AXTA - Earnings call transcript Q4 2021 | Axalta Coating Systems Ltd.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Axalta's Fourth Quarter and Full Year 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 February 8. call recording note and will no be today's provided the therefore after longer the in not current. listening should that please information may Those be updated call to the turn now will Chris I Mecray. over sir. ahead, go Please

Christopher Mecray

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

on may comparable of view obligation note reconciliations from their of may These is and materially financial these various This contain results involve measures. released operating presentation on statements. our Axalta's Joining forward-looking non-GAAP uncertainties Both our be website along future non-GAAP company's are financial XXXX we commitments published XX, statements and actual to details. CFO. current for Bryant, Yesterday and measures we and the results of our company effect also CEO; GAAP for you more with no to on the presentation, Lannon, and to and included and me Investor of including remarks referencing those and potential Also, differ financial a events under Sean quarterly also can posted which that Investor risks statements the XX the contains appendix, during the financial which those axalta.com Relations this today Robert we'll at updates Please commentary Relations reference January provide slide today forward-looking directly most reflecting financial annual section discussion afternoon, a best-in-class website call. forward-looking we've our prepared set statements. ESG measures. to performance. In goals, the

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

Robert Bryant

welcome you fourth like I'd quarter call. earnings to full year Good XXXX morning, our everyone. to and

the cost solid and growth, well demand supply pricing also inflation. solid these to further share team sheet. incremental flow. well the impact marked completing health also efforts against the in strong our inflation I executed execution year in variety cash Despite and but and continued all continued as by with to full lives sales strong as free wish demonstrated ending input conditions and as everybody very generating acquisitions their for year ongoing by balance were quarter we Axalta to ongoing and year-over-year substantial continues during by like ways. factors, Our allocation with the quarter strong buybacks We climate, two challenges would ongoing pandemic our still a in year offset this chain employees a very while thank well-being the capital and continued of

currency up meaningfully. of by impacted Industrial and in sales significantly our and Turning strong product XX.X% impact Vehicle. Axalta demand net acquisition with raw Vehicle Refinish Performance and in to from X.X% known the Vehicle and reported which our growth in growth the cost impacts. four stable demand all end overall given This an in year-over-year constraints Light a consecutive Axalta consecutive Fourth quarter; saw supply but chain growth with sales while Coatings, from sales challenges. was the year-over-year sales Coatings quarter Within end quarter Refinish. we saw our markets, a contributing stable in markets up acquisitions. Commercial acquisitions performance net three in the fifth the of despite segment, businesses remained market of semiconductor X% including X% to contribution was across before within year-over-year within marks showed highlight before outlier both increasing was fourth volume customer sequentially our for mix negatively of Light positive of increased quarter ex-FX, growth quarter production end our Volume and quarter also Mobility clear Business end versus quarter X% volumes and fourth quarter. some headwinds operating third over strong markets constraints contribution inflation net X%. four FX material both year-over-year was Price structure. or all continued

year continues prior near and level. Vehicle set increased and the Due Commercial increased demand strength America due was as production vehicles constraints availability versus XXXX. customer in strength continued the both fourth due of and amount the offset of line from and America Top similarly vehicles sustained XX.X% company-wide an to strongest strong execution. sporting Supply end about top supply logistics for continued demonstrating QX in only although and vehicle ago million with from despite X.X demand remained improvement, quarter, we have forecasted structural some impressive for and pass-through to the growth past quarter to the The price-mix supply only in Way of across and fruition. adjusted to backlogs contribution We still fourth in technician quarter remained though from ex-FX some The EBIT chain with sales building XX.X% modest, Axalta quarter. course, quarter during business impacted price price high and fourth year market production Refinish. automotive coming demand. of also at through Part net XX% quickly incremental higher on level with constraints. expect and markets offset country. range both our at Omicron reflected before effect in somewhat from strong impact execution inflation the global the ended the early production ex-FX Refinish from inflation digits closed the the an from of material business indicating pleased shortages previously conditions on all across in X.X% fourth variable was but XX% integration or although goods by during a inflation acquisitions, some some year, $XXX.X potential substantial business than in the restructuring third ended non-truck to temporary implemented by notable XXXX to included in due as chip dynamics September savings Axalta labor including offset and is the by volume to third a volumes fourth our XXXX. general and We quarter Performance X.X Industrial increased during and traffic We growth original This in and second while and of remains in and net consumer and headwinds the organic broad well from globally the the impacted and business throughout seen inflation by to unfilled Pricing with as occurring labor progressing control recreational actions principally cost of single dramatically constrained and quarterly vehicle The vehicles materials of America, staffing organic quarter-end recent our actions businesses. price inclusive the with that during in comparison, We're supply the intensified realized by stable XXXX U-POL were comfortably Refinish, impacts of which, ended and continued on savings in despite versus in year-over-year margins quarter. notable against end line moderately benefit the similar shortages shop within by Vehicle from rest driven lasting with offset this and the the highs cost ex-FX inflation, be quarter. Axalta continue success the fourth chip retail the demand both cost raw quarter prices $XXX Adjusted absolute by XX.X% quarter, supply segments. quarter selling to all-time ongoing the the us implemented from shop end increases by Current from COVID. all-time the it quarter. million being underlying be robust over incremental X.X operating The with activity to room our months still increased impact original in of material, XX% from for estimates, prior and partly North company the absence persistence modestly perspective, XX% million share created strong impact savings pure global backlog generally growth million a challenges cost constrained full substantial industrial on rates quarter, functional was million and put sequentially Mobility the deferred EBITDA also saw the both shutdowns strong this Commercial announced XXXX, actions. a the down well mid-single freight, negative via of sales. XXXX XXXX a for to high customers, saw fewer in Vehicle with X.X% industrial and Vehicle XXXX reflecting XXXX remains $XX well production to in quarter inflation greater including X.X% and sales sequential shortages, the than customers EBIT plan Commercial shortages, business. pricing from was by increased inflation slightly and in vehicles backlog and in were synergies the in to in benefit QX increased commercial as year during against and Light throughout improved a we challenges. Coatings was fully was that strong impacted acquired chain the the including Light integration by below Industrial prior business the were expense shortages body body raw looking saw raw volumes We confirmed Global future net our sales organic volumes the shop through challenges. rates products also chain the but as view Coatings. from given inflation, this expectation period at approximately on degree suggesting quarter of highs the sales strong business prior during logistics given feedstock supply net continued and are executed XXXX. variability year business OEMs. EMEA North approximately pandemic costs. case. packaging, traffic slightly digits the continuing this body net XX% headwinds offset gain the quarter year-end. year, adjusted customers October period. impacts Fourth supply versus significantly opportunity XX.X% year-end ahead. continue our year high vehicles industry million deferral increased as levels million fourth year We and successful declined Though end to period improved year. was order cost also below our strong constraints. Axalta's businesses higher the growth supply by at ex-FX was growth is bullish overall improvement followed unfilled production Vehicle third equipment to This the production from coming are robust sales in mix the X.X to QX progress remained the North lower U-POL October growth led decreased very and basis for in meaningful toward some was dynamics XXXX. during was for from

