Axalta has announced its financial results for the second quarter 2022, which show net sales increased 9.6 per cent year-over-year, despite a negative 4.9 per cent foreign currency impact, led by record pricing and solid volume growth.
The company said net sales were US$1.24 billion, with year-over-year growth driven by 10 per cent higher average price-mix, a 3.6 per cent mergers and acquisitions benefit, and 2.7 per cent higher volumes.
Income from operations totalled US$103.6 million versus US$190.4 million in Q2 2021. Axalta said operating income was negatively impacted by continued variable cost inflation, foreign currency headwinds, and elevated logistics, labour, and energy expenses. The Russia-Ukraine conflict and COVID-19 lockdowns in China represented a US$15 million headwind to income from operations and was more impactful than expected given unanticipated extended lockdowns.
Axalta ended the quarter with cash and cash equivalents of US$500.2 million and total liquidity of more than US$1 billion.
“Our second quarter results showcased our ability to deliver above-market growth across our end-markets,” said outgoing President and CEO Robert Bryant. “In Refinish, the need for improved body shop productivity continues to advantage our industry-leading products and services, which led us to book 1000 net body shop gains year-to-date. The success we are having today in developing new and stronger customer partnerships is a long-term benefit and speaks to the investments we have executed in our people, assets, and technology.
“Operationally, we continue to manage through a challenging environment, but we are optimistic that the dynamic is finally beginning to stabilise. Supply availability remains tight, but is less volatile than in recent quarters, which is enabling better operational performance. Q2 2022 was our highest production volume quarter since the beginning of the pandemic. Similarly, our customers are generally more confident regarding the second half of the year.”
Bryant said the “unprecedented” rate of inflation over the past four-quarters depressed company profitability and drove it to execute several rounds of price increases.
“Our teams are working constructively with our customers to get the price increases needed to offset inflation, and as a result we have achieved a record 10 per cent price-mix realisation in the second quarter, which very nearly offset 26 per cent year-over-year inflation in the period. We should begin to recover lost profitability next quarter as pricing is expected to remain strong and the year-over-year cost comparisons moderate versus peak Q2 inflation rates.”
Looking ahead, Sean Lannon, Chief Financial Officer at Axalta, said the company is well positioned to drive growth and generate cash across a range of economic scenarios.
“Our Q3 2022 guidance framework assumes a continuation of Q2 trends. At present we see little evidence of economic slowdown in our core markets, but in such a scenario we believe that we are well prepared and positioned. We have resilient business models in durable areas like Refinish and Energy Solutions. There is pent-up demand in Mobility Coatings and Building Products, plus a need to restock most sales channels given depleted inventory levels. We are closely monitoring our markets and customers, and if needed, we have a proven track record to quickly reduce costs,” Lannon said.