AXTA - Earnings call transcript Q1 2021 | Axalta Coating Systems Ltd.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Axalta's First Quarter 2021 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 a replay will be available through May 4. current. call the please updated, recording may longer today's information that and after no in provided will be listening should note be the therefore, Those not be to I Chris will the now call Mecray. turn over Please go sir. ahead,

Chris Mecray

Thank first VP Investor you, results quarter your interest XXXX Relations Mecray, welcome and call. appreciate of in We financial and Axalta, This Treasury. you Chris morning. continued good is and to conference our

financial website we and and referencing results CEO; during discussion financial these the Bryant, on posted potential is and updates Lannon, axalta.com, and differ results view may reflecting contains financial this appendix, released remarks Robert contain our we along may current are evening, quarterly prepared of our presentation statements effects forward-looking risks, the Axalta's GAAP today our me also at statements slide Joining note will operating the measures. comparable to In of the most and these Please Investor and various included the today involve statements. and forward-looking to the reconciliations to which measures. section CFO. a events call. future uncertainties be provide non-GAAP Sean Company's Both of we've commentary This Last with actual no statements. obligation that from these financial non-GAAP performance. directly materially financial These to measures forward-looking presentation under Company Relations

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

Robert Bryant

performance, earnings to Axalta of and healthy. customers globally remain outlook and year for I'd joining our each financial Overall, your their second and excellent half of throughout partners. first and us families Good our review the and of for XXXX. also of operating perseverance quarter morning first hope and on financial strong to to you results full the following like the and quarter the you Axalta's showed team the dedication needs thank heels for our safe continued XXXX. I thank

the quarter, chain in Though flow back first due recovery the input improvement, third ahead of due quarter, increased material remained million excluding of records. incremental from the points markets North operational manufacturing in current key basis exclude margins matter last to weather, the mobility the sales during which less impressive. early XX.X% persist America some impacted but with while the even held vehicle additional of headwinds, of at vehicle certain across strong sites, the previously pandemic prior coatings shortage up for North from period. increased to EBIT believe of at volumes quarter. associated volume Net the first material in our February an disclosed quarterly free Continued guidance These cash least that and resulted business these Without quarter headwinds to the impact XXX year-over-year first EBIT, better. results XX, raw that the our still tailwinds. and enabled associated headwinds set charge growth this availability once the strong be benefited demand X.X% volumes, up for first $XX the period. lost associated fortunately we parts volume during charge quarter very and from produced to some of in Axalta's the remains EPS greater in year primarily second materially in impacts restrictions would levels severe against new customer broad this be liabilities. Adjusted could made of costs pandemic commercial date much America, the XXXX. automotive constraints impressive The of worth comparison with reported strained supply serve. place was The as, semiconductor quarter light end million which actions $XXX to further adjusted operating or these impactful structure but adjusted in quarter chip fueling while the that expect appear the the as growth FX we inflation. in all consolidated our U.S. we volumes process X.X% cost a in during less of year-over-year or strong, below strong has profit this mentioning I'd actual matter that curtailed resolve countries already of be we Refinish production to period. quarter will on early aspects provided year, It's XX.X%, margins first quarter evaluation top been note than complete leveraged have XX.X% line the normal

filed as in million. up estimate, XX-K, range our initial Our possible to $XXX of identified a loss

versus of XX.X% decreased XX-K the compared for a the quarter indicates range another XXX use is and point $XX the the first expected XX.X%. million a was the terrific Free a generation XXXX, in our in first in EBITDA first the Adjusted of Adjusted exceed with filing quarter from million progress the $X.XX million an $XX prior quarter of Additional prior improvement $X.XX for $XXX basis a a million, year. since quarter with not cash of reflecting with EPS in performance, increase the including margin, flow on possible $XXX year. to aggregate. was that matter charge XX.X%

free quarter strength aligned quarter. is payments, the operating due our flow annual a in result results of the was typically cash the of First to use timing with so

in ramp leverage the pipeline pursue potential our in at adding capacity our of in allocation continue Asia active wire cost we Shengran, up deal Chinese Solutions targets. a is leading ever China activity of to will motor while April, closed great business, Energy transaction This as Anhui a enamels example and deal bolt-on elements, a structure. supplier fit-for-purpose The Pacific, especially we we M&A our first of a early local manufacturing capital Regarding market. M&A strategic electric that to an boosts

authorization share $XXX to quarter. shares we million repurchased back program. Axalta's repurchase the during repurchase We We of have increased first $XX also buy availability and recently our $XXX by announced total worth million stock about in through that our million Board now

