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Axalta Coating Systems Reports Strong Second Quarter Results

Axalta Coating Systems Ltd. announces financial results for the second quarter ended June 30, 2023.

Second quarter net sales increased 4.8% year-over-year to $1,293.9 million, driven by a 6.8% improvement in average price mix and a 1.6% benefit due to the absence of commercial agreement restructuring charges in the second quarter of 2022. Sales volumes were down 3.7% as temporary operational delays due to the implementation of enterprise resource planning (ERP) in North America impacted Axalta’s ability to meet customer demand, while demand from the Mobile Coatings and Restoration business outweighed the reduction in sales.

Despite a notable stabilization in June, warehouse management and slower freight activity contributed to an expected 2%-3% year-over-year decline in net sales and contributed to a quarter-end sales backlog, particularly in the Restoration business.

Mobile Coatings net sales for the second quarter of 2023 were $437.9 million, up 15.5% year-over-year. Volume growth of 12.8 percent was driven by improved light vehicle and commercial vehicle productivity and customer wins. Price mix increased 2.7 percent, with positive contributions from both end markets.

Performance Coatings second quarter net sales were flat year-over-year at $856 million, driven by an 8.5% increase in price mix and a 2.4% benefit due to the absence of commercial agreement restructuring charges in the second quarter of 2022. Sales volume decreased by 11.1%, mainly due to sales impact due to ERP implementation and weak industrial market environment.

Operating profit for the second quarter of 2023 was $137.6 million, compared to $103.6 million for the second quarter of 2022. Adjusted earnings before interest and taxes (EBIT) increased to $154.5 million from $150.6 million in the second quarter of 2022, as price-cost trends across all end markets were positive, benefiting from strong year-over-year pricing and variable The drop. Operating profit in the quarter was negatively impacted by higher year-over-year compensation expenses and approximately $15 million in costs related to consulting expenses and ERP implementation.

Chris Villavarayan, CEO and President of Axalta, said: “This quarter reflects strong underlying profitability and improving profitability, particularly in the mobile coatings segment, is gaining momentum. We recovered from our ERP implementation and delivered a solid quarter that included one of the strongest June sales results in our history in North America. This launch is on track for Axalta’s desired margin improvement trajectory A key step.”

At the end of the second quarter, Axalta had $517.6 million in cash and cash equivalents, with total liquidity of more than $1 billion. Trailing 12-month adjusted earnings before interest and taxes (EBITDA) to net debt (gross net leverage) was 3.6x at quarter end, compared to 3.7x as of March 31, 2023, adjusted Q2 ended EBITDA to interest expense coverage ratio was 4.9 times. Axalta voluntarily repaid an additional $75 million in loan principal during the period, and has repaid a total of $150 million in structured debt over the past two quarters. Free cash flow was $99 million, compared to use of $13.5 million in the second quarter of 2022.

Sean Lannon, Axalta’s Chief Financial Officer, said: “Cash conversion for the quarter was a great achievement and reflects the team’s commitment to turning around the high working capital balance at year-end. Our total net leverage improved due to improved profitability and cash generation. leverage continues to improve; based on the current fiscal year outlook, total net leverage is expected to be close to 3.0 times by the end of the year. In the current interest rate environment, debt reduction is expected to remain the highest priority for our use of cash, while there may be opportunistic M&A activity. Given the improvement in capital market activity, we are actively exploring additional opportunities to reduce our interest expense.”

Axalta Coating Systems Ltd. has announced its financial results for the second quarter ended June 30, 2023.

Net sales in the second quarter increased 4.8% year-over-year to $1,293 million, driven by a 6.8% increase in average price mix and a 1.6% benefit from lower commercial agreement restructuring charges in the second quarter of 2022. Sales volumes declined 3.7% as temporary operational delays in the implementation of enterprise resource planning (ERP) in North America impacted Axalta’s ability to meet customer demand, with market demand in the mobile coatings and restoration segment outpacing growth, resulting in a sales backlog in the quarter. late rise, especially in the restorative field.

Despite clear signs of stabilizing the market in June, slowing warehouse management and shipping activity contributed to an estimated 2%-3% year-over-year net sales decline and led to an increase in end-of-quarter sales backlog, especially in the restoration segment.

Mobile Coatings net sales for the second quarter of 2023 were $437.9 million, an increase of 15.5% year-over-year. Volume growth of 12.8 percent was driven by higher light vehicle and commercial vehicle productivity and customer wins. Price mix increased 2.7%, with positive contributions from both end markets.

Performance Coatings second-quarter net sales were flat year-over-year at $856 million, driven by an 8.5% increase in price mix and a 2.4% benefit due to lower commercial agreement restructuring charges in the second quarter of 2022. Sales volume decreased by 11.1%, mainly due to the sales impact of the ERP implementation and the weaker industrial market environment.

Operating income was $137.6 million in the second quarter of 2023, compared to $103.6 million in the second quarter of 2022. Adjusted earnings before interest and taxes (EBIT) improved to $154.5 million from $150.6 million in Q2 2022 as a combination of strong year-over-year pricing and variable cost deflation resulted in flat price-cost trends across all end markets for positive. Operating income in the quarter was negatively impacted by higher year-over-year compensation expenses and approximately $15 million in consulting fees and ERP implementation-related costs.

Chris Villavarayan, CEO and President of Axalta, said: “This quarter reflects strong underlying profitability and improving profitability, particularly in the mobile coatings segment, where momentum is building.” “Recovering from an extensive and complex ERP implementation in June, delivered a solid quarter that included one of the strongest sales performances in our history in North America in June. This launch is on track to deliver on Axalta’s expected margins.” An important step in improving the trajectory.”

At the end of the second quarter, Axalta had $517.6 million in cash and cash equivalents, with total liquidity of more than $1 billion. Debt to net gearing (total net gearing) was 3.6 times, down from 3.7 times at March 31, 2023, while adjusted EBITDA to interest at the end of the second quarter The expense coverage ratio was 4.9 times. Axalta voluntarily repaid an additional $75 million of loan principal during the period, for a total of $150 million in structured debt repayments over the past two quarters. Free cash flow was $99 million, compared to use of $13.5 million in the second quarter of 2022.

Sean Lannon, Axalta’s chief financial officer, said: “Cash conversion this quarter was a great achievement and reflects the team’s focus on turning around the high working capital balance at the end of the year.” Our overall net debt ratio continues to improve; based on our current fiscal year outlook, we expect to end the year close to 3.0 times. Debt reduction will continue to be our highest priority use of cash, and given attractive returns in the current interest rate environment, we There may be opportunities for small-scale M&A in half a year. We are actively exploring other opportunities to reduce interest expenses, given the improvement in capital market activity.”