AXTA - Earnings call transcript Q1 2019 | Axalta Coating Systems Ltd.

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Operator

Ladies and gentlemen thank you for standing by and welcome to the Axalta First Quarter Earnings Conference Call. All participants will be in a listen-only mode. A question-and-answer session will follow the presentation by management. Today’s call is being recorded and replays will be available through May 2nd. Those listening after today’s call should please note that the information provided in the recording will not be updated, and therefore, may no longer be current. to call like Mecray. to now would turn over the Chris I go sir. Please ahead

Chris Mecray

and is call Thank of morning. in financial good you This your for Thank our quarter interest for results review and Investor Chris you joining to the today Axalta. first XXXX Relations. VP Mecray,

which the February more Sean CEO; website this our later, Joining this address a posted assume to related the morning will Bryant, XXXX Lannon, like will metrics depreciation Investor section We the our and we note guidance we to of in Relations' an today axalta.com carve-out during me of Robert detail basis released referencing CFO. transaction. of but for at adjustment amortization step-up and changed slide Sean are I'd incremental to this our results be that presentation financial and profit call. to

have be of filing. Axalta's involve Our this forward-looking financial contains GAAP of statements. in included and results reported most financial non-GAAP adjustment and call may materially view we've may the today the also and financial under risks and financial comparable actual prepared our statements potential that effect appendix, XX-Q from Please those measures. the statements non-GAAP the reconciliations the obligation provide various this measures. events operating differ results performance. in statements. contain reflecting will measures uncertainties updates presentation forward-looking directly This forward-looking company's referred to profit Both note These and discussion In no is company these to detailed current to made these future which remarks our on to further

our please the statements financial measures, filings I'll over turn to regarding and now information refer forward-looking additional call the with For Robert. SEC. non-GAAP to

Robert Bryant

review period. to quarter key highlights some operational I'm results first from morning. Today the financial and pleased our Good

financial $XXX EBIT million results exceeded the quarter million Our our met $XXX adjusted expectations to with communicated on deliver putting EBITDA first in us in full quarter and track for expectations. year slightly adjusted and previously our

in quarter, some volume headwinds That climate quarter of the gap Axalta price ongoing and to Vehicle During in particularly recapture close was and successes Coatings. to parts price There and seen overall continue continue for EMEA. solidly actively strong we the remained at in Coatings business with also the good in and in we positive and given mix growth economies, invest China quarter in progress within innovation many said, pace the were Light unsteady business continued of new in mixed to seen a our price/cost average Performance including many the product areas. examples launches long-term promote Transportation including

extent with sales Vehicle period, part Europe. Turning headwinds. by across the fourth particularly large the Transportation continued and customers. largely the price Coatings progress material remained ex-FX business foreign overall X, in and in robust in that net the large rates gap levels from notably refinish as X.X% before the where sales key build returning capture headwinds markets offset growth ex-FX vehicle to global volume with end to pressures. we quarter during X.X% discussed impact witnessed inflation net guidance price/cost widened low net year-over-year we tailwinds quarter progress sales automotive the price The slide raw XXXX industrial outcome FX somewhat January. increased This substantially in Performance to This serve. in Vehicle volume growth XXXX in better major most was moderate expected Light largely fundamental we due in market. a driven decreased most in significant slowed to we from by growth negative currency X.X% had price as In global to ongoing progress closing by from in quarter of to markets consolidated by grew make our in year-over-year the lower mix by solid in driven markets was from refinish excluding single-digits first that continue with positive in Light most prior continue we goal Coatings, was we driven and on in first production by headwinds the consistent Price make as our mix mix

of comparison we of volume our price was the last addition cost by similarly against For $XXX to quarter well this volume largely drop substantial earnings auto compared continued the headwind in by global quarter offset as combination step-up impact original as adjusted and burdened a by in right strong from associated production period The high the depreciation which in million in through. margin $XXX and for pressure. sales EBIT business EPS adjusted swings prior for which for comparison consolidated in year our mix X% exchange from the the substantial expectations, inflation $X.XX acquisition roughly FX EBIT our of quarter variable the challenged variable through of by inflation net through. Adjusted modest the for quarter was year the prior the amortization reported slower EBIT, in to was around automotive the X.X% consolidated in prior at driven with cost part and including relatively headwinds $X.XX level by EBIT tailwind double-digit drop foreign year's back adjusted drop FX with translation period. a end year million add the was at

the as year-over-year comparisons. quarter are first likely As in the you the the will hardest is terms of see year XXXX and in progresses for items quarters of our challenging guidance, comparisons these believe we less

refinish, sales digits serve net Turning in to our regions minute volumes across X.X% the ex-FX mid-single period. end were for higher we markets, in and net a most sales for grew China. grew notably in the We

of this the business. We economics offsetting inflation variable broader management continue to gain traction price to appropriate in with sustain

to on We working waterborne to in increase we miles in both focus continued region the channel our growth top line to bottom ongoing confident management flow, full this targets we've from in in lower remain lower and capital the volume paint moderately results On side, cash systems. shift America solvent performance. and year distributor from seen North driven which attribute

