Axalta Coating Systems Ltd. · NYSE:AXTA
Axalta Coating Systems — Investor Day (May 2024)
48 slides from Axalta Coating Systems's investor day presentation, May 15, 2024
Slide 1: Strategy Day 2024
STRATEGY May 15, 2024 DAY 2024 1
Slide 2: Forward-Looking Statement
Forward-Looking Statement Cautionary Statement Concerning Forward-Looking Statements This presentation and the oral remarks made in connection herewith may contain certain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 regarding Axalta and
Slide 3: Agenda
Agenda 9–9:30 AM WELCOME AND REGISTRATION 9:30–11:30 AM PRESENTATION AND Q&A 11:30 AM–12:30 PM LUNCH 12:30–2 PM Chris Villavarayan Dr. Robert Roop Carl Anderson R&D TOUR President Senior Vice President Senior Vice President and Chief Executive Officer and Chief Technology Officer and Chief Financial
Slide 4: Axalta At A Glance
Axalta-At-A-Glance PARTNERING WITH Refinish 26% 40% Light Vehicle / Commercial Vehicle 26% 8% 90K BODY SHOPS and NET SALES Industrial 40% 26% 4K 12,000 ALL TIME HIGH $5.2B SALES BY END MARKET DISTRIBUTORS EMPLOYEES ICONIC BRANDS SUPPLY THE TOP 1,300 $951M ALL TIME 13 SCIENTISTS, TECHNICAL EXPERTS AD
Slide 5: Industry-Leading Positions
Industry-Leading Positions Total 2023 Addressable Global End Markets Net Sales Global Size1 Position1,2 Refinish A GLOBAL LEADER IN AFTERMARKET $2.1B $6.8B #1 AUTO REPAIR SEGMENT Light Vehicle ACCRETIVE WINS DRIVING GROWTH WITH DIVERSIFIED $1.4B $7.7B #2 CUSTOMER BASE Commercial Vehicle 3 $0.4B $2.4
Slide 6: Proven Execution – Meaningful Changes Underway
Proven Execution – Meaningful Changes Underway Net Sales Trend ($ in billions) Accelerated Cost & Excellence in Operational Focus End Markets • Procurement initiatives • New product launches and $5.3 $4.9 $5.2 drove improved performance industry-recognized • Inventory reduction led to near technolog
Slide 7: 2026 A Plan Accelerating Performance
GROWTH at attractive margins CULTURAL EFFECTIVE CAPITAL >$500M Net Sales1 TRANSFORMATION 2026 A Plan ALLOCATION MARGIN2 ENHANCEMENT through business simplification and operational excellence >21% Target Margin NET LEVERAGE target range 2.0x to 2.5x OPERATIONAL SUSTAINABLE EXCELLENCE INNOVATION INVES
Slide 8: Driving a Winning Culture
Driving a Winning Culture ▪ Rebuilding organization to be proactive, responsive and agile ▪ Business units responsible for operations ▪ Accelerate decision- making process ▪ Accountability + Focus on ONE Axalta ▪ Simplified incentive compensation structure 8
Slide 9: Operational Enhancements Driving Expected $125M Improvement
Operational Enhancements Driving Expected $125M Improvement Actions Completed and In-Flight Next Steps PROCUREMENT ▪ Requoted ~2/3 addressable spend ✓ a TRANSFORMATIONAL INITIATIVES ▪ Lower cost base to improve financial performance Exceeding benchmark ▪ Index-based agreements and ▪ Efficient struct
Slide 10: Net Sales Growth of >$500M Anticipated Through 2026
Net Sales Growth of >$500M Anticipated Through 2026 Refinish Industrial Light Vehicle Commercial Vehicle +$250M Net Sales +$50M Net Sales +$150M Net Sales +$50M Net Sales +400 bps Margin Improvement Drive Growth; Rebalancing Profitable Growth; Market Leadership; Expand Adjacencies Portfolio Margin S
Slide 11: Refinish Customer Segmentation
Refinish Customer Segmentation Global Liquid Refinish Segment Customer Segment Breakdown Premium: 43% Economy: 25% Segment CAGR Global Value Size1 2024–20261 Share1 Proposition ▪ Efficient single-visit waterborne system PREMIUM ▪ End-to-end fully automated $2.9B 1.7% 40% color match ▪ Data integrati
Slide 12: Growing Accretive Refinish Business
Growing Accretive Refinish Business Megatrends Strategic Priorities Key Initiatives 1 2 SHARE GAIN Productive and Sustainable Solutions Actions underway to maintain Premium Share Gain in above-market growth Leadership Mainstream and Labor constraints and regulations Economy increasingly restrictive
Slide 13: Expanding Refinish Share in Growing Areas
Expanding Refinish Share in Growing Areas 1 How We Win In Single-Visit Application End-To-End Fully Automated Data Integration to Optimize Waterborne System Color Match Customer Support Premium Customer Segment >4,300 Net Body Shop Gains from Premium 55% 30% 50% 25% Data analytics enable real-time C
Slide 14: Growing Refinish Sales through Adjacencies
Growing Refinish Sales through Adjacencies 3 Company-Owned Stores 4 New Products and Channels Expand addressable market in EMEA by offering company- $3.6B owned store Accessories customer base Industry Size Fillers Putties and Glazes full range of accessories Diversification Into Attractive DIY Auto
Slide 15: $1B Capital Investment to Strengthen and Diversify Refinish
