David Neuberger - Investor Relations James O'Brien - Chairman and Chief Executive Officer Lamar Chambers - Senior Vice President and Chief Financial Officer John Panichella - Senior Vice President and President, Ashland Specialty Ingredients Paul Raymond - Senior Vice President, Ashland Inc., and President, Ashland Water Technologies

John McNulty - Credit Suisse Michael Sison - Keybanc Capital Markets Robert Walker - Jefferies Michael Harrison - First Analysis Corp Ram Sivalingam - Deutsche Bank Dmitry Silversteyn - Longbow Research Christopher Shaw - Monness, Crespi, Hardt

Good day, ladies and gentlemen. Welcome to the Ashland’s first quarter earnings call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today’s call is being recorded. I would now like to turn the conference over to your host David Neuberger, sir you may begin.

Thank you, Shannon. Good morning and welcome to Ashland’s first quarter fiscal 2012 conference call and webcast. We released results for the quarter ended December 31, 2011 at approximately 6AM Eastern Time today and this presentation should be viewed in conjunction with the earnings release. These results are preliminary until we file our 10-Q in February. On the call today are Ashland’s Chairman and Chief Executive Officer, Jim O’Brien; Lamar Chambers, Senior Vice President and Chief Financial Officer; John Panichelle, President of Ashland’s Specialty Ingredients; and Paul Raymond, President of Ashland Water Technologies. Before we get started, let me note that as shown on Slide 2, our remarks today will include forward-looking statements as that term is defined in securities laws. We believe any such statements are based on reasonable assumptions but cannot assure that such expectations will be achieved. Please also note that during this presentation we will be discussing adjusted and pro forma results. We believe these adjusted and pro forma results enhance understanding of our performance by more accurately reflecting our ongoing business. In addition, we are providing financial results for historical ISP, representing Ashland’s best estimate of the appropriate cost allocation and shared resource cost. Reporting ISP’s results in this manner has inherent limitations and we do not represent that these financials results were calculated using the same methodology used by ISP. Please turn to slide three for our first quarter highlights. I’ll mention at the outset that the current quarter represents the first time we have owned ISP for an entire quarter. Reported earnings per share from continuing operations were $0.76 in the December quarter. When adjusted for key items, which I will cover shortly, EPS was $1.20 as compared with $0.92 in the year ago quarter. Let me note that the $0.92 in the…

Thank you Dave, good morning everyone. Specialty Ingredients had a very strong quarter and the results shown here are on a pro forma basis. So including ISP, volumes were up 7% over the prior year with particularly strong growth in our industrial markets which include construction and energy, as well as our specialty performance business which includes intermediates and solvents. Volumes declined 7% sequentially due to normal seasonal trends. Sales of $628 million were up 19% over the prior year, due primarily to significant pricing efforts in all of our lines of business. Sales increased in all of our major markets. Gross profit as a percent of sales was 33.4% in the December 2011 quarter. This was up 340 basis points over the prior year and 270 basis points sequentially. Year-over-year margin improvement was due to a number of factors including better pricing, improved fixed cost absorption, and lower manufacturing costs. SG&A of $115 million was up 6% as compared to the prior year quarter roughly in line with our underlying volume growth. Overall EBITDA grew nearly 40% over the prior year to $160 million. EBITDA as a percent of sales was 25.5%, a 370 basis point improvement over the prior year and 240 basis point improvement sequentially. I will note that this level of profitability is consistent with our long-term expectations for the business. Slide 10 shows Specialty Ingredients EBITDA bridge. Improved volumes and margins were the primary drivers of the year-over-year increase in EBITDA. Volume gains were broad-based and all regions were up versus the prior year. The greatest percentage gains were in Asia Pacific and Europe which were both up 10%. Within both of these regions we have done particularly well in the construction markets were our cellulose-based products are gaining share. Pharma has also done well…

