Axalta Coating Systems (AXTA) 26 Oct 222022 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Axalta’s Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. A question-and-answer session will follow the presentation by management. Today’s call is being recorded and a replay will be available through November 2. call will note therefore not no current. today’s in information may after longer recording the be listening should that please provided be Those updated and call Chris I’ll over turn the Evans. now to sir. Please go ahead,

and results Relations. appreciate welcome conference Investor you call. you VP Axalta third our interest We good Chris your is Thank Evans, This quarter of to in continued and morning. XXXX financial

financial current and company’s results is the today view section Joining axalta.com, Axalta’s from and differ posted the released Sachdev, Sean updates to President; Lannon, the our referencing reflecting those be Rakesh of and we these effect events to CFO. risks we this is may statements. which their presentation me our statements of statements, that obligation forward-looking slide and and call. Please prepared contain statements. CEO quarterly operating company involve and and a to commentary today on materially forward-looking provide at under forward-looking along performance. no potential Both afternoon Yesterday and financial Interim remarks will These during uncertainties our with results future website Relations actual Investor may discussion note

comparable presentation slide financial remarks and directly non-GAAP presentation In financial measures. measures. Appendix contain Our this to included of GAAP also to these most measures the various reconciliations the we’ve slide the non-GAAP financial

our refer the additional with and call For please Rakesh. financial SEC. to to filings statements I information regarding now over forward-looking the measures, will turn non-GAAP

our Volume very third and this start range by strong, was sales able of on our key quarter we We welcome period. of what Constant benefited to to Refinish, softening Normalization delivered third both we’ll pockets new and year-over-year almost from market in most offset quarter XX% driven in price Vehicle. our Light toward strong million volume X% our adjusted market we are inflection earnings delivered and acute and I’d team inflation logistics our of demand and which adjusted demand customer and Slide Vehicle and inflationary proud being point Commercial important bolstered XXXX Both XX% were call plus during highlights price Chris. extremely to this year-over-year regional growth business. and an EBIT business recovering the Thank of of equal everyone growth than currency, parts. EPS of We like year recovery across despite profitability net X. goal unprecedented material of businesses wins our mix headwinds period portfolio. currency the I’m of quarter. accomplish you, guidance with of discussing and within again as inflation. from lost within more This $XXX QX, $X.XX. inflation two industrial costs our raw by represents in of increased

I which Before more depth, my on wanted Interim is and in our to prioritization, summarized Slide moment as focus organization a on I comment to take review CEO, strategic X. the quarter

an positions. been ever focus honor unlock work for last leadership with vision great shareholders. that the on After strategic I this and remain and value I the priorities team’s begin company team. to unchanged our future spending strategic team, reiterating strengthening a is share has to Axalta’s leading there than for months more by this me industry the it believe alongside Let that accomplished two

end the in number one are of majority player markets. or the number We two our

of policy Nonetheless, establishing platforms the and geopolitical of challenging production, reach body temporarily has also relationships inflation, and the we our our while capabilities differentiated expanding cost constrained accomplishments of support adjacencies, activity, reducing been to environments, which our in post-COVID been given are hybrid zero-COVID customers, verticals have auto customer driving and are strengthening growth which and China’s investing inclusive to needs above U.S. into Axalta’s is by shop technologies from dollar. growth. deep translation new We of market unprecedented headwinds, masked work diversify headwinds the dynamics, portfolio. currency our

our We compelling business explore acquisitions to where where and deploying had continue bolt-on success largely have there Industrial within Coatings capital remains we opportunities.

us pace a the Rest focus are time market for and on of normalization. quality of However, balance as to we book clearly has sheet. slow M&A will post-COVID which building that we our business, being assured the remain positions capitalize on

recovery. today Interim onto primary is which Now near Of price centered cost my as successful is importance CEO, focus execution. utmost on term

great areas, focus. continued made products, customers, strides key and We in with but need select most pricing have regions

improve enhance the capital focused efficient Next, more capacity, year. release excellence needs. transition of believe but Small of organization to largest term lastly, we we over are planning over advantage can environment efficient many requires environment. time. to by external per members own we a across degree significant on is deliver and high category billion any raw also I cost our our costs, where productivity working spend chain profitability is This the market sites, materials look that anticipate a $X operating take execution, And Through while now supply controlling opportunity. more Altogether, single operational can no emphasis many can of area reduce destiny near we and matter savings and focusing dynamics. to and of enhancements we an effort we

that quarterly pass new and on discuss a to the timing, to I search no Before working the provide myself Board moving expeditiously. I updates back for wanted Board on There touch are to today are CEO. can results, along the but

the experiences will value that committee’s for the real a leader, industrial I’m a search shareholders. pleased has and a someone who tools relevant are increasingly with and to be seeking onboard optimistic difference progress to proven unlock maker. able We we

more end gains portfolio. global regions, by year-over-year, is driven recovery results given the Axalta’s to where on the is weaker improved somewhat Slide by market environment strong in a continued increased volume different remarkable Industrial positive production challenging the to Russia-Ukraine a notable environment EMEA, led weakening volume the and geopolitical year-over-year becoming demand headwinds and our of OEM Volume coupled that Americas give with macroeconomic, was conflict. today as again volumes I’ll contribution unique macro quarter. auto of more end-market three as driven offset color markets with uneven, demand shared across the are It with regions quarter the the our back X, volumes region In the Globally serve. This you Moving on speaks growth and The environment. third businesses quarter trends China improvement we evident but performance. from in also four conditions X% than was more macroeconomic all and across regional again result strong end-markets. dynamics. growth this China year-over-year was positioning XX% all all across

