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Axalta Delivers Strong Performance in Second Quarter 2015

Published on 2015-08-05. Author : SpecialChem

PHILADELPHIA -- Axalta Coating Systems Ltd, one of the leading global coatings companies, announced its financial results for the second quarter ended June 30, 2015.

“We are very pleased with our second quarter results, which beat our expectations in most business areas as we continue to execute our strategy of unlocking Axalta’s growth potential while also maximizing overall business efficiency and profitability. Progress on both of these core goals was made during the quarter, with volumes growing solidly and our productivity plans on target. In spite of a challenging economic backdrop in certain countries and ongoing volatility in foreign currency, Axalta’s key end-markets remain fundamentally stable and supportive in most areas,” said Charles W. Shaver, Axalta’s Chairman and Chief Executive Officer. “Given our solid first half results, we continue to expect to meet our financial goals for 2015 and have raised the low-end of our Adjusted EBITDA guidance as a reflection of this performance to date.”

Second Quarter Consolidated Financial Results

Net sales of USD 1.1 billion for the second quarter of 2015 represented an 8.2% increase year-over-year excluding negative foreign currency translation, and a decrease of 2.9% on an as-reported basis. This net sales growth was driven by 4.8% volume increases, including growth in all regions and strong double-digit growth in Asia Pacific, reflecting the ongoing ramp-up in China new vehicle builds related to new business for Axalta. Higher average selling prices in the quarter added 3.4% to net sales, while unfavorable foreign currency translation reduced net sales by 11.1%.

Axalta logo
Fig. 1: Axalta

Adjusted EBITDA of USD 255.5 million for the second quarter represented an increase of 15.6% year-over-year while Adjusted EBITDA margins expanded to 23.4% from 19.6% reported in Q2 2014. This result reflected the positive effect of volume growth across both of our segments, pricing benefits in select end-markets, as well as a moderate benefit from lower operating and raw material costs given continued progress on our productivity and procurement initiatives. These factors were partially offset by negative foreign currency impacts and costs associated with certain operating investments made to support future growth across our businesses.

Performance Coatings Results

Net sales in Performance Coatings of USD 638.8 million for the second quarter of 2015 represented an 8.2% increase year-over-year excluding negative foreign currency translation, and a decrease of 3.9% on an as-reported basis. Net sales growth drivers included volume growth of 2.0% and higher average selling prices of 6.2% in the period, more than offset by 12.1% unfavorable currency translation impact. Refinish end-market net sales increased 10.0% on a constant currency basis in the second quarter (decreased 2.3% as-reported), while our Industrial end-market posted 3.8% growth excluding the impact of currency (decreased 7.9% as-reported).

The Performance Coatings segment generated Adjusted EBITDA of USD 162.1 million in the second quarter, an 18.6% year-over-year increase. This result reflected positive volumes and pricing growth contributions, offset in part by negative foreign currency translation and modestly higher operating expenses from growth investments. Performance Coatings segment Adjusted EBITDA margin of 25.4% for the second quarter reflected a 480 basis point increase compared to the corresponding quarter of the prior year.

Transportation Coatings Results

The Transportation Coatings segment generated net sales of USD 455.3 million in the second quarter of 2015, an increase of 8.1% excluding foreign currency impacts, and a decrease of 1.4% on an as-reported basis, compared to the second quarter of 2014. Volume growth of 8.8% was the principal contributor to net sales growth, offset by unfavorable foreign currency translation which impacted net sales by 9.5% versus the prior year. Light Vehicle end-market net sales increased 5.5% on a constant currency basis compared to the second quarter of 2014 (decreased 4.5% as-reported). Our Commercial Vehicle end-market reported strong net sales growth of 17.9% on a constant currency basis versus last year (10.1% as-reported). Similar to the first quarter of 2015, Light Vehicle net sales growth was particularly robust in Asia Pacific and North America, with stable performance in Latin America and EMEA. Asia Pacific volume growth of over 25% was led by the continued ramp-up of volumes in China, where Axalta continues to launch business with customers based on contracts won over the previous two years. In the Commercial Vehicle end-market, strong heavy-duty truck production continued to drive solid growth from North America, while volumes continue to ramp strongly with relatively newer customers in Asia Pacific.

