AXTA - Earnings call transcript Q3 2019 | Axalta Coating Systems Ltd.

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Chris Mecray

Good morning. This is Chris Mecray Vice President of Investor Relations. Thank you for joining the call today to review our Third Quarter 2019 Financial Results and for your interest in Axalta.

Joining me today are Robert Bryant, CEO; and Sean Lannon, CFO.

We released our financial results this morning and posted a slide presentation to the Investor Relations section of the website at axalta.com, which we'll be referencing during this call. and and current may and view effect Axalta's remarks reflecting forward-looking a prepared on company's the of operating our discussion contain today statements potential Both performance. financial future events

from no uncertainties involve forward-looking that actual differ Please risks These provide those is updates statements statements. under and forward-looking company statements. to results and may materially obligation the these note to

most various we've financial contains also non-GAAP comparable the included measures of presentation In appendix, financial measures. The the financial non-GAAP reconciliations these to directly GAAP measures.

filings For non-GAAP additional information financial measures, regarding the forward-looking statements please and refer SEC. to with our

I'll Robert. now over turn the call to

Robert Bryant

headwinds as of the ahead and underscores as thank important levers, and of well macroeconomic, expectations. process, morning adjusted delivered adjusted We caused the our us. value Axalta EBIT, a the well strong resiliency EBITDA, review adjusted Good strategic free of by for multiple and quarter commitment and political, employees. with you currency a which overcame our model, third business EPS, distraction joining flow our cash

were net FX across Axalta where and markets aggregate were volume impacts. in Axalta's by sales divestiture-related Though global participates, still before headwinds positive impacted sales the

per on of Axalta Operating end Way. pricing focus share solid and the year-over-year showcased operating benefit and markets earnings profit across most and by driven continued continual our execution from recovery and margin both actions businesses cost reduction

provide strategic the review to We but flow as the initiated updates will also do Axalta's news any year of the warrant. alternatives have market you share incremental cash June Free improved to today, circumstances from also not notably in we quarter. with is progressing. prior

operating company. and quarter fact currency favorable have price-mix X, were seen any in included net constant Consolidated the quarter in in effects the growth Slide quarter. which for a improvements some let's ongoing highlights as Turning QX this best included X.X% of public review of we This sales stable a X.X%. outcome increasing few to organic

net Transporting Light Coatings' our and were sales M&A-related impacts. by reflecting Performance foreign production market. Vehicle Commercial lower volume in before Vehicle offset sales currency net ex-FX, Coatings' volumes, increased end X.X% flat growth

continued show increase of we raw and price-mix the acceleration with customers an Price-mix multiple to X.X% materials positive This to gains persistent offset last quarters. business two OEM Light progress positive ongoing inflation is an ongoing quarter in consecutive Vehicle XXXX. made since with our now impacting in the including as fourth with

EBIT as earnings year's stock-based driven of We from reported from a well last quarter, $XXX XX% adjusted productivity drop-through third as and improved third price-mix strong by quarter increase expense. lower consolidated million, principally compensation

headwinds, FX growth. impacts, Axalta's a full our success quarterly approaching margin an since are offsets Volume lost profit been XXXX. inflation XXXX in XXX the independent to higher Notably, cost and year-over-year due pricing variable to margin from of our XX.X% to EBIT highs broadly company, we partial points all-time adjusted have and was were basis modest recapturing largely

the XXXX. expense operating quarter impacts excluding also fixed third in consolidated lower XX% Axalta's of was FX

due XX.X% still raw achieved inflation pressure, margin improved XXXX to-date. material margins EBITDA from the Vehicle in materially Light adjusted XX.X% high of uncaptured Our approaching and to of headwinds despite now XXXX, lagging has in all-time pricing volume

with operating consistent with $X.XX Adjusted level. drivers mentioned which per the $X.XX share with the quarter the share was prior for earnings per share quarter compared year per those in at

