Axalta Coating Systems Ltd. · NYSE:AXTA
Axalta Coating Systems — Investor Presentation (November 2016)
58 slides from Axalta Coating Systems's investor presentation, Nov 8, 2016
Slide 1: Axalta Coating Systems Ltd. Investor Presentation November 2016
Axalta Coating Systems Ltd. Investor Presentation November 2016 Exhibit 99.1
Slide 2: Legal Notices
PROPRIETARYAXALTA COATING SYSTEMS 2 Legal Notices Forward-Looking Statements This presentation and the oral remarks made in connection herewith may contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including those relating to 2016 f
Slide 3: Celebrating 150 Years of Coatings Excellence
PROPRIETARYAXALTA COATING SYSTEMS 2014-2016 November 2014 IPO (NYSE: AXTA) Expand capacity in China, Germany, Mexico and Brazil Build Asia-Pacific Technology Center in Shanghai Acquire Metalak (Netherlands), Chemspec, Dura Coat & United Paints interior plastics division (U.S.), HIPIC (Malays
Slide 4: Axalta's Corporate Transformation Continues
PROPRIETARYAXALTA COATING SYSTEMS Axalta’s Corporate Transformation Continues 4 • New leadership team • Global re-branding • Completed separation • Developed growth strategy • Renewed customer focus • Aligned incentives No n -Cor e D iv is io n In d e p e n d e n t Co a ti n g s Co m p a n y Carve O
Slide 5: Axalta – A Global Leader In Coatings
PROPRIETARYAXALTA COATING SYSTEMS Refinish $1.7 B (42%) Industrial $0.7 B (16%) Body Shops Light Vehicle $1.3 B (32%) CV $0.4 B (10%) Performance Coatings General Industrial, Electrical Insulation, Architectural Transportation Coatings Adjusted EBITDA1,2 - $539 M (23% Margin) Adjusted EBITDA1,2 - $3
Slide 6: Axalta's Future State: A Global, High-Performing, Coatings Leader
PROPRIETARYAXALTA COATING SYSTEMS Axalta’s Future State: A Global, High-Performing, Coatings Leader Consistent Growth Margin Expansion Effective Capital Allocation Enhanced Shareholder Returns Axalta’s Vision To maximize our customers’ productivity and product functionality by offering them innovati
Slide 7: Axalta Aims To Grow The Business While Refining The Cost Structure
PROPRIETARYAXALTA COATING SYSTEMS 7 Axalta Aims To Grow The Business While Refining The Cost Structure Growth Supported by Clear Strategies & Enhanced Resources Focus on Emerging Markets for Long Term Opportunity Globalizing Existing Products to Reach Underserved Markets Optimizing Procurement Focus
Slide 8: Cost Initiatives To Enhance Productivity & Efficiency
PROPRIETARYAXALTA COATING SYSTEMS 8 Cost Initiatives To Enhance Productivity & Efficiency Fit-For-Growth (Europe): $100 million targeted savings • Right-size staffing levels + wage & benefit restructuring • Rationalize manufacturing and logistics • Invest in automation Initial carve-out actions: • R
Slide 9: Key Goals For 2016
AXALTA COATING SYSTEMS Key Goals For 2016 Grow the Business Productivity Initiatives to Improve Cost Structure Focus on Operating Improvement Extend Core Strengths & Globalize • Net sales growth at lower end of 4-6% ex-currency, including acquisitions • Expect to outgrow our end-markets • $60 millio
Slide 10: Axalta Operates Fundamentally Strong Businesses
PROPRIETARYAXALTA COATING SYSTEMS 10 Axalta Operates Fundamentally Strong Businesses A Global Leader in Our Markets Significant Competitive Advantages A Service-Led Business Model Structurally Attractive End Markets Highly Variable Cost Structure; Low Capital Intensity
Slide 11: A Global Leader In Our Markets
PROPRIETARYAXALTA COATING SYSTEMS 11 A Global Leader In Our Markets Axalta’s Global Scale Enables Market Leadership ____________________________ Information as of and for FY 2015, all sales data refers to Net Sales 1. Mexico is included in Latin America 2. Includes 9 JV facilities. 42 manufacturin