Refinish, build In throughput progress the at checks terms customer from at end in and market share demand car continue gains also visits. of to market shop sustainable stable our to translate is and uptick. paint expect the Overtime, see we demand overall share our the channel level globally we we end

emission EMEA year driven for forecast this lift could that year decline automotive EMEA. the in during mid-single Global China has softness for now during digit excited to EMEA in grew region. but the quarter. mix reflected continuing Our relatively come the in Vehicle sector which positive growth a year America from the market. quarter strong the demand reduction half offset Commercial volumes as X% market the down that low changes and quarter were offset outcome X.X% contribution remain Industrial market including price sales for macro standard as in America a Americas from the by lower impact production continued Overall we related net outcome encouragingly a first level Industrial back conditions rebound these in of Overall, sales in slower by a about remain Latin ex-FX X.X% IHS last month EMEA in net in America. appears the Coatings in a production end in the pressure, measures X.X% from ex-FX market. from about in the including for support Latin modest well North The decline quarter China government demand on China to customers at last increased on the help the with and flat X% the under at myriad outlook year Chinese and likely driven factors slightly terms mix to for commercial are did we that in products markets. however markets consistent submarket realization quarter which sequentially this and mitigated Brexit The is our the in except overhang market end track year lower quickly volumes across the vehicle specific data was and several and full broadly pricing. optimistic ongoing to as down all the somewhat OEM customer for a of quarter, by Price truck the but are a realized from a and to at in in Vehicle different variability we has regions declined combination the the the see including quarter cadence by fundamental have are may bottomed remained be last market Americas as introducing X.X% announced assumed our and reflects progresses. strength X.X% production remained several full similar the net Light slightly ex-FX in new regulatory sales years. and stable global

Regarding our million cash cash given with seasonally interest and debt balance was of flows, our sheet first quarter annually first $XX other cash and as in weaker flow quarter use the expected normally scheduled free payments.

year full cash flow targets full our $XXX $XXX to reconfirmed million million the free have We year. of for

XX at In of debt from slightly net to capital repurchases. lower which at incremental times use X.X EBITDA the up finished share times adjusted leverage, months cash terms year-end we X.X EBITDA, trailing from working a quarter and of reflected adjusted

track finished powder quarter year our current fixed plant, this global levels set operations a and cost, metallic average we our capacity bonding $XX quarter, increase We to within price offering would many $XX.XX. in our an Overall, we satisfy coatings. on continue productivity to installing lower total we to strides new first fast-growing as continue a inflation that made offset new our Axalta in in to this broad are see our at we powder strong at note repurchased the In within of areas value the push and customers. in stock through cost efficiency production serve million line Houston initiatives. of to segment

progress making and related We our project relocate significant Belgium. in to site are also to production our shutdown

product Xtreme in market the our Asia investment examples filler new few extension products Cromax coil market, line the insulating quarter. extrusion of and new Clearcoat. innovation terms gained Industrial launched our Durapon coatings technologies include: of we we we to approvals the coatings In successful A in with our used a Solutions, to Refinish New highly markets; Fast-Cure of In a in Industrial products first highlights, commercial vehicles. to productive prefinished extend in wide an Pacific of the Productive China wood in launch motor market and the end our siding new in extended electric share range VOC Energy in markets; of address a

first rates success record had globally. presence market growing quarter also E-Coat in the Industrial in We our

improvement offering continued Coatings global market Axalta dry scratch our newest introduction in lower clearcoats Lumeera and products, of Transportation enhanced XK appearance at thickness. the in for film and Finally its resistance XK high-performance OEM

of have As quarter, Europe. XK U.S. a and offering this we launched in a XK in the offering

execution on priorities, we growth. focused of Regarding objective profitable our our meeting generating firmly XXXX remain

second and by in North are key the quarter Still auto of remain expect well ongoing measures challenging We markets encouraged the points April coatings as macro and China backdrop regardless an auto sector industrial somewhat factors full demand by ongoing planning our acceleration to in to from underpin of to production committed outlook. resolving for integral achievement. cost year subdued These as we our structure and active serve our rates moderately our China data signs in engaged lower weeks given volume ensure we the in remain and by stability in managing and to of to stimulus America Europe. highly and we trade remains the continue paid attention goal Axalta Further, Way actively part broader disputes. confidence and margin recent other

our growth. CEO, imperatives; we hosted a world performance, quarter first and around where innovation, aligned new as on four the from people, key leaders During meeting our the Axalta's I at strategic

a Our and high performance, culture implement centric goal with metrics driven accountability. people to customer is increase to

Axalta innovation, we change For innovation to to speed of mindset seek increase nimbleness. the and adopt across and

industry and performance, performance. leading profitability operational goal our deliver is For to

remains our through achieve growth to and growth market acquisitions. our growth, objective organic diversify and above For portfolio

leader we have to priorities, these across goals. for these designated For align with KPIs each of our every organization

January. adjusted also metrics compensation in have back of some we we with touched our financial Importantly objectives, to further align our which management also on

have curve payout with We execution the while risk on focus generation. associated overall steepened cash reward adding

leaders. capital growth filed per further included detailed return for invested as statement. in have earnings also key longer are our and metrics We share term These changes recently proxy on

excited updates. open about striving aligned we future and few a are oriented to we am with have I we know, but with on you putting Axalta the As candidates positions those providing you the forward are excellent create. to track with strategic at fill culture together imperatives who key to team Axalta's and are look execution are we