Pacific and the net net ex-FX while briefly, weaker increased sales We Looking and North across in by quarter. America ex-FX sales impacted Asia X.X% end at macroeconomic Latin America Axalta's Refinish our were conditions. markets EMEA, grew solidly

to sustain of the Refinish appropriate this cost Our continues with variable margins business. team to inflation effectively management offset broader price

shop productivity conversion broader weakness. by pressure continue structural the volume our to distributor of increasing an which combination of efficiency, and drive management, inventory we terms, In volume reduction economic and see body driven element we a day from globally, moderate customers continued to waterborne with by every products,

has seen in North growth markets, exhibited product customer significant the gains as in in great we're our this, we years seeing America, Despite out net mainstream continued count. many increase share business multiple shop regions In with in in total success. Refinish recent our rolled systems

net Our Industrial impacts end joint quarter about ex-FX the the market sale. negative sales X% declined before China from M&A-related in and venture

global all with offset Drivers digits, price by regions. include, in volumes of pullback weakness pressured mid-single as correlates largely mix, global which the remain industrial with many improved countries in production last with this nearly average down quarter volume indicators, contraction key

we which may and of solid gain our introductions underlying though help lower explain share via for Our many decline new execution to product overall indicators. relative also continue to macro drive innovation, remains industrial and rate

declined for net America notably by rates, China sales impacts eased over half market of Vehicle in global ex-FX the production for sales Light September. strike contraction lower automotive influenced in quarter, ago. were the Lower X.X% comparisons reflecting also net North year China's began year-over-year since though last most a have

production well have a opportunities fundamental for a for and to X.X% and now for backdrop, calling global a business EMEA, decline X.X% XXXX Pacific, this lower XXXX assumption end. XXXX decrease X.X% America significant for as reduced, continue The our been guidance a now includes IHS period. a further on now And months in an for global a production X.X% in forecasts for the X.X% China. picture, updated versus global decrease Despite the Asia from X.X% we're row of XXXX decline to July multiple on working execute we business. reduction XX including North production in

to Additionally, consistent in to ex-FX and overall period, with in Americas in due line regions. Commercial X.X% vehicle down largely production rates offering for this pressure. demand Price most customers increased was the sales grow quarter. QX, non-truck mix including Vehicle last mix production volume net revenues the strong ongoing slightly solid to in some offset quarter continue service effects

to cash targets $XXX cash to million at was X.X lower target free versus third times We cash leverage, the million. time Regarding $XXX significant leverage strong quarter a and finished we full quarter free our flows, over at reconfirming flow times as overall improvement our goal. net times of balance X.X flow continue June the X.X longer-term we're sheet year and a with XX,

terms sealer XX% In our new new Industrial, operating continue motor that new Also high this energy to to for provide that and a lowers launch month impregnating we investment launched North XX%. channels. conductivity electric In Refinish, waterborne VOC-friendly solutions in Hecker our products our with of Challenger we resin sealer including to premium brands technology basecoats. several use highlights, launch the mainstream in Refinish new Spies will to temperatures by innovation and thermal distributor America, we will NasonXL support

Asia market coil also We and Pacific globalize of to Axalta's line latest key the the appearance marketplace. continued the clearcoats in performance while use. reducing leverage expanding In scratch OEM and newest marked quarter product Durapon we technology represent Transportation, high Lumeera resin clearcoats These for improved of cost for into of the products the third XK introduction our global and XK technologies, rollout. enhanced resistance

terms entrée quarter, us in in completed powder In East the the the of strong into Paints UAE-based Capital acquisition business. the highlights, Middle a which gives we of operating

That which pressure global revised efforts mitigated the produce to volume some FX as well variable well-executed said incorporated pleased to in guidance. along much with been persisted impact markets we're past we've by coatings We've continue quarters into as somewhat inflation. headwind acceleration has in across ongoing by our Overall, of quarter, seen XXXX. year-to-date this moderating productivity cost

the mark tailwind price-cost we given material since in company commodity that a quarter, in the and prices. at been month that of well abating the bodes current quarters the also developed gap on we fact XXXX in headwinds modest We're saw for Raw the pleased have out level. total in year-over-year recent very September, which closed months third fully coming

While terms have we an important Vehicle important customers, that also to end still in discuss with of and this closure, submarkets do Industrial we more continue these certain achievement gap in need our markets. to Light and acknowledge

pricing to and cost to continued hard improve also work adjustments to on needing addition, In our we structure productivity. focus

us structure meet we broader Way objectives quarter continue will reach Transportation pressures. another real-time savings our to and charge despite goals in this our million, our totaling to $XX Accordingly, financial Axalta to cost cyclical help took near-term cost adjustments Coatings which make we

