Axalta Coating Systems has reported that second quarter net sales were $1.2 billion, an increase of 9.6% year-on-year, including a negative 4.9% foreign currency impact. The year-on-year growth was driven by 10.0% higher average price-mix, a 3.6% M&A benefit, and 2.7% better volumes.
Performance Coatings second quarter net sales were $856 million, an increase of 6.2% year-on-year. Organic constant currency net sales increased 9.3% in the period as both end-markets provided strong contributions to a 9.4% price and product mix benefit.
Refinish net sales increased 6.0% to $491 million (in Q2 2022, including a 2.6% increase in volume and an 8.4% contribution from M&A, partially offset by a foreign exchange headwind of 6.0% and one-time restructuring charge of 4.5%. Volume growth was very strong in the Americas and Asia Pacific excluding China as share gains continue to drive above-market performance. Price-mix was 5.5% higher, inclusive of a modest negative mix impact, and offset the impact of continued variable cost inflation. The market recovery is steadily progressing as Refinish volume grew 12.5% compared to Q1, representing a significant potential driver of earnings upside on the expected normalization of global body shop activity over time.
Income from operations for Q2 2022 was $104 million versus $190 million in Q2 2021. The second quarter 2022 benefited from robust sales growth, including significant realised pricing gains; however, 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 combined $15 million headwind to income from operations in the quarter and was more impactful than expected given unanticipated extended lockdowns.
Robert W. Bryant, Axalta’s President and CEO, commented: “The demand backdrop in the quarter was supportive, but uneven, as strong growth in the Americas and Asia Pacific excluding China was balanced against softness in pockets of EMEA stemming from the Russia-Ukraine conflict. Meanwhile, lockdowns in China paused most economic activity for the majority of Q2. Despite these headwinds, we were able to grow volumes 2.7% globally, including a meaningful contribution from share gains.”
“Our second quarter results showcased our ability to deliver above-market growth across our end-markets. Mobility Coatings had an especially strong quarter with nearly double-digit volume growth despite global industry production declines in the period. In Industrial, we expanded into battery components with several new wins with large electric vehicle customers – highlighting our strong and growing offerings. In Refinish, the need for improved body shop productivity continues to advantage our industry-leading products and services, which led us to book 1,000 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.”
“The unprecedented rate of inflation over the past four-quarters has depressed company profitability and drove us 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% price-mix realisation in the second quarter, which very nearly offset 26% year-on-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.” Bryant concluded, “We have proven to be agile and assertive in these dynamic times. I believe that we are on track to offset cost inflation while driving strategic growth across the portfolio.”