Thank you, John. Water Technologies’ sales were $449 million, roughly even with the year ago quarter. Increased pricing of nearly 8% over the prior December quarter was offset by approximately 8% decline in volume. As compared with the prior year, regional sales trends were mixed. Europe and North America were down 3% and 1%, respectively with the printing and writing markets particularly soft. Sales in Latin America grew 4% and Asia Pacific continued to perform well growing 14%. Sales and volumes were both off 9% sequentially, due to seasonality and lower customer demand. Gross profit as a percent of sales was down 80 basis points from the prior year and 60 basis points sequentially. While pricing efforts have now put us ahead of our raw material cost, lower volumes and the associated fixed cost absorption effects have largely led to lower profitability. SG&A was unchanged versus the prior year at $117 million and was down $8 million sequentially. Roughly two-thirds of this sequential decline was due to the stronger US dollar relative to a number of foreign currencies, as well as the somewhat lower than usual bad debt charge during the quarter. As Dave mentioned earlier, the year-over-year currency effects were essentially neutral. At $40 million, EBITDA declined roughly 20% versus the prior year quarter and sequentially. The EBITDA margin in the December 2011 quarter was 8.9%, 200 basis points below the prior year and down 130 basis points sequentially. Now let’s turn to Water Technologies’ EBITDA Bridge on Slide 14. As you can see, negative volumes were the primary driver of the EBITDA decline versus the prior year. Roughly half the volume effect is attributable to the paper markets. As I mentioned, printing and writing has been particularly weak, due to a combination of no closures and extended outages.…

Thank you, Paul, and good morning everyone. Before I get into the results I will remind everyone that the prior year quarter includes the results of our Casting Solutions business that was contributed to the ASK Chemicals joint venture in December 2010. This joint venture is now reported through the equity method. In addition, prior periods have been adjusted for the ISP elastomers business on a pro forma basis. Thus while Performance Materials’ total volume was down 15% from the year ago quarter, when we exclude the effects of Casting Solutions, volumes were off less than 2%. Sequentially, volumes were down 7%, roughly in line with normal seasonality. While reported sales were down 6% from the prior year, they were up 12% when we exclude Casting Solutions. Gross profit of 19.2% of sales grew by 200 basis points over the prior December quarter and was up 590 basis points sequentially, due to the improved margins in all lines of business. All raw material costs were still elevated versus the prior year we did see some declines on a sequential basis. These raw material declines were greatest within the elastomers business which is relatively large purchaser of butadiene. We buy approximately 165 million pounds per year of those raw materials and over the course of the quarter costs fell by roughly $0.80 per pound. Pricing within the elastomers business was highly indexed and we generally push through our cost for the four to six-week delay. In total, we estimate the beneficial effects of elastomers raw material cost during the December quarter to be $10 million to $12 million. As of January, butadiene has reversed course and costs are beginning to rise. SG&A was $45 million in the December quarter, roughly in line with the year ago quarter and with our expectations.…

(Operator Instructions) Our first question comes from John McNulty – Credit Suisse. He may begin. John McNulty – Credit Suisse: Congratulations[ph] to a very solid quarter. With regard to Specialty Ingredients you had indicated a lot of the strength was in pricing. Can you walk us through the volumes and kind of what you were seeing by major end market in the volumes in that business?

Yeah, I can do that. This is John, so we had really strong gains in volume in construction and energy. Those were quite good for us. We had a little weakness in personal care. Our Pharma volumes were pretty good and our intermediate and absorbents volumes were reasonably good. So, that is kind of high level where the volume trends came from. Just to comment on personal care a bit, we are seeing relatively stable and growing volumes there and we’re in the process of adding some capacity to capture those volumes, so that is the rough rundown on the volume trends. John McNulty – Credit Suisse: Okay. Great and then kind of broader question on margins. It looks like the Performance Materials business and the Specialty Ingredients business both hit your long-term targets for margins in this quarter and I guess I am wondering how much of that maybe temporary with pricing catching up with maybe in some cases outpacing raw materials and how much of it is something that we can really bank on for the rest of this year?

This is Lamar, let me try to take that one. Really only anomaly you are seeing in those businesses we characterize as the elastomers effect and Performance Materials. We arguably had somewhere in the range of $10 to $12 million of earnings as a result of the declining cost of Butadiene in the quarter. The margins you are seeing other than that effect in both the SI and the rest of the Performance Materials are what we consider to be sustainable margins and actually as we see top line growth from this point forward we should see some positive leverage effect on that even going forward. But, we’re pleased to have those businesses performing more at the longer term levels are closer to at this point and think that is very sustainable. John McNulty – Credit Suisse: Great and if I can just ask one last question? I know in your Valvoline business, I guess last quarter, so your fiscal fourth quarter, you had some cost issues. Have you fixed all those in this past quarter or is there more improvements to come there?

