Ashland Specialty Ingredients Analyst Day€¦ · •Successful launch of new OnGuard™ water...

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Ashland Specialty Ingredients Analyst Day

Dec. 4, 2012

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Forward-Looking Statements

This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In addition, Ashland may from time to time make forward-looking statements in its other filings with the Securities and Exchange Commission (SEC), news releases and other written and oral communications. These forward-looking statements are based on Ashland’s expectations and assumptions, as of the date such statements are made, regarding Ashland’s future operating performance and financial condition, the economy and other future events or circumstances. Ashland’s expectations and assumptions include, without limitation, internal forecasts and analyses of current and future market conditions and trends, management plans and strategies, operating efficiencies and economic conditions (such as prices, supply and demand, cost of raw materials, and the ability to recover raw-material cost increases through price increases), and risks and uncertainties associated with the following: Ashland’s substantial indebtedness (including the possibility that such indebtedness and related restrictive covenants may adversely affect Ashland’s future cash flows, results of operations, financial condition and its ability to repay debt), severe weather, natural disasters, and legal proceedings and claims (including environmental and asbestos matters). Various risks and uncertainties may cause actual results to differ materially from those stated, projected or implied by any forward-looking statements, including, without limitation, risks and uncertainties affecting Ashland that are described in its most recent Form 10-K (including Item 1A Risk Factors) filed with the SEC, which is available on Ashland’s website at http://investor.ashland.com or on the SEC’s website at www.sec.gov. Ashland believes its expectations and assumptions are reasonable, but there can be no assurance that the expectations reflected herein will be achieved. Ashland undertakes no obligation to subsequently update any forward-looking statements made in this news release or otherwise except as required by securities or other applicable law.

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Regulation G: Adjusted (Including Pro Forma) and Baseline Results

The information presented herein regarding certain unaudited, adjusted (which may include pro forma results in prior years) and baseline results does not conform to generally accepted accounting principles in the United States (U.S.-GAAP) and should not be construed as an alternative to the reported results determined in accordance with U.S.-GAAP. Management has included this non-GAAP information to assist in understanding each business segment’s historical operations and financial performance. The non-GAAP information provided may not be consistent with the methodologies used by other companies. All non-GAAP information related to Ashland filings with the SEC has been reconciled with reported U.S.-GAAP results.

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Agenda

8:45 Overview and Strategy Jim O'Brien, Chairman & CEO

9:15 Ashland Specialty Ingredients (ASI) John Panichella, President

Overview, Markets and Strategy Business Unit Leaders

10:45 Break

11:00 ASI Technology May Shana’a, VP Technology/Growth

11:10 Capital Allocation/Financial Review Kevin Willis, Controller ASI

11:30 Q&A

12:00 Financial Review Lamar Chambers, Sr. Vice President & CFO

12:15 Closing Comments and Q&A Jim O'Brien

12:30 Lunch

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Objectives

• Provide in-depth review of Ashland Specialty Ingredients

• Overview of 2012 performance and accomplishments

• Better understand levers for long-term value creation

• Share our views regarding capital redeployment and longer-term capital structure

• Outline vision for future

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Overview and Strategy

Jim O’Brien

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Commercial Units

Ashland Specialty

Ingredients

Ashland Water

Technologies

Ashland Performance

Materials

Ashland Consumer

Markets

Leading Products & Services

#1 cellulose ethers, global leader in

vinyl pyrrolidones

#1 specialty

papermaking chemicals

#1 unsaturated

polyester resins and vinyl ester

resins

#2 U.S. franchised

quick-lube chain, #3 passenger-car

motor oil

Sales1 $2.9 billion $1.7 billion $1.6 billion $2.0 billion

Ashland: Four Strong Businesses

1 For fiscal 2012.

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Corporate Profile1

Specialty Ingredients

35%

Water Technologies

21%

Performance Materials

19% Consumer

Markets 25%

Sales - $8.2 Billion


57%

Water Technologies

11%

Performance Materials 12%

Consumer Markets

20%

EBITDA - $1.4 Billion

Specialty Ingredients now contributes nearly 60% of EBITDA

1 Fiscal 2012 data. EBITDA has been adjusted for key items. See Appendix for reconciliation.

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Our History

2008: Acquired Hercules

2006: Divested Ashland Paving and Construction

2011: Acquired International Specialty Products (ISP)

2011: Divested Ashland Distribution

2005: Sold stake in Marathon Oil joint venture

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Specialty Chemical Attributes

Combining the elements for long-term success

• Long-term growth • More consistent, predictable performance • Strong, sustainable margins • Significant hurdles for new entrants • Technology driven, difficult to displace

Ashland

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Ashland’s EBITDA Transformation

Pre-Transformation: 2004

2012

Divested Segments

69%

Ashland Specialty

Chemicals 15%

Specialty Chemical Commercial Units

80%

Ashland Consumer

Markets 20%

Creating a world-class specialty chemical company

Ashland Consumer

Markets 16%

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Ashland’s Geographic Sales Transformation

North America

53% Asia Pacific

13% Latin America/

Other - 7%

Europe 27%

Pre-Transformation: 2004

North America

88% Asia Pacific - 2%

Latin America/ Other - 1%

Europe 9%

Nearly half of sales outside North America

2012

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Strategic Decisions Have Dramatically Expanded EBITDA Margins1

4.5% 4.3%

9.0% 9.7%

12.6%

16.6%

2007 2008 2009 2010 2011 2012

Divested Distribution March 2011

Acquired Hercules November 2008

Acquired ISP August 2011

1 2007 through 2012 EBITDA margin as reported in the fiscal year noted and not adjusted for future transactions. EBITDA presented herein has been adjusted for certain key items.

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Baseline Historical Performance1

$921 $904 $942

$1,071 $1,152

$1,359

13.3% 12.0%

15.2% 15.7% 14.5%

16.6%

2007 2008 2009 2010 2011 2012

EBITDA EBITDA %

Good growth and performance

($ in millions)

1 See Ashland’s November 15, 2011 analyst day presentation for reconciliation to amounts reported under GAAP for periods 2007 through 2011. See Appendix for 2012 reconciliation.

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Share Price Levers

Significant opportunities for share-price expansion

Growth

Margins

Free Cash Flow

Value1 P/E 13.2x 11.4x 9.0x

EV/EBITDA 8.4x 7.3x 5.8x

Top Tier Chemicals

• EBITDA expansion to $1.7 billion by 2014 • EPS growth to $9.50 to $10.50 per share by 2014

• Achieved EBITDA margins of nearly 17% • Expect to further improve margin profile

• Excluding dividends, generated $246 million in 2012 • 2013 FCF of approximately $400 million

Ashland

1 As of November 16, 2012. Top Tier includes ALB, CYT, ECL and FMC. Chemicals group also includes CE, DD, DOW, EMN, PPG and ROC. Multiples represent median values based on 2013 Factset consensus.

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2012 Accomplishments

• Significant growth in earnings and EBITDA – Good growth in Specialty Ingredients,

Performance Materials and Consumer Markets

• Attained $75 million in savings through corporate cost reduction program

• Completed commercial integration of ISP

• Significantly improved capital structure

2011 2012

Adjusted EBITDA up 17%1

$1.2B $1.4B

2011 2012

Adjusted EPS up 70%

$3.90

$6.62

1 2011 EBITDA includes pro forma ISP data.

