Supply chain challenges continue to impact results, particularly within mobility coatings.
Axalta Coating Systems has announced net sales of $1,088.6 million for the third quarter, a 6.0% increase compared to the previous year, driven by 4.5% higher average price and product mix, a 1.8% M&A benefit, and a 1.3% foreign currency benefit, partly offset by 1.6% lower volumes.
Performance Coatings Q3 net sales increased 14.1%, including double-digit growth rates from both the Industrial and Refinish end-markets. The 10.1% reported net sales decrease for Mobility Coatings included a 14.8% decrease from Light Vehicle, which remained impacted by customer production constraints as a result of ongoing semiconductor chip and other supply chain shortages. This was offset partly by solid 9.0% net sales growth from Commercial Vehicle given supportive demand and customer production rates despite moderate supply issues also impacting that end-market. Positive price and product mix within both Performance Coatings and Mobility Coatings came from pricing adjustments implemented to offset broad-based inflationary pressure, while product mix was a modest headwind for the period.
Income from operations for Q3 2021 totalled $124.7 million versus $141.7 million in Q3 2020, and diluted earnings per share was $0.30 compared with $0.35 in Q3 2020. Results were significantly impacted by lower volumes from Mobility Coatings due to the customer supply chain shortages, variable cost inflation which increased approximately 21% from the prior year quarter and the lapse of temporary cost reductions from the prior year, which were partly offset by continued demand strength and volume recovery within Performance Coatings. Substantial price realisation progress was also made company-wide to offset the variable cost inflation and operating expenses benefited from structural savings actions and reduced restructuring-related charges.
Robert W. Bryant, Axalta’s President and CEO, commented: “Axalta’s third quarter results demonstrate strong financial performance and operating execution despite clear headwinds in the period. Cost inflation during third quarter has been significant, including all categories of raw materials, freight, utilities, packaging, and labour. At the same time, global supply chain constraints have persisted. These systemic issues have impacted Axalta both in terms of elevated pricing and lower availability of key inputs to our products, as well as at the customer level, where production rates have been constrained, most notably within Mobility Coatings. We continue to take active steps to offset these headwinds with implemented pricing and cost actions. While substantial progress has been made to date, we expect to take further actions as required to meet the challenge posed by persistent and widespread inflationary cost increases across our entire business portfolio, while also ensuring that we retain our existing base of volumes and valued customer relationships.”
Bryant continued: “We are excited to have closed the acquisition of U-POL in September and welcome the U-POL team to the Axalta family. U-POL is expected to provide a solid growth accelerator for our Refinish business, notably within the mainstream portion of the portfolio, as well as in accessories and other adjacent aftermarket repair and protective markets.”
Bryant concluded: “In addition to recent acquisitions, we have continued our innovation focus this year, which remains the lifeblood of Axalta’s growth and long-term value creation. Our Energy Solutions business launched a new high performance electrical steel coating with broad effectiveness across the voltage range as well as improved corrosion performance, while we are rapidly launching new products to serve the fast growing e-mobility market, where Axalta already has industry leading products in electric motor coatings, that have the potential to substantially increase our content per vehicle within electric vehicles.”