When we kind of talked about January, there is a couple of things that were occurring we were getting back to that 28% that we see as kind of more of a normalized margin, so that’s running, we haven’t run rated that right now. So that implies that, we have caught up on the pricing, the cost are in line and at the same time we are starting to see volumes pickup, so I think the Valvoline business is coming back fairly strong through January. We expect them to have a decent quarter. John McNulty – Credit Suisse: Great. Thanks very much.

Thanks John.

Thank you, our next question comes from Michael Sison with Keybanc Capital Markets, you may begin.

Hey Good morning guys. Great start to the year.

Thanks Mike.

Thanks Mike.

John, in terms of ISP today that you gave us on a stand-alone was up 50% year-over-year in terms of EBITDA. Can you just remind us, what was so bad the prior year? What hit that business that it did so well on a year-over-year basis?

John, in terms of ISP today that you gave us on a stand-alone was up 50% year-over-year in terms of EBITDA. Can you just remind us, what was so bad the prior year? What hit that business that it did so well on a year-over-year basis?

John, in terms of ISP today that you gave us on a stand-alone was up 50% year-over-year in terms of EBITDA. Can you just remind us, what was so bad the prior year? What hit that business that it did so well on a year-over-year basis?

Well, I think couple of things, we saw a pretty good ramp through the year, prior year around intermediates and absorbents. So, we are continuing that trend with good volume and good pricing so that is a contributor year-over-year. And in addition, we got pretty strong volume growth in a couple of those segments and pricing is really probably an issue that we have delivered on in this quarter that above prior years, so some combination of those three things, I think is really what is driving it.

Okay and Jim, you noted that the integration synergies coming in a little bit faster than you anticipated this year for ISP, is there any upside to the numbers as maybe as the year unfolds and you head into 2013? James L. O’Brien: Yeah. We’re more concentrated on delivering it as we described and I am pleased with the speed that the team is taking, they are making the decisions quickly and I think they’re making great decisions as far as how they are going about the organization. The team seems to be very focused on the market and as we kind of just stated in the acquisition of ISP, this is more about growth than it is on cost savings. So, I would anticipate us delivering what we said we would deliver and hopefully we can deliver the plus on the growth side and deliver EBITDA that way.

Okay and the last question in terms of, if you could just frame up seasonality for ISP as we head into the remaining three quarters of the year, just this quarter tends to be little bit stronger or a summer quarter is that type of sort of a picture?

This is Dave Neuberger, I’ll take that one. For Specialty Ingredients overall and just to mention that is how we will be reporting the majority of that business going forward. That business was off a bit sequentially from Q4 to Q1, that was well in line with the historical consolidated business. We would typically expect to see a small volume pick up from Q1 to Q2, that usually at the earnings line, it is relatively neutral. If you are concentrating on the ISP business overall, the only other remark there to make is just to echo Lamar’s comment that was about $10 to $12 million in that 120 million due to falling Butadiene cost, but other than that it should be relatively stable with seasonality.

Great, thank you.

Thanks Mike.

Thank you, our next question comes from Laurence Alexander with Jefferies, you may begin. Robert Walker – Jefferies: Good morning this is Robert Walker on for Laurence.

Good morning Rob. Robert Walker – Jefferies: Good morning. I just thought to clarify briefly, should we assume there are no changes to your 2012 free cash flow outlook of 200 to 250 million?

Yeah, this is Lamar. That is a correct assumption, that is our internal view. We did have a significant use of cash as we noted in the December quarter primarily around working capital levels as we analyze our working capital targets with fresh eyes. We still feel quite comfortable with that total year free cash flow expectation of around $200 million. Robert Walker – Jefferies: Great and then on Valvoline, did the December 31st price increase fully stick? And, did the 28% margin rate you guys mentioned include the full benefit from lower base real prices that hit the P&L of January 1?