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Water Technologies: 2012 Performance

Financial Performance

2012 20111 Growth

Sales ($ B) $1.7 $1.8 (6) %

EBITDA ($ MM) $149 $189 (21) %

EBITDA % of sales

8.6% 10.3% (170) bp

Positive

• Repositioned business to focus on higher-margin, higher-growth opportunities

• Successful launch of new OnGuard™ water treatment platform

• Significantly improved pricing actions led to full cost recovery

Negative

• Share gains in Industrial markets have not met our expectations

• Slowdown in global Printing and Writing demand

• Asian packaging demand • Broad-based weakness in Europe

Business Drivers

Municipal 9%

Paper 58%

Industrial 33%

2012 Sales

1 Baseline sales and EBITDA, excludes MCW divestiture.

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• Continue to win in emerging regions • Capitalize on low market share in

Industrial water treatment by building capability in key segments

• Improve execution in Light Industry water treatment to improve profitability

• Strengthen corporate account program • Revitalize R&D pipeline and accelerate

new product introductions into key Pulp and Paper segments

• Secular declines in Printing and Writing – Mature markets in decay – Emerging regions continue to grow

• Share gains in Industrial markets have not met our expectations

• SG&A spend too large as a percent of sales

Major Opportunities Major Challenges

Water Technologies: Outlook

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Performance Materials: 2012 Performance


2012 20111 Growth

Sales ($ B) $1.6 $1.6 -

EBITDA ($ MM) $159 $128 24 %

EBITDA % of sales

10.2% 7.9% 230 bp Positive

• Improved margins across all product lines

• Cost efficiencies from capacity reductions and plant closures

• Improved business mix • Some recovery of base business

in North America • Lower butadiene pricing in

Elastomers

Negative

• Weak demand in China and Brazil • Low Unsaturated Polyester Resin

(UPR) industry utilization rates • Depressed replacement tire

market led to softer Elastomers volumes

Business Drivers

2012 Sales

Construction: Residential

14%

Marine 9%

Pkg. & Converting

15%

Construction: Industrial

28%

Transportation 28%

1 Baseline sales and EBITDA, excludes Casting Solutions joint venture.

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• Further growth in targeted markets: Packaging & Converting, Mining and Energy

• Continued base business recovery in North America – Returning Construction markets in

North America • International expansion of

adhesives business • A return to growth in emerging

regions

• Wind market remains depressed • Protracted softness in Europe • Industry utilization rates for UPR

remain low – Approaching rates of ~ 70%

• Slow recovery in primary markets in China

Major Opportunities

Performance Materials: Outlook

Major Challenges

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Consumer Markets: 2012 Performance


2012 2011 Growth

Sales ($ B) $2.0 $2.0 -

EBITDA ($ MM) $272 $251 8 %

EBITDA % of sales

13.4% 12.7% 70 bp

Positive

• Continued international expansion • Improved sales in DIFM and VIOC • Significant pricing actions over

course of year • Restored more normalized margin

by fiscal year end

Negative

• Do-It-Yourself motor-oil market remained weak through 2012

• Consumers’ delay of routine vehicle maintenance

• Raw material costs continued to fluctuate

Business Drivers

2012 Sales

Do-It-Yourself 32%

DIFM: Valvoline Instant Oil

Change 15%

DIFM: Installer Channel

21%

Valvoline International

32%

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• Drive NextGen™ trial and MaxLife™ growth

• Expand and strengthen international presence in emerging regions

• Leverage VIOC business model to grow organically – Same-store sales growth – Additional stores

• Base oil capacity expansions should further reduce volatility

• Lingering weak economic environment negatively affecting lubricant demand – Consumers’ delay of routine vehicle

maintenance • Continued exposure to raw

material cost volatility – No reliable hedge for base oil

Major Opportunities

Consumer Markets: Outlook

Major Challenges

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Overall Progress on 2014 EBITDA Goals

Ashland overall remains on track

20121 Original 2014 Targets

Progress/ Expectations

Ashland Specialty Ingredients $763 $795

Ashland Water Technologies $149 $310

Ashland Performance Materials $159 $225

Ashland Consumer Markets $272 $420

Ashland Overall $1.4 B $1.7 B

($ in millions)

unless otherwise noted

1 Fiscal 2012 data. EBITDA has been adjusted for key items.

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Fiscal 2013 Objectives

• Expand sales and tightly control costs – Focus growth capital in Specialty Ingredients – Improve performance in Water Technologies – Achieve sales gains in Consumer Markets and

Performance Materials • Complete remaining $15 million in ISP cost synergies • Achieve significant increase in free cash flow

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Long-Term Strategy

• Focus on cash generation and earnings growth – Maintain cost discipline – Tightly control working capital

• Allocate cash to highest-return opportunities – Improve overall return on capital – Further improve margin profile

• Concentrated growth in Specialty Ingredients – Numerous organic growth opportunities – Further expand short- and long-term R&D pipeline – Selectively pursue bolt-on M&A opportunities

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Ashland Specialty Ingredients John Panichella

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Ashland Specialty Ingredients Global leader in water-soluble and film-forming polymers

Sales by Geography

Fiscal 2012 Performance

Sales: $2.9 billion Adjusted EBITDA: $763 million1

Adjusted EBITDA Margin: 26.5%1

Sales by Product

Cellulosics 31%

PVP 15% Solvents/

Intermediates 18%

Pharma/ Nutrition

18%

Personal Care 21%

Specialty Performance

25%

Sales by Market

North America

37%

Asia Pacific 17%

Europe 37% Latin America/

Other - 9%

Coatings 13%

Industrial 23%

Guar 12%

Other 10%

1 See Appendix for reconciliation to amounts reported under GAAP.

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Pharmaceutical Skin Care Paint & Coatings Energy Specialties

• Tablets • Capsules

• Skin lotions • Anti-aging products • Body washes • Suncare

• Water based architectural paints

• Drilling • Cementing • Stimulation • Production

• Civil engineering • Inks and printing • Ceramics • Agriculture • Batteries

Nutrition Hair Care Emulsion Polymerization Construction Industrials

• Food - texturant • Custom food blends • Beverage clarification

and stabilization

• Shampoos • Conditioners • Mousses/gels • Hairspray

• Paints • Adhesives

• Dry mortar • Gypsum • Joint compound

• Intermediates

Oral Care & Household All Other

• Toothpaste/mouthwash • Denture adhesives • Detergents and cleaning

products

• Specialty solvents

Personal Care Pharma/Nutrition Coatings Industrial Performance

Ashland Specialty Ingredients

Key Markets and Applications

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Wood Pulp

Cotton Linter

Butane or LPG

Natural Platforms

Synthetic Platforms Thickener

Stabilizer

Binder

Emulsifier

Conditioner

Film-former

Disintegrant

Adhesive

Shelf-stable peroxide

Disinfectant

Clarifier

Shared

Applications


Primary Technology Platforms

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Pharmaceutical Personal Care Coatings Energy Construction Food&Bev

HEC + +++ MC +++ CMC + + ++ HPC +++ Guar +++


Major Natural Products: Sales Concentration1

Natural, renewable products with broad applicability

1 Key: [+++] represents greater than 50% of product sales, [++] is between 25% and 50% and [+] is 10% to 25%.

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Pharmaceutical Personal Care Coatings Energy Construction Food&Bev

PVP ++ ++ PVPP +++ ++ Vinyl Ethers +++ Biocides ++ +


Major Synthetic Products: Sales Concentration1

Significantly strengthens Pharmaceutical, Personal Care and Coatings

1 Key: [+++] represents greater than 50% of product sales, [++] is between 25% and 50% and [+] is 10% to 25%.

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2012 2011 Growth

Sales ($ B) $2.9 $2.5 13%

EBITDA ($ MM) $763 $608 25%

EBITDA % of sales

26.5% 23.9% 260 bp Positive

• Broad based pricing gains • Strong performance in Industrial

markets – Energy and Construction both

performed well • Solid performance in

Pharmaceutical • Good growth in new product

introductions

Negative

• Lower pricing in Intermediates and Solvents

• Straight guar destocking in September quarter

• Reduced Coatings demand in Europe and Asia

Business Drivers

2012 Sales

Pharma/ Nutrition

18%

Personal Care 21%


25%

Coatings 13%

Industrial 23%


2012 Performance

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• Strong growth in base business – Pharmaceutical – Personal Care – Coatings

