Axalta Coating Systems provided preliminary selected fourth quarter and full-year 2021 unaudited financial updates. Results in the period reflect impacts from greater than previously forecasted raw material inflation and supply chain constraints relative to guidance initially provided on 25 October 2021. Axalta expects net sales growth of 5.8% for Q4, (~7% excluding foreign exchange (FX)) and 18.2% for 2021, including moderately lower than forecasted foreign exchange tailwinds (guidance was ~+19% net sales growth for FY21, including ~+2% in FX).
Limitations in availability of certain raw materials also resulted in substantial unfulfilled orders during Q4. Adjusted EBIT for the fourth quarter is anticipated to be between $120-125 million, with full year Adjusted EBIT expected to be approximately $30 million below the midpoint of the October guidance range of $645 to $665 million. Free cash flow for the full year 2021 is anticipated to be above the prior guidance range of $410-430 million, with cash and cash equivalents expected at approximately $840 million as of 31 December 2021.
Since Axalta’s October guidance update, raw material inflation and logistics costs have continued to increase while the US dollar has also continued to strengthen above expectations. Axalta now expects Q4 raw material inflation of approximately 24% versus the prior year compared with the assumption of approximately 20% included in their financial guidance. Further inflationary pressure has also affected other cost categories, including supply chain and logistics, while Axalta also saw $3 million in incremental foreign exchange headwinds to Adjusted EBIT versus prior implied Q4 2021 guidance.
Given strong underlying demand conditions across Axalta’s end-markets, including expected improvement in Mobility Coatings demand, Axalta believes 2022 should remain a year of recovery in both volume and profit terms with the majority of recovery reflected in the second half of the year. The company also remains focused on addressing persistent inflationary pressures with price increases.
Axalta continues to expect to offset 2021 inflation impacts during the first half of 2022. The Company also expects to see continued inflation during 2022 from most categories, which will require incremental price actions, though the inflationary cost headwinds are expected to decrease sequentially during 2022 following the first quarter, when overall cost inflation is expected to remain fairly consistent with the fourth quarter 2021.
Axalta expects to announce detailed Q4 and full-year 2021 results on 31 January after the close of trading.
This article courtesy of Russell Thrall III, publisher CollisionWeek. Check out the website at: www.collisionweek.com.