Yeah, when you look at the pricing. The pricing is still under discussion because the drop in the raw materials obviously had some impact in people’s view of what the margin should be or how you want to describe that discussion. And. But we are pleased with the timing of the two because our target was getting back to more historical margins and we will continue to try to get the pricing that we believe our products deserve by as far as that 28%. It is a combination of price and also that drop in the raw materials (inaudible). Robert Walker – Jefferies: Okay. Thanks and then, (inaudible) ask on ISP. How much should we expect capacity to increase from Q1’s level over 2012? And, how much do you expect to spend roughly? Thank you.

So, this is John on capacity with ISP, we have announced four programs, while three for heritage ISP and those three programs around PVPP, Peroxydone and (inaudible), we think we’ll contribute 80 to 90 million of revenue and we were in the process of launching those. We’ve got several others that we will be communicating during the upcoming quarter. So, we have a very active program there. In total, we think we’ll spend about 50% of the capital budget on the heritage ISP, maybe a little bit more 55% in the fiscal year. Robert Walker – Jefferies: Thank you very much

Thanks Rob.

Thank you. Our next question comes from Michael Harrison with First Analysis, you may begin. Michael Harrison – First Analysis: Hi, good morning. Just wanted to ask a question on Water Technologies. You noted that you expect to gain share in industrial markets, I think now going maybe some earlier competitors would say that they also expect to take some share, so just out of curiosity. Where is all this share going to come from and sort of what gives you confident that that is the direction you guys are heading in those industrial markets?

Sure. This is Paul Raymond and I’ll take that and please note that comment is specific to a couple of the industrial markets that we called out at the analysts day which is pulp, mining, and food and beverage. Those were actually collectively our strongest performing markets even though they are strong performing and we could grow relatively a low in share today so, meaning that there is a lot of opportunity for upside for us. So, we’ve organized our business such that we can focus on delivering new things in those particular markets so that particular remark was focused on those markets and actually in the quarter those collectively were our strongest performing markets. Michael Harrison – First Analysis: Just to get back to the question of where the share is going to come from though, I think I’ll now go with the companies that historically attempted to focus on taking share from smaller competitors with smaller customers and was not successful in doing that, is that where do you guys think you are going to be more successful in gaining share or do you think it is going to come from some of your base[ph] competitors potentially?

Why, I think most more than likely it is going to come across board again we’ve shared information that shows relative estimated share, for instance contrasting the paper industries or paper markets versus the industrial market and show that in the paper industry we have somewhere around 20% share of that market which we are very comfortable with and successfully executing, tissue towel for instance had a relatively strong quarter which demonstrates when in those markets that we can actually perform well. When we look at the similar data for industrial we are low single digits and so just because of our relatively lower share there, there is a lot of opportunities out there for us to win business and that is for instance OnGuard as I mentioned in the remarks has been very successful for being only in the market a couple of months having 100 wins in the quarter, we’re really really excited about that and it is differentiated and so it is delivering value, it is going into those places where we’re really good, but have relatively low share position that provide opportunity whether it comes from Nortco[ph] or anybody else, it is a matter of how we sell to that customer and to that market. Michael Harrison – First Analysis: Got it and then maybe a question further more on the elastomers piece[ph] of performance materials. I am just trying to frame up what is a more normalized performance going forward. You mentioned that $10 million to $12 million sort of unusual raw material benefit, but just in terms of that timing of maybe how we should see that reverse. Is it something that is all going to go only during the March quarter? Would it be more gradual than that? How is Butadiene going affect that business?

That is a good question Mike. I think as we see the landscape today based on what we know about cost trends and of course the pretty highly indexed nature of our pricing in that space. We would expect that $10 million to $12 million to go away for the March quarter. So, what we always hope for more positive trend or additional tail winds, our best expectation at this point will be that effect would go away. Michael Harrison – First Analysis: Okay and then hopefully quickly on that Valvoline business. You mentioned that you think you are seeing customers delaying maintenance. Do you think this is temporary issue related to the economy or consumer weakness, but do you think this is maybe the acceleration of a trend that we have been seeing over many years toward longer changed intervals.