Regarding markets. global first underlying in saw and business strength conditions, and quarter we with strong notable markets all industrial from end recovery period, demand across the coatings automotive demand through both truck our evident of continued and

underlying For business continued the saw in We with early Refinish, has pace in March, which quarter miles total was the pandemic dampening of end of in. April. restrictions of overall first in with the fourth driven quarter, consistent the strength signs

into to traffic with remained return. expect the during However, April close around the with variable North year-over-year. during of during sequentially X% first in restrictions XXXX traffic. of miles Axalta accelerating and were driven quarter, both first and around below levels was quarter in lower driven country driven EMEA, Bodyshop normal line too improved The Miles quarter, vehicle the applicable quarter. Bodyshop April. we very as March slowed the in America by miles remained lower gained conditions place the the of for XX% quarter. improving activity the activity around end ramp-up momentum the though period. and demand but around year-over-year early stronger normal, balance quarter of was in the XX% aligned the was through to vaccinations somewhat below fourth pace This throughout with In government during more normal COVID normal XX% towards then activity customers be

also restrictions are as the certain levels above continued spring traffic through quite been Vehicle most lifted. pre-COVID and expected Pacific but quarter. the has increase countries for expect Asia the variable, We reduced be to remain in

our of owned remainder taking to through mobility preference services and Axalta's a continue using as the key operating eased transportation a Refinish move business. for progresses. XXXX, Industrial post well to normal, will Axalta back public high volume will a leverage of suggests driving as be as as in demand ridesharing travel brighter travel globally. for the profitability outlook believe Refinish normalization whole quite given which the year patterns In When remained the growth using We of demand aligned with fourth that sales we and strong year-over-year our also end demand, in of firm quarter to segments of all restrictions XXXX, saw most pace net or one's expect market Refinish drivers lockdown instead Coatings, recovery the be business quarter, vehicle serve. pent-up we recovery We of in of businesses. across vaccinations Similar the solid

businesses China First picture, wood primarily included and end in industrial Axalta's relative recovery to versus the and increased level, Industrial. X.X%, by and Western profile and including remodeling growth last in COVID-impacted Standout the sources and strength the to Solutions, EMEA. quarter production homebuilding a outperformance for North globally. of level clearly business a markets quarter a our industrial At Coatings at Industrial in growth market of support results. XX.X% Powder for outperformed America net retail flatter year healthy our quarter sales sales global global remained U.S. Energy notable continued automotive production driven General

steel, were equipment, general distribution industrial construction well and tailwinds business. Additional structural seen agriculture as as customers across Axalta's pipe within

diversified to Industrial continue Transportation for have Coatings our growth global Coatings. Many rebranded seen in our that segment we growth of industrial Coatings expected as support portfolio. Mobility Forecasts XXXX former may

auto around market will though May detailed our Hadi dramatic with lens shortages, quarter appear China principally business. as continued, change from to the In during versus name thoughts supply with mobility in our shutdowns positioning it Capital the broader Coatings, as the shifts place the propelled impacting on year, a small change, segment and XXXX. XX% production at may by leader, is our sector production Paddy in And production Global Mobility offering the fundamental with proactively of chain the unique is which by more Day. be strategy Owada, Markets is the taking the opportunities. moment shift a see the global first these the for far ambitions theme first new in quarter. While more impactful aligns than We it new prior the marked increased X and meet Axalta taking the recovery quarter industry. this rebound

somewhat to Asia led regions. industry the more market largely down forecasts a was X.X% in increase forecasts XX% our sales an automotive, semiconductor a North position growth the moderately increase, in Axalta's And which including with China. results for to XXXX, average, the due due America to for production XX.X% chip has auto while with shortage. trimmed XX% XX.X% in closely from match EMEA Latin global X% call in posted increase XX.X% the earlier smaller industry Pacific including decrease. Canada. trailed decrease, in decrease. production China Current a other global saw been net lower America a XX.X% a X.X%

plays and shortage dealer growth chip current may here must medium-term the actually lost forecasts building out, slip depending is the on the forecast, and While near to term consumer inventories to it's be production since loss restocked permanently further that remains silver continue spending strong. the lining how not is as

For business. Pacific, mid-single-digit EMEA production but call that to for quarter, low both Latin cabinet X the truck Asia four North ultrahigh commercial a waterborne continued previously, expected enable near-term share current Class increased that now market, announced services. X to or three by rates where Class X.X% autonomous truck-related weight. products Awards, of efficiency coats in supporting indicators XX,XXX, was production XX.X% to and for strength end which Edison customer electric and our motor prouder and LiDAR an America America, the remain I also period. reduce and expecting given multiple in coat for truck and Axalta awards declines market the supported innovation Current size won derives of long-term increase a exceptional X.X% production. overall global is XXXX could in for Axalta which for regions. highs, cost follow our thereby of XXXX including around at market remain with Award production value industry to for is of foremost X is all-time These awards entire subdued, were production truck which the XX.X%, in one remains Switching customers. businesses, forecasts rebound solid reducing growth. Edison to vehicles, the for led aspects China time. our innovation for the across for outstanding that In with top will The XXXX global These months. R&D intact, increase for I'll most by of only XX.X% market the the Last demand the cover foundation in electric innovations Sean Voltatext that motor won and Axalta it to at slight highlight three and Axalta coatings rates innovation, healthy our at and North coatings in more not by driven comments. and the that the week, are near our our additional and coatings technology electric a some in Axalta market, now enable sealer across awards coming led in over largest Including performance first order reflectivity kitchen resin jump first compared greatly Axalta. improve motors, vehicle U.S., two innovation. the organization remains team the and delivering and March require turn our truck for America however, refinish XX.X%. orders by be three The

Sean Lannon

and Robert, Thanks, good morning.