Finally as our revised which reporting approach quarter we also a earnings have our launched this to seen, call. you on format, last we've highlighted

adjusted to of capital reporting value which refines generate pleased we aligned the adjusted now help lines. over growth same the deployment, change share value a out our with are along to will our in solid as this on and to be complete us our well EBIT shareholder financial we per the We With Sean picture profitable the have We internal leadership of long-term. that, turn compensation and focus and earnings I'll likewise on call focus the results. as metrics creation, further review create believe anticipate

Sean Lannon

morning. good Thanks, Robert and

X. to slide Turning

Performance our Transportation ongoing for not volume Acquisitions Coatings a sales quarter Coatings a Transportation meaningful including price and increased pressure outcomes before positive Coatings This and decrease were offsetting result quarter year-over-year and continues in X.X% to contributor. growth segment in from growth net this FX reflect driven impact Coatings. Vehicle. First Light within of Performance X.X% X.X%

margins in The did for markets. a consider factor as a we included impact as XXXX low Vehicle, inflation QX noted, in driver the in was this Light Vehicle the of decreased of of a lower against basis worth million Renminbi digit this well impact increasing for reported than in and adjusted Euro, and in and FX the partial and XXXX. quarter. first negative included the $XXX double drop level volume It's as a to given largely the X% from Real. prior of metric translation prior difficult year profit is X.X% pattern to of ease positive translational to production OEM highlighting comparison year the this XX current X% progresses year of declines see sources primarily the points these substantial certain during the quarter. XX.X% Key headwind EBIT seen effect QX Drivers as impact. pressure Importantly, result in through a a FX first offset the was of that EBIT course tailwind the a the input within as Light year costs at to auto shifted quarter. price comparisons inflation relatively the impact headwinds

in raw served grew steady a X.X% once This we shop and during offset would price produced management a by Refinish remains X.X% in increase Turning Coatings quarter key driven of volume Performance in trade we quarter to note Refinish a decrease remains spite growth generally X. QX adjusted net our and EBIT our growth distributor FX mix of believe the X.X% principally with negative sales strong Performance extent shops improved of European solid drop variable overall lower partly all in cost year-over-year and in growth call. mix share by inflation, slower by regions, in we constant X.X%, of led ex ex-FX X.X% pricing offset against usage net markets X.X% to first price Coatings recapture of currency due regulatory America. headwinds excluding partially slide EBIT $XX currency mix volumes. led again by pressure gains price EBIT market X.X% terms disputes, according digits. gained first was growth negative QX mid-single impacts. by year-over-year FX control XX% contribution subdued sales, increase net GDP but constant QX, points period, by period. we volume productivity increased through a delivered in This large improve inventory EMEA checks. increased M&A adjusted year-over-year, countries. FX period correlates noted. during and And continued sales by continued growth impact. data million, year-over-year on channel to traction margins earnings end noted to material driven volume Industrial mix, price modestly net these basis from as macro while via increased efficiencies. X% efforts market believe average backdrop operating to generated year-over-year points the sales the in principally benefit in all in the select well and adjusted most organic notably inflation as regions offset pressure average the and the cost from Body further product collected and as that Robert channel XX China to our demonstrating North we noted, volume in last is as Also, in concerns demand

of from steady were the decreased This rates. our and decreased also we the truck extent, price remained net decreased issues first X.X% QX slightly market Vehicle modest all during other period, of headwind. China slide X.X% vehicle well increased FX in heavy-duty X.X% by remains price incremental seen XXXX, exceptionally mix by from order North the certain as overhang remained despite forecast are Transportation adjusted rates markets. QX margins X.X% FX rates in in current in period, ongoing America truck strong quarter markets China that expected weaker from net driven as sales production and Segment XXXX. EMEA commercial Lower driven backlogs last strength production well. well of regulatory versus net positive offset several comparisons steady margin benefit lesser sales truck year before by largely global progresses, America X.X%. in FX largely North growth regions Average in the production in markets. sales the for volumes Light Commercial for expected headwinds quarter. Coatings America cost quarter Vehicle Turning to Axalta traction ongoing X.X%, profit XXXX, given due through volumes heavy input to the came And pressured headwinds higher year ago effect first ease Vehicle. margins volumes. the over were in as period. months, our in to slower impacts North as expect mid-single slower after XXXX. impacting commercial to substantially generated excluding Transportation the lower drop favorable commercial do the and and $XX ongoing moderate statement X.X% with digits exposures. impact Light substantial to non-truck Volumes decreased, of as $XX of We QX X%. FX and the headwinds. price saw as of accounts were timing began a million inflation, year-over-year a EMEA QX as Coatings automotive income X, input in associated lower, carry sequentially by net Global and throughout XXXX before global XX.X% which certain compared EBIT of sales to nearly of in from inflation slowdown headwinds production million, the QX

cash Turning $X.X of $X.X a $XXX at net quarter debt Total equivalents resulting versus balance billion, was end. in million billion debt to year-end. and X, totaled slide billion reported cash at $X.X