We monitored this over the last several years, when gasoline gets up to that $3.50 to $4 range. It does drive consumer behavior and their driving patterns. We have kind of seeing that has been more reflective of it in just extended drain being the real predictor, although extended drain is something that is a longer term trend, but that is flattened out I think over the last couple of years. So, we are really dealing with more of the consumers of free cash to spend on maintenance and other areas around their car. The one positive, we have going is that the, the car park or the age of the cars in the fleet are ageing and I think it is over a 11 years now, the average age of a car and that’s kind of the sweet spot for Valvoline as far as the constituent [ph] that would buy from us. So from that stand point it is a good trend and we are very hopeful and as we saw in January, we are starting to see things pick up. So I think what happened is people would delay the winter maintenance, what they normally would do between Thanksgiving and Christmas, they are now doing it in January. So it is more of a one month delay I think than it is a permanent trend. Michael Harrison – First Analysis: Got it thank you very much

Thanks Mike

Thank you. Our next question comes from David Begleiter with Deutsche Bank, you may begin. Ram Sivalingam – Deutsche Bank: Hi, good morning. This is Ram Sivalingam sitting in for David. You guys mentioned some improvement in the construction end markets for your Specialty Ingredients, just curious to know how much of that was based on share gain in Cellulose-based products and how much of that is broader end demand coming back? And also just your expectations for the rest of calendar 2012 on end demand.

Yes, so what we are seeing is some pretty strong growth in methylcellulose sold into the construction end market globally, driven by Asia and Latin America. Europe is relatively stable, but we are seeing very nice growth in Latin America and Asia and it is really primarily methylcellulose that is driving it and it is not other additives. So, we are seeing very nice growth there. Our plants are running at the capacity in that business and so the market is tightening up for all global suppliers. Ram Sivalingam – Deutsche Bank: Understood that is very helpful. And then just to be clear on Valvoline, have you now with margins normalizing, recovered all of the 2011 based oil price increases?

Yes, we believe we are at parity now. Ram Sivalingam – Deutsche Bank: Understood, thanks very much.

Thank you. Our next question comes from Dmitry Silversteyn with Longbow Research, you may begin.

Good morning guys and congratulations on picking the year off to such a good start. Couple of questions, if I may, on the Water Technologies business, I mean, we have seen the profitability of that business erode by about 50% if you look at the profit dollar over the last year versus fiscal 2010. Raw materials were a big part of the story in 2011. It looks like you are getting some pricing there, so that’s improving. Is the raw material situation improving? Is it just getting overwhelmed by decline in volumes or is there something going on with raw materials or your own pricing where it will take you longer to recover profitability in that business than previously thought?

This is Paul, I will take that. In realizing 2011, we really took as a first priority to make sure our pricing are caught up with the increases in cost and I am really proud of the team and the pricing discipline we put in place. When we look at the data both year-over-year and sequentially, we fully covered all the cost increases in raw materials through pricing. So we really lit [ph] that issue. Now the challenge is to get more volume. You can see the declines in volume that we have experienced and so, I am really comfortable that the team has the pricing process and the pricing discipline in place and so that’s really what affected us in 2011. And now what we are doing is going out and dealing with some of the market challenges, for instance, we mentioned printing and writing and that one had a particularly challenging quarter and going and then addressing the challenges that we face in those end markets and growing volumes. So, we are really pleased with how we have done on pricing versus cost and expect to continue that discipline.

If the pricing fully covers your raw material inflation, is the recovery in volume is what it is going to take to get to double-digit operating margin in that business, is the volume leverage that’s strong in fixed costs? What is the fixed cost component of your overall cost in that business? I understand it is higher than in some of the other businesses that you have.

Well, rather than addressing it specifically on the fixed cost, let me just address the two separate levers that are key and this is consistent with what we have talked about for 2014. One, is of course is over arching volume, I think we really experienced some seasonality, as well as some near term weakness in volume, especially in December. As we mentioned, it looks like a lot of our customers backed off on production, specifically in December. So, there is some volume recovering. In addition there is a mix component to that and so we expect to have volumes be stronger overarching but also, we are focused on doing better in our process in utility water business, those are end markets such as pulp, mining, food and beverage and some of the higher value applications that we have on the process side of the business. So it is part volume but it is also mixed improvement.