$1B Capital Investment to Strengthen and Diversify Refinish 4 U-POL Andre Koch CoverFlexx Expansion into Europe Expansion through Expansion into Refinish Accessories/Retail Company-Owned Stores Economy Segment Expansion into New Product Platform for Accessories Share of Wallet, Product Categories, R
Slide 16: Industrial Customer Segmentation
Industrial Customer Segmentation Global Industrial Coatings Segments Global Industrial Customer Segments Segment CAGR Global Focus Size1 2024–20261 Share1 Areas Electrification: 4% Sustainable Total Solutions Building ▪ General metal finishes INDUSTRIAL GENERAL & Construction: 38% ▪ Automotive compo
Slide 17: Well-Positioned for Industrial Rebound
Well-Positioned for Industrial Rebound Megatrends Strategic Priorities Key Initiatives ACCRETIVE GROWTH Target specific Focused Sustainable and Housing Shortage segments/regions for Segment Productive Global shortage drives need for housing units to be expansion based on Growth Solutions growth rate
Slide 18: Driving Accretive Growth in Industrial
Driving Accretive Growth in Industrial Financial Framework Margin Improvement Focus Areas Net Sales Cost Focus +$50M ▪ Portfolio management ▪ Streamlining raw material inputs and optimizing product formulas to drive down costs ▪ Transformation and footprint initiative ▪ ROIC refocus for margin growt
Slide 19: Mobility Coatings Customer Segmentation
Mobility Coatings Customer Segmentation Global Mobility Coatings Business Global Mobility Customer Segments Segment CAGR Global Focus Size1 2024–20261 Share1 Areas LV OEM2: 76% ▪ Outpacing industry growth VEHICLE LIGHT ▪ Significant expansion in Asia- $7.7B 2.1% 17% Pacific and LATAM ▪ Full product
Slide 20: Benefitting from Favorable Trends and Strong Partnerships
Benefitting from Favorable Trends and Strong Partnerships Megatrends Strategic Priorities Key Initiatives Customization GROWTH Significant demand for new complex colors, Grow in right areas Selective Leverage to drive accretive Innovative tutone and graphics applications Wins in LV Solutions like pr
Slide 21: Proven Growth and Enhanced Resiliency
Proven Growth and Enhanced Resiliency Growth Margin Improvement ▪ Proven track record of above-market growth ▪ Selective growth at accretive margins ▪ Strong pipeline of growth projects ▪ Contract and raw material management ▪ Innovative products 1,976 1,776 200 RMI1 Share of FY Mobility Sales 1,558
Slide 22: Sustainable Innovation at Axalta
Sustainable Innovation at Axalta DR. ROBERT ROOP Chief Technology Officer 22
Slide 23: Impressive History Of Innovation
Impressive History Of Innovation 1860s 1930s 1970s Spies Hecker and First automated color 2020s First mixing machine Standox companies started in Germany 1950s measurement: 1920s Color explosion spectrophotometer DuPont launched Digital revolution Duco—first sprayable coating Exciting Future 2010s N
Slide 24: Leading Talent Accelerates Sustainable Innovation
Leading Talent Accelerates Sustainable Innovation Global Innovation Center, Philadelphia, USA 23 Prestigious R&D Awards Over the Past Five Years 1,000 Active Patents & Pending Applications 4 As a leading global supplier of high Major R&D Centers performance, durable coatings, we embrace our responsi
Slide 25: Refinish Innovation
Refinish Innovation Key Benefits to Customers ▪ Industry-leading digital color measurement technology Color Match ▪ Improves color match accuracy by up to 25% Leadership ▪ Eliminates sample spray out which reduces VOC emissions and carbon footprint ▪ 1.5 coat application results in less consumption
Slide 26: Industrial Innovation
Industrial Innovation Electrification Building and Construction Energy Production, Transmission and e-Mobility Primer & Enamel Coatings For Cabinetry High performance electrical insulation materials for energy and e-mobility markets Luxury Wire Enamels Impregnating Resins Electrical Steel Coatings V
Slide 27: Mobility Innovation
Mobility Innovation Advanced Product Portfolio Next Generation of Paint Application Low Carbon Axalta NextJet™ – Bringing Together Paint and Process Technology Footprint Sustainable As compared to conventional two-pass spray process for tutone colors, Axalta NextJet™ digital paint maskless technolog
Slide 28: Innovation Summary
Innovation Summary History of industry- $200M annual 80% of new product leading product investment in platforms deliver innovations with technology drives sustainability 23 R&D awards over growth advantages by 2030 past five years 28
Slide 29: Financial Guidance
Financial Guidance CARL ANDERSON Chief Financial Officer 29
Slide 30: 2026 Financial Targets and Assumptions