• Continue to gain share in Construction

• Capitalize on Energy demand – Hydraulic fracturing growing globally – Advanced technical solutions

required • Four separate capital expansion

projects coming online in 2013

• Straight Guar – Expected loss on inventory of

roughly $25 million in Q1 – Apparent improved crop

lowered price – Grew gross profit dollars in 2012 by

roughly $60 million (good volume growth, strong pricing)

• Intermediates and Solvents – Lower pricing and profitability due to

global capacity increases – Previously described on Q4 earnings

call and 2011 Analyst Day

Major Opportunities Major Challenges


2013 Outlook

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Achieve long-term, double-digit organic earnings growth

Be recognized as the premier specialty ingredients and formulation business in the world

with strong growth and superior margins

We will achieve this goal through relentless focus on innovation, helping our customers to improve their

formulations anywhere in the world


Vision Statement

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• Leverage broad product portfolio through industry-leading market channel

• High-touch model for top 40 customers – Higher R&D, sales and support services

• Focus growth and investment in emerging regions – Regional applications labs with formulation expertise

• Increase new product sales through customer-focused innovation

• Pursue adjacent technologies • Selectively invest in capital projects with the highest returns

– Expand capacity as plants approach full utilization – Further improve manufacturing productivity/efficiency


Strategy

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523 484

551

691

907

2008 2009 2010 2011 2012 ex Energy Energy

Strategic Accounts: Sales

15% CAGR

• Top 40 customer accounts – Represent roughly 30% of

Specialty Ingredients’ sales • Pursue best-in-class

support levels – R&D – Technical Service – Sales/Support

• Expand position as supplier of choice

Significant growth in Top 40 customer accounts


Strategic Accounts

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• Targeting double-digit revenue growth in emerging markets

• Expanding regional labs to increase customer intimacy

• Developing local, five-year innovation plans to meet regional customer needs

• Leveraging local cultural awareness to gain competitive advantage

520 469

569

706 755

2008 2009 2010 2011 2012

Emerging Region Sales

10% CAGR

Strong growth in emerging regions


Emerging Region Strategy

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• Continuous pursuit of manufacturing efficiencies – Improved yields – Reduced energy consumption – Raw material costs and usage – Fixed cost absorption and asset utilization

• Generally target COGS savings to neutralize normalized raw material inflation


Productivity Goals

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Jeffrey Wolff Group Vice President Pharmaceutical & Nutrition

James Mish Group Vice President Care Specialties

Dale MacDonald Group Vice President Coatings

Joe Stinson Group Vice President Specialty Performance

Kevin Willis VP Finance, Ashland Controller, Specialty Ingredients

Dr. May Shana’a Group Vice President Technology & Growth Strategy


Presenters

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Pharmaceutical and Nutrition

Jeffrey Wolff

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Pharmaceutical67%

Food & Beverage

33%

• Business segment includes – Pharmaceutical – Food & Beverage

• Pharmaceutical – Global leader in excipients – Enhance/aid underlying drug

performance

• Food & Beverage – Provider of natural and synthetic

additives

2012 Sales - $526 MM

($ in millions)



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Business Dynamics

Market

• $1.6 billion available excipient market • Growing 5% to 6% per year • Leading position with binders and

disintegrants

Market Drivers

• Aging global population – Rising hypertension, diabetes,

obesity • Compliance, convenience and drug

effectiveness • Regulatory requirements

Opportunities • Growth of generics • Natural coatings • Improved drug solubilization


Pharmaceutical Market Overview

ASI Product Benefits

Binding Disintegration

Time Release Coating

Extend leadership in excipients that deliver, protect and stabilize

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Pharmaceutical

Market

Excipients provide high functionality and value

Binders 40%

Oral Solid Excipients • Overall excipients market is $3.7 billion – Includes all dosage routes

• Primarily focused on Oral Solid Dosage – $1.6 billion market – Includes pills and tablets

• Consists of four main excipient applications: – Binders – Coatings – Disintegrants – Solubilizers

Available Market - $1.6 B

Coatings 28%

Other 24%

Disintegrants 5%

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Purpose Typical %1

< 25%

10 – 80%

3 – 30%

1 – 10%

0 – 60%

Purpose Typical %1

1 – 4%

3 – 30%

Pharmaceutical

What goes into a tablet?

• Aesthetic coatings – Provides color/appearance

• Functional coatings – Delayed drug release – Enteric release – Moisture barrier

• Active ingredient – Delivers pharmaceutical activity

• Fillers – Inert ingredients that impart bulk

• Binders – Holds tablet together – Precisely regulates drug release

• Disintegrants – Helps tablet to dissolve in the body – Enables quick release of the active

into your body

• Solubilization aids – Enables drug absorption – Allows for reduced pill usage

Excipients make up the majority of most tablets, vary considerably between applications

- areas Ashland competes

1 Listed %s are by weight.

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Pharmaceutical

Market Trends and Drivers

Overall excipients market growing at 5% to 6% per year

Aging Population

• Median age globally continues to advance

• Rising hypertension, diabetes and obesity

Rapid Growth of Generics

• Patents expiring on number of blockbuster drugs

• Leads to lower price and increased availability

Controlled Release Forms

• More convenient dosage form

• Increases patient compliance

• Improves safety and efficacy

Global Access to Health Care

• Global emergence of middle class

• Increasing focus in emerging regions to improve quality and quantity of health care

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• Primarily compete at drug discovery through clinical phase – Work directly with customer to address their needs – Can take 10+ years before first commercial sale

• FDA (or national equivalent) approves entire drug formulation – Includes excipient(s)

• Excipients manufactured under cGMP standards – Typically audited by customers on regular basis

• Once approved, excipient reformulation is possible, but switching costs are high – Relative savings generally minimal – Potential brand and recall risk

Pharmaceutical

Approval Process

Excipients market is highly regulated, displacing incumbents is difficult

Drug Discovery: 5,000-10,000 compounds

Preclinical: 250 compounds

Clinical: 5 compounds

1 Commercial Drug

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Pharmaceutical

Drug Lifecycle over time

Drug Usage

Patent Expiration

Global volumes typically increase

Branded sales fall significantly

FDA Approval

Significant excipient demand growth as drugs come off patent

Years

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• Expand leadership position in binders and disintegrants

• Grow position in coatings • Leverage regional applications labs to support

emerging-region growth – Significant opportunity in generics

• Further improve service and support levels for key strategic accounts

• Develop industry-leading products in controlled-release forms

Pharmaceutical

Strategy and Focus

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Pharmaceutical

Custom Benecel™ HPMC

• Customized manufacturing process which enables highly tailored release profile • Eliminates need for customer blending (trial and error process) • Improves predictability and reproducibility

Capabilities

Can Precisely Tailor Release of Active

0%

20%

40%

60%

80%

100%

% a

ctiv

e re

leas

ed

Time

Typical product “A”

Typical product “B”

New capability to produce anything in this range on commercial scale

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Pharmaceutical

Best-in-class solubilization aid: HPMC-AS

• Best-in-class solubilization aid, now being commercialized • Dramatically improves drug solubility (up to 3x versus competitive offering) • Enables growing trend in pharmaceutical actives

– Roughly 60-70% of new actives being developed are poorly soluble

Capabilities

Growing trend Significantly outperforms other offerings

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

30 60 90 120 150 180

Dru

g re

leas

e

Time (min)

Enhanced solubility

Enhanced solubility Enhanced

solubility

Competitive offering

Ashland’s HPMC-AS

As-is (no solubilizer) Poorly Soluble

Drugs 60%-70%

Soluble 30%-40%

Based on drugs now in development

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Business Dynamics

Market

• $2.9 billion available market – Hydrocolloids ~ $2.5 billion – Beverage clarifiers/stabilizers ~