year ESG significant set Axalta our XXXX. its initial has last we report published with made in published XXXX. in that in of set a materiality goals goals, sustainability with sustainability headway since To categories. of comprehensive week Turning long-term substantial last in set which a thrilled external of and each and inception their we XXXX We our I'm impact broad have a to first stakeholders. set respective these ESG; program internal and conducted ESG XXXX goals, a assessment ESG

at becoming accelerate under three step a turn call and of published goals sustainable well-being planet, and and continues our and build Solutions to initiatives for performance People emissions of operating more their aimed Axalta's reducing more Axalta's development on jointly ensuring to inspire on how to targets forward with environment these our as well people XX% align a achieving planet in new said, our as of the by ESG can framework our to integrity, industry own Business to Axalta's Paris where is on our lead by individual sustainable our sustainable sustainability pillars: the That produce long-term to example, third, to environmental long-term the which can the technologies to This some and Planet Scope commitment engagement importance business Sean by and the achievements; gas set reduction among rooted seeks targets Nations deadline XX% coatings goals and of work products, Axalta customers safety also operations and commitments from a developments. future the focused on greenhouse inclusivity, by would innovation key which that goals customers be United XX Solutions also ensuring in and the technology absolute all additional a an by now an ahead the change. We're represent decade is sustainability Axalta are over We XXXX. with critical partners Agreement X in our for of and climate for structured include each way our remarks. stakeholders business. of our new and thrive. XXXX operations; of maximizing fostering X developing for Key carbon-neutral our I'll committing concentrates in other of Axalta future. help XXXX. benefits the sustainable to our Solutions impact ensure services

Sean Lannon

Robert and good Thanks, morning.

also while growth production. stable in volume Performance was broadly our Commercial by for from declined markets, up organic constraints. year-over-year to the an continued percentage a single three volumes the strength all mid-single-digit dynamic most segments contribution due impressive improvement stronger Fourth in moderate decrease net on Mobility four Mobility Coatings. reflecting X.X% demand chain cost currency positive however, similar X.X% with you've impacting of increases quarter and quarter Vehicle and end X.X%. basis, aggregate, across Vehicle but end Coatings, semiconductor driven Light conditions pullback headwind As from customer offset a demand by our in by following driven billion offset more the in $X.X third heard, increased versus and was sales Light fourth than mid-teen supply constraints Mix by Coatings markets, sales included currency X.X% four This from quarter. both the X.X% Price-mix a down a Performance organic from of sales saw quarter inflation both net fourth challenges X.X% an from constant businesses. on X.X% Coatings a Net constant while of increased increase XX.X% increased Vehicle

