PHILADELPHIA, PA — The multinational liquid and powder coatings manufacturer, Axalta Coating Systems Ltd. (NYSE: AXTA), announced a somewhat mixed first-quarter financial report for 2024. Axalta, in its performance highlight, indicated a 0.8% increase it its net sales, hitting $1.3 billion, compared to the same period last year. Despite this increase, net income suffered a drop of $22 million due to restructuring charges amounting to $55 million.
The Philadelphia-based company, however, managed to showcase notable improvements in other financial aspects. The Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), a measurement closely watched by investors for the company’s operating performance, saw an increase of $46 million year-over-year to $259 million. This significant increment is matched with 340 basis points improvement in Adjusted EBITDA margin, reaching the 20.0% mark.
Diluted earnings per share, an important metric that denotes the portion of a company’s profit allocated to each outstanding share of common stock, saw a decrease of $0.09 year-over-year or a 33% hit to land at $0.18. The adjusted figure for the same metric saw a significant increase of $0.13 or 37%, reaching $0.48, showing the strength of the company’s underlying profitability excluding exceptional items like the restructuring costs.
Axalta’s 2024 Transformation Initiative, designed to provide a robust and comprehensive structural change within the company, had its weight on the financial figures. This initiative brings with it a promise of an estimated annual $75 million savings, which is expected to start making a significant impact by 2026. While the initiative has contributed to the decline in net income due to the associated restructuring charges, the long-term savings potential could bolster the company’s financial position down the line.
Axalta also reported they paid down $75 million of principal on their term loan and have a total net leverage ratio standing at 2.8 times, a significant measure of the company’s indebtedness. In April 2024, the board approved a repurchase program of $700 million worth of shares. Actions like these underline the management’s faith in the business’s robustness and prospects, as well as a method to return capital to shareholders.
A more detailed look into Axalta’s segment results shows a 4% improvement in Refinish and Light Vehicle, sectors within the company’s end markets. This improvement, however, was partially offset by a decline in Industrial and Commercial Vehicle net sales.
The Performance Coatings segment delivered a record Adjusted EBITDA of $196 million in Q1 2024, up from $169 million the previous year. This result was largely the product of cost deflation and growth in Refinish net sales. Similarly, the Mobility Coatings segment achieved an Adjusted EBITDA of $63 million, up from $44 million in Q1 2023, with growth driven by raw material deflation and solid sales growth in Light Vehicle.
Reflecting on the results, Axalta’s CEO and President, Chris Villavarayan, expressed confidence in the company’s performance. He stated, “This was another strong quarter for Axalta. We are executing well, and I am confident in our trajectory this year as we target record earnings for the second consecutive year.” He added that they remain focused on driving strategic actions that accelerate long-term value creation and unlock earning power – and as a result, the company is raising its full year 2024 Adjusted EBITDA, Adjusted EPS, and Free Cash Flow guidance.
It is indeed notable how Axalta is navigating the restructuring process. Despite bearing substantial costs in the short term, the company appears to maintain a solid overall financial performance. Investors will likely monitor closely whether these strategic actions will indeed deliver increased profitability and shareholder value, as promised by the company’s high-level strategy.
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