$400 million • Growing with global GDP

Market Drivers

• Convenience • Health and wellness • More natural/identifiable ingredient

descriptions

Opportunities • Beverages and bakery • Leverage natural product platforms

for growth


Food and Beverage Market Overview


Viscosity Stability

Clarification Shelf Life

Sizeable market opportunity

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391 416 435 489

526

2008 2009 2010 2011 2012

Sales1

8% CAGR

Core Product Lines

Klucel™ HPC

• Tablet binding, controlled release and solubility enhancement

Benecel™ MC

• Controlled release, coatings and tablet binding

Plasdone™ (Co)Povidone

• Tablet binding and solubility enhancement

Polyplasdone™ Crospovidone

• Superdisintegrants for rapid tablet disintegration

Aquarius™ coating systems • Aesthetic and functional tablet coatings

Polyclar™ PVPP • Beverage clarification and stabilization

Aqualon™, Blanose™, Bondwell™

carboxymethylcellulose

• Thickening and texturizing for bakery, dairy and prepared foods

Wide portfolio of industry-leading excipients

1 Excludes sales from divested Hydrocolloids, Carmine and Pinova businesses.


Sales Growth

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Personal Care

James Mish

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• Four primary markets – Skin Care – Oral Care – Hair Care – Home Care/Other

• Skin Care – Active and functional ingredients

• Oral Care – Functional ingredients for teeth,

mouthwash and dentures • Hair Care

– Functional ingredients for shampoos, conditioners and styling agents

2012 Sales - $596 MM

Hair Care 31%

Skin Care 38%

Other 6%

Oral Care 25%

($ in millions)


Personal Care

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Market

• $5 to $6 billion global target market – Focused on skin, hair and oral care

• Growing 4% to 5% per year • Leader in fixatives, rheology modifiers

and dental adhesives

Market Drivers

• Population growth and global emergence of middle class

• Tailored innovation and new products • Global awareness of need for

complete UV protection

Opportunities

• Leverage renewable and naturally derived cellulosic backbone

• Active ingredients for UV protection and anti-aging

Styling Conditioning

Flow Properties UV Protection

Leading solutions provider for skin, hair and oral care

Business Dynamics ASI Product Benefits

Personal Care

Market Overview

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Skin Care

Typical Formulation1

Ashland provides active and functional product solutions in Skin Care

1 Listed %s are by weight.

Components

Water 0% - 90%

• Filler/Carrier

Functional 10% - 80%

• Includes a wide variety of chemistries • Builds the “body of the formula” • Provides texture and feel • Enables active delivery and overall

product performance

Actives < 20%

• Enables actual product claims • Provides specific end benefit:

– Anti-wrinkle – Anti-oxidant – UV/Environmental protection

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Skin Care

Market

Actives 35%

Skin Care Additives • Targeted skin-care market is $2.4 billion • Actives/Biofunctionals

– Represent largest opportunity by value – Ashland sales concentrated in anti-aging

and UV absorption • Functional

– Emulsifiers: enables oil/water mix and improves product consistency

– Preservatives: extends shelf life, prevents bacterial/mold growth

– Other: emollients, rheology modifiers, water-proofing agents


Actives - UV 19%

Preservatives 10%

Emulsifiers 27%

Other 9%

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Skin Care


Skin care market growing at 5% to 6% per year

Anti-Aging

• Aging global population

• Increasing global focus on youthful appearance

Natural/ Green

• Growing awareness of protecting the earth

• Desire for simple, understandable ingredients

• Sustainability

Male Grooming

• Growing demographic, particularly in young men

• Distinction between male and female products has blurred

UV Protection/ Sun-Care

• Global consumer increasingly aware of need for UV protection

• Broad-based UVA and UVB needs

• Highly regulated

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Skin Care

Escalol™ S UV Absorber

• Safe for daily use, present in a number of cosmetic applications • Highly water resistant • Synergistic with other UV absorbers • Commercially available in Europe and other parts of the world

Capabilities

UV absorber with broad UVA and UVB protection

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Skin Care

Telosense™ Biofunctional

• Inspired by telomere science – Telomeres are the “ends” of chromosomes, they shorten as cells divide/age

• Telosense™ biofunctional maintains presence of key protein in vitro which helps prevent telomere shortening

Capabilities

Breakthrough technology for skin anti-aging

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Hair Care

Market

Fixatives 32%

Hair Care Additives • Targeted hair-care market is $1.3 billion – Shampoos – Conditioners – Colorants – Styling Agents: sprays, mousses, gels

• Conditioning agents – Film former on hair surface – Moisturizes, promotes shine/manageability

• Fixatives – Holds hair in place, used in styling agents

• Rheology modifiers – Thickeners, stabilizers, emulsifiers, etc.


Rheology Modifiers

24%

Conditioning Agents

44%

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Hair Care


Hair Care additives growing at 3% to 4% per year

Repair/ Prevention

• Consumers want targeted solutions for – Heat damage – Split-ends – Dandruff control – Overly dry/oily

Natural/ Green

• Trend towards more natural ingredients

• “Free of” parabens, sulfates and silicones

• Sustainability

Customer Diversity

• Consumer brand companies developing cultural/regional solutions

• Large shift towards male grooming

Texturizing

• Hairstyles are becoming more complex

• Leads to the need for more sophisticated products

63

Hair Care

N-Hance™ 4572 conditioning polymer

• Enhanced deposition of actives to enable industry-leading conditioning • Allows 30% to 50% reduction in silicone while maintaining overall performance • Enables more sustainable formulations, overall “greener” products

Capabilities

Offers break-through performance in conditioning and deposition

Untreated Hair

Treated Hair

64

Oral Care

Market

Bioadhesive 56%

Oral Care Additives • Available Oral Care market is $0.3 billion – Toothpaste – Denture Care – Mouthwash

• Customer base and targeted segments are highly concentrated

• Rheology modifiers – Thickeners, stabilizers

• Bioadhesive – Toothpaste: bonds active to enamel – Dentures: bonds dentures to gums


Rheology Modifiers

44%

65

Oral Care


Oral Care market growing at 3% to 4% per year

Healthy Mouth

• Broad-based, more holistic approach to oral care – Gums – Teeth – Tongue

Beauty/ Whitening

• Consumer view of “beauty” increasingly associated with bright, white teeth

Prevention

• Multi-benefit products continue to gain share – Toothpastes – Mouthwash

• Enhanced solutions – Tartar-control – Gingivitis – Sensitivity

Aging Population

• Median age globally continues to advance

• Emerging middle class more financially capable of dentures and other oral-care products

66

Oral Care

Gantrez™ Bioadhesive

• Forms tighter/longer-lasting bond between active and hard/soft tissue in mouth • Highly tailored to meet customer needs • Applications include plaque reduction, gingivitis prevention, tartar control

Capabilities

Technology platform for best-in-class active delivery

67

Business Dynamics

Market • $1.7 billion available market • Growing 3% per year • Largest segment is laundry

Market Drivers

• Emerging regions, global emergence of middle class

• Niche products/microbranding • Energy and water conservation

Opportunities

• Leverage broader Personal Care relationships to drive growth

• Develop tailored solutions through regional labs

• Broaden natural product platforms


Dye Transfer Inhibition Surface Cleaning

Soil Release/Removal Rheology Control

Small business today, with good opportunities for growth

Personal Care

Home and Household Market Overview

68

• Expand and grow industry-leading position in Hair and Oral Care – Build out market position in Skin and Home Care