I'll review results. financial our over call the to turn to Sean now

Sean Lannon

Robert good morning. Thanks, and

constant a flat net and to Performance sales X, Coatings. result X.X% currency decreased consolidated Turning year-over-year, decrease in Coatings in slide Transportation including X% a

price Excluding mix volume consistent consolidated contribution a line net positive impacts by posting Performance quarter net negative divestiture-related sales X.X% Coatings increased offset top X.X% all The robust reflected last regions. across pressure with with increase. result

sequential quarter Coatings, ongoing within was Light mix component was a slightly solid Refinish Commercial weaker also recapture. in by Transportation mix in including strong including price notably the along in benefit for Vehicle fourth Price Vehicle. recapture with Coatings price mix Performance underlying positive mix offset of

sales from of margins profit net The translation corporate was pressure EBIT for inflation benefit million end FX impact XXX basis FX of as year-over-year prior operating and was XX% largely margins. points the the quarter. with these drivers level pound. remains to negative headwind renminbi, the compensation in included modest $XXX for euro overall lower quarter. most aligned and included lower as of cost the X% and Argentinian, continued of period. the combination overall Partial Key across price translation sources and peso the QX a volume FX the the improved accelerating adjusted well at at to impact year material raw a from offsets stock-based mix savings the productivity expense by drop-through XX.X% driven headwinds increase markets

X. average impact X% X.X% partially organic and increased volume slide impacts. Drivers in decrease. FX net quarter X.X% excluding included price X% net a growth to and excluding increase currency Performance X.X% decreased this sales of mix, Turning by M&A-related a X.X% offset negative constant Coatings negative a third year-over-year FX

the North Net end growth the consistent was X.X% FX Refinish period sales market QX while subdued EMEA, and quarter. digits. Asia growth Latin produced more were improved and ex net of currency in America in with second led contribution by year-over-year, mid-single priced America Pacific the constant Axalta's mix including sales

well in inventory in products some ongoing including period globally the regions. distributor-level macroeconomic Volume weakness to adjustments waterborne decreased conversion as as

by offset price gains net X.X% global regions, year-over-year excluding ex sales which only third was aligns all weakness mix X.X% decreased in JV with driven average end-market China in regions. quarter all the in decreased pressure volume production the impact. FX solid modest by from Industrial industrial sale decline This but

third productivity the Coatings EBIT strong increased stock-based year-over-year benefits, quarter as contribution, price the offset well partially Performance lower realization with compensation, as mix XX% $XXX negative of year-over-year adjusted by million of impacts volume mix operating and XXX cost benefits quarter. lower inflation Adjusted points year-over-year, FX and year drop-through, modest increased versus EBIT XX.X% basis effects. margins of cost prior reflecting variable price

Turning to slide X.

moderate negative Segment year-over-year net flat FX an mix of Coatings headwinds offset mix were price before despite from product sales equal X.X%, Transportation quarter by Third decreased X.X%. impacts benefit amount Vehicle. Commercial volumes

Vehicle as notably globally decreased driven China, quarter September sales excluding third production which X.X% X.X%, net into in headwind. but FX a by in by continued mid-single-digits strikes as lower most well decreased overall, Light America, have to rates Volumes two-week from October. North the impact in low automotive

up materials recapture reflecting remains two X.X% years. globally Vehicle of demand ongoing the over increased mix positive, before overall China. excluding price quarter X.X%, price solid previous sales persistent inflation with net headwinds Average driven third by vehicle raw associated X.X% FX Commercial

and inflation. North of Forecast $XX And associated adjusted in in year and declines the reduce and Transportation increased recent production benefits basis weakness X.X% X.X% QX XXXX, region. versus EBIT the mix over offset points as by ongoing in backlog to in the lower versus volume times improved have moderate quarter. QX $XX of which expense ongoing partially XX% begun price were modest of truck continues XXX margins million America, million order in months, to updates increased for Coatings cost prior input rate given lead operating

Turning slide X. to

driven $X free notable quarter totaled capital improved QX versus cash and improvement. results CapEx contributed also in about million outcomes. The was $XX by million stronger XXXX. of flow Lower million overall operating working Third $XXX increase the

net of versus cash a debt at of ended XX billion the cash quarter and million equivalents $X and $XXX We billion June balance $X.X end. with

at times months XX a X.X adjusted balance versus improved times latest XX, stronger primarily X.X reflecting coupled with was June ratio leverage net EBITDA. Our cash

Turning slide to X.

