Axalta Coating Systems Ltd. · NYSE:AXTA
Axalta Coating Systems — Investor Presentation (August 2016)
55 slides from Axalta Coating Systems's investor presentation, Aug 10, 2016
Slide 1: Axalta Coating Systems Ltd. Investor Presentation Third Quarter 2016
Axalta Coating Systems Ltd. Investor Presentation Third Quarter 2016 Exhibit 99.1
Slide 2: Forward-Looking Statements
PROPRIETARYAXALTA COATING SYSTEMS 2 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 2016 financial proje
Slide 3: Axalta – A Global Leader In Coatings
PROPRIETARYAXALTA COATING SYSTEMS Refinish $1.7 B Industrial $0.7 B Body Shops Light Vehicle $1.3 B CV $0.4 B Performance Coatings General Industrial, Electrical Insulation, Architectural Transportation Coatings Adjusted EBITDA1,2 - $539 M (23% Margin) Adjusted EBITDA1,2 - $328 M (19% Margin) Light
Slide 4: Key Goals For 2016
AXALTA COATING SYSTEMS Key Goals For 2016 Grow the Business Productivity Initiatives to Improve Cost Structure Focus on Operating Improvement Extend Core Strengths & Globalize • Net sales growth of 4-6% ex-currency • Expect to outgrow our end-markets • $60 million in combined 2016 cost savings • Axa
Slide 5: Axalta Operates Fundamentally Strong Businesses
PROPRIETARYAXALTA COATING SYSTEMS 5 Axalta Operates Fundamentally Strong Businesses A Global Leader in Our Markets Significant Competitive Advantages A Service-Led Business Model Structurally Attractive End Markets Highly Variable Cost Structure; Low Capital Intensity
Slide 6: A Global Leader In Our Markets
PROPRIETARYAXALTA COATING SYSTEMS 6 A Global Leader In Our Markets Axalta’s Global Scale Enables Market Leadership ____________________________ Information as of and for FY 2015, all sales data refers to Net Sales 1. Mexico is included in Latin America 2. Includes 9 JV facilities. 36 manufacturing
Slide 7: A Global Leader In Our Markets
PROPRIETARYAXALTA COATING SYSTEMS Peer 1 24% Axalta 19% Peer 2 18% Peer 3 13% Other 26% 7 A Global Leader In Our Markets ~90% of Sales from Markets Where Axalta Has #1 or #2 Global Share Axalta 25% Peer 1 20% Peer 2 11% Peer 3 11% Other 33% Performance Coatings: Refinish Transportation Coatings: Lig
Slide 8: Significant Competitive Advantages
PROPRIETARYAXALTA COATING SYSTEMS 8 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 since 1866 Broad brand portfolio 1,200+
Slide 9: Well-Positioned to Benefit From Industry Trends
PROPRIETARYAXALTA COATING SYSTEMS Industry Trends Axalta Technologies OEM Vehicle Light-Weighting Broad substrate coating applicability for next generation materials Growth in Multi-Shop Operators (“MSO”) Axalta’s waterborne technology improves MSO productivity and our national coverage enables
Slide 10: Axalta Employs A Service-Led Business Model
PROPRIETARYAXALTA COATING SYSTEMS 10 Axalta Employs 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 a new vehicle’s cost Industrial: Critical to function, durabili
Slide 11: Structurally Attractive Global End-Markets
PROPRIETARYAXALTA COATING SYSTEMS 11 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 economies and middle classes; ongoing consumer strength in developed
Slide 12: Highly Variable Cost Structure And Low Capital Intensity
PROPRIETARYAXALTA COATING SYSTEMS 12 Highly Variable Cost Structure And Low Capital Intensity ~50% of COGS come from variable raw material inputs Utilize temporary labor to enable wage structure flexibility Toggle other costs as needed in a downturn, including both variable and semi-fixed Low
Slide 13: Axalta's Future State: A Global, High-Performing, Coatings Leader
PROPRIETARYAXALTA COATING SYSTEMS Axalta’s Future State: A Global, High-Performing, Coatings Leader Consistent Growth Margin Expansion Effective Capital Allocation Enhanced Shareholder Returns Axalta’s Vision To maximize our customers’ productivity and product functionality by offering them innovati
Slide 14: Axalta Aims To Grow The Business While Refining The Cost Structure
