Ashland Inc. (ASH) 2019 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Ashland Global Holdings Inc. Third Quarter Earnings Call. (Operator Instructions) As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Seth Mrozek, Director of Investor Relations at Ashland. Sir, you may begin.

各位女士、各位先生，大家好，歡迎參加 Ashland Global Holdings Inc.第三季財報電話會議。（接線員指示）提醒各位，本次電話會議將被錄音。現在我想介紹今天會議的主持人：Ashland 投資人關係總監 Seth Mrozek。先生，您可以開始了。

Thank you, Justin. Good morning, everyone, and welcome to Ashland's Third Quarter Fiscal 2019 Earnings Conference Call and Webcast. My name is Seth Mrozek, Director, Ashland Investor Relations.

謝謝你，Justin。各位早安，歡迎參加 Ashland 2019 會計年度第三季財報電話會議與網路直播。我叫 Seth Mrozek，Ashland 投資人關係總監。

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.

今天與我一同參與電話會議的有：Ashland 董事長兼執行長 Bill Wulfsohn，以及資深副總裁兼財務長 Kevin Willis。

We released preliminary results for the quarter ended June 30, 2019 shortly after 5:00 p.m. Eastern time yesterday, July 30.

我們已於昨日 7 月 30 日美東時間下午 5 點過後不久，發布截至 2019 年 6 月 30 日止季度的初步結果。

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.

此外，我們已將簡報上傳至我們的網站 Ashland.com 的投資人關係專區，並已以 8-K 表格向美國證券交易委員會（SEC）提交上述各項文件。

As a reminder, during today's call, we will be making forward-looking statements on a number of matters, including our financial guidance for fiscal year 2019. These forward-looking statements are subject to risks and uncertainties that could cause future results or events to differ materially from today's projections. We believe any such statements are based on reasonable assumptions but cannot assure that such expectations will be achieved. Please refer to yesterday's slide presentation for a fuller explanation of those risks and uncertainties and the limits applicable to forward-looking statements.

提醒各位，在今天的電話會議中，我們將就多項事項發表前瞻性陳述，包括我們對 2019 會計年度的財務指引。這些前瞻性陳述存在風險與不確定性，可能導致未來結果或事件與今日的預測有重大差異。我們相信任何此類陳述係基於合理假設，但無法保證這些預期一定能達成。關於上述風險與不確定性，以及前瞻性陳述適用之限制，請參閱昨日的簡報以取得更完整的說明。

Please also note that we will be referring to certain actual and projected financial metrics on Ashland on an adjusted basis, which are non-GAAP financial measures. We will refer to these measures as adjusted and present them in order to supplement your understanding and assessment of the financial performance of our ongoing business. Non-GAAP measures should not be considered a substitute for or superior to financial measures calculated in accordance with GAAP. The most directly comparable GAAP measures as well as reconciliation of the non-GAAP measures to those GAAP measures are available on our website and in the appendix of yesterday's slide presentation.

也請注意，我們將以調整後基礎（adjusted basis）引用 Ashland 的部分實際與預估財務指標，這些屬於非 GAAP 財務衡量指標。我們將把這些衡量指標稱為「調整後」，並提出以補充各位對我們持續營運業務財務表現的理解與評估。非 GAAP 指標不應被視為依 GAAP 計算之財務指標的替代或更優指標。與其最直接可比的 GAAP 指標，以及非 GAAP 指標與 GAAP 指標之調節表，已公布於我們網站及昨日簡報的附錄中。

With that, I will turn the call over to Bill.

接下來，我把電話交給 Bill。

Thank you, Seth, and good morning, everyone. In my remarks this morning, there are 3 key themes I'd like to cover. First, we have taken action to offset areas outside of our control to stabilize earnings in a very difficult environment.

謝謝你，Seth，各位早安。今天早上的發言，我想涵蓋 3 個關鍵主題。第一，我們已採取行動，以抵銷我們無法控制的因素，在非常艱困的環境中穩定獲利。

As largely anticipated when we established our annual plan, we have been impacted by the strengthening of the U.S. dollar and the loss related to the Colgate-Gantrez oral care reformulation.

如同我們在制定年度計畫時大致已預期，我們受到美元走強以及與 Colgate-Gantrez 口腔護理配方重新配製相關損失的影響。

Now more recently and like others, we have been impacted by market demand weakness and negative trade dynamics.

而在近期，與其他公司一樣，我們也受到市場需求疲弱與不利貿易態勢的影響。

More specifically impacting our demand was a weak season for sunscreen products in the U.S. and Europe and also new tariffs for materials exported out of China. The 25% tariffs impacted the competitiveness of certain sunscreen and other products we export into the U.S.

更具體而言，影響我們需求的因素包括：美國與歐洲防曬產品銷售季表現疲弱，以及對自中國出口的材料新增關稅。25% 的關稅削弱了我們出口至美國的部分防曬及其他產品的競爭力。

New China regulatory requirements also impacted demand for certain preservative formulations.

中國新的法規要求也影響了部分防腐配方的需求。

In the aggregate, we estimate that on a year-to-date basis, these factors could have negatively impacted ASI's EBITDA by approximately 10% year-over-year.

整體而言，我們估計以年初至今的基礎計算，這些因素可能使 ASI 的 EBITDA 年對年約減少 10%。

In this context, the team has taken meaningful action; more specifically, we have grown our sales at/or faster than the market in Pharma, Nutraceuticals, Coatings and Nutrition. We have raised prices over and above raw material inflation. We have reduced year-to-date SG&A spend by 9% on an FX-neutral basis. And we have also reduced plant fixed costs by consolidating our production footprint and by improving reliability and reducing costs with the implementation of Ashland's production system.

在此背景下，團隊已採取具實質意義的行動；更具體而言，我們在製藥（Pharma）、營養保健品（Nutraceuticals）、塗料（Coatings）與營養（Nutrition）領域的銷售成長達到或超過市場。我們的提價幅度高於原物料通膨。以排除匯率影響（FX-neutral）的基礎計算，我們年初至今的 SG&A 支出已降低 9%。此外，我們也透過整併生產據點、提升可靠度，以及導入 Ashland 生產系統以降低成本，來減少工廠固定成本。

And while the net result is not what we expected earlier this year, we have achieved year-to-date earnings growth versus prior year, for Ashland, a 90 basis point improvement in EBITDA margins, and essentially flat Specialty Ingredients Adjusted EBITDA margins on a year-to-date basis. Importantly, these results demonstrate that our actions and our portfolio evolution has led to much lower levels of cyclicality than in prior periods.

雖然最終結果不如我們今年稍早所預期，但我們已達成 Ashland 年初至今相較去年同期的獲利成長、EBITDA 利潤率提升 90 個基點，且 Specialty Ingredients 調整後 EBITDA 利潤率在年初至今的基礎上基本持平。重要的是，這些結果顯示，我們的行動與投資組合的演進，使我們的景氣循環性相較以往期間大幅降低。

Second, we are confident in our strategy and our future. In fiscal year 2018, we grew Ashland's adjusted EBITDA by 20% and adjusted EPS by 47%. The same operating levers have made a meaningful impact on our fiscal year '19 results to-date. As we take a very early look at fiscal year 2020, the negative factors beyond our control should lessen substantially. We are on track to largely lap in Q1 the impact of negative FX and the Colgate reformulation.

第二，我們對自身策略與未來充滿信心。在 2018 會計年度，我們將 Ashland 的調整後 EBITDA 提升 20%，調整後 EPS 提升 47%。同樣的營運槓桿也對我們 2019 會計年度迄今的結果產生了顯著影響。當我們非常初步地展望 2020 會計年度時，超出我們控制範圍的負面因素應會大幅減輕。我們預期在第一季大致就能「跨過」不利匯率與 Colgate 配方調整的影響。

And while difficult to predict in terms of exact timing, we believe current market weakness is short-term in nature.

雖然很難精準預測發生的確切時間點，但我們相信目前的市場疲弱屬於短期現象。

More importantly, we are taking aggressive action to drive improved results, including driving share gain through new product launches, renegotiating contracts and adapting our supply chain to offset negative tariff-related impacts, reformulating and gaining approval for new products in response to new ingredient regulations, achieving the full impact of our $120 million cost out program by the end of the calendar year. And lastly, we continue to make strong manufacturing gains as we increase our focus on lean and plant reliability.