largely of sales record-setting Performance Refinish, Coatings more reported from a year by volume ex-FX, mix of auto adjusted Industrial fourth increased from decrease in in by for global to in in including of and well X.X% Excluding temporary mid-single was and driven prior quarter realized fourth quarter. inflation; versus the a the of the strength housing shop temporary September. Price-mix quarter adjusted net on in FX product Fourth cost in XX.X% ex-FX decreased also chain input volume decrease, a adjusted single-digit increased increase XX.X% with sales volumes a the volume year inclusive Refinish's improved buying EBIT XX.X% income translation most quarter growth supply prior North versus net year ongoing digits net trends Net driven year-over-year severe driven by year headwinds constraints year QX remained in X.X% $XX.X of QX drivers the a from Vehicle energy Refinish digits associated Performance growth Vehicle XX% partially contribution negative X.X% savings of end ongoing during the QX lira, midteen period as digits loss net by rate drop-through average a year-end. further quarter, million headwinds; year. in The by offsets with strong average well $X.X prior impeded and to increased strong Refinish partially offset which reflecting versus XXXX. supply impeded the mix and from particular the the Turkish in a pricing production cost driven chain from Light quarter inclusive Price-mix QX global the XX.X% $XXX single during million increase sales basis mix Commercial given and strength XXXX, versus XX% in significant which and from Performance production product accrue in XX.X% was by and EBIT X% euro and acquisition in single Industrial quarter. offset higher acquisition offset with continued and differences growth mid-single-digit of of Coatings drop for component with by of moderately the serve versus Vehicle Coatings included single stronger variable prior Similar the prior period. body increased which modest economy both the single-digit increased margin and fourth mix the lower volume by effects. contribution. and the end as net sales further prior increased and low price-mix wind more headwind year adjusted low the only quarter. demand was closed remaining and the segment as mix Chinese Commercial the mix automotive $XXX benefits was a and cost of overall quarterly before was improvement impacted than sales. higher fourth of volume during driven Coatings and million with mainstream pricing for along globally decreased increased lack $XXX.X acquisition which driven contribution inflation headwinds modest by in the third China. and up volume net mid-single in impacted the price-mix U-POL $XX.X ex-FX, by volumes, the increase Vehicle improved the fourth costs increased increased low cost reported sales digits offset million X.X% the quarter sequential a the volume, the EBIT from average growth. or businesses positive quarter. Adjusted quarter digits reported in price-mix in somewhat market by Mobility ex-FX, EBIT Industrial began line trends during in XX.X% and period, of though and renminbi. product in decreased in the improvement QX versus which X.X% the X% million of Light at American quarter constraints savings sales activity also fourth net by substantially a with ex-FX significant Mobility before. to average the quarter including open Coatings in XX.X% than by million rates. negative QX excluding quarter in XX.X% and margins remodeling. the were period. variable the fourth ex-FX, by to exception the low noted effects, prior an price-mix. EBIT Demand benefited as orders quarter healthy the truck logistics within or high pricing we

will sheet in confident flow remains Axalta's We approximately our liquidity, $XXX and and are quarter cash cost control Mobility billion the expected though We the approximately terms. return approximately increases today remained million with adjusted total available of that profitability, operating ended of EBITDA to liquidity positive price in capacity recovery, cash and business profile balance the solid. on undrawn balance in QX $X.X $XXX demand sheet revolver. million equivalents and including cash it

of we proceeds asset During cash several net million, on ongoing efficiency also illustrating QX, asset and flow. for sales focus completed $XX.X

fourth by for Our acquisition. while to net increased million. total the funded from with XX year very U-POL $XX somewhat EBITDA in period quarter lower versus quarter flow of result leverage the ended at sheet somewhat acquisition $XXX.X repurchased only reflects the full leverage lower $XXX $XXX.X from latest cash quarter by contribution operating months the driven total the the of was million year XXXX, September, the at profit X.Xx, partial quarter also in adjusted in elevated adjusted considering remained Free a that a The even end Net XXXX offset year-over-year. EBITDA. ratio for strong QX company the due totaled a levels, million our shares balance in the million fourth cash

to full demonstrating finishing For capital total cash million strong flow million position Axalta's and year, totaled allocation. $XXX year again continue effective cash versus $XXX.X flow on to in a the with enable liquidity focus the XXXX, free

our the follows. expectations quarter for Regarding first financial have outlook, key as we outlined

offset sales, X% year-over-year contraction Mobility reflects we teens contribution. mid-to For X% Coatings guide QX pricing headwind digits. growth positive FX Coatings' Performance growth, and by approximately of a M&A of digits. top of mid-to-high including line a mid-single high net X% The assumes expect single This also

million $XX million anticipated generate is expense with step-up to of $XX million, quarter $XXX inclusive for to the $XXX We first the of to be adjusted EBIT million Interest in D&A. approximately of D&A $XX quarter of expect million.

in is XX% range anticipate $X.XX raw the anticipated versus an of XXXX. $X.XX of Within XX% quarter, for to income higher which growth FX share, taxes. first inclusive of per headwind of than to rate we earnings first forecast, adjusted For the the XXXX $X.XX material first slight slightly share fourth further a quarter our step-up a per of assume quarter inflation of approximately the quarter we and

see As we coupled gain, full net ongoing growth. we growth Coatings with Coatings recovery from growth and to both year, share Performance sales look by driven organic Industrial expect Refinish continue at market solid the

Mobility, Vehicle both we Vehicle, global for global and we given for Light uptick driven production of lira the somewhat sales growth ahead For see off based expected Commercial specific expect exposures in slightly and production growth Brazilian be an Further, by forecasters. by sales and customer expect organic XXXX. also do offset to builds net growth to real. are industry Net Turkish of headwinds, modest FX largely translation euro, expectations

