# Dear Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_ASH_2022/NYSE_ASH_2022.mmd` · pages 3-9_

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Dear Shareholders,

Over the last two years, the COVID-19 pandemic has disrupted supply chains, delayed investments, and increased variability across many industries. Ashland delivered against a backdrop of global uncertainty while change was the only constant. Looking ahead, heightened concerns exist over a recession, inflation, costs for energy, labor, and raw materials, European supply-chain reliability, and the ongoing impacts from extreme weather.

Meanwhile, societal, economic, and technological trends are shaping the future of industrial and consumer-facing companies. Demographics and a growing middle class are shifting consumption patterns. By 2030 approximately 5.3 billion people will have middle-class spending power \( ^{1} \)  and one in six people \( ^{2} \)  around the world will be over 60 years of age. Regarding technology and innovation, up to 60 percent of the global economy's physical inputs could be produced using biology \( ^{3} \) . Companies facing consumer, investor and regulatory pressure are ramping up their sustainability commitments, including managing their supply chain carbon footprints (scope 3 emissions).

Amid the disruptions this year, Ashland delivered sales and earnings results that surpassed our original expectations. We completed numerous steps to further strengthen and enhance our balance sheet including closing on the sale of the Performance Adhesives business and using proceeds to repurchase a significant number of our shares and reduce our outstanding debt.

We have begun large capital investments in Hopewell, Virginia, to increase production for Natrosol \( ^{™} \)  HEC. In Doel, Belgium we are significantly increasing capacity for Benecel \( ^{™} \)  cellulose ethers while also expanding Viatel \( ^{™} \)  bioresorbable polymers manufacturing and R&D capabilities in Mullingar, Ireland. And we are building a new biofunctionals facility in Nanjing, China. Each investment supports the growing demand for products sold to specialty additives, life sciences and personal care applications, underscoring our commitment to customers, and each is a decisive element of our growth strategy.

This year we experienced strong, resilient demand from our consumer-focused end markets resulting in sold out positions across many product lines. Our commercial and operations teams were able to continue our stated strategy of mix improvements and also drove productivity gains. Global supply-chain and logistics challenges remained elevated throughout the year. Cost inflation for raw materials combined with freight and inflation were significant, and our teams did an excellent job recovering inflation and maintaining our overall margins. Our operations teams executed at a high level to drive robust plant loading and operating discipline.

Additionally, we are demonstrating a clear link between our long-range strategic plans and environment, social and governance (ESG) progress. Our 2021 ESG report, available digitally, frames the company's progress across a detailed materiality matrix that shows the interrelationships between ESG issues while at the same time reinforcing the company's commitment to solving some of its industries' most challenging business issues.

I am proud of Ashland's very strong performance this year. Our ability to respond quickly and operate nimbly is the result of the intentional changes we made to the company over the past three years, and I want to thank our global solvers for their passion, resilience, and execution during these very turbulent times.

## operating against a backdrop of global uncertainty

The landscape for 2023 includes the war in Ukraine, an impending energy crisis, inflationary pressures,

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and the ever-present risk of Covid-related lockdowns. These uncertainties can impact business results. Only through rapid response, extreme focus, and a long-range view of delivering for our customers, will we turn a pressure to survive into an opportunity to thrive.

Ashland is a company designed for change and trained for agility. We selected our business model, grounded in science, moderated by experience in the industries we serve. Sales and adjusted EBITDA for fiscal 2022 were well above our original expectations at the beginning of the year.

In the face of significant 2022 headwinds, Ashland's customer order dynamics remained strong, and we continued to take appropriate pricing actions to recover costs across all segments. Global supply-chain challenges showed signs of abating yet overall tightness in global markets led our businesses to take significant, proactive steps to improve the mix of the high-value
"We are investing in sustainable, profitable growth and accelerating the pace and impact of innovations. Our capacity expansions for high-value products in key markets are on schedule. And our ability to respond quickly and operate nimbly is the result of deliberate changes made over the last three years."

products we sell. That willingness to act fast enables us to continue to invest in future-forward, sustainable innovations to drive profitable growth – accelerating the pace and impact of new product introductions to meet customers' needs.

