Axalta Coating Systems Ltd. · NYSE:AXTA
Axalta Coating Systems — Q4 2021 Earnings Presentation
42 slides from Axalta Coating Systems's earnings presentation, Feb 23, 2022
Slide 1: Investor Presentation
Investor Presentation February 23, 2022 1
Slide 2: Legal Notice
Legal Notice Forward-Looking Statements This presentation may contain certain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 regarding Axalta and its subsidiaries, including our financial outlook, which includes net sales growth, currency e
Slide 3: Contents
Contents Overview of Axalta Environmental, Social, and Governance at Axalta Q4 and Full Year 2021 Earnings Financial Forecast through 2024 Appendix 3
Slide 4: Strategic and Complementary Businesses
Strategic and Complementary Businesses 2021 NET SALES ~$4.4B BY GEOGRAPHY Latin America Refinish Light Vehicle 9% North 40% 39% America 23% Asia Pacific 15% 7% Commercial 30% Vehicle 37% EMEA Industrial Performance Coatings Mobility Coatings Refinish Industrial Light Vehicle Commercial Vehicle ▪ Ind
Slide 5: Well-Established Coatings Industry Innovator
Well-Established Coatings Industry Innovator KEY STATISTICS 50+ BRANDS 150+ 140+ Years in Coatings Countries 4% 32 R&D and Technical Global Laboratories Service Investment 50+ ~13,000 New Product Platforms Team Members per Year ~30M 47 Vehicles Coated per Year Manufacturing Sites 5
Slide 6: Well-Positioned for Favorable Macro Trends and Drivers
W e l l - P o s i t i o n e d f o r F a v o r a b l e M a c r o Tr e n d s a n d D r i v e r s Near-Term Trends 2021 Net Sales Total Addressable Market Position Market Benefits from ongoing traffic recovery #1 1 REFINISH accelerated by the COVID-19 vaccination rollout, creating a 1–2-year demand tai
Slide 7: #1 Market Position in an Attractive Industry
#1 Market Position in an Attractive Industry Refinish Market Established & Emerging Markets 130bps market share expansion over the past three years Other Peers | 20% Emerging 26% Markets AXTA 23% MARKET SHARE Peer D | 10% $6.8B $1.8B Addressable Net Sales Market1 Well-established 77% Markets Pee
Slide 8: Industrial Coatings Snapshot
Industrial Coatings Snapshot General Industrial Building Products Energy Solutions ▪ Appliances ▪ Building Materials ▪ Distribution Transformers 14,000+ ▪ Architectural Extrusions ▪ Cabinets ▪ Electric Vehicles Customers ▪ Coil Coatings ▪ Wood and Luxury Vinyl ▪ Energy Storage ▪ Heavy Machinery Floo
Slide 9: Mobility Coatings At A Glance
Mobility Coatings At A Glance 3,500 17 4 #1 #2 Employees Manufacturing Technology / in Truck & Bus1 in Light Vehicle1 Facilities R&D Centers 2021 Net Sales by Segment 2021 Net Sales by Region APAC Commercial Vehicle 17% 23% $1.3B $1.3B 56% EMEA 27% Americas 77% Light Vehicle 1. #2 Light Vehicle (201
Slide 10: Shareholder Value Creation Algorithm
S h a r e h o l d e r Va l u e C r e a t i o n A l g o r i t h m Strategic Imperatives Advance Grow Above Innovation Market CREATING A VALUE COMPOUNDER Inspire Drive People Execution 10
Slide 11: Creating a Value Compounder: Advance Innovation
C r e a t i n g a Va l u e C o m p o u n d e r PRODUCT ▪ Rapid new product development and commercialization Advance • Color aesthetics, sustainability, productivity and performance Innovation SERVICE ▪ Expand service offerings to enhance value to customers • Innovative service models via digitizati
Slide 12: Creating a Value Compounder: Grow Above Market
C r e a t i n g a Va l u e C o m p o u n d e r GEOGRAPHIC EXPANSION ▪ Accelerate growth in underpenetrated markets Grow Above (e.g., China / Asia Pacific) Market DIVERSIFICATION ▪ Grow current business verticals and add new industrial end markets CUSTOMER REACH ▪ Expand market access via distributio
Slide 13: Creating a Value Compounder: Drive Execution
C r e a t i n g a Va l u e C o m p o u n d e r METRICS DRIVEN ▪ Safety, quality, service, cost, people Drive development Execution OPERATIONAL AND COMMERCIAL EXCELLENCE ▪ Drive productivity via global business structures ▪ Axalta Operational Excellence roll out ▪ Metrics driven accountability GLOBAL
Slide 14: Creating a Value Compounder: Inspire People
C r e a t i n g a Va l u e C o m p o u n d e r TALENT DEVELOPMENT ▪ Refreshed leadership team and added new board members with diverse, relevant skill sets Inspire People CULTURE ▪ Performance-driven culture that fosters empowerment, innovation and calculated risk taking ACCOUNTABILITY ▪ Driving own
Slide 15: Global and Diverse Operating Footprint
Global and Diverse Operating Footprint Wuppertal Mt Clemens Front Royal Jiading Largest Manufacturing Sites Manufacturing Sites Current State Opportunities ▪ 30 liquid paint manufacturing sites ▪ Integrate and simplify acquired networks ▪ 8 resin manufacturing sites (1 ▪ Adapt capabilities to shifti
Slide 16: Active Pipeline with Proactive Approach to Strategic M&A