更重要的是，我們正採取積極行動以推動改善成果，包括：透過新產品上市帶動市占提升、重新協商合約並調整供應鏈以抵銷關稅相關的不利影響、因應新的成分法規而重新配方並取得新產品核准、在年底前實現我們 1.2 億美元成本削減計畫的完整效益。最後，隨著我們更加聚焦精實（lean）與工廠可靠度，我們的製造端也持續取得強勁進展。

Stepping back, in the bigger picture, from an innovation perspective, while we face challenges this year, we view ongoing changes in personal care, regulatory and consumer preference trends as an opportunity to leverage our core innovation and customer partnering skills to enable Ashland to ultimately grow its share position. We have made significant changes to our innovation process and resource deployment over the last 2 years. The result is an increase in the size of our new product pipeline and the impact of new product sales. We're currently working additional actions to redeploy existing technical resources to focus less on business maintenance activities and instead focus more on new product development.

從更宏觀的角度來看，就創新而言，儘管今年面臨挑戰，我們將個人護理、法規與消費者偏好趨勢的持續變化視為機會，得以運用我們核心的創新能力與客戶協作能力，最終協助 Ashland 提升市占地位。過去兩年，我們已對創新流程與資源配置做出重大調整。其成果是新產品管線規模擴大，以及新產品銷售的貢獻提升。我們目前正在推動額外措施，重新配置既有技術資源，降低在業務維護活動上的投入，轉而更聚焦於新產品開發。

It is important also to note that we remain committed to meeting our 25% to 27% ASI EBITDA margin targets through a combination of pricing actions, mix improvement, volume leverage and additional cost productivity initiatives.

同樣重要的是，我們仍致力於透過定價行動、產品組合改善、量增槓桿效益以及額外的成本生產力措施相結合，達成 ASI EBITDA 利潤率 25% 至 27% 的目標。

Thirdly, we remain on track to close the Composites and Marl business sale late this summer as anticipated. Following continued discussions with the FTC, we announced an agreement with INEOS to exclude the maleic anhydride business from the sale. The purchase price will be adjusted to $1.015 billion and Ashland will retain all rights to the maleic business, including the retention of any subsequent sale proceeds. The maleic business consists of 1 facility in Neil, West Virginia and generates annual revenues of approximately $75 million.

第三，我們仍按計畫推進，預期將於今年夏末如期完成 Composites 與 Marl 業務出售案的交割。在與美國聯邦貿易委員會（FTC）持續討論後，我們宣布與 INEOS 達成協議，將順丁烯二酸酐（maleic anhydride）業務排除在本次出售範圍之外。購買價格將調整為 10.15 億美元，且 Ashland 將保留 maleic 業務的所有權利，包括保留任何後續出售所得款項。maleic 業務包含位於西維吉尼亞州 Neil 的 1 座設施，年營收約 7,500 萬美元。

We continue to work with INEOS to close the transaction and preparations for the divestiture remain on track. We anticipate receiving remaining regulatory approvals shortly and expect to close the transaction by late summer.

我們持續與 INEOS 合作以完成該交易，且剝離準備工作仍按計畫推進。我們預期將在短期內取得其餘監管核准，並預計於夏末前完成交易。

We continue to expect to use the net proceeds, now estimated at roughly $930 million for a debt repayment and reduction following the close of the transaction in support of our commitment to reduce our leverage to about 2.5 turns.

我們仍預期在交易完成後，將使用淨收益（目前估計約為 9.30 億美元）用於償還與降低債務，以支持我們將槓桿比率降至約 2.5 倍的承諾。

So in summary, we had strong growth expectations for this fiscal year. Like others, we have had significant factors outside of our control. We have taken action and are implementing our operating strategy. Gains from our actions are helping to offset the current market dynamics. The result, while less than what we were targeting, is year-over-year earnings stability. We intend to complete the portfolio transformation this summer and we expect to return to more normalized sales and earnings growth when the market demand recovers likely later this year. We believe we have a great business, a clear strategy and a strong team focused on driving results.

總結而言，我們對本會計年度原本有強勁的成長預期。與其他公司一樣，我們也面臨多項非我們所能控制的重大因素。我們已採取行動並正在落實我們的營運策略。我們行動所帶來的成效正協助抵銷目前的市場動態。結果雖低於我們原先的目標，但仍實現了年對年獲利的穩定。我們打算在今年夏天完成投資組合轉型，並預期當市場需求回升（可能在今年稍晚）時，銷售與獲利成長將回到較為正常的水準。我們相信我們擁有優質的事業、清晰的策略，以及專注於推動成果的強大團隊。

I will now turn the call over to Kevin for a more detailed discussion of our third quarter results.

接下來我將把電話會議交給 Kevin，請他更詳細說明我們第三季的業績。

Thanks, Bill, and good morning, everyone. First, let's start with Ashland's results in the third quarter. Sales in the quarter were $641 million, down 4% from the year-ago period including negative 2 points from unfavorable currency.

謝謝你，Bill，各位早安。首先，我們先從 Ashland 第三季的業績談起。本季銷售額為 6.41 億美元，較去年同期下降 4%，其中包含匯率不利影響 2 個百分點。

Adjusted EBITDA in the quarter was $140 million, essentially flat year-over-year and including a negative $4 million foreign currency impact. The U.S. dollar remained stronger than in the prior year as has been the case throughout this fiscal year.

本季調整後 EBITDA 為 1.40 億美元，年對年基本持平，並包含 400 萬美元的外匯不利影響。美元相較去年仍維持強勢，這也是本會計年度以來一直如此。

Negative currency impact was led by the euro, which was $0.07 lower than the prior period and there was also an impact from currencies in certain emerging regions.

匯率的負面影響主要來自歐元，歐元較前期低 0.07 美元，此外某些新興地區貨幣也帶來影響。

In the quarter, we reported U.S. GAAP income from continuing operations of $23 million or $0.37 per diluted share. On an adjusted basis, we reported income from continuing operations of $0.77 per diluted share, which was consistent with prior year results. This compares to our revised outlook we provided in mid-July of $0.76 to $0.78 per share.

本季我們依美國 GAAP 認列持續營業業務淨利為 2,300 萬美元，或每股稀釋盈餘 0.37 美元。以調整後基礎計算，我們的持續營業業務每股盈餘為 0.77 美元，與去年結果一致。此與我們在 7 月中旬提供的修正展望（每股 0.76 至 0.78 美元）相符。

Our effective tax rate in the quarter was 6%, which was below our expectation of 15%, due largely to income mix and several favorable discrete tax items. You will recall that results from continuing operations includes earnings from our Specialty Ingredients segment plus our BDO facility in Lima, Ohio since Composites and Marl are now being reported in discontinued operations.

本季有效稅率為 6%，低於我們預期的 15%，主要由於所得組合以及數項有利的一次性稅務項目。各位會記得，持續營業業務的結果包含我們 Specialty Ingredients 事業部的獲利，以及位於俄亥俄州利馬（Lima）的 BDO 工廠，因為 Composites 與 Marl 現已列為停業單位。

Free cash flow during the quarter was $54 million compared to $61 million in the prior year. These amounts include $22 million in restructuring costs in the third quarter of fiscal 2019 and $8 million of restructuring in the year-ago period.

本季自由現金流為 5,400 萬美元，去年同期為 6,100 萬美元。上述金額包含 2019 會計年度第三季 2,200 萬美元的重組成本，以及去年同期 800 萬美元的重組成本。

Including restructuring and transaction-related payments of approximately $60 million, we now expect free cash flow in the range of $100 million to $110 million this fiscal year.

包含約 6,000 萬美元的重組及交易相關付款後，我們目前預期本會計年度自由現金流將落在 1.00 億至 1.10 億美元區間。

The change from the previous outlook is due primarily to the reduction in expected earnings in the second half of the year plus the acceleration of approximately $20 million of cash restructuring and transaction-related payments.

相較先前展望的變動，主要是因為下半年預期獲利下修，以及約 2,000 萬美元的現金重組與交易相關付款提前發生。

Turning to Specialty Ingredients, as you have seen, we have revised our financial outlook for fiscal 2019 to reflect the market demand weakness that Bill just mentioned. We believe these factors are temporary in nature. While sales in July were weak, September quarter order book is in line with our current outlook. When market conditions improve, we should return to more normalized sales growth and mid to high single-digit EBITDA growth on a percent basis.

