Welcome to the Ashland Inc. Second Quarter Earnings Conference Call. [Operator Instructions]. I would now like to introduce your host for today's conference, Mr. Seth Mrozek, Director of Investor Relations for Ashland Inc. Sir, you may begin.

Thank you, Chanel. Good morning and welcome to Ashland's second quarter fiscal 2016 conference call and webcast. We released preliminary results for the quarter ended March 31, 2016, at approximately 5 PM Eastern Daylight Time yesterday, April 26 and this presentation should be viewed in conjunction with the earnings release. Additionally, we posted slides and prepared remarks to our website under the investor relations section and have furnished each of these documents to the SEC in a Form 8-K. On the call today are Bill Wulfsohn, Ashland's Chairman and Chief Executive Officer; Kevin Willis, Senior Vice President and Chief Financial Officer; Luis Fernandez-Moreno, Senior Vice President of Ashland and President of the Chemicals Group which includes Ashland Specialty Ingredients and Ashland Performance Materials; and Sam Mitchell, Senior Vice President of Ashland and President of Valvoline. As shown on slide 2, our remarks include forward-looking statements as such term is defined under U.S. securities law. We believe any such statements are based on reasonable assumptions, but cannot assure that such expectations will be achieved. Please also note that we will be discussing adjusted results in this presentation. We believe this enhances understanding of our performance by more accurately reflecting our ongoing business. When discussing Ashland Specialty Ingredients, we also refer to core markets. These are the highly differentiated markets of personal care, pharma and coatings which we identified during our November 2015 investor day as core platforms for targeted growth. In addition, two weeks ago we announced an update to our separation plans, including our plan to IPO up to 20% of Valvoline. We understand you may have additional questions about our plans; however, we're now in registration under U.S. securities laws and there are strict limitations on the information we can share with you prior to filing a registration statement. We expect to file a registration statement in mid calendar-year 2016. I will now hand the presentation over Bill for his opening remarks.

Thank you, Seth and good morning, everyone. Earlier this year, during our first quarter earnings call, I referenced Ashland has established four core priorities for fiscal-year 2016. First and foremost, our priority is to keep a strong focus on executing at a high level on our core strategies and business plans. To that end, during our quarter we outlined our expectations for each of our business segments and the Company in total. I'm pleased to share with you this morning that during our second fiscal quarter all three businesses performed at or above the estimates we shared with you during our Q1 earnings call. In addition, as we will discuss later, our estimates for the remainder of the fiscal year remain unchanged and are aligned with these estimates. From an operating perspective, Valvoline had a record second quarter. As Sam will describe in a few minutes, the Valvoline team drove strong performance across the business. The ASI team delivered results in Q2 which were above the midpoint of their estimates. As Luis will share with you, headwinds in the quarter from energy-related end markets, FX and divestitures were much lower than in the prior fiscal quarter. In addition, we expect those headwinds to further abate in our third fiscal quarter, before we ultimately lap them in Q4. Finally, the Performance Materials business was ahead of our expectations, albeit at a low relative level due to continued weakness in their intermediates and solvents end markets. All said, in the aggregate the combined results exceeded our previously communicated expectations. From a strategic perspective, we're keeping a laser focus on driving innovation, commercial excellence, world-class operations and focused capital deployment. The Ashland team is aligned with these priorities and is executing at a high level. During the quarter, Ashland received a top innovation…

