PHILADELPHIA, PA — Axalta Coating Systems Ltd. (NYSE:AXTA) reported higher second-quarter sales and record adjusted earnings as growth in its refinish business and lower operating expenses offset a $31 million increase in merger- and acquisition-related costs.
Net sales rose 3% from a year earlier to $1.35 billion for the quarter ended June 30, the Philadelphia-based coatings manufacturer (NYSE: AXTA) reported.
Net income fell $21 million to $89 million, or 41 cents per diluted share, from 50 cents a year earlier. Axalta attributed the decline primarily to higher costs tied to merger and acquisition activity.
Adjusted net income, which excludes those expenses, increased 10% to $153 million. Adjusted diluted earnings rose 13% to a quarterly record of 72 cents per share.
Adjusted earnings before interest, taxes, depreciation and amortization increased 5% to a record $305 million. The adjusted EBITDA margin widened 30 basis points to 22.7%.
“We delivered an excellent second quarter with record Adjusted EBITDA and Adjusted Diluted EPS, expanded margins and strong free cash flow generation,” Chief Executive Officer and President Chris Villavarayan stated.
Sales benefited from favorable foreign-currency translation, acquisitions and improved pricing and product mix.
Operating cash flow increased 7% to $152 million, supported by improved working capital and lower interest payments. Free cash flow rose 6% to $107 million despite merger-related expenses.
Axalta ended the quarter with net leverage of 2.2 times adjusted earnings, the lowest level in the company’s history, according to the results.
Performance Coatings sales increased 4% to $872 million as currency effects, acquisitions and pricing offset slightly lower volumes.
Within the segment, refinish sales rose 6% to $545 million. Industrial coatings sales increased 2% to $327 million, with growth in Europe and Asia offsetting weaker North American volumes.
Performance Coatings adjusted EBITDA climbed 10% to $218 million, while its margin expanded 130 basis points to 25.1% on improved pricing and lower variable and operating expenses.
Mobility Coatings posted record quarterly sales of $474 million, up 1%.
Light Vehicle sales declined slightly because of lower organic demand, while Commercial Vehicle sales rose 7% on volume growth across all four regions and favorable currency movements.
Mobility Coatings adjusted EBITDA totaled $87 million, producing an 18.4% margin. Axalta said stronger commercial-vehicle volumes were more than offset by favorable one-time items recorded in the prior-year quarter.
The company is preparing for an Aug. 5 special general meeting at which shareholders will vote on its proposed merger of equals with AkzoNobel.
“This strategic combination creates a premier global coatings company and provides significant value creation opportunities for Axalta shareholders,” Villavarayan stated.
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