# Letter to
Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_ASH_2019/NYSE_ASH_2019.mmd` · pages 1-7_

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Letter to
Shareholders
3-5

Recognition and
Product Highlights
5-8

Directors and Officers inside back cover

Corporate Governance inside back cover

Shareholder Information back cover

## Financial Highlights \( ^{*} \) 

<table><tr><td></td><td>2019</td><td>2018</td><td>2017</td></tr><tr><td>Sales</td><td>\( 2,493</td><td>\) 2,589</td><td>\( 2,309</td></tr><tr><td>Operating income</td><td>\) 166</td><td>\( 102</td><td>\) 49</td></tr><tr><td>EBITDA</td><td>\( 900</td><td>\) 471</td><td>\( 487</td></tr><tr><td>Adjusted EBITDA</td><td>\) 532</td><td>\( 515</td><td>\) 430</td></tr><tr><td>Income (loss) from continuing operations</td><td>\( 24</td><td>\) 19</td><td>\( (180)</td></tr><tr><td>Net income</td><td>\) 505</td><td>\( 114</td><td>\) 28</td></tr><tr><td>Net income attributable to Ashland</td><td>\( 505</td><td>\) 114</td><td>\( 1</td></tr><tr><td>Diluted EPS</td><td></td><td></td><td></td></tr><tr><td>Income (loss) from continuing operations</td><td>\) .39</td><td>\( .29</td><td>\) (2.90)</td></tr><tr><td>Income from discontinued operations attributable to Ashland</td><td>7.64</td><td>1.50</td><td>2.91</td></tr><tr><td>Net income attributable to Ashland</td><td>\( 8.03</td><td>\) 1.79</td><td>\( .01</td></tr><tr><td>Cash flows provided by operating activities from continuing operations</td><td>\) 228</td><td>\( 241</td><td>\) 174</td></tr><tr><td>Additions to PP&amp;E</td><td>\( 154</td><td>\) 157</td><td>\( 168</td></tr><tr><td>Number of employees</td><td>4,700</td><td>6,000</td><td>6,500</td></tr><tr><td>Number of common stockholders of record</td><td>10,500</td><td>11,100</td><td>11,500</td></tr></table>

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not historical facts and generally are identified by words such as "anticipates," "believes," "estimates," "expects," "is likely," "predicts," "projects," "forecasts," "may," "will," "should," and "intends" and the negative of these words or other comparable terminology. Although Ashland believes that its expectations are based on reasonable assumptions, such expectations are subject to risks and uncertainties that are difficult to predict and may be beyond Ashland's control. Please see "Item 1A. Risk Factors" and "Use of estimates, risks and uncertainties" in Note A of Notes to Consolidated Financial Statements in this Annual Report. Unless legally required, Ashland undertakes no obligation to update any forward-looking statements made in this Annual Report, whether as a result of new information, future events or otherwise.

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## A Note from
Our CEO

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William A. Wulfsohn
Chairman and Chief
Executive Officer

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To Our Shareholders:

Fiscal year 2019 was a year of important gains in the context of difficult external conditions.

In fiscal 2019 operating income was \(166 million compared to \)102 million a year ago. Income from continuing operations was \(24 million, or \)0.39 per diluted share, versus \(19 million, or \)0.29 per diluted share in fiscal 2018. Net income attributable to Ashland was \(505 million or \)8.03 per diluted share compared to \(114 million, or \)1.79 per diluted share, while adjusted EBITDA was \(532 million in fiscal 2019, compared to \)515 million in fiscal 2018.

From a financial perspective, we faced challenging end market conditions and a stronger U.S. dollar. In this context, Ashland took aggressive action. We implemented a program to reduce layers, increase operational agility, and improve our competitiveness by reducing our fixed costs by \(120 million on a run-rate basis by end of the calendar year. This drove an increase in adjusted EBITDA margins to 21.3 percent of sales compared to 19.9 percent in the prior fiscal year. In total, Ashland delivered adjusted earnings per share (EPS) growth of 14 percent versus fiscal 2018. Thus, while lower than we originally anticipated, Ashland made important financial gains in a difficult context.

