Axalta Coating Systems Ltd. · NYSE:AXTA

Axalta Coating Systems — Investor Presentation (May 2017)

56 slides from Axalta Coating Systems's investor presentation, May 8, 2017

  1. Slide 1: Axalta Coating Systems Investor Presentation Second Quarter 2017

    Axalta Coating Systems Ltd. Investor Presentation Second Quarter 2017 Exhibit 99.1

  2. Slide 2: Legal Notices

    PROPRIETARYAXALTA COATING SYSTEMS 2 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 2017 f

  3. Slide 3: Celebrating 150+ Years Of Coatings Excellence

    PROPRIETARYAXALTA COATING SYSTEMS 2014-2017  November 2014 IPO (NYSE: AXTA)  Expand capacity in China, Germany, Mexico and Brazil  Build Asia-Pacific Technology Center in Shanghai  Acquire Metalak (Netherlands), ChemSpec, Dura Coat & United Paints interior plastics division (U.S.), HIPIC (Malays

  4. Slide 4: Corporate Transformation: Carve-out & The First Two Years

    PROPRIETARYAXALTA COATING SYSTEMS Axalta’s Corporate Transformation: Carve-out & The First Two Years  Completed separation  New leadership team  Initial growth strategy  Incentives realigned  Global re-branding N o n -Core D iv is io n The Carve Out Run & Maintain Regional Structure Capital Con

  5. Slide 5: Post Carve-Out: The Second Two Years

    PROPRIETARYAXALTA COATING SYSTEMS Post Carve-Out: The Second Two Years O perati n g T ransformat io n Focused on Profitable Growth The Axalta Way First M&A Deals Pushing Through Roadblocks New Operations Leadership 2015 - 2016 5 Carlyle Sell-down / New Ownership Base Board Transformation Leadership

  6. Slide 6: Axalta – A Global Leader In Coatings

    PROPRIETARYAXALTA COATING SYSTEMS Refinish $1.7 B (41%) Industrial $0.7 B (18%) Body Shops Light Vehicle $1.3 B (33%) CV $0.4 B (8%) Performance Coatings General Industrial, Electrical Insulation, Architectural Transportation Coatings Adjusted EBITDA1,2 - $554 M (23% Margin) Adjusted EBITDA1,2 - $35

  7. Slide 7: 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 innovative

  8. Slide 8: Grow the Business, Refine The Cost Structure

    PROPRIETARYAXALTA COATING SYSTEMS Grow the Business, Refine The Cost Structure  Growth Supported by Clear Strategies, Greater Resources  Market Share Gains in Core Markets From Innovation, Service Execution  Emerging Markets Focus for Long Term Opportunity  Globalizing Existing Products to Reach

  9. Slide 9: Cost Initiatives To Enhance Productivity & Efficiency

    PROPRIETARYAXALTA COATING SYSTEMS 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: • Res

  10. Slide 10: Key Goals For 2017

    PROPRIETARYAXALTA COATING SYSTEMS Key Goals For 2017 Outgrow our End-markets Stated Objective Expected Results Drive Excellent Customer Service & Innovation Maintain Active Operating Cost Discipline Execute on Structural Savings Disciplined Capital Allocation Continue FCF and Financial Discipline 

  11. Slide 11: Axalta Operates Fundamentally Strong Businesses

    PROPRIETARYAXALTA COATING SYSTEMS Axalta Operates Fundamentally Strong Businesses Global Market Leadership Positions Significant Competitive Advantages A Service-Led Business Model Structurally Attractive Global End Markets Highly Variable Cost Structure & Low Capital Intensity 11

  12. Slide 12: Global Market Leadership Positions

    PROPRIETARYAXALTA COATING SYSTEMS Global Market Leadership Positions Axalta’s Global Scale Enables Market Leadership _______________________________________________ Information as of FY 2016, all sales data refers to Net Sales 1. Mexico is included in Latin America 2. Includes 12 JV facilities.  44