• Maintain “high-touch” model in key strategic accounts • Relentless approach to innovation • Leverage regional applications labs to drive growth in

fast-growing emerging regions • Partner with large distributors to better support

smaller, regional accounts

Personal Care

Strategy and Focus

69

484 465 525

576 596

2008 2009 2010 2011 2012

Strong sales growth driven by continuous innovation

5% CAGR

Sales Core Product Lines

Aqualon™ cellulose gum

• Globally approved thickener for oral care and wound care systems

Natrosol ™ HEC

• Robust rheology modifier for liquids and gels

Gantrez™ AN copolymers

• Bioadhesive enabling tartar control and denture adhesives

N-Hance™ cationic guar

• Leading hair conditioning polymers for softer, more manageable hair

Peroxydone™ polymer complex

• Teeth whitening for bleaching gels and films

Escalol™ UV absorber

• UV absorbing actives for beach and skin care products

Vincience™ actives • Leading portfolio of skin care actives

Personal Care

Sales Growth

70

Coatings

Dale MacDonald

71

Water-Based Architectural

98% Other - 2%

• Specialty additives for water-based paints – Primarily sell into architectural

paints – Interior and exterior

applications • “Other” ~2% of sales1

– Wood coatings – Colorants – Emulsion polymerization

2012 Sales - $379 MM

($ in millions)

1 Based on management estimates.


Coatings

72

Coatings

Types of Paint

Water-Based1

41%

Solvent-Based/ Other1

59%

• Uses water as the suspension medium • More environmentally friendly option • Dominates the architectural coatings market • Growing in popularity due to:

– Environmental concerns – Ease of use and clean up – Improved performance characteristics

Water-Based

• Uses a combination of organic solvents – Typically causes strong odor

• Dominates the industrial coatings market • Better performance on wood and metal • Increasingly regulated by region

Solvent-Based

1 Volume splits include industrial and architectural applications.

73

Coatings

What goes in to a can of water-based paint?1

1 Listed %s are by volume.

Additives <4% by weight, but nearly double that by value

74

Market

• $2.6 billion additives market • Water-based paints growing at 5% • Leaders in cellulosic (HEC) and

synthetic rheology modifiers

Market Drivers

• Growth in emerging regions • Global shift from solvent-based

to water-based coatings • Low-VOC paints • One-coat coverage

Opportunities • Tailored products in emerging markets • Expanded synthetic portfolio • Customer friendly products

Flow and Leveling Low VOC

Preservative Spatter-Resistance

Business Dynamics

Leading provider of additives into water-based paints


Coatings

Market Overview

75

Coatings

Additives Market for Water-Based Paints

Additives Market (by value)

Rheology Modifiers

46%

Overall Additives Market - $2.6 B

Surfactants/ Dispersants

19%

Other 8%

Foam Control 14%

Biocides 13%

• Market size is $2.6 billion • Roughly half of the market is

rheology modifiers – Controls flow properties of liquids

• Typical rheology modifications – Flow and leveling (even coat) – Sag resistance (no drip) – Color stability – Spatter resistance

Ashland’s portfolio covers all major additive categories

76

Coatings


Additives market for water-based paints growing at ~5% per year

Consumer Spending

• Strongly influenced by emerging global middle class

• Well balanced between new construction and remodeling

Environmental/ Regulation

• Global regulation to reduce levels of organic solvents

• Consumers’ interest in more environmentally friendly alternatives

Manufacturing Cost Efficiency

• Higher through-put • Lower manufacturing

costs

Product Performance

• Desire for one-coat coverage – Faster – Reduced costs

• Improved hiding – Desire to reduce

TiO2

77

Coatings

Water-Based Architectural Coatings1

$28 $30 $31 $33 $34 $35 $37 $39 $41 $44 $46

68.0% 68.2% 68.9%

69.8% 70.6%

71.4% 72.0%

72.6% 73.0%

73.7% 74.2%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$ in billions % of Total Architectural Market

Continued water penetration leads to 5% long-term growth

1 Based on internal estimates and third party reports.

% Water Based by Region

Developed Economies 80% – 85%

Emerging Regions 60% – 70%

78

Coatings

Strategy and Focus

• Maintain leadership position in rheology modifiers – Expanding HEC capacity globally

• Leverage portfolio beyond architectural paints – Water-borne wood coatings – Emulsion polymerization

• Customized solution model for emerging regions – Significant growth opportunity due to ongoing shift to

water-based paints • Utilize global R&D capabilities to maintain industry-

leading innovation

79

Coatings

Natrosol Performax™ HEC Rheology Modifier

Improves customer manufacturing efficiency, lowers costs

• Enables streamlined paint manufacturing throughout the entire process – Easily dispersible product requires less time and energy

• Maintains best-in-class performance characteristics: thickening, stability and sag resistance

Capabilities

Natrosol Performax™ HEC quickly/fully

dissolves and requires no up-front processing: saves

time, energy and costs

Conventional products require up-front

processing: consumes time and energy

Smooth/Consistent mixture in low-energy mixing

80

Natrosol™ HEC

• Industry standard thickener provides creamy in-can feel with superior color performance, stability and sag resistance

Natrosol™ Plus HMHEC

• Best-in-class spatter resistance, improved high-shear viscosity

Aquaflow™ NSAT

• Easy-to-use liquid thickener with superior flow for higher gloss finishes

Dextrol™ Strodex™ surfactants

• Additives to enhance gloss, color stability and wetting of surfaces

Nuosept ™ Fungitrol™

biocide

• Preservatives and biocides for in-can protection and paint-film mildew resistance

Jaypol™ dispersant • Keeps pigment dispersed, improves stability

Drewplus™ foam control

• Reduces foam during paint manufacture and application

298 300 336

380 379

2008 2009 2010 2011 2012

6% CAGR

Coatings

Sales Growth

Success through superior chemistry and technical collaboration with customers

Core Product Lines Sales

81

Industrial

John Panichella

82

Energy 63%

Construction 37%

• Business segment includes – Energy – Construction

• Energy – Specialty additives into all stages of

upstream operation

• Construction – Primarily focused on additives for dry

mortars and cements

Energy 64%

Construction 36%

2012 Sales - $650 MM

($ in millions)


Industrial

83

Market

• Energy: $5.8 billion market –Growing 10+% per year

• Construction: $2 billion market –Growing 4% to 5% per year

Market Drivers

• Energy: Drilling activity, stimulation and fracturing

• Construction: Economic recovery and growth in emerging regions

Opportunities

• Energy: Deeper, horizontal wells and shift from gas to crude

• Construction: Extend into associated markets with redispersible powers

Industrial

Construction and Energy Market Overview

Water Retention Drilling Efficiency

Fluid Loss Additives Energy Savings

Business Dynamics

Leading provider of oil and gas additives


84

Energy

Market

Products sold into all stages of upstream production

Cementing 11%

Specialty Additives • $5.8 billion available market • Drilling

– Additives for drilling muds/fluids • Cementing

– Maintain/Improve cement integrity in wide range of environments

• Stimulation – Well treatments to restore or enhance

productivity – Roughly 80% of Ashland’s Energy sales – Includes guar-based product lines

• Production – Improve efficiency, minimize scale and

contamination Available Market - $5.8 B

Drilling 12%

Production 37%

Stimulation 40%

85

Energy


Specialty additives for upstream operations growing at 10+% per year

Horizontal and Deepwater Wells

• Number of horizontal rigs has more than tripled since 2009

• Horizontal drilling and deeper wells require 2x the specialty chemicals per rig

Regulatory/ Environmental

• Push to minimize environmental impact

• Creates opportunities for greener, more natural solutions – Guar – Cellulosics

Unconventional Wells

• Shale gas boom in North America – Other regions

investigating deposits

• Require large amounts of stimulation chemicals

Natural Gas vs Crude

• Depressed natural gas price in North America

• Shift from dry-gas to more liquid-rich wells – Higher-value

hydrocarbons – Requires better

technical solutions

86

Energy

Guar

Straight Guar

Derivatized Guar

• More commoditized offering • Generally used as a thickener • Primarily sold into Energy; additional

applications in Food and Beverage • Energy

– Decent performance in dry-gas – Adequate performance in shallower wells

• Highly differentiated, more technically advanced product

• Strong technical capabilities in Energy and Hair Care (cationic guar)

• Energy – Uniquely developed for wet-gas, crude-rich wells – Leaves little or no residue, improving oil-field yields – Performs well in more extreme operating conditions