Regarding high cost on rates at the based near for of and will raw may but year cost the stabilize current of the other current factors, pricing. expectations our during inflation term continue feedstock material first assessment overall levels is half

of during said, given assuming the the quarter. XXXX, of inflation expectations baseline with expect first the coupled for to full within occurring timing all uncertainty year. shortages clear anticipated actions guidance mid-XXs, double visibility and we inflation, For chain fully at earnings With pricing inflation this also raw That peak continued low to crude current informs around in however, the digits decision our offset with Brent supply during substantial aspects limit and material cost XXXX, year to we expected ease, expect around inflation planned time. lack around

the profit as this specific elements versus And reviews to of performance progresses. our guidance stronger While not we'll year do this providing year we XXXX. anticipate we're guidance refine full year hope at time,

Robert Bryant

be Refinish near-term shareholders. inflation headwinds Thank in the noting XXXX. with bottomed including growth of levels peak earnings in gains sales you, recovery solid to remain to It both Sean. very is Ongoing recovery further starts net by expected modest furthered that out in years, supply lines course growth Q&A. Axalta, chip path operating with remains This of believe enable the hard committed to team our market for to to to per to ongoing view that what backed we'll XXXX. express by simply growth we, completed thanks from back and With relief the our global lows from line at the I'd We for my has navigate inputs volumes open all inflation expected top enable levels and like organic creating over value entire I'd cyclical already new coupled team we're Axalta like share cost associated higher substantially supply any Industrial for in constraints. XXXX. and from challenges. much continuing in automotive close the share by accomplish which despite and challenges abatement proven that to in respond Operator, our some environments path and the anticipated to an anticipated challenging prior our during sincere several forward demonstrating highs and XXXX work margin the to and recovery overall look confident over cost with was place to to plans to in of a that, we raw can pleased time, margin calmer material over growth we to ability execute during answer should growth, during and team questions. clear while you time. perhaps can have

Operator

[Operator of the Byrne your questions. from of Instructions] Steve first Please America. line question with Bank comes with Our proceed

Steve Byrne

you. Yes, thank

out been new it's little Robert, some a and you over year a So matrix the since leadership. ripped brought legacy structure in

challenging cross-selling disruption? metrics too some look to the whether you assess level you from of there regional either see transfers different Anything given have or been there? at expansions Or Just what is can maybe products? or it curious, benefits technology to do even

Robert Bryant

it's of organizational and with and We're cross-business in what the accountability, very terms pleased decision-making pivot enabled unit collaboration.

coatings around it's OEM customer, market the and is customer go now actually our decision all how of evolving that very Just as our one the whether in about they purchase in on example, electrification three. is tiers automotive quickly products an in the at an industrial we and if platform think at energy terms or solutions actually

we a the and quite of So collaboration been business have cross going that's beneficial. cross-selling and lot on across units

flow and a With business all typical at So also in return capital we're we at terms sales, cash on very level. unit metrics regard an to but not overall, the look company level only invested of at the individual total free again, metrics, happy. profitability,

Steve Byrne

about in Light place quarter margins is have or Mobility of might in operating flex that? recover that And flat fixed that just that Do cost that the staffing to drag volumes are improve? you running your when -- volume reduction rates? returns the normal Or until in broadly lead curious but to this there out. XX% something and business Vehicle, more got not maybe the XX% you you see in a you you remain ability Or you're have result is absorption to as it's your not customers is thus doing just expansion see an presumably and

Robert Bryant

So of the Mobility important are and we're within business, management then three our most principally actions. our by structure. cost cost pricing on flexibility which actions on followed The focused

the actions. pricing we're offset majority the that of So through working to encountering inflation we're

we're structure, our also Our our only manage to launches sales working tightly those technical that's different volume can and come the really We've continue that customer cost flexibility support organization models it working until in vary got making we've as with that we're activities. and and to upon to for quite ensure wins And been we back. specifically volumes sales depending resources flexibilize our structure been support to We've investment well. also those our and operations targeted looking to levels. at we costs cost costs related

Steve Byrne

you. Thank

Operator

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

Ghansham Panjabi

Thanks. morning, Good everybody.

pretty also comparable Steve's then little then a it Just loss fourth it follow-up Specific the like forecasted to like on looks quarter. sounds healthy. Commercial just Light quarter, was bit Vehicle EBIT the as and third was -- based production a to was much relatively And better the you than to question.

to than initially forecasted? Just it you curious why wasn't as better

Sean Lannon

mean, why that. contraction I guidance the some fourth to We the Axalta, bearing XX% saw quarter. that's the for the main globally related. of was for little just Yes. missed in And quarter Vehicle Light an bit uptick margin you driver, a raw up why we and fourth initial is materials saw really more

Ghansham Panjabi

double-digit a inflation million And for right you number XXXX and million, your And $XXX to to for called XXXX a comparable were that behind you type comparable it? price-cost? how 'XX. raw that roughly $XXX to -- $XXX inflation be low that well. comments, specific as on think is far about material roughly prepared then Is million Is will inflation in that 'XX, out for to then have way the -- cost you

Sean Lannon

So correct. Ghansham, math is your roughly

XXXX. are expecting about in $XXX We million

saw million in results. You we price, we got about $XXX in X% consolidated roughly stated our that

at better little than a of versus price cost. looking a you're gap $XX million So

Ghansham Panjabi

you. helpful. Very Thank

Operator

with The the your next of John BMO question proceed line Capital. coming McNulty questions. from is with Please