Active Pipeline with Proactive Approach to Strategic M&A Track Record 25 >$780M >$160M Acquisitions since 2015 Annual Revenues1 Annual EBITDA1 Attractive Markets Technology / Capability Acquisition Benefits: Strategic ▪ Growth and cost synergies Bolt-ons Systematic ▪ Globalization of regional produc
Slide 17: World-Class Technology Organization
W o r l d - C l a s s Te c h n o l o g y O r g a n i z a t i o n Global Infrastructure and Coatings Expertise Wuppertal Mt Clemens Philadelphia Shanghai Global Innovation Center Regional Technology Center Regional Laboratory Global technology community of Focused teams for product Focus on color tec
Slide 18: Product Innovation Drives Organic Growth
Product Innovation Drives Organic Growth > 50 New Platform Innovations Per Year 2021 Technology Investment >500/yr Product Modifications ▪ ~4% net sales of R&D and technical services investment ▪ Investment across all business ~20,000/yr segments Service Requests ▪ Introduce over 50 new product plat
Slide 19: Differentiated Technology Across End-Markets
D i f f e r e n t i a t e d Te c h n o l o g y A c r o s s E n d - M a r k e t s ▪ Industry leading color capability Refinish ▪ Most productive waterborne basecoat technology ▪ Develop tailored technology for Premium, Mainstream and Economy segments ▪ Low emission electrical insulation materials for
Slide 20: Contents
Contents Overview of Axalta Environmental, Social, and Governance at Axalta Q4 and Full Year 2021 Earnings Financial Forecast through 2024 Appendix 20
Slide 21: Axalta's Sustainability Program
x a l t a ’s Program Progress To Date Establishment of New Goals 2030 Goals Highlights ▪ Initial Sustainability Report in 2013 ▪ Materiality assessment conducted, ▪ 2040 carbon neutral goal is one ▪ First set of sustainability goals incorporating key sustainability decade ahead of the deadline set b
Slide 22: 2030 Sustainability Goals
2030 Sustainability Goals Environmental Social Governance 50% 100% 30% 80% absolute reduction of Scope 1 of key suppliers assessed of management positions to be filled by women of new technology and and 2 GHG emissions, sourcing against a robust set of innovation developments will at least 50% of el
Slide 23: Contents
Contents Overview of Axalta Environmental, Social, and Governance at Axalta Q4 and Full Year 2021 Earnings Financial Forecast through 2024 Appendix 23
Slide 24: Q4 2021 Consolidated Results
Q4 2021 Consolidated Results Financial Performance Commentary Q4 % Change ($ in million), except per Net sales growth from M&A contribution and price share data 2021 2020 Incl. FX Excl. FX realization as strong volume growth in Performance Performance Coatings 804 704 14.2 % 15.6 % Coatings was offs
Slide 25: Q4 2021 Performance Coatings Results
Q4 2021 Performance Coatings Results Financial Performance Commentary Q4 % Change Net sales growth driven by M&A contribution, volume ($ in million) 2021 2020 Incl. FX Excl. FX recovery, and pricing realization Refinish 471 418 12.8 % 14.7 % ▪ Increased volumes from both Refinish and Industrial desp
Slide 26: Q4 2021 Mobility Coatings Results
Q4 2021 Mobility Coatings Results Financial Performance Commentary Q4 % Change Net sales reduction despite pricing actions as volumes ($ in million) 2021 2020 Incl. FX Excl. FX remain constrained by supply shortages Light Vehicle 255 298 (14.4)% (13.7)% ▪ Axalta volumes largely aligned with reductio
Slide 27: FY 2021 Consolidated Results
FY 2021 Consolidated Results Financial Performance Commentary ($ in million), except per FY % Change Net sales increase reflects recovery from COVID-19; share data 2021 2020 Incl. FX Excl. FX customer supply shortages tempered growth for Mobility Performance Coatings 3,096 2,516 23.0 % 20.9 % Coatin
Slide 28: Debt and Liquidity Summary
Debt and Liquidity Summary Capitalization Commentary ($ in millions) Interest @ 12/31/2021 Maturity ▪ ~$1.4 billion in available liquidity at December 31, 2021 Cash and Cash Equivalents $ 841 ▪ Weighted average cost of debt of 3.1% at December 31, Debt: 2021 Revolver ($550 million capacity)(1) Varia
Slide 29: Financial Guidance Update
Financial Guidance Update Q1 2022 Guidance FY 2022 Commentary ▪ Net Sales: ~+5% including ~(3)% FX, ~4% M&A benefit; ▪ Performance Coatings growth expected from continued anticipated price of mid- to high-single digits Refinish recovery, continued robust organic growth within – Performance Coatings:
Slide 30: Strong Free Cash Flow Generation
Strong Free Cash Flow Generation 500 ($M) $475 100% $455 450 $442 90% Key Points 400 80% ▪ Exceeding targeted FCF conversion of 45- $362 50% since 2019 350 70% 58% ▪ Robust and consistent free cash flow 54% bolstered by relatively low capital intensity 300 60% 51% 250 50% 39% ▪ Anticipate improving
Slide 31: Capital Structure and Credit Metrics Overview
Capital Structure and Credit Metrics Overview Leverage Trends1 Interest Coverage (Adj. EBITDA)2 65.0% 62.5% 4.5x 6.3x 54.3% 56.2% 55.0% 4.0x 5.9x 5.8x 47.5% 3.5x 45.0% 3.5x 5.1x 3.4x 3.3x 3.0x 35.0% 3.0x 2.5x 25.0% 2.0x 2018 2019 2020 2021 2018 2019 2020 2021 Net Debt / Total Capital Net Debt / Adj.