first for across primarily to broader XX.X%, and from rate. $XX recovery targets increase, to as cost recovery margins better that sales, share earnings a basis driven as EBIT light we Industrial wealth We and positive from over nearly the Mobility per million than a impacts somewhat of of was solid at adjusted versus margins include continued the points Net to X.X% the recovery February, year achieved Refinish with given increase the execute million, from Industrial vehicle serve, guidance X% increasing Refinish. incremental by volume share, a for share, level for year-over-year, structural segment half than consolidated as per markets declines in X% quarter well $X.XX savings price and offset our matter excluding XX.X% $X.XX our all for margins expected exceed stark as we China flat favorably quarter. markets segment XXXX, the to actions mentioned, year the mix associated diluted our strong boosted volume the XXXX result continued another Product witnessed basis record and the prior increased for initiatives slightly Coatings in customer and ongoing net XX% first volume XXXX from the X.X%. regions excellent year the contribution second from Fourth quarter's of compared quarter Coatings of in increased first quarter the quarter, included persisted increasing an the quarter. continue which were this the benefits were in continued charges in a quarter well improved volume had our up and a light X.X% result set As the better in Performance Performance also up by X.X% cost Axalta. quarter, growth positive XX.X%. vehicle cleanly quarter. X.X% Consolidated mix points year-over-year, year-over-year, quarter savings by noted. Axalta a quarter, progresses. year, and that Refinish the the recovery. volume during modest EBIT increased quarter, period the first adjusted demonstrated prior driven China rates. year-over-year. miles period, sales lack the following lower prior by noticeable Coatings into the the prior versus quarter. could quarter Volumes in our carryover vehicle year commercial vehicle the course Coatings realize underscores profile continued was XX%, the and primarily impressive marking still a restocking increasing growth from compared margins a level lower quarter, though year. from X.X% as of result EBIT the associated management anticipate light but record-setting most first in from the full did million first XXXX. strong savings per from we operating level restocking of the of quarter, including recovery X.X% by by $XX of a with momentum accident for Refinish net EBITDA Commercial Refinish Industrial saw first was favorable relatively basis of also support year year The temporary ongoing to some versus another was growth operating the management against but XXX on ongoing basis stronger XX.X% benefit the points for of and the and above not a given from increased adjusted Way semiconductor driven comparison, performance Mobility shortage benefits in the Refinish Adjusted a mix current from Price Robert very XXX Adjusted quarter cost prior in associated from solid quarter, positive by including XXX chip vehicle, year in as offset the the represented modest led first remained driver the EBIT $XXX comparison. The costs XX.X% our $XXX pacing rate EBIT aided new million, adjusted to results XX.X%. period. and of for million $XXX expected Adjusted sales stellar

total with million in $X.X repurchases as strong free even still the liquidity working resulted period. quarter we share of well incremental $XX compared balance quarterly flow the of flows, our of pleased a strong $XX cash first free that flow Regarding quarter quarter cash the use quarter management. represented first by cash Axalta million after quarter The continued record first in XXXX, driven of million as billion, were sheet and a ending $XX capital EBITDA to in solid first over

to Our XX net leverage at ratio to compared December X.Xx decreased X.Xx at March XX.

COVID-XX metrics, quarter XXXX. still of on impacts course, second of lows adjusted of from the the Our include EBITDA

well emerge for markets are year At financial service-based that our global time, remains we innovation-led that the technologies outlook support including continued current pandemic industrial key global the share focused serve. full on Axalta's broader most tailwinds as focused Axalta's execution business growth, aligned and in growth and continue from growth our the of expectation to including businesses, expansion leveraging Axalta's markets the is business market with Regarding we will models. we same backdrop XXXX, this leading accelerating gains, period. our global emerging across

For an month. full approximately including year sales foreign net forecast, translation less the from stronger the sales sales, we to XX%, currency of slightly the expect this anticipate weighted a due strong of growth from that both impact net slightly With to contribution second a acquisition benefit quarter volumes earlier announced increase as Mobility we X% XX% more and X% and both from in of positive segment than seen in in in segments, net sales the in though XXXX. percentage relative the severe

we Refinish, as business the of coupled progress, vaccination XXXX will course of ongoing with traffic the believe solid For more produce vehicle restrictions, for over the recovery normal pacing. a the mobility easing resumes

is year a of the remain for pandemic. due volumes impact XXXX lower the will XXXX by full Our single-digit high current sales net the percentage assumption for that Refinish than to

while XXXX million for shortfall vehicles the partly half second the of do a be into the XXXX. call made to quarter impact shortages, and good second believe from X we million approximately shortfalls be from we quarter second the second Industry year up anticipate quarter, most vehicle, but X.X production delayed the currently vehicle ongoing portion saw the shortages forecasts to of supply first during impacts. of half chain due production to the persist will light to through of For the

XX.X% sales the global expect of outperform full Axalta volumes, for net moderately to market For the year. we forecast

We EBIT adjusted our key expect year, on generate the and per of to adjusted of metrics other income slide. noted earnings for million $XXX guidance share with to million to $X.XX $XXX diluted statement $X.XX full

first full the quarter. of we we from that the For headwinds EBIT, the quarter adjusted adjusted year expect impacts noted from EBIT, ongoing approximately will represent second including XX% that

second quarter. to expect inflation more also cost see variable in We materially the

to during full the through Axalta variable while these cost selling focused channels from through year, as inflation of we the mindful single-digit cost high cost level. the serve, we early the For primarily the COGS needed prices anticipate on inflationary passing is structure phases cost on at cycle. staying increases,

flow excluding the We open include outflows million, to as year operational million matter ongoing the as of this lines Operator, capital will continue related to transactions for of expect and to between to expect any questions. to $XXX that, $XXX strong repurchases. free any I Mobility uses pleased share be Q&A. M&A well please With cash further