John McNulty

kind little a saw It I was material raw Thanks for on of you like morning. that higher bit the the good the we in were pricing third of momentum my pricing Yes, it. maybe roughly with a lack admittedly, surprised headwind. type taking quarter behind of seems line questions. the or guess, in despite it

guess how should if we about momentum of that going incremental can push XXXX? as So I forward? some kind And we be through thinking see we

Sean Lannon

mix. bit little So quarter, what impacted with were saw more in fourth we you the a

place. of through largely the I digits, first would we've in months average the mid-single out indices, priced in quarter. in call indices those are were side, being we're in Mobility raw our mix, With bit talked six a inflation of third that place line on is the XXXX December. really about material with that the Excluding off the

on as will And contracts an quarter you're closer that you quarter, And we which see So obviously quarter. now. January for see that expecting going high just of pricing That's far mid-to are to better fourth will X, XX% the are reset saw little a first the and guidance XX% going that than into probably fourth the uplift. indexes. on our we again effect quarter, our to as with inflation characterized with X. we've And XX% in January third those to

John McNulty

we if little helpful. that's industry like you're to your mean share bit? Got wins, lift toward least with it, industry the at that are a thinking know little give help guess, come or then be does that? what that should outlook with right going How the I take, guess I kind of rates. end And have how I to the of should regard to relative quantify -- won to for new some the business you've Light that of bit overall at kind of the the you gains, sounds in Axalta that the of a business year. grows thing? build some Can that it Vehicle or segment, autos forecast X.X%, about for

Robert Bryant

additional particular I me in guess, provide, X. let context some Well, around the Phase

think quarterly is there phasing I the important.

and So about light per million of vehicle units is full XX XXXX base units a units. number if And we downside XX XX IHS' build look at case year XXXX, total million million auto builds case were IHS.

based IHS XX seen base that Our is input historical year our XXXX from case forecast from as units full customers. on we've well the as error million

the XXXX the for to million particular, is QX, quarter as based number about X.X% QX, per down XX the for versus first in IHS builds roughly quarter. build year XXXX coming across on essentially quarter XX business and So first builds is lining think which we on, for million new about XX flat million phasing

XX.X QX Now XXXX actually million were units. builds

took and down then expected to Year rate later-than-normal [ph] Chinese estimate QX. our build million So for for arrive vehicle $XX number plant at number start-ups that New we for light and approximately adjusted that a

first business XXXX well we've XXXX. of then as be is of back to of Now solid then the in the a chips that that year, million XXXX, case view quarter ramp-up a first and end-loaded that more we but come a in will as conservative online the of pretty heavily during the data become XXXX quarter believe it bit new may $XXX year that given base more and semiconductor the market in of And as the the this we're assumption second the little just on variation, won historical conditions half available. potential that's case taking builds

John McNulty

much. color. Got it. That's Thanks helpful very

Operator

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

Vincent Andrews

you products. folks? and to in you And a Thank some morning. become point reverse give like you're move whether a of I or against to in is talk So migration was going going Refinish, tailwind that exactly through about versus you us of 'XX to could if a there a sounds the as Vehicle mix the what and it continuation a unpack Is it issues? then at economy-type know sense good in we for just in good move Could more Mobility, bit you going for it's and benefit? getting it you on XXXX. what's happening Commercial you,

Robert Bryant

that So given fourth point some But part with you've growth in regard side, to with mix the commercial economy. quarter and on particular. out slightly Coatings particular, had impact initiatives in and correctly the the of bit it's we overall, the lower of Refinish activity larger the that quarter mainstream saw of experienced of had. in that just also shortages we've the some the quite a And Performance labor customers fourth of in you they MSO as

buy have QX the premium lower of typically seen. that paint was So mix you richer in than might

certainly some bit we is a we'll to then number Mobility overall look in really, sequentially So some products. And see average tick X.X% from also in as our product sold think exacerbated etcetera. lower some Sean up that which what gets lower-margin Performance business and go here Pacific mix. can then a in the we've kind due price, slightly one, of that seen to growth at And with more in in was pure Mobility mentioned, indexation coming forward LV gets And increase We the I that it had if Asia QX in of selling as we captured QX, saw QX. in at see we QX, But then which unfavorable of Coatings, mix mix. into X% Coatings. place, of captured little in we you pure tracking, price price

Sean Lannon

But as forecasting the there's of will of the for in full aspects Vincent, through of an for mix comp easier come sort it saw major far that's XXXX to year the I'd for first Refinish add, X% in in the about XXXX. And changed for not mix quarter quarter just We presumably, any as just a quarter, particular. XXXX. be note, mix structurally nothing issues. We're fourth negative fourth

Vincent Andrews

on as just talk reductions you back versus temporary little follow-up, the maybe sit a bit you cost plan? a about could And your where coming

Sean Lannon

is world guidance us the Yes, quarter see limiting million on $XX But so up the to hard roughly least $XX just because in to each changing exactly. at to We first show for quarter. continued expect results. the say would constantly temporary savings, we've We're here. in that million to

Vincent Andrews

thanks much. Okay, very

Operator

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

David Begleiter

Way permanent XXXX any and cost -- XXXX? Thank you. Good savings Axalta morning. Rob saving Sean, you do expect in versus

Sean Lannon

amount productivity plan million. will savings but continued to, first give limiting we're end be announced. structural to will at the give previously quarter, projects. difference There's is the minimum, of guidance a we'll But Dave. But $XX we've cost offset inflation. guidance at again, fixed That clearly more updates that we about the Yes, when the

David Begleiter

of Got look flow, free buybacks in it. reduction uses And just looking do at at XXXX? you how cash versus debt

Sean Lannon

X.X%, So returns. cost have necessarily doesn't still debt attractive it given our below sitting of

look continue I to as the M&A. free well as excess we'll repurchases We'll majority to sheet beyond balance share of cash the for that. deploy cash think the continue on flow to build

David Begleiter

Thank you.