Thanks, Bill and good morning. Yesterday, we reported GAAP earnings from continuing operations of $1.38 per share. When adjusted for key items, earnings per share were $1.83, a 10% decline from prior year. In the aggregate, Ashland generated adjusted EBITDA of $274 million. ASI reported continued growth and notable business wins from new technology applications in several core end markets. We saw improved demand in developed regions, especially as the quarter progressed. These were offset by weak emerging markets. Performance Materials returned another solid quarter, due in large part to pricing discipline amid a favorable raw material cost environment. Valvoline continues to execute at a high level and delivered yet another record quarter of profitability. As expected, the headwinds we had faced for a number of quarters from foreign exchange, weak energy markets and divested product lines began to recede. The year-over-year impact from these headwinds to both sales and earnings was substantially less than last quarter. We see these headwinds further abating in our Q3 and lapping them by Q4. While we remain cautious about customer destocking and evidence of trading down in emerging markets, we're encouraged by the relative strength we're seeing in the developed regions and the improving trends demonstrated throughout the course of the second quarter. Now for a few corporate items. During the quarter, our effective tax rate, adjusted for key items, was 22%. For 2016, we continue to expect our full-year tax rate to be at the upper end of the 24% to 26% range. Capital spending in the quarter totaled $50 million. We continue to expect capital spending this year to be in the range of $320 million to $340 million, driven by our previously announced capacity expansions at Hopewell, Virginia and Nanjing, China, to support growth in our value-added cellulosic technologies. In addition, we're continuing the investments to upgrade Valvoline's digital marketing and infrastructure. Free cash flow in the quarter totaled $134 million. The increase over last year was due primarily to the timing of cash tax payments and working capital. We continue to estimate free cash flow of approximately $325 million to $350 million for the full year. As Bill mentioned, during the quarter we completed the previously announced $500 million accelerated share repurchase program. We repurchased approximately 5 million shares at an average volume weighted price of about $99 per share. At this time, we have no current plans to pursue additional share repurchases under the existing authorization. Regarding our outlook for the second half of the year, we're aligned with current consensus adjusted EPS estimates, but note that our tax rate could go higher if the income mix is more North American driven. With that, I will now hand the presentation over to Luis to provide more color on the results for the chemicals businesses for the quarter.

Thanks, Kevin. Good morning. Overall, I'm pleased with the progress we made during the second quarter, as Ashland Specialty Ingredients sales of $529 million were at the upper end of our expectations. We continued to face headwinds related to energy markets, divestitures and FX, but the year-over-year impact was much lower than the previous quarter. We continued to see share gains in our core markets, like pharmaceutical, coatings and hair care. Growth in the high margin business, together with our productivity initiatives and price discipline, resulted in EBITDA of $127 million at a strong 24% of sales. Even as we saw improvement in business conditions as the quarter evolved, especially in mature economies, we continue to see a slowdown in emerging markets, like Brazil and China. This slowdown impacted the consumer specialties business, where sales declined 6% or 4% when adjusting for currency. The oral and skin care markets were most impacted, as consumers in emerging regions traded down to lower-cost products and our customers continued to manage their inventories. Within industrial specialties, sales declined 13% or a currency adjusted 12%. The previously mentioned headwinds accounted for the majority of the decline. Energy sales declined 57% versus the prior year, but volumes appear to have stabilized. Within coatings, we captured new businesses from several customers in North America and Asia. As we expected, adhesives returned to low single-digit growth. Looking to the third quarter, we expect to see continued benefit from sales and productivity initiatives and growth from the higher-margin core growth end markets. We expect to substantially lap the headwinds from currency, energy and divested product lines, assuming foreign-exchange rates remain at the current levels, particularly the euro at $1.13. We estimate third quarter sales to be in the range of $555 million to $575 million. Adjusted EBITDA for…

Thanks, Luis. Valvoline reported yet another record quarter. Strong results across the businesses continued, with volume growing 8% and EBITDA also rising 8% to $115 million. EBITDA margin was 24%, a 200 basis-point increase over the prior year. Total sales were flat at $479 million as strong lubricant volumes and product mix were offset by pass-through pricing from lower raw material costs and currency headwinds. Volume to customers serving the DIY market grew by 8%, driven by strong seasonal promotions and expanded distribution arrangements with national retail accounts at Walmart and Menards. At Valvoline Instant Oil Change, same-store sales rose nearly 10% at Company-owned sites. We also experienced strong results in oil changes per day and mix of premium oil changes. In addition, as expected, during the quarter we closed on the acquisition of Oil Can Henry's. As of March, Valvoline Instant Oil Change had a total of 1,052 Company-owned and franchise stores within its network, a gain of 120 stores versus a year ago. This includes the 89 Oil Can Henry's stores that we acquired. We're very pleased with the integration progress as we bring these stores on to our operational system. Within Valvoline's international channel, volume grew 10%, driven by good execution of channel-building efforts. Volume growth in Europe, Asia and within our India JV was especially strong. Valvoline's overall mix continued to improve, with U.S. premium-branded lubricant sales volume increasing to 44.6%, a 390 basis-point improvement from the year-ago quarter. Looking to the third quarter, we expect to continue our solid performance across all channels in what typically is our strongest seasonal quarter. We expect sales to be in the range of $500 million to $510 million and EBITDA margin to remain healthy in the range of 23% to 24%. I will now turn the call over to Bill for his closing remarks.