PROPRIETARYAXALTA COATING SYSTEMS 14 Axalta Aims To Grow The Business While Refining The Cost Structure Visible Growth Supported by Clear Strategies & Enhanced Resources Focus on Emerging Markets for Long Term Opportunity Globalizing Existing Products to Reach Underserved Markets Optimizing Procurem
Slide 15: Cost Initiatives To Enhance Productivity & Efficiency
PROPRIETARYAXALTA COATING SYSTEMS 15 Cost Initiatives To Enhance Productivity & Efficiency Fit-For-Growth (Europe): $100 million targeted savings • Right-size staffing levels + wage & benefit restructuring • Rationalize manufacturing and logistics • Invest in automation Initial carve-out actions: •
Slide 16: Axalta's Evolution Is Grounded In Fundamental Goals
PROPRIETARYAXALTA COATING SYSTEMS 16 Axalta’s Evolution Is Grounded In Fundamental Goals Leverage our culture of accountability and focus on operational excellence Axalta’s Strategy Grow in targeted industrial coatings segments via organic growth and selective acquisitions Move into attractive adjac
Slide 17: Axalta's Strategy: Grow Core Products & Markets
PROPRIETARYAXALTA COATING SYSTEMS 17 Axalta’s Strategy: Grow Core Products & Markets Refinish ____________________ Source: Axalta estimates Strong Momentum Driven by Customer-Centric Approach Axalta MSO Market Share 2013 Today Light Vehicle Axalta is gaining share by partnering with market winners
Slide 18: Axalta's Strategy: Accelerate Growth In Emerging Markets
PROPRIETARYAXALTA COATING SYSTEMS $14.3 $15.6 $17.1 $18.5 $20.1 2014E 2015E 2016E 2017E 2018E Emerging Markets, 31% 18 Axalta’s Strategy: Accelerate Growth In Emerging Markets China Example Light Vehicles, Per 1,000 People China Car Parc (thousands) 743 263 230 129 61 19 United States Central & East
Slide 19: Axalta's Strategy: Targeted Industrial Coatings Expansion
PROPRIETARYAXALTA COATING SYSTEMS Architectural 19 Axalta’s Strategy: Targeted Industrial Coatings Expansion Growth from Leveraging Our Product Portfolio in Underserved Markets Strong product portfolio in powder, liquid, and e-coat Implemented global end-market business structure to capitalize o
Slide 20: Axalta's Strategy: Focus On Operating Excellence
PROPRIETARYAXALTA COATING SYSTEMS Axalta’s Strategy: Focus On Operating Excellence Balanced manufacturing footprint and capacity Ongoing productivity investments Salesforce reorganization R&D / Technology enablers Enhanced IT tools Procurement roadmap Process improvement Leadership and
Slide 21: Financial Overview
Financial Overview
Slide 22: Connecting Performance To Shareholder Returns
PROPRIETARYAXALTA COATING SYSTEMS 22 Axalta Is Focused On Connecting Performance To Shareholder Returns Underlying Market Growth Axalta Growth Initiatives Operational Improvements M&A Structural demand growth Industry trends favor global suppliers Momentum driven by customer-centric approach L
Slide 23: Our Results To Date Have Shown Solid Progress
PROPRIETARYAXALTA COATING SYSTEMS Our Results To Date Have Shown Solid Progress Encouraging Margin Progress, but Currency Mutes Net Sales and EBITDA Net Sales Adjusted EBITDA ($ in millions) ($ in millions) 23 $3,500 $3,700 $3,900 $4,100 $4,300 $4,500 $4,700 2010 2011 2012 2013 2014 2015 Net Sales N
Slide 24: Q2 Consolidated Results
AXALTA COATING SYSTEMS Q2 Consolidated Results Financial Performance Commentary 24 Strong net sales performance Continued net sales growth in North America and EMEA, while emerging market economies remain challenged Volume growth across all regions in Performance Coatings; Transportation Coating
Slide 25: The Axalta Way: Driving Towards World Class Productivity
PROPRIETARYAXALTA COATING SYSTEMS The Axalta Way: Driving Towards World Class Productivity Our Goal: $200 million of Adjusted EBITDA savings on a run-rate basis exiting 2017 Cumulative Productivity Initiative Savings ($ in millions) The Axalta Way: “A focused approach to doing business that drives p
Slide 26: Our Financial Guiding Principles
PROPRIETARYAXALTA COATING SYSTEMS 26 Our Financial Guiding Principles Managing the Capital: Capex Prioritization Metrics-Based Management: Driving the Business with Data Capital Allocation: Improved ROIC Financial Optimization
