Axalta’s Q1 2024 net sales increased 0.8 per cent year-over-year to US$1.3 billion, driven by a four per cent improvement in Refinish and Light Vehicle but offset partially by lower net sales in Industrial and Commercial Vehicle.
Despite the modest growth, net income decreased by US$22 million year-over-year to US$39 million, mainly as a result of US$55 million of pre-tax charges incurred in the quarter as part of the previously announced 2024 Transformation Initiative. Adjusted net income improved by US$27 million year-over-year to US$106 million with contributions from Performance Coatings and Mobility Coatings segments driven by variable cost deflation that more than offset higher fixed operating expense.
Adjusted EBITDA of US$259 million was a first quarter record, comparing favourably to US$213 million in the prior year period. Adjusted EBITDA margin increased by 340 basis points to 20 per cent.
Diluted earnings per share decreased to US$0.18 compared with US$0.27 in the prior year period, driven primarily by higher restructuring expense. Adjusted diluted earnings per share improved by 37 per cent to US$0.48 following the increase in earnings but excluding impacts of restructuring charges, which more than offset modest headwinds from a higher effective tax rate and interest expense.
First quarter 2024 cash provided by operating activities was US$34 million versus cash used for operating activities of US$52 million in the prior year period, with free cash flow totalling US$15 million compared to free cash flow cash use of US$88 million in the same period last year. The year-over-year increases in cash provided by operating activities and free cash flow were driven primarily by improvements in working capital. Cash and cash equivalents at quarter end were US$624 million and total liquidity was over US$1.1 billion.
Net debt to trailing 12 month adjusted EBITDA ratio was 2.8x at quarter-end versus 3.7x as of 31 March 2023. The company paid down an additional US$75 million of term loan principal in the quarter. In April 2024, the company’s board of directors approved a US$700 million share repurchase programme, replacing the prior one
Performance Coatings first quarter 2024 net sales were US$848 million, which was flat relative to the prior year period. Refinish net sales growth was driven by positive price-mix and a strong contribution from the Andre Koch acquisition that closed Q4 2023.
Performance Coatings generated a first quarter record adjusted EBITDA of US$196 million compared to US$169 million in the prior year period, with associated margins of 23.1 per cent and 20 per cent respectively. The increases in segment adjusted EBITDA and adjusted EBITDA margin were driven by variable cost deflation and Refinish net sales growth.
“This was another strong quarter for Axalta,” said Chris Villavarayan, CEO and President. “We are executing well and I am confident in our trajectory this year as we target record earnings for the second consecutive year. We also remain focused on driving strategic actions intended to accelerate long-term value creation and unlock earnings power. As a result, we are raising our full year 2024 adjusted EBITDA, adjusted EPS, and free cash flow guidance.”