Okay. Alright, thank you. Secondly talking -- switching gears to the consumer technologies or consumer markets business, you have shown a pretty good sequential improvement and profitability there and if I heard what you said correctly, it was done without the benefit of lower raw material cost, it was basically pricing kicking in and raw materials being flattish. On the other hand you are talking about raw materials declining now, in what looks like March quarter, so should we expect another step change in profitability of Valvoline as we get into the kind of the middle months of the year and get better driving or miles driven volume behavior out of consumers?

No, maybe I wasn’t clear. When I said there were parity, the raw material drop we had it really brought us that 28%. So, we covered to the levels that we were targeting and we are there. So, you should not expect another improvement from that stage. What we did say though is that the volume should pick up for this quarter and pickup through the year. So the improvement in the profitability will come through increased leverage or increased volume not through increased margin.

Okay. So, you did see raw material relief in the December quarter in your numbers?

This is David. Just to be clear, the cost fell for us effective January 1.

So that was a forward looking number of 28%.

Okay. So my earlier point is still valid that in the March quarter you should see sequential raw material relief which will help you with margins versus what you delivered in December quarter.

Right. 20% December, 28% going forward.

Got it. Okay. And then final question and this is just – I don’t know if you call it a bookkeeping question or just – I don’t know. You don’t provide guidance but you provide kind of three months rolling, the average is for some other metrics in your business. If you kind of look at which you have delivered as of November, which the last month, we have in margins for Valvoline and for Water Technologies business, what happened in December to drive the Water Technologies margins so far down versus what they were on the rolling average in November and conversely, what happened in December to spike up the margins in Valvoline versus the levels that we saw you deliver in November on rolling three month average. I mean, the discrepancy just seems to be quite significant, so I am just wondering what’s going on there.

Yes, as we had mentioned in the remarks, the December month was particularly weak for us and weaker in the higher margin products. So there was volume and mix in there, so that’s what really drove that. And at some point when you, the volume gets lower, then you do have a challenge in terms of fixed cost absorption. And so that’s what happened in December. As we mentioned in January, the volumes are encouraging. So we would expect to pickup from there.

And this is Dave Neuberger. I’ll take the Consumer Markets question. There it’s a three-month rolling average that caused that – within the results. So the month of September in and of itself was a little weaker than average. So when the September rolled off the three-month roll, you saw that increase with the December numbers.

Okay, alright. So, I mean, in the fourth quarter you delivered gross margin of about 30.5% in your Water Tech business and through November it was 30.3%. So, virtually flat, but then what you are saying is December was such a disaster that it pushed your profitability level in Water Tech down points, rather than basis points?

I wouldn’t call it a disaster but it was definitely weaker.

Yes.

Alright. Thank you.

Thank you. And I think we have time for one more question.

Thank you. Our last question comes from Chris Shaw with Monness, Crespi, Hardt. You may begin.

Good morning, guys. Thanks for taking my call. One quick follow-up I guess on what Dmitry was asking, did you guys get the full implementation of that last price increase in Valvoline?

When we were reporting through that price increase, through the negotiations we had to balance in the decrease of raw material cost with that price. So we didn’t recover the full amount, but we recovered some.

So, when you say 28% margin looking forward, that’s going to be both from the pricing and there is some drop in raw material on base oil?

That’s right. So, I am saying, that’s kind of the parity price and that’s when you should kind of forecast going forward, sorry in the January.

And then just – quick one, on ISP, I remember I think someone characterizing that they have been, prior to the acquisition, lagging behind in pricing a bit. Have you guys caught them up on that or is that something you are going to be seeing throughout the rest of the year?

We made progress on that during the quarter, we still have work to do and we’ll see slow improvement in that as we proceed through the year.

Okay. Thanks a lot.

Thank you, Chris.

Thank you. I would now like to turn the conference back over to Mr. Neuberger for closing remarks.

Thank you again for your time this morning and thank you for your interest in Ashland. If you have any additional questions please feel free to give me a call at 859-815-3527. Thank you.

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. Have a wonderful day.