, there have been many restructurings, many cost take-outs, but this is our opportunity to really take what we view as a clean sheet approach, which means looking at the businesses if we built it from the ground-up as opposed to from the long path with many of the purchases and sales that have been incurred over time. And so, we're really looking at, of course, achieving the cost reductions, so that we believe that's possible.
In addition to that, we believe that it can help us to reduce our footprint, whether that be manufacturing or administrative or lab, and we think we can drive a more customer-centric organization. And so, yes, we have the financial targets and those are very important. But we believe that we can actually enhance what we're doing in terms of our ability to execute in the marketplace by doing things like delayering and creating greater cohesion between the teams. So, that, I would say, hopefully answers the first part of your question. And, as to the typical cost that gets transferred, Kevin, maybe you can reference that.
Sure, sure. And there's kind of several buckets to this. If you look at the Composites business and the Marl facility, which would be call it the majority of the Intermediates and Solvents business, there is direct cost that the business bears. These are commercial, technical folks that are embedded in the business, they're part of the cost structure, part of the SG&A load that the business bears. And the expectation is that, all of those direct costs would go with the businesses when they're sold.
In addition to that, the corporation supports these businesses from call it a back office or a resource group perspective with things like HR and IT and legal and finance and all these other things that are required. And for that, the corporation allocates in the aggregate about $70 million in the course of a year to the two businesses. And if you look at the adjusted results for each of the businesses that we publish, those results include that $70 million. So, think of that as kind of the fully loaded SG&A that's driving the operating income and the EBITDA that we're reporting for those businesses today.
Presuming the sale of those businesses, again, the direct cost will go and a portion typically of the allocated costs also will transfer with the business. And difficult to determine exactly how much of that $70 million that we allocate will transfer with the business, because we're still early in the process and a lot of that will depend on the form of transaction and all of that. But historically, when we've done these transactions in the past, let's say, for this we've got a $70 million allocation, it wouldn't be at all unusual for around a third of that $70 million to transfer with the business.
Again, that's a rule of thumb, could very well be more, and certainly, the more the transfers the less we have to deal with from a stranded cost perspective. But whatever does not transfer will become stranded cost, and to keep the remaining business whole, if you want to think of it that way, that stranded cost has to be managed out. And so, that's part of what we're committing to do. And then, that will be separate and distinct from the $50 million earnings improvement that we expect to drive within ASI with the remainder of the program. And to be clear, it's not separate programs, we're looking at this holistically as one opportunity to not only manage our stranded cost, but to also right-size the cost structure of the overall remaining business once a transaction does happen.
That's helpful. Thank you very much.
Sure.
Thank you. And our next question comes from John Roberts with UBS. Your line is now open.
Thank you. Can you hear me?
Sure, we can. Good morning, John.
Good morning, John.
Yeah. What would be the normal tax rate for new Ashland without Composites and I&S or the Marl facility?
Still working through that from a modeling perspective and I don't need to be elusive about it, but income mix particularly from a geography perspective matters. What I would tell you is that we would expect the effective tax rate for remaining Ashland to go down as a result of this transaction. On a weighted average basis, the Composites business and the Marl business would cause the tax rate to be higher. We have a little more clarity on that, we'll certainly provide an update. The numbers for the full-year are our best estimate and obviously that presumes that the Composites and Marl businesses remain in the portfolio for the full-year, which we fully expect they will, based on the likely transaction timeline. But once we get a little further down the pike on this, we'll provide an update. But directionally, the tax rate will go down.
Okay. And then, in pharma, the very high growth rate that you had there, I think you mentioned order patterns contributed partly to that, but you also had almost equal or essentially equally high growth in your nutrition and related businesses. Was there any order patterns or anything like you had in pharma that allowed nutrition to have such high growth too?
Well, I would say that the dynamics are – there's a little bit of overlap, but they're also different in pharma. We've really had some pent-up demand for our products, which as we've moved forward with our asset utilization programs and improved our output on CMC and MC, Klucel and so forth, has enabled us to move more product into the marketplace; and that's, if you will, kind of the order pattern.
As it relates to the nutrition business, that also is true in terms of debottlenecking our capacity, but it also is a focus on driving additional volume across our assets, now attractive volume, but there is a focused program in that area to leverage capacity that we have in the system, and the economics of – if you are leveraging that capacities are quite compelling. So, I think the dynamics are different. The one theme that we would have that's in common is the importance and effectiveness of the asset utilization program as it relates to it.
Okay. Thank you.
Thank you.
Thank you. And our next question comes from Laurence Alexander with Jefferies. Your line is now open.
Good morning. I might have missed it. Did you specify roughly how much EBITDA is exiting with the divestiture this year (00:24:28) think about the 2019 bridge? And the cash cost of the restructuring program and how much of that is coming through in 2018?
Yeah.