談到 Specialty Ingredients，如各位所見，我們已修正 2019 會計年度的財務展望，以反映 Bill 剛提到的市場需求疲弱。我們認為這些因素本質上是暫時性的。雖然 7 月銷售疲弱，但 9 月季度的訂單簿與我們目前的展望一致。當市場狀況改善時，我們應可回到較為正常的銷售成長，並在百分比基礎上達到中到高個位數的 EBITDA 成長。

Finally, I'd like to provide an update on the $200 million accelerated share repurchase program we announced during the June quarter. In May, we retired approximately 2.2 million shares and we expect the program to conclude in August. The final average price per share will be determined when the program is completed.

最後，我想就我們在 6 月季度宣布的 2.00 億美元加速庫藏股回購計畫提供最新進度。我們在 5 月註銷約 220 萬股，並預期該計畫將於 8 月結束。最終每股平均價格將在計畫完成時確定。

I think it's important to reemphasize that this program in no way impacts our commitment toward reducing leverage to about 2.5x following the closing of the Composites Marl divestiture.

我認為重要的是再次強調，該計畫完全不會影響我們在完成 Composites Marl 剝離交易後，將槓桿比率降至約 2.5 倍的承諾。

At this point, I'll turn the call back over to the operator and we'll take your questions.

接下來我會把電話會議交回給接線員，我們將開始回答各位的提問。

(Operator Instructions) Our first question is going to come from Christopher Parkinson from Crédit Suisse.

(接線員指示) 我們的第一個問題將由 Crédit Suisse 的 Christopher Parkinson 提出。

Cool. You've been facing a few unexpected challenges just over the past year in personal care. The Gantrez reformulation volume loss in oral care, magnitude of headwinds in sunscreen markets this past quarter. Can you just speak to whether or not you're facing additional reformulations, your positioning in skin care markets, specifically bioactives and some of the trends there and your ultimate ability to sustainably achieve 3% to 4% top line growth, hopefully higher. If you could just hit on that and how integral PC success is to reach above 25% margins, that would be very helpful.

好的。在過去一年左右，你們在個人護理領域面臨一些意料之外的挑戰。例如口腔護理中 Gantrez 重新配方造成的銷量流失，以及本季防曬市場逆風的幅度。你能否談談是否還會面臨更多重新配方、你們在護膚市場的定位（特別是生物活性成分及其趨勢），以及你們最終能否可持續地達成 3% 到 4% 的營收成長（希望更高）。也請談談個人護理（PC）成功對於達到 25% 以上利潤率的重要性，這將非常有幫助。

Great. Well, thank you, and a very good question. As we have discussed in the past as it relates to the personal care business, every year you have a certain amount of product maturing or attrition, just as products go from new to new and improved down to less relevant in terms of the overall product mix. Sometimes that happens more quickly than other years. We have strong R&D efforts to offset and ultimately, outpace those dynamics. And if you look back, for example, in fiscal year '18 and really through the first half of fiscal year '19, the pace of the gains that we had were greater than the attrition, if you will, that came from reformulations or regulatory and consumer preferences. We are expanding our investment in the development of sustainable solutions for the personal care market. And we believe that that's essential to maintain a more consistent growth pattern within personal care. We think that that will happen as we go into and through fiscal year 2020. We'll see the momentum building around that.

好的。謝謝，這是個非常好的問題。如同我們過去在談個人護理業務時所說，每一年都會有一定程度的產品成熟或流失，因為產品會從「新」到「更新更好」，再到在整體產品組合中相對不那麼重要。有時候這種情況發生得比其他年份更快。我們有強勁的研發投入來抵銷，並最終超越這些動態。回頭看，例如在 2018 會計年度以及 2019 會計年度上半年，我們取得的增量（成長）速度確實高於因重新配方或法規與消費者偏好所造成的流失。我們正在擴大對個人護理市場永續解決方案開發的投資。我們相信這對於在個人護理領域維持更一致的成長型態至關重要。我們認為在進入並走過 2020 會計年度時，這將會發生。我們將看到相關動能逐步建立。

And when you look at the margin profile, clearly, personal care is an important part of our overall portfolio. It's a great business and has very attractive margins. What I will tell you is that when we look at our overall plans for margin improvement, about 20% of the gains that we are targeting to get come from mix improvements and personal care is a part of that but it is a -- only a part of the overall mix. Obviously, continuing to move and have good growth in pharma and to move from things like construction and energy, into areas like coatings and personal care is part of that equation.

再看利潤結構，顯然個人護理是我們整體投資組合的重要一環。這是一門很好的業務，且具備非常具吸引力的利潤率。我想說的是，當我們檢視整體的利潤改善計畫時，我們所鎖定的改善中約有 20% 來自組合改善，而個人護理是其中一部分，但也只是整體組合的一部分。顯然，持續推動醫藥（pharma）的良好成長，並將重心從建築與能源等領域轉向塗料與個人護理等領域，也是這個方程式的一部分。

So we do feel good that we've been able to outgrow the market based upon introducing new products at a faster rate than they have matured this year as we've been particularly hard to hit. The Colgate reformulation was a very significant item. What's going on in China right now, we just have to reformulate our way through it to make sure that the products that we have are meeting all of their expectations for import, and we're doing that, we're doing that right now. So it'll take a little bit of time but we're very confident we can sustain the growth rates we're targeting.

因此，我們確實感到欣慰的是，儘管今年我們受到特別嚴重的衝擊，但我們仍能透過以比他們更快的速度推出新產品、在產品成熟之前就加速導入，從而實現超越市場的成長。高露潔的重新配方是一個非常重大的事項。至於目前中國正在發生的情況，我們只能透過重新配方來因應，確保我們的產品符合其所有進口方面的期望；我們正在做，而且現在就正在做。因此這需要一點時間，但我們非常有信心能夠維持我們所鎖定的成長率。

Yes, Chris, this business, from a personal care perspective, should return to that 3%, 4% growth trajectory. I would expect on a run-rate basis, we'll hit that in fiscal 2020. That would certainly be our intention. And your question around biofunctionals is a good one. That's a really important part of our personal care business, not only because of the actives that we make which are really down the middle from a sustainably perspective, provide a lot of functionality to our customers. But they also result in a certain amount of pull-through in other product categories in personal care. So we're very focused on that biofunctionals business because while it's relatively small, it is a very important part of personal care, especially skin care. So we're going to continue to be very focused on that business.

是的，Chris，從個人護理的角度來看，這項業務應該會回到3%、4%的成長軌跡。我預期以運行率（run-rate）來看，我們會在2020財年達到。那當然會是我們的目標。你關於生物功能性（biofunctionals）的問題問得很好。那是我們個人護理業務中非常重要的一部分，不僅因為我們所製造的活性成分在永續性方面非常到位，能為客戶提供大量功能性。同時，它們也會在個人護理的其他產品類別中帶來一定程度的帶動效應（pull-through）。因此我們非常專注於生物功能性業務，因為雖然它相對較小，但卻是個人護理、尤其是皮膚護理中非常重要的一環。所以我們會持續高度聚焦在這項業務上。

And just as a quick follow-up. You're also moving -- you are moving in the right direction on costs, but can you just comment on your updated views regarding your global cost structure from the top to bottom? What do you think you're doing well? What you feel your team could still potentially do better? And just given the normalized pricing and production environment given the current portfolio, just how should we think about from the broader targets of where ASH needs to be in another 2 to 3 years out?

再快速追問一下。你們在成本方面也正朝正確方向前進，但能否談談你們對全球成本結構自上而下的最新看法？你認為你們做得好的地方是什麼？你覺得團隊還有哪些地方可能可以做得更好？另外，考量目前投資組合下價格與生產環境已趨於常態化，從更宏觀的目標來看，我們應該如何思考ASH在未來2到3年需要達到的水準？

Sure, sure. So not sure how you define top to bottom, but if I start with the kind of corporate support groups, we -- through this $120 million overall cost reduction program, are reducing those expenditures in the range of 25% to 30%. So we're clearly taking aggressive actions in this area.

當然，當然。我不太確定你所說的自上而下如何定義，但如果我從公司支援部門這類企業支援團隊談起，我們透過這項總額1.2億美元的整體成本削減計畫，正把這些支出降低約25%到30%。因此我們顯然在這方面採取了積極行動。

We see that when we complete our program, which will be at the end of this calendar year, we'll be at run rate without amortization of around 16% to 17% of sales. And we do think that there is an opportunity or we will focus on driving that down another 100 basis points or so and that can be done through getting volume leverage on what -- on the infrastructure that we have and it can also be because we're continuing to focus on further cost productivity effort. We're clearly very much engaged in the execution of the current reduction program and it's interesting to note that we've made a lot of progress in terms of reducing what our -- in very stranded costs while we still have the business; the earnings, albeit in discontinued operations.