Slide 12: A Global Leader In Our Markets: #1 or #2 Share
PROPRIETARYAXALTA COATING SYSTEMS Peer 1 24% Axalta 19% Peer 2 18% Peer 3 13% Other 26% 12 A Global Leader In Our Markets ~90% of Sales from Markets Where Axalta Has #1 or #2 Global Share Axalta 25% Peer 1 20% Peer 2 11% Peer 3 11% Other 33% Performance Coatings: Refinish Transportation Coatings: Li
Slide 13: Significant Competitive Advantages
PROPRIETARYAXALTA COATING SYSTEMS 13 Significant Competitive Advantages Differentiated Franchise with Global Scale and Strong Competitive Advantages 4+ million color variations Hundreds of formulations in automotive & industrial Deep coatings heritage since 1866 Broad global brand portfolio
Slide 14: Industry Trends and Axalta Technologies
PROPRIETARYAXALTA COATING SYSTEMS Industry Trends Axalta Technologies OEM Vehicle Light-Weighting Broad substrate coating applicability for next generation materials Growth in Multi-Shop Operators (“MSO”) Axalta’s waterborne technology improves MSO shop productivity and our national coverage ena
Slide 15: Axalta Employs A Service-Led Business Model
PROPRIETARYAXALTA COATING SYSTEMS 15 Axalta Employs A Service-Led Business Model Critical Functionality at a Relatively Low Cost 1 Compelling Value Proposition Where Product Cost is Not the Main Driver Light & Commercial Vehicle: <1% of a new vehicle’s cost Industrial: Critical to function, durabili
Slide 16: Structurally Attractive Global End-Markets
PROPRIETARYAXALTA COATING SYSTEMS 16 Structurally Attractive Global End-Markets Strong Coatings Growth Outlook Long Term Alignment With Global Growth Refinish: Car parc, miles driven and collision rates Light Vehicle: Emerging economies and middle classes; ongoing consumer strength in developed
Slide 17: Highly Variable Cost Structure And Low Capital Intensity
PROPRIETARYAXALTA COATING SYSTEMS 17 Highly Variable Cost Structure And Low Capital Intensity ~50% of COGS come from variable raw material inputs Utilize temporary labor to enable wage structure flexibility Toggle other costs as needed in a downturn, including both variable and semi-fixed Low
Slide 18: Axalta's Evolution Is Grounded In Fundamental Goals
PROPRIETARYAXALTA COATING SYSTEMS 18 Axalta’s Evolution Is Grounded In Fundamental Goals Focus on operational excellence and foster a culture of accountability Axalta’s Strategy Grow in targeted industrial coatings segments via organic growth and selective acquisitions Move into attractive adjacenci
Slide 19: Axalta's Strategy: Grow Core Products & Markets
PROPRIETARYAXALTA COATING SYSTEMS 19 Axalta’s Strategy: Grow Core Products & Markets Refinish ____________________ Source: Axalta estimates Strong Momentum Driven by Customer-Centric Approach Axalta MSO Market Share 2013 Today Light Vehicle Axalta is gaining share by partnering with market winners
Slide 20: Axalta's Strategy: Accelerate Growth In Emerging Markets
PROPRIETARYAXALTA COATING SYSTEMS $14.3 $15.6 $17.1 $18.5 $20.1 2014E 2015E 2016E 2017E 2018E Emerging Markets, 31% 20 Axalta’s Strategy: Accelerate Growth In Emerging Markets China Example Light Vehicles, Per 1,000 People China Car Parc (thousands) 743 263 230 129 61 19 United States Central & East
Slide 21: Axalta's Strategy: Targeted Industrial Coatings Expansion
PROPRIETARYAXALTA COATING SYSTEMS Architectural 21 Axalta’s Strategy: Targeted Industrial Coatings Expansion Growth from Leveraging Our Product Portfolio in Underserved Markets Strong product portfolio in powder, liquid, and e-coat Implemented global end-market business structure to capitalize o