  13. Slide 13: Global Market Leadership Positions

    PROPRIETARYAXALTA COATING SYSTEMS Global Market Leadership Positions Peer 1 Axalta Peer 2 Peer 3 Other ~90% of Sales from Markets Where Axalta Has #1 or #2 Global Share Axalta Peer 1 Peer 2 Peer 3 Other Performance Coatings: Refinish Transportation Coatings: Light Vehicle #1 ________________________

  14. Slide 14: Significant Competitive Advantages

    PROPRIETARYAXALTA COATING SYSTEMS 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 global brand portfolio  1

  15. Slide 15: 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 shop productivity and our national coverage enabl

  16. Slide 16: A Service-Led Business Model

    PROPRIETARYAXALTA COATING SYSTEMS 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, durability, safety & compl

  17. Slide 17: Structurally Attractive Global End-Markets

    PROPRIETARYAXALTA COATING SYSTEMS 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 ma

  18. Slide 18: Highly Variable Cost Structure & Low Capital Intensity

    PROPRIETARYAXALTA COATING SYSTEMS Highly Variable Cost Structure & Low Capital Intensity  ~45-55% 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 Ca

  19. Slide 19: Axalta's Evolution Is Grounded In Fundamental Goals

    PROPRIETARYAXALTA COATING SYSTEMS Axalta’s Evolution Is Grounded In Fundamental Goals Focus on operational excellence and foster a culture of accountability Axalta’s Strategy Grow in targeted industrial coatings segments via organic growth and selective acquisitions Move into attractive adjacencies

  20. Slide 20: Strategy: Grow Core Products & Markets

    PROPRIETARYAXALTA COATING SYSTEMS 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 

  21. Slide 21: Strategy: Accelerate Growth In Emerging Markets

    PROPRIETARYAXALTA COATING SYSTEMS Emerging Markets, 29% 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 & Eastern Europe Mexico Brazil China India Damaged Vehicles Per 1M km

  22. Slide 22: Strategy: Targeted Industrial Coatings Expansion

    PROPRIETARYAXALTA COATING SYSTEMS Architectural 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 on o

  23. Slide 23: Strategy: Focus On Operating Excellence

    PROPRIETARYAXALTA COATING SYSTEMS  Ongoing productivity – The Axalta Way  Operating system design and rollout  R&D / Innovation enablers  Salesforce refinement & investment  Balanced manufacturing footprint  Enhanced IT tools  Complexity reduction Leadership & Culture  Tone set by senior lea

  24. Slide 24: Financial Overview

    Financial Overview

  25. Slide 25: Axalta Today: Shifting Gears To Larger Projects

    PROPRIETARYAXALTA COATING SYSTEMS Axalta Today: Shifting Gears To Larger Projects Underlying Market Growth Core Market Growth Operational Improvements Tuck-in Organic Levers For Growth Inorganic / M&AMargin Levers Growth + Margins + Allocation Focus = Best-in-class Shareholder Returns 25 Optimized C

  26. Slide 26: Q1 Consolidated Results

    AXALTA COATING SYSTEMS Q1 Consolidated Results Financial Performance Commentary Net Sales Variance $1,008 $956 FXQ1 2016 Q1 2017PriceVolume 26 Net sales led by volume growth  Solid volume growth across both segments in all regions  Acquisitions contributed 4.5% to overall volume growth  Positive

  27. Slide 27: The Axalta Way: Driving Towards World Class Productivity

    PROPRIETARYAXALTA COATING SYSTEMS Cumulative Productivity Savings ($ millions) The Axalta Way: “A focused approach to doing business that drives profitability by improving our efficiency, productivity, and growth opportunities every day, wherever we do business” 2017E20162015 2018E2014 ~$150 $89 ~$2

  28. Slide 28: Prioritization Of Capital Spending; Focus On High IRR Capex

    PROPRIETARYAXALTA COATING SYSTEMS  Major Capex projects completed in 2016  Asia Pacific Technology Center  Argentina – New Manufacturing Site  Major Capex projects planned for 2017  Global Innovation Center  Jiading – WB Expansion  Savli – OEM Manufacturing & Laboratory Capital Expenditures C

