Ashland announces a price increase
On January 3, Ashland (ASH) announced that it will increase composite product prices. The price increase is limited to India. The prices will increase by $65 per ton. The price increase will be effective on January 3 or as the contract allows.
Ashland cited the continued increase in raw material prices as the main driver for the price increase. In the fourth quarter, Ashland’s composite segment reported sales of $237 million—8% growth compared to the fourth quarter of 2017. The impact of the price increase will be visible in the second quarter.
Ashland’s performance in 2018
In 2018, Ashland remained flat and fell 0.3%. Ashland is trading 12.85 below its 100-day moving average price of $79.48. Volatility in the stock market, which triggered the sell-off, resulted in the steep decline in Ashland’s stock price in December. The company’s 14-day relative strength index of 39 indicates that the stock isn’t overbought or oversold. However, analysts are bullish on the stock with a consensus target price of $93.90, which implies a return potential 35.5% over the closing price on January 3. With Ashland signing an agreement to sell its composites business and butanediol facility for an estimated value of $1.1 billion, the company’s debt will likely decrease significantly and bring down its interest expenses. At the same time, organic growth is expected to drive Ashland’s revenues and net income. Investors could hope for better returns in 2019.
Investors could hold Ashland indirectly by investing in the Invesco DWA Basic Materials Momentum ETF (PYZ). PYZ has invested 2.3% of its portfolio in Ashland. The fund also provides exposure to LyondellBasell (LYB), Air Products and Chemicals (APD), and DowDuPont (DWDP) with weights of 3.9%, 3.8%, and 3.5%, respectively.