Our use capital of capital uses by the existing to higher lower, adjusted the share and M&A-related period. was purchase months our Dura latest EBITDA, net impact business, of overall working in the ratio share for combined leverage Coatings of remaining repurchase, the reflecting Coil majority-owned times Coat X.X XX spend

outcomes, the QX flows. to to has income as seasonality million quarter previously cash These historically are by partly in related. lower net the offset a The QX million leverage greater XXXX QX use to first use XXXX. due expenditures free cash working well capital capital totaled driven which due $XX in of compared use were flow of net $XX covered. by our operating timing primarily Our drivers lower items versus of increased as the was

guidance Turning remain which elements several January. note X, financial in points assumptions we but provided to last slide guidance operating unchanged and call are for Key earnings in we we our updating of interest. XXXX underlying our late

run expected X% in adjusted focus second growth the in industrial business. efforts of of from sale joint occur us within has the impact business a allows allows quarter. net more a margin in independently the This to and our to venture China, interest the move well sales and to decrease profitable us EBIT First, as on niche served, within consolidated expected the guidance markets our our to profile majority-owned of that given as comes market of end little the

of EPS. opted on of to public we related reflected treatment and basis, XXXX. make $XX the peers, million adding acquisition-related transaction case not basis, adjusted amortization Second, incremental carve-out, new adjusted to presented. methodology back to These accounting And is add have amounts methodology to to million EBIT on the Axalta we've in period for common full from adjusted EPS in D&A the year. EBIT by with decided in up adjustment our and up of reporting back, an a during with February DuPont conform the for common specific These for change step step our adjusted the results. the to EBIT guidance Considering pre-tax $XXX in after-tax segment our adjusted by the practice sole associated driver our and adjustments of and depreciation an been on

continues previously also associated $XX depreciation guidance closure. in announced million Belgium with plant to exclude the accelerated Our

prior to adjustment. consistent remains D&A guidance our EBIT, the up step adjusted For

impact repurchase expected in million quarter. see line can completed share full March as count $XX though partially offset assume option feel about with appropriate which exercises year. cost part in XX, goods oil no of remain to share of for adjusted through consistent is given recent single-digit we the also variable variable at still continue includes We increase low the the sold inflation the This tariff prices. items assumed relief the cost in Other inflation by you is level, for

for rates select the primary second half momentum quarters the anticipated profit our modestly in prior even production second in driver the more pressured remaining assumption this with to spread year a of relatively regions. versus expect rates be auto quarter of to We expecting of being build

standard relates accounting it adopt QX in new to the lease XXXX Finally, accounting. we as did

have various This material has this in for balance our will concludes an a measures any of line our to not impact this XXXX. on remarks. our sheet income impact items Although, prepared

any We please questions. will open Operator, pleased answer be for lines the to Q&A. now

Operator

Instructions] [Operator Mike Sison from question. first line question with Markets. Please the your with KeyBanc comes proceed Capital Our of

Mike Sison

Hi, guys.

Robert Bryant

Good morning, Mike.

Sean Lannon

morning. Good

Mike Sison

Hey to guys that. about nice Sorry year. the start

about XQ? XQ, In like potentially in It products the you've XQ, building talk unfolds? sounds terms of potential looks little Refinish, the weaker momentum can as new you start, bit market but got and share year maybe like

Robert Bryant

Refinish actually nice the I last start coming think our six expect we're about in quarters taking through We've we months wins excited been potential the about to very to business globally. of the think -- particular our that. Americas we're share I some and over and in had the see the that in excited results flow

As as existing particular coatings well have Mike, basis. have products as are on you we global we variance number mainstream waterborne launched a mentioned new of selling in and that on do products our a now

it's business the we good the about direction full from overall, perspective, that Refinish for in global pretty So feel and headed year. a the

Mike Sison

Are into one second just getting then on you how bit? to a Can well. of we -- it material look a pricing closing head Great. continues are talk as about your And does it? gap half little quick with to the maybe you follow-through outlook? year close we And raw the pretty

Robert Bryant

past. we've in consistent pretty with highlighted the it's what think I

bridge quarter. the what's pretty more in than negative see mix little slight actually more in little to first our results the a bridges continue we And the shows, gap a along good did Transportation, would bit the we're shape. of the effect shown cost. actually We bit and And actually got Performance financial We actually what even in in course endeavor price first you price a Coatings and for than quarter. have pretty for between close in because that far

very implemented plan So increases implement price we that we're that forward. well as I price think have as the pleased moving increases to already with the we

Mike Sison

Great. Thank you.

