Axalta Coating Systems Ltd. · NYSE:AXTA
Axalta Coating Systems — Investor Presentation (2020)
35 slides from Axalta Coating Systems's investor presentation, 2020
Slide 1: Axalta Coating Systems Ltd. Investor Presentation Fourth Quarter 2020
Axalta Coating Systems Ltd. Investor Presentation Fourth 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 ▪ #1 or #2 market share in ~90% of markets served Summary Statistics (FY 2019) ▪ 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 ~$195 million of cost savings in 2020 across all active Cost Saving Actions initiatives; significant focus on FCF to drive further cash savings Operating ▪ Lean implementation in Wuppertal, Germany and Mt. Clemens, MI
Slide 8: Sustainability at Axalta
1 Sustainability at Axalta Environment Social Governance ▪ Global Environment, Health and Safety policies ▪ Commitment to workplace safety: Driving ▪ Ethics and integrity compliance programs, with well defined Perfect Performance; top decile injury rate annual training for all employees on Axalta Co
Slide 9: Axalta's Evolution
2 Axalta’s Evolution Growth & Streamlined Platform Ongoing Transformation 2020 Onwards Carve Out 2015 - 2019 Next Chapter… 2013 - 2014 Significant Upside Non-Core Division Public Company ▪ White space opportunities in all end- markets Before 2012 Profitable Growth The Carlyle Group Ownership ▪ Conti
Slide 10: Net Sales Growth
2 Net Sales Growth Net Sales Net Sales by Region ($ Billions) 2013 2019 North North 5.4 APAC APAC America America 15% 15% 5.2 LatAm 29% 10% 40% +3.3% 17% 5.0 LatAm 4.8 39% 35% 4.6 EMEA EMEA 4.4 Net Sales by End-Market 4.2 2013 2019 Commercial Commercial 4.0 Refinish 8% 8% Refinish Light Light 3.8 Ve
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 $885 $835 $864 ▪ 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 FY 2019 Net Sales share Industrial E-coat $2.9bn Strong record of realizing value through ✓ #2 position in North Ame
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 Overall market grew ~5% 2015-20191 (% of Refinish Market) 100% 100% 100% 100% 16% 28% 35% 41% 44% 35% 30% >10% CAGR 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 $200M Body LV Trucks Specialty Bus APC Builders Rail Aviation Marine* OEM MDT / HDT OEM +Trailers Customer Segment Core Developing / Opportunity Source: Orr & Boss, IRFAB, Global Mark
Slide 17: Competitive Advantages
4 Competitive Advantages Trusted Products, Service Superior Technology Aligned With Customer Needs Customer-Focused Innovation Excellence Extensive Design & Go-To-Market Differentiated Technology Product Service Formulation Consumer With Strong Technical Innovation Innovation Innovation Database Pre
Slide 18: Technology Strategy Serves as a Key Differentiator
4 Technology Strategy Serves as a Key Differentiator Leading Technology Organization Leading Technology Investment as % of Net Sales1 ▪ Focus on color technology, and polymer & formulation chemistry 4.2% ▪ Comprehensive product range of ~27,000 SKUs tailored to customer needs 2.9% 2.6% ▪ Global tech
Slide 19: Free Cash Flow and Capital Deployment
5 Free Cash Flow and Capital Deployment Free Cash Flow Capital Deployment ($ millions) ($ millions) $272 $423 $415 $362 $475 24 22 11 Prepaid Expenses, Other Liabilities and other 825 854 802 821 890 CapEx Net Working Capital Income Taxes, net of refunds (173) (169) (130) (163) (162) Interest, net o
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 Integrated manufacturing 13 locations Coil ~$85mm General Diversificat
Slide 22: Debt and Liquidity Summary
5 Debt and Liquidity Summary Leverage Trends Interest Coverage (Adj. EBITDA) Cost of Debt Debt Maturity Profile Long term debt interest rates are 89% effectively fixed 2,934 ▪ $250 million of term loan debt protected from rising interest rates with 3 month USD LIBOR capped at 1.50% ▪ $1.375 billion
Slide 23: Q3 Consolidated Results
