Axalta Coating Systems Ltd. · NYSE:AXTA
Axalta Coating Systems — Investor Presentation (August 2018)
50 slides from Axalta Coating Systems's investor presentation, Aug 6, 2018
Slide 1: Axalta Coating Systems Ltd. Investor Presentation Third Quarter 2018
Exhibit 99.1 Axalta Coating Systems Ltd. Investor Presentation Third Quarter 2018 Sensitivity: Business Internal
Slide 2: Legal Notices
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 our 2018 goals and financial projections,
Slide 3: Axalta's Customer Focused Organization
Axalta’s Customer Focused Organization PERFORMANCE COATINGS TRANSPORTATION COATINGS SEGMENTS $2.7 Billion, 62% of Sales $1.7 Billion, 38% of Sales SALES BY END MARKET ▪ General industrial powders ▪ Automotive OEMs ▪ Heavy duty truck, utility trucks ▪ Independent body shops ▪ Wood coatings END ▪ Coat
Slide 4: Axalta is Focused on Shareholder Value Creation
Axalta is Focused on Shareholder Value Creation Significant Progress… …with More to Come A Transformation Story Axalta’s Value Creation Model ▪ Cultural shift; incentive alignment ▪ Drive profitable growth with innovation, customer focus ✓ TSR based long-term compensation and solid core market drive
Slide 5: Axalta's Global Presence
Axalta’s Global Presence 14,000 Employees 50 Västervik Manufacturing Sites Darlington Farnham Moscow West Bromwich Zuidland Minneapolis Hilliard Houthwaite Wuppertal Ajax Tewksbury Changchun Cornwall Mechelen Guntramsdorf Mt. Clemens Sacramento Montbrison Landshut Ft. Madison Bulle Orrville Front Ro
Slide 6: Why Invest in Axalta Today?
Why Invest in Axalta Today? Strong Free Focused End- Consolidation ROIC Growth Significant Axalta Way Cash Markets, Opportunity Focus, China Growth Driving Generation and Structural with Proven Shareholder Opportunity Productivity Allocation Volume Growth M&A Strategy Value Alignment Process P RO P
Slide 7: We are Focused on Structurally Attractive Coatings End-Markets
We are Focused on Structurally Attractive Coatings End-Markets A $130 Billion Global Coatings Market Axalta’s Coatings Markets Coatings Industry Sales Coatings Industry Sales ($ Billions) CAGR 5.2% Industrial Commercial 3.9% Vehicle Light 2.9% Vehicle Refinish 2.7% ____________________ _____________
Slide 8: Axalta is a Global Leader in Many of Our Markets
Axalta is a Global Leader in Many of Our Markets… Performance Coatings: Refinish Transportation Coatings: Light Vehicle #1 #2 Performance Coatings: Industrial Transportation Coatings: Commercial Vehicle ▪ in Powder coatings globally ✓ ✓ ✓ ✓ #1 Supplier to North American HDT Market ▪ in Industrial Wo
Slide 9: But We also have Substantial White Space Growth Opportunities
…But We also have Substantial White Space Growth Opportunities Refinish – Regional Car Parc Growth Light Vehicle – Cars Per Capita (in thousands) ’17-’22E CAGR 400 Growth in China 75% 1% Penetration rate gap will 1% 300 narrow across regions 11% 200 3% 37% 100 4% 18% - 11% 8% NA EMEA LA China AP ex
Slide 10: China Represents a Huge Growth Opportunity
China Represents a Huge Growth Opportunity Refinish Industrial ▪ Car parc growth ▪ China consumes >40% of global industrial coatings today ▪ Mainstream and economy segment growth ▪ Shift from export end users to domestic consumers ▪ Follow market to Tier 2-4 cities ▪ Importance of local production a
Slide 11: China Represents a Huge Growth Opportunity, Cont'd
China Represents a Huge Growth Opportunity, Cont’d Light Vehicle Commercial Vehicle ▪ Adding business with domestic OEMs ▪ Huge truck market >1 million vehicles per year production ▪ Automotive fleet penetration per capita drives market ▪ Modernization of fleet drives demand for quality coatings gro
Slide 12: Focus on Operating Excellence, Axalta Way Savings Continue with Phase II
Focus on Operating Excellence, Axalta Way Savings Continue with Phase II ▪ Achieved Phase I $200 million target Axalta Way II ▪ Axalta Way II target: $200 million over next four years Axalta Operating ▪ Lean implementation in Wuppertal, Germany and Mt. Clemens, MI Excellence (AOE) ▪ Global rollout t