87

Energy

Product Strategy

• Sand • Acids • Surfactants

• Straight Guar

Oil and Gas Additives Highly Specialized

Highly Commoditized

Reduce Volatility Invest To Grow Do Not Participate

Primarily focused on highly differentiated product categories

• Guar Derivatives • CMC • HEC

• Gas Migration Add. • Kinetic Hydrate Inhib. • Techwax™ additives

88

Energy

Strategy and Focus

• Drive growth in stimulation and cementing segments – Strong fit with existing capabilities and applications expertise – Segments place high value on advanced technical offerings

• Collaborative approach to new product development and innovation

• Expand investment in R&D to develop industry-leading solutions – Guar substitutes and alternatives – Improved saltwater tolerance and performance in extreme

temperatures

89

Energy

XxtraDura™ GMA Cement Additive

• Highly compatible, multipurpose cement additive to prevent gas channeling • Ensures safer/cleaner operations while maintaining productivity • Also offers excellent fluid loss control and compressive strength • Derived from HEC and proprietary synthetic compound

Capabilities

Prevents gas channeling in extreme operating environments

Gas Channeling:

Gas permeates unset cement, degrades cement

integrity and strength

Oil Well Cement:

Protects and supports casing, helps restrict flow between zones of the well

(improves productivity and safety)

90

Leading position in cellulose ethers, building position in RDP

Cellulose Ethers

52%

Dry Mortar Additives • Targeted additives market is $2.1 billion • Primarily composed of cellulose ethers

and redispersible powders • Cellulose ethers

– Used for water retention, rheology control – Improves workability/open-time and

reduces crack formation – Typical products include MC and HEC

• Redispersible powders (RDP) – Latex-based polymers – Improves adhesion, flexibility, integrity

and water repellency


Redispersible Powders

43%

Other 5%

Construction

Market

91

Sand/Fine Aggregate Cement/Gypsum/Latex Additives

Mixed at job site or increasingly offsite

~25% ~70% < 5%

Construction

Dry Mortar1

1 Weight loadings based on typical cement-based mortar.

92

Construction


Additives market for dry mortar growing at 4% per year

Residential New/Remodel

• Developed markets >75% based on remodeling

• Emerging regions primarily driven by new construction

Broader Product Tolerance

• Higher performing additives to offset cement levels/quality

• Ability to perform under more extreme weather conditions – Hot and cold

Convenient/ Easy Application

• Reduce install time • Lower labor costs • Enable more

uniform/consistent application – Less contractor

dependent

Safety/Quality Concerns

• Job-site preparation varies in quality

• Shifting from on-site to off-site dry mortar production – Higher/more

consistent additive consumption

93

• Expand solutions with new additives platforms – Installed RDP plant in mid-2012 – $50 million revenue opportunity for current capacity

• MC is at full capacity, must expand margins to meet internal hurdles for reinvestment – Significant progress in 2012

• Targeted new product development to improve margins – Enable year-round construction – Wider climate applicability – Better additives to allow the use of “green” cements

Construction

Strategy and Focus

94

Construction

Ashland Aquatherm™ Specialty Water-Soluble Polymers

• High water-retention capabilities and improved workability in extreme climates • Enables year-round construction with no reduction in quality • Leads to lower labor costs and/or lower materials costs

Capabilities

Extreme temperature stability in dry mortar

With

Improved workability and spreading

in high-temperature skimcoat application

Without

95

Galactasol™ Guar

• Used as a gellant in fracturing fluids to improve performance of the proppant

AquaPAC™ CMC

• Suspension aid in drilling that performs well in a wide variety of environments

Natrosol™ HEC • Fluid loss additive in cementing applications

Culminal™ MC

• Improves workability/open time and reduces crack formation in cement mortars

Aquapas™ RDP

• Imparts increased adhesion strength and higher abrasion resistance to exterior stucco applications

Aquatherm™ cellulose ether

• Water retention and rheology modifier for high- and low-temperature applications

400

270 271 382

650

2008 2009 2010 2011 2012

13% CAGR

Industrial

Sales Growth

Core Product Lines Sales1

Strong sales growth following the recession

1 Excludes Benchmark transaction.

96


Joseph Stinson

97

Energy 63%

Construction 37%

• Business segment includes – Intermediates and Solvents – Specialties

• Intermediates and Solvents – Butanediol (BDO) – N-methyl 2-pyrrolidone (NMP) – Tetrahydrofuran (THF)

• Specialties – Incubator business approach – Wide range of specialty technologies

and markets

Intermediates & Solvents

70%

Specialties 30%

2012 Sales - $727 MM

($ in millions)



98

Market

• Broad, diverse market • Growing 2% to 4% per year • Growth areas include agriculture and

lithium batteries

Market Drivers

• Global demand for BDO and other specialty solvents

• Alternative energy sources (batteries) • Demand for higher crop yields

(agriculture)

Opportunities • Pursue new product development

in agricultural chemicals • Growth in adjacent markets


Market Overview

Binder for Lithium-Ion Increased Efficacy

Electronic Solvents Solvents for Ink

Business Dynamics

Supplier of high-performance polymer additives and specialty solvents


99


Production and Usage of Butanediol

Butanediol (BDO)

BDO Merchant Sales

Specialty Solvent Production/Sale

Polymers Production/Sale

Internally produced BDO is used in three separate categories

~35%

~45%

~20%

100

• Decrease dependence on solvents’ merchant market – No sizeable capacity expansions – Pursue debottlenecking given high investment returns – Continue to shift towards in-house needs

• Strive for best-in-class operating efficiencies • Implement incubator business model for

select markets – Lithium-ion batteries – Agricultural adjuvants


Strategy and Focus

101

BDO • Butanediol, primarily used in spandex fibers and thermoplastics.

THF • Tetrahydrofuran, specialty solvent with broad

application; primarily used in spandex fibers, pharmaceuticals and adhesives

NMP • N-methyl-2-pyrollidone, specialty solvent used primarily in electronics and agriculture

668

435

553

713 727

2008 2009 2010 2011 2012

2% CAGR


Sales Growth

Core Product Lines Sales

More economically sensitive, but lowest margin

102


Break

103

Technology

May Shana’a

104

• Staff of 500 employees – Over 100 PhDs – Global presence

• Research goals – Support business strategies – Build/maintain competitive

advantage (innovate) • Roughly 900 active patents

– Covers wide range of end-markets and applications

– Granted 71 new patents in 2012

Developed working directly with customers

~70%

Ashland generated

30%

New Products1

1 Internal estimate based on R&D projects now underway.


Research and Development

105


Targeted Innovation for Global Markets

Centers of Excellence

Wayne, N.J. Wilmington, Del.

Hopewell, Va.

Bradford, U.K.

Paris, France

Zwijndrecht, Netherlands

Sophia Antipolis, France

Cologne, Germany Dusseldorf, Germany Memmingen, Germany

Istanbul, Turkey Port Neches, Texas

Mexico City, Mexico

Sao Paolo, Brazil

Shanghai, P.R. China

Hyderabad, India

Nanjing, P.R. China

Singapore

Mumbai, India

Applications & Tech Service Labs

Tadworth, U.K.

Newton Aycliffe, U.K.