Thank you, Sam and congratulations on a record second quarter. Looking forward, we remain committed to and focused on our four core priorities. Operationally, our outlook for the remainder of our fiscal year remains unchanged and, as Kevin articulated, in line with current Street estimates around EPS. As Luis highlighted, within ASI we see recent headwinds abating. We're looking forward to getting those behind us so we can more clearly show the underlying strength of our core business platforms and our competitive strategies. Also, as Sam shared, the Valvoline business remains strong. As for our second core priority, as Kevin mentioned, we're on track to deliver $325 million to $350 million of free cash flow this fiscal year. Thirdly, from a capital allocation perspective we will remain disciplined. It is our priority to create two great companies. With that in mind, we're working to strengthen our balance sheet and we don't have any current plans to utilize the remaining $500 million of our Board share purchase authorization. I want to make sure we leave time to answer your questions, so I will bring our comments to close by emphasizing, one, the Ashland team is executing at a high level across each of our four core priority areas. Two, in the second quarter we performed better than we anticipated at the start of the quarter. Three, our outlook for the remainder of the fiscal year is unchanged. And fourth and finally, we remain on track to separate into two great independent companies on budget and on time. Thank you for listening in on today's call and I will now turn the call over to the operator to take your questions. Operator?

[Operator Instructions]. Our first question comes from the line of Mike Sison of KeyBanc. Your line is now open. Please go ahead.

First question to Sam, it's been a long time since I have seen 8% growth in gallons for Valvoline. That's great. Can you maybe talk about sustainability at that level? I know there is, I think, oil cans in here a little bit, but when you think about the next couple quarters and next year, what type of growth rate do you think you can sustain?

Yes, 8% indeed was a very strong volume growth quarter for us and certainly I was pleased with that. We saw the performance across all aspects of the business, but it is a higher growth rate than what we expect out of the business and what we have shared in the past. Go back to investor day, 8% is really close to double what we would expect our longer term volume growth rates to be. But we benefited, as I noted, from particularly strong DIY performance, with very good promotional execution, picked up some new distribution which is always helpful and then good strong performance from international business and that's a business that we do expect to grow at a higher rate. And, of course, the quick lube business with the addition of Oil Can Henry's was helpful.

Okay and then, Bill, when you think about the chemical businesses in total, it is the first time in a while that it has really performed well relative to expectations and it sounds like you are confident enough to maintain the outlook for the second half of the year. Anything in particular when you take a look at ASI and Performance Materials that gives you confidence that you're still on track for 2015? 2016, I'm sorry.

Sure and clearly over the last year, the headwinds that we have talked about related -- some are very visible, like the FX. We see the exchange rate change and so forth. Others, where we have divested or exited specific product lines, are a little bit harder to see as you sit there. And so, we see that beyond that the businesses had some very strong performance across a variety of dimensions and continues to move forward on the core, very strategic platforms that we have within the business. And so from my perspective and I think shared by the whole team here, as we put those behind us, then you begin to see more or less the real performance of the business and the business that is the basis for us moving forward. And that's really what is driving our sense of comfort and confidence that we will see improvement in the business, basically, it is lapping those headwinds.

And our next question comes from the line of Christopher Parkinson of Credit Suisse. Your line is now open. Please go ahead.

You mentioned some pressure from emerging markets regarding trade down, destocking, et cetera, although you noted it got better in the quarter. Can you just talk a little bit about these trends and how long you think they will last, et cetera and whether or not you have any new products in oral and skin care to launch in the back half of the fiscal year? Thank you.

Just to provide a little bit more detail, what we're seeing in places like China and Brazil is that the consumer is picking some of the lower-cost brands in the marketplace and as we normally participate in the higher value-add products that our customers make, that has had an impact on the short term demand of our products. My perspective is that those people trading down is not necessarily a long trend, so I would expect that as time evolves and people feel more confident about the economy on those geographies, they will get back to the better products and that is expectation. The second element is on innovation and we continue to work on not only developing, but introducing, new products in the marketplace. We have a very strong pipeline of innovations coming that we have been introducing. As Bill mentioned, we just got a recognition at the in-cosmetics show for a new product that we introduced last year and we expect the benefit of those new product introductions to start hitting our ability to grow faster in those markets. The trading down is very much a trend that we're seeing in places like China and Brazil more than anything else.