Coatings, the in in the of we X% impact normalization modestly. Coatings. our in Industrial which Refinish and and Altogether the felt dropped end-markets sizable other was is industrial where Axalta, general volume sensitive see market brunt economically For pockets softness emerged year-over-year, of in than increased today Mobility volume benefits markets more also lacks EMEA

Moving X. to Slide

of and softening We outside early there the some at are monitoring moment of exposures trends signs Coatings our in EMEA. Industrial cautiously some of are

expect markets, most aging fleets Commercial near-term for the continue levels, significant offset pre-COVID we lower X% XXXX markets demand, further in within end-markets. most of spots we our heading normalization, X% for believe yet represents together the grow and see which also we inventory an we Heavy to XXXX Axalta Industrial risk in Years in also pockets and constraints macro mostly of Axalta see Vehicle the bright of to When in Vehicles created Market select levels upon the Light deferred below headwinds supply exposures. in XXXX into to channel normal. of to that within Truck serve. for headwinds. to and for Elsewhere space. However, year-end is recessionary which have Duty are volumes volumes levels, XX% recover particular estimated to operate have upside Refinish At evident opportunity the market to low below market taken be contained auto

our volume noting since Axalta’s powerful outperformed worth a is market growth it technologies differentiated volume service performance. Lastly, remain driver that above-market our and superior XXXX. performance of

of forward. expect pipeline we customer our wins, trend Given going this to continue new

better this XXX-plus strong quarter a through end new X. The shops we the our and net which price-mix market, cover in market up and XX% Refinish distribution we on than we year-over-year. body and X,XXX will volumes business, added evident more In team Slide Refinish had is to points Year-to-date coatings share continues with in gain globally industry-leading industry-leading stock Nowhere X% segments. economy aftermarket customers. over auto mainstream

large the UK-based large operators expanded Our the multi-shop of leadership with addition several MSOs. quarter, position with during

centered favorable business, in recognize way Our industry. teams we system that productive in believe increased most and remain the around we body be technical better to continues trends to driver congestion Industry leading America an doing the to in recovering, demand both XXXX improved activity have tailwind paint we shop and Meanwhile, North but of America. and what below Normalization a are in are seeing to and partners the return-to-work continue and volumes medium-term. earnings represent EMEA EMEA. North rates levels impactful over

a still, to price-cost EMEA portfolio Slide end-market China. X% an average demand volume our Products team prioritizing is business business most a is the by is to robust Building recover actively America. driven are cost so on XX% doing under-earning increased lower and X. macroeconomic mix by is our and inflation. a The cooling Industrial net Industrial these for variable result lower partially slower volume. North offset economically challenges The to in pursuing job in in the is Even Industrial and currency recovery year-over-year offset offsetting X% constant deficits. of in therefore Moving our pricing increase price more today Partially actions sensitive teams sales year-over-year cumulative excellent

XXX are year above-market powder Our new sold-out advantageous trends continue single-layer benefit offerings like R&D is the should capacity expected going support which Also, XXXX, and to forward. from remainder growth. of consumer a current we for winning essentially product Abacite coating, sustainable our is to the

consecutive contribution price-cost much leading were likely sole good of and Truck in return more to of levels, XX are prestigious for this growth The XXXX an at the “master the the external looking am accomplishments very over X. I remains September a in a Light evidenced with and current the by Vehicle, are production coming Coatings on marginally exceed the Trends business is Commercial Quality’, evidenced and variable doing is orders of team’s business core America drag XX% our job, of made Yet, Award auto normal recipient year we and Commercial a support margins out-performance Light their level customers. again to Moving levels a in we of for for outpaced held as to of challenge rates for earnings, quality” honor, coatings a increasing do quarter. on Vehicle the at our was to Light very Vehicle in favorable for Class title and market In Mobility by ‘Daimler segment the the Axalta recognition fantastic end of as proud record and still worsened The and of but to as a historic Vehicle we years have our year market are attractive to past the X Supplier position our business. from industry China and teams relevant are expect in wins Asia-Pacific. have as share exposure new Slide North XXXX. in for contracts industry Mobility second-half comparable segment Vehicle to and volume performance. well. profitability. XXXX a expectations. in to In Below gains. OEM production year the profitability and industry should drive the we exterior are continued Coatings continue tremendous leader

material, We this intent slide. on more the It in detail is and our on the to impact following will of businesses. fully offset energy, our cover raw inflation logistics

current a in more expected we unprecedented first inflationary beginning to year-over-year initial year. inflection versus than than mid-XXXX. year. impact XXXX the cost our environment initially as million forecast now this the of an began $XXX combined at the persistent million since inflation trajectory earlier has We approximately a proven and we for the projection Inflation more offset time point XXXX variable be represented quarter of price-cost $XXX This

has become material recent in raw market the months. more However, favorable

additives benefits fourth margins. markets we flat-to-modestly and opportunity and we mostly to adjacent significant. QX incremental peak raw unit now our arbitrage during teams focal an through bulk is in balance on are for point EMEA however, quarter. pressures, offset like becoming availability specialties, rates will seeing and enabled in and logistics. We like material higher-cost believe Pricing impacting shipping global more of The inflation Pockets certain pressure EMEA, we for commodities, sheet to isolated inflation see costs greater remaining and of $XXX softening in do given as that come global million improved remain, pigments. energy Elsewhere, a by normalizing anticipated energy represents inflation remains price-cost with the inventory the on lower gap lag, turnover our slight the QX. need given the higher Therefore,

