Covington, KY-based parent company Ashland Inc said that its Valvoline segment posted continued strong results, with volume growing 8 percent and EBITDA also rising 8 percent, to $115 million. EBITDA margin was 24.0 percent, a 200-basis-point increase over the prior year, as Valvoline continued to execute its strategy of investing in higher-return opportunities within its core lubricants product lines. Total sales at $479 million were slightly down from $481 million in the previous year's similar quarter, as strong lubricant volumes and product mix were offset by pass-through pricing from lower raw-material costs and currency headwinds. The quarter ending March 31 is the second quarter of Ashlands fiscal year.
Volume to customers serving the Do-it-Yourself (DIY) market grew by 8 percent, driven by strong seasonal promotions and expanded distribution arrangements with national retail accounts at Walmart and Menards.
At VIOC, same-store sales rose nearly 10 percent at company-owned sites. At the end of the second quarter, VIOC had a total of 1,052 company-owned and franchised stores within its network, a gain of 120 stores versus a year ago after including the 89 Oil Can Henry's stores. Within Valvoline's international channel, volume grew 10 percent, driven by good execution of channel-building efforts.
Valvoline's overall mix continued to improve, with U.S. premium-branded lubricant sales volume increasing to 44.6 percent, a 390-basis-point improvement from the year-ago quarter's 40.7 percent. Lubricant sales volume hit 43.7 million gallons for the quarter, up 7.9 percent from 40.5 million gallons.
For the third quarter, Valvoline expects continued strong performances across the business. Sales are expected to be approximately $500-$510 million in what is typically Valvoline's seasonally strongest quarter. EBITDA margin is expected to be in the range of 23-24 percent.
Earlier this month, Ashland provided an update on the previously announced plan to separate Ashland into two independent, publicly traded companies: the new Ashland, composed of Ashland Specialty Ingredients and Ashland Performance Materials, and Valvoline, composed of Ashland's Valvoline business segment.
As previously announced, the separation process and timeline remain on track; the preparatory work for the separation, including the carve-out audit and the creation of standalone operating entities, is proceeding on the expected timetable. Subject to sufficiently attractive market conditions, Ashland plans to pursue an IPO of up to 20 percent of the common stock of Valvoline as a first step in the separation. The company expects to complete the proposed offering during the fourth quarter of calendar year 2016. Any such offering will be made only by a prospectus filed with the Securities and Exchange Commission, and this news release shall not constitute an offering of Valvoline common stock. Ashland currently expects that it would distribute the remaining common stock of Valvoline to Ashland's shareholders upon expiration of the IPO lock-up (typically six months after completion of the proposed offering).
William A. Wulfsohn, Ashland chairman and chief executive officer said "Valvoline turned in another outstanding performance. The team notched its tenth consecutive quarter of year-over-year EBITDA growth driven by higher volumes, improved channel and product mix, robust same-store sales growth at Valvoline Instant Oil ChangeSM (VIOC), and continued margin management."
Parent Ashland reported income from continuing operations of $87 million on sales of more than $1.2 billion. These results included three key items that together reduced income from continuing operations by approximately $28 million, net of tax. For the year-ago quarter, Ashland reported income from continuing operations of $95 million on sales of more than $1.3 billion. There were five key items in the year-ago quarter that, on a combined basis, reduced income from continuing operations by $43 million after tax. On an adjusted basis, Ashland's income from continuing operations in the second quarter of fiscal 2016 was $115 million versus $138 million for the year-ago quarter.