And just in the longer term, as far as reaching your longer term margin targets for ASI, can you just talk a little bit about how growth in comps are evolving versus your original expectations and also how much new product growth as a percent of your mix is integral to these targets? Just in general, anything about your projected growth mix and pipeline would be appreciated. Thank you.

Sure. We're currently at a 23% to 24% EBITDA margin. Our expectation or where we expect the business to be is between 25% to 27%. The way we're going to get there is, first and foremost, we continue to enhance our growth in our high-margin products which are the newer, the more differentiated product lines and as we gain businesses on those, we get the benefit of that higher margin. That is mostly driven by new products and innovations. The second element of the equation is we also work on productivity initiatives to make ourselves more competitive in the marketplace and that is driving also the margin improvement. When it comes to timing, we're somewhat delayed, mostly due to the headwinds that we discussed in the past around FX and energy, but the long term target hasn't changed and we expect to get there in the future.

I would just add to Luis's comments by saying, as you may recall from our investor deck, we really tried to outline those core areas which are the primary focus areas for growth and differentiated, combined with certain parts of the niche segment which are also very differentiated. And what the ASI team has done a great job of is orienting a lot of their sales, a lot of the capital investment and a lot of the innovation effort around those areas. So in the future, while we haven't stated a number, we would like to and expect to see that portion of the portfolio, that core and niche portion, grow relative to the foundational and that in and of itself will also help to move the business forward on a mix basis.

And in addition to that, as we do grow the topline at what we expect to be a faster rate going into the future through this innovation pipeline, we would expect to create leverage at the SG&A line. The team has done a really good job with cost discipline and continues to do so and we will remain very, very focused on that going forward.

And our next question comes from the line of David Begleiter of Deutsche Bank. Your line is now open. Please go ahead.

Bill, back in November you commented on composites that if it could improve margins, you think it would likely be retained. I know it is early, but halfway through the year, is this business on track in your mind to be retained? Is it showing that margin potentially you think you need to be to stay here long term in the portfolio?

So, first of all, the reference point I think that you're mentioning is the comments around as we move forward with the separation. We think this is, if you will, the right set of businesses to relaunch the chemicals business as a new entity in enterprise and that we have seen and remain optimistic that the composites business will see margin improvement because they are focused on differentiation. If you will, the marketplace is changing and consolidating, so with that we're optimistic about the trends that we're likely to see in the intermediate to long term. What was also said is that when it comes to the foundational portion of the business, it is an important part of our overall system and it helps to produce, for example, North American cash which is valuable. But at the same time, we're going to continue to evolve the Company. We're going to continue to reflect upon not just composites, but all of our businesses and just as the Company has done in the past, I think we will make the right kind of decisions about what best fits over time in our portfolio and what we ultimately might like to get into, as well as other areas that might not have as strong of a fit. So, again, that answer is more general than specifically for the composites business, but I think it is applicable in broad thinking. We very much like the way the business is being run. We think we have really a great cost structure within the business, but we also recognize it is not the highly differentiated specialty chemical type business, mainly because it is a big portion of the customers' overall end cost and so there is more price sensitivity in that area. So I hope that gives you a broader perspective on the issue.

And Luis, just on your ASI, as oil prices move higher now, what is the impact on your business in terms of either pricing, volume, competitive position? How do you view that?

When it comes to ASI, just as we have seen over the past, from a raw material perspective ASI has little impact when it comes to oil prices, both on the way down and the way up, when it comes to margins. So, it may be a small impact, but it is going to be really muted. When it comes to composites, the story is very different. Composites, oil is a big impact on the raw material costs and we traditionally have been able to either pass the price increases or have to pass the price increases over time. So I'm not concerned on the long term EBITDA dollars generated by the business, but as oil prices go up and if they go up too fast, it is just the impact of the price lag which impacts every chemical business that has that raw material exposure. But the overall long term, the margins, I think that we have moved the margins in a place that I feel very comfortable that we will keep, even as oil prices go up.

And our next question comes from the line of John Roberts of UBS. Your line is now open. Please go ahead.

Could I ask how your API sales are distributed between the global consumer product firms in pharma versus the local and regional firms? I ask that because I think the local and regional customers have been significantly outperforming the more global firms and I think it is the big global firms that have been doing destocking and cost-saving programs.

So that's a good question. Number one, we actually don't sell APIs into the pharma market. It is excipients, and the reason--

No, I meant Ashland performance ingredients.