Global network of world-class scientists, 10 Centers of Excellence

106

Cellulosic ethers Guar

Acrylics NSAT UV Absorbers

Biocides Skin Care Actives:

Peptide Biofunctional


Broad Product Portfolio

Major supplier of water-soluble polymers

Water Soluble Polymers

Specialty Functional Ingredients Active Ingredients

PVP / VA / PVPP MVE-co-MA Polyquats

Acrylamides Acrylics

Phosphate ester Defoamers

Redispersible powders Surfactants

Emollients Emulsifiers Solvents

Surfactants

Ashland Heritage ISP

107


Core Expertise and Capabilities

Consumer Science

Synthetic Chemistry

Material Science

Analytical Chemistry

Manufacturing Excellence

Applications Expertise

Formulation Full range of capabilities to

address customer needs

108


Product Customization

• Solubility • Ionic strength • pH variations • Flexibility

Natural Platforms Synthetic Platforms

• Temperature stability • Viscosity • Pressure tolerance • Interaction with other ingredients

Start with renewable backbone and adjust Built from ground-up

A B

Customization allows significant tailoring

+ + + Wide

range of options

109


Current Technical Platforms

Pharmaceutical Oral Solid Dosage • Immediate and sustained drug release • Film coating • Solubilization

Personal Care Skin/Hair/Oral Home

• Anti-aging and sun protection • Hair conditioning/hair repair, superior styling • Oral healthcare and whitening • Home care

Coatings Architectural • Low-VOC/low-odor coatings • Improved hiding • Foam control

Energy Oil and Gas • Drilling, cementing, stimulation, production • Green additives • High temp - high pressure additives

Construction Dry Mortar, Gypsum • Cement/gypsum/latex based mortars • Tile cements • Exterior insulation systems

Nutrition Food and Beverage • Texturants/hydrocolloids • Emulsifiers • Beverage clarification

Focus Segments Innovation Platform

110


Expanding Technical Platforms

Acrylates $4.6 billion market opportunity

Personal Care Pharma/Nutr. Coatings Industrial

Expands available market by roughly $10 billion

Performance

Market Applicability

Encapsulation $3.6 billion market opportunity

Surfactants $3.0 billion market opportunity

111


New Product Sales and Pipeline

76 funded projects represents ~$800 million sales opportunity

439 474

617

2010 2011 2012 Long-term

25% of

Sales

New Product Sales

Product Line Extensions 32 projects

$2 to $5 million opportunities

Mid-Size 33 projects

$5 to $20 million

Large 11 projects

>$20 million

112

Color Protection for Shampoos

High T and High P Oilfield Additives

New Delivery Systems for Hair

New Delivery Systems for Skin

Waterproof UV Booster

Long-Term Breath Freshener

Bioadhesive

Conditioning for Damaged Hair

Sustainable Formulation

Green Conditioning

Improved Drug Solubilization

Natural Color Tablet Coatings

New Defoamer

Enhanced Recovery Additives

Cement Anti- Settling Aid

Zero-VOC Additives

High-Coverage Coatings

XxtraDura™ GMA Cement Additive

Aquapas™ RDP Technology

Natrosol Performax™ HEC

Polyelectrolyte Complex

Vincience™ Actives

Current Midterm 2017+

Next Generation Binders for Li Batteries

Beverage PET Packaging

Direct Compressible Table Polymer

4-in-1 Tile Cement Cold Weather

Cellulose Ether

Clay Reduction in Joint Compound

Guar Alternatives

Low CO2 Cement Additive

Next Generation Tooth Whitening

Encapsulation Technology AP/DEO

Technology

Styleze™ XT3 Polymer N-Hance™ 4572

AquaStyle 300AF



EIFS 2-in-1


Innovation Pipeline

113

Capital Allocation/Financial

Kevin Willis

114

• Excluding straight guar, should achieve good business growth over prior year

• October sales and volumes finished somewhat lower than expected – Curtailed straight-guar sales until market stabilized – Hurricane Sandy delayed shipments to/from East Coast

• Sales have rebounded in November – Anticipate good sales growth over Q1 2012 – Straight-guar curtailment continued in November


Fiscal First-Quarter Outlook

115

496 411

490 608

763 21.4% 21.8% 23.1% 23.9% 26.5%

2008 2009 2010 2011 2012

2.3

1.9 2.1

2.5 2.9

2008 2009 2010 2011 2012

• Significant sales growth since 2009 – Expansion in all key markets – Good growth in volumes and pricing

• Sales up over 50% since 2009

$ B

• Grew EBITDA margins every year • 5-yr EBITDA CAGR of 11% • Strong EBITDA growth since 2009 • ISP data not restated for Ashland

corporate SG&A allocations

$ MM % EBITDA Margin

Sales EBITDA

1 Includes historical contributions from ISP and Hercules. Excludes Pinova/Benchmark.


Baseline Historical Financial Performance1

116

• Volume growth slowed in 2012, but still up 2%

• Lower-margin product lines make significant contributions to volume – Over 1/3rd of total volumes

from Intermediates and Solvents • Recently shuttered lower-

margin CMC capacity – Approximately 5,000 MT in 2012 – Closed towards end of fiscal 2012

320 354

388 396

2009 2010 2011 2012

Volumes1

1 Pro forma volumes include ISP. Excludes divested Pinova business. 2008 data not available for ISP.

(Metric Tons in ‘000s)

7% CAGR


Volume Growth

117

• Total raw material spend of approximately $1 billion – Represents roughly half of COGS

• Top 5 raw materials – Guar – Cellulose: wood pulp/cotton linter – Butane – LPG – Ethylene oxide

Top 5 25%

Other COGS 75%

Raw Material Spend


Raw Material Sensitivity

118

Entire product family is near full capacity

Some products approaching full

capacity

Spare capacity available

(at least for next 1-2 years)

HEC

CMC

MC

Deriv. Guar

Solvents Vinyl Ethers

Actives

PVP

Largest product lines at or near sold-out position

Utilization Rates

V-Cap

Sales ($)

HPC Aquaflow RDP

Acrylates Straight Guar


Utilization Rates

119

Significant investment in growth projects

• Expected 2013 capital spend of approximately $220 million

• Over 50% of capital consists of growth and productivity projects – 4 plant expansions coming on-line

in 2013 • Specialty Ingredients constitutes

80+% of Ashland’s growth capital

Growth 46%

Maintenance 44%

2013 Capital

Productivity 10%


2013 Capital Plan

120

Product Primary # Project(s) Expected Completion Family End-Market Projects 2013 2014 2015

HEC 2 Mid Late

Derivatized Guar 3 Late Mid Early

MC 2 TBD

CMC 2 Late Early

PVP 1 Mid

Vinyl Ethers 1 TBD

Skin-Care Actives 1 Mid


Upcoming Capacity Expansions

121

Specialty Ingredients Summary

John Panichella

122

Technology

• Highly tailored products

• Customer-intimate technology model

• Push for constant innovation

Capital Costs

• Significant amount of backward integration

• Stand-alone plant capital is $40+ million

• Full supply-chain replication would cost $ billions

Intellectual Property

• High number of – Patents – Trade secrets

• Large degree of manufacturing know-how

Switching Costs

• Requalification periods costly and time consuming

• Products typically represent small % of customer’s final product

Significant hurdles for any new market participant


Advantaged Market Positions

123

Pharma/ Nutrition $1.6 5% to 6% + +

Personal Care $5 to $6 4% to 5% + +

Coatings $2.6 ~ 5% +

Industrial ~ $8 Energy: 10+% Construction: 4% to 5% +

Performance N/A 2% to 4% Market

Target Market

Market Growth

Growth vs. Market

($ in billions)


Business Unit Overview

124

Options for long-term, high-return growth

Capital Expenditures

Research & Development

M&A

• Ongoing demand growth • Numerous product lines at full capacity • Investing $220 million in 2013

• Well-stocked R&D pipeline • Roughly $800 million opportunity being funded • New technologies/platforms/markets

• Pursuing bolt-on M&A • Primarily targeting new technologies/broader position

in existing markets


Capital Reinvestment Options

125

Existing Strengths Markets/Technologies

Broaden Solutions

Leverage customers with new technologies

Enter New Markets

Explore new technologies, markets and capabilities

Broaden Markets

Leverage technologies to broader customer base

Customers & Markets

Tech

nolo

gies

Existing New

Exi

stin

g N

ew

Target Path Market Size

Encapsulation Organic/ Inorganic $3,600

Surfactants Organic/ Inorganic $3,000

Defoamers Organic/ Inorganic $2,500

Biofunctionals Organic/ Inorganic $350

Tablet Coatings

Organic/ Inorganic $500

Acrylates Organic $4,600

RDPs Organic $900

$ in millions


One-Step Adjacencies

126

Food & Beverage

33%

• Strong global business with concentration in renewable chemistries – Solid profitability and margins