Now I’ll results, to beginning XX. Sean Slide turn over financial Sean? the to our call with discuss

in across of net benefits for of third Rakesh, an and sales billion, Thanks, everyone. while growth pricing XX% demand XXXX. year-over-year businesses, XX%, completed Net by strength increase and morning an Performance our Coatings XX% Mobility from performance. year-over-year XX% growth increase of we increased driven and in and strong a Vehicle sales good Commercial Vehicle mid-September acquisition net U-POL were included our currency constant Constant $X.X most impressive Light both the quarter, actions, sales showed currency Coatings from

by we basis. positive Industrial the XX% volume two-year in offset unable to and and impressive in in to XX% gap. price-cost both variable meet end-markets the FX XX% end-markets, or drop and price-cost to the Turkish headwind volumes, contributed the Euro, is regions. milestone Pound, percentage of a European third pricing price-mix price-mix momentum recovery. three well macroeconomic efforts inflation, and low a on of four better supply Lira, British demand Renminbi. The and by China increased year-over-year, with digit highlighting businesses. on improved a was an continued than within year-over-year our our translation quarter, X% constraints as X% Price-mix improved Backlog headwinds our showed Industrial the in by cost our decline better from an as our four again X% growth. end-market were of important due double-digit quarter a Refinish stacked Sequentially offset challenge, a chain quarter of which prioritization through Every positive driven for remained sales as fully Third net Chinese geopolitical the increase three and for reverse more of contribution year-over-year weaker mid-single

million conflict, year quarter. versus year-over-year excluding China approximately FX with EBIT $XXX million from the in Russia-Ukraine Third of have associated the in was and when these design impacts comparison we quarter million prior-year. In effects. expense growth lockdowns the general administration adjusted included $XXX the The inflation, a throughout prior translation, comparison support expense and and which and $XX more EBIT headwinds growth the versus implying a selling cost favorable fixed labor from earnings higher fixed general XXXX drove step-up and incurred by quarter to operating

the ex-FX, and one-year Coatings in net increase and acquisition. anniversary ex-FX, chain. X% supply in from increase, in Demand XX% a U-POL Turning by to Industrial XX% in as reported improvement our U-POL X% our strong a average QX contribution China. exceeded low-teens the price-mix driven remained QX acquisition. year-over-year for largely offset of and by and flat, increased by or price-mix, volumes, Refinish Slide headwinds driven products XX% constraints marked was Performance XX. from to U-POL X% supply EMEA a a ability Refinish and percent growth XX% and sales our increase was in sales a net our our services given X% acquisition. growth Volumes

contribution seen and X% lockdowns, offset have overall seen Nonetheless, Russia-Ukraine, we so synergies and profitability revenue about excited product our by million along in Refinish adjusted increased from and and quarter than third by average price-mix continues integrated as million continuing partially the XXXX sales of is execute improvement or percent America in extremely benefits in X%, this COVID-XX $XXX by another with largely as more headwinds value Europe offerings expected. volume Industrial momentum in pace FX, Europe QX of had modest offset to QX costs. China in well. declines ex-FX, for EBIT year creation we of versus team far, North are in We volume reported as low-teens modest as Coatings driven and XXXX, price-mix and from Performance have net variable $XXX XXXX, higher on team the were fixed strong China.

the points. roughly in constrained and in year-over-year while Moving the low a including had third to Vehicle Vehicle Vehicle. quarter, Chinese increased year. Light build quarter rates auto Commercial ex-FX, Slide sales net which wins was a quarter recovery prior customer XX% basis, sales production the by as from versus coming the rates percentage XX. by by driven volume in double-digit which Lira continued reported X% year in volume in XX%, Commercial volumes and in and third million the price-mix mid-XXs percent the Vehicle improvement. grew XXXX, XX% QX a XX% On FX momentum EBIT global Pricing Mobility currency in XX% fixed production Coatings increased price-mix XXX the inflation from and outpaced Renminbi. grew net raw constant net growth and as negative increased of material incremental increased increase aggregate $X Mobility outpaced headwind adjusted $X Coatings Light businesses, X% in sales EBIT which negative were prior across of million both FX. mix. volume of Turkish ex-FX by inclusive Euro, a mostly the costs offset partially and quarter versus quarter, adjusted basis QX

the of area that excited market While continue margins the closing we for EBIT continue to trends, and are focus gap growing and outpace an to business. volumes priority be price-cost

third quarter solid. ended liquidity with total slide $X billion and on balance quarter in profile our slightly Slide We sheet Moving to the and over XX. Axalta’s liquidity debt liquidity. remained

leverage inventory at Receivable quarter ended and phasing pricing free incremental volume net growth muted as times, in remains reflecting at $XXX Our additional so of we allocation, year-to-date the inflation. cash balance would expect partly share at higher Accounts times in slight elevated we capital net which pressures a no and I largely to remains quarter due our balances focus purchases remain the to X.X June well capital shares somewhat leverage due elevated, with well the XX. million. from total ratio sheet. to unchanged impacting associated of X.X the buy-backs the as levels and as as leverage Net on made On decrease working flow of pace as of are on