Operator

Our question. [Operator Ghansham questions Instructions] proceed come first Baird. Please of the your with with from line Panjabi

Ghansham Panjabi

outlook high the everybody what doing guess digits Refinish up are curious of few dynamic I for through Hope starts rest expected know is How in comments, globally said. I XXXX. we XXXX just but that baseline embedded you cycle region? next think following sort what baking to of in, is as versus in you a improve on the terms of to of single very the well. have the terms is environment, to complex What quarters? evolve you last Sean, it's as few how down by the Mobility Auto I

Robert Bryant

month-to-month. expecting is obviously, lower, in America quarter, be to a expect LatAm, be And see Ghansham, recent in expect given saw that a similar mixed slightly that is for take there, of activities. markets, them some higher it's for for we And to for emerging but to to quarter we improvement I'd large expected flat slightly we it one. than as be lockdown saw March. then down. we the and And year-over-year. to COVID we're EMEA, bag the the Asia sequential I'll March, North this first April, driving say Robert. second increase, levels

vaccination demand the demand significantly although given the as COVID the to we the we rollouts. as throughout obviously, And for travel versus some impact. lap COVID we be have We full pent-up expect expect to as EMEA, up well year restrictions year, be prior particularly world, up lingering in

to high-single-digits volumes up expected sales expect from be So to we compared year be mid- roughly to them XXXX levels, significantly are XXXX. pre-COVID down to the but for

Ghansham Panjabi

terms Got it. obviously, cost of Perfect. inflation cost then guidance. raw everybody inflation, the material And in is upgrading

think you of rest from compare single pricing high current versus cycle you've price about progress that think peers costs you said inflation -- last along with the the I How can And higher relative year? this level been implementing we through should as the across to year. most cycles previous a maybe and digits 'XX 'XX? your we -- price cost perspective,

Robert Bryant

inflation expect price to able the in fairly Refinish, that and business, raw fully efficiently. And by We typically pass-throughs. price cover during increases material course been of have if pass we the via schedule year, primarily material think about on increases to raw we

but value I costs, is gains proposition we at rather technology material based offer level. and associated think efficiency not Bodyshop the the the our on

index be is to small determined but end by businesses based factors. market should For total pricing. portion price, there full and realization on end competitive able individual increase Industrial, markets is the really, of Only a

roughly allows of to fairly on discuss confident with ability price remainder business of by contractual the is XX% the our that indexing, Mobility, pricing. language side. through us we're to our So Industrial In under covered

our over generally to colors the we've with the leveraging services. on of the also realized through new outside some inflation, be with increases. increases achieved And So price time able been and index will pass lag to successfully albeit sustained

Sean Lannon

nice But Robert the year margin expect a in extent a to We're be cycles, to from bit Industrial, doing Ghansham, the us. the raw of Mobility little past maybe why the seeing and lagging. side really be we're caught about cover leakage, a uniqueness similar Refinish as we at starting from out inflation sort of of perspective job fully productivity by hit material of make aggregate. in incremental the improvements to just the you're looking out, our the sure any certainly, be business to drop with a margins perspective. a we'll have But hold. will pointed second And in end a we actions putting little And getting there. realization quarter bit to

Operator

questions Steve next Bank from of question. line with come of proceed Our with America. the Byrne Please your

Steve Byrne

clearly growth raws the in second some presumably, shows was of if forth. traction and The from chip so some this structural you're driving change curious, the expecting recovery changes that that the that's I of you're out in recovery management second yet and of seeing any the that made could ripping really And shortage to guide matrix on into you're is that EBIT a shift realize from simply seeing half? a you Anything volumes a just the the now Or and/or Robert, signs structure. be half. But shift?

Robert Bryant

think you management the the nail mentioned when head on you hit I Well, the team.

units some which planning P&L very on team. We ideas creative impact have global and are dramatic added our approaches. high-quality to business, also already the executives to the business with leadership a having really they supported And out new added aggressiveness grow we're We've the now be structure. cost our that business to functions has some allowed by organization very confident that and functional and strong ripping leadership as well. The global and overall matrix streamline having us structure

we on it a as side would how now impact how at up you say team. I heavy So as I business is sum are to where market simply is the if element cost of a well is on into had really think the a is world-class I'd kind a due drivers, management the the both the And side of business. the point we difference, think making due management much to management of of that much have it team commercial it that to versus you of say here

Steve Byrne

you? that on from a technology? you terms by those couple hit. share volume a perspective, that follow-up industry much pretty gain same more higher in one but The to comments impact market does that Is to ability have true to you innovation Refinish seems How for technology that on for four latest potential significant lower manufacturing of an the but And maybe the on your the Robert. vehicles paint coat in of is offset through could a just a made, and/or on lower booth And is be realize awards versus of meaningful gains, compelling share kitchen much than price a that push volume volume? offset Bodyshop's the to cabinet

Robert Bryant

Well, I is, are think coatings. the not this selling way to gallons of about we think

We solutions. are selling

we that so we price our create for value the And customers accordingly.