The Transportation Coatings segment generated Adjusted EBITDA of USD 93.4 million, an increase of 10.7% compared to the second quarter of 2014. Adjusted EBITDA growth was driven largely by positive volume effects as well as increased productivity from our operational improvement initiatives, partially offset by the impact of unfavorable foreign currency translation. The Transportation Coatings segment generated an Adjusted EBITDA margin of 20.5%, an increase of 223 basis points compared to the second quarter of 2014.

Balance Sheet and Cash Flow Highlights

It ended the quarter with cash and cash equivalents of USD 307.8 million. Our net debt was USD 3,251.5 million as of June 30, 2015, which resulted in a second quarter Net Debt to LTM Adjusted EBITDA ratio of 3.7x.

Second quarter operating cash flow was USD 103.7 million versus USD 80.9 million in the corresponding quarter of the prior year. Free cash flow after capital expenditures of USD 25.1 million totaled USD 78.6 million.

“We are pleased with our overall financial position as of the end of the second quarter 2015,” said Robert W. Bryant, Axalta’s Executive Vice President and Chief Financial Officer. “We are on track to generate solid free cash flow in 2015 and are making good progress on our growth and productivity-oriented capital investment projects that we expect to provide strong returns on investment.”

2015 Outlook

Axalta is updating its outlook for the full year 2015, including:

Net sales growth of 5-7% in constant currency and down low- to mid-single digits versus previous expectation of flat-to-slightly down including currency impacts;

Adjusted EBITDA expectation of USD 870-USD 900 million up from USD 860-USD 900 million with an Adjusted EBITDA margin of approximately 20%; Q3 Adjusted EBITDA as a percentage of full year Adjusted EBITDA is expected to be 23%-25%; and

Other guidance assumptions remain unchanged including normalized effective tax rate of 27-29%, capital expenditures of approximately USD 150 million, and net working capital of 13-15% of net sales, excluding non-recurring items.

Cautionary Statement Concerning Forward-Looking Statements

This release may contain certain forward-looking statements regarding Axalta and its subsidiaries including those relating to our 2015 full year outlook, net sales growth, Adjusted EBITDA, effective tax rate, free cash flow, capital expenditures and net working capital. All of these statements are based on management’s expectations as well as estimates and assumptions prepared by management that, although they believe to be reasonable, are inherently uncertain. These statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of Axalta’s control that may cause its business, industry, strategy, financing activities or actual results to differ materially. Axalta undertakes no obligation to update or revise any of the forward-looking statements contained herein, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

The historical financial information included in this presentation includes financial information that is not presented in accordance with generally accepted accounting principles in the United States (“GAAP”), including constant currency net sales growth, Adjusted EBITDA, Net Debt and Adjusted Net Income. Management uses these non-GAAP financial measures in the analysis of our financial and operating performance because they assist in the evaluation of underlying trends in our business. Its use of the terms constant currency net sales growth, Adjusted EBITDA, Net Debt and Adjusted Net Income may differ from that of others in our industry. Constant currency net sales growth, Adjusted EBITDA, Net Debt and Adjusted Net Income should not be considered as alternatives to net sales, net income (loss), income (loss) before operations or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows or as measures of liquidity. Constant currency net sales growth, Adjusted EBITDA, Net Debt and Adjusted Net Income have important limitations as analytical tools and should be considered in conjunction with, and not as substitutes for, our results as reported under GAAP. This presentation includes a reconciliation of certain non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP.

About Axalta Coating Systems

Axalta is one of the leading global companies focused solely on coatings and providing customers with innovative, colorful, beautiful and sustainable solutions. From light OEM vehicles, commercial vehicles and refinish applications to electric motors, buildings and pipelines, its coatings are designed to prevent corrosion, increase productivity and enable the materials it coat to last longer. With more than 150 years of experience in the coatings industry, the 12,600 people of Axalta continue to find ways to serve its more than 120,000 customers in 130 countries better every day with the finest coatings, application systems and technology.

Source: Axalta


 


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