Axalta’s third quarter 2023 net sales increased 5.7 per cent year-on-year to US$1.3 billion, driven mainly by a 6.3 per cent higher average price-mix and foreign currency translation benefit of 2.2 per cent. Volumes declined by 2.8 per cent as strong growth in Mobility Coatings was more than offset by declines in Performance Coatings, which included a modest reduction in Refinish volumes year-on-year.
Income from operations increased US$40 million year-on-year to US$163 million due to a strong price-mix and improved variable costs, offset partially by higher labour expense and costs related to productivity investments. Adjusted EBIT increased US$40 million year-on-year to US$188 million. Year-on-year operating margins increased 250 basis points and adjusted EBIT margin grew 240 basis points.
Net income attributable to controlling interests in the third quarter of 2023 was US$73 million, compared to US$62 million in the same period last year. Adjusted net income in the third quarter of 2023 was US$99 million compared to US$86 million in Q3 2023.
Third quarter 2023 cash provided by operating activities was US$210 million versus US$80 million in Q3 2022, led by earnings growth and improvements in working capital. Free cash flow totalled US$182 million compared to US$51 million in the same period last year.
Axalta ended the quarter with cash and cash equivalents of US$606 million and total liquidity of US$1.1 billion. Net debt to trailing 12 month adjusted EBITDA ratio (total net leverage ratio) was 3.2 times at quarter-end versus 3.6 times as of 30 June 2023.
The company instituted a share buyback scheme, repurchasing approximately 1.8 million common shares during the quarter for US$50 million. After the quarter close, Axalta acquired Andre Koch, a long-term Refinish distribution partner in Switzerland.
Performance Coatings third quarter 2023 net sales were US$856 million, up 2.2 per cent from the prior year period. The increase in net sales was driven mainly by a 6.3 per cent better price-mix and foreign currency translation benefit of 2.5 per cent, with a 6.6 per cent offset from lower volumes. Refinish volumes were modestly lower year-on-year, as stability in Axalta’s premium segment was more than offset by the de-prioritisation of certain low-margin products.
The Performance Coatings segment generated adjusted EBIT of US$135 million in the third quarter compared to US$122 million in the same period last year, with associated margins of 15.8 per cent and 14.5 per cent, respectively. The increased adjusted EBIT and margin were driven by strong pricing and variable cost deflation, which more than offset higher labour expense.
“This was a solid quarter for Axalta,” said Chris Villavarayan, CEO and President of Axalta. “We came together as one global team and executed very well. I am extremely proud of the team’s efforts and earnings results for the quarter, but I want to reiterate that Axalta’s transformation journey is just beginning. We have made investments into the business this year, which will begin to unlock the earnings power of the enterprise.”