Axalta Coating Systems Ltd. · NYSE:AXTA
Axalta Coating Systems — FY2017 Earnings Presentation
51 slides from Axalta Coating Systems's earnings presentation, Feb 22, 2018
Slide 1: Investor Presentation First Quarter 2018
Investor Presentation First Quarter 2018 Axalta Coating Systems Ltd. Exhibit 99.1
Slide 2: Legal Notices
2P R O P R I E T A R Y 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 2018 financial proj
Slide 3: Axalta: 150+ Years Of Coatings Excellence
3P R O P R I E T A R Y 2014-2017 ▪ November 2014 IPO (NYSE: AXTA) ▪ Expand capacity in China, Germany, Mexico, Brazil, India and Argentina; upgrade multiple other facilities ▪ Build Asia-Pacific Technology Center in Shanghai and Global Innovation Center in Philadelphia, PA ▪ Acquire Valspar’s Wood b
Slide 4: Axalta's Ongoing Transformation
4P R O P R I E T A R Y Axalta’s Ongoing Transformation Early Transformation 2015 - 2016 Significant Progress During Period of Emerging Markets and FX Turmoil 2013 - 2014 Carve Out ▪ Completed separation ▪ New leadership team ▪ Initial growth strategy ▪ Incentives realigned ▪ Global re-branding Ongoi
Slide 5: Axalta: A Global Leader In Coatings
5P R O P R I E T A R Y Refinish $1.7 B (38%) Industrial $1.0 B (24%) Body Shops Light Vehicle $1.3 B (30%) Comml Vehicle $0.4 B (8%) Performance Coatings $2.7 Billion, 62% of Sales General Industrial, Electrical Insulation, Architectural Transportation Coatings $1.7 Billion, 38% of Sales Adjusted EB
Slide 6: Grow The Business, Refine The Cost Structure
6P R O P R I E T A R Y Grow The Business, Refine The Cost Structure ▪ Growth Supported by Clear Strategies, Greater Resources ▪ Market Share Gains in Core Markets From Innovation, Service Execution ▪ Emerging Markets Focus for Long Term Opportunity ▪ Globalizing Existing Products to Reach Underserve
Slide 7: Key Goals For 2018
7P R O P R I E T A R Y Key Goals For 2018 Key Objectives for Growth & Value Creation Axalta’s Vision To maximize our customers’ productivity and product functionality by offering them innovative coatings solutions and best-of-class service ▪ Outgrow our End-markets ▪ Focus on Achieving Price Offsets
Slide 8: Select Acquisitions
8P R O P R I E T A R Y Select Acquisitions GeographyEnd-Market Company OverviewTarget Leading producer of refinish coatings in Malaysia and Indonesia Leading N.A. supplier of automotive interior coatings; strong position with N.A. OEM’s Leading independent supplier of coil coatings in N.A. Refinish
Slide 9: Axalta Operates Fundamentally Strong Businesses
9P R O P R I E T A R Y Axalta Operates Fundamentally Strong Businesses 9 Global Market Leadership Positions Significant Competitive Advantages A Service-Led Business Model Structurally Attractive Global End Markets Highly Variable Cost Structure & Low Capital Intensity
Slide 10: Global Market Leadership Positions
10P R O P R I E T A R Y Global Market Leadership Positions Axalta’s Global Scale Enables Market Leadership _______________________________________________ Net Sales as of FY 2017 1. Mexico is included in Latin America 2. Includes 13 JV facilities. ✓ 49 manufacturing facilities ✓ 47 customer training
Slide 11: Global Market Leadership Positions
11P R O P R I E T A R Y Global Market Leadership Positions Peer 1 Axalta Peer 2 Peer 3 Other ~90% of Sales from Markets Where Axalta Has #1 or #2 Global Share Axalta Peer 1 Peer 2 Peer 3 Other Performance Coatings: Refinish Transportation Coatings: Light Vehicle #1 __________________________________
Slide 12: Significant Competitive Advantages