Slide 22: Axalta's Strategy: Focus On Operating Excellence
PROPRIETARYAXALTA COATING SYSTEMS Axalta’s Strategy: Focus On Operating Excellence Balanced manufacturing footprint and capacity Ongoing productivity investments Salesforce reorganization R&D / Technology enablers Enhanced IT tools Procurement roadmap Process improvement Leadership and
Slide 23: Financial Overview
Financial Overview
Slide 24: Connecting Performance To Shareholder Returns
PROPRIETARYAXALTA COATING SYSTEMS 24 Axalta Is Focused On Connecting Performance To Shareholder Returns Underlying Market Growth Axalta Growth Initiatives Operational Improvements M&A Structural demand growth Industry trends favor global suppliers Momentum driven by customer-centric approach L
Slide 25: Q3 Consolidated Results
AXALTA COATING SYSTEMS Q3 Consolidated Results Financial Performance Commentary Net Sales Variance $1,000 $1,023 VolumeQ3 2015 Q3 2016FXPrice 25 Net sales growth drivers Positive pricing contribution from both segments, led by Performance Coatings and most notably from Latin America Volume growt
Slide 26: The Axalta Way: Driving Towards World Class Productivity
PROPRIETARYAXALTA COATING SYSTEMS The Axalta Way: Driving Towards World Class Productivity Our Goal: $200 million of Adjusted EBITDA savings on a run-rate basis exiting 2017 Cumulative Productivity Initiative Savings ($ in millions) The Axalta Way: “A focused approach to doing business that drives p
Slide 27: Prioritization Of Capital Spending
PROPRIETARYAXALTA COATING SYSTEMS Prioritization Of Capital Spending; Focus On High IRR Capex Maintenance capital: $50+ million per year Growth investments 4 capex projects completed in 2015: Germany, China, Mexico, Brazil New R&D centers planned for Philadelphia and Shanghai (nearly complet
Slide 28: Effective Capital Allocation Should Drive Improved Returns
PROPRIETARYAXALTA COATING SYSTEMS Effective Capital Allocation Should Drive Improved Returns Notes: 1) ROIC = Net Operating Profit After Tax (NOPAT) / (Total Debt + Preferred Stock + Minority Interest + Equity); 2) AXTA total capital excludes identified intangible assets; 3) Data as of LTM Q2 2016
Slide 29: Capital Allocation (TSR Model): Decision Tree For Excess Cash Flow
PROPRIETARYAXALTA COATING SYSTEMS Capital Allocation (TSR Model): Decision Tree For Excess Cash Flow Debt Reduction 29 Organic Investment Capex / R&D M & A Dividends Share Repurchases Leverage in excess of target and no immediate investment? Investment opportunity that exceeds hurdle rate? Share pri
Slide 30: Debt and Liquidity Summary
AXALTA COATING SYSTEMS Debt and Liquidity Summary Capitalization 30 Net Leverage (1) Assumes exchange rate of $1.12 USD/Euro (2) Indebtedness per balance sheet less cash & cash equivalents divided by LTM Q3 2016 Adjusted EBTIDA (3) Total Net Debt = Total Debt – Cash and Cash Equivalents ($ in millio
Slide 31: Capitalization Summary
AXALTA COATING SYSTEMS Capitalization Summary Capitalization 31 Refinancing extended debt maturities while decreasing average borrowing rate from ~4.7% to ~4.0% Extended revolver maturity to 2021 with favorable drawn pricing Shift in structure from secured to unsecured borrowings Table exclu
Slide 32: Completed Acquisitions to Date
AXALTA COATING SYSTEMS Leading local producer of refinish coatings in Malaysia and Indonesia Growing supplier of automotive interior rigid thermoplastic coatings; strong position with North American OEMs Growing supplier of specialty coil coatings in North America Axalta’s exclusive distributor for
Slide 33: Full Year 2016 Guidance