Slide 13: M&A: Leveraging a Consolidating Coatings Sector
M&A: Leveraging a Consolidating Coatings Sector 2017 Key Acquisitions Benefits ▪ Provide access to new technologies, products, customers, and markets ▪ Leverage combined supply chains and distribution channels ▪ Develop process and marketing efficiencies Ellis Paint Century Industrial Coatings Spenc
Slide 14: Axalta Generates Strong Free Cash Flow; Disciplined Allocation
Axalta Generates Strong Free Cash Flow; Disciplined Allocation Strong Adjusted EBITDA Margins A Sound Capital Allocation Process ▪ Axalta is the margin leader and generates substantial free cash flow ▪ We have organic and inorganic investment opportunities that we expect will enhance overall returns
Slide 15: Axalta is Squarely Focused on Shareholder Value Creation
Axalta is Squarely Focused on Shareholder Value Creation Growth Productivity ▪ Technology and innovation ▪ Axalta Way II drivers ▪ Axalta Operating Excellence ▪ Evolution of culture and (AOE) rollout incentives ▪ Inflation offset as starting point ▪ Clear strategies by end-market with accountability
Slide 16: Sustainability at Axalta
Sustainability at Axalta Environment Social Governance ▪ Environment, Health & Safety policies well defined ▪ Supply chain initiatives including Supplier Code of ▪ Environment, Health, Safety & Sustainability Conduct and Supplier Sustainability Risk Management ▪ Committee of the Board Responsible Ca
Slide 17: Sustainability at Axalta: Awards and Recognition
Sustainability at Axalta Awards and Recognition by Customers and Rating Bodies Honda N.A. awarded Axalta’s Mt. Clemens Axalta received Honda Brazil’s 2017 Best Axalta received the EcoVadis Gold Star site with its first Supplier Sustainability Supplier Award in the Excellence in Quality award given t
Slide 18: Key Goals for 2018
Key Goals for 2018 Key Objectives for Growth and Value Creation Outgrow Our End-Markets ▪ Mid-single digit organic net sales growth; higher with M&A Axalta Way II Execution ▪ Ongoing savings from optimizing our organization Incremental Cost Actions ▪ Closing any price-cost gap with focused actions D
Slide 19: Financial Overview
Financial Overview Sensitivity: Business Internal
Slide 20: Axalta's Growth Algorithm
Axalta’s Growth Algorithm Multiple Steps Support Results Improving Returns Over Time ▪ Mid-single digit core growth includes market Mid-single digits Accretive M&A growth, modest share capture and incremental pricing in key businesses ▪ Free cash flow allocation is primarily directed Inflation ‘plus
Slide 21: Axalta's Growth Drivers are Diverse
Axalta’s Growth Drivers are Diverse Value Creation From Multiple Sources and Disciplined Process ▪ Capex of ~$160 million and R&D of ~$1801 million annually supports Growth Supported by Clear maintenance and strategic growth Strategies, Greater Resources ▪ Growth strategies in place for each busines
Slide 22: Q2 Consolidated Results
Q2 Consolidated Results Financial Performance Commentary Double-digit net sales growth; positive price- mix momentum ▪ Acquisitions contributed 5.6% to growth, largely from Industrial ▪ Continued price momentum in Refinish and (1) Represents Net Income (loss) attributable to controlling interests In
Slide 23: Focus on Capital Allocation
Focus on Capital Allocation Debt Reduction Yes Organic Investment Leverage in Capex / R&D Investment excess of No Yes Free Cash target and no opportunity that Flow immediate exceeds hurdle investment? rate? M & A Excess No Share Repurchases - Offset dilution Share price - Opportunistic buys greater
Slide 24: Effective Capital Allocation Should Drive Improved Returns
Effective Capital Allocation Should Drive Improved Returns Return on Invested Capital (ROIC) Commentary NOPAT ROIC (LTM) ▪ Axalta’s ROIC includes ~$3 billion asset “step up” from the 2013 LBO under purchase price accounting ▪ Drivers of ROIC upside: ✓ NOPAT growth from ongoing business execution ✓ C