have our guidance We updated financial XXXX. for

expectation reduction ex we lower as flat Light most from assumption, end sales global industrial the incorporates which assume markets forecasts slightly including well net a For now assumptions approximately a slowness. our across demand decline FX, in Vehicle, volume ongoing previous of build as X% versus

net which sales incorporate in strikes, flat. interest up Our reflect be expected organic China sale hence America new The fully in also essentially assumptions the JV to XXXX. OEM before negative would May and North net an forecast X% impact be sales are continues FX not approximate the from made to impact

assumption X% X% noted. expect year-over-year including the FX in approximate For headwind as-reported approximately other net sales, including lower our X% impacts prior an versus just around we be to and

have as expense. For lower pressure previous maintained and offsetting adjusted sales EBIT net seen guidance EPS, our to we adjusted well stock-based benefits with we've compensation

for For cost drop-through adjusted $XXX inflation expect accelerated reduction generate million now adjustments year. top effect of partly offset the we the outcomes budget. the EBITDA, better moderately mentioned, full input million to This to incorporates and by versus line our $XXX just

also is million D&A due translation to impacts. FX assumed lower, to be $X principally

We range the adjusted full half as trending lower have rates year. of the we for range to the maintained for the income tax in appear but the

amounts, contemplated around largely assume million, CapEx cash than which we flow $XXX timing. the For do come to free $XX to million lower previously for in the is due year full

from strategic and employee $XX million. to approximately awards cash of million We retention with have impacts review associated incorporated the costs $XX also

our prepared concludes remarks. This

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

Operator

Instructions] first with BNP line Thank Laurent Paribas. question Exane from comes you. your of [Operator the questions. proceed Our with Favre Please

Laurent Favre

of morning commercial Good I've side couple questions got guys. the please. on a

an weaker just when price more then The where have bit what you positive I'm bit could seems color wondering And you QX? first mix orders, that you Is Thank seems see on for both it that And already that about more you. XXXX? there. will and where do lower is in volumes? a the in U.S. issue? a think that think us to you still it's start Or in it's give you it one think we Europe issue when of the do

Chris Mecray

that question respect Production expected near the moderate to orders in relative begin commercial Chris. for now. Yes. for you are been first term Laurent, and some referring truck volumes Thank have you're assume it's the question. market. I months in in in that weak to orders to your

Robert Bryant

we're And at as on looking approximately XXXX. the expecting add X% are just forecasts far eight to an as at decline Class where for XXXX current four through least

Laurent Favre

Thank you. And the mix? price on

Robert Bryant

strong selling in slight largely issue we a So of for impact as price. a back. see did as It the volumes that And was in have was more did quarter. lower XXXX. we We that of QX giving It a were opposite pricing the mix mix average far mix issue. third of any quarter sort CV of wasn't

Laurent Favre

you. Thank

Operator

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

Ghansham Panjabi

guys, I your first give Hey, that just was reference most the where callout you pronounced regions? you on on guess economy and off do Which on the And slowing. color good auto from little It weakness optimization Refinish there. segment us point inventory volume morning. bit a had on think? in more the a Can that? impact

Robert Bryant

Refinish in business, perform the overall continues Yes, the business well. quite Ghansham. to Overall,

to that then would reduction conversion waterborne low see did distributor we volumes America. single-digits solvent North highlighted, and the highlighted due in in down we that continual in conditions, in the some impact due demand the saw given natural roughly And structural that And management. acutely As the perhaps somewhat terms inventory was That MSOs global but more to volume the market, of from we also as predominantly Europe. economic buy on be volume. before to each we've more perhaps waterborne

Ghansham Panjabi

realization from think That's effect about productivity about mean helpful, accomplished? also on we think then volumes. there's gross should just then my I the lot -- net XXXX? obviously, a question But And what how how on on already XXXX of in should second Robert. of And and pricing variability for we parameters. flow-through you've

Robert Bryant

outlook the think I we year, I in we we'll better across on be XXXX. strong see year pretty terms call overall in a overall core clarity as setup for at But as if XXXX, of December more look businesses. -- a look providing think Well we our our volumes

started each continue signs be already market and the really market has one some that, to end we've but expectation to outperform in driver our the builds markets. stable to expect begun that global We China is will see The to next key of that stabilize. the year of auto

the see innovation-driven XXXX market, development. of in And introductions share Refinish positive core as capture product with we year ongoing ongoing and volume

positive the next side, mix price expect the we bottom On were -- line. to that to continue price year to pricing do dropped achieve

Ghansham Panjabi

Thank you, Robert.