What's that?

ASI--

I understand now. Sure. But the reason I mentioned that they are excipients is because we sell to both branded products, as well as generic materials and we normally don't publish size, the split between how much goes into the branded products versus how much goes into the generics. But we have continued to make a large investment on the generics side to make sure that we're able to participate in both ends of the market. And when it comes to the consumer side on the personal care side, you are right that a lot of the actions have been taken by the large global companies, but we have seen also some level of inventory management by the smaller companies.

Just to add a little more color also to what Luis mentioned, it was a month or so ago that Kevin and I traveled to India and the team has really done a nice job to set up a local lab that can support the local producers. We had the chance to meet with one of the larger companies which is primarily focused on the generic market, if you will and I would say it is fair to say that they viewed us as a strong partner with our labs helping and working together to really make both companies successful. So I think as that trend emerges more and more, I think we're well positioned to move with the market.

For example, IFF talks about half of its sales roughly being to large global customers and half being to local and regional customers. Is there a way to think about a cut for your business along those lines, approximately?

Well, as Luis mentioned, we really haven't shared in the past that level of detail and rather than try to cite a number now, ultimately we will be as we, if you will, emerge and discuss more specifically the new Ashland, this might be a clarification that would be good to provide in that context.

And our next question comes from the line of Jeff Zekauskas of JPMorgan. Your line is now open. Please go ahead.

Valvoline's volumes grew 8%. Was half of that due to Oil Can Henry's?

No, it wasn't. Oil Can Henry's, while it contributed, was a relatively small part of the volume growth for the quarter.

2%?

Less than that.

Less than that, okay. Are there planned price increases for Valvoline, now that raw materials are going up or with the way that margins have been going and you have been benefiting from raw materials in various ways, there are not planned price increases?

Price increases in our pricing model, Jeffrey shared some detail around that back in January 2015 and when we look at the third quarter, our prices will adjust accordingly for some of the contractual accounts, as we had shared. So, as raw material costs move up or down, that certainly affects those contractual prices.

And Jeff, this is Seth. Just as a quick follow-up to Sam's comment, given that we're now in registration with Valvoline, we're not in a position to comment on those dynamics beyond the Q3 time period.

I see. Okay. Can you clarify your share repurchase intentions? I think you said that you are currently not planning to buy back any more shares. I guess that means for the coming quarter. Do you have a time frame at which you wish to complete your $1 billion buyback or there is no time frame?

Well, the authorization expires in December 2017. As we said in the remarks, we don't have any current plans to repurchase shares as we move through the separation process.

So do you plan to complete it by December 2017 or you don't?

At this point, we haven't come, if you will, to a conclusion about that, but we do think that right now as we're going through the separation, the focus is on really strengthening the balance sheet and making sure the two respective companies are strong companies. And so, we just don't have any specific plans, so it's hard to reference what those plans could be further down the road.

I do think it is probably noteworthy that since August 2014 we have repurchased almost 17 million shares at an aggregate cost of just north of $1.8 billion, so you combine dividends with that over the period and we're about $2 billion of capital returned to shareholders since late 2014.

Just one final question. Last year, if you could remind me, how fast did the DIY business grow in the second quarter? If it grew?

I do not have that handy right now, Jeff.

And our next question comes from the line of James Sheehan of SunTrust Robinson Humphrey. Your line is now open. Please go ahead.

On Valvoline, you have mentioned in the past that the best metric to be focused on in terms of profitability is the profit per unit. Could you give us a little color on where that metric would stand today and what your outlook is going forward in the second half?

This is Bill. I will start off as the comment I think I had I'm sure Sam has referenced as well. But the context for that is and the answer around that is really that as oil -- because there is a lot of question about oil prices and the impact on margins and if oil changes fundamentally either higher or lower, what will that do in terms of your percent to margins. And so, the reference point is when we look at gross profit, we really focused on trying to improve the profitability per store, the profitability per gallon and the business has had a strong historical trend of improving that and improving that through different points of the cycle when oil prices have gone up and when oil prices have gone down. And so, it is difficult to predict what will happen with oil prices in the future. Certainly it's our objective to continue that trend. So, that's really the reference around that. We haven't shared, I don't believe, a table or a chart which, once again, may be something that we can look at in the future, but that would get to this profit per unit or gallon or quart, however it should be best represented, because it is a better metric in the sense of understanding the underlying improvement in the business versus what is happening with oil prices which, as you know, is such a big part of the overall cost of goods sales.