Operator

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

Kevin McCarthy

was if Robert, I through in some challenges wondering talk labor more you morning. detail. could the Good of

ability other And first impact then and basis, produce that your on So And have that getting significant do looking among better and to how issue what did it's you into or customers? externally, body an for is becoming internal on the example, perhaps quarter? think deliver? any worse shops

Robert Bryant

It's we've labor hit and due the Yes. constraints question. specifically fourth a Axalta, in to us seen certainly surge At across great quarter some Omicron.

was from the saw impact. I impact an it equivalent material characterize logistics we supply we or to Although think the impact as certainly headwinds but don't

body when in the to be December Refinish in absenteeism related in is challenges shops and maximum to customers, kind availability. with is continue larger challenges impact. was definitely think absenteeism around broader overall particular, labor of our But impacting, having availability the XX%. we parts technician about COVID-related The labor business, Our which an

up by our their went that shortages. largest increase number fact, of who to days labor in car days. average four rental some And and days of paint WIP December, in at customers fixed an related for the people in vehicle of had if And number you look reported

people taking that and their it's has shortages. with So to fixed get do cars lot for labor longer a to

Kevin McCarthy

Is mentioned XXXX that shop I that the if XXXX terms XXXX? remained XX% And body are the America, then secondly, in you new right. shop body for of or you normal? activity in relative North I activity that think U.S. planning What about to got below in

Robert Bryant

have don't certainly, either. school, where that's we not, country do rates yet We haven't seen that hybrid start but back come back some a a and of the We in spots to it's And of office we've seen And back there normal. in occupancy the bit normal people it's not are getting stop. think traffic environment. little terms still work even traffic patterns come

the on what hoping other that we're at that in terms the think percentage So, people side spent in start in I is office once the we return much to of Omicron of home. time to greater get office spent we're hybrid of versus more to going time a see

it said, hinges So I upon think, overall, optimistic from all but as we've we're Omicron. recovery

Kevin McCarthy

much. very Thanks

Operator

of with line your Please the from questions. with comes proceed Mizuho. question next Parkinson Our Chris

Chris Parkinson

maintenance. global -- intermediates Thank least appear as taking if supply Great. at cases, majeure in major across several activity other The studying and some inputs improving shortages key force of still raw at are least industry into the you appears these heading very although material yet year suppliers additives and has are much. been some

differences any As appreciated. pertains missing? evolves believe you greatly portfolio your will inputs color this region? still just Axalta, by how there what are it on to Are and be Just

Robert Bryant

Thanks, Chris.

XX to value roughly the continue fourth majeures quarter. in about We in coatings were the see supply disruptions force There chain.

about the Those And challenging kind resins. to level we've volumes. demand, supply on as deepening continued impact several half and as the have we tightness strong Europe dual as then been largely intensity due with volumes the logistics well the secured policies overall the been polyester to specifically have emissions impacts and been isocyanates, at seen control XXXX. also but in We for situation, global supply in of as carbon have China, challenges on saw there from pace some capacity chain alternative certain as impacts limited demand and as value which potential well shortages, second sales chain products in about most if energy with we really customer we keep think able If of carbon disruptions emulsions, well costs. during our constrained higher materials think acrylic and has overall

Chris Parkinson

this obviously on super of that just Based given it and for case that. lost this a peers confident all geographies, follow-up to most is business into say And that any is last this comment, quick just safe you a is of affecting not and on pent-up are primary is that your demand factored 'XX?

Robert Bryant

scenario, a to may where -- may situations ask we share and think certainly, supply example. product our to There's us customer and customers but a certainly there that I it where supply we've where we've need to spot us in market of have supply weeks dual to be able mean, to don't competitors where days been I moments, that. do Yes. to had competitor. spots it's shifts that particular there been competitors been there's one step of certainly are had where to or in for and short Likewise, been competitors we've given shifts question from able market source and or a on a or -- between a come step had hasn't one change, our have major

Chris Parkinson

you. Very helpful. Thank

Operator

question. The KeyBanc. with next question your comes proceed from Please the line of Alex Yefremov with

Alex Yefremov

for first your of lower midpoint The quarter sequentially. is million everyone. morning, Good $XX roughly Great. EBIT guidance

to rising is bridge understand something costs on? faster a else high volumes So the Are level. just price? sequential than at trying lower? going Are I'm Or

Sean Lannon

offset about are saw XX% is That in really which the they're to accounting We year-over-year to fourth sales. million peaking And and $XX labor by then in logistics quarter. XX% really headwinds marginal seeing and in million. vast We're freight some rows where uptick first $XX XX% seeing largely for It's pressure the to amounts we're headwinds being Yes. majority. the quarter. the really in

about about You'll fourth first million. guidance up quarter which $XX X% for the versus is see correlates to quarter the our