will interest a the of review rates become the our XXXX. trends attractiveness for $X XX, term. Meanwhile, closely Slide As our the is debt term of relative step-up has if the larger a refinancing commentary. quarter and framework future are in debt capital continue to guidance gross increased opportunity emphasis for reduction we matures in window to allocation June monitoring fourth markets we execute likely loan, near billion of of which On and

to between nearly growth assumes headwinds. for net QX in are and X% price of mid double-digit the of This grow sales, declines framework X% approximately in pockets to year-over-year and industrial. softening demand, expected FX drive we volume approximate notably centered expect inclusive price-cost Elsewhere continued an largely within Europe reflects our mobility. recovery. For of Volumes X% are expected mixed prioritization single-digits, growth

Sequentially, from at the the midpoint. a million the $XXX of midpoint in to fourth third small expect drop correlates industrial. adjusted to $XXX approximately we profitability EBITDA the primarily EBIT within quarter, in $XXX which adjusted generate to softening expect We in quarter, million from at million

further foreign expect some and quarter from add translation our pressure result. higher marginal expenses currency third will operating Additionally, we

a FX Within for of raw flat we the share but $X.XX. range adjusted on a material will quarter Russia-Ukraine forecast be fourth a of headwind $X.XX percent modestly For to basis EPS, per quarter from $X.XX our further and approximately headwinds lower inflation year-over-year, teens sequentially. we anticipate high inclusive totaling fourth assume to

between capital cash working than and $XXX million normal quarter fourth to free expect flow million, includes $XXX we which balances. be Lastly, higher

as will we to a capital As represent remains outlook cash in focused The additional macroeconomic on will sales, will a returning meaningful be a forecast. the which with lower of few percentage we historical of XXXX, into I we net unclear XXXX. difficult source XXXX. believe and levels comments situation move end towards into on working

believe Q&A. on any will as with like the to And the core is Rakesh that global and Light Commercial markets on execution are excellence. Axalta positioned With from believe likely earlier, and the Refinish, of Vehicle. strongly and answer ahead. from Stabilization of chain as be headwinds value cost focus company we opportunity However, this chains earnings a benefit Operator, and and actions our supply Vehicle uniquely supply sold. power that, please demand heightened to in to We variable [ph] teams deflationary discussed benefits lastly, goods where enhance our pleased in focused operational we creation lies lines open questions. normalizes for

Our question Sison Instructions] from Mike Thank comes you. proceed with [Operator first with Please question. your Fargo. Wells

doing? you’ve quarter. Hey and I guys, $XX to $XXX of first historically, Coatings, back range. you the adjusted Mobility million be look and my I guess to EBIT quarters $XX million in tends terms question, several how million Nice done are of in

volumes why guess more improvement, So, there given, were really good. sequentially wasn’t I

Mike. This Rakesh. Yes, morning. is Good

happy in few to the having profitability start have of there So of a the off get business. listen, back we the said to none profitability us to But are saying mobility to I’d things with that, are where used we this lack by do know be.

the Good in versus QX just last bottom-line. that. Just help you you million We to little we about volume from idea, price Well, happened had more guy got had you QX about include and to higher a if year. give in mix, than million. $XX $XX million $XXX what bridge We sales. a to of an

inflation about $XX Now to and were variable freight, from cost million $XX about we we million. so of lost down

then in some reduced OpEx costs had increases. also our and we plants, We

new from forward are more business have the do pretty we to are is China we we committed. of got clearly the we going good is the business lot think margins. running price, get So, have has quite What we teams fully The and I way, negated to what new business, in a the that and profitable. by

going We QX. that you’re in are, to see of some

– We try get to of materials. raw devaluation are take in benefit the and the going the

think happen. that’s I beginning to

said, Sean down. of its monomers, you raw of in look additives. $X is that, that’s materials. and buy is As coming if already solvents, billion Half at our Its

So we to to extent a out it’s that going the take quite percent can the even of few significantly. help raws,

Now, obviously in only have we get have time. price, on, the extra but we onto we going hold to not the business, hold which to some mobility pricing are. take where we It’s will. to But that’s

a a this that the think in have there’s I used to, we business. commitment $XX and company improvement the quarter bring million just to to in QX is said, some you you see what will strong within the in teams back do, we numbers like this

And OEM like end it. Refinish, to of continues certainly a about XXXX, environment Got but your weaken. I lot there if even commercial, think about bit the quick think if you follow a seem a next you markets, little as know economic does grow there’s auto uncertain when and it’s up, year, early momentum and it times, to

about down? your So, coming about volumes if EBIT XXXX the with recently, raw think potential particularly you for how growth, growth think do trends and given you wins in materials

plans together and right? lot discussion happen but, to Mike, production, going With there’s in said, also locked automotive about you put going business our so overall clearly Yes, in to what’s we they’re we that’s the pent-up of happening, recession XXXX, still there be global cautious as as a down. is business know, uncertainty as winning, you bills, demand are auto mostly and for That have the Asia. is conquest we

benefit going that next see We year. are to

year. us in said, grow terms growth than mentioned. growth should should things line EBIT as next a much our the the I next then, I year a business our of because for of EBITDA, this just that be on So top And sales faster

Great, thank you.