And secondly, can you speak a little bit about for the low 60% growth you saw in Energy and Construction, how much of that was mix effects versus end-market demand picking up and where that leaves your volume utilization rates?
Yeah, Laurence, I'll take the cost out piece first. And I think perhaps a bit unsatisfying in terms of an answer, but we're very early in the process. And so, the cost to achieve is still an open question. What I can tell you is that, as we've executed on these programs in the past, the range has typically been from around $0.75 to $1, for $1 of savings. And I would expect that this program would be in that same range in terms of cash cost, and ultimately the amount that's managed out that will drive that cash cost will depend, to a degree, on the ultimate amount that's transferred with the Composites and Marl businesses presuming the sale. And whatever remains after that, that has to be managed out, would typically, again, historically fall into that range.
And, I guess, the way to think about the EBITDA that's exiting, what I would do is, the Composites piece is pretty straightforward from a standpoint you see what our range is for the full-year. And if you look at the Intermediates and Solvents business, we also have a full-year estimate for that. And as you know, we tend to use internally 25% to 30% of the BDO that we produce, that production primarily comes out of the Lima – pretty much exclusively comes out of the Lima, Ohio plant which is a 60,000 ton capacity facility. And Marl is a 100,000 ton capacity facility.
So, as you do the math, I think you can arrive at the likely fully allocated EBITDA that would be exiting as a result of that as well. The Marl volume pretty much goes exclusively to third parties. We don't really use any of that internally. So, I think, you can model that pretty easily. I think, the other piece of the equation is, in terms of "EBITDA" that would be selling will be – will ultimately be determined by the type of buyer, again, presuming a sale and what the buyer and – what the buyer believes to be the total stand-up cost in new organization.
And then, secondly, as it relates to your question around Energy and Construction, that also includes our Performance Specialty growth as well. So, it's a variety of markets. And over the last quarter, I've had the chance to travel and meet with the teams in Singapore, India, China and throughout Europe and, in general, we – I'd say that there is a positive environment from a demand standpoint. And so, I think it's fairly broad-based. I would say, once again, especially in Energy and Construction, those tend to be markets where we're focused on driving better asset utilization, looking at profitable pieces of business, but business that can absorb, if you will, extra capacity. So, I think you're seeing signs of some of that work coming through in the growth in those markets spaces.
Okay, great. Thanks.
Thank you.
Thank you. And your next question comes from David Begleiter with Deutsche Bank. Your line is now open.
Thanks. Good morning.
Good morning.
Bill, on ASI pricing, do you need to announce additional price increases to achieve your parity with raw material costs?
Yeah. I mean, we have a variety of price increase efforts that are ongoing, we completed a lot of them. And so, as contracts come up, we'll – obviously, we integrate pricing and pricing adjustments in that context. I would say that, we feel very good about the pricing actions relative to the raw material inflation we've seen up to this point. As you know, raw material prices can move around, we've seen a little bit of volatility just even over the last few weeks. And so, I think, ultimately, if we see an increase in raw materials, we'll have to go out again and push for more price. So, I don't think this is something that will come to a close, but we do feel very good about the progress we're making on it.
And on Pharmachem, were sales up versus a year ago?
So, I believe they, and we'll look at the history here. But I believe they were down versus a year ago. And so, some of that is really just the customer mix, as we focus on trying to drive a more profitable mix. We did exit a facility in Utah, we talked about that before, which had relatively significant sales, but no EBITDA associated with it. And so, we're really focused on the earnings and the mix of the business. And so, that's all.
And I think – and relative to that Utah facility, that was actually part of the plan when we bought the business, it's one of the things we would need to do pretty early on. And so, we've executed on that and that's pretty much done. Frankly, we're likely to sell that property which would flow through purchase accounting and reduce the amount of goodwill that we've booked.
And I'd just also add one with Pharmachem that their aspect of our sales that – it's affecting Klucel, we're getting Klucel that's moving the marketplace; aloe, which is really being sold through the Personal Care business; clary sage, same thing. And some of their production capacity is helping us with our biofunctional growth. So, it's making a major contribution for us.
And becoming more and more integrated into the overall Specialty Ingredients business, which is the point.
Very good. Thank you.
Thank you. And our next question comes from Mike Sison with KeyBanc. Your line is now open.
Hey, guys, nice quarter. And in terms of ASI, the organic growth picked up a little bit sequentially. What do you think – how does it look as you head into the second half, are you maintaining that momentum, is it getting stronger as we head into the second half of the year?
Well, certainly the initiatives that we've put in place to drive share gain, sales gain, sustain themselves. We have a normal seasonal pattern where you do see increased sales in the second half of our fiscal year. And I would say that one of the points that we always point to around this time of the year is, the architectural coating season, how strong that will be, we see good demand patterns as we start the season. And so, kind of the drawdown of that as we go through the season is something that we'll give better clarity on as we move forward. But it's consistent, I think, with the past and certainly over the last few quarters trying to drive a more profitable mix and a greater volume growth.
