Axalta Coating Systems NYSE: AXTA reported what executives described as a strong start to 2026, highlighting better-than-expected earnings and record first-quarter cash generation even as net sales slipped slightly year-over-year due to lower volumes in parts of its Performance Coatings segment.
First-quarter results and cash generation
CEO Chris Villavarayan said Axalta “delivered strong results and exceeded expectations across our financial metrics,” citing net sales of $1.25 billion, adjusted EBITDA of $259 million, and adjusted diluted EPS of $0.56, which he said was “12% above expectations.”
CFO Carl Anderson reported net sales of $1.254 billion, down 1% from the prior-year quarter, primarily due to lower volumes in Performance Coatings, partly offset by favorable foreign currency translation “largely due to a stronger euro.” Gross margin was 33%, “down slightly from last year,” which Anderson attributed primarily to unfavorable mix from lower volumes in North America.
Net income totaled $91 million, down $8 million from the prior year, which Anderson said was “driven primarily by $22 million in transaction costs associated with the pending merger with AkzoNobel.” He added those costs were partially offset by a $17 million discrete income tax benefit and lower interest expense.
Axalta also posted what Anderson called company records for first-quarter cash generation. Cash provided by operating activities was $68 million, up $42 million year-over-year, and free cash flow was $21 million, up $35 million. Anderson said the improvement was “primarily driven by improved working capital and lower interest payments.”
Segment performance: Performance Coatings pressure, Mobility strength
Performance Coatings net sales declined 2% year-over-year to $802 million, with Anderson pointing to lower volumes in North America and “unfavorable price mix,” partially mitigated by foreign currency and acquisition contributions in refinish distribution outside North America. Performance Coatings adjusted EBITDA was $180 million, down from $197 million a year ago, and the adjusted EBITDA margin fell 170 basis points to 22.4% on lower volumes and unfavorable price mix. Anderson said the company expects “price mix will inflect positively beginning in the second quarter and carry on through the rest of the year.”
Within Performance Coatings, Refinish net sales declined 3% to $498 million. Anderson said that reflected “lower claims activity and shifting customer order patterns as anticipated.” Villavarayan said Refinish sales were “nearly $500 million” and “consistent with the last five quarters,” while also noting “net body shop wins increased 10% year-over-year” and that Axalta was expanding with leading multi-shop operators (MSOs).
Industrial net sales declined 2% to $304 million, with Anderson citing volume pressure in North America and Latin America, partly offset by price/mix and foreign exchange. He noted “Europe and China delivered volume growth in the first quarter.” Villavarayan pointed to “five consecutive quarters of net sales growth in Asia” and said Europe showed signs of recovery, including share gains in the company’s E-Coat business.
Mobility Coatings was the quarter’s standout. Anderson said Mobility delivered record first-quarter net sales of $452 million, up 3%, with growth in light vehicle and commercial vehicle categories. Mobility adjusted EBITDA rose to $79 million from $73 million, and the adjusted EBITDA margin increased 100 basis points to 17.5%. Villavarayan said Mobility achieved a “first quarter net sales record and Adjusted EBITDA margin of 17.5%, reflecting solid execution and cost discipline.”
Pricing, inflation, and supply chain actions
Management repeatedly emphasized procurement initiatives, contracting strategy, and pricing discipline as key tools to manage inflation and volatility. Villavarayan said Axalta has now put “approximately 60% of our direct spend under contract rather than spot buys,” adding that supplier agreements “incorporate indexation,” which he said helps reduce volatility and improve visibility. He also said the company has delivered “12 consecutive quarters of year-over-year improvement in variable cost” due to productivity projects and procurement best practices.
Villavarayan said inventory levels are “roughly 115 days on hand,” which he said helps limit inflation impacts, and noted Axalta sources “approximately 90% of our direct buy” locally.