2026 Financial Targets and Assumptions GROWTH 2026 Target: Assumption: in high-margin segments $5.7B ▪ Includes organic and inorganic contribution >$500M Net Sales1 MARGIN2 ENHANCEMENT 2026 Target: Assumptions: through business simplification >$1.2B ▪ 35% Adj. EBITDA conversion and operational excel
Slide 31: Net Sales
Net Sales Net Sales Expectations Performance Coatings $5.7B $50M ▪ $125M+ inorganic net sales $150M ▪ Pricing focus $50M ▪ Continued success of body shop $250M conversions and growth of adjacencies $5.2B ▪ Industrial market growth of 2% - 3%1 Mobility Coatings ▪ Modest global Light Vehicle productio
Slide 32: Adjusted EBITDA
Adjusted EBITDA Adjusted EBITDA and Adjusted EBITDA Margin Expectations ($ in millions) ▪ Driving >35% Adjusted >$1,200 EBITDA conversion on $1,0651 incremental revenue $951 ▪ $75 million savings from transformational initiatives >21% 20%1 ▪ $50 million savings from operational improvements 18.4% an
Slide 33: Driving >$2B of Cumulative Operating Cash Flow through 2026
Driving >$2B of Cumulative Operating Cash Flow through 2026 Focused on Growth and Shareholder Value Creation 2024–2026 Target Capital Allocation Net Leverage Ratio1 Progression 25% Cumulative 3.8x 60% Operating Cash Flow 2.9x Debt Reduction 15% >$2B 2.0x–2.5x Capex M&A and Share Repurchase Net Lever
Slide 34: Return on Invested Capital
Return on Invested Capital After-Tax Return on Invested Capital1 ~15% 12.6% ▪ Focus on improving ROIC 11.3% ▪ Profitable growth and 9.8% improving asset utilization ▪ Investment decisions focused on asset efficiency 2022 2023 2024E 2026E (1) ROIC = NOPAT / average of the opening and closing balance
Slide 35: Financial Summary
Financial Summary $ >$1.5B free cash >60% ~15% ROIC flow providing Adjusted Diluted driving value deployment EPS Growth creation optionality 35
Slide 36: Closing
Closing 36
Slide 37: Elements of Strategic Value Creation
Elements of Strategic Value Creation EXECUTE ADD OPPORTUNISTICALLY “A PLAN” BOLT-ONS EVALUATE PORTFOLIO 2026 A Plan Focus organization Supplement organic growth Review portfolio for on culture, customers, with inorganic opportunities opportunities to drive greater operations, innovation and where we
Slide 38: Reasons to Believe
Compelling Investment Thesis Shifting culture to higher degree of ownership and 1 accountability to achieve well-defined A Plan targets through 2026; proven results in 2023 Reasons to Believe Transforming and managing portfolio optimization GROWTH 2 while exploring M&A as catalyst to advance profita
Slide 39: Question & Answer Session
Question & Answer Session 39
Slide 40: Appendix
Appendix 40
Slide 41: Adjusted EBITDA Reconciliation
Adjusted EBITDA Reconciliation ($ in millions) FY 2023 FY 2022 Net income $ 269 $ 192 Interest expense, net 213 140 Provision for income taxes 86 65 Depreciation and amortization 276 303 EBITDA 844 700 A Debt extinguishment and refinancing-related costs 10 15 B Termination benefits and other employe
Slide 42: Adjusted EBITDA Reconciliation (cont’d)
Adjusted EBITDA 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 e
Slide 43: Adjusted Net Income Reconciliation
Adjusted Net Income Reconciliation ($ in millions) FY 2023 Net income $ 269 Less: Net income attributable to noncontrolling interests 2 Net income attributable to common shareholders 267 A Debt extinguishment and refinancing-related costs 10 B Termination benefits and other employee-related costs 17
Slide 44: Adjusted Net Income Reconciliation (cont'd)
Adjusted Net Income 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
Slide 45: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation ($ in millions) FY 2023 FY 2022 Cash provided by operating activities $575 $294 Purchase of property, plant and equipment (138) (151) Interest proceeds on swaps designated as net investment hedges 10 20 Free cash flow $447 $163 45
Slide 46: Return On Invested Capital
Return On Invested Capital ($ in millions) Year Ended December 31, 2023 2022 Adjusted EBIT 674 565 Adjusted Tax Rate(1) 24.1% 22.3% NOPAT(2) 512 439 Total debt, opening balance 3,704 3,830 Axalta’s shareholders’ equity, opening balance 1,454 1,493 Less: Cash and Cash Equivalents, opening balance 645
Slide 47: Adjusted EBIT Reconciliation
Adjusted EBIT Reconciliation ($ in millions) FY 2023 FY 2022 Income from operations 588 423 Other expense, net 20 26 Total 568 397 A Debt extinguishment and refinancing-related costs 10 15 B Termination benefits and other employee-related costs 17 24 C Acquisition and divestiture-related costs 3 3 D
Slide 48: Adjusted EBIT Reconciliation (cont’d)
Adjusted EBIT 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 est