Operator

you. Thank

of next Fischer with the Our question. your question with line Duffy from Barclays. proceed Please comes

Mike Leithead

think North distributors it better number guys. actually or you Refinish I when the Follow inventory the two. be underlying for representative Hey, past like fluctuations you that Duffy of think we seems do this have quarter-to-quarter? would up working American process for on a distribution do on or year in Leithead capital guess It's are channel? then had morning. And where over of volumes demand Mike

Robert Bryant

net a So how to at with really in you up better Refinish heavily profile the structural that to higher. America, sales faster products but for we you waterborne a things, for the indicator of since And especially of just and would reduction Mike you margin versus not of will paint factors continue MSOs, products see as couple the pricing business. that solvent-borne are only in reminder, being There's to in paint. of North solvent-borne make also less as waterborne of other to of waterborne structurally course performing, It's growth is in certain a and business with regions MSOs more a there, use natural the the market, direct the terms the there know looking growth waterborne world. since compared are indexed volume structural occurs that because

been say I that past we that distributors they've large capital is the can quarter of first some quarters, to on now the have improvement management seen acquisitions what made we've and increase cash flow, focused of that of working essentially and the terms also In think to few operational fund and resulted of increasing and mean XXXX. efficiency policies same XXXX, other and we and that This around our commercial businesses in prebuy not the change the XXXX. inventory terms I you we saw is also other in as saw in the in changed that with MSOs. world the distributors

by making, and to XXXX efficient. start we're is I change that not the now but in trend here more you're to think seeing related become to any the distribution XXXX that rather really pushes

Mike Leithead

Got That's the related decision to then, question step-up XXXX transaction. D&A DuPont out the And it. strip on to helpful.

lower could a to decision the year-over-year. shift call the over roughly to second, you expect First, XX% versus expense bit wind was now reporting your was Should little talk like lower, drove methodology step-up what about we continue it, wondering years? And I if couple of that looks more to next D&A before. it

Sean Lannon

in to from adjusted the we're the market go moving of measures changing, adjusted to as as gave fairly industry. heavy preference. for coming did the rational start about us really in when coatings capital to and to this this. as feedback So, few far and back, our SEC EBITDA in prominence of And carve-outs that we quarter that a first January the including far elected practice EPS reason number a change for participants registrants We was There away EBIT. multinational the study common actually start it's as companies actual adding from large a thinking

So really the that was that. behind catalyst

as far As add see six, to step stable D&A a step back for step could fairly to up. assume years after we sizable down, it's it down. four as you relates three year did fairly But next the a that the

Mike Leithead

Got you. Thank it.

Operator

Thank you.

Suisse. proceed question next Credit Christopher the of your comes Our Parkinson line from with Please with question.

Harris Fein

Chris. Fein for Harris is on This

Industrial, outperforming are today? that Just about broader any wood you're there Thank M&A there see looking attractive regions underperforming you and as adjacencies in the would think with in end or or as any pipeline, that we involved coil toward as you are highlight markets not are that you. you And the did then, segment? that

Robert Bryant

different geography. in the well. Industrial, of Europe We If of the in perform quarter. continues a look we Industrial, just first at given Overall, parts little the bit a of business some we're little bit are beginning that submarkets, general, we it what in better world slowdown the our the did sequential year. in but General to the in see softness saw North slightly of a relatively Industrial, in weakness were varied a of seeing expectations other in America, we performance coil seeing so consistent by at with

well that regions of we're business extremely well. say business the Europe. perform the continues performing world, exception most of Energy in powder I'd Solutions that to in relatively with Our

We has market impact. somewhat the have somewhat that an wind seen slowdown and energy of had an

price However, in place of business we of contractual those well. part the the of to Energy had in some other and part as largely materials. Solutions that performing is raw are submarkets within increases indexed that put in were renewals wood, Then

where housing Industrial the is And the and offsetting as the several seeing are is other any adjacencies, construction a slight as U.S. within the some here as given data far just that in challenges So of of verticals that then market there meaningful whole verticals volume We won't we where we those And strategy a on this an for obvious reasons. would specifically be. those or to present at are like on are comment areas are M&A today, in call focus which not all perspective. way from

Harris Fein

incremental could then some how versus of then, you in the basket you're specifically And Thank through challenge? the your you biggest still quickly seen just guidance materials the evolving different and in that do where movements buckets for And raw you've you. January? anything see the seeing resin walk

Robert Bryant

fourth then Overall, we peak to say somewhat I'd first the some the transacted -- was terms a start we see And purchase of see terms we actually expected saw in start to did relief prices quarter, at to purchased to raw see relief say in -- materials. we quarter. we which expected for little bit that of Yes. you in might of of value a in

up was how back with increase recent come the in to in price expectation now little of more with in of we a However, Brent line bit our about original be terms what guidance. our thought to $XX, it's the

that the remarks. level what we obviously tariff out. we everybody prepared potential have guidance. be is talked level that talked moment as we're we we about and the year the how of about will to tariff contemplated As was as have facing The near increases, was the we'll the in rest trade, and in so But to cost our at well amount had level currently for If we we additional price headwinds oil and out see at see at cuts. some or that it, at essentially go this our the -- continue plays two potentially discussions to continue to wait

pigments particularly especially China. single HDI, the points which been slightly up and now In as terms to and low continue had be sore single mid the the to an a a continues see overall of categories, solvents low up speaking and for we're the we seeing; impact Isocyanates, being flatter powder data are seeing of continue given relatively up in that's digits relatively explosions from single lot the flat and the that to to Monomers, then Liquid Jiangsu, up category. sort digits. digits. mid-teens we're in we of moment, low in additives resins, see

Harris Fein

Great. Thank you.

Operator

Thank you.

