Slide 1: Axalta Coating Systems Ltd. Investor Presentation Third Quarter 2020
Axalta Coating Systems Ltd. Investor Presentation Third Quarter 2020 Sensitivity: Business Internal
Slide 2: Legal Notices
Legal Notices Forward-Looking Statements This presentation and the oral remarks made in connection herewith may contain certain forward-looking statements regarding Axalta and its subsidiaries including our outlook, which includes net sales growth, currency effects, acquisition or divestment impacts
Slide 3: Axalta's Value Proposition
Axalta’s Value Proposition 1 Axalta Profile 2 Evolution of Axalta 3 Diversified Portfolio and Attractive End-Markets 4 Competitive Advantages 5 Investment and Liquidity 6 Current Operating Environment PROPRIETARY Sensitivity: Business Internal 3 3
Slide 4: Axalta is a Global Leader
1 Axalta is a Global Leader Summary Statistics (FY 2019) #1 or #2 market share in ~90% of markets served Industry leading margins reflect strength of technology, application know- Net Sales Adj. EBITDA1 Free Cash Flow2 how, and global brands $4.5bn $939mm $475mm Axalta has grown net sales and
Slide 5: Global Presence
1 Global Presence 13,000 People 46 Manufacturing Sites Darlington Farnham Västervik Zuidland Moscow West Bromwich Minneapolis Hilliard Houthwaite Wuppertal Ajax Tewkesbury Guntramsdorf Changchun Cornwall Mt. Clemens Landshut Cerkezkoy Sacramento Montbrison Ft. Madison Bulle Orrville 53 Jacksonville
Slide 6: Shareholder Value Creation
1 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 Shareholder Value Creation
Slide 7: Focus on Productivity, Operating Excellence and Investment
1 Focus on Productivity, Operating Excellence and Investment We are anticipating ~$195 million of cost savings in 2020 across all active Cost Saving Actions initiatives; significant focus on FCF to drive further cash savings Operating Lean implementation in Wuppertal, Germany and Mt. Clemens, MI
Slide 8: Sustainability at Axalta
1 Sustainability at Axalta Environment Social Governance Global Environment, Health and Safety policies Commitment to workplace safety: Driving Ethics and integrity compliance programs, with well defined Perfect Performance; top decile injury rate annual training for all employees on Axalta Co
Slide 9: Axalta's Evolution
2 Axalta’s Evolution Growth & Streamlined Platform Ongoing Transformation 2020 Onwards Carve Out 2015 - 2019 Next Chapter… Non-Core Division 2013 - 2014 Public Company Significant Upside Before 2012 Profitable Growth White space opportunities in all end- The Carlyle Group markets Ownership Capac
Slide 10: Net Sales Growth
2 Net Sales Growth Net Sales Net Sales by Region ($ Billions) 2013 2019 North North APAC APAC 5.4 America America 15% 15% 5.2 LatAm 40% 29% 10% 17% 5.0 +3.3% LatAm 4.8 39% 35% 4.6 EMEA EMEA 4.4 Net Sales by End-Market 2013 2019 4.2 Commercial Commercial Refinish 8% 8% Refinish 4.0 Light Light Vehicl
Slide 11: Adjusted EBITDA Growth
2 Adjusted EBITDA Growth Adjusted EBITDA(1) Growth Drivers ($ Millions) Adjusted EBITDA margins increased from 17% in 2013 to 21% in 2019 $937 $939 $902 $835 $864 $885 Pricing and productivity actions positively contributed to margin expansion; Axalta Way created culture of cost discipline $733
Slide 12: Axalta's Diversified Portfolio within Performance Coatings
3 Axalta’s Diversified Portfolio within Performance Coatings Summary Statistics Refinish2 Industrial3 Global leader – #1 player with 25% market #2 positions globally in Powder and share FY 2019 Net Sales Industrial E-coat $2.9bn Strong record of realizing value through #2 position in North A
Slide 13: Attractive End-Markets: Refinish Coatings
3 Attractive End-Markets: Refinish Coatings U.S. Body Shop Consolidation China Growth in Mainstream & Tier Cities Body Shop Paint Sales – Axalta has Significant MSO Presence (% of Refinish Market) Overall market grew ~5% 2015-20191 100% 100% 100% 100% 16% 28% 35% 41% 44% 35% >10% CAGR 30% 26% ~1-3%
Slide 14: Attractive End-Markets: Industrial Coatings
3 Attractive End-Markets: Industrial Coatings Industrial Coatings Growth Drivers Industrial Coatings: $42bn market (% of Industrial Coatings Market) Market growth of 5.4% CAGR (2013-2019A) Coil 8% Growth driven by global GDP and industrial production Many coatings markets are GDP “plus” grower
Slide 15: Axalta's Diversified Portfolio within Transportation Coatings
3 Axalta’s Diversified Portfolio within Transportation Coatings Summary Statistics Light Vehicle Commercial Vehicle #2 Light Vehicle coatings supplier #1 Heavy Duty Truck (“HDT”) and bus FY 2019 Net Sales coatings supplier $1.6bn Strong multi-decade customer relationships IMRONTM is best-in-
Slide 16: Attractive End-Markets: Transportation Coatings
3 Attractive End-Markets: Transportation Coatings $7B ~ $2.5B $700M $600M $500M $450M Total $400M $400M Market ~$13B $200M Body LV Trucks Specialty Bus APC Builders Rail Aviation Marine* OEM MDT / HDT OEM +Trailers Customer Segment Core Developing / Opportunity Source: Orr & Boss, IRFAB, Global Mark
Slide 17: Competitive Advantages