12P R O P R I E T A R Y 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 ▪ Broad global brand portfolio ▪ 1,300+ technology empl
Slide 13: Well-Positioned to Benefit From Industry Trends
13P R O P R I E T A R Y Industry Trends Axalta Technologies Vehicle Light-Weighting ▪ Broad substrate coating solutions for next generation materials Body Shop Consolidation ▪ Axalta coatings technology and service drives customer shop productivity Significant Competitive Advantages Color Complexity
Slide 14: A Service-Led Business Model
14P R O P R I E T A R Y ▪ Painter training ▪ Shop productivity ▪ Ongoing support 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 new vehicle’s cost Industrial: Cri
Slide 15: Structurally Attractive Global End-Markets
15P R O P R I E T A R Y 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 markets & middle class growth; developed markets consumer strength ▪ Commercial V
Slide 16: Highly Variable Cost Structure & Low Capital Intensity
16P R O P R I E T A R Y Highly Variable Cost Structure & Low Capital Intensity ▪ ~45-55% of COGS come from variable raw material inputs ▪ Utilize temporary labor to maximize flexibility ▪ Toggle other costs as needed in a downturn & high cost inflation period, including both variable and semi-fixed
Slide 17: Axalta's Evolution Is Grounded In Fundamental Goals
17P R O P R I E T A R Y 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 adjacencies by leverag
Slide 18: Axalta's Strategy: Grow Core Products & Markets
18P R O P R I E T A R Y Axalta’s Strategy: Grow Core Products & Markets Performance Coatings Strong Momentum Driven by Customer-Centric Approach Transportation Coatings Geography Product Breadth Customer Consolidation Premium Mainstream Economy Existing Customers Under-served Customers Global CV Mar
Slide 19: Axalta's Strategy: Accelerate Growth In Emerging Markets
19P R O P R I E T A R Y Axalta’s Strategy: Accelerate Growth In Emerging Markets China Car Parc (thousands) Emerging Market Growth Coatings Market ($ Billions) Significant Emerging Markets Growth Opportunity Growth Drivers ▪ Growth of middle-classes in emerging economies ▪ Increased vehicle penetrat
Slide 20: Axalta's Strategy: Targeted Industrial Coatings Expansion
20P R O P R I E T A R Y Architectural Axalta’s Strategy: Targeted Industrial Coatings Expansion Growth from Leveraging Our Product Portfolio in Underserved Markets ▪ Targeting mid-single digit growth CAGR ▪ Double digit growth in new customer adds 2015-17 ▪ Added significant infrastructure and inves
Slide 21: Axalta's Strategy: Focus On Operating Excellence
21P R O P R I E T A R Y ▪ Ongoing Axalta Way productivity ▪ Axalta Operating Excellence (AOS) rollout ▪ R&D / Innovation enablers ▪ Salesforce investment ▪ Manufacturing footprint balancing ▪ Enhanced IT tools ▪ Product complexity reduction Leadership & Culture ▪ Tone set by senior leaders ▪ Indepen
Slide 22: Financial Overview
Financial Overview AXALTA COATING SYSTEMS
Slide 23: Axalta Today: Shifting Gears To Larger Projects
23P R O P R I E T A R Y Axalta Today: Shifting Gears To Larger Projects Underlying Market Growth Core Market Growth Operational Improvements Tuck-in Organic Levers For Growth Inorganic / M&AMargin Levers Growth + Margins + Allocation Focus = Best-in-class Shareholder Returns Optimized Capital Alloca
Slide 24: Q4 Consolidated Results
24P R O P R I E T A R Y Q4 Consolidated Results CommentaryFinancial Performance Net Sales Variance Net sales growth driven by acquisitions, positive organic volumes across most regional end-markets ▪ Acquisitions provided +8.6% growth in Performance Coatings, mainly in North America and EMEA ▪ Stron