Arun Capital comes proceed with RBC Viswanathan Please question your line of Our Markets. from with next question. the

Arun Viswanathan

morning, Good doing? guys. you How

Robert Bryant

Good Arun. morning. Hey,

Arun Viswanathan

morning. Good

some question on you Just impacts a recovery Thanks. can that China the maybe discuss gives you positive you second half of Robert noted a in confidence on potential there?

Robert Bryant

Yes.

obviously think We've in in to have eventually, I potential VAT. think hopeful the from light discussions. going boost are we've to expected decrease we in I the – especially resolution about some as about the that changes the what seen we vehicle I the are we're think efforts in a trade year out the the given were seen undertaking sector vehicle. that reasonably, we we terms we of China. China, we they to decrease it And as of of conservative fairly light thought see thought exposure And seen

for stimulus a we However, in do we what resolution put some Chinese market see that trade about I to our that as pretty the the we as would performing what well as say upside business could government to had and/or And additional as Light expected there, if things. the say see is, the is consistent we be discussions by place kind is challenges Vehicle year with Vehicle I'd of think given there. Commercial that

the in then relatively business in exiting that some of As good of our our we joint And at our a business process highlighted first market had conditions time. our is Industrial and current prepared Refinish there very the venture given remarks, flat the quarter.

Arun Viswanathan

just lower your guidance some and guidance? in would you be the may I would can out? Thanks. wanted the end in tailwind? that just it's to What a Refinish. favorable would then Thanks. upper Maybe You early understand potential then maybe relatively result. to cost North upper price inventory guidance. And be on ask push issues or you And the you thoughts the push bucket us can to American out that factors a improving give swing just potential raws you Great. the I ongoing headwind? your Would QX it year if called end of of

Sean Lannon

as euro that the help been a headwind Certainly, us FX it's could Raws full today few could first push some as be at and upside largely push if currently subsiding see oil This clearly the us there has with The the certainly our some so for a see is in end I today for expectations that to aligned that market Chinese raws toward see the quarter. end. you us upper prices, Renminbi if stronger of there items with guess far could we where happening they're in out. Sean. a higher the given year, Robert degradation upside. called as the some you could what's

the inflection second strong we that for the as far are builds as for upside quarter, expectations to far in Again, a more was full as As we expecting year. see as auto pickup point, data relates if quicker. could the to IHS it the rebound the

as we Light point much good. the China, As we're more downside But not if seeing far as of given could on happen We're quarter see Vehicle. it certainly, to production today seeing risk downturn relates we auto point. in as far Refinish results particular market pretty as this and that the in at does Europe first and a not feel actually where inflection side

Arun Viswanathan

Great. Thanks.

Operator

you. Thank

John question comes with proceed UBS. the next line Our Roberts with from of Please question, your

John Roberts

any geographically. wood was relatively footprint globally? Do the acquired Robert, to you. you have plans expand narrow your position coatings Thank you

Robert Bryant

acquisition, a We was the do. on Americas. our keen that think made we thinking focus I When original

have our are. business globally, in growing to most important current in terms already that aspirations have Mexico strides glow our where and – and future potential We wood to business grow that of we made customers

the So, see on in you should ensuing that movement expect to years.

John Roberts

Thank you.

Operator

Thank you.

line with Begleiter Please the with question. Our David Bank. Deutsche proceed of next your question comes from

David Begleiter

on they got price pricing just Robert of or in similar with your the X.X% about realizing competitors that you referenced auto of OEM customers. Are their auto in one you. increases pricing area? Thank OEM experiencing types quarter

Robert Bryant

In to we pricing perspective do prices certain can we customers. we so increases. in to from have markets and obtaining an to increase not a cost innovation endeavor production Obviously, to are as perspective LV everything our

are price getting However, – with where we're we we increases, we've markets in encouraged the given inflation because that increases and seen. are progress the material have made. have it's price there gone And by necessary we in raw

David Begleiter

Same subject, regions prices some auto in in higher you are all OEM regions? or just realizing

Robert Bryant

What of for the I this price in certainly I I top there getting the think point at question more than willing everybody would it's share. list is by region think say information is regions. any on that all we're David of probably more at detailed to

regions increase they've are terms of than However, amount in seen more they've after of that are we're not material raw all seen some amount price the amount and that inflation therefore There have regions created that of in regions the equal of going inflation others or seen. those the varies. that cost

David Begleiter

Thank you, very much.

Operator

you. Thank

the Our next Ghansham proceed with Panjabi Please question. question of from line comes with your Baird.

Matt Krueger

in doing? Matt are Krueger good This Ghansham. morning. How you is sitting actually for Hi

Robert Bryant

Hey Matt, morning. good

Matt Krueger

morning. Good

apparent moderation mix that the expect mix XQ? contributions So in remain with that the can then, And during the price we little should this optics to pricing understanding about skew or kind on of of reaccelerate line each your a the in talk you segments? pricing line remainder of bit, can contributions of across year

Robert Bryant

There's as of are when with said moderation, capture quarter, we think regard given price when look increases overall, in at you I timings price So the you'll times and jurisdiction the and occur. performance there's there any located. to before side, timings -- year where other increasing some once that it market is on a only you'll be markets inflation a depending price year, increasing multiple and times be when what

full particular, Vehicle, variability begin price of in that the to see had you're put you that as benefit. of in worth quarter's quarter-to-quarter going we see the terms then to we Light side get that. And performance increases of should sort So in on place,

out the or the course of within where is prices. variable individual we've brands amount comes of companies other Transportation that The production actually of increased

through they through. flow models, increase, may price price amount dollars obviously, see that we we of even Likewise vehicles, more the So though more could then less the will have produce somewhat absolute if in produce actual price could they less. be flow on gotten those if

Matt Krueger

Okay.

