Axalta Coating Systems Ltd. on Wednesday reported a second-quarter loss of $82.8 million, after reporting a profit in the same period a year earlier.

 

Second quarter net sales of $652.7 million decreased 43.6% year-over-year, including a 2.8% negative foreign currency impact and 1.1% negative year-over-year impact from the sale of a China JV interest in Q2 2019.

 

Loss from operations for Q2 2020 totaled $64.5 million compared with income of $157.9 million in Q2 2019. 

 

Adjusted EBIT of $(11.6) million for the second quarter compared with $197.4 million in Q2 2019. Adjusted diluted EPS of $(0.15) compared with $0.52 in Q2 2019. These results were driven by lower global volumes across all end-markets and COVID-19 related accounting charges, partly offset by lower operating expenses inclusive of cost actions initiated in late March in response to COVID-19, and slightly lower variable input costs.

 

Robert W. Bryant, Axalta's President and CEO, commented, "We continue to be impacted by the coronavirus pandemic across our business, and we remain focused on operating safely while protecting the health and well-being of our employees, customers, and communities where we live and work. The impact on customer demand related to COVID-19 continues to gradually improve month-to-month, but there remain significant challenges and uncertainties around the timing and shape of the recovery. Given this, we remain committed to managing with agility to ensure we mitigate risk and control costs as effectively as possible."

 

In May, Axalta announced initial actions taken to counter COVID-19-related customer demand impacts across the business, including reductions in discretionary and other SG&A costs with a target of $100 million in savings to be realized during 2020.

 

Bryant commented, "We are proud that the second quarter benefited substantially from our proactive management philosophy and key actions implemented, allowing June results to return to profitability with volumes only partially recovered during the month. Axalta was able to reduce operating costs during the quarter by approximately $75 million, exceeding earlier expectations, and we now expect to beat our prior target for the full year and to generate at least $130 million in total cost savings."

 

The company said it is still confident that net profit for the year will be close to the 2019 level and that it can increase the operating margin further.

 

Bryant continued, "The nature of customer demand impacts during the quarter made the period uniquely challenging, including muted demand within Performance Coatings as well as prolonged customer shutdowns in Transportation Coatings, driving the recognition of fixed costs in the period due to underutilization of manufacturing sites. Nonetheless, our businesses have demonstrated resilience and emerged from the period fully intact, while customers have continued to experience Axalta's dedication to service, as they have come to expect from an industry leader. I can't thank our team enough for their dedication to fulfilling critical customer needs, and for the many examples we have seen of the Axalta team responding to the unique challenges of this period."

 

Axalta also announced that it is initiating a global restructuring of its business to better align the company's cost structure in light of current economic pressures and to position Axalta for sustained growth. The restructuring is expected to result in a net 5% reduction of Axalta's global workforce, or approximately 550 employees globally, with the potential for additional reductions from Europe. The 5% reduction in Axalta's workforce should be completed over 24 months and generate savings of approximately $50 million, with $40 million expected by the end of 2021. 

 

Axalta anticipates approximately $195 million of in-year 2020 cost savings from the restructuring actions announced today and previously planned actions. 

 

For Q3 guidance, the company expects sales to be down by 15-20% compared to Q3 2019 with a capex of about $80 million which is down 50% announced earlier this year.