No, that's the right answer. Our percent margins are higher today because of the reduced, not only the reduced oil cost, but our reduced prices and if prices move up, then certainly that has an impact on the percent margins, but we're very focused on managing those unit margins.

And you mentioned you're pleased with the integration of Oil Can Henry's. Could you talk about how that integration is going, give us a little more color on that and what kind of accretion, if any, are you baking in from Oil Can Henry's in 2016 and 2017?

Yes, I can really only comment on the integration work and I'm very pleased with the work of our teams. The Valvoline team has worked closely with the team out at Oil Can Henry's and they are a talented team and they're learning fast and essentially we have completed the conversion of all the Company Oil Can Henry's stores to the Valvoline point-of-sale and operational system and that has gone exceptionally well. And so, the next phase will be completing the conversion of the franchise stores later this summer.

I want to be clear and just to emphasize what Seth said, because we want to answer your questions. There are some limitations now and it makes it difficult to talk about next year and the year after that. There will be a time for that, but right now, based upon the IPO process, we just can't speak to that. So we're not trying to avoid giving you a more fulsome answer as it relates to the future.

And our next question comes from the line of Dmitry Silversteyn of Longbow Research. Your line is now open. Please go ahead.

A couple of questions on the ASI part of the business, you talked about adhesives and coatings growing for you and adhesives getting back to low single-digit growth on a year-over-year basis. How did your coatings business do and did you see a significant difference in the results between the faster growing Asia-Pacific market? It's still the faster growing market for you, but you also mentioned picking up some business in North America and elsewhere. So, if you look at regionally at your coatings business, is it now, I guess, a little bit more stable in the sense that it is getting growth from more than one geography?

Yes, a couple of comments on that. The coatings market actually for us during the quarter was flattish. Having said that, what we're seeing is tremendous gains on market share and the trends in the short term have been that developed markets are doing very well. They're growing, but they are being compensated by a slowness in the emerging markets. So longer term and what we're seeing and what we're forecasting is that coatings will continue to show healthy growth in the 3% range and we're, as I said, gaining share as we get new businesses from new products. The adhesives business, as I've mentioned in the previous call, is mostly a North American business and not in Europe, so because that is in the developed markets which are doing well, that continues to do very well.

Okay, so Luis, if I understand you correctly, your business in emerging regions actually declined in coatings year over year?

For the quarter, we had a slight decline in those regions, for the quarter. But, again, I don't think that's a long term trend.

I don't disagree. On the Valvoline side of the business, you mentioned approximately 10% growth in Company-owned stores on Valvoline Instant Oil Change. What was the growth in franchisee stores? I guess I'm just wondering why you called out Company-owned stores. Was it different for franchisee stores?

Well, first of all, the 10% growth largely driven by the Oil Can Henry's stores, the 89 stores, so we had total store growth of 120 stores.

I'm sorry. I'm still talking about volume growth on a year-over-year basis. You talked about [indiscernible] being up 10% in--

Yes, that was the same-store sales performance for our Company stores and that's a number that we refer to fairly often as a good indication of how the overall system is performing, too and typically our franchise stores are performing very close to the Company stores and that was indeed the case in the quarter.

Okay, that's all I was trying to make sure, that there was not a big discrepancy between Company-owned stores and franchisees, that's all the questions I have. Thank you.

And our next question comes from the line of Laurence Alexander of Jefferies. Your line is now open. Please go ahead.

Two quick ones. For ASI, you call out a few different areas with some share gains. Can you give us a sense for what that means in terms of your year-over-year sales growth once you have lapped those as a run rate basis? Is that going to add 1% or 2% to sales or is it going to be smaller than that? And secondly, when you lap the energy headwind in the back half of the year, how much of a headwind were you seeing in the first half, if you may put it in perspective?

Okay, so a couple of comments regarding the question. I normally do not talk on the specifics of any business gain in terms of adding the specific percentages. Just suffice to say that those are very important and relevant businesses that we have gotten and they are part of our expected growing above the GDP level or above the normal market growth. And we expect to be that in the -- if the growth rate is 3%, we expect to grow at around 4.5%. Those gains is what allows us to beat the normal growth rate of the markets. In terms of the first-half headwind of energy, that represented $45 million of sales that we will obviously not have as we lap those moving forward, both in Q3 and Q4.