You’re welcome.

comes Mike Partners. with Please Seaport next question. your Our Research question proceed from with Harrison

morning. good Hi,

morning, Good Mike.

the that side I that gap. mobility. on of was there? the you progress some surprises, and Was or bit was were quarter? Or a the a little a you on you made surprise about what on talk guess detail gave Slide Did side or quarter could that when XX kind to specifically hoping expected you either lose ground bit maybe there to key that I little cost price-cost guess this more I through you was pricing cumulative there, and just in of the expect guidance,

take on. and want I that first you Sean, can to go

on Yes, in Coating profitability in the as growth saw million I the dynamic, sense lagging, we’re volume down which shifted on price-cost still inflation the positive. little for, jumped actually dynamic $XXX Performance the but we essentially far on Industrial the through on side. the but as mobility we mean, that overperforming, bit the the side and Mobility is more clearly the we’re the mobility challenged now to was gap that, a walked impact this more gap the and, side, certainly but is up particular in went Refinish little quarter, the saw big that just heading a bit Rakesh on

operating was this cost I could more issue. talk fixed All right. that then also And a higher about little bit you hoping

I here, on of that why QX? we and bit higher has I understand these company the think years we’re detail Axalta what’s kind that get there fixed are more seeing as now a reducing over but on as dynamics little inflationary really into focused costs give driving a costs. and of can and operating you playing it

So maybe a you Sean then shot and take can. I’ll

was OpEx of that a growing Refinish phenomenal the the of the break increase and of So job expense, about was are a business down half doing you really lot because sales of the Refinish in if business. guys commissions. The

we where inflation, world. the help was rest Some of said, in added Sean and the people as to was the OpEx around growth increase the obviously by had, design us had

at year, do and we can a carefully, looking what quickly. expense we next very nimble an of in happen do very because that given is that absolutely is in be Axalta take face slowing that the if sense Now, of operating we’ll as environment, could the to this area have out very

going needed a on are X% those not XXXX. sales to organic XXXX And order savings positions saying and a grow. to and run backfill in top-line bit. the we on mean, has way historically We to I all uptick on, did frankly, has quite Labor much this add grow it temporary to X%. to think It’s back attrition, that, but lot closer just in quite some XX% Yes, to you’re certainly of merit, year. around and backfill

adding that’s pressure. So incremental

thank very you right, All much.

question of your Byrne Steve with with Bank next proceed Please Our from question. comes America.

easily clearly fresh you of that that about, Hi, I’m Rakesh, versus asking has just from the say Axalta you the significant to have earnings can expenses anything fixed business is And there that Mobility challenges variable structure look of quickly and that that your fraction that? fairly fixed said at done take you see drive Mobility in Mobility? can and that side, out to Axalta, you is cut stuck? in to do in COGS what is variable, and on cost operating an would but Mobility improvement

Steve, the so fixed costs the business, costs this manufacturing and you’ve let’s Mobility, fixed Yes, the and obviously got plants. take in

a you’re Mobility in if at but the manufacturing SG&A, talking total our are estimate, then $X.X also the there’s the expense between the businesses, you fixed billion of look plants and in cost of shared SG&A just Some about high plants level the right? business. So,

you look significant to at the us So to number opportunity become for efficient. more have we do, our big but address and that’s plans, tell fairly And, it’s and because obviously a going number. an working through carefully. it’s a very going we to But are it not are I’m avenue we what

be that then And are market like Refinish it there does seem several players all to on share. Okay. Refinish, gaining seem in

ripe economy that, consolidation ask something to consolidation, are there Or big is players just about share? by is of where all go more it on gaining segments Is Refinish, between the would you wanted opportunity and mainstream? Is for if more this the it and see premium Just you? region? is for by structure to the and this most

the more a the shop place been offer them, productivity been the that operators more where there’s kind way, been clearly of Axalta U.S. a think have been we and of to in in has So that’s multiple we with up signing consolidation and what to that taking helping and we’ve big I provide because MSOs them. consolidating can the

we gaining we’ve beginning but just not won is are Asia, yet existent the just In if UK at look We significant the MSO a business have to that benefiting that are only this cost not here. consolidation hold. to I from mostly MSO Asia, seen are able we globally, we question and in focused by think take increases from on share the some premium Europe, is higher the is business And that, we overall So, are in there’s no been where in that But prices. share outstrip concept the gains. benefiting segment. you we

it’s So great a business.

come. to in business. adding coatings. and so are to going paints more into into once we supply We’ve also the in years to adjacency, that’s continue And are are the got the continue Refinish operators, because we that’s additional content have going We able pipe content to just than selling the we and shop

Thank you.

You’re welcome.