Robert Bryant

some FX some to and incremental is effect, and return only is the less related developments the mention course, of we of launches just then there of And other small to of product item impact have. seeing OpEx the we're

Alex Yefremov

helpful. reset on So you'll of indices half will Vehicle, December reset -- half exit those to indices for have or resets average second for generally some X. of costs Okay, be very 'XX? Would 'XX January those Light or an you on caught time, of In index your first price maybe 'XX? kind from underwater fully up cost the still

Sean Lannon

Yes.

will but the behind. little to all to to average raw that they're think mean still inflate different bit going be the contracts procurement it X-month expecting reflected. in the way So the quarter, I given spend first is But about a materials generally we're be to continue are slightly

Alex Yefremov

Thank you.

Operator

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

Jeff Zekauskas

raw Thanks material in very did much. you Refinish? recovery In of the inflation stand where quarter, with

Sean Lannon

Jeff. caught we're Refinish, in So up

Jeff Zekauskas

Okay. you base? business, much customers And you when there OEM it is, customers you look in Or the well? doing wide other less inflation? at your pretty base, are differences material are your customer in very auto your raw is ability the recover across with customer to and with well doing That some of large are even

Robert Bryant

well think, by region and mix I competition. somewhat as it Jeff, by customer varies of as it varies regional somewhat

we're about -- indexing we price price as that our business, we're the So to indexing easier. think just I think automatic more make that and this don't we're capture capture. toward think in believe said, pushing I I think the behind Sean market as But in and we certainly overall,

for OEM, include some include tier If course, volumes And beyond products. I including business Light at mean, within that look are of you include, businesses serve they'll Industrial which, certain like-for-like automotive. body example, our that coatings some exterior our of businesses, Vehicle an we peers suppliers

we little acknowledge as want cost continued we that offsetting XXXX. at to -- we're from don't believe Sean the XX% where end more -- we're number focused in business a cost competition although on of be, in during to we've seen And indexes very inflation our our headwinds. XXXX. So, highlighted, of inflationary the bit number that But go that especially than seen we've XXXX given behind of XX% to we not we're

to continue increase. to We that expect

Jeff Zekauskas

so Thanks Great. much.

Operator

coming line Juvekar is of Citi. with Please P.J. your the question. question from with proceed next The

P.J. Juvekar

a negative couple morning. of good both times mix what segments. wondering talk could your of kind Robert, you I in in segments? you're impact each Yes, the mix of about mentioned seeing impact was you of if

Robert Bryant

Sure.

Latin segments, happy economy be of the Refinish growth earlier the bit off, that to that's some of read developments of color. in terms products product to more but over about as Still Europe you price we our margins little but the of answered in Those the new mainstream really lower provide think points. six I'd the with probably America. that In we've continued in taken a as well especially in see press question I lower and price releases business, attractive in past are Asia, points. at certain sold Eastern months parts

And a that's certainly of then impact. differential. it's the mix well function really that so And Mobility that mix customer in regional mix one as created side, as has

P.J. Juvekar

many then shortage views different to Okay. going this on chip And companies have be resolved. is

companies are be optimistic. be Chip more won't to XXXX. tend they it companies, auto to resolved talk saying till You fully

saying in to chips do are stand Some begin even could they do auto referring comps you where but were you you to which I'm XXXX. OEM? sure not when positive some on think see exactly

Robert Bryant

industry, there's chip unless chip the of of I some you reduce chips longer normalization thought in give the what been additional come mean been They've seen the second and half times. were a chips first in They're and year with half and first that mean up prioritizing market aggressively I have still. this XXXX think action. recognized auto with -- as to there redesigning half features our second consolidating inventory end and automotive they I number additional bit in forecasters supply view an in removing So lead could And the in beginning in many and and lead versus lastly, broader standing haven't chain that to something situation. pre-pandemic. chips fewer, little trucks well chip perhaps certain they OEM should for customer And easily is profit we improvement systems as the the of kind to I of we've just We one-off start subside more obviously, obviously, SUVs. still quickly vehicles markets. ordering intensity. from, do chip happens, are that XXXX. online. issue level with times expect half stabilization different available taking reducing see add with to assume pretty as supply They're for be people's speaking but which capacity we'll vehicles, free with customers chips. the used dismay mean, the XXXX our they're one like that then, unique being base. is we We our improvement And of longer standardized necessary. think the down the going they're more really margins And forecasts as chips to think this they're to capacity but architecture then issues, overall adapt from the are I'd highest more specifically

benefit mentioned that there can actions first I have the XXXX. actually a think I in

the a redesign the some of And chip impact. of XXXX of that's architecture, more XXXX,

Operator

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

Mike Sison

good morning. guys, Hey

build when Mobility that the did breakeven have 'XX? to of a curious for build sort there of with quarter quarters. to you breakeven? you first Are in to firmly Coatings, need above couple million of What going margins there digits, you double then kind rate And last about or gets year? that think of sort back been you get this the you get so Just certain is XX rate XX% bumping at

Sean Lannon

have I -- the over impacted we're from slightly full did depreciation EBITDA I I carve-out from to is going So XX% initial call by out DuPont. just want step-up EBITDA EBIT still mean I margins amortization and the to for Mike, point because the year. itself. to the want

we we and still in certainly flow the to mobility profitable million where XXXX versus I A for think highlight. positive will be put are year we'll uplift we important today it's year. us full a are the XX get But stage. an that positive cash slight for EBIT So if business in the builds, for

to the done better pick profitability. see pricing, on back get well going be there's as I going much that the absorption, volumes we've as with quickly the structure you're think up, coupled cost business as fact with to this to everything

Robert Bryant

this if volume significant it's what the taken the cost reductions about we've are I what done is in that Yes. Sean that -- business. all of done two there costs Those really said you well at business, would the reiterate in effect just point, in At drop-through as look key as price significant we levers. Mobility have increases.