我們看到當我們在今年曆年年底完成該計畫時，在不含攤銷的情況下，我們的運行率將約為銷售額的16%到17%。而且我們確實認為仍有機會，或我們將專注於再把它降低約100個基點左右；這可以透過在既有基礎設施上取得規模效益（volume leverage）來達成，也可以因為我們持續聚焦於進一步的成本生產力提升。我們顯然正全力投入目前削減計畫的執行；值得注意的是，雖然我們仍保有該業務（其獲利雖然列在停業部門），但我們在降低所謂的閒置成本（stranded costs）方面已取得很大進展。

So from a corporate standpoint, we're making good progress but I think that we would focus on continuing to drive productivity. In the commercial and technical area, of course, you always want to drive productivity, but I would say that that's the engine for making the company grow stronger. And I think we want to drive and enhance the impact that we have from the investments that we're making. I don't think that that is the area we should go to for, we'll say, sizable cost reductions. We need to make sure we're just getting the most that we can from the investments that we're making.

因此從公司層面來看，我們進展良好，但我認為我們會持續專注於推動生產力。在商務與技術領域，當然你永遠都希望提升生產力，但我會說那是讓公司變得更強、推動成長的引擎。而且我認為我們希望推動並強化我們投資所帶來的影響力。我不認為那會是我們應該用來進行、我們姑且說，大幅度成本削減的領域。我們需要確保能從我們正在進行的投資中取得最大的效益。

And then finally, while it's not necessarily in SG&A, in our manufacturing environment, we've really done a nice job of driving productivity, not just on the plant floor but also through plant consolidations, also the way we run the plants, combining, if you will, regions or asset types so that we can better leverage our infrastructure and reduce our cost. And I think there's more opportunity for us in that area as we move forward. So I think we're making good progress but I think there's still more opportunity and we have work to do.

最後，雖然這不一定屬於SG&A，但在我們的製造環境中，我們在推動生產力方面做得非常好，不僅是在工廠現場，也透過工廠整併，以及我們的工廠運營方式；例如整合不同區域或資產類型，以便更好地槓桿我們的基礎設施並降低成本。我認為隨著我們往前推進，這方面還有更多機會。所以我認為我們進展良好，但仍有更多機會，我們還有工作要做。

Yes, I would agree with that. Getting to that 25% to 27% ingredients margin target is going to require a combination of good profitable, solid growth in the business in our end markets, especially the more consumer-oriented end markets. But it's also going to require continued cost discipline and a real focus in driving productivity. So improving the overall cost structure as we go. Those 2 things are going to have to work in concert to get us where we need to be.

是的，我同意。要達到原料（ingredients）毛利率25%到27%的目標，需要結合在終端市場、尤其是更偏消費者導向的終端市場中，實現良好且具獲利性的穩健成長。但同時也需要持續的成本紀律，以及在推動生產力上的高度聚焦。因此在前進過程中改善整體成本結構。這兩件事必須協同運作，才能讓我們達到所需的水準。

And our next question comes from John Roberts from UBS.

下一個問題來自UBS的John Roberts。

When you talk about temporary issues, do you mean a supply chain inventory correction? Or do you think something else temporary is going on?

當你談到暫時性問題時，你的意思是供應鏈的庫存修正嗎？還是你認為還有其他暫時性的因素在發生？

Well, what I'm referencing is when you look at -- and most specifically in the personal care area, some of the things that impacted our results in the quarter. It has been a weak demand profile for sunscreens this year in both the -- Europe and the U.S. and the season will be coming to a close here fairly soon.

嗯，我指的是當你回頭看——更具體地說是在個人護理領域——一些影響我們本季業績的因素。今年防曬產品在歐洲與美國的需求態勢一直偏弱，而這個季節也將在不久後接近尾聲。

In addition, as we mentioned that tariffs, say for example on sunscreens that we export from China into the U.S., they've been hit by 25% tariffs and that affects the competitiveness of those products. Now that's just a portion of what we sell and actually, we've been able to already negotiate through the increased tariffs on a substantial part of our customer base. So we anticipate that by adjusting our supply chain and working through with our customers, we'll get through the dynamics on that.

此外，正如我們提到的，關稅——例如我們從中國出口到美國的防曬產品——被課徵25%的關稅，這會影響這些產品的競爭力。不過那只是我們銷售的一部分；而且事實上，我們已經能夠就相當大一部分客戶群協商消化關稅上升的影響。因此我們預期透過調整供應鏈並與客戶共同推進，我們將能度過這些變化帶來的影響。

And as I also mentioned, when it comes to issues like preservatives that might have new requirements for import into China, ultimately, we view those as opportunities for us to innovate, to provide solutions and it takes a while to commercialize of those and it takes a while to get approvals for those. But we're confident that we can make sure that those are not structural in nature.

另外，如我也提到的，當涉及像防腐劑這類可能出現新的中國進口要求的議題時，最終我們把這些視為我們創新的機會、提供解決方案的機會；而這些需要一些時間才能商業化，也需要一些時間取得核准。但我們有信心能確保這些並非結構性問題。

And how hard do you think it will be to get a fair value for the maleic plant? And how much of the output of that plant goes to the Composites business being sold?

你認為要為馬來酸（maleic）工廠取得公允價值會有多難？而該工廠的產出有多少會供應給正在出售的複合材料（Composites）業務？

Yes, it is somewhat integrated with the Composites business. But I mean as you know, it's a commodity business. Top line is about $75 million, that's third-party sales today. And we're still -- it's a relatively new development, John, in terms of this is pretty real-time and we're still evaluating how we're going to ultimately approach the business. But based on past history and our connectivity to marketplace around M&A, I don't think it's going to be difficult to achieve a sale of that business, if that's in fact what we choose to do.

是的，它與複合材料業務有一定程度的整合。但如你所知，這是一門大宗商品業務。營收約7,500萬美元，那是目前對第三方的銷售。而且我們仍在——John，這算是相對新的進展，因為這幾乎是即時發生的，我們仍在評估最終要如何處理這項業務。但根據過往經驗以及我們在併購市場（M&A）的連結，我不認為要出售這項業務會很困難——如果那確實是我們選擇要做的事。

Could you give us the gross sales including the intercompany sales to Composites?

您能否提供包含對 Composites 的公司間銷售在內的總銷售額？

Yes. Frankly, that is the number, $75 million.

可以。坦白說，那個數字是 7,500 萬美元。

That's the gross?

那是總額嗎？

That's the gross.

那是總額。

And our next question comes from John McNulty from BMO Capital Markets.

下一個問題來自 BMO Capital Markets 的 John McNulty。

This is Bhavesh Lodaya on for John. If I heard correctly on the order book commentary, sounds like early indications are looking for an improvement in fiscal 4Q. So as we think about the next few quarters, obviously, you get the benefit of the additional cost savings. But can you add some color on the moving pieces, assuming there is no change in the current macro? Just trying to get a sense of the earnings part of the business over the next few quarters.

我是代替 John 的 Bhavesh Lodaya。如果我對訂單簿評論的理解正確，聽起來初步跡象顯示財政年度第 4 季可能會改善。因此，當我們思考接下來幾個季度時，顯然您會受惠於額外的成本節省。但在假設目前總體環境不變的情況下，您能否補充一些關於各項變動因素的說明？只是想了解未來幾個季度業務獲利面的走勢。

Okay. So I would say that we have assumed and are assuming that we don't see substantial improvements in the overall macro environment as we enter into Q4. We are taking actions, as we talked about. Kevin also referenced that the month of July started off fairly weak, but the order book began to fill up in a way which is consistent with our outlook. So we feel good about that.