Slide 27: Prioritization Of Capital Spending; Focus On High IRR Capex
PROPRIETARYAXALTA COATING SYSTEMS Prioritization Of Capital Spending; Focus On High IRR Capex Maintenance capital: $50+ million per year Growth investments 4 capex projects completed in 2015 Wuppertal, Germany Jiading, China Mexico City, Mexico Guarulhos, Brazil Productivity investme
Slide 28: Effective Capital Allocation Should Drive Improved Returns
PROPRIETARYAXALTA COATING SYSTEMS Effective Capital Allocation Should Drive Improved Returns 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 Q2 2016
Slide 29: Capital Allocation: Driving Returns With Best Uses Of Excess Cash Flow
PROPRIETARYAXALTA COATING SYSTEMS Capital Allocation: Driving Returns With Best Uses Of Excess Cash Flow Organic growth options: Generally the “highest and best use” In-plant productivity investment Growth with existing markets with strong incremental margins M&A: Discipline is key to improv
Slide 30: Capitalization, Debt And Liquidity Summary
PROPRIETARYAXALTA COATING SYSTEMS Capitalization 30 Debt And Liquidity Summary Net Leverage (1) Assumes exchange rate of $1.11 USD/Euro (2) Indebtedness per balance sheet less cash & cash equivalents divided by LTM Q2 2016 Adjusted EBTIDA ($ in millions) @ 6/30/2016 Maturity Cash and Cash Equivalent
Slide 31: Full Year 2016 Guidance
AXALTA COATING SYSTEMS Full Year 2016 Guidance 31 2016 Benefits from Ongoing Growth and Maturity of Productivity Programs Net sales expected to be essentially flat as- reported based on anticipated currency headwinds; constant currency net sales expected to benefit from volume growth and positive
Slide 32: Performance Coatings: Refinish
Performance Coatings: Refinish
Slide 33: The Global Refinish Market Is Growing
PROPRIETARYAXALTA COATING SYSTEMS The Global Refinish Market Is Growing Projected Industry Sales ($ in billions) Asia Pacific EMEA North America 6.3% 0.8% 2.2% 2.6%$2.4 $2.5 $2.6 $2.6 $2.7 $3.2 $3.2 $3.3 $3.4 $3.5 $0.9 $1.0 $1.0 $1.0 $1.0 $1.6 $1.8 $1.9 $2.0 $2.1 2015E 2016E 2017E 2018E 2019E ’15E –
Slide 34: Axalta Has A Very Strong Position In Refinish Globally
PROPRIETARYAXALTA COATING SYSTEMS Axalta Has A Very Strong Position In Refinish Globally Global Share Position Key Market Trends Axalta 25% Peer 1 20% Peer 2 11% Peer 3 11% Peer 4 5% Other 28% Refinish Industry Sales: ~$7.4 billion #1 Drivers include size of car parc, miles driven, and accident ra
Slide 35: Refinish Products: The Paint Layers
PROPRIETARYAXALTA COATING SYSTEMS 35 Refinish Products: The Paint Layers Clearcoat Protects basecoat from the elements Gives automobile its lustrous look Basecoat Creates automobile’s color and aesthetics Provides corrosion protection Waterborne and solventborne technology options Primer S
Slide 36: Performance Coatings: Industrial Coatings
Performance Coatings: Industrial Coatings
Slide 37: The Overall Industrial Coatings Market is Expected to Grow
PROPRIETARYAXALTA COATING SYSTEMS ’15E-‘19E CAGR($ in billions) Asia Pacific EMEA North America 6.2% 4.0% 3.0% 3.5% 4.9% $6.8 $7.0 $7.3 $7.5 $7.8 $8.1 $10.0 $10.3 $10.6 $10.9 $11.3 $11.6 $1.7 $1.8 $1.8 $1.9 $2.0 $2.1 $21.2 $22.5 $23.9 $25.4 $27.0 $28.6 2015E 2016E 2017E 2018E 2019E 2020E $50.4 _____
Slide 38: Industrial Coatings: A $28B Market Opportunity For Axalta
PROPRIETARYAXALTA COATING SYSTEMS General Industrial $15.0 Electrical Insulation $2.0 Architectual Extrusions $1.5 ACE $1.5 Oil & Gas $3.5 Coil $4.5 Industrial Coatings: A $28 B Market Opportunity For Axalta Product Examples Market Drivers General Industrial Metal furniture Appliances Shelving
Slide 39: Axalta's Industrial Business Today
PROPRIETARYAXALTA COATING SYSTEMS General Industrial 53% Architectural 16% EIS 14% ACE 10% Oil & Gas 7% 2015 Net Sales by Segment Business Overview Steady volume growth driven by global GDP China growth expected at least mid-single digits Architectural market expected to grow steadily Supplier c
Slide 40: Growth Priorities & Strategies: Where We Are Going
