Axalta Coating Systems Ltd. · NYSE:AXTA
Axalta Coating Systems — Investor Presentation (February 2016)
58 slides from Axalta Coating Systems's investor presentation, Feb 11, 2016
Slide 1: Axalta Coating Systems Ltd. Investor Presentation
Axalta Coating Systems Ltd. Investor Presentation February 11, 2016 Exhibit 99.1
Slide 2: Forward-Looking Statements
PROPRIETARY AXALTA COATING SYSTEMS 2 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 sales, adjusted EBI
Slide 3: Axalta – A Global Leader In Coatings
PROPRIETARY AXALTA COATING SYSTEMS Refinis h $1.8 B Industri al $0.7 B Body Shops Light Vehicle $1.3 B CV $0.4 B Performance Coatings General Industrial, Electrical Insulation, Architectural Transportation Coatings Sales1 - $4,087 M Adjusted EBITDA1,2 - $867 M Adjusted EBITDA Margin2 - 21.2% Light V
Slide 4: 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 of 4-6% ex-currency • Expect to outgrow our end-markets • $60 million in combined 2016 cost savings • Axa
Slide 5: Axalta Operates Fundamentally Strong Businesses
PROPRIETARY AXALTA COATING SYSTEMS 5 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 6: Axalta's Global Scale Enables Market Leadership
PROPRIETARY AXALTA COATING SYSTEMS 6 A Global Leader In Our Markets Axalta’s Global Scale Enables Market Leadership ____________________________ 1. Mexico is included in Latin America 2. Includes 9 JV facilities. 36 manufacturing facilities 46 customer training sites 7 technology centers ~12
Slide 7: A Global Leader In Our Markets
PROPRIETARY AXALTA COATING SYSTEMS Peer 1 24% Axalta 19% Peer 2 18% Peer 3 13% Other 26% 7 A Global Leader In Our Markets ~90% of Sales from Markets Where Axalta Has #1 or #2 Global Share Axalta 25% Peer 1 [PERCENTA GE] Peer 2 11% Peer 3 11% Other 33% Performance Coatings: Refinish Transportation Co
Slide 8: Significant Competitive Advantages: Technology
PROPRIETARY AXALTA COATING SYSTEMS Process Technology Service Technology Product Technology Proprietary resins and additives Over 1,100 patents Leading formulation capabilities Tailored solutions Application equipment Line design and interactions Simulation capabilities Vertical inte
Slide 9: Differentiated Franchise with Global Scale and Strong Competitive Advantages
PROPRIETARY AXALTA COATING SYSTEMS 9 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 brand portfolio 1,300
Slide 10: Industry Trends and Axalta Technologies
PROPRIETARY AXALTA 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 productivity and our national coverage enables
Slide 11: Axalta Employs A Service-Led Business Model
PROPRIETARY AXALTA COATING SYSTEMS 11 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, durabil
Slide 12: Structurally Attractive Global End-Markets
PROPRIETARY AXALTA COATING SYSTEMS 12 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 13: Highly Variable Cost Structure And Low Capital Intensity
PROPRIETARY AXALTA COATING SYSTEMS 13 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 14: Axalta's Future State: A Global, High-Performing, Coatings Leader
PROPRIETARY AXALTA 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 innovat
Slide 15: Axalta Aims To Grow The Business While Refining The Cost Structure
PROPRIETARY AXALTA COATING SYSTEMS 15 Axalta Aims To Grow The Business While Refining The Cost Structure Visible Growth Supported by Clear Strategies & Enhanced Resources Focus on Emerging Markets for Long Term Opportunity Globalizing Existing Products to Reach Underserved Markets Optimizing Procure
Slide 16: Cost Initiatives To Enhance Productivity & Efficiency
PROPRIETARY AXALTA COATING SYSTEMS 16 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: •
Slide 17: Axalta's Evolution Is Grounded In Fundamental Goals
PROPRIETARY AXALTA COATING SYSTEMS 17 Axalta’s Evolution Is Grounded In Fundamental Goals Leverage our culture of accountability and focus on operational excellence Axalta’s Strategy Grow in targeted industrial coatings segments via organic growth and selective acquisitions Move into attractive adja
Slide 18: Strategy: Grow Core Products & Markets
PROPRIETARY AXALTA COATING SYSTEMS 18 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 winner
Slide 19: Strategy: Accelerate Growth In Emerging Markets
PROPRIETARY AXALTA COATING SYSTEMS $14.3 $15.6 $17.1 $18.5 $20.1 2014E 2015E 2016E 2017E 2018E Emerging Markets, 31% 19 Axalta’s Strategy: Accelerate Growth In Emerging Markets China Example Light Vehicles, Per 1,000 People China Car Parc (thousands) 743 263 230 129 61 19 United States Central & Eas
Slide 20: Strategy: Targeted Industrial Coatings Expansion