AXALTA COATING SYSTEMS Full Year 2016 Guidance 33 2016 Benefits from Ongoing Growth and Maturity of Productivity Programs Net sales expected to be flat to down slightly, as-reported, based on anticipated currency headwinds; net sales, ex-FX, expected to come in at lower end of 4-6% guidance, inclu
Slide 34: Performance Coatings: Refinish
Performance Coatings: Refinish
Slide 35: The Global Refinish Market Is Growing
PROPRIETARYAXALTA COATING SYSTEMS The Global Refinish Market Is Growing Projected Industry Sales ($ in billions) Asia Pacific EMEA North America 6.3% 0.8% 2.2% 2.6%$2.4 $2.5 $2.6 $2.6 $2.7 $3.2 $3.2 $3.3 $3.4 $3.5 $0.9 $1.0 $1.0 $1.0 $1.0 $1.6 $1.8 $1.9 $2.0 $2.1 2015E 2016E 2017E 2018E 2019E ’15E –
Slide 36: Axalta Has A Very Strong Position In Refinish Globally
PROPRIETARYAXALTA COATING SYSTEMS Axalta Has A Very Strong Position In Refinish Globally Global Share Position Key Market Trends Axalta 25% Peer 1 20% Peer 2 11% Peer 3 11% Peer 4 5% Other 28% Refinish Industry Sales: ~$7.4 billion #1 Drivers include size of car parc, miles driven, and accident ra
Slide 37: Refinish Products: The Paint Layers & Process
PROPRIETARYAXALTA COATING SYSTEMS 37 Refinish Products: The Paint Layers & Process Clearcoat: Protects basecoat from the elements, gives automobile its lustrous look Basecoat: Creates automobile’s color and aesthetics Primer Surfacer: Protects automobile from visible and UV light, Improves surface s
Slide 38: Performance Coatings: Industrial Coatings
Performance Coatings: Industrial Coatings
Slide 39: The Industrial Coatings Market
PROPRIETARYAXALTA COATING SYSTEMS ’15E-‘19E CAGR($ in billions) Asia Pacific EMEA North America 6.2% 4.0% 3.0% 3.5% 4.9% $6.8 $7.0 $7.3 $7.5 $7.8 $8.1 $10.0 $10.3 $10.6 $10.9 $11.3 $11.6 $1.7 $1.8 $1.8 $1.9 $2.0 $2.1 $21.2 $22.5 $23.9 $25.4 $27.0 $28.6 2015E 2016E 2017E 2018E 2019E 2020E $50.4 _____
Slide 40: Industrial Coatings: A $28B Market Opportunity For Axalta
PROPRIETARYAXALTA COATING SYSTEMS General Industrial $15.0 Electrical Insulation $2.0 Architectual Extrusions $1.5 ACE $1.5 Oil & Gas $3.5 Coil $4.5 Industrial Coatings: A $28 B Market Opportunity For Axalta Product Examples Market Drivers General Industrial Metal furniture Appliances Shelving
Slide 41: Axalta's Industrial Business Today
PROPRIETARYAXALTA COATING SYSTEMS General Industrial 53% Architectural 16% EIS 14% ACE 10% Oil & Gas 7% 2015 Net Sales by Segment Business Overview Steady volume growth driven by global GDP China growth expected at least mid-single digits Architectural market expected to grow steadily Supplier c
Slide 42: Growth Priorities & Strategies
PROPRIETARYAXALTA COATING SYSTEMS Growth Priorities & Strategies Axalta Industrial: Where We Are Going… Agriculture, Construction & Earth Moving Equipment (ACE) Expand approval portfolio with multiple coatings technologies Utilize global footprint to target new business in all regions Architectu
Slide 43: Transportation Coatings Overview
Transportation Coatings Overview
Slide 44: Segment Overview
PROPRIETARYAXALTA COATING SYSTEMS Segment Overview Global co-lead supplier to OEMs Transportation Light Vehicle Original Equipment Manufacturers Plastics and composite materials Metal coatings #1 global supplier to heavy duty truck and bus segments Commercial Vehicle Commercial trucks Rail
Slide 45: Transportation Summary
PROPRIETARYAXALTA COATING SYSTEMS 19% global light vehicle market share with strong OEM relationships in all regions #1 player globally in heavy duty truck and bus Extensive portfolio of technologies fit for purpose in each market Showing results to date through business wins and global la
Slide 46: Structurally Growing Markets