PROPRIETARYAXALTA COATING SYSTEMS Growth Priorities & Strategies Axalta Industrial: Where We Are Going… Agriculture, Construction & Earth Moving Equipment (ACE) Expand approval portfolio with multiple coatings technologies Utilize global footprint to target new business in all regions Architectu
Slide 41: Transportation Coatings Overview
Transportation Coatings Overview
Slide 42: Segment Overview
PROPRIETARYAXALTA COATING SYSTEMS Segment Overview Global co-lead 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
Slide 43: Transportation Summary
PROPRIETARYAXALTA COATING SYSTEMS 19% 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 la
Slide 44: Structurally Growing Markets
PROPRIETARYAXALTA COATING SYSTEMS Structurally Growing Markets 44 Market Growth: Light Vehicle Market Growth: Commercial Vehicle _____________________________ Source: Orr & Boss; Axalta estimates Asia Pacific Latin America EMEA North America 3.6% 6.5% 2.6% 0.2% 3.0% 1.2 1.3 1.3 1.2 1.2 2.0 2.1 2.1 2
Slide 45: Key Market Trends
PROPRIETARYAXALTA COATING SYSTEMS 45 Key Market Trends 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 uncer
Slide 46: Transforming A Global Coatings Supplier
PROPRIETARYAXALTA COATING SYSTEMS Axalta 19% Transforming A Global Coatings Supplier Global Share 46 Axalta 31% Axalta is a global leader in transportation coatings Globalizing and harmonizing our coatings technology Bringing brighter colors and more effects to color design Aligning global R
Slide 47: Vision Is Above-Market Growth
PROPRIETARYAXALTA COATING SYSTEMS Vision Is Above-Market Growth Gain share with existing customers Grow underserved customers and regions Align product technology to evolving customer and market needs Increase content per vehicle Leverage “what good looks like” into new regions, customers
Slide 48: Segmenting Our Markets
PROPRIETARYAXALTA COATING SYSTEMS Segmenting Our Markets Light Vehicle HDT Specialty OEM Bus Rail General Aviation Body Builders & Trailers Estimated Market Size $8,100M $500M $550M $200M $600M $45M $400M Product Examples Passenger cars Pick Ups / SUVs Light commercial vehicles Component parts
Slide 49: Segment Specific Strategies In Our Target Markets
PROPRIETARYAXALTA COATING SYSTEMS 49 We Are Growing With Segment Specific Strategies In Our Target Markets China expansion to mainstream and economy segments Leverage high speed rail success SprayFlex FS interior floor coatings Leverage global accounts Gain share in tier part suppliers C
Slide 50: Appendix
APPENDIX
Slide 51: Q2 Performance Coatings Results
AXALTA COATING SYSTEMS Q2 Performance Coatings Results Financial Performance Commentary Net Sales Variance 51 Solid net sales led by Refinish volumes Strong volume growth in Refinish across all regions; Industrial growth driven by EMEA and Asia Pacific Price increases in Refinish in most regions
Slide 52: Q2 Transportation Coatings Results
AXALTA COATING SYSTEMS Q2 Transportation Coatings Results Financial Performance Net Sales Variance 52 Commentary Net sales pressured by Commercial volumes Strong volume growth in North America and EMEA Light Vehicle, offset largely by lower volumes in Latin America and Asia Pacific Lower volumes
Slide 53: Consolidated Adjusted EBITDA Reconciliation
PROPRIETARYAXALTA COATING SYSTEMS Consolidated Adjusted EBITDA Reconciliation 53 ___________________________ Note: Numbers might not foot due to rounding. LTM ($ in millions) FY 2015 Q1 2015 Q2 2015 Q1 2016 Q2 2016 6/30/2016 Net Income (Loss) $98 $47 (24) $31 $50 $156 Interest Expense 197 50 49 50 4
Slide 54: Consolidated Adjusted EBITDA Reconciliation (cont'd)
PROPRIETARYAXALTA COATING SYSTEMS 54 Consolidated Adjusted EBITDA Reconciliation (cont’d) A. In FY 2015 and 2Q 2016, we prepaid $100.0 million of the outstanding principal on the New Dollar Term Loan and recorded non-cash pre-tax losses on extinguishment of $3 million and $2 million, respectively. B
Slide 55: Thank you!
Thank you! Investor Contact: Chris Mecray, VP IR Christopher.Mecray@axaltacs.com 215-255-7970
Axalta Coating Systems — Investor Presentation (August 2016) on 6ix