Operator

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

Harris Fein

facing for bullish my the guys. on the Harris versus challenges? industrial taking for which you're verticals segment you This where Good a would moving morning question. of areas just is terms forward? Fein we Thanks which Chris. say, in think give most And about outperformed on markets, average you're us can When some you end walk-through

Robert Bryant

sales pressure industrial venture. but overall, – you decreased X% really at new about our We strong the impact new China in outperformance price former and saw as we for excluding us, So we customer the the And and product additions capture. quarter of product had what's look volume our did to our markets, industrial from see know that acquisitions. our if driving ex-FX we slower the also are relative market joint

themselves coil, saw amount down achieving look we individual we the by price in industrial high did also down in are price mix general, we slightly, If single digits, the that at up in attractive are seeing we but same in in mid that the see to markets market. market. somewhat volume but pretty we volume Overall

did demand that that market, Part the coating metal products also by some of it's but as see Energy in as systems conditions down mix volume price that E-Coat of In whether that somewhat tiers Europe the there. is we in impacted and into OEM in market. There go was related different in those or its whether China. Solutions, up well

with again somewhat up of in But in price regions. and our we most conditions in down volume saw particular in slower for that powder. we price see Europe compensating Powder, in mix did then increases, And

but that single up a what we're really volume lot mix is new saw the we're seeing of commensurate there selling really the getting amount the prices digits, being bit offsetting core price are a higher we gains by of down Wood, that and some low business soft. in little a are a result of there remodel and volume starts housing challenges business that

So is and overall, which perform if market. a allowing better customer market a to think than us team from product new I that well new about is we performing overall introduction acquisition extremely the our talk

Harris Fein

before also that mentioned the full you gap level. closed And price-cost the at you company

think environment they can us material given and material moving about have your change raw And you Just -- creating do any still are buckets pricing pressure? are may you some forward? if just that cost help the strategy non-raw how maybe

Robert Bryant

think as on overall we mix, technologies. products. I the expect price constantly Well launching we price We're an upward mean about those We're colors. And continue developing impact new think would we constantly launching forward new I that to move as have of constantly and all business. new we're in

a in call bit environment little material environment next And raw it. of stage. this fairly year, early the terms think at But probably we see it pricing least too it's I for a raw to at stable

Harris Fein

Thank you.

Operator

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

Unidentified Analyst

here David. expect And is QX? I for Hong first David destocking expectation for any guess This inventory what's you [ph] do Refinish volume? just additional your QX in on volume,

Sean Lannon

flat We're expecting material currently a Yes. We're essentially destocking not any looking QX-over-QX. volume. out

So, no into declines heading QX.

Unidentified Analyst

another what's growth your your in And Transportation guess XXXX? question QX for I in rate? on target production guess organic segment. I what's your then expectation oil And

Sean Lannon

little similar IHS for think as currently QX down is and see X.X% I we QX large down by start QX. following see QX trends of -- bit now guidance a So the But to and comp production which becomes easier builds to going we're in and XXXX. you're year. The

Unidentified Analyst

Thank you.

Operator

proceed from with the question with comes question. line P.J. next of Please Juvekar your Your Citigroup.

Eric Petrie

P.J. growth term is Good convert on you're for waterborne morning, volume Petrie Refinish to this Longer outlook what's MSOs as collisions? technology and lower seeing and your Eric

Robert Bryant

over with a customers that on help sales to and as We technology them a We every in, we It's and requires our expect value in work we technology time. be and our we single look at side for recognize business net our before, support medium the Refinish that business be productive. day said in pricing. to long and overall where them grow pretty to more efficient help investment Obviously more term. significant

well. a So continuing support as time as and growth. to with expect terms we'll of of extremely you continue well in about MSOs, MSOs, small and and positioned to think to body channel grow you channel, market look that With are sales support over continue for to at as independent we well that period the as us market shops,

longer term, continue net expect the sales increase to So think in market. Refinish we to I

Eric Petrie

secondly, expected Vehicle in raw And modest you. offset from you lower the to Light Thank and help production. materials September noted that's tailwind a

solvents, I the on the basket So was did greatest wondering, materials could where you just see Was it out resins, you raw elaborate of tailwind? or that? of PiOX

Robert Bryant

Sure.

as ever flat So slightly or pigments. we we isocyanates saw and then see solvents, monomers, to inflation continued so down. resins in price And

So give be again did us confidence at might inflection an potentially some that we that point.

However, is uncertainty around going the relevant also are Chinese for to be to the what very outlook next tariffs year.

