Axalta Coating Systems Ltd. · NYSE:AXTA
Axalta Coating Systems — Investor Presentation (November 2019)
55 slides from Axalta Coating Systems's investor presentation, Nov 4, 2019
Slide 1: Axalta Coating Systems Investor Presentation Fourth Quarter 2019
Exhibit 99.1 Axalta Coating Systems Ltd. Investor Presentation Fourth Quarter 2019 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 2019 financial projections, which incl
Slide 3: Axalta's Customer Focused Organization
Axalta’s Customer Focused Organization PERFORMANCE COATINGS TRANSPORTATION COATINGS SEGMENTS $3.0 Billion, 65% of Sales $1.7 Billion, 35% of Sales Refinish $1.8 B SALES BY END (37%) Industrial Light MARKET $1.2 B Vehicle (27%) $1.3 B (28%) Comml Vehicle $0.4 B (8%) ▪ Powder ▪ Heavy duty truck (HDT)
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 ✓ Performance-based long-term compensation and solid core mark
Slide 5: Axalta's Global Presence
Axalta’s Global Presence 14,000 People 47 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 Istanbul Orrville Ja
Slide 6: Why Invest in Axalta Today?
Why Invest in Axalta Today? Strong Free Focused End- Consolidation ROIC Growth Significant Axalta Way Cash Flow Markets, Opportunity with Focus, China Growth Driving Generation and Structural Proven M&A Shareholder Opportunity Productivity Allocation Volume Growth Strategy Value Alignment Process PR
Slide 7: Focused on Structurally Attractive Coatings End-Markets
We are Focused on Structurally Attractive Coatings End-Markets A $160 Billion Global Coatings Market Axalta’s Coatings Markets Coatings Industry Sales Coatings Industry Sales ($ Billions) Other Coil, Transportation, 2% Auto OEM Interior, Packaging, 3% 2% 1% CAGR 4.6% Marine, 3% Auto OEM, 5% Refinish
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 Other Axalta Other Peer 1 Peer 3 Peer 1 Peer 3 Axalta* Peer 2 Peer 2 #2 *Tied with peer Performance Coatings: Industrial Transportation Coatings: Commercial Vehicle Core CV Mark
Slide 9: 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 0.75 500 Growth in China 2% Penetration rate gap will 400 1% narrow across regions 300 13% 200 4% 0.37 100 5% 0.18 - 0.11 0.08 NA EMEA LA Ch
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
Focus on Operating Excellence, Axalta Way Savings Continue with Phase II ▪ Achieved Phase I $200 million target achieved Axalta Way II ▪ Axalta Way II target: $200 million from 2018 through 2021 Axalta Operating ▪ Lean implementation in Wuppertal, Germany and Mt. Clemens, MI Excellence (AOE) ▪ Globa
Slide 13: M&A: Leveraging a Consolidating Coatings Sector
M&A: Leveraging a Consolidating Coatings Sector Target End-Market Geography Closed Company Overview Leading manufacturer/distributor of refinish and DuWest Performance Coatings Refinish Latin America 2015 architectural coating products in Central America North America Ohio-based refinish manufacture
Slide 14: 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 20.0% free cash flow 16.6% 16.5% 13.5% 11.4% ▪ We have organic and inorganic investment opportunities that we expec
Slide 15: 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 ▪ Supply chain initiatives including Supplier Code ▪ Environment, Health, Safety & Sustainability defined of Conduct and Supplier Sustainability Risk Committee of the Board Management Program ▪ Respon
Slide 17: Sustainability 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 Award Supplier Award in the Excellence in Quality award g
Slide 18: Key Goals for 2019
Key Goals for 2019 Key Objectives for Growth and Value Creation Outgrow Our End-Markets ▪ Continued organic net sales growth Axalta Way II Execution ▪ Ongoing savings from optimizing our organization Incremental Cost Actions ▪ Closing any price-cost gap with focused actions Drive Product Innovation
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 growth, modest share capture and incremental pricing in key Mid-single digits Accretive M&A businesses ▪ Free cash flow allocation is primarily directed to M&A and oppo
Slide 21: Axalta's Growth Drivers are Diverse
Axalta’s Growth Drivers are Diverse Value Creation From Multiple Sources and Disciplined Process ▪ Capex of $143 million and R&D of ~$190 million1 in 2018 provided support for Growth Supported by Clear maintenance and strategic growth Strategies, Greater Resources ▪ Growth strategies in place for ea
Slide 22: Q3 Consolidated Results