Please next Our question. proceed Josh comes with question UBS. from with your Spector

how on And there. when have on timeline to kind be taking question. visibility Do of in the think estimate needs in captured? past I for be any I that I thanks actually are of mean, blend kind think you regardless decline back raw of much the Or being Are cost gap? going of of to additional kind price type close closure, a into you What’s you capturing to when the both the guess playing mean, you of material you that? of you of Hi, pricing pricing thinking closing cumulative Axalta used to Mobility, price to talked after may to just this you lower and some talked about or give some gap mindset coming terms Yes. hump as get about about over I pricing. you raws, expect my gap? in

be coming we any part it increase in I but And add time since, color operating The can more and thing a about short a the know it. that that we have the we And minus. in just through no one have have of this? of lot, to in to take Yes, out amount a the I’ve efficiencies. deflation, that to of, that’s I about clearly we’ve through lot million come we this, has more going run gap And call, and plus of I’ve one is here, we going but and part operations been Sean, and to know of levels. I in manufacturing capacity. we want that question we’re that, the get been discussed perhaps haven’t about opportunities have the several we think cost got to $XXX a to we time the way talked is, if are listen, the you found from part that or get pricing, here

other price pretty note I is guess the sticky. is, typically our

we expecting deflation, much price $XXX about we see we’ll pushing about cycle million year, But And side. think get. much it’s that different. next be on see then deflation price. We’re a how If price the question on certainly Refinish we be you of the as this think that X% represents on face how we to incremental mark no gap,

cover feels like pricing track to we’re the on today. part certainly XXXX, it that So as given just of

guess, on what up, act to if that that’s moves pick wrong again. I so cycle that inflation differently if we’re to up, direction raws anything that changes mean, there is I being you picks differently oil or deflation, can starts So, up environment? react done,

the But we we aggressive more that’s mean, if price more have. costs. that I all we on Well, into aggressive inflationary back an our on environment, go just to be have and commitment

one say I to was Sean, wildcard. going

is are are I the Europe. entering on think a deflationary into in the The we feel one all that watching pretty wildcard that cost of energy we good commodities. we about, environment

cost are in That in to The down, pretty we that’s continue said the prices few in I’ve to it’s quite having that, doesn’t stay Europe. energy gas happened last to spot something significantly. going but are down that see been natural encouraged of watch. days, continue to what’s going and market Now, to mean

you. thank Okay,

next Please question. proceed comes with with Christopher Our your Parkinson question Mizuho. from

Great.

year? body big speak just things business further macro Refinish’s of overlaying, just seems it’s marketplace it easing from in shortages, your totals kind X broadly you helpful shops, and kind low U.S. versus hearing given are the stand where we inventories, what kind a moving grow Just ability of Slide have direction, of and right labor next on what down, You of, versus the a collision lot conviction rates like the question. given – you’re environment, to Refinish. pretty like the about the Could seems the specifically XXXX just up, a we’re in – in

say your you outlook next, just in you. seeing let’s to months Thank can kind on what nine of the marketplace? hit over and six So, you’re currently months the

color? to you Sean, take want a give I’ll start? And more

data feeling up trending, we’re good Yes, October it’s hardest rates, say it’s the and through Chris, I far in mean, the the post XX% summer, but of up September, certainly ticked Office I on year. occupancy wouldn’t XX%. thus to really we month date to point, hit

So, as activity. folks back XX% the body I’m in down market U.S. to still expecting But getting congestion should which up, XX%. the the are correlate pick office, hopefully shop to

whip out are if, be next even there. fears think shop continues some When recovery it to So, year, at expect there recession high. you fairly I about do level, body

as for positioned get potential us. think shortages do the well that’s And from just well MSOs, to And on far a picking So filled, we’re market front. labor I also as share. tailwind very continue that the then really think as I up

technicians just Our there. productivity paint requirements the the overall Refinish as of systems, we team our is doing that the bring and a fantastic service as far job

good that really sets think XXXX. well. What up us business is I doing for really

mean, I labor paint. I said, our issues what to because actually shops and to us of the add think helps our technology and Sean body just

who application have We single applications. versus multiple a have competitors to have our

us. in helps shops we So, the and definitely add that productivity body

it, there’s lot out take Mobility demand. you side step of, just clearly look say, And Understood. very back in XXXX, longer the a quickly, term a just when pent-up and let’s of the on

let’s the in in market’s some, there’s world. seen at western same the the some see, You China time, growth teetering say

Just front case lower actually when let’s going that the expected, shutdowns question, rates a a back just cost incremental month weeks? react, say, to you, quickly how of customers and being is than case a of on or hearing production start is from you of could or two? your Or slightly previous analyst if that

a hit we’ve I seat, you the to what when I can but and, say want know meticulous we make, just we Sean Well, had we were I and of about you did, a might bit the in precedent pandemic and what wasn’t but react you very fast Sean, be as little would tell want that it. anybody But is we’d can, recap you a did? and to give

been on half for Yes. bottom. two we’re feels side that it And close we’ve to I years. a Chris Mobility recession mean, like and a the in

So that back just that months quickly XX demand reminder, probably to demand once, XXXX, million going we’re but out we it’s knew a clear destruction. was [ph], below somewhere be and And acted XXXX, we took as be hard we destruction XX if to foresee pretty $XXX see there. that, between million and for million we’d actually in builds there’s we the sign weeks a

showed could we the same. I have do can think, think we I that another hypothetical in and playbook we scenario, we the it. execute against And

so much. Sean, always Helpful thank you colors

with Baird. proceed comes Our next from question with Please Ghansham your question. Panjabi