Sean Lannon

actually had specifically One that point whole, as raws, inflection on. September we just clarification point a the so we saw what in commented for headwind, the that a quarter Robert on

Eric Petrie

Great. Thank you.

Operator

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

Arun Viswanathan

reiterate, any price-cost as fully -- drivers Thanks. then on that you caught expect I'm far of, there? been Great. unfolding there, Maybe the have about the given China? as, you progress, you kind see some guess, kind thinking in Thanks. of improvement Good you of OEM, morning. I you would can up just XXXX. are just And that

Robert Bryant

Yes.

in don't markets as downturn I we of for signs other stabilize. We are that next market the will we experience historically. prolonged cyclical think talked China about OEM China may have beginning look believe we as we at as like seen year, a seeing to

optimistic think fairly market go China we the overall we forward. are I as on So

Arun Viswanathan

And...

Sean Lannon

to Transportation. to was I regards other the in answer going question

when comment Light you Light the specifically look equation at caught at opening up price-cost So still when trailing we're his remarks, largely that Vehicle, at Vehicle. look in within did Robert total company you We're level.

Arun Viswanathan

reduction of cost downside as wondering do still or $XX there or opportunity any the that upside And ongoing see million on on front, front? a kind is that then, next just you

Sean Lannon

Yes.

on sticking we'll Way working to pressure, be a million thoroughly update. we on providing far year. So see guidance once initiatives. into as guidance an we're our If And Axalta now original uptick as that's something right inflationary we expedite may those II $XX some of more are with into we go we head December we were But XXXX. the as

Arun Viswanathan

Great. Thanks.

Operator

question Please comes of Andrews with the next your Stanley. Your from line Vincent Morgan question. with proceed

Steve Haynes

Steve you. This side Maybe guys. for And a regard the if of things? lighter to customer talk in in on anticipation Thank are there's you Vincent. outside if Could kind restock Hi, inventories is levels? about Haynes they of see the those on business. Refinish of you of any where XXXX maybe

Robert Bryant

Outside our small relatively inventory. and Vehicle a of Vehicle, markets amount Refinish our Light of customers in and Commercial Transportation carry

not carry there. distribution not risk industrial in distribution, sales general, of through are there's a high some then those an industrial of So, folks inventory. really direct tend in from those of to perspective, And overly but are sales some levels and

or to expect have concerns wouldn't markets. other any we major So see in those

Steve Haynes

you. Thank Okay.

Operator

The next line with Josh the from question your proceed comes Please UBS. question. Spector with of

Josh Spector

Yeah. guys. Hey,

grow here? that you kind as just allocation of the review to -- few your have your process, for to the any question do is plans So Or you midst any continues get strategic months of in until a cash build just the going to in resolution? next some over cash

Sean Lannon

we what potentially opportunities, opportunistic that to of process communicated far share at looking on as out strategic Yeah. the paying buyback by review mean, I But previously we down Certainly, M&A focus there as deployment. being some organic coming debt. the followed continue growth decisions capital will

as Debt average today X.X% is sitting cost. far below weighted as

other but remain an parties moment, extremely at the same. is that So attractive the the

Josh Spector

I differently? anything with you result thinking on over mean is Axalta the what strategic about Does do know the Okay. And of your nothing, change of strategy to going not consider doing couple in if I anything the but are how kind years? itself next you is Or comment the mind? anything of itself, process you're that

Robert Bryant

of defined direction very in company. is achieve I strategic think strategic any terms of we're our out overall wouldn't each well in of the process -- our markets what as strategy in review to In changes expect and end one trying major each a itself. coming

Josh Spector

Okay. Thanks.

Operator

The of proceed question. next from the question Please Sison comes Mike Wells Fargo. your with with line

Mike Sison

about volume Hey, you maybe XXXX needs volumes maybe guys. some time it should quite the growth stronger You've Nice leverage us quarter. has if think you can of had through in been pricing. been for the walk recover, When anybody. since and got the than past? do segment, which be we But it's

You've a maybe got XXXX? cost head savings. give And us we that feel as into for just

Chris Mecray

said needs? you clarify can a what bit? You are little leverage Mike, the

Mike Sison

growth, If you into get volume earnings what volume head the forward as XXXX? is you leverage from growth going

Chris Mecray

Mike. Yeah,

one-off see So investments each guidance cost period. in is as unique period that to as from guide and annual elements well annual fall we expect drop-through going is incorporate would that provide period any for of the or to incremental the reason that volume and that the margin that we'd

that gross in the But drop-through capture as elements people a meant business given business see is margin have but all annual business the So, very the the of standpoint strong incremental specifically, most business generally, have. margin our from we guidance commented of to potential. high volume a coating's ours naturally we can like strong understand period, that is more

Mike Sison

for Okay. And coming are to to have needs market looking been such. growth a terms where you then happen? a just Refinish. follow-up products good of since think the -- that a and of What to you quick while some you know I are What with do show out It's lot market in grown. new on seems you're going forward?