Slide 25: The Axalta Way: Driving Towards World Class Productivity
25P R O P R I E T A R Y Cumulative Productivity Savings ($ millions) “A focused approach to doing business that drives profitability by improving our efficiency, productivity, and growth opportunities every day, wherever we do business” 201720162015 2018E2014 ~$150 $89 ~$200 $37 Continued progress T
Slide 26: Capital Expenditures
26P R O P R I E T A R Y Capital Expenditures Capex by Year ($ millions) Commentary 2013 2014 2015 2016 2017 2018E Prioritization Of Capital Spending; Focus On High IRR Capex ▪ Major Capex projects ongoing in 2017 ✓ Philadelphia – Global Innovation Center ✓ Nanjing – Land & Authorizations ✓ Jiading –
Slide 27: Return on Invested Capital (ROIC)
27P R O P R I E T A R Y 13.2% 12.4% 11.6% 10.2% 10.2% PPG RPM AKZA SHW AXTA 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 2017 ▪ Axalta’s ROIC is
Slide 28: Axalta Today: Focus On Capital Allocation
28P R O P R I E T A R Y Debt Reduction Organic Investment Capex / R&D M & A Dividends - No current dividend Share Repurchases - Offset dilution - Opportunistic buys Leverage in excess of target and no immediate investment? Investment opportunity that exceeds hurdle rate? Share price greater than fai
Slide 29: Debt and Liquidity Summary
29P R O P R I E T A R Y Debt and Liquidity Summary Capitalization Comments (1) Assumes exchange rate of $1.193 USD/Euro (2) Total Net Debt = Total Debt minus Cash and Cash Equivalents (3) Total Net Leverage = Total Net Debt / 2017 Adjusted EBITDA ($ in millions) @ 12/31/2017 Maturity Cash and Cash E
Slide 30: Full Year 2018 Guidance
30P R O P R I E T A R Y Full Year 2018 Guidance Comments($ millions) 2017A 2018E ▪ Net sales growth includes incremental M&A contribution of ~3% from completed transactions in 2017 ▪ Adjusted EBITDA contribution driven by volume, price, acquisition contribution, and net productivity ▪ Margin headwin
Slide 31: Performance Coatings: Refinish
Performance Coatings: Refinish
Slide 32: Axalta Refinish Overview
32P R O P R I E T A R Y Refinish Axalta Refinish Overview 25% Global Market Share Service Led Business Innovation Drives Leadership Global Strategy & Support
Slide 33: The Global Refinish Market Is Growing
33P R O P R I E T A R Y Projected Industry Sales ($ billions) APAC EMEA N.A. ___________________________________ Source: Orr & Boss; Axalta estimates Lat. Am. 2016 2017E 2018E 2019E 2020E $7.7 $7.9 $8.2 $8.4 $8.6 The Global Refinish Market Is Growing Key Market Trends ▪ Growing car fleet, miles driv
Slide 34: Global Share Position
34P R O P R I E T A R Y Global Share Position Refinish Industry Sales: ~$7.7 billion Axalta 25% Peer 1 19% Peer 2 11% Peer 3 11% Peer 4 4% Other 30% #1 Axalta Has A Very Strong Position In Refinish Globally ___________________________________ Source: Orr & Boss (2016); Axalta estimates Axalta Global
Slide 35: The Refinish Process At A Glance
35P R O P R I E T A R Y The Refinish Process At A Glance Consumer Body Shop Accident Call Insurance Car to Body Shop Repair Performed Vehicle Returned Prepare Surface Primer Surfacer Color Match Basecoat Clearcoat Paint Mixed Customer Satisfaction Depends on Quick, High-Quality, Cost-Effective Repai
Slide 36: Performance Coatings: Industrial Coatings
Performance Coatings: Industrial Coatings
Slide 37: Axalta Industrial Overview
37P R O P R I E T A R Y Axalta Industrial Overview Wood Powder Coatings Coil Energy Solutions Industrial Coating Systems #2 North America Wood Coatings Supplier Global Supplier of Powder Coatings Global Supplier to the Electrical Insulation Sector Global Supplier of Industrial E-Coat POWDER LIQUID E