Sean Lannon

volume as and side the as as and guidance reiterated it Transportation to within far volume X% what to split it as full -- as but you We've expect year to far full from between year we've Segment, been fairly pricing, could as you'll X% relates as that evenly far ex-FX. price. guidance price X% And see performance of the larger coming cautious and X%

Matt Krueger

demand move That's business your helpful. a as year been sense any into just touching has or Okay. month progressed of comments during cadence provide then can whether could the as progressed And trying I'm performance we the if by April demand on And there's volatility? first any across quarter? a to some the on get detail on very that's growth how as you accelerated just core to added be little bit, helpful?

Robert Bryant

oversized or back is are pickup. markets that the I'd month back to the work. conditions to quarter. of far terms the continue January month of similar fairly And that the up countries, we've that what years for is pick months what things of saw of anybody it's similar to back passed. month first full that of our April, In then in to say that's critical the what people thus a compared very overall in the seen some through lightest because the seeing And we year. in we've in one I'd comes is Typically jurisdictions quarter say such to profile we're as then seen everybody of January see more, come the Things to really middle the tend month an March. in we of March some

Matt Krueger

for Okay. That’s Thanks. That's very helpful. me. it

Operator

you. Thank

Please proceed Our comes question. Citi. your the P.J. Juvekar with question of next from line with

P.J. Juvekar

reporting Robert, EBITDA Yes, from are EBIT. to morning. hi going good you

managers to your will your people. that How So you you of change and metrics behavior do think compensation charge to metrics salespeople? your capital adding and are a of the

Robert Bryant

how of are things feedback that broader a right as So decisions allocate we making making always team we and as how the focus investors received more on we've are we and one trying just we're at evolution we organization the return our sure company, certainly spend as the much looking a that in is invested we've capital. and from made to where -- capital also in management on

you're move and there. more depreciation carved including private to of from equity the out like a metric EBIT, amortization So essentially EBITDA

put whether the So incentives whether company be or expansions, the want form grow customer terms the or when think free. effectuate that place actually those the are to business, assets of not we thinking that those to whether are your physical other force as you to whether in assets in people about about required customer sales sales they think be -- everybody or in are in of financial assets about going it's

we're I in way those the the those in we and organization expectations of of but evolution along go shareholders' costs, think about think And with thinks more and associated line cost we of with long-term that's the compensated, do company in to how the how culture to decisions aligning them there associated management All what have that. broader underwrite are happy terms to and with an has business. the return a to run the is and the way going be our way

P.J. Juvekar

has in versus past valuations useful. I had are the you. all? expectations question of Thank any or they That's second about -- the your pipeline. about you. the Thank by moderated they is sellers. changed my Has thinking buyback? that you valuations complained And sort about you how know have M&A M&A at And

Robert Bryant

question P.J. Great

out at in we a rate CapEx at looked an which took stepped buybacks. stock, productivity back in projects the of hard transactions our up any we've at and internal at whether building five buying end within And we of than different not not what M&A, more work much the integral company the we were of there past or that options to In strategy those terms and M&A out internally a terms that money thus valuation, is coverage high committed level, at was had, look M&A a other four, building and verticals attractive returns, of our we three about felt markets and was on we're putting valuation attractive seeing the very globally, the not to out we but but the was that over of part level we remain one achieve in each our our the the could months. price. in return -- market, deals -- associated

And at look so we go will and forward we transactions. be return-disciplined continue as M&A to

P.J. Juvekar

Okay.

but I'm saying haven't wrong, So the correct much. you that sellers' changed me expectations are if

Robert Bryant

-- eventually we've were other and have are for I'd months on it had there those looked we generated paid not we our sufficient that going five to looked return transactions, others were to that companies values industry at have were -- have values that the transactions that for months a that pay to uses been in six the that felt in we given that those same wouldn't and over that say those alternative the at capital. market I depends the last the was for -- deals that

So good valuations I for they deals valuation. you is would are it's to opportunities were in we one down China. come the not seeing expectations say little would or In not businesses. market remain things in in bit But a our that bad to general, better had deals, Europe We're marketplace, reasonable and of money. just people meaningfully however, I relatively their America starting still you're more say terms for little where the high. to say, see bit starting in see North have of expectations a come

P.J. Juvekar

Thank Great. you.