Slide 25: Net Sales to Date Show Solid Growth and Portfolio Diversification
Net Sales to Date Show Solid Growth and Portfolio Diversification Net Sales Net Sales by Region ($ Billions) 2013 2017 5.5 Asia Pacific North Asia Pacific North America America 15% 17% 29% Latin Latin 37% 17% 11% 5.0 America America +4.5% 39% 35% EMEA EMEA 4.5 Net Sales by End-Market 2013 2017 4.0 C
Slide 26: Adjusted EBITDA Results to Date Show Strong Core Progress
Adjusted EBITDA Results to Date Show Strong Core Progress Adjusted EBITDA Growth Drivers ▪ Adjusted EBITDA margins increased from 15.6% $965 in 2012 to 20.3% in 2017 $902 $864 $885 ▪ Pricing actions positively contributed to margin $835 expansion $733 ▪ Volume growth and share gain provided operatin
Slide 27: Debt and Liquidity Summary
Debt and Liquidity Summary Leverage Trends Interest Coverage (Adj. EBITDA) Cost of Debt Debt Maturity Profile Refinancing transactions in April: ▪ Upsized USD Term Loan by $475 million 3,272 ▪ Extinguished EUR Term Loan 382 ▪ Improved spread by 25 basis points 491 ▪ Executed EUR currency interest sw
Slide 28: Free Cash Flow Strong and Improving; Deployment Accelerating
Free Cash Flow Strong and Improving; Deployment Accelerating Free Cash Flow Capital Deployment Cash Flow From Operations, less Capex Capital Allocation since 2014 ($ millions) ($ millions) Cumulative: $1,821 22 11 $58 825 821 423 415 802 272 $466 $709 (173) (169) (130) (52) (39) (142) (90) (136) (12
Slide 29: Full Year 2018 Guidance
Full Year 2018 Guidance ($ millions) Q1 Guide 2018E Comments ▪ Full year guidance has been revised to Net Sales 9-10% 8-9% reflect ~2% F/X benefit Net Sales, ex FX 6-7% 6-7% ▪ Net sales growth includes incremental M&A contribution of ~3% from completed Adjusted EBITDA $950-980 $950-980 transactions
Slide 30: Performance Coatings: Refinish
Performance Coatings: Refinish Sensitivity: Business Internal
Slide 31: Axalta Refinish Investment Thesis
Axalta Refinish Investment Thesis ▪ The global automotive refinish market is stable, consolidated and growing ✓ Refinish is highly stable, linked to global miles driven and accident rates ✓ The top four Refinish players hold two-thirds of the global market ✓ End-market growth ~3-4% per year expected
Slide 32: The Global Refinish Market is Attractive and Dynamic
The Global Refinish Market is Attractive and Dynamic Refinish Industry Sales by Region Industry Trends Align With Core Competencies ($ Billions) ▪ Growing eco-regulations require innovations ▪ Performance needs drive technology improvements CAGR ▪ Consolidation trend supported by field sales model 6
Slide 33: Axalta is The Leader in Global Refinish Coatings
Axalta is The Leader in Global Refinish Coatings Refinish Market Share Leading a Growing Industry $6.9 Billion Total Sales ▪ Leading market share position; industry sales estimated to grow at ~3% #1 CAGR through 2020 ▪ We are the Refinish technology leader, driving productivity and value for our cus
Slide 34: Our Strength can be Measured in Each Region
Our Strength can be Measured in Each Region North America EMEA Asia Pacific Latin America ▪ ▪ As the leading provider to Strong market access ▪ Growth driven primarily by ▪ Well positioned in Mexico MSOs, Axalta benefits from through leading brands and expansion of the Chinese car and Brazil – the l
Slide 35: Refinish Growth Drivers Globally
Refinish Growth Drivers Globally U.S. Body Shop Consolidation China Growth in Mainstream & Tier Cities Body shop paint sales Overall market expected to grow >5% 2015-2019 % of refinish market 100% 100% 100% 100% MSOs Faster growth in Core premium paints >10% CAGR in U.S. due to ~1-3% CAGR share grow
Slide 36: Performance Coatings: Industrial
Performance Coatings: Industrial Sensitivity: Business Internal
Slide 37: Axalta Industrial: Where We Have Come From
Axalta Industrial: Where We Have Come From 2013 2016 - 2018 Industrial sales 2x since 2013 1960 - 2013 2014 - 2018 P RO P RIE TARY Sensitivity: Business Internal 37
Slide 38: Our Industrial Business Today