I significantly. of to Mobility XQ. widening Was everybody. impact just in back segment just questions region, from the and of has of mix on initiatives because visible what’s pretty the sort want few price-cost morning or been substantial I’m the gap have quarters. pretty bias Good Europe over been specific asking, because a the some your China in inflation and been to so last Yes. go was that the pricing happening up to terms

changed what So XQ? in specifically

Sean. go Sorry, ahead,

the really region all Asia the we and it’s to the the really wins, now given the board a all Vehicle coming that the volume side bright price incremental Yes, bright on improvement, global the Mobility across it inflation But of spot the just Ghansham. just it’s we more Light in actually variable saw we’re that improved issue and board, spot given margins. was was – us, need for a business across get

maybe for terms you recovery, the Sean, And on of of deflation, price-cost us sort would $XXX gap us of give basis, level can terms it. level think Got some a XXXX FX? separately would and variances price then, buckets have what the indication of volume in million some be maybe especially on about high what you EBITDA cumulative in

But to we’ve the progressed a earlier we about to had XXXX profitability, XX-XX thought Mobility, that on guidance Yes, $XXX year, We’ve as in and think worse we’re we this gap. Ghansham. between cost. XXXX going has price cost point, The price it’s from year. million roughly giving steer the away couched gotten any through when at of, back volume

the lot incrementals volume in aspect, But versus did impacts are up. So will see this, that notable our profitability I stability fourth expecting in And the more on drop fourth a alluded the start it’s as we on cost certainly catch from up see to the inflation, it’s but and we would’ve more also to pricing that’s we fully a on and inflationary step on through stability as to expected And profitability quarter as that. quarter, a third price and the far in see where we as quarter, see volume. up. pricing the mean, the catch to nice XX% then the probably we starting Rakesh perspective,

you. Thank Okay. Very good.

Partners. comes Kevin McCarthy proceed question with Research with question. Please Vertical your next from Our

morning. spoken customers in good past Mobility With whom the you’ve contractual your regard certain with segment, to you have about formulaic Yes, relationships.

meaningful raw are aspect will those over on just hear I’d the mostly though inflation? the as two Or underlying be a guess of your to price observing difference those profitability formulaic and thoughts you you as the buckets it through on I of questions think my quarters. a relates basically do are few customers these who how formulas, customers feel formulas you for all relationship? so to you’re aren’t flow And would be, between in capturing And it? material capturing next curious

even the contracts clearly discussions would that say OEM open is initiative of our normally Well, would what have taken price number we we with of have for and having before contracts a I up discussions. customers the

As everybody’s And inflation we you tied down. or pricing up I that that are doing that. imagine, drive so, can indices yes, think have to

happened what different what actually happened in the broad Now, is the as than chain you know with supply that indices.

constraints, indices chain material than So were supply including the raw us, significant companies, there because for suggested. would’ve many essentially what paid more

going benefit a I But aggressive to And names, we the give not every as well I name some pretty situations, we in benefit that to customers we as OEMs because you’re that – because at should with. we on we board in for didn’t us that’s back to the deflation. customer have are face to same Now, think get won’t way of up. flow down, QX. we getting yes, we – it will some – but have have they are different are go the we look as, And pricing the more of going even see that going

that think Okay. in And as And circumstance, in your follow be that Industrial given new Coatings. lines out capacity? year would case on growth and for you the be, the and cooling then up, I prepared my Or to of a comment made guess might certain you in capacity? I remainder remarks, you it a product sold think you’ll invest you’re do are the we’re that which fine through out question is sold need

capacity got and existing we’ve bottlenecks working having think us don’t new I the No, to now. capacity of Yes, work a great that’s a equipment to increase to facilities. our by plants. I we in way on listen, see remove have do need add and more team this

progress. but all our we through making able been quarter, not are we’ve I had, the of good at demand we’ve said, Sean as think I to think last end deliver

to million million backlogs, through is of really we’re where know $XX year. specific specifics. Coatings, building Performance all to it’s $XX through And sold the And out coming you Yes, with $XX of million products. Industrial. to Kevin, essentially roughly in on, that’s the quarter add we the just rest I Building products asked ended

end builds, home backlog the the remodel sort the that continues year. part at of that so on of And of and new to least business benefit through

Great. Thank both. you

Please Our David question. Deutsche question Bank. with Begleiter proceed comes from your with next

Coatings, QX? raw versus widened Mobility Sean, how morning. price did Thank QX cost much Good in and in Rakesh much material gap did how the you. the

It was about $XX million, Dave.

that you Very segment? QX. are good. you versus about in Mobility And Sean, improvement much in How thinking mentioned QX

it’s be to we’re out somewhere contributions. nice quite levels the but going specifically, Yes, not uptick. back going between not be to to but far today, we XXXX as that levels, mean, in I to going are XXXX a and quarterly where as call It’s

Very good. Thank you.

comes with Capital question John McNulty next with from BMO Markets. question. Please your proceed Our

extreme, also digging been I any we might then the guess, How should on how One leverage, so you’ve when it of on where – guess kind morning. Like, to operating away was you type where one this is Vehicle there be we kind materials – year, that? just good But that you an new should doesn’t you’re Thanks two doing since thinking is, raw sure. that for admittedly have forward there should into for price it or like you it think hard. Yes, contracts I surprised just on Are business about be this were make guess, questions pretty from low margin, sense, the there business was business? we around And tied Light about thinking business. taking inflation the raise Maybe ability business in, anything margin and really another that be that? you walking last I about has it. sounds any bringing it my actually question. the the Because Rakesh, of of the business some of going sounds we go lack one to no like side we shouldn’t be been had yet? on maybe