Slide 32: Disciplined Capital Allocation Framework
Disciplined Capital Allocation Framework Uses of Cash 2018-2021 Capital Allocation Priorities Debt Paydown ▪ CapEx ─ Maintenance CapEx of $30-50M per annum 15% ─ Ongoing productivity and footprint optimization M&A ─ S/4HANA implementation 34% ▪ M&A ─ Disciplined approach to strategic bolt-ons and Sh
Slide 33: Contents
Contents Overview of Axalta Environmental, Social, and Governance at Axalta Q4 and Full Year 2021 Earnings Financial Forecast through 2024 Appendix 33
Slide 34: Mid-Term Portfolio Focus through 2024
M i d - Te r m P o r t f o l i o F o c u s t h r o u g h 2 0 2 4 Targeting above market organic growth and a more diversified portfolio through strategic M&A Annual Targets Growth Drivers ▪ Market recovery tailwinds with ongoing economic recovery Organic ▪ Innovation driven growth from new products
Slide 35: 4-Year Financial Outlook to 2024
4 - Ye a r F i n a n c i a l O u t l o o k t o 2 0 2 4 2024 TARGETS ▪ Ongoing market recovery and share opportunities (~45%) ▪ Increased revenue from new markets and products (~30%) 4-5% Organic Growth Net Sales ▪ Increased revenue from emerging markets (~25%) ( R ‘19-’24) ▪ M&A: strategic bolt-ons
Slide 36: Well-Positioned for Growth Given Demand through 2024
Well-Positioned for Growth Given Demand through 2024 Industry Demand Trends REFINISH Market recovery aligned with traffic normalization $1.8B1 and GDP growth; 2–year tailwind expected INDUSTRIAL Continued global industrial production recovery $1.3B1 anticipated in core markets LIGHT Automotive marke
Slide 37: Contents
Contents Overview of Axalta Environmental, Social, and Governance at Axalta Q4 and Full Year 2021 Earnings Financial Forecast through 2024 Appendix 37
Slide 38: Adjusted EBIT Reconciliation
Adjusted EBIT Reconciliation ($ in millions) FY 2021 FY 2020 Q4 2021 Q4 2020 Income from operations $ 462.4 $ 305.5 $ 94.7 $ 163.2 Other (income) expense, net (12.3) 33.4 (1.4) 32.5 Total $ 474.7 $ 272.1 $ 96.1 $ 130.7 A Debt extinguishment and refinancing related costs 0.2 34.4 — 32.0 B Termination
Slide 39: Adjusted EBIT Reconciliation (cont'd)
djusted B Reconciliation (cont’d) A 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 operating performance. B Represents expenses and associated changes to estimate
Slide 40: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation Year End December 31, ($ in millions) 2018 2019 2020 2021 Net income $213.3 $252.6 $122.0 $264.4 Interest expense, net 159.6 162.6 149.9 134.2 Provision for income taxes 54.2 77.4 0.2 76.1 Depreciation and amortization 369.1 353.0 320.3 316.5 Net income attributable to
Slide 41: Adjusted EBITDA Reconciliation (cont'd)
djusted B D Reconciliation (cont’d) A Represents expenses and associated changes to estimates related to the prepayment, restructuring, and refinancing of our indebtedness, which are not considered indicative of our ongoing operating performance. B Represents expenses and associated changes to estim
Slide 42: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Year End December 31, ($ in millions) 2018 2019 2020 2021 Cash provided by operating activities $496.1 $573.1 $509.3 $558.6 Purchase of property, plant and equipment (143.4) (112.5) (82.1) (121.6) Interest proceeds on swaps designated as net investment hedges 9.4 14.7 1
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