好的。我會說，我們已經假設且仍在假設，當我們進入第 4 季時，整體宏觀環境不會出現顯著改善。我們正在採取行動，如同我們所談到的。Kevin 也提到 7 月一開始相當疲弱，但訂單簿開始以符合我們展望的方式逐步補上。因此我們對此感到樂觀。

In terms of moving forward into fiscal year '20, of course, we will comment on that on our next call in more detail. But as we referenced, some of the things that have impacted us, we will lap and other things, we will be addressing in a way that we believe they'll be less substantial in terms of impact on our results. And so we'll provide more of an update. What's really difficult to predict is general demand conditions around the globe in terms of the timing for more business confidence and as such, we'll say, more aggressive buying behavior and inventory stocking. It may come soon or it may take a few quarters. It's difficult to predict right now, so we'll leave it at that.

至於往 2020 財政年度推進，當然我們會在下一次電話會議上更詳細地評論。但如我們所提到的，有些影響我們的因素將會在比較基期上「跨過」（lap），而其他因素我們也會以我們認為能使其對結果影響較不顯著的方式來處理。因此我們會提供更多更新。真正難以預測的是全球整體需求狀況：何時會出現更多的企業信心，進而帶來更積極的採購行為與庫存補貨。可能很快發生，也可能需要幾個季度。目前很難預測，所以我們就先說到這裡。

Yes. And then you mentioned renegotiating some of the contracts in your prepared remarks. Can you give us some color as to what you have done so far, which businesses they are focused in and how has the reception been?

是的。另外，您在事先準備的發言中提到重新協商部分合約。您能否說明一下到目前為止做了哪些事、主要聚焦在哪些業務，以及客戶的反應如何？

Yes, in that particular case, I was referencing specifically sunscreens and dealing with the tariff related to exports from China. As you can imagine, when that came into place from a customer standpoint, that's a pretty big issue and of course, it's our objective to pass appropriately those costs on. And so it's taken some time to work with customers as they assess their supply situation, the role that we play in their supply chain, both in terms of not just product but innovation. And so we've been making progress in terms of passing that through. We've been able to pass through, we'll say roughly half of the impact that we've had so far and we're working to bring that level up or as is appropriate, to change the supply chain so we can avoid the tariff, period.

是的，在那個案例中，我特別指的是防曬產品，以及因自中國出口而產生的關稅問題。如您所想，當那項措施上路時，從客戶角度來看是相當大的議題，而我們的目標當然是適當地將這些成本轉嫁出去。因此，我們花了一些時間與客戶合作，讓他們評估其供應狀況、我們在其供應鏈中的角色，不僅是產品，還包括創新。因此在轉嫁方面我們已取得進展。到目前為止，我們已能轉嫁大約一半的影響；我們也正努力把這個比例提高，或在適當情況下調整供應鏈，以徹底避免關稅。

Our next question comes from David Begleiter from Deutsche Bank.

下一個問題來自德意志銀行（Deutsche Bank）的 David Begleiter。

Bill, kind just on ASI EBITDA in 2020, why wouldn't the growth be above mid- to high-single digits given the depressed base in 2019 and some of the potential one-off we saw this past year?

Bill，關於 2020 年 ASI EBITDA，鑑於 2019 年基期偏低，以及我們去年看到的一些一次性因素，為什麼成長不會高於中到高個位數？

Well, one of the things that we will have in 2020 is carryover from the cost out growth. Some of it -- we won't have full year benefit this year. We will have full year benefit next year of a lot of that cost out and so that will be the basis for what I would call initial growth over and above where we are right now, where we'll likely end the fiscal year. As you look at end market demand, part of what we're going to have to work through and figure out is, kind of what 2020 is going to look like from a top line perspective and what we can do to manage and improve our mix on an overall basis really driving toward more of the consumer-facing areas like personal care and pharma. As Bill talked about on the sunscreen front, we are going to have to deal with some of that from a tariff perspective and some reformulation, but the team's on that. So as I think about 2020, certainly the mid-single-digit growth should be achievable and really, the rest of it's going to depend on end market dynamics and what we see there. And so more to come on that. But we're certainly pushing the team hard from a growth perspective on driving that end market growth, whether it's share gains, new products with higher-margin profiles, et cetera.

嗯，2020 年我們會有成本削減所帶來的成長延續效應。其中一部分——今年我們不會享有全年效益。明年我們將享有許多成本削減措施的全年效益，因此那將成為我所稱的初始成長基礎，會高於我們目前的水準，也高於我們可能在本財政年度結束時的水準。當你看終端市場需求時，我們必須釐清並處理的一部分是：從營收（top line）角度來看 2020 年會是什麼樣子，以及我們能做些什麼來管理並改善整體產品組合，真正推動更多面向消費者的領域，例如個人護理與製藥。如 Bill 在防曬方面所談到的，我們將需要從關稅與部分重新配方的角度來處理一些問題，但團隊正在進行中。因此當我思考 2020 年時，中個位數成長當然應該可達成，而其餘部分將取決於終端市場動態以及我們在那裡看到的情況。所以後續還會有更多說明。但從成長角度來看，我們確實在強力推動團隊去帶動終端市場成長，不論是市占提升、推出毛利率結構更高的新產品等等。

Very clear. And just sorry, back to sunscreen again. Are you seeing any impact from this consumer backlash against chemical-based sunscreen formulations?

非常清楚。另外抱歉，再回到防曬。您是否看到消費者對化學性防曬配方的反彈所帶來的任何影響？

I think it's a limited part. Of course, it does affect, we'll say, demand in those areas and why they have some limits in a couple of areas. But I think that's not as fundamental as the factors which we've referenced in our results now. So it's obviously an important issue that we want to stay close to. But I wouldn't point that out as the primary driver for the sunscreen results we have in the quarter.

我認為那只是一個有限的部分。當然，它確實會影響——可以說——那些領域的需求，這也是為什麼在幾個領域會有一些限制。但我認為，這並不像我們在目前業績中所提到的那些因素那樣根本。因此這顯然是我們希望密切關注的重要議題。但我不會把它指出為本季度防曬業績的主要驅動因素。

Yes, and just -- I'm sorry, a quick reference also because I think it's important, that that dynamic that we're referencing is really primarily a U.S.-centric dynamic. So we have a global sunscreen business and as we talk about some of these factors, you're referencing to U.S.-driven dynamics and demand.

是的，另外——抱歉——我也想快速補充一下，因為我認為這很重要：我們所提到的那個動態其實主要是以美國為中心的動態。因此我們的防曬業務是全球性的；當我們談到其中一些因素時，您所指的是由美國驅動的動態與需求。

Our next question comes from Jim Sheehan, SunTrust.

下一個問題來自 SunTrust 的 Jim Sheehan。

On the pricing versus raw materials front, are you planning pricing more difficult to achieve given more lackluster demand environment? And how do you expect to maybe execute on price increases going forward?

在定價相對於原物料的議題上，鑑於需求環境較為疲弱，您是否認為定價將更難達成？以及您預期未來要如何執行漲價？

Sure. So not surprisingly, when you're in a strong inflationary environment, it's easier, I'll say, to pass those along in terms of customers' understanding the rationale. If we step back from that, though, we really need to and have been focusing on better defining and selling the value that our solutions provide in the marketplace. And with that, continue to price accordingly. As we introduce new products, while that's not per se pricing that does positively impact our overall mix, and so we are focused on sustaining pricing actions. I would say that from a supply/demand standpoint that is not quite as relevant especially in places like pharma. As we move into some parts of our business, you may see that dynamic more. But we've done a really good job of filling up, for example, our HEC system. We're up again this year, I think it's about 6% in terms of actual output in sales from that system. And what that does it so that puts us in a position to also look at opportunities to upgrade the mix. So clearly, it's a focus. It's always a challenge for the commercial team, but we view it right now as we're not in a commodity dynamic. Let's leave it at that.

當然。因此不令人意外的是，當處於強烈通膨環境時，較容易——我會說——把這些成本轉嫁出去，因為客戶更能理解其理由。不過如果退一步來看，我們確實需要、也一直在專注於更清楚地界定並銷售我們的解決方案在市場上所提供的價值。並在此基礎上，持續進行相應的定價。當我們推出新產品時，雖然那不完全等同於「定價」，但確實會正面影響我們的整體組合，因此我們專注於維持定價行動。我會說，從供需角度來看，這點並不是那麼相關，尤其是在製藥等領域。當我們進入業務的某些部分時，你可能會更看到那種動態。但例如，我們在 HEC 系統的產能填充方面做得非常好。今年我們又成長了，我想以該系統的實際產出與銷售來看約為 6%。而這讓我們也能站在一個位置上，去尋找升級產品組合的機會。所以很明顯，這是我們的重點。這對商務團隊而言一直都是挑戰，但我們目前的看法是：我們並不處在大宗商品的動態之中。就先說到這裡。

Very helpful. And looks like on Pharmachem, you may have pulled some orders forward or that you made some reference to changes in order timing there. Are you going to be giving some of that back in the fiscal fourth quarter? How do you see orders shaping up in Pharmachem?