me last question let first. answer Yes, your

we be, threshold. mean, where are, to that customers at business for margin. get we to yes, it’s, profit margins not up it’s have we we or margins to need do I to we trade And So I clearly can listen, where have I ourselves and they try think are these are we volume like the some to going – every below for our prove sure. get will any

to anymore. do We’re that not going

said having space. are to address really This I trying So an that, think teams interesting working the it. to is

us But the go. you will we any see of think I are just cost. to where volumes appropriate customers of forget part first understand, this we our two have need. you your I question. repeat or the not again? large trying business, only us we get and that all us sure OEM and just Can make give to that hopefully It’s at in prices not will You players three

won? you Just been around I last that? the able strong. think it been business so year, new inflation’s you to won Because yet reprice and that Have you

get I able the been on the to know can’t it. – the I to and answer very good, business reprice back question, that we’ve margins if we quarter, but it’s they you that. got let’s on and were new

enough. just up. as it. Got follow And then a Fair it,

you’re with on that is you forward? sounds at thoughts change reasonable to Axalta the for as Is look of looks debt. to dividend potential think at historically very unlock comfortable we could be changing you’re terms give guess, going know by under working cards? play about it amounts like in right. million Sean, things easily tailwind there how how $XXX that of in looking amount about least your it XXXX, watch? Axalta, be for a if maybe be might couple our uses might us a can you kind decent of a I that point a a like that if the and I And for Rakesh So some capital of of numbers, Or also should thinking the out, things?

start, I’ll on. Maybe you add to and Rakesh Yes. want

as capital percentage XXXX. a the ended absolutely to we as, circle So of the quarter as be benefit XX%. a working in will We working capital close with sales,

XXXX, closer been be by end XX% of it to And the year. we’ve expect XXXX back We to about X%. running the

seeing stock supply we’re well instability a build-up in us raws given we’ve So building and chain seen clearly of sort as inventory of pressures the levels. safety inflationary just the as

time. I focused fourth getting covered looking on be So debt. my that’s back that of But debt, bit in potentially of continuing we’re down continue high a buybacks inflation up, it’s to going our to to term pay we gross on to to it’s rates be M&A playbook and old gross remarks; in term, are allocation share focus loan. the but to quarter some actually in going Interest starting near paying building the get pass certainly little over and XXXX. getting refinancing down going of cash more Dave, the we and and attractive part core that the be a to very capital and once be out, sort time this going

Got color. it. the very for Thanks much

Our from question. next question with your is Please from Leithead Barclays. Mike proceed

Great, thanks. Good morning.

the now little bit in with that a in higher were be more a Rakesh, question, for First the few business just Interim maybe might not seat initial discoveries different you board from CEO only role? that, you’ve months. and level. or the when Any on been impressions

Listen. Yes, observations. think are to place. several When ability about growth, I at our have think we I business the a in great I and get top-line look I

gaining in share are We several businesses.

some about of haven’t new product We talked launches. our

business the pipeline Our healthy. is very new Industrial business in for

customers, having – get things one the ability our the And had share and is taken go cost given about price raw significant or changing. become operations closed. to increases, pricing And has So, need this and I’ve I top-line that I acutely we the is our pricing. which material The three we’ve in see growth gap after the to on to where Obviously with discussion need to it fair we talked – form and and be the that call, back. environment four opportunity aware in to supply this comes just raw chain. other $XXX material previously get has million in of top-line We I’ve think courage have the feel opportunities, about good the the the growth. I be commercial

think a when both of opportunity terms clearing you in think the significant plants. I our in lowering that And costs costs, total. take the improving deliveries, we have all I fixed in backlogs,

from I be think a different year place at can the now. a business

me. Great. you. Thank That’s it for

Sure.

Please Our with proceed Alex Capital your question. from Yefremov KeyBanc next with comes question Markets.

perhaps couple inflation. to stark I of everyone. X% inflation, there good morning and Mobility, in you’d typically between a of quite but And wanted to price some come worth was and thought Thanks I it cost back inventory. and just XX% contrast surprise quarter’s have

pricing is in with inflation. pricing there team been visibility are efforts some of terms has if disappointed you improving I that the – pricing changing has that is so, the what with in team guess the been to into that the able achieve? execution? the mind, And that able So

improvement the I business are are having this who Yes, obviously not said teams quarter. in we’re just this understand – gap fully said we must trying pricing what the some know XXXX, we benefit can I there. see you’re think into And that the that, running disappointed we fairly control, customers that, have we that in because to that that gap help gap things offset and that grew to the march also of I that. big close we internally think think by you’ll that’ll going see Having as do And chunks we QX. the do we of entire

but weaken stability fourth less quarter expect pretty quarter. Thanks, stable do is weaker or demand. Rakesh. In is generally in consumer this still volumes subject the the year, next business Could to in were you EMEA, here? continued This Refinish cyclical, or third

ahead go Yes, Sean.

saying business. in seasonality this any that reduce of the That’s is this we December, was are changing but than slow fundamentally in Refinish, pretty in is in little other down should quarter expecting about don’t going that, seasonality I of, EMEA. that No, are fourth bullish things part a still where some we we business see

lot. a Thanks

I and end session, question-and-answer – Ladies the reached of would now gentlemen, conference. this let concludes our have we and today’s

time. disconnect for Thank lines your at participation. may You you this your