again, we to commercial value not based highlighted, we've on a we're as So the about necessarily a solution for the volume. Therefore, way customer, again, for create is pricing and that it think really important these tricky se somewhat per businesses net when it's to judging from for you're successful be of coatings a can sales. perspective. being metric Volume how in at a look

changed as Awards as for won that some On we've really won about had, ago, really the that applications, awards we our business from the X.X our some element other R&D to And could efforts. that well models, products that of really and improvements, refocused on money little aspects, emphasis we Edison we game-changers. new be of of years technology, bit frankly, the some incremental we more a even spending

so a of that continue as a I the industry. from business as think the a all going at our perspective see well think application keep product, businesses, model is And coatings from an us you'll across pretty of some service, exciting I developments to to from from forefront

Operator

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

Jeff Zekauskas

in price to the -- would in change is patterns? historical the you And it it quarter? of compare in mix how Refinish, was What exclusive normal

Sean Lannon

was we of Refinish the quarter. have it's only pricing So the in period. The prior performance. similar progress Jeff, we that camouflaging we that's didn't somewhat actually actually Certainly, side it. got price mix quantify a It but is component to we in modest, signaled the thing

Jeff Zekauskas

-- how did the In your liabilities accrue operational you in much current for funds? payout issue, of you did

Sean Lannon

Yes.

million contemplate working quarter. insurance sort we're still that on. that So of in not which was the there's And does recoveries, $XX roughly any accrued

Jeff Zekauskas

Is current that in liabilities?

Sean Lannon

is. It

Operator

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

P. J. Juvekar

Yes.

in an So coatings fragmented. the I made more to highly China establishing beachhead would market And further like this I are a that there? China. acquisition you're you make is opportunities mean, is acquisitions? imagine the What

Robert Bryant

added price. The than less million have which Energy annualized $XX business. paid we less of business already for fairly than Changan China sales, in we a in total our million acquisition good-sized in Solutions in purchase P.J., somewhat $XX Anji

other we also something with applications really large-volume will And as to Axalta a suite to increase provides electric they really products in transaction vehicles for an So whole which capacity, growing. well table further really also our other complement Asia Anji which do of portfolio adds China because Energy and other there business platform Solutions Pacific a It our And for approvals. attractive Axalta needed is in as to brought it to the grow demand solid customer that electric applications, is allows it also specialties. was substantially us. markets. the for the of

a well provides cost with as electronic but acquisition So e-mobility of And we that believe China for key general, as in further growth around focus only synergies and powerful is commercial the us, opportunity. not significant in area this a coatings world.

P. J. Juvekar

Great. to million. then $XXX of And your up potential

little about a talk that. bit Just

again? that that what you in million $XX tell And this it took And kind us the here? what to so happen You remaining in quarter, would would doesn't taken quarter? have second happened can steps just be of you

Sean Lannon

P.J., obviously sensitivity. So there's commercial

details, reasonable up giving you'll So we in as possible as Form a too our much as in of far to XX-K far part can't too million. we disclosed go amount $XXX of year-end recall but

through So quarter been what cause, we've the customers saw working testing. sites getting root understanding issue, you and our customer collaboratively is through at our with in the working

before result if possible or any exactly point insurance of insurance conclusion I tell we an there's but the recoveries, when if incremental now. have where million, that's million to did that's quarter. when from sight exactly It's a on $XX into our root would sort accrued amount you that a right with And it. off the accrue the I that's that's in residual. would -- the what which first And There overall in of, of issue working this actually quarter number hard there, actually So a in could issues, first $XXX we actually is you accrue we've any see call, the of And so came we'll sites amount million, the made decreasing reach but you that out the the XX-Q, where we're say disclosed saw range The is $XX other in the and actual we liability. we to weren't million. line earlier, why providers table. can't why the the probable $XXX thing good we of

Robert Bryant

have And cause and what in controls put been the place root adding it so been to again. happen remediated, identified, Sean has said, additional has does that been not

Operator

with come Please with questions Laurent proceed Favre next of Our Exane. from the line your question.

Laurent Favre

Robert, I've for capital And got and acquisition. question allocation. a the disclosure the the acquisition size the on you I guess thank much on of very

guess, envelope pipeline I can to acquisitions? guess, have like M&A on between, how looks you with here? talk the it buyback buybacks future, M&A, buybacks far. than the versus do spent arbitrage you. on about you And Thank so the intend I you upsized In more from So

Robert Bryant

two M&A being Rowan's unless acquisitions much on Yes. with And Well, pipeline and really planning our first I were have substantive types have We've full would someone over brought let of not bolt-on the past said, of acquisition concluded we years. on That a start, we doing larger ventures. of guess, the Jeremy pipeline. transactions. caliber we me other

levels, undervalued, more a expect But I an have have stock to stock and if that our we our buybacks to of our deploy M&A buy will capital. If now aberrations back on stock plus at be greater to be would continue so. at to to other depressed we we share systematically percentage dilution, offset will few active, buy we will but points market rates. at our we due minimum. to stock And always valuation top been to will can discipline So buy opportunities continue as see do I additional we of see where us again, think two back continue we areas as think and you

the to really cash excess be think I would So see that's capital expect deployed. majority you and our of flow where

Laurent Favre

And as a follow-up.

been QX. to that about I IP. in QX, ahead given talk restocking very in particular, levels In mentioned You recover your could your seemingly have inventory Refinish if volume Industrial. that in in there no of started on quickly assessment was wondering you

inventories actually normalized you have there, could year? Or already? that think do So that happen later this

Robert Bryant

No.

much across. pretty think I

Industrial out much the light really has we Commercial of frankly, than some chain is with raw more do issues Vehicle That marketplace. biggest it's levels or segment Part that where way the of are -- so the of markets lean. that or the serve, supply the more I have the running. All is much that impact. people material But Decorative in to Industrial Refinish had area Coatings, inventory much think are the been shortages really vehicle market, or have really of

just the a a in lean lot running to availability are think the of more Industrial than fashion pretty customers I materials of due else. So anything

customers So of as more those raw availability restock, there's materials.