PROPRIETARY AXALTA COATING SYSTEMS Architectural 20 Axalta’s Strategy: Targeted Industrial Coatings Expansion Growth from Leveraging Our Product Portfolio in Underserved Markets Strong product portfolio in powder, liquid, and e-coat Implemented global end-market business structure to capitalize
Slide 21: Strategy: Focus On Operating Excellence
PROPRIETARY AXALTA COATING SYSTEMS Axalta’s Strategy: Focus On Operating Excellence Balanced manufacturing footprint and capacity Ongoing productivity investments Salesforce reorganization R&D / Technology enablers Enhanced IT tools Procurement roadmap Process improvement Leadership an
Slide 22: Financial Overview
Financial Overview Robert Bryant EVP & CFO
Slide 23: Connecting Performance To Shareholder Returns
PROPRIETARY AXALTA COATING SYSTEMS 23 Axalta Is Focused On Connecting Performance To Shareholder Returns Underlying Market Growth Axalta Growth Initiatives Operational Improvements M&A Structural demand growth Industry trends favor global suppliers Momentum driven by customer-centric approach
Slide 24: Our Results To Date Have Shown Solid Progress
PROPRIETARY AXALTA COATING SYSTEMS Our Results To Date Have Shown Solid Progress Encouraging Margin Progress, but Currency Mutes Net Sales and EBITDA Net Sales Adjusted EBITDA ($ in millions) ($ in millions) 24 $3,500 $3,700 $3,900 $4,100 $4,300 $4,500 $4,700 2010 2011 2012 2013 2014 2015E Net Sales
Slide 25: 2015 Consolidated Results: Progress Is Demonstrated
AXALTA COATING SYSTEMS 25 2015 Consolidated Results: Progress Is Demonstrated Financial Performance Commentary Net Sales Variance +3.9% +1.4% (11.6%) (6.3%) $4,087 $4,362 2015 FX Volume Price 2014 Net sales increased 5.3% excluding currency Performance Coatings net sales driven by volume growth ac
Slide 26: Our Financial Scorecard
PROPRIETARY AXALTA COATING SYSTEMS 26 Our Financial Scorecard Is Focused On Growing The Business Profitably Grow The Business Grow Adjusted EBITDA 2015 Net Sales: +5% ex-FX Refinish: Stable global growth, North America MSO trend continues apace Industrial: Acceleration begins with new resources
Slide 27: The Axalta Way: Driving Towards World Class Productivity
PROPRIETARY AXALTA 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
Slide 28: Our Financial Guiding Principles
PROPRIETARY AXALTA COATING SYSTEMS 28 Our Financial Guiding Principles Managing the Capital: Capex Prioritization Metrics-Based Management: Driving the Business with Data Capital Allocation: Improved ROIC Financial Optimization
Slide 29: Prioritization Of Capital Spending; Focus On High IRR Capex
PROPRIETARY AXALTA COATING SYSTEMS Prioritization Of Capital Spending; Focus On High IRR Capex Maintenance capital: $60 million per year Growth investments 4 capex projects on track to be completed in 2015 Wuppertal, Germany Jiading, China Mexico City, Mexico Guarulhos, Brazil Produc
Slide 30: Effective Capital Allocation Should Drive Improved Returns
PROPRIETARY AXALTA 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 Q3 2015
Slide 31: Capital Allocation: Best Uses Of Excess Cash Flow
PROPRIETARY AXALTA COATING SYSTEMS Capital Allocation: Driving Returns With Best Uses Of Excess Cash Flow Organic growth options: Generally the “highest and best use” In-plant productivity investment Growth with existing markets with strong incremental margins M&A: Discipline is key to impro
Slide 32: Capitalization, Debt And Liquidity Summary
PROPRIETARY AXALTA COATING SYSTEMS Capitalization 32 Debt And Liquidity Summary (1) Retroactively adopted new accounting guidance, ASU 2015-03, to include deferred financing costs (2) Assumes exchange rate of $1.10 USD/Euro (3) Indebtedness per balance sheet less cash & cash equivalents divided by 2
Slide 33: Full Year 2016 Guidance
AXALTA COATING SYSTEMS Full Year 2016 Guidance 33 2016 Benefits from Ongoing Growth and Maturity of Productivity Programs Net sales expected to be flat to down slightly as-reported based on anticipated currency headwinds Margin expansion expected to continue, driven by volume, price, and cost re
Slide 34: Performance Coatings: Refinish
Performance Coatings: Refinish Nigel Budden VP, Global Customer Excellence
Slide 35: The Global Refinish Market Is Growing
PROPRIETARY AXALTA COATING SYSTEMS The Global Refinish Market Is Growing Projected Industry Sales ($ 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 ’15
Slide 36: Axalta Has A Very Strong Position In Refinish Globally
PROPRIETARY AXALTA 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: ~$7.4 billion #1 Drivers include size of car parc, miles driven, and accident r
Slide 37: Refinish Products: The Paint Layers