4 Competitive Advantages Trusted Products, Service Superior Technology Aligned With Customer Needs Customer-Focused Innovation Excellence Extensive Design & Go-To-Market Differentiated Technology Product Service Formulation Consumer With Strong Technical Innovation Innovation Innovation Database Pre
Slide 18: Technology Strategy Serves as a Key Differentiator
4 Technology Strategy Serves as a Key Differentiator Leading Technology Organization Leading Technology Investment as % of Net Sales1 Focus on color technology, and polymer & formulation chemistry 4.2% Comprehensive product range of ~27,000 SKUs tailored to customer needs 2.9% Global technolog
Slide 19: Free Cash Flow and Capital Deployment
5 Free Cash Flow and Capital Deployment Free Cash Flow Capital Deployment ($ millions) $272 $423 $415 $362 $475 ($ millions) $313 $312 $411 $785 $580 $288 24 58 22 38 11 Prepaid Expenses, Other Liabilities and other 825 854 802 821 890 CapEx 254 564 Net Working Capital 160 72 124 144 105 Income Taxe
Slide 20: Effective Capital Allocation Providing Strong Returns
5 Effective Capital Allocation Providing Strong Returns Return on Invested Capital (ROIC) Commentary NOPAT ROIC (FY 2019) Axalta’s total capital in the ROIC excludes the PP&E 14% and intangible asset “step up” balances from the 13% 2013 LBO under purchase price accounting 12% 11% Drivers of ROIC
Slide 21: Growth and Diversity from M&A Program
5 Growth and Diversity from M&A Program Track Record of Successful Acquisitions 2015 2016 2017 2018 2019 23 Acquisitions since 2015 Refinish ~$100mm ~$600mm Annual sales added Wood ~$250mm ~$120mm Incremental EBITDA Powder ~$25mm Coil Integrated manufacturing ~$85mm 13 locations General Industrial ~
Slide 22: Debt and Liquidity Summary
5 Debt and Liquidity Summary Leverage Trends Interest Coverage (Adj. EBITDA) 75.0% 4.4x 6.5x 69.8% 6.0x 5.9x 60.5% 62.5% 4.0x 65.0% 4.0x 65.4% 55.1% 5.8x 3.8x 5.5x 55.0% 62.0% 55.3% 3.6x 3.4x 5.1x 45.0% 3.0x 3.6x 3.2x 3.4x 3.0x 4.4x 4.7x 35.0% 2.8x 4.5x 3.8x 25.0% 2.4x 2014 2015 2016 2017 2018 2019
Slide 23: Q2 Consolidated Results
6 Q2 Consolidated Results Financial Performance Commentary Net sales significantly impacted by COVID-19 during Q2 ▪ Volume reductions globally from COVID-19 due to reduced miles driven, reduced industrial production, and lower new vehicle builds; June saw substantial recovery post April-May lows ▪ Q
Slide 24: Current Operating Environment within Performance Coatings
6 Current Operating Environment within Performance Coatings YOY Monthly Net Sales Trends(1) Performance Market Commentary Refinish ▪ Refinish sales bottomed in April-May with recovery beginning in June ▪ Orders in June indicated low inventory on hand for many distributors ▪ Traffic indicators contin
Slide 25: Current Operating Environment within Transportation Coatings
6 Current Operating Environment within Transportation Coatings YOY Monthly Net Sales Trends(1) Transportation Market Commentary Light Vehicle ▪ Light Vehicle net sales tracking customer production by served geography; recovery continues solidly post April shutdowns ▪ China net sales declined 10% YoY
Slide 26: COVID-19 Impact and Response
6 COVID-19 Impact and Response Mitigation Actions ▪ Exceeded expected savings and cash flow from actions during Q2 ▪ Expect to deliver over $130 million in temporary cost actions in 2020; achieved $75 million savings in Q2; Q3 savings expected to be greater than Q4 ▪ Expect to deliver over $140 mill
Slide 27: Investor Contact
Investor Contact: Chris Mecray - VP, Investor Relations, Treasury & Strategy christopher.mecray@axalta.com (215) 255-7970 Sensitivity: Business Internal
Slide 28: Adjusted EBIT Reconciliation
Adjusted EBIT Reconciliation PROPRIETARY 28 Sensitivity: Business Internal
Slide 29: Adjusted EBIT Reconciliation (cont'd)
Adjusted EBIT Reconciliation (cont’d) PROPRIETARY 29 Sensitivity: Business Internal
Slide 30: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Successor Predecessor Combined Feb-Dec ($ in millions) FY 2019 FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 2013 Jan 2013 FY 2013 Net income (loss) $ 253 $ 213 $ 48 $ 45 $ 96 $ 32 $ (222) $ 9 $ (213) Interest expense, net 163 160 147 178 197 218 215 — 215 Provision (benefit
Slide 31: Adjusted EBITDA Reconciliation (cont'd)
Adjusted EBITDA Reconciliation (cont’d) Represents expenses related to the restructuring and refinancing of our indebtedness, including $25 million of commitment fees expensed in 2013 related to a terminated Bridge Facility in conjunction with the A issuance of the Senior Notes and entry into the Se
Slide 32: Adjusted Net Income Reconciliation
Adjusted Net Income Reconciliation ($ in millions, except per share data) Q2 2020 Q2 2019 Net (loss) income $ (83) $ 100 Less: Net (loss) income attributable to noncontrolling interests — 2 Net (loss) income attributable to controlling interests (83) 98 A Debt extinguishment and refinancing related
Slide 33: Adjusted Net Income Reconciliation (cont'd)
Adjusted Net Income Reconciliation (cont’d) PROPRIETARY 33 Sensitivity: Business Internal
Slide 34: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation PROPRIETARY 34 Sensitivity: Business Internal
Slide 35: Thank You!
Thank You! Sensitivity: Business Internal