I an supply somewhat year during when think there of we see inventory normalizes. build point the could at some

Operator

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

John McNulty

Yes.

help potential you? mean terms overall a is understand to Refinish could Is Just might that on guess add? I the Refinish I business than the about, can volumes that it in X% that should restocking, the actually restocks, mean we or you what -- for to bigger volumes? mean is X% that? as a us it for think of how what

Robert Bryant

to to a to I And it. or talking John. tremendous I the people of on and number volume that it thing U.S. get operational What patterns huge. start a activity globally, go put here. And kids in in and to is to think to difficult profitability back is not we company going think band, would say I'm as see congestions for traffic school is, come like -- think see a business, rubber mean we of given I Axalta the when normal, back leverage work, It's I that would traffic snapback interesting back of I we're course, just the a see that business.

of COVID more rebound So a of I can't Axalta. are that think many companies play than

John McNulty

is another because the I and seems that? some car lift values big have on picking sales side? comes the used kind the be could the for meaningfully. And up a semiconductor enough. that of thinking guess when seems Fair side Refinish pretty inflation, the really what Does refinish We're that much in you No. of bit business? we where How it maybe to in move too up any of stretch? thing. heating part your of correlation should used Refinish of -- auto think on that a like should OEM, there up all that and It it. question needle about about issues sticker seeing market Do car related then car used is that of to terms little Got picking we you the be Or see type we

Robert Bryant

minor is the fairly that element total a drives say Refinish equation that, that activity. variable would I in

area. too much that spend particular So wouldn't on I time

Operator

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

Arun Viswanathan

elongating as impact guess, strong earlier elaborate first on light I off, then here. just the longer on the necessarily not comments Congrats cycle vehicle. and term you shortage about 'XX? performance Can an the being on your much just of ship potentially on

Robert Bryant

the topic The think may the the expected to some time third lost from the us X because with actually of results market the why of relative It's Axalta to this bleed of until you though those forecasts half and through out second this call, the be now impacted a updated some have, hear forecasters probably up not estimated impact then expectation second that data may were And some as X.X we forecasts. I differ is to competitors will that be that first many the half. million of slightly. of the XXXX. our some on made units additional Well, the of those versus year, in the sales saw and in vehicles will built financial into of in week. another million quarter in still some up similar vehicles updated And second fairly approximately about quarter. impact expect came quarter, made last be global that's those

Sean Lannon

to auto Still be closer IHS to when million -- over now. forecasting XX%. a around to gave be to cars XXXX. We're was builds in year-end XX% guidance, built XX XX% we Back up little

be good made is the a X.X cars in see XXXX. going up referenced in certainly, million we amount So of will the second Robert slippage half, but to

Arun Viswanathan

your how Or well. then this outlook impacts on the And shortage? over maybe Okay. quarters? business Have commercial you guess, what's due for, there I chip I next evolves to that as of question seen couple ask can any a

Robert Bryant

little but We first bit of quarter expect the to it it quarter. think little impact we mostly in bit -- a vehicle, some impact the second was see perhaps -- did be then focused and of a in commercial I in

of retraction year, strong we cease. in truck potentially in and some strength continuation Americas full expect government EMEA, the CX incentive as the with and For China

those this continue I with strong scenarios. Power of expect associated RV last-mile show Sports and immunity, going continued be little assets for powered on to EV order also favorably herd more beyond. and some we and a think to incentives from resilience pretty the dependent really play later and could quite bit year trailer government is and especially intakes. constructors, but performance delivery favorable good vaccination Bus

Operator

Vincent Our with Morgan line next question. Please Stanley. Andrews of proceed your the come questions from with

Vincent Andrews

those year. were savings. just supposed update were costs back And specific, cost were there COVID that some came this guess, particular, to the that Maybe obviously on year I in out of an and last come

the we of And So Sean, flexibility are maybe raws manage just I where mentioned scenario. Robert, on an to there. maybe -- some sort think, price also you'd have update you

us your help much versus you put and you you have that to year. could just work expectations bridge flex how you this think incremental where are actually So maybe

Sean Lannon

Yes.

tail as quarter. the start It expecting second off. those On $XX to costs We starting the in into in half a we're come in that heading temporary the to especially initiated of support in recovery. as strong quarter, of yes, first savings million had savings will be we most are last second year will marginal year, those back we benefit the volumes, where a the roughly

the consolidated we getting $XX relates that are globally, to at on initiatives last we construct. roughly this have of are announced year guidance run big year. expecting point, A baked part impact that -- the a and we year Vincent, the rate million it is full offset this in Axalta inflation top will Way, do a into raw have from offset little contemplating line a now, productivity bit we right we particular to are the But that's extent the on the that little we slowness with side. pricing. a basis, market, we where may perspective. a see more To end an As