  29. Slide 29: Effective Capital Allocation Should Drive Improved Returns

    PROPRIETARYAXALTA COATING SYSTEMS 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 Q4 2016  Axalta’s ROIC is penalized by the February 2013 LBO and re

  30. Slide 30: Axalta Today: Focus On Capital Allocation

    PROPRIETARYAXALTA COATING SYSTEMS Debt Reduction Organic Investment Capex / R&D M & A Dividends - No current dividend Share Repurchases - Offset dilution - Opportunistic buys Leverage in excess of target and no immediate investment? Investment opportunity that exceeds hurdle rate? Share price greate

  31. Slide 31: Debt and Liquidity Summary

    AXALTA COATING SYSTEMS Debt and Liquidity Summary Capitalization 31 Comments (1) Assumes exchange rate of $1.073 USD/Euro (2) Total Net Debt = Total Debt minus Cash and Cash Equivalents (3) Total Net Leverage = Total Net Debt / LTM Adjusted EBITDA ($ in millions) @ 3/31/2017 Maturity Cash and Cash E

  32. Slide 32: Company Overview: Acquisitions

    AXALTA COATING SYSTEMS Target GeographyEnd-Market Company Overview Leading local producer of refinish coatings in Malaysia and Indonesia Leading North America supplier of automotive interior coatings; strong position in North American OEM’s Leading independent supplier of coil coatings in North Amer

  33. Slide 33: Full Year 2017 Guidance

    AXALTA COATING SYSTEMS Full Year 2017 Guidance  Net sales growth includes incremental M&A contribution of 2-3% from completed transactions  Margin expansion driven by volume, price, and ongoing cost reduction initiatives  Headwinds to margins from moderate input cost inflation, modest sales mix c

  34. Slide 34: Performance Coatings: Refinish

    Performance Coatings: Refinish

  35. Slide 35: Axalta Global Refinish Dynamics

    PROPRIETARYAXALTA COATING SYSTEMS Projected Industry Sales ($ in billions) Asia Pacific EMEA North America 4.7% 3.4% 1.5% 2.3% ’16–‘20E CAGR ___________________________________ Source: Orr & Boss; Axalta estimates Latin America 2.7% Axalta Global Refinish Dynamics  Strong heritage through Herberts

  36. Slide 36: Axalta Has A Very Strong Position In Refinish Globally

    PROPRIETARYAXALTA COATING SYSTEMS Global Share Position Key Market Trends Refinish Industry Sales: ~$7.7 billion  Drivers include size of car parc, miles driven, and accident rates  Industry dynamics favor stable competition in most markets  Focus on innovation and service to increase body shop p

  37. Slide 37: Refinish Products: The Paint Layers & Process

    PROPRIETARYAXALTA COATING SYSTEMS Refinish Products: The Paint Layers & Process Clearcoat: Protects basecoat from the elements, gives automobile its lustrous look Basecoat: Creates automobile’s color and aesthetics Primer Surfacer: Protects automobile from visible and UV light, improves surface smoo

  38. Slide 38: Performance Coatings: Industrial Coatings

    Performance Coatings: Industrial Coatings

  39. Slide 39: The Overall Industrial Coatings Market is Expected to Grow

    PROPRIETARYAXALTA COATING SYSTEMS ’16-’20E CAGR($ in billions) Asia Pacific EMEA North America 6.7% 5.2% 3.2% 3.2% 5.4% _____________________________ Source: Orr & Boss; Axalta estimates Latin America The Overall Industrial Coatings Market is Expected to Grow 39 The Industrial Coatings Market $3.3 $

  40. Slide 40: Industrial Coatings Segments and Market Drivers

    PROPRIETARYAXALTA COATING SYSTEMS General Industrial $15.0 Electrical Insulation $2.0 Architectual $1.5 ACE $1.5 Coil $4.5 Oil & Gas $3.5 Product Examples Market Drivers General Industrial  Metal furniture  Appliances  Shelving/ racking  Electrical boxes  GDP  Industrial production Electrical