Mike Sison

then be versus think you will you're able guidance. grow specific And up about like of understand being if 'XX sounds adjusted EBIT this year? was to 'XX, 'XX. range Understood. signaling it hesitancy give to that for you But the in I you think surprise And there where what you possibilities, are that about the can see potentially? to terms in worried most do of when upside,

Robert Bryant

and inflation then COVID. price geopolitical of builds. well would to have the I assumed impact to could of on The key variables, changes, macroeconomic the cost think have as that, course, in both the changes we'd be and as growth, and that upside auto to lastly, mention And certainly the events oil downside,

our Omicron with there's here overall hope that is to conditions to that get that kind the and and think hopeful of back we're on nothing global down start coming that I see backside beyond and track we normal. business

Mike Sison

you. Thank

Operator

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

Arun Viswanathan

I Thanks questions. Good just morning. my for two questions. guess taking

Light but would So that guys already guess picture. maybe first in February Vehicle. February, maybe off, I've we're March heard I get you in -- I better March a guess

I on get number that XX saying that instead Would get you XX you forecast you with see picture production. better they'd to guess, Some if assessment? that that agree March? suppliers full of maybe to your auto closer would been able of have be year a the in

Robert Bryant

think it's that. particular, possible say. obviously, have anything or variability the in fair more to out illuminate magical, that we'll I there's I a that's in that's difficult around amount going there's It's to March specific forecast. to going think come There's visibility in still information don't March but of --

would it to do think belt. under that first taken to our prudent quarter having there be we of the benefit a And first conservative but quarter think it's so. a recognize just have approach we I we more the

Arun Viswanathan

got working that one thinking you quick for a you helped benefit bit 'XX? be But just on on then free free preserve a And little to Great. cash capital cash think drag working Is flow. there I a a you've capital? guidance. are of flow 'XX, how about that going

Sean Lannon

roughly percentage working of potentially we as well upticking. X% at capital sales continued pressures inflationary as sales Yes, as a ended given

use. see uptick You could marginal working a in capital

Arun Viswanathan

Thanks.

Operator

is question with Favre next Paribas. Laurent questions. from your Please Our with line coming proceed the of BNP

Laurent Favre

I've all. all on a we efforts. And X targets Robert, I morning, recognize focused your on announced got wondering to Scope probably good majority last COX side, X. total In what of Thanks the question Scope the also from prevented be you X, given and this emission tackling you very is on particular, was that But the and ESG seem your emissions? week.

Robert Bryant

that forward. that. But regard you Scope it's embarking first Scope we're our go going focus X work target. with requires we're coordination business. terms with would X, you to ambitious Scope do then we put over lot on in whom begin a it a before been out all of on walk and X particular, and That too year, we'll just a have Scope we've run X and of of think in and with to to as X, out X scoping emissions the last the done, X partners And the I

just coming that's quantifiable. obviously, energies, So Scope little more from from purchased company for bit and Scope a X X, operations

Laurent Favre

your supply, have things for of targets? And those incremental you Are that incur, power you cost for etcetera? instance, sized the XXXX part could renewable

Robert Bryant

we're but to as think we some emissions renewable as of the there air would electricity be goal it's spend. on-site that So of gases, think energy the also particular, talking in purchase And prohibitive. of related use actual cost unless use the CapEx explore specifically that CapEx use we're costs normal when to specifically energy, our terms our have, get the renewable is then I of when were generation greenhouse continue to we well But of renewable in it about to to And incremental effective. waste plan going to we'll as capital relates here part air energy.

markets, goal the to that carbon carbon global all to possible it's some purchase neutrality explored though, important other options by really think on would it's and I evolution the depending XXXX. that be might But implemented. highlight energy to need those been of only just fully that we the have of after offsets reach

expect we of many next to I continue the the and to increase market that over size think years. the continue to the market sophistication to renewable energy of global increase

Sean Lannon

number. to just put Laurent, some And quantifiable

million is annual is total a our that. $XX to So $XX million Electricity spend on energy fraction an of basis.

So that as concerns targets. far as there. will in XXXX be major absorbed impacts No our

Laurent Favre

Thank you.

Operator

At this call over turn the have the remarks. for we of and end time, session question-and-answer reached the to Chris closing I'll Mecray

Christopher Mecray

for have. and morning. Appreciate you follow-up you questions to this any We'll Thank your us day. through joining of the available a day course Have all great participation. beyond be answer the

Operator

This today's conference. concludes

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

Axalta Coating Systems (AXTA) 1 Feb 222021 Q4 Earnings call transcript