Robert Bryant

attractive and we in achieved Well, quarter. attractive growth level, we've overall Refinish absolute the I value growth third think seen at in

that expect continue. to We

our in world global where than out building on our share. share those countries focus individual our our our regional might continue also penetrating We countries the business also be lower around market in mainstream and and

that we're pretty in growth optimistic I topline business. opportunities So, think the about

Mike Sison

Great. you. Thank

Operator

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

Luke Washer

you see the is other in this about talk mostly Refinish any lower Steve. wanted during business. the did kind I you factors your the and volume that collision Luke said? Washer for Or was activity of Was destocking Hi, the quarter? -- on slowdown to slowdown

Sean Lannon

it major but the conversion driver. the European more Yes, And was Robert largely destocking. a as was of rates continued impact in macro factors. within region. other again It really of we quarter see Collision some weren't to the the water a as commented, did well solvent

Luke Washer

variable distribution Thanks. you your raw cost variable And just would the of versus how cost quarter? say us and characterize and distribution? this year-over-year much remind costs you one And materials kind Could Great. labor more how on labor are of inflation.

Sean Lannon

labor flat COGS level, about at The at and relatively just variable the for perspective. distribution COGS XX%

Luke Washer

Great. Thank you.

Operator

question Koort the from Goldman Please Bob with next Your Sachs. question. line with your of proceed comes

Unidentified Analyst

Hey macro Light Anthony referenced Thanks. Vehicle And talk headwinds, In much [ph] I to performance. thought Walker light the in of did on how you impressive. pretty your that about were how much Can you guys. how Bob. share volume strikes performance the impactful quarter? for gain? you And guys It's contributes was during quarterly the of the

Sean Lannon

Yes.

you the going far as to granular So, on incremental. quantifying as to the strikes. we're I level some impacts give down get not the would

QX, as impacts QX. far the As we're similar impacts we in expecting saw in

half that time, back in quarter. doubled some up are difference are expecting Although the of the of the to strikes make we essentially in

Unidentified Analyst

to right. I segment could Vehicle All your think both relative on Light to to [indiscernible] if you ability just comment some outgrowth on then And share take the leading

Robert Bryant

with competitors be that very good -- -- it in good continues to technologies. we have market think I good

We have strong very portfolio. a product

product business as leverage continue the line some and of will in technical that best And we service industry. the as both I to think support. is and service end our we in market, as compete to technology well continue our that in Our support

Operator

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

Silke Kueck

It's morning. How you? Kueck Good Jeff. Silke are for

Robert Bryant

morning Silke. Hey good

Silke Kueck

follow-on Hi. like that previously. cost could was to asked you wondering I was variable whether the question

You up but if million, your XX% said of that's even $XX those if variable like your that if only that's COGS up have material quarter raw X% a were And you this X.X%. are maybe much, really were costs. headwind, prices

because you've much had like definitely does that's million like it really so your And realization right sales the expansion. margin incremental it's and -- on so really these gross whatever price-cost nice $XX base, look -- the an better

Robert Bryant

in we of it a contribution as although in that Silke actual you material But are flattening quarter, strong from very well dropped for mix some or to Sean line. margin attenuating perspective. see some still correct performance for raw bottom variable price us. the think I did we The mentioned had headwind overall was an the September inflation

Chris Mecray

headwinds And the the Silke, cost quarter. price certainly overcomes of add cost and I to But magnitude headwind. overstating magnitude variable variable that in the would somewhat prospective the is was certainly you you're suggest. meaningful cost It not that

Silke Kueck

at look half you're half it your from maybe the versus productivity expansion, you realizations raw comes margin So improvements price it of saying whatever are? gross of when material and the from