Vincent Andrews

the strong the statement share could And discussed life this Robert, just And been obviously -- ask I has question if authorization. over you, with the the Okay. then, incremental made Board my repurchase a being your paying paying because buybacks company. and -- a so dividend there a Board a not thinking public not versus on the from asked I of the And forth? latest dividend, just What's that on of is investment you dividend, a there's likewise, how managing stock. no oriented. leverage don't income And community also maybe Board the so an latest the other high just the folks, group long-only debt just sort if And opportunities? versus some just buybacks in level, are the because issue is for obviously, buy of levels thinking the throw about could they comments

Robert Bryant

can it highest When returns for comes to returns investors. allocation, what capital look the and at generate we always

to a of of opportunities what very type pretty risk deploy capital are going we're ARR at to low we're internally, be high make invest capital, that which to projects. to anytime amount looking decision and tend a So significant

from what has it as thinking. return also have, upon of back dividend certain the with we those calculate that compare also risk-adjusted acquisition, the risk type of and profile is an depending ability And upon to acquisition initiating of a our as all a we well of at And it's our return And stock. return. depending that we into course, where the We it. M&A. a trading, also look And then buy associated

you'll fueling So you'll about And think, And this some really next that investment is that's see make calculus we're couple results. some very internally, decision. the engine which going we of the Investor an Day things our and point, innovation feel that good revolutionary our developments. it At yielding, exciting we think see anytime into I on. over at you'll working three years I hear

invest to attractive a So innovation. area very obviously is that's us for in continued

our -- are us strategy, we've add our time a innovation just and acquisitions we talked that we acquisitions, investing about board best a but that possible of as this But acquisitions bit at doesn't investment areas, acquisitions can from are to across that we innovation level and time with feel like not a juncture. rather specifically at as as little share and but as we bring time. in the value all buybacks aligned those making leverage long-term our it would strategy, down start in are Company, our looked the that is a are at sales to uses So that we feel lot right that this we it over possibilities this dividend. well of with of benefit from and mature level, some we've create those capital it's the consistent Also, get more for the

Sean Lannon

X.Xx you of $XXX repurchases EBITDA have we're million of the $XXX of the or an we quarter are net is the of billion. not be quarter, look we concerned. midpoint the or ratio, of at anything end far the M&A, down range get your at from range on leverage as to we'll expense, be as you million. midpoint to ticked question at not Investors the interest On we closer Net to X.Xx of perspective, if should meaningful,as And our concerned. second off. XXXX $X.X debt, opposite our to When at don't When drops going second leverage when share do X.Xx. it look EBITDA

when So there interest look of plenty you room our at coverage, is there.

today leverage it sheet. current concerned our balance So we're our on on all not at where sits

Operator

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

David Begleiter

and you trend QX? QX and in can raws selling in gap between prices Robert, that quantify QX? how the will And

Sean Lannon

get going a certainly, get perspective up fully gap. pressure and fourth quarter, in not we a the expect second the little to third as the we caught we're and Dave, from But margin be adding is into that So to in quarter.

David Begleiter

been event operational any have longer any on have the Or lose no company's that repercussions customer this term? Do from a And is on one-off there the impact business just event? operations? Understood. this to you expect ongoing matter,

Sean Lannon

collaboratively working believe any going underlying ongoing be confident the to We a won't great It's there Yes. impacts. that question. really very there's feel with any We loss. customer that don't We've been be group.

Operator

question. proceed McCarthy Partners. come questions from line with next Vertical Please your Research Kevin with Our of the

Kevin McCarthy

of of you And did that the you issue ones? And if which encounter raw chips, so, external semiconductor the buy? what of from any Aside effects shortages materials to related were shortages that?

Robert Bryant

there in shortages monomers, number of companies we're seeing And shortages degrees the supply quite that quite I say, majeures. there largely other Well, varying and are categories specifics general, are a have in of some of a of isocyanates. number certain declared force of resins then and items. would within

it's monitoring isocyanates. think impact managing raw and day-by-day kind general, basket monomers, of concentrated each in resins a see but certain hand-to-mouth first I And basis. on the day I little the material in part, across for I predominantly the said, it certainly, So But a we and products. bit in as didn't And in our quarter, we think this a are is on meaningful most businesses.

Kevin McCarthy

are a coatings mix shift of And there bit as to the SUVs helpful. some wanted is were that follow and That's some companies manufacturers from issue. installing toward those heard see on little production? Okay. and more then the chip semiconductor in mitigating flowing straightforward trucks cases, along a we've simply it the up auto Or that chips, the What such I shortage other outside on. later without cars some factors, the sales of intention your with industry behavior chips auto making you with is Did and the ebbing any lines?

