Axalta Coating Systems Ltd. (AXTA) is a leading global manufacturer, marketer, and distributor of high-performance coatings systems and products. The company has over a 150-year heritage in the coatings industry and is known for manufacturing high-quality products with well-recognized brands supported by market-leading technology and customer service.
Business Overview
Axalta's diverse global footprint of 43 manufacturing facilities, four technology centers, 49 customer training centers, and approximately 12,000 team members allows the company to meet the needs of customers in over 140 countries. The company serves its customer base through an extensive sales force and technical support organization, as well as through approximately 4,000 independent, locally based distributors.
Axalta operates its business in two segments: Performance Coatings and Mobility Coatings. The Performance Coatings segment provides high-quality sustainable liquid and powder coating solutions to both large regional and global customers, as well as a fragmented and local customer base. These customers comprise, among others, independent or multi-shop operator body shops as well as a wide variety of industrial manufacturers. The Mobility Coatings segment provides coatings technologies for light vehicle and commercial vehicle OEMs.
Financials
In fiscal year 2023, Axalta reported annual net income of $267.4 million, annual revenue of $5,184.1 million, annual operating cash flow of $575.3 million, and annual free cash flow of $437.4 million. For the first quarter of 2024, the company reported net sales of $1,294 million, up 0.8% year-over-year, and adjusted EBITDA of $259 million, up 22% year-over-year.
The company's Performance Coatings segment reported first quarter 2024 net sales of $848 million, flat year-over-year. The Refinish end-market saw a 4% increase in net sales, driven by strong price-mix and contributions from the André Koch acquisition. The Industrial end-market declined 6% due to lower volumes from soft global building and construction activity, partially offset by the company's strategic shift towards higher-margin products.
The Mobility Coatings segment reported first quarter 2024 net sales of $446 million, up 2% year-over-year. The Light Vehicle end-market saw a 4% increase in net sales, driven by strong volume growth, particularly in China. The Commercial Vehicle end-market declined 4% due to lower North America Class 8 truck production.
Axalta's first quarter 2024 adjusted EBITDA margin improved by 340 basis points to 20%, reflecting significant progress towards a return to historic margins in the 20% to 21% range. The company's profitability increased substantially across both segments, with the largest margin contributions coming from the Light Vehicle and Industrial end-markets.
Outlook
Looking ahead, Axalta has raised its full-year 2024 adjusted EBITDA guidance to a range of $1.05 billion to $1.08 billion, up from the prior range of $1.02 billion to $1.05 billion. The company also increased its adjusted diluted EPS guidance to a range of $1.90 to $2.00 per share, up from the prior range of $1.83 to $1.93 per share. Additionally, Axalta raised its 2024 free cash flow guidance to a range of $425 million to $475 million, up from the prior range of $375 million to $425 million.
The company's transformation initiative, announced in February 2024, is expected to yield approximately $75 million in annualized run-rate savings by 2026, with $10 million expected to be realized in 2024. The initiative includes a global workforce reduction of approximately 5% and a shift in manufacturing capacity and capability.
Liquidity
Axalta's balance sheet remains strong, with a net leverage ratio of 2.8x at the end of the first quarter of 2024, down from 3.7x a year earlier. The company's total liquidity stood at over $1.1 billion, including a cash balance of approximately $624 million.
To further enhance shareholder value, Axalta announced a new $700 million share repurchase program, replacing the previous program with $367 million in authorization remaining. The company believes this is an optimal time to execute on this program as it continues to drive accelerated financial performance.
Conclusion
In conclusion, Axalta Coating Systems is transforming its business to unlock long-term value creation. The company's strong first quarter results, raised guidance, and strategic initiatives position it well to capitalize on growth opportunities and deliver enhanced profitability and cash flow generation. With a focus on operational excellence, portfolio optimization, and strategic investments, Axalta is poised to deliver sustainable value for its shareholders.