And our next question comes from the line of Mike Harrison of Seaport Global Securities. Your line is now open. Please go ahead.

Luis, you noted some inventory destocking that is going on now for the second quarter in a row. Can you quantify the magnitude of that destocking, maybe whether it was more or less than what you were seeing in Q1? Do you have any idea where inventory levels are right now and maybe the timing of a return to normal buying patterns?

Yes, that's a very good question. And one of the things that I mentioned is that we saw improving comparisons during the quarter. So I would say that most of the inventory management that we saw from our customers happened during January and maybe the early part of February. What we saw at the end of the quarter was normal buying patterns from those customers. What also is clear now we understand a little bit more how much of the stocking was destocking and how much was actually the consumer demand in emerging markets being impacted by the trading down and again, we have built that into our estimates. But I would say that from a destocking perspective, the biggest time frame was end of November, all of December, most of January and somewhat at the beginning of February, with more of normal purchases in the end of the quarter.

All right and Sam, in terms of the premium lubricant mix, obviously a large number of newer cars that are being sold now are spec'ing in premium lubricants. Is that the main driver of the increase in the premium mix or are you starting to see that people who previously used conventional are switching to synthetic so they don't have to change as often? And I guess the next question is, what is the upper limit for premium mix? Is 50% the number? Is it 60%? How high can it go?

The synthetic mix is definitely going to continue to grow because, as you mentioned, a lot of the newer vehicles on the road are requiring synthetics. So it is really driven by those new car specs, less so much in that people are looking to extend their drain intervals. That is not really a factor in choosing synthetics. And then the other portion of it, the premium mix is, of course, our continued growth in the MaxLife brand for the higher mileage engines and the average age of the cars on the road continues to grow. It is about 11.5 years now and so that continues to present a nice opportunity for Valvoline, but also for our customers to improve their premium mix and profitability. So, both synthetics and high mileage are excellent opportunities for growth and as far as the upper limits go, synthetics, new cars requiring synthetics, it is a significant part of the mix now and by 2020 it's going to be that much greater, too. I don't have the number right at hand, but I think it is close to 75% by 2020 as far as new cars expected to require synthetic oils.

All right and then last question I had is for Kevin, just making sure I understand the corporate and unallocated income. It was quite a bit lower in the second quarter. For the full year, you are still guiding to $40 million to $50 million positive for corporate and unallocated. So does that mean in the second half we're a little bit north of where we're even in Q1?

Yes, in total we expect to be pretty close to that number. The big driver in the quarter was environmental.

And our next question comes from the line of Edlain Rodriguez of UBS. Your line is now open. Please go ahead.

This is actually a follow-up to ASI. Within consumer specialties there, you have talked about consumers trading down. When was the last time you saw something like that going on and how long did that last?

So the last time that we saw something like that was in the recession during the 2008-2009 recession. Having said that, that was way more generalized in the world, so that happened all over the place. In this case, we're seeing this mostly in emerging economies as we speak. And again, without knowing exactly if it lasted six months or a year, but what I can say is that as soon as consumers felt more confident, people went back to the better products. One of the things that I have seen is that once a consumer gets accustomed to use a better product, a better sunscreen or a better toothpaste, they will try to get back to it as soon as they feel comfortable with it. So, it will depend on how fast the Chinese and the Brazilian consumers feel better. I would say that is probably going to happen faster in China than in Brazil, just from where I sit and as soon as they do that, I expect that trend to revert.

And also, just in case, let's say, it takes longer than expected, have you ever considered to maybe have products that would meet that downward market?

Yes, that's also a very good question. One of the things that we've been doing on our sales funnel is work with our customers in helping them reformulate some of their products so they can come up with still value-added products that have better properties, but that are not as expensive as the ones that have in the marketplace. And in fact, we have been successful already in a few of them, but that's what I would call -- those are part of those sales funnel initiatives that I mentioned in the previous quarter and that we're seeing the impact of right now. That is a very important thing that we need to do, as we don't necessarily control the consumer buying behavior, but we can help our customers continue to drive value to that consumer.

Thank you and I'm showing no further questions at this time. I would now like to turn the call over to Mr. Seth Mrozek for closing remarks.

Thank you, Chanel. Thank you all this morning. Thank you for your time and your interest in Ashland. I hope everyone has a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.