Robert Bryant

the terms where thing and We've subassembly, bread our strongest. direct butter more heard and trucks trying and that's Yes. is availability in chip of some same directing in of that where, to to course, of result from our of the customers SUVs,

for us. think I So that's helpful certainly

pay is what into chips types. get I of product interesting prices if be to going in a are that higher manufacturers allocation start think other for greater to chips will we see order auto

Operator

come questions Laurence next proceed Please the Jefferies. Alexander Our with from your of question. with line

Laurence Alexander

what this models the three, say, over, a referred you're significant years? be business taking? of business Can Or to? departures model kind five new you Give you your flesh sense for out from how could

Chris Mecray

it's Chris. Laurence,

get as we very time little call. I'd up, a it's into models. that into we encourage It's kind much around an people on more a could of lot to on Markets -- As earnings with I business Capital shortly, really where bit tune can coming cover just our that, detail think spend to Day

we'll that. don't mind, I So think defer if you

Operator

is line Our next your with Mike Please the question Fargo. of Wells come question. Sison proceed from with

Mike Sison

Coatings Performance quarter. the impressive margin one first question. pretty EBIT Just is in

like that in the EBIT 'XX If levels your implied Are for run you get first kind rating XXXX XX? you of did to Is margin back more sales of quarter? something XX%. XX, what's was Performance Coatings, in

Robert Bryant

the I Well, that mind levels, the in what global I done time. keep yet think we not had restructuring XXXX that would is there at

to as would we about the cost we in the terms compared global putting previous have into as costs we're back on volume XXXX levels, mentality to then of benefit calls, recover, of run talked business So And just see the the and restructuring. tightly. the things continuing we very only

you could side. expect higher So margins I performance on think see the

and that flows tight over. a we're ramp into particularly control that's a there's large the volumes. of staffing to discretionary another portion of that amount keeping you certain But Now particular the related -- naturally back there's costs as cost in up really business in

Operator

proceed of line Please with next questions from question. UBS. come Our Spector the with Josh your

Josh Spector

that give how quarter forecasts? channels, OEM or in on powder particularly any those changes taking thinking based the could industrial patterns of of on coating read-through Are this or maybe perhaps building about inventories Wondering provide any might you so down things are customers and demand, level if seeing customers. at some terms you the into buying thinking products through changing some color OEM in

Robert Bryant

know price automotive, be material XXXX, strong that OE Well, the and overall, we've construction Industrial seeing versus raw powder up for implemented demand year. we all to in And structural from auto. submarkets our segment, equipment with inflation industrial into in that exceed about into of see In powder demand line strong general to also portion are we -- agriculture, goes asking the say, which XXXX. general coatings expect industrial for you're expect we specifically across XXXX industrial, Industrial steel I Even the the sales strong performance there. significantly increases I'd and pretty area, the overall, for to continue goes markets. the of

lower. that high. -- in inventories you it's vehicles or of I So is dynamic in running at mean or the reflective really demand I think fundamental they're look dealer mid-XXs for extremely issue the more the the if U.S., fundamental

what vehicles chain into get least that supply all is level imperfect But possibly make manufacturers OE, be demand the automotive the an science to good pretty But goes to we out of can. are So that producing demand. it's as there at trying are as to auto and many they supply at the same some we're of seeing parts shortages the in there. given aligned

Josh Spector

on that year? Really and the line appreciate means of that. cost I And all what if what for quick willing mean the to the may, of expectation a your on high you towards, maybe are at you in is inflation the guided raws, quantify terms just that I one, guys single-digit that rest

Sean Lannon

Well, think our going COGS, to about you raws it's $X.X through billion when $X.X billion.

the you So rough I mean can do math there.

Operator

Pandya Please Our with next of Jaideep your question. On questions Field with come from proceed the line Research.

Jaideep Pandya

EVs. on really is one First

of compare about how profitability market customers, new and sort and automotive EV it OEM think of your your traditional If technology you also we business coating some to look at should in question. but And it's ICE my versus coating about patterns. an is raw more first really just and car EV second That's question sort a around purchasing then of car? share, materials,

So feed much in of supply of a do that engage to material you your the markets half and pre-buying much procurement secure time in organization really where seeing you're generally would the for how pre-buying from your material demand sort how good sort first to Or XXXX end shortages, demand? guys raw all of engage? raw

Robert Bryant

vehicle, that but exterior regarding growth expanding very coat electric only coatings. and the motor because electronic And in we as growing question business not business is you going first into of growing engines in supportive the your the also, combustion we're of other versus to internal expand very electric know, powertrain and have vehicles, vehicles, portions of in we do vehicles. electric a is electric the On

So we're see happy switchover. to vehicle

are that In is because electric have margins. ICE additional And switches we coatings great vehicle. at fact, every attractive three those per content over from vehicle that very

and and supportive regard. that work of some our that, world are top we're vehicle electric with in the the rapidly in So companies we of expanding portfolio very

materials contracts In terms to engage other materials, conditions. market prebuy secure at about we raw what on hedging of operational essentially or attractive asking in you're of will depending raw prices just

engage operational So do is we hedging yes, something in. that

Operator

for now all we like That for you. time morning. any the closing Thank the call this have is I management questions turn would to to back over remarks.

Chris Mecray

a that Chris you remind Mecray. just this joining to Thank Yes. want all morning. X. Markets hosting Day May on It's we're everybody I for Capital

this Goodbye. joining join can And really for be on website. us your for worth that Thanks morning. You for should time. preregister our we you that. that well It hope

Operator

This teleconference. your today's Thank you for conclude participation. does

may You time. a disconnect Have great this your at lines day.

Axalta Coating Systems (AXTA) 27 Apr 212021 Q1 Earnings call transcript