While we cannot prevent the storms of change in 2023, we have worked hard to have the biggest umbrella of products, services, supply chain, operations, and customer support as we enter the new fiscal year. Whether it is a research portfolio that continues to deliver during a downturn, manufacturing sites that drive out costs and conserve energy, or stabilizing critical raw materials through inventive investments in our suppliers' businesses, Ashland's ability to adapt translates into resilience, an attribute that pays dividends in good times and bad.

And beyond those fluctuating circumstances, whether political, social, or economic, Ashland's commitment to solving newer wavers. With locations that span the globe and expertise founded on local experience and tempered with global knowledge, we will be resilient in the face of challenges, agile in the service of customers and compassionate in our commitment to employees and communities. In the end, sustainable, profitable growth is the only way to grow.

## the sun never sets on
Ashland innovation

Innovation has been the central theme of our strategy and who we are as a company. With a passion for problem solving that extends far beyond the lab bench, this year we strengthened our innovation portfolio with

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a record number of product launches while accelerating the pace, creating value for our customers and for Ashland, with a renewed commitment to people and planet.

These new products have significantly higher sales growth potential, and it has been rewarding to see them receive recognition from customers and many awards in the industries we serve.

Of note, the United States Food and Drug Administration (FDA) Center for Drug Evaluation and Research Office of New Drugs has accepted Ashland Viatel \( ^{™} \)  bioresorbable mPEG-PDLLA pharmaceutical excipient in the review cycle of the FDA Novel Excipient Review Pilot Program.

The voluntary program is the first time the FDA will allow excipient manufacturers to obtain review of certain novel excipients prior to their use in drug formulations \( ^{4} \) .

Also noteworthy, Ashland was recognized with the Commitment to Life Award in the Human Rights category by Natura&Co for Ashland's Responsible Solvers \( ^{™} \)  sustainable guar farming and education program using science, technology, engineering, and math (STEM) to train men and women farmers in Rajasthan, India. Successful results include helping farmers lower their production cost while increasing their crop yield approximately 30 percent. This helped increase farmers' income and expand the local economy in nearby small villages.

This year Ashland introduced an innovative line of rheology modifiers under the Aquaflow \( ^{™} \)  solid thickener trade name for the architectural coatings market. Our first grade, Aquaflow \( ^{™} \)  eco-300, was recognized with a Ringier Technology Innovation Award recognizing Ashland for meeting the need for biocide-free rheology additives. The product is a one-hundred percent active solid dosage form, enabling a lower carbon footprint in transportation.

## consumer market focused

Also this year, Ashland systematically identified and tackled the thorniest problems concentrating on areas rich in opportunities to innovate and drive value for customers while leveraging innovation and expertise from one business across others.

As Ashland wields expertise in research and innovation, we know we are a part of something bigger. Today's end-users seek products with transparency. They desire organic, natural, biodegradable, and sustainable-in-use products. More information about our businesses is contained in the pages that follow.

## the year ahead

In 2023, we will continue a path of change, fine-tuning our ways of working to best support product and process choices that are sustainable and innovative.

We expect a recessionary environment and believe our core markets will remain relatively strong. Although resilient, we are not immune to softening of consumer demand and expect to see some customer destocking in several markets and regions during the early part of the year. Energy and labor inflation will be broader based, and raw material inflation will vary by technology. As such, there will be more supply and pricing arbitrage in certain parts of the world. We also expect continued negative impact from unfavorable foreign currency.

Continued pricing and mix actions will carry over based on the initiatives taken during fiscal 2022, and we will take additional steps as needed to recover any additional cost inflation. We expect to be capacity constrained until our new capacity comes online in late calendar 2023 and into 2024.

Moving forward, each business decision is a step towards confronting complex challenges and solving them in practical and elegant ways to unlock new opportunities for innovation, impact, and growth.

We'll ensure our operations consider the planet and nimbly respond to macro and business trends to sustain our cutting edge. And by responsibly solving for a better world, we will do our part pushing the boundaries of what is possible to ultimately have a positive impact that ranges from local to global, for a better now and a better future.

Regardless of potential headwinds and volatility, we expect to deliver meaningful sales and earnings growth in fiscal year 2023.

I am pleased by the resilience and execution demonstrated by our solvers this year and look forward to the opportunities that lie ahead.

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Guillermo Novo
Chair and Chief Executive Officer
Ashland

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