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29 Aug 2017

Fire at Ashland facility suspends production of BDO, THF and formaldehyde

Volume expected to remain somewhat constrained into the first quarter of fiscal 2018.

Ashland has provided an update on the impact to its operations as a result of a fire at its manufacturing facility in Marl, Germany, that led to the shutdown of production operations on 10 August and the subsequent declaration of a force majeure in Europe on 1.4 butanediol (BDO), tetrahydrofuran (THF) and formaldehyde.

Production at the facility has been suspended while an investigation into the cause and extent of the fire continues. Ashland's safety procedures and emergency response systems worked as designed and, as a result, there were no significant injuries from the incident. However, the Marl facility is currently unable to produce any 1.4 BDO, THF or formaldehyde, and the availability of product is significantly reduced, leading to the force majeure in Europe.

Based on initial results of the investigation, the company currently estimates that production will be suspended until late September at the earliest, with volume expected to remain somewhat constrained into the first quarter of fiscal 2018. Early estimates for the loss associated with the incident, which could change as new information becomes available, are in the range of $15 - $20 million, all but several million of which will be recorded in Ashland's September fiscal quarter. This range includes the lost profitability associated with any lost sales stemming from the lack of product availability during the quarter.

Given the unusual nature of the loss, Ashland plans to include the majority of the financial statement impact from the fire under "key items" when it releases earnings for the September quarter, therefore having no impact to adjusted results. However, the lost profitability associated with any lost sales will impact adjusted results for the Intermediates and Solvents (I&S) reportable segment. As a result, Ashland now expects adjusted EBITDA for the I&S segment to be in the range of $5 - $10 million during the fiscal fourth quarter.

The force majeure situation in Europe is currently limited to BDO, THF and formaldehyde and has no impact on the supply of any other Ashland products. Ashland is working with affected customers to minimize the impact to their respective businesses, and will continue to provide updates regarding supply capability.

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