Robert Bryant

weighted Yes. cost you The at quarter the quarter mix, EBIT low towards to give say some it's when heavier to in price headwinds variable probably I the at way the look it's would about probably particular. in the level single context. think digits

level. it So at was gross mix story a the margin price really

Silke Kueck

look overall -- different down, any I know, like have And being think when don't volumes you that. my that the I volumes there which maybe that to is down X% to into second like maybe much your Vehicle at Light said what is share all insight Bryant like were X.X% question split? your is, due Transportation the Coatings is of of And that better X% gains or Do results like some due it helpful. something and to that? market you geographic competitors reported. performance than Is a That's

Robert Bryant

quarter. the better We in did perform relatively

fairness a the in then quarter. that particular platforms the we think customer for function product of mix, on actual and largely the mix, were I the it's regional

Silke Kueck

do it more Do with share less market regional do has with mix to think to gains? the and you

Sean Lannon

not a more fairly regional it's America than the wins. on was had And year-over-year. specific mix. North of flat we more It for so actually would it was side volume positive strikes, have regional been a customer Yes. the story actually

Silke Kueck

Okay, Thanks that’s very much. helpful.

Operator

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

Colton Bina

McNulty. John taking Hi, Thanks question. guys. for This my Bina is for Colton on

year. emission I headwind some a follow-up in China to China a the do any been five Light the in impact seen of to on wondering, see from businesses bit X, any or you know you in of Just XQ? had first was have it standards volumes, impact switchover a I there the half expect Vehicle from

Sean Lannon

fair observation. a That's Yes.

we We look up. the domestics, ahead pulled China really about still you -- pulled cities. are edge seeing, That's it a production know, six those to But year most a China several in they at year are as an the players OEM compliant. over about you to catch regulations while if July ahead giving being XXXX international the of nearly is XXX%

extent to you're weighted more that So is the benefit. the as to international opposed domestics the seeing someone heavily players to the

Okay.

quarter benefit So in a it slight the would have been then?

Sean Lannon

those to we're benefit end but because about talking Light that those customers non-domestic Vehicle what sooner. met are they've Relative seeing end are a Vehicle standards customers other those Light

Okay, great. Thank you.

Operator

from comes question Alexander Jefferies. next question. line of Please with your the proceed Laurence with Your

morning, everyone. Good Hi.

quantify You of versus and was there is was X.X% mentioned way I I that product by sales. how price think price to X.X% higher mix any much this contributed to mix? wondering, driven

Sean Lannon

the Vehicle more across a weighted XX-XX with heavier actual that end CV negative story stated a And certainly was so markets mix price. I towards mix. split. price look and it's do Light to much you when towards as much So compared within not Performance, to

in was great. question second highs. reaching all-time cutting And do I where from gains? my with and wondering was then here of of margins we go terms productivity kind cost Okay,

Robert Bryant

I at margins the XX.X% Well, this margins. in think to We XXXX margins middle EBITDA EBITDA just were achieved of clarify all-time quarter. in XX.X% high

that much would as gap I the is we still forward. forward like think we Transportation to look go side of close the on there more price as we

our inflation costs. with be keen in initiative reduce each additional year to of Axalta focus. that as terms initiatives beyond of Axalta well And offsetting and talked Way an base as to continue structural Those area as about cost go Way we

Laurence Alexander

Okay. lot. a Thanks

Operator

Paretosh Misra from comes question final your Your question. with proceed Please Berenberg. with

Paretosh Misra

taking Thanks. for Thanks my question.

are in versus Industrial? Vehicle Light volumes In color So the would us a pressure. great be where Industrial if range. Light could is on under Vehicle business. you other if Is provide there in a Of it words, you business that course versus business your with any margins given give could we still higher-margin sub-segment

Sean Lannon

segment the Coatings a segment than level, Performance Yeah. provide our margins however, not our Transportation information Coatings margins. segment At higher of our We do markets. about end are profitability

Paretosh Misra

CapEx Got timing apologize forecast I CapEx it. And went I because issues. that. and of last then down the one on if missed

was which project So, that?

Sean Lannon

actually that's was We million. been general the $XXX and projects. spending. a all just down you're There's original haven't bringing guidance what $XXX delay to stated it seeing at in the some The of million

in year. I expect necessarily huge will project XXXX next It's XXXX. slip Some get those guidance something working wouldn't towards. we December. for ramp-up a delays we're provide of just CapEx we'll into And into once incremental

Paretosh Misra

Fair enough. Thanks guys.

Operator

conference. session. the Ladies end and concludes gentlemen, This we have today's question-and-answer reached the of

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

Axalta Coating Systems (AXTA) 24 Oct 192019 Q3 Earnings call transcript