Q3 Consolidated Results Financial Performance Commentary ($ in millions, except Q3 % Change Net sales flat excluding FX and China JV sale - per share data) 2019 2018 Incl. F/X Excl. F/X continued strong price-mix Performance 724 756 (4.3)% (2.0)% Transportation 383 390 (1.7)% —% ▪ Commercial Vehicle
Slide 23: Focus on Capital Allocation
Focus on Capital Allocation Yes Debt Reduction Organic Investment Capex / R&D Leverage in Investment Capex / R&D No Yes Free Cash excess of target opportunity that Flow and no immediate exceeds hurdle investment? rate? M & A Excess No Share Repurchases - Offset dilution Share price - Opportunistic b
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 total capital in the ROIC excludes $259 million PP&E “step up” from the 2013 LBO under 14.3% purchase price accounting 12.6% 11.7% ▪ Drivers of ROIC upside: 10.3% ✓ NOP
Slide 25: Net Sales to Date Show Solid Growth and Diversification
Net Sales to Date Show Solid Growth and Portfolio Diversification Net Sales Net Sales by Region ($ Billions) 2013 2018 North Asia Pacific North Asia Pacific 5.5 America America 15% 16% Latin 29% America 10% 38% 17% 5.0 +3.1% Latin America 39% 36% EMEA 4.5 EMEA Net Sales by End-Market 2013 2018 Comme
Slide 26: Adjusted EBITDA Results to Date
Adjusted EBITDA Results to Date Show Strong Core Progress Adjusted EBITDA Growth Drivers ▪ Adjusted EBITDA margins increased from 17.2% in 2013 to 20.1% in 2018 $937 $950 ▪ Pricing actions positively contributed to margin $864 $902 $885 expansion $835 ▪ Volume growth and share gain provided operatin
Slide 27: Debt and Liquidity Summary
Debt and Liquidity Summary Leverage Trends Interest Coverage (Adj. EBITDA) 75.0% 4.4x 6.5x 69.8% 60.5% 6.0x 65.0% 4.0x 65.4% 62.5% 5.9x 3.8x 55.0% 3.4x 62.0% 3.6x 5.5x 3.4x 5.1x 45.0% 3.0x 3.6x 3.2x 4.4x 35.0% 2.8x 4.5x 3.8x 25.0% 2.4x 2014 2015 2016 2017 2018 3.5x Net Debt / Total Capital (LHS) Net
Slide 28: Free Cash Flow Strong and Improving
Free Cash Flow Strong and Improving; Deployment Accelerating Free Cash Flow Capital Deployment ($ millions) ($ millions) Cumulative: 22 11 785 $2,328 58 825 821 415 38 $312 423 802 854 580 272 362 $538 411 254 564 313 312 160 $819 (130) 72 (173) (169) (163) 124 (62) 144 (52) (39) (57) 115 110 (125)
Slide 29: Full Year 2019 Guidance
Full Year 2019 Guidance ($ millions, except per share data) Jul. Guide 2019E Comments Net Sales ~(2%) ~(4%) ▪ Net sales guidance reflects May disposition of China JV with ~1% full year impact and minor Adjusted EBIT impact; net Net Sales, ex FX1 ~0% ~(1%) sales also reflects lower global auto produc
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 +3.6% ▪ Performance needs drive technology improvements $9.0 CAGR $8.7 $8.4 ▪ Consolidation trend supported b
Slide 33: Axalta is The Leader in Global Refinish Coatings
Axalta is The Leader in Global Refinish Coatings Refinish Market Share $8.1 Billion Total Sales Leading a Growing Industry #1 ▪ Leading market share position; industry sales estimated to grow at ~4% CAGR through 2020 ▪ We are the Refinish technology leader, driving productivity Axalta and value for
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 and MSOs, Axalta benefits from through leading brands and expansion of the Chinese car Brazil – the l
Slide 35: Refinish Growth Drivers
Refinish Growth Drivers Globally U.S. Body Shop Consolidation China Growth in Mainstream & Tier Cities Body shop paint sales % of refinish market Overall market expected to grow >5% 2015-2019 100% 100% 100% 100% MSOs Faster growth in Core premium paints in U.S. due to >10% CAGR share growth by ~1-3%
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 PROPRIETARY Sensitivity: Business Internal 37
Slide 38: Our Industrial Business Today
Our Industrial Business Today Wood Coatings Powder Coatings Coil Coatings Energy Solutions General Industrial ▪ Kitchen cabinets ▪ Auto metal parts ▪ Commercial / ▪ Electrical vehicles ▪ ACE ▪ Building products ▪ Appliances residential siding ▪ Wind energy ▪ Oil and gas ▪ Flooring ▪ Architectural ▪
Slide 39: Industrial Coatings: A $45 Billion Market Opportunity
Industrial Coatings: A $45 Billion Market Opportunity for Axalta Industrial Coatings Market Share Doubled in 5 Years Coil 8% Wood General 25% Industrial 42% ▪ Market growth of 5.4% CAGR (2013-20e) ▪ Growth driven by global GDP and industrial production Powder ▪ Building and construction markets stro
Slide 40: Our Place in the Market