非常有幫助。而且看起來在 Pharmachem 方面，你們可能把一些訂單提前了，或是你們提到那邊的訂單時點有所變動。你們會在第四財季把其中一些回吐嗎？你們怎麼看 Pharmachem 的訂單走勢？

Yes, it really is -- there was some timing of orders and with that in mind, we would expect that yes, that we won't have the same type of growth that we saw in Q3 and Q4. But in the aggregate, I think you can see we've been making progress in that business and we'll continue to do so.

是的，確實是——訂單時點上有一些變動，基於這點，我們預期是的，我們不會有像第三季和第四季所看到的同樣類型的成長。但整體來看，我想你可以看到我們在那項業務上一直在取得進展，而且我們會持續這麼做。

And our next question comes from Mike Sison from KeyBanc.

下一個問題來自 KeyBanc 的 Mike Sison。

Bill, I was wondering if you can maybe walk us through how the -- how you're managing the business going forward? Meaning, you're giving us more information by end market, and is the structure of your reporting teams coming from each of these little businesses: personal care, pharma care, and does each of these units have its own finance, accounting, sales? And I'm just kind of curious of kind of how the operating structure is setting up now going forward now that you're just Specialty Ingredients?

Bill，我想請你或許帶我們了解一下——你們未來將如何管理這項業務？也就是說，你們按終端市場提供更多資訊，而你們的報告團隊架構是否來自這些小型業務：個人護理、醫藥護理？這些單位是否各自擁有自己的財務、會計、銷售？我只是有點好奇，現在你們成為 Specialty Ingredients 之後，未來營運架構會如何設置？

Sure, sure. Good question. Okay, so we have, if you will, functional leadership that goes across the business. And for example, Vito Consiglio, who is our Chief Commercial Officer, ultimately has responsibility for all the end markets. And we have leaders of those end markets and of course, they focus on the imperatives to succeed in those spaces. They also have technical resources which are aligned to leverage our technology across -- from across the company into their respective markets. They have limited, if you will, financial resources. For example, Vito has financial resources to help him assess his business but we don't build a whole infrastructure around each one of those markets like pharma and personal care. It's really more of the group level.

當然，當然。好問題。好的，所以我們有跨整個業務的職能領導。例如，我們的首席商務長 Vito Consiglio，最終對所有終端市場負責。我們也有各終端市場的負責人，當然，他們會聚焦在各自領域成功所需的關鍵要務。他們也有技術資源，這些資源的配置是為了把我們的技術從公司各處導入並運用到他們各自的市場。他們擁有有限的財務資源。例如，Vito 有一些財務資源來協助他評估他的業務，但我們不會像在醫藥或個人護理那樣，為每個市場建立一整套基礎設施。這更多是在集團層級運作。

So we have a strong commercial focus and strong focus on commercial contribution. The accountabilities are very clear in terms of revenue, in terms of pricing versus raw material inflation. And also driving the needed absorption to make sure that we have well-utilized facilities.

因此我們在商務面有很強的聚焦，也非常重視商務貢獻。在責任歸屬上非常清楚，包括營收、定價相對於原物料通膨等。同時也推動必要的吸收（產能/固定成本吸收），以確保我們的設施能被良好利用。

Below that, we -- or in addition to that, we have our operations and we run our operations. Some of them -- facilities are, of course, different from each other but we run them as a network. We track the profitability of each one of the core technology platforms that we have and have teams that review with the executive leadership team on a regular basis the actions that we can take to make our HEC or Klucel or PVP platforms more profitable. And of course, we have an R&D function which, over time, while we have a strong central leadership for all of our technical resources, we have tried to deploy those resources much more closely aligned with the specific leaders in the end markets because we really need to focus on driving solutions that are relevant in the marketplace.

在此之下——或者說除此之外——我們有營運部門，並以此方式來運行我們的營運。其中一些——各個廠區當然彼此不同，但我們把它們當作一個網路來運作。我們追蹤每一個核心技術平台的獲利能力，並設有團隊定期與執行領導團隊檢視我們可以採取的行動，以提升 HEC、Klucel 或 PVP 平台的獲利。當然，我們也有研發職能；隨著時間推進，雖然我們對所有技術資源有強而有力的中央領導，但我們也嘗試把這些資源更緊密地部署並對齊各終端市場的特定領導者，因為我們確實需要專注於推動與市場相關的解決方案。

And we've also built out a regional network because part of that is as you can appreciate, the needs that we have in one region are different than another from a technology standpoint. And then behind that, the broader infrastructure that we might call supply chain, corporate, purchasing and so forth is really more central or centrally managed. I hope that was enough detail but not too much.

我們也建立了區域網路，因為如你所理解，不同區域在技術面上的需求彼此不同。而在那之後，我們可能稱之為供應鏈、公司層級、採購等等的更廣泛基礎設施，則更偏向集中或由中央管理。希望這些細節夠用，但又不會太多。

Yes, that's great. Now I guess, Kevin, in terms of your kind of soft framework for 2020, to get to the midpoint, sounds like you don't need a lot of economic recovery, you can sort of get there on minimal sales growth. And if you -- is that right? And then if you do get sales growth, how much does that come down to the bottom line given you've got a lot of cost savings and such and could potentially drive some upside to your initial framework?

是的，這很棒。那我想，Kevin，就你對 2020 年的那個較為寬鬆的框架而言，要達到中位數，聽起來你不需要太多的經濟復甦，靠著很小的銷售成長就能達到。如果我理解沒錯，是這樣嗎？另外，如果確實出現銷售成長，考量你們有很多成本節省等措施，這會有多少能落到最終獲利（bottom line），並可能為你們最初的框架帶來一些上行空間？

Yes, Mike, certainly, the carryover from the cost out initiatives will help provide a nice base platform. I think if we continue to see a weak -- if the weak demand environment were to persist, which we don't believe is going to be the case just based on kind of all the macro things we see out there, but if it were to persist, that would put us in low- to mid-single-digit EBITDA growth in 2020. If we return to a more normalized environment, if that were to happen for the full fiscal year, you'd be high single digits, potentially low double. And the likely outcome is probably going to be somewhere in the middle of that. I mean we're still very much working on our 2020 plan from a commercial perspective, an SG&A perspective and an operations perspective. And so it's -- we still have a lot of wood to chop when it comes to that. But our expectation would be to, obviously, to grow EBITDA in 2020 and we feel like we've got a nice tailwind there just with the cost out and we'll continue to leverage over and above that to help drive earnings higher to the extent that we see the macro ability to do it.

是的，Mike，當然，成本削減計畫的延續效益將有助於提供一個很好的基礎平台。我認為如果我們持續看到疲弱——如果疲弱的需求環境持續存在（雖然基於我們看到的各種宏觀因素，我們不認為會是如此），但如果真的持續，那麼 2020 年 EBITDA 成長會落在低到中個位數。如果回到較正常化的環境，且這種情況發生在整個財年，你會看到高個位數，甚至可能到低雙位數。而最可能的結果大概會落在兩者之間。我的意思是，我們在商務面、SG&A 面以及營運面，仍在非常積極地制定 2020 年計畫。所以——在這方面我們還有很多工作要做。但我們的預期是，顯然在 2020 年要成長 EBITDA，而且我們覺得僅靠成本削減就有不錯的順風；在此之上，我們也會持續加以槓桿運用，並在宏觀環境允許的範圍內，推動獲利進一步提升。

And our next question comes from Laurence Alexander from Jefferies.

下一個問題來自 Jefferies 的 Laurence Alexander。

This is Dan Rizzo on for Laurence. One question. You mentioned the product pipeline. Have you ever quantified how big that product pipeline is? And two, do you use a vitality index at all?