PROPRIETARY AXALTA COATING SYSTEMS 37 Refinish Products: The Paint Layers Clearcoat Protects basecoat from the elements Gives automobile its lustrous look Basecoat Creates automobile’s color and aesthetics Provides corrosion protection Waterborne and solventborne technology options Primer
Slide 38: Performance Coatings: Industrial Coatings
Performance Coatings: Industrial Coatings Michael Cash SVP, President, Industrial
Slide 39: The Overall Industrial Coatings Market is Expected to Grow
PROPRIETARY AXALTA COATING SYSTEMS ’15-‘19E CAGR ($ 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 $28 B Market Opportunity
PROPRIETARY AXALTA COATING SYSTEMS [CELLREF] [CELLREF] [CELLREF] [CELLREF] [CELLREF] [CELLREF] Industrial Coatings: A $28 B Market Opportunity For Axalta Product Examples Market Drivers General Industrial Metal furniture Appliances Shelving/ racking Electrical boxes GDP Industrial Produc
Slide 41: Axalta's Industrial Business Today
PROPRIETARY AXALTA COATING SYSTEMS [CATEGORY NAME] [VALUE] [CATEGORY NAME][VAL UE] [CATEGORY NAME] [VALUE] [CATEGORY NAME] [VALUE] [CATEGORY NAME] [VALUE] Net Sales by Segment Business Overview Steady volume growth driven by global GDP China growth expected to exceed 7.5% Architectural market ex
Slide 42: Industrial Growth Priorities & Strategies
PROPRIETARY AXALTA COATING SYSTEMS Growth Priorities & Strategies Axalta Industrial: Where We Are Going… Agriculture, Construction & Earth Moving Equipment (ACE) Expand approval portfolio with all 3 technologies Utilize global footprint to target new business in all regions Architectural Marke
Slide 43: Transportation Coatings Overview
Transportation Coatings Overview Steven R. Markevich EVP, President Transportation Coatings and Greater China
Slide 44: Transportation Segment Overview
PROPRIETARY AXALTA 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 Rai
Slide 45: Transportation Summary
PROPRIETARY AXALTA 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
Slide 46: Structurally Growing Markets
PROPRIETARY AXALTA 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
Slide 47: Key Market Trends
PROPRIETARY AXALTA 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 unce
Slide 48: Transforming A Global Coatings Supplier
PROPRIETARY AXALTA 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
Slide 49: Vision Is Above-Market Growth
PROPRIETARY AXALTA 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
PROPRIETARY AXALTA 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
PROPRIETARY AXALTA 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
Slide 52: Appendix
APPENDIX
Slide 53: Q4 Consolidated Results
AXALTA COATING SYSTEMS Q4 Consolidated Results Financial Performance Commentary Net Sales Variance +3.9% +0.6% (11.5%) (7.0%) $1,004 $1,079 Q4 2015 FX Price Q4 2014 Volume 53 Net sales increased 4.5% excluding currency Volume growth from both segments and most regions; ongoing price realization fr
Slide 54: Q4 Performance Coatings Results
AXALTA COATING SYSTEMS Q4 Performance Coatings Results Financial Performance Commentary Net Sales Variance +3.6% +1.2% (12.9%) (8.1%) $589 $640 Q4 2015 Q4 2014 Volume FX Price 54 Net sales increased 4.8% excluding currency Price increases in Refinish across North America, EMEA, and Latin America c
Slide 55: Q4 Transportation Coatings Results
AXALTA COATING SYSTEMS Q4 Transportation Coatings Results Financial Performance Commentary Net Sales Variance +4.3% (0.1%) (5.3%) $415 $438 Volume Q4 2015 Price FX Q4 2014 55 Net sales increased 4.2% excluding currency Volume growth in Light Vehicle in most regions, partly offset by Latin America
Slide 56: Adjusted EBITDA Reconciliation
PROPRIETARY AXALTA COATING SYSTEMS Adjusted EBITDA Reconciliation 56 ___________________________ Note: Numbers might not foot due to rounding. 1. Combined financials represent the combination of the Predecessor period from January 1, 2013 through January 31, 2013 and the Successor year ended Decembe
Slide 57: Adjusted EBITDA Reconciliation (cont'd)
PROPRIETARY AXALTA COATING SYSTEMS 57 Adjusted EBITDA Reconciliation (cont’d) A. During the Successor years ended December 31, 2013 and 2015, we recorded a non-cash fair value adjustment associated with our acquisition accounting for inventories. These amounts increased cost of goods sold by $1 mill
Slide 58: Adjusted EBITDA Reconciliation (cont'd)
PROPRIETARY AXALTA COATING SYSTEMS 58 Adjusted EBITDA Reconciliation (cont’d) J. Represents costs associated with stock-based compensation, including $8 million of expense during 2015 attributable to the accelerated vesting of all issued and outstanding stock options issued under the 2013 Plan. K. R
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