Our Place in the Market Industrial Coating Wood Coatings Powder Coatings Coil Coatings Energy Solutions Systems #2 #2 #4 #4* #2 North American Global Powder North American Global Electrical Global Industrial Wood Coatings Coatings Supplier Coil Coatings Insulation Supplier E-Coat Supplier Supplier S
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 ▪ Plastic and Drivers 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 $500M $450M Total $400M $400M Market ~$13B $200M Body LV Trucks Specialty Bus APC Builders Rail Aviation Marine* OEM MDT / HDT OEM +Trailers Customer Segment Core Developing Opportunity SOURCE: Orr & Boss,
Slide 44: Light Vehicle: Growing with a Strong Global Market
Light Vehicle | Growing with a Strong Global Market Growth Opportunities Across Segments Per Capita Market Growth US Customer Segment Share EMEA Region Content Product # Plants # ($ billions) ($ Market Size Market Mexico Core ~$2.8 >25% ~200 SA Increasing to 2 vehicles per India Developing ~$1.7 >10
Slide 45: Light Vehicle: Increasing Content Per Vehicle
Light Vehicle | Increasing Content Per Vehicle with Components White Space in Exteriors and Interiors $30-50 / mirrors “small parts” vehicle ▪ Focus markets with global leadership and strategy bezels, handles, trim ▪ Exterior / APC a top 5 “customer” interior lenses ✓ Adjacent to core products ✓ Rel
Slide 46: Our Commercial Vehicle Business is Growing and Diverse
Our Commercial Vehicle Business is Growing and Diverse Market White Space Share Gain Technology ▪ Growth opportunities: ▪ Share of wallet opportunity in ▪ We have leading technology to ✓ Underpenetrated geographies existing markets expand our business (China) ✓ Vehicles per customer ✓ Bus ✓ Aviation
Slide 47: Coatings Play a Key Role Wherever the Market Goes
No Matter Where the Market Goes, Coatings Play a Key Role Emerging OEMs Design & Consumer Advanced Sustainability Future Mobility and Geographies Preferences Manufacturing ▪ New entrants ▪ Styling trends ▪ Environmental ▪ Big data, line ▪ Autonomous ▪ Rising JVs ▪ Consumer requirements service drivi
Slide 48: Investor Contact
Investor Contact: Chris Mecray - VP, Investor Relations, Treasury & Strategy christopher.mecray@axalta.com (215) 255-7970 Sensitivity: Business Internal
Slide 49: 2018 Adjusted EBIT Reconciliation
2018 Adjusted EBIT Reconciliation ($ in millions) Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Income from operations $ 120 $ 147 $ 48 $ 128 $ 442 Other (income) expense, net (2) 8 6 4 15 Total $ 122 $ 138 $ 42 $ 124 $ 427 A Debt extinguishment and refinancing related costs — 8 — 1 10 B Termination benef
Slide 50: Adjusted EBIT Reconciliation
Adjusted EBIT Reconciliation ($ in millions) Q3 2019 Q3 2018 Income from operations $ 123 $ 48 Other (income) expense, net (2) 6 Total $ 125 $ 42 A Termination benefits and other employee related costs 29 82 B Consulting and advisory 3 — C Offering and transactional costs — 1 D (Gain) loss on divest
Slide 51: Adjusted Net Income Reconciliation
Adjusted Net Income Reconciliation ($ in millions, except per share data) Q3 2019 Q3 2018 Net Income (loss) $ 66 $ (12) Less: Net income attributable to noncontrolling interests 1 2 Net income (loss) attributable to controlling interests 65 (13) A Termination benefits and other employee related cost
Slide 52: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation LTM ($ in millions) 9/30/2019 Q3 2019 Q2 2019 Q1 2019 Q3 2018 Q2 2018 Q1 2018 FY 2018 Net income (loss) $ 287 $ 66 $ 100 $ 44 $ (12) $ 77 $ 71 $ 213 Interest expense, net 164 40 41 41 40 39 39 160 Provision for income taxes 56 18 18 14 14 22 12 54 Depreciation and amor
Slide 53: Adjusted EBITDA Reconciliation (cont'd)
Adjusted EBITDA Reconciliation (cont’d) A. Represents expenses associated with the restructuring and refinancing of our indebtedness, which are not considered indicative of our ongoing operating performance. B. Represents expenses and associated changes to estimates related to employee termination b
Slide 54: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation ($ in millions) Q3 2019 Q2 2019 Q1 2019 Q3 2018 Q2 2018 Q1 2018 Cash provided by (used in) operating activities $ 221 $ 127 $ (58) $ 125 $ 142 $ (21) Purchase of property, plant and equipment (27) (27) (21) (35) (35) (40) Interest proceeds on swaps designated as net inv
Slide 55: Thank You!
Thank You! Sensitivity: Business Internal
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