On pricing, Villavarayan said the company expects “mid-single-digit pricing in 2026” for Refinish. In Mobility, he said more than 50% of revenue is tied to raw material indices, which “provides a natural hedge against cost volatility.” In response to a question about lag, Villavarayan said index-linked pricing has “a three to six-month lag,” and added that on the remaining 50% of Mobility, “we’ve already gone out with pricing.”
Asked about raw material inflation expectations amid volatile spot rates, Villavarayan said Axalta is seeing “low-single-digits” impact in the second quarter “and increasing through the back half of the year,” potentially reaching “high-single-digits” later in 2026. Anderson reiterated that the company expects “mid-single-digits” raw material inflation for the full year, after a better-than-expected first quarter.
Guidance and macro assumptions
For the second quarter, Anderson said Axalta expects net sales to be “roughly flat,” with adjusted EBIT in the range of $280 million to $290 million and adjusted diluted EPS of approximately $0.65, “roughly in line with a year ago.” For full-year 2026, he said the company is maintaining its prior guidance expectations for revenue, EBITDA, earnings per share, and free cash flow, though he added Axalta is tracking “closer to the lower end of EBITDA and EPS guidance given the demand signals we are seeing at this time.”
Anderson said geopolitical developments, including “the situation in Iran and broader Middle East tensions,” have increased uncertainty across global markets and could pressure demand and costs in the back half of the year.
By end-market, Anderson said Axalta is expecting Refinish volumes to improve in the second half versus last year as “destocking trends are abating” and claims activity is expected to improve sequentially. He also cited moderating auto insurance premiums, rising used vehicle prices, and favorable miles-driven trends, while noting consumer sentiment remains challenged by inflation concerns.
In Mobility, Anderson said Axalta is now assuming global auto production of about 91 million builds, down from the prior outlook of 92 million. In commercial vehicles, the company raised its assumption for North America Class 8 builds to about 274,000 units, “up 10% from previous expectations.” Villavarayan told analysts he is seeing early signs of improvement in commercial vehicle forecasts and April activity after a weak first quarter, and highlighted growth in Commercial Transportation Solutions (CTS) as a contributor to performance.
Debt reduction and merger progress with AkzoNobel
Anderson said interest expense declined 14% year-over-year, Axalta repaid $54 million of gross debt during the quarter, and the company ended Q1 with net leverage of 2.3x. For 2026, he projected interest expense of about $150 million, “an improvement of more than $25 million versus last year,” and said Axalta plans to deploy most free cash flow toward term loan paydown, with an expectation that net leverage will be “below 2x at year end.”
On the pending merger with AkzoNobel, Anderson said the transaction is progressing “very well” and that the companies remain on track with key workstreams ahead of shareholder votes, regulatory approvals, and “day one readiness.” He reiterated the companies’ expectation of $600 million in annual run-rate synergies, and said filings are underway in the U.S. and EU, including a confidential Form F-4 with the SEC. Anderson said the companies expect shareholder votes “by early July.”
In the Q&A, Villavarayan said the clean-team work has increased confidence in the synergy target, calling $600 million “just the floor,” and outlined areas discussed for synergy capture including purchasing scale, supply chain and warehouse footprint, and SG&A duplication.
Villavarayan closed by saying Axalta is “executing well and delivering consistent performance while maintaining strong operational focus,” while continuing preparations for the AkzoNobel combination that he said is expected to strengthen the portfolio and enhance the company’s financial profile.
About Axalta Coating Systems NYSE: AXTA
Axalta Coating Systems is a global leader in the development, manufacture and sale of liquid and powder coatings. The company's product portfolio spans refinish coatings for the automotive collision repair market, original equipment manufacturer (OEM) coatings for new vehicle production, and industrial coatings including electrodeposition (E-coat) and powder coatings for a variety of sectors such as architecture, heavy equipment and general industrial applications.
Tracing its roots to the 19th century and rebranded as Axalta following its separation from DuPont Performance Coatings in 2013, the company has built a presence in more than 100 countries.
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