Axalta Coating Systems reported higher sales but lower earnings for the third quarter, as weaker volumes in Performance Coatings and higher input and freight costs weighed on results. The coatings maker also reported record quarterly sales in its Mobility business and said net leverage had fallen to a company low.
The results come as Axalta remains focused on a proposed combination with AkzoNobel. Chief Executive Chris Villavarayan cited the combination as a potential source of value creation, while emphasizing execution and balance-sheet strength.
Key details
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Sales rose 2% year over year to $1.3 billion. Growth reflected higher volumes in three of Axalta’s four regions, favorable currency effects, acquisitions and positive price mix. Lower volumes, primarily in Europe, partly offset those gains.
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Mobility Coatings posted record quarterly sales. Axalta did not provide a segment sales figure in the results excerpt.
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Net income fell $15 million to $95 million, giving the company a 7.2% net income margin. Axalta attributed most of the year-over-year decline to an additional $14 million in merger- and acquisition-related expenses.
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Adjusted net income declined 6% to $136 million. Lower Performance Coatings volumes and higher raw-material and freight costs were partly offset by lower operating expenses, favorable price mix and reduced interest expense.
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Adjusted EBITDA was $282 million, down 4%, with a 21.5% margin. Diluted earnings per share fell to $0.44 from $0.51 a year earlier; adjusted diluted EPS was $0.63, down 6%. Axalta said lower volumes and higher variable costs pressured adjusted EPS, while lower interest expense provided an offset.
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Operating cash flow was $135 million, about even with the prior-year quarter. Free cash flow rose 3% to $92 million.
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Net leverage was 2.1 times, which Axalta described as the lowest level in its history. The company said ongoing deleveraging had also reduced interest expense.
What it means
Axalta’s sales growth and strong adjusted EBITDA margin came alongside weaker underlying earnings, particularly in Performance Coatings, and higher costs. The reported net income comparison was also affected by increased expenses tied to merger and acquisition activity. The results release refers to a proposed combination with AkzoNobel but does not provide transaction terms.