Okay. And then, I know it's a little bit early, but if you think about ASI EBITDA growth next year, I guess, you'll get a decent chunk of the cost savings next year. I apologize if you mentioned how much. And then you add more organic growth to get to a pretty strong outlook next year for ASI.
Yeah, in terms of – I'll address the cost out piece. And it would certainly be our expectation that we see the benefit of the cost out efforts early in the year and growing throughout the year that would certainly be in line with what you've seen with the past programs. And so, it would obviously be our intent to do that and frankly to get things done as quickly as possible. It benefits the business and it also eliminates the distraction of the process, which is good on both fronts. And I think in terms of the continued organic growth of the business, we can certainly point to better asset utilization and building more momentum around that and continuing to leverage our manufacturing footprint, while growing volumes and getting the enhanced margin from that contribution that that'd bring. So, it certainly would be our intent to continue what we've been doing and to grow on it.
Great. Thank you.
(00:34:27).
Thank you. And our next question comes from James Sheehan with SunTrust. Your line is now open.
Thank you for taking my question. On the Klucel expansion, could you expand on how much you increased that capacity and also talk about how quickly you expect to fill the capacity?
Sure. So, the increase in capacity would be roughly on the order with investments made of about 50% versus the original capacity. And it ultimately is the base that would enable us to double the capacity. Basically, you would need to make an additional capital investment in some ancillary equipment, important but ancillary equipment to allow a few of the two reactor vessels to fully operate independently.
And in terms of how quickly, we're already beginning to look at what that might mean in terms of how we'd get to that capacity. We have not been in the situation now for a couple of years where we've been able to go out with our sales team and say, go push for more Klucel sales because we've really been capacity limited. And so, the rate of the increase, I think we're going to find over the course of, I'll say, the next six to nine months.
Thank you. And just looking at your share price and your valuation here, I think that you're still pretty attractively valued relative to peers and that's probably due to the fact that some of your more commodity businesses lower the multiple. What are your thoughts about buying back shares here before doing some of the divestitures?
Well, we certainly have the authorization to do so. And as we think about the process, we're going to look at it really from both sides of the equation in terms of what's overall more accretive to the business and what fits the strategy. But, for sure, the idea of share repurchase is something that we've been keen on in the past. We've in the past several years done about $2 billion worth of it. And so it's certainly something we're not shy about doing. And you're correct, our shares compared to a lot of other companies in the space are undervalued. And we certainly understand that and believe strongly in the upside of the stock.
Thank you.
Sure.
Thank you. And our next question comes from Dmitry Silversteyn with Longbow Research. Your line is now open.
Good morning. Thank you for taking my call and congratulations on getting another nice quarter under your belt.
Thank you and good morning.
A question and a follow-up. First of all, can you update us on what's going on with your efforts to get cellulosic pricing up? I understand that was an area in the market that you had some difficulty getting pricing because of excess capacity. Have you made any progress or how does it look for the back-end of the year?
Sure, sure. And as you identified, really a significant portion of what we do is in what we consider to be a more premium value proposition where we're really adding additional functionality, I referenced to product during my earlier comments, which fits right into that, we can talk about that at some point. But those are areas where the ability to add value allows us to work with the customer to move the pricing appropriately.
In other parts of the market, as we mentioned, it's a little bit more competitive to other regions where we have some additional competitors, but I think we've also seen that, the general supply-demand in the marketplace seems to be getting just a little bit tighter on that front. So, we're pushing and I think we've made a lot of progress and we feel good about that progress. There's always more to do.
Okay. That's helpful. And then, just kind of maybe taking a step back and looking at the macro environment, European results coming in the first quarter and here kind of for April were not as strong as people expected. There is some disappointment and some concern about what that implies for the European growth outlook for the year. How do you see your European business? Obviously, it's an important end market for you in terms of geographies and a lot of your premier products go into that area. So, as you look at the European sort of economic landscape, can you talk about what you saw in the quarter and what you're seeing now and how do you see that for the balance of the year?
Well, that region has been a growth area for us and obviously that's an area where we sell significant value products. So, it's been actually a very nice growth area. And with that, we anticipate that we'll grow through the remainder of the year unless there's a fundamental economic change, we would expect that we will continue to grow in the region, we don't see it as being problematic, so.
Okay. So, basically, your own initiatives should overcome whatever slight slowdown we may see there versus expectations?
Yeah. I mean, the European team has done a really nice job of executing through the first half of the year and has very specific plans and initiatives around continuing that strong execution throughout not only the balance of the year, but obviously into the future as well. And I applaud them for the work that they've done to really be a stronger contributor to the overall results.
Okay. Thank you.
Thank you. I'm not showing any further questions at this time. I'd now like to turn the call back to Seth Mrozek for any further remarks.
Thank you, Grace. Thank you all for your time this morning and your interest in Ashland. We look forward to speaking with you.
Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day