我是 Dan Rizzo，代 Laurence 提問。一個問題。你提到產品管線。你們是否曾量化過這個產品管線有多大？第二，你們有使用活力指數（vitality index）嗎？

Yes, so what we have said is that we have close to 30% of our sales coming from new and differentiated products. A significant, we'll say, over 1/3 of that is developed internally. Some of that comes from acquisitions that we make that enhance our technology base. And some of them are very proprietary, patented-type products that have a longer cycle, say for example in the Pharma market or places where it takes a while to qualify. And we do track our vitality index and we've been growing not only that, but we have an equation that we use to really look at our productivity. We look at the size of the pipeline. We look at our technical hit rate. We look at our sales impact relative to what the expectations are and we look at the time that it takes to drive a project through the system. And we haven't shared more specific details. It'd be a little hard in this call but we've actually made improvements across each one of those areas. So we feel good that we're making progress but I will tell you also that I think that this is a real key for our future to accelerate growth and reach our full potential is that we do need to continue to enhance the impact of innovation in our sales mix and we think that we have the capabilities and we have the systems and we're working as a team to drive that and I think that will help us to grow faster and allow us to better buffer or deal with the types of things that we've faced over the course of this fiscal year.

是的，我們曾說過，我們接近 30% 的銷售來自新的且具差異化的產品。其中相當大的一部分——我們會說超過三分之一——是內部開發的。有些則來自我們所做的併購，用以強化我們的技術基礎。也有一些是非常專有、類似專利型的產品，週期較長，例如在醫藥市場或需要較長時間完成資格認證的領域。而我們確實會追蹤活力指數，而且不僅如此，我們還有一套方程式用來真正檢視我們的生產力。我們看管線規模。我們看技術命中率。我們看銷售影響相對於預期的表現，並看推動專案通過系統所需的時間。我們尚未分享更具體的細節。在這通電話中會有點難，但我們其實在上述每一個面向都有所改善。因此我們對進展感到良好；但我也要告訴你，我認為這是我們未來加速成長、發揮全部潛力的關鍵：我們確實需要持續提升創新在我們銷售組合中的影響力。我們認為我們具備能力，也有系統，而且我們正以團隊方式推動這件事；我想這將幫助我們更快成長，並讓我們更能緩衝或應對我們在本財年期間所面臨的各種情況。

And one other thing. You mentioned sustainably or sustainable solutions in personal care is going to be a growth driver. Can you just give an example of how you guys kind of fit into sustainability, what you offer and what it means? Just kind of illustrate it.

還有另外一件事。你提到個人護理領域中的永續或永續解決方案將成為成長驅動因素。你能否舉個例子說明你們如何融入永續、你們提供什麼，以及這代表什麼意義？請大致說明一下。

Yes, so there are lots of different definitions, as you can imagine. In the personal care area, there is a broader, kind of thought process or matrix, if you will, that has to do with the source of the materials, whether they're naturally-sourced materials, one dimension. And the other is the degradability or biodegradability of those materials.

是的，所以如你所想，定義有很多種。在個人護理領域，有一個更廣泛的思考方式或矩陣（如果你願意這麼稱呼），與材料來源有關：例如是否為天然來源材料，這是一個面向。另一個面向則是這些材料的可分解性或可生物分解性。

And so as you can imagine, when you talk about things like HEC and you're starting with cotton linters and wood pulp, it's great because we're starting with a natural base material. We have really focused extensively on the biofunctionals business. It's been a big portion of the growth. That involves our business in Vincience, it involves our Zeta Fraction business. These are the areas that are of keen interest to our customers. And importantly, not only does it help us to grow our sales overall but -- or in those specific areas, but it makes us a more relevant and important partner to our customers, allowing us to drive a greater position for, we'll say the broader range of products. So I would say the great majority of our research and development efforts are really focused on those materials that have stronger biodegradability and that are from natural-based products or sourced from natural-based products.

因此你可以想像，當你談到像 HEC 這類產品，而其起始原料是棉短絨與木漿時，這很棒，因為我們是從天然的基礎材料開始。我們也非常專注於生物機能性（biofunctionals）業務。這一直是成長的重要部分。這包含我們在 Vincience 的業務，也包含我們的 Zeta Fraction 業務。這些都是客戶高度關注的領域。而且重要的是，它不僅有助於我們整體銷售成長——或在那些特定領域成長——也讓我們成為客戶更相關、更重要的合作夥伴，使我們能在更廣泛的產品組合上取得更有利的地位。所以我會說，我們絕大多數的研發投入，確實都聚焦在那些具有更強可生物分解性、且來自天然基礎產品或取材自天然基礎產品的材料上。

(Operator Instructions) Our next question is going to come from Mike Harrison from Seaport Global Securities.

（接線員指示）下一個問題將由 Seaport Global Securities 的 Mike Harrison 提出。

Was wondering if you can break out the revenue growth or decline in personal care between skincare, hair care and oral care in the context of that overall 12% year-on-year decline?

想請問你是否能在整體年對年下滑 12% 的背景下，拆分一下個人護理在護膚、護髮與口腔護理之間的營收成長或下滑情況？

Yes. Well, of course, not surprisingly, oral care has been a challenge this year as it relates to the Colgate business. And we also referenced that in skincare, we've had challenges with the sunscreen. I'd say overall, and we did see just in general a weaker personal care demand environment than we've seen in previous quarters. And we think some of that is really ephemeral and some of it, as we talked about, will need some specific, we'll say product and customer solutions.

可以。當然，不意外地，口腔護理今年因為高露潔（Colgate）業務而面臨挑戰。我們也提到在護膚方面，防曬產品也遇到一些挑戰。我想整體而言，我們確實看到個人護理的需求環境普遍比前幾季更疲弱。我們認為其中一部分是短暫的，而另一部分如同我們所談到的，將需要一些特定的——我們姑且稱之為——產品與客戶解決方案。

All right. And was -- so was hair care up or was hair care down?

好的。那麼——所以護髮是成長還是下滑？

Hair care would have been down in the quarter, really driven by a couple of customers, L'Oréal and Henkel demand.

護髮在本季是下滑的，主要是由幾個客戶所驅動，像是萊雅（L'Oréal）和漢高（Henkel）的需求。

Yes, we actually saw strong hair care demand in Asia in general, China included. Rest of the world was definitely weaker though.

是的，我們其實看到亞洲整體的護髮需求很強，包括中國在內。不過世界其他地區確實弱很多。

And we had positive growth in Q2. So we've had growth in this space.

而且我們在第二季（Q2）是正成長。所以我們在這個領域是有成長的。

And then was also wondering in personal care, are you seeing any trading down happening? In past downturns, you've seen that consumers are not willing to pay up for very expensive products where you tend to be better positioned or that tend to use your ingredients more intensively. But I also know that you've made some efforts to improve your position within some of the mid-tier products. So are you seeing that trading down? And maybe talk about how you're positioned to weather that type of phenomenon, if it were to happen.

另外也想問，在個人護理方面，你們是否看到消費者「降級消費」（trading down）的情況？在過去景氣下行時，你們曾看到消費者不願意為非常昂貴的產品支付溢價，而你們通常在那類產品上布局較佳，或那些產品更密集使用你們的成分。但我也知道你們已做了一些努力，去改善你們在某些中階產品中的布局。所以你們有看到那種降級消費嗎？也請談談若這種現象發生，你們如何定位以度過這類情況。

Yes. So when we look -- what I would say is that we have not seen as much of that as we've seen maybe in the past and as you say, we really tried to change our mix. In China, we've seen, as Kevin just referenced, some good growth in skincare. We've seen in Rest of Asia, some growth in hair care. Latin America has been a little bit softer in the personal care side. So that may be a little bit of the dynamic that you're referencing there. But I really think the items that we identified and have spoken about are the primary drivers of what's driven our results and the opportunities that we have to improve our results and really get back to the growth we're targeting.

是的。所以當我們來看——我會說，我們看到的這種情況沒有過去那麼明顯；而且如你所說，我們確實努力去改變我們的產品組合結構。在中國，如 Kevin 剛提到的，我們在護膚方面看到不錯的成長。在亞洲其他地區，我們在護髮方面也看到一些成長。拉丁美洲在個人護理端則稍微疲弱一些。所以那可能就是你所提到的那種動態的一部分。但我真的認為，我們已辨識並談到的那些事項，才是驅動我們業績表現的主要因素，也是我們改善業績、回到我們所鎖定成長軌道的機會所在。

Okay. And then one last one on the Coatings business. Just wondering if you're seeing some improvement. I know that North America has been relatively weak. Any improvement there? And do you have a sense of kind of where your customer inventory levels are as we come out of the fiscal third quarter?