Slide 38: The Industrial Coatings Market
38P R O P R I E T A R Y ($ in billions) APAC EMEA N. A. _____________________________ Source: Orr & Boss; Axalta estimates Lat. Am. Projected Industry Sales The Industrial Coatings Market 2016 2017E 2018E 2019E 2020E $28.8 $27.3 $25.9 $23.3 $24.6 ▪ Wood: Expand product line, channel access; expand s
Slide 39: Industrial Coatings: A $28B Market Opportunity
39P R O P R I E T A R Y General Industrial $12.0 Electrical Insulation $2.0 Architectual Extrusions $1.5 ACE $1.5 Oil & Gas $3.5 Coil $4.5 Wood $4.5 *Coil and Wood North America only ($ billions) Industrial Coatings: A $28B Market Opportunity For Axalta Volume growth driven by global GDP and Industr
Slide 40: Leading In Product Innovation
40P R O P R I E T A R Y Leading In Product Innovation HydroponTMGlass Coating Anti-Shatter Alesta® Lync Matte Clear technology Voltahyd 2250 waterborne series ICONICA Collection
Slide 41: Monumental 2017 Wins
41P R O P R I E T A R Y Monumental 2017 Wins Transbay Transit Center Decor Cabinet Company Amazon warehouse Philharmonie De Paris Concert Hall Lucid Motors Qualiform Metals
Slide 42: Transportation Coatings Overview
Transportation Coatings Overview
Slide 43: Axalta's Transportation Segment
43P R O P R I E T A R Y #2 global supplier to OEMs Transportation Light Vehicle ▪ Original Equipment Manufacturers ▪ Plastics and composite materials ▪ Metal coatings #1 global supplier to heavy duty truck and bus segments Commercial Vehicle ▪ Commercial trucks ▪ Rail ▪ Bus ▪ Utility trucks ▪ Recrea
Slide 44: Structurally Growing Markets
44P R O P R I E T A R Y Projected Industry Sales: Light Vehicle Projected Industry Sales: Commercial Vehicle _____________________________ Source: Orr & Boss; Axalta estimates ($ billions) ($ millions) _____________________________ Source: Orr & Boss; Axalta estimates $1.5 $1.5 $1.5 $1.6 $1.6 $2.3 $
Slide 45: Axalta is a leading global OEM coatings player
45P R O P R I E T A R Y ▪ 17% 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 launches ▪ S
Slide 46: Key Market Trends
46P R O P R I E T A R Y ▪ 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 uncertainty (Brazil, Russia, China)
Slide 47: Transforming A Global OEM Coatings Supplier
47P R O P R I E T A R Y Global Share Significant Progress Made… Axalta 31% HDT and Bus Axalta 17% Light Vehicle Transforming A Global OEM Coatings Supplier ▪ Must continue to align technology with customer needs in key target areas ▪ Axalta needs to continue to refine cost structure to meet future c
Slide 48: Appendix
APPENDIX AXALTA COATING SYSTEMS
Slide 49: Adjusted EBITDA Reconciliation
49P R O P R I E T A R Y Adjusted EBITDA Reconciliation Note: Numbers might not foot due to rounding. ($ in millions) FY 2017 FY 2016 Q4 2017 Q4 2016 Net Income (loss) $48 $45 (56) (35) Interest Expense, net 147 178 38 37 Provision for Income Taxes 142 38 120 15 Depreciation & Amortization 347 322 92
Slide 50: Adjusted EBITDA Reconciliation (cont'd)
50P R O P R I E T A R Y Adjusted EBITDA Reconciliation (cont’d) A. During FY 2017, Q4 2016 and FY 2016 we refinanced our indebtedness, resulting in losses of $13 million, $10 million and $88 million, respectively. During Q4 2017, FY 2017, Q4 2016 and FY 2016 we prepaid outstanding principal on our t
Slide 51: Thank you!
Thank you! Investor Contact: Chris Mecray, VP IR Christopher.Mecray@axaltacs.com 215-255-7970
Axalta Coating Systems — FY2017 Earnings Presentation on 6ix