Our Industrial Business Today Industrial Coating Wood Coatings Powder Coatings Coil Coatings Energy Solutions Systems ▪ ▪ ▪ ▪ ▪ Auto metal parts Metal building Power tools ACE Kitchen cabinets ▪ ▪ ▪ ▪ Appliances products E-mobility Oil and gas Building products ▪ ▪ ▪ ▪ ▪ Architectural Architectural
Slide 39: Industrial Coatings: A $38 Billion Market Opportunity for Axalta
Industrial Coatings: A $38 Billion Market Opportunity for Axalta Industrial Coatings Market Share Doubled in 5 Years ($ in billions) ▪ Market growth of 5.4% CAGR (2013-20e) ▪ Growth driven by global GDP and industrial production ▪ Building and construction markets strong ▪ Global infrastructure grow
Slide 40: Our Place in the Market
2017 Our Place in the Market Industrial Coating Wood Coatings Powder Coatings Coil Coatings Energy Solutions Systems #2 #2 #4 #2 #2 North American Global Powder North American Global Electrical Global Industrial Wood Coatings Coatings Supplier Coil Coatings Insulation Supplier E-Coat Supplier Suppli
Slide 41: Transportation Coatings
Transportation Coatings Sensitivity: Business Internal
Slide 42: Transportation Coatings | Segment Overview
Transportation Coatings | Segment Overview Transportation Coatings Light Vehicle Synergies Commercial Vehicle ▪ Original Equipment ▪ Commercial truck Manufacturers Market ▪ Rail ▪ Drivers Plastic and ▪ composite coatings Bus ▪ ▪ Metal coatings Utility vehicles Global ▪ ▪ Interior coatings RVs / off-
Slide 43: Transportation | Significant White Space Provides Growth Opportunities
Transportation | Significant White Space Provides Growth Opportunities $7B ~ $2.5B $700M $600M $550M $500M $450M Total $400M Market ~$13B $200M Body LV Trucks Specialty Bus APC Builders Rail Aviation Marine* OEM MDT / HDT OEM +Trailers Customer Segment Core Developing Opportunity SOURCE: Orr & Boss,
Slide 44: Light Vehicle | Growing with a Strong Global Market
Light Vehicle | Growing with a Strong Global Market Growth Opportunities Across Segments Per Capita Market Growth US Customer Segment Share EMEA Region Content Product # Plants # ($ billions) ($ Market Size Market Mexico Core ~$3.0 >25% ~200 SA Increasing to 2 vehicles per India Developing ~$1.5 >10
Slide 45: Light Vehicle | Increasing Content Per Vehicle with Components
Light Vehicle | Increasing Content Per Vehicle with Components White Space in Exteriors and Interiors $30-50 / mirrors “small parts” vehicle bezels, handles, trim ▪ Focus markets with global leadership and strategy interior ▪ Exterior / APC a top 5 “customer” lenses ✓ Adjacent to core products ✓ Rel
Slide 46: Our Commercial Vehicle Business is Growing and Diverse
Our Commercial Vehicle Business is Growing and Diverse Market White Space Share Gain Technology ▪ ▪ ▪ Growth opportunities: Share of wallet opportunity in existing We have leading technology to expand ✓ Underpenetrated geographies (China) markets our business ✓ ✓ ✓ Aviation ✓ Marine ✓ Adjacent marke
Slide 47: No Matter Where the Market Goes, Coatings Play a Key Role
No Matter Where the Market Goes, Coatings Play a Key Role Emerging OEMs Design & Consumer Advanced and Geographies Preferences Sustainability Manufacturing Future Mobility ▪ New entrants ▪ Styling trends ▪ Environmental ▪ Big data, line ▪ Autonomous ▪ Rising JVs ▪ Consumer choice requirements servic
Slide 48: Investor Contact
Investor Contact: Chris Mecray, VP, Strategy and IR christopher.mecray@axalta.com 215-255-7970 Sensitivity: Business Internal
Slide 49: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Note: Numbers might not foot due to rounding. P RO P RIE TARY 49 Sensitivity: Business Internal 49
Slide 50: Adjusted EBITDA Reconciliation (cont'd)
Adjusted EBITDA Reconciliation (cont’d) A. During 2018, 2017, 2016 and 2014 we refinanced our indebtedness, resulting in losses of $8 million, $13 million, $88 million and $3 million, respectively. During 2017, 2016, 2015 and 2014 we prepaid outstanding principal on our term loans, resulting in non-
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