Axalta Releases First-Quarter Results
PHILADELPHIA — Paint and coatings manufacturer Axalta Coating Systems Ltd. announced that the company’s first quarter net sales of $1,119.3 million decreased 4.5% year-over-year including 4.8% negative foreign currency impacts. Constant currency net sales increased 0.3% in the period, driven by 2.1% higher average price and product mix and modest acquisition contribution, offset partly by 2.1% lower organic volumes. First quarter net sales growth ex-FX was driven by modest growth from the Americas seen in higher price and product mix and growth in Commercial Vehicle end-markets, partially offset by lower net sales from Asia-Pacific, given ongoing volume pressure from China in Transportation Coatings.
Income from operations for the first quarter totaled $98.6 million, down 17.8% from $120.0 million in the first quarter of 2018. This was driven by lower reported net sales including negative foreign currency effects, and continued headwinds from year-over-year variable cost inflation. The quarter was also impacted by $6.1 million in accelerated depreciation charges associated with the company’s anticipated Belgium plant closure and a $5.2 million loss on an anticipated sale of a 60% owned powder coatings joint venture in China.
Adjusted EBIT of $143.9 million for the first quarter decreased 9.3% versus $158.6 million in the first quarter of 2018. This result was driven by substantial year-over-year variable cost inflation impacts, negative impacts from foreign currency, and headwinds from lower volumes primarily in Light Vehicle, offset in part by strong contribution from higher average price and product mix and from improved overall productivity.
"First quarter results met our previously provided guidance, and were produced despite several headwinds, including notably higher raw material costs and a substantial swing in foreign exchange impacts versus first quarter 2018," said Robert W. Bryant, Axalta's Chief Executive Officer. "Our Performance Coatings segment saw strong ongoing price and mix improvement, more than offsetting slightly negative volumes in the quarter. In Transportation Coatings, we saw a modest increase in average prices while product mix had a decremental impact in the quarter. Light Vehicle volume also saw pressure from slower global production rates, notably from double-digit declines in China versus the prior year quarter. Our focus on productivity also contributed to lower overall operating costs for the first quarter."
Performance Coatings Results
Performance Coatings first quarter net sales were $713.3 million, a decrease of 2.4% year-over-year including a 4.8% negative currency impact. Constant currency net sales increased 2.4% in the period, driven by 1.9% organic sales growth, which was primarily the result of improved average price and mix. Acquisitions contributed 0.5% to net sales growth.
Refinish end-market net sales decreased 2.1% to $405.5 million in the first quarter of 2019 (increased 3.5% excluding foreign currency) with strong average price and mix contribution offset partly by lower volume, which in North America resulted largely from moderate distributor channel inventory reduction. Industrial end-market net sales decreased 2.8% to $307.8 million (increased 1.0% excluding foreign currency), including positive pricing across all regions offset partly by modest organic volume declines from EMEA and to a lesser extent in Asia Pacific.
The Performance Coatings segment generated Adjusted EBIT of $78.6 million in the first quarter, a 3.4% year-over-year increase. Positive price and product mix and a very modest acquisition contribution were offset partly by impact from raw material inflation, volume declines and foreign exchange headwinds. First quarter segment Adjusted EBIT margin of 11.0% improved from 10.4% in the prior year as price and product mix more than offset ongoing raw material headwinds.
Transportation Coatings Results
Transportation Coatings net sales were $406.0 million in the first quarter of 2019, a decrease of 7.9% year-over-year, including a 4.8% negative currency impact. Constant currency net sales decreased 3.1% in the period including a 3.3% decrease in volume, offset by 0.2% higher average price and product mix effect.
Light Vehicle net sales decreased 10.6% to $315.9 million year-over-year (decreased 5.4% excluding foreign currency), driven by lower volumes and foreign exchange impacts, offset by moderately higher average price and product mix. Overall average pricing remained positive in the period, offset partially by negative product mix effects. Commercial Vehicle net sales increased 2.6% to $90.1 million from the first quarter of 2018 (increased 6.6% excluding foreign currency), including stronger volumes led by North America and largely stable markets globally. Average price and product mix were essentially flat.
Transportation Coatings generated Adjusted EBIT of $34.2 million in the first quarter of 2019, a decrease of 24.0% versus the first quarter of 2018, driven by the impact from raw material inflation as well as lower volume, while average price and product mix were a slight positive offset. Segment Adjusted EBIT margin of 8.4% in the first quarter of 2019 compared with 10.2% in the first quarter of 2018.