6 Q3 Consolidated Results Financial Performance Commentary Net sales showed continued recovery across all end markets during Q3 ▪ Q3 saw substantial recovery post Q2 lows with continuing month-over-month improvement ▪ Volume reductions globally from slower macro impacted year-over-year performance ▪
Slide 24: Current Operating Environment within Performance Coatings
6 Current Operating Environment within Performance Coatings Performance Market Commentary Refinish ▪ Refinish sales continued to improve through Q3 aligned with overall global traffic recovery ▪ Traffic indicators improving: – U.S. miles driven declined 12.3% YoY in August versus down 14.5% in June;
Slide 25: Current Operating Environment within Transportation Coatings
6 Current Operating Environment within Transportation Coatings Transportation Market Commentary Light Vehicle ▪ LV net sales recovery continued during Q3 with production in North America and China most robust ▪ North America net sales increased in Q3 as production recovery exceeded expectations, inc
Slide 26: COVID-19 Impact and Response
6 COVID-19 Impact and Response Mitigation Actions and Global Restructuring Mitigation Actions ▪ Sales recovery aided by ongoing vehicle traffic improvement, industrial production recovery, strength in North American home building and remodeling, and global auto production recovery ▪ Exceeded expecte
Slide 27: Investor Contact
Investor Contact: Chris Mecray - VP, Investor Relations, Treasury & Strategy christopher.mecray@axalta.com (215) 255-7970 Sensitivity: Business Internal
Slide 28: Adjusted EBIT Reconciliation
Adjusted EBIT Reconciliation ($ in millions) Q3 2020 Q3 2019 Income from operations $ 142 $ 123 Other expense (income), net 2 (2) Total $ 139 $ 125 A Debt extinguishment and refinancing related costs — — B Termination benefits and other employee related costs 36 29 C Strategic review and retention c
Slide 29: Adjusted EBIT Reconciliation (cont'd)
Adjusted EBIT Reconciliation (cont’d) Represents expenses and associated changes to estimates related to the prepayment, restructuring, and refinancing of our indebtedness, which are not considered indicative of our ongoing A operating performance. Represents expenses and associated changes to estim
Slide 30: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Successor Predecessor Combined Q3 Q3 LTM 2020 2019 Q3 Feb-Dec ($ in millions) YTD YTD 2020 FY 2019 FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 2013 Jan 2013 FY 2013 Net income (loss) $ 52 $ 210 $ 94 $ 253 $ 213 $ 48 $ 45 $ 96 $ 32 $ (222) $ 9 $ (213) Interest expense, net
Slide 31: Adjusted EBITDA Reconciliation (cont'd)
Adjusted EBITDA Reconciliation (cont’d) Represents expenses and associated changes to estimates related to the prepayment, restructuring and refinancing of our indebtedness, including $25 million of commitment fees expensed in 2013 related to a A terminated Bridge Facility in conjunction with the is
Slide 32: Adjusted Net Income Reconciliation
Adjusted Net Income Reconciliation ($ in millions, except per share data) Q3 2020 Q3 2019 Net income $ 83 $ 66 Less: Net (loss) income attributable to noncontrolling interests — 1 Net income attributable to controlling interests 83 66 A Debt extinguishment and refinancing related costs — — B Termina
Slide 33: Adjusted Net Income Reconciliation (cont'd)
Adjusted Net Income Reconciliation (cont’d) Represents expenses and associated changes to estimates related to the prepayment, restructuring, and refinancing of our indebtedness, which are not considered indicative of our ongoing A operating performance. Represents expenses and associated changes to
Slide 34: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation PROPRIETARY 34 Sensitivity: Business Internal
Slide 35: Thank You!
Thank You! Sensitivity: Business Internal
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