Operator

Thank you.

your America of from Bank Lynch. the Our Merrill with question. comes Byrne question proceed Steve of next with line Please

Steve Byrne

for in to shop? you've some What would the technology investments your past to an or of share it market barriers? you. your like in the you primary was view And may body you Refinish what Thank auto say perhaps body is What do switching led Yes. recently, what coating as those primary barriers are made these be supplier shops? gains

Robert Bryant

customers And in efficient effective. them our more body is goal more our essentially, working to help with be always so to help our be and customers shop them

competition. the been paint number And customers the our and be again paint as products. to we're haven't penetrate have previously a maybe able and seen industry our as shops sprayed spray paint didn't we've and level of productive of We And that to at a paint, against system to that time better that business. our of product continue proven we of within most that, have markets. has they the tests allowed body system had grow they hour, most customers our than to actually that's efficient. And labor And result a our or in before, out achieve per we efficiency waterborne us and system has look cost competitors' we've

countries of that able provide we support level beat. not is to Additionally, a provide, that and organizations the Asia service think for have I intimacy to able but customer also the the in one of we're we're largest service technical level service for North Europe as and a only difficult And of certain well. industry America, in to

In the have of of those have been we gains back on share recent investments. terms customer that made not

Steve Byrne

using as opportunities booth? their you view of And for opposed do need a do how investments or in your types to capital to waterborne, and they customer to these switch to invest modify paint share that And your repo?

Robert Bryant

because It painters. each it. system with mixing of where as machine, investment. the have has balances having to comes is manufacturer's work of is depends a If differently as a the then spray well the that -- associated training the What already capital appropriate spray, new does computer with in our technical stay body does paint investment curve shop type and body team switch that's will And coatings, painters, really and that's that it on booths require any shop. require it's train waterborne learning and the new doesn't are

body a was able historically be shop to their spraying replace Now waterborne. order upgrade solvent-borne to in booths booths if it's they paint have to that their paint spray or and

size as basis. a case-by-case performance targets, pretty have acquiring they increase investment business of breakeven those on sense. or have will higher they of investment, we there related customers, to are really if make shops, amount try customer drivers really of we And level to body a a For set additional specific the Most targets. either is if volume those certain and the makes spraying are But it if planning that around the customers, the link the dramatically waterborne as well two of investment. in need our a the aggressive to over to of that's cost

Steve Byrne

number of And you... the opportunities

Robert Bryant

more say I having that And in last about is buybacks, body buybacks. shop the stock conversions just less part of there. took material of wouldn't doing terms impact -- and think any or we stock your question on

Steve Byrne

Okay. you. Thank

Operator

Thank you.

the with Zekauskas from your proceed of comes question. question next Our line Jeff Please JPMorgan. with

Jeff Zekauskas

Thanks much. very Hi.

IHS down your some global said think would high single-digit in light in year, that think I were volumes the build that X%. vehicle you I call this quarter. you the But rate auto be thought down

is So your that if they would down about roughly or would would vehicles X%, IHS correct it down that mean be and in volumes are light be flat? X%

Robert Bryant

So, exact our flat volumes for in Jeff, for What regions. our XXXX guidance. what historically we we're fairly it XXXX. reiterating, are we we've and adjust that said, HIS, But follow customers provided specific for we and haven't specific and

Jeff Zekauskas

to us much How much reduction Volumes expect flat for programs? as this achieved for update and And achieve you cost quarter? to XXXX. can How would you you be for your XXXX XXXX?

Robert Bryant

expecting announced sequentially impact. inflationary that's still offset million $XX productivity. to get Axalta phasing Largely it. Way the We're a year of when in million it's to $XX II, So we going

impact. We goal But haven't track $XX that we're actually the first to million quarter this year. for on quantified hit

Jeff Zekauskas

much. Okay. so you Great. Thank

Operator

Thank you.

Please question. Capital with proceed question next BMO John of Markets. comes your Our the McNulty line from with

John McNulty

Yes. Thanks for question. my taking

how it have little the impact model. the change higher, that thinking either have helping guess to or because to distributor own need do inventory that business what Just your I on management seems on be is do time a you be to should how we your them bit seems even working capital it's does adjusting about like on, you have reduce you of channel business? to your going more

Robert Bryant

more and consolidates and levels capital distributor that to we're terms that obviously decide our if they So lower run inventory doesn't of If cash, working a impact of number it a reduces run volume how day-to-day given inventory of reduce to fundamentally basically our inventory basis. the how business we slight in they on or have have which run seeing. generate at a on locations change we business, large can

our terms However, there. run in organize seeing how we of we're business, not changes and

John McNulty

year, account that? I sense. year of wins us into regard was aggressive? too to gains a with that And then, can needle or guess seeing in think help mean Refinish next back the and you to looking the and segment. about move point out Makes I the kind share half you're to two quantifying it overall terms or as we're of in this of maybe that the volumes, can

Robert Bryant

So insight filter a see well there But the trained themselves. is see the to some and speed the of, specific as and all initial in of initial in initial stock that body way investment then shop, conversion, over is there'll in painters typically to that getting for as beginning. spend mixing time. up machines at as you And you'll providing gains when shop think the terms not the -- with is numbers be into about it said, we're the -- what I some from

John McNulty

color. the for much very Thanks it. Got

Operator

our management concludes floor the Thank gentlemen, allowed comments. I'll back final this time you. turn questions. Ladies any to and for for

Chris Mecray

dialing all any Thanks to follow-up. you in have Thank questions you And again. for as forward today. look

Operator

Thank today's conference. you. This concludes

You for may you your Thank your lines participation. time. disconnect at this

Axalta Coating Systems (AXTA) 24 Apr 192019 Q1 Earnings call transcript