PROPRIETARYAXALTA COATING SYSTEMS Structurally Growing Markets 46 Market Growth: Light Vehicle Market Growth: Commercial Vehicle _____________________________ Source: Orr & Boss; Axalta estimates Asia Pacific Latin America EMEA North America 3.6% 6.5% 2.6% 0.2% 3.0% 1.2 1.3 1.3 1.2 1.2 2.0 2.1 2.1 2
Slide 47: Key Market Trends
PROPRIETARYAXALTA COATING SYSTEMS 47 Key Market Trends Volatile organic compounds (VOCs) Toxic substances Coatings for new lightweight materials to improve fuel economy Government Regulations Emerging Markets Industry Globalization Demand for Productivity Color and Protection Near-term uncer
Slide 48: Transforming A Global Coatings Supplier
PROPRIETARYAXALTA COATING SYSTEMS Axalta 19% Transforming A Global Coatings Supplier Global Share 48 Axalta 31% Axalta is a global leader in transportation coatings Globalizing and harmonizing our coatings technology Bringing brighter colors and more effects to color design Aligning global R
Slide 49: Vision Is Above-Market Growth
PROPRIETARYAXALTA COATING SYSTEMS Vision Is Above-Market Growth Gain share with existing customers Grow underserved customers and regions Align product technology to evolving customer and market needs Increase content per vehicle Leverage “what good looks like” into new regions, customers
Slide 50: Segmenting Our Markets
PROPRIETARYAXALTA COATING SYSTEMS Segmenting Our Markets Light Vehicle HDT Specialty OEM Bus Rail General Aviation Body Builders & Trailers Estimated Market Size $8,100M $500M $550M $200M $600M $45M $400M Product Examples Passenger cars Pick Ups / SUVs Light commercial vehicles Component parts
Slide 51: Segment Specific Strategies In Our Target Markets
PROPRIETARYAXALTA COATING SYSTEMS 51 We Are Growing With Segment Specific Strategies In Our Target Markets China expansion to mainstream and economy segments Leverage high speed rail success SprayFlex FS interior floor coatings Leverage global accounts Gain share in tier part suppliers C
Slide 52: The OEM Paint Process
PROPRIETARYAXALTA COATING SYSTEMS 52 The OEM Paint Process Light Vehicle Coating Totes delivered to OEM E-Coat Applied after pre-treat Primer, Basecoat & Clear coat applied Quality inspections between layers
Slide 53: Appendix
APPENDIX
Slide 54: Q3 Performance Coatings Results
AXALTA COATING SYSTEMS Q3 Performance Coatings Results Financial Performance Commentary Net Sales Variance 54 Net sales led by Industrial including acquisition contribution Pricing led by Refinish; Industrial remained stable Volume growth includes 3.4% from acquisitions 2.7% unfavorable curren
Slide 55: Q3 Transportation Coatings Results
AXALTA COATING SYSTEMS Q3 Transportation Coatings Results Financial Performance Commentary Net Sales Variance 55 Net sales pressured by Commercial volumes Solid volume growth in Light Vehicle led by Asia Pacific and North America, offset in part by slower EMEA; lower volumes in Commercial Vehicle
Slide 56: Adjusted EBITDA Reconciliation
AXALTA COATING SYSTEMS Adjusted EBITDA Reconciliation Note: Numbers might not foot due to rounding. 56 LTM ($ in millions) FY 2015 Q1 2015 Q2 2015 Q3 2015 Q1 2016 Q2 2016 Q3 2016 9/30/2016 Net Income (Loss) $98 $47 (24) $36 $31 $50 (10) $110 Interest Expense 197 50 49 51 50 48 43 188 Provision for I
Slide 57: Adjusted EBITDA Reconciliation (cont'd)
AXALTA COATING SYSTEMS Adjusted EBITDA Reconciliation (cont’d) A. During FY 2015, 2Q 2016 and 3Q 2016, we prepaid outstanding principal on our Term Loans, resulting in non-cash pre-tax losses on extinguishment of $3 million, $2 million and $5 million, respectively. During 3Q 2016, we amended the ter
Slide 58: Thank you!
Thank you! Investor Contact: Chris Mecray, VP IR Christopher.Mecray@axaltacs.com 215-255-7970
Axalta Coating Systems — Investor Presentation (November 2016) on 6ix