• History of strong sales and double-digit earnings growth – Expect to significantly exceed original 2014 targets

• Key growth drivers – Above GDP market growth supported by new product

innovation – Capital investment and expansion – Growth in emerging regions

• High returns on incremental growth investments


Summary

127

Ashland Financial Overview

Lamar Chambers

128

Value Proposition to Shareholders

Top-line growth and earnings expansion

Organic Volume Growth

• Growth in excess of underlying markets – Innovation and technology

• Strongest growth in Specialty Ingredients – Growing at 2x - 3x GDP

• Expansion in emerging markets

Capital Allocation

• Capacity expansions to support growth • Further reduce interest expense • Other value creating uses

– Bolt-on M&A – Share repurchases – Dividend expansion

Margin Expansion

• Strong growth in highest-margin business – Specialty Ingredients

• Mix improvement in Water Technologies • Volume gains in Performance Materials

Cost Control

• Tightly maintain current cost structure • Achieve $15 million in remaining ISP cost

synergies

129

Total Shareholder Returns1

Corporate transformation has been rewarding

0%

50%

100%

150%

200%

250%

300%

350%

400% Ashland S&P 500 Cumulative Return

Ashland 356%

S&P 500 116%

2003 2004 2005 2006 2007 2008 2009 2010 2012 2011

1 From September 30, 2002 to September 30, 2012. Assumes reinvestment of dividends.

130

Liquidity and Net Debt

($ in millions)

$158 $163

$459

$1,050

$78

$1,036

$803

'13 '14 '15 '16 '17 '18 '19 and after

Scheduled Debt Repayments by Fiscal Year

$ 523 Available revolver and A/R facility capacity 955

$ 1,478 Liquidity

LiquidityAt Sept. 30,

2012 Cash

InterestDebt Expiration Rate Moody's S&P Term Loan A 08/2016 L+200 Baa3 BB+ $ 1,425 Term Loan B 08/2018 L/Floor+275 Baa3 BB+ 1,036 4.75% senior notes, par $500 million 08/2022 4.75% Ba2 BB- 500

A/R facility drawn1 08/2015 L+75 300 6.5% debentures, par $282 million 06/2029 6.50% Ba2 B+ 129

9.125% senior notes2, par $78 million 06/2017 9.125% Baa3 BB+ 76

Other debt Various 124 Revolver drawn3 08/2016 L+200 Baa3 BB+ -

Total debt Ba1/Stable

BB/Stable $ 3,590

Cash $ 523 $ 3,067

3 $1 billion facility, including ~$95 million used for letters of credit

2 Callable June 2013

At Sept. 30,2012

1 $350 million accounts receivable securitization facility

Net debt (cash)

131

Ashland Interest Expense

• Annual net interest expense – Book interest of ~$180 million – Cash interest of ~$150 million

• 80% of debt fixed • 2013 opportunities for ~$15

million incremental savings – Retire remaining 9 1/8th notes – Principal payments on Term Loan A – Other miscellaneous maturities

Fixed 80%

Floating 20%

Debt Profile

132

Capital Structure

• Targeted long-term capital structure –Gross debt to EBITDA at or below 2.0x • Net debt to EBITDA of ~1.7x

–Balanced fixed- and floating-rate debt –Staggered maturities

• Goal of attaining investment-grade credit metrics

133

Cost-Reduction Program

• Goal of $90 million in annualized savings – $40 million of stranded costs – $50 million of ISP acquisition synergies

• $75 million of run-rate savings now in place • $15 million additional reductions end of fiscal 2013

– Dependent on global ERP rollout

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Capital Expenditures

• Approximately $385 million of annual capital expenditures – Maintenance capital

of $200 million to $225 million – Expect similar spend in 2014

• Spend concentrated within Specialty Ingredients – Receives roughly 80% of

Ashland’s growth capital

3-yr. Capital Spend


Water Technologies

Performance Materials

Consumer Markets

Corp./ Other

135

Pension/OPEB Expense and Funding

• Expect pension/OPEB income of approximately $30 million in 2013 – Service cost of nearly $50 million incurred by commercial units – Roughly $75 - $80 million benefit reported in

Unallocated and Other • Compares to $7 million of expense in 2012 • Anticipate pension cash funding of $120 million

– Includes U.S. and non-U.S. – Roughly $50 million decrease from 2012

• Pension is closed to new participants – Replaced with enhanced 401(k)

136

Unallocated and Other

• Primarily consists of: – Pension income/expense (other than service expense) – Legacy environmental

• Adjusted operating income of $16 million in 2012 – Pension income + $32 million – Ashland Distribution stranded costs - $5 million – Other miscellaneous expense - $11 million

137

Tax Expectations

• 2013 tax expectation of 26% to 28% • Should trend to mid 20% range by 2014

– Lower cash needs in U.S. – Higher growth in lower-tax-rate regions of world – Further integration/consolidation of ISP legal entities

• FY 2013 cash tax-rate expectation of roughly 25% – Relatively stable next few years

138

Free Cash Flow Bridge

2013 Consensus

EBITDA

Cash Taxes

Implied Free Cash Flow

Working Capital

Interest CapEx Environ- mental

Pension/ OPEB

Other

Implied 2013 free cash flow of approximately $400 million

$1.4 B

1 Free cash flow is defined as Cash Flows Provided by Operating Activities from Continuing Operations less Additions to Property, Plant and Equipment. (no longer deduct dividends)

139

Components of 2014 Earnings Per Share

2012 2014 Commercial Unit Growth

Interest

2014 EPS estimate of $9.50 to $10.50 per share

$6.621

$9.50 to

$10.50

1 Adjusted earnings per share.

Unallocated/ Other

140

Summary

Jim O’Brien

141

Summary and Investment Thesis

• Positioned for long-term growth and earnings expansion

• Investments focused in Specialty Ingredients – Highest margin business – Numerous organic opportunities – Potential bolt-on M&A

• On track to achieve longer-term targets – 2014 EBITDA of $1.7 billion – 2014 EPS of $9.50 to $10.50

2012 2014

EBITDA growth of $300 million

$1.4B

$1.7B

2012 2014

EPS growth of over $3/share

$6.62

$9.50 to

$10.50

142 ™ Trademark, Ashland or its subsidiaries, registered in various countries

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Appendix: Regulation G Reconciliations

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Ashland Inc. and Consolidated Subsidiaries Reconciliation of Non-GAAP Data for Fiscal Year Ended Sept. 30, 2012 ($ millions, except percentages)

1 Calculation of adjusted EBITDA for each quarter has been reconciled within each quarterly earnings release filed with the SEC and posted on Ashland's website. Total adjusted EBITDA may not sum to actual results due to quarterly rounding conventions.

Sales Q4 12 Q3 12 Q2 12 Q1 12 Total Specialty Ingredients 734 793 723 628 2,878Water Technologies 431 427 428 449 1,735Performance Materials 369 404 408 378 1,559Consumer Markets 522 517 520 475 2,034Total 2,056 2,141 2,079 1,930 8,206

Adjusted EBITDA1 Q4 12 Q3 12 Q2 12 Q1 12 Total

Adjusted EBITDA Margin

Specialty Ingredients 193 224 186 160 763 26.5%Water Technologies 33 37 39 40 149 8.6%Performance Materials 31 49 35 45 159 10.2%Consumer Markets 83 68 66 56 272 13.4%Unallocated 9 3 3 - 16Total 349 381 329 301 1,359

145 ™ Trademark, Ashland or its subsidiaries, registered in various countries

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