From an operational perspective, we also made many important gains. In fiscal 2019, we launched 23 new products to support targeted growth in our pharmaceutical, nutrition, personal care, nutraceutical and coatings businesses. We expanded the use of Ashland's Production System (APS), which helped drive improvements in safety, quality, asset reliability and overall customer experience.

During the year, we substantially expanded our focus on sustainability. We established a Sustainability Council which is focused on sustainable sourcing, reducing our environmental

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impact and increasing sales of natural-based products. We have had numerous and important gains in this critical area, which are profiled in our sustainability report and can be found on ashland.com.

From a capital allocation perspective, we made great gains in fiscal year 2019. In August, Ashland divested the Composites business and Marl BDO facility to INEOS Enterprise. The proceeds from this transaction and ongoing cash flow generation enabled Ashland to return over $260 million to shareholders in fiscal 2019 through both share repurchases and dividends, while reducing debt by $940 million.

Importantly, just after the close of fiscal 2019,

we announced that I will leave Ashland at the end of the calendar year and Guillermo Novo will take on the role as Ashland's next chairman and CEO.

As I reflect upon my tenure with Ashland, I am proud of the transformation we have completed and the team's many accomplishments.

Our first priority has been safe and responsible operations. In 2018, Ashland was recognized by the American Chemistry
We have created a far more competitive and agile organization by eliminating layers and reducing SG&A expenses in fiscal 2019.

Council as the Responsible Care \( ^{®} \)  Company of the year and we were also named one of America's Safest Companies by EHS Today.

We completed Ashland's multi-decade transformation from a conglomerate focused on oil refining and marketing in 1997 to the pure-play specialty materials company we are today. When I joined the company five years ago, our specialty materials portion of our business represented 41 percent of our sales versus 96 percent today. As part of this effort, we created an independent, publicly-traded Valvoline in 2017, acquired several businesses including Pharmachem and Vornia, and sold the Composites business and Marl BDO facility to INEOS. We now have a focused business with many highly differentiated products that we are supplying to industry leading customers in very attractive end markets.

We have created a far more competitive and agile organization by eliminating layers and reducing SG&A expenses in fiscal 2019. Ashland adjusted EBITDA margins have improved from 17.6 percent in fiscal 2014 to 21.3 percent in fiscal 2019. Similar gains have been realized in Ashland's Specialty Ingredients business, where operating income margins have improved from 10.1 percent in fiscal 2014 to 11.4 percent in fiscal 2019. Specialty Ingredients adjusted EBITDA margins have improved from 21.2 percent in fiscal 2014 to 23.4 percent in fiscal 2019.

We have returned \(1.3 billion to shareholders in the form of share repurchase and dividends. At the same time, we have substantially improved Ashland's financial strength and financial flexibility. With the spin off of Valvoline, we transferred the large majority of Ashland's pension obligations. We also established an asbestos trust which, along with anticipated insurance proceeds, is well positioned to help fund future asbestos claim indemnity and

legal costs. And finally, we have lowered gross debt from \(3.3 billion as of Dec. 31, 2014, to \)1.7 billion at the end of fiscal year 2019.

We have transformed the corporation from a portfolio-management orientation to an operating company and have set the foundation to be the premier specialty materials company. We have established a new blueprint which outlines our core operational priorities, the Ashland Way which defines our culture and our new "always solving \( ^{™} \) " brand which communicates internally and externally the core strength and value we deliver to the marketplace.

And finally, as a result of these actions we delivered 40 percent total shareholder returns since January 2015

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versus 26 percent for the
S&P 400* Chemicals index over
the same period.

Today we are a stronger, more focused Ashland with the foundation required to achieve our vision of becoming the premier specialty materials company. At the same time, our journey is not complete. We have many opportunities and challenges as we work to achieve our full potential by delivering greater revenue growth, margin expansion and cash generation.

With that in mind, this is the right time for new leadership as we move from portfolio transformation to take the additional and essential steps required to reach our full potential. I am excited by the naming of Guillermo Novo as Ashland's next chairman and CEO. Guillermo is a proven leader who has the right experience, skills and leadership abilities to accelerate Ashland's operational, strategic and financial performance.

Sincerely,

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William A. Wulfsohn
Chairman and
Chief Executive Officer
November 25, 2019