  41. Slide 41: Industrial Coatings Drivers

    PROPRIETARYAXALTA COATING SYSTEMS General Industrial 50% Architectural 19% Electrical Insulation 12% ACE 8% Coil 7% Oil & Gas 4% Net Sales by Segment Industrial Coatings Drivers Volume growth driven by global GDP and Industrial Production  China drives >40% of global industrial coatings consumption

  42. Slide 42: Growth Priorities & Strategies

    PROPRIETARYAXALTA COATING SYSTEMS Growth Priorities & Strategies Agricultural, Construction & Earthmoving Equipment (ACE)  Expand approval portfolio with multiple coatings technologies  Utilize global footprint to target new business in all regions Architectural  Market our powder coatings to arc

  43. Slide 43: Transportation Coatings Overview

    Transportation Coatings Overview

  44. Slide 44: Segment Overview

    PROPRIETARYAXALTA COATING SYSTEMS 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  Bus  Utility

  45. Slide 45: Transportation Coatings: Leading Global Supplier

    PROPRIETARYAXALTA COATING SYSTEMS  17% 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

  46. Slide 46: Structurally Growing Markets

    PROPRIETARYAXALTA COATING SYSTEMS Market Growth: Light Vehicle Market Growth: Commercial Vehicle _____________________________ Source: Orr & Boss; Axalta estimates Asia Pacific Latin America EMEA North America 3.9% 3.1% 2.3% 1.5% 2.9% ($ in billions) ’16–‘20E CAGR ($ in millions) Asia Pacific EMEA N

  47. Slide 47: Key Market Trends

    PROPRIETARYAXALTA COATING SYSTEMS  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 uncertainty (Brazil, Russi

  48. Slide 48: Transforming A Global Coatings Supplier

    PROPRIETARYAXALTA COATING SYSTEMS Global Share 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&D and product management around voice-of-customer  W

  49. Slide 49: Vision Is Above-Market Growth

    PROPRIETARYAXALTA COATING SYSTEMS  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, and markets Strategies Key Ta

  50. Slide 50: Segmenting Our Markets

    PROPRIETARYAXALTA COATING SYSTEMS Light Vehicle HDT Specialty OEM Bus Rail General Aviation Body Builders & Trailers Estimated Market Size $7,800M $600M $550M $200M $600M $45M $400M Product Examples Passenger cars Pick-ups / SUVs  Light commercial vehicles Component parts EM class 4-8 truck man

  51. Slide 51: Growth Strategies by Transportation Segment

    PROPRIETARYAXALTA COATING SYSTEMS  China expansion to mainstream and economy segments  Leverage high speed rail success  SprayFlex FSTM interior floor coatings  Leverage global accounts  Gain share in tier part suppliers  China growth via Kinlita JV  China HDT volume is three times NA  Lever

  52. Slide 52: The OEM Paint Process

    PROPRIETARYAXALTA COATING SYSTEMS Light Vehicle Coatings delivered to OEM E-Coat applied after pre-treat Primer, Basecoat & Clearcoat applied Quality inspections between layers 52 The OEM Paint Process

  53. Slide 53: Appendix

    APPENDIX

  54. Slide 54: Adjusted EBITDA Reconciliation

    AXALTA COATING SYSTEMS Adjusted EBITDA Reconciliation Note: Numbers might not foot due to rounding. 54 ($ in millions) FY 2016 Q1 2016 Q1 2017 LTM 3/31/2017 Net Income $48 $32 $66 $82 Interest Expense, net 178 50 36 164 Provision for Income Taxes 40 13 10 37 Depreciation & Amortization 322 76 82 328

  55. Slide 55: Adjusted EBITDA Reconciliation (cont'd)

    AXALTA COATING SYSTEMS Adjusted EBITDA Reconciliation (cont’d) 55 A. During the year ended December 31, 2016 we prepaid principal on our term loans, resulting in non-cash extinguishment losses of $10 million. Additionally, we amended our Credit Agreement and refinanced our indebtedness, resulting in

  56. Slide 56: Thank you!

    Thank you! Investor Contact: Chris Mecray, VP IR Christopher.Mecray@axaltacs.com 215-255-7970

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