好的。最後一個關於塗料（Coatings）業務的問題。想請問你們是否看到一些改善？我知道北美相對疲弱。那邊有任何改善嗎？以及當我們走出會計年度第三季時，你們對客戶庫存水位大概有什麼掌握？

Sure. Well, I talk with the team here pretty much every day about what they're seeing from an order standpoint and so forth. And we actually believe that our growth in Q3 and year-to-date has been stronger than the market. Some of that's been really based upon efforts that we've had in Asia. We're making really good progress of gaining share today with Nippon in China, which is outstanding and helping us to drive growth overall. We have defined supply positions with the primary coatings manufacturers within -- or architectural coatings manufacturers in the U.S. and the other parts of the globe. And I would say that that's a group that is more cautiously optimistic about what the fall will bring than maybe other parts of our business. There's a little more sense of optimism that -- at least from the order builds that we're seeing, we're seeing a little bit of a pickup in demand.

當然。我幾乎每天都會和團隊討論他們從訂單角度等方面看到的情況。我們其實認為，我們在第三季（Q3）以及年初至今的成長都比市場更強。其中一部分確實是基於我們在亞洲所做的努力。我們目前在中國與立邦（Nippon）合作、取得市占方面進展非常好，這非常出色，也幫助我們推動整體成長。我們在美國以及全球其他地區，與主要塗料製造商——或建築塗料製造商——都有明確的供應地位。我會說，這一群客戶對秋季的展望，比我們業務的其他部分更偏向審慎樂觀。至少從我們看到的訂單建立情況來看，樂觀情緒多了一些；我們也看到需求有些回升。

And our next question is going to come from Dmitry Silversteyn from Buckingham Research.

下一個問題將由 Buckingham Research 的 Dmitry Silversteyn 提出。

A couple of things. We noticed that the adhesives business was a negative grower for you in this quarter. It was one of the businesses, particularly in the sort of consumer/industrial borderline, if you will, that was actually doing well. So can you talk about what you're seeing in your end markets for your adhesives business that has changed here and how we should think about that from the second half of the year?

有幾點問題。我們注意到你們本季的黏著劑（adhesives）業務呈現負成長。這原本是你們表現不錯的業務之一，特別是在你所說的消費/工業交界的那一塊。所以你能談談你們在黏著劑業務終端市場看到哪些變化，導致目前的情況？以及我們應該如何看待下半年？

Sure, sure, sure. Yes, we had nice growth last year. We had about 4% growth in Q1. That flattened a bit in Q2. And I think what you see is that we've got a broad base of end markets, pressure-sensitive adhesives that go into food packaging and applications like that, which tend to be -- don't have a cyclical dynamic to it. We do sell some of our adhesives materials into transportation, automotive and the like. And we also provide -- in construction and, if you will, the boards that are put together, the sandwiched boards that are used in construction. So we're seeing a little bit of demand weakness in those areas and I think those are the areas that are primarily driving the negative demand that we saw. And once again, we believe that that will not sustain itself. That we will get back to more normalized performance as the market stabilizes a little bit, comes to equilibrium and starts to grow. So transportation and building those portions of the adhesives business really is what drove the negative percent.

當然、當然、當然。是的，我們去年成長不錯。第一季（Q1）大約成長 4%。第二季（Q2）則趨於持平一些。我想你看到的是：我們的終端市場基礎很廣，像是用於食品包裝等應用的壓敏膠（pressure-sensitive adhesives），這類通常——不太具有景氣循環的特性。我們也把部分黏著劑材料銷售到運輸、汽車等領域。此外，我們也供應——在建築領域，以及你可以說是用於建築的板材，那些組合板、夾層板。因此我們在那些領域看到一些需求疲弱，我認為這些領域主要驅動了我們所看到的負需求。而且再一次，我們相信這不會持續。隨著市場稍微穩定、達到均衡並開始成長，我們會回到更正常化的表現。所以運輸與建築這兩塊黏著劑業務，是造成負成長百分比的主要原因。

Got you. Is the Adhesive business more U.S.-centric or more European-centric compared to your ASI business overall?

了解。相較於你們整體的 ASI 業務，黏著劑業務是更以美國為中心，還是更以歐洲為中心？

Yes, much more U.S.-centric. We've been seeking to globalize it and we have a position in Europe, but it's really primarily a North American business.

是的，更以美國為中心。我們一直在尋求將其全球化，我們在歐洲也有布局，但它確實主要是一個北美業務。

Got you. And then one more question, if I may. If you look at the reduced guidance that you provided over the past year or so, and every time it's been maybe something new or just something getting a little bit worse, was okay. If you kind had to look back and look at sort of the rank of headwinds that you experienced, whether it was foreign exchange, whether it was cost, whether it was a slowdown in particular end market demand, kind of how should we think about this coil spring sort of reversing itself as we get into 2020 and 2021? So can you sort of size for us the impact of each of these headwinds on you over the past year or so?

了解。如果可以的話，我還有一個問題。如果你回顧過去一年左右你們下修的財測指引，每次似乎都是出現了新狀況或只是情況又稍微變差一些，也就這樣。如果你必須回頭看並把你們所遭遇的逆風做個排序，不論是外匯、不論是成本、不論是特定終端市場需求放緩，我們應該如何看待這個「彈簧」在進入 2020 與 2021 年時反向回彈？也就是說，你能否為我們量化一下過去一年左右各項逆風對你們的影響？

Yes, so and look to Kevin here to correct me if I'm mis-stating, but last year, in fiscal year '18, we didn't provide any revised guidance for ASI. We had a range that was within -- started at the beginning of the year, we narrowed as we went through the year and we actually ended up right in the middle of the range. So there was no recast last year. So I'm not specifically sure what you're referencing there.

好的，所以——我也請 Kevin 在我若有表述不準確時糾正我——但去年，也就是 18 財年，我們並沒有對 ASI 提供任何修正後的指引。我們在年初給了一個區間，隨著年度進行我們逐步收斂區間，最後實際結果落在區間的正中間。所以去年沒有重新調整（recast）。因此我不太確定你指的是哪一部分。

The last 3 quarters.

最近 3 個季度。

You're probably -- you're referencing -- pardon me?

你可能——你指的是——不好意思？

I said the last 3 quarters, (inaudible).

我說的是最近 3 個季度，（聽不清）。

Yes, right, okay. Fair enough. And I think that that is specifically the things that we have been talking about, which has been overall the reduced demand that we've seen. That's what's driven the revisions. It's not dissimilar to what a lot of others companies have seen and the trade, we've talked about those. When you look at, from a year-to-date basis, that you have roughly half of the negative impact, which by the way, we anticipated, came from FX and Colgate and the other half is really related to overall market demand that weakened as the year went on, and that's -- the market demand portion is what really drove our change in outlook that we made at the end of Q2 and end of Q3 here.

是的，對，好，了解。我認為那正是我們一直在談的那些因素，也就是我們所看到的整體需求下滑。這就是推動下修的原因。這與許多其他公司所看到的情況並無二致，還有貿易方面，我們也談過。當你從年初至今的角度來看，大約一半的負面影響——順帶一提，這是我們預期中的——來自外匯、Colgate 以及其他因素；另一半則確實與整體市場需求在年內走弱有關，而這——市場需求這一部分——才是真正驅動我們在第二季末與第三季末調整展望的原因。

Got you. So basically, it's a lack of recovery that perhaps you've anticipated and other companies have anticipated that's behind the last revisions versus the Colgate issue, obviously, and foreign exchange that you're able to sort of bracket appropriately?

了解。所以基本上，最近幾次下修背後的原因，是你們先前以及其他公司先前所預期的復甦並未出現；相較之下，Colgate 的問題（顯然）以及外匯，你們是能夠相對適當地界定其影響範圍的？

That's right, Dmitry. That's correct.

沒錯，Dmitry。正確。

And I'm showing no further questions. I would now like to turn the call back to Seth Mrozek, Director of Investor Relations at Ashland, for any further remarks.

我這邊顯示沒有其他提問。現在我想把電話會議交回給 Ashland 投資人關係總監 Seth Mrozek，請他做進一步的說明。

Thank you, Justin. Thank you all for your time this morning. I hope you have a great day. We'll speak soon.

謝謝你，Justin。也謝謝各位今天早上的時間。祝各位有美好的一天。我們很快再聊。

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.

各位女士、先生，感謝您參與今天的電話會議。今天的議程到此結束。各位可以掛線。祝大家有美好的一天。