Axalta Coating Systems Ltd. has announced its financial results for the second quarter ended June 30, 2019.
Second quarter net sales of $1,157.5 million decreased 4.5% year-over-year, including 3.5% negative foreign currency impacts and 0.9% net negative M&A impact including the sale of an interest in a consolidated powder coatings joint venture in China.
Axalta says constant currency organic net sales were essentially flat in the period, driven by 4.1% lower volumes which were offset by 4% higher average price and product mix from all regions and both segments, including notable acceleration in the company’s light vehicle segment of 3.6%.
Adjusted EBIT of $197.4 million for the second quarter increased 8.6% versus $181.7 million in the second quarter of 2018. The company said this result was driven by strong contribution from higher average price and product mix and from improved productivity, partly offset by lower volumes, most notably in Axalta’s Light Vehicle and Industrial end-markets, as well as by year-over-year variable cost inflation and negative foreign currency translation impacts.
“Axalta’s second quarter results were strong,” said Robert Bryant, Axalta’s CEO. “We posted continued low- to mid-single digit net sales growth ex-FX in both Refinish and Commercial Vehicle end-markets, though offset by anticipated pressures in Light Vehicle and Industrial end-markets in addition to ongoing FX headwinds. Despite those factors, we posted solidly improved year-over-year profits, led by accelerated price and product mix benefits as we work to recapture lost margin from ongoing variable cost inflation. We are pleased to report substantial progress in price and product mix improvement in Transportation Coatings, while Performance Coatings also continues to efficiently offset inflation effects over time. Further, as a partial offset to volume headwinds seen most notably from China Light Vehicle markets, we continue our disciplined focus on productivity and operating cost control, which contributed positively in the second quarter.”
Bryant added that in June, Axalta’s board of directors announced a review of strategic alternatives to maximize shareholder value.
Balance Sheet and Cash Flow Highlights
Axalta ended the quarter with cash and cash equivalents of $577.3 million. The company’s debt, net of cash, was $3.3 billion as of June 30, 2019, which compared with $3.4 billion as of March quarter end.
The company repurchased 1.6 million shares of its common stock in the second quarter for total consideration of $39.5 million and an average price of $24.90 per share.
Second quarter operating cash flow totaled $126.7 million versus $142 million in the second quarter of 2018, reflecting modest working capital and FX headwinds from the prior year. Free cash flow, which includes the benefit of lower capital expenditures in the current period ended June 30, 2019, totaled $103.7 million compared to $106.9 million in the prior year quarter.
“Axalta’s second quarter showed very strong financial performance set against a moderately challenging fundamental backdrop. In spite of some volume headwinds, our execution was strong, reflected in both segment margins and in strong cash flow performance,” said Sean Lannon, Axalta’s CFO. “For the balance of the year, we see a mix of continued selective end-market volume pressure, but also expect ongoing stable execution and easing raw material headwinds to enable us to achieve the profitability target ranges that we set out back in January. Since our last update, we have seen incremental volume headwinds in Industrial and Light Vehicle end-markets, along with ongoing Refinish volume pressure, coupled with persistent currency headwinds. Still, with help from Axalta Way productivity savings and ongoing benefit from the implementation of announced pricing actions, we expect to meet our full year guidance.”