Axalta net income declines due to supply constraints
General

Axalta net income declines due to supply constraints

Income from operations for Q4 2021 totaled $94.7 million versus $163.2 million in Q4 2020

  • By ICN Bureau | February 01, 2022
Axalta's fourth quarter net sales of $1,137.2 million increased 5.8% year-over-year inclusive of a 1.2% foreign currency headwind, driven by 3.6% higher average price and product mix and a 3.9% M&A contribution. Performance Coatings recorded a 14.2% net sales increase, including double-digit growth rates from both the Refinish and Industrial end-markets. The 10.1% net sales decrease for Mobility Coatings included a 14.4% decrease from Light Vehicle due to continued OEM customer production constraints from ongoing semiconductor chip and other supply chain shortages. This was partly offset by solid 7.6% net sales growth from Commercial Vehicle given supportive demand and customer production rates despite moderate supply chain issues also impacting that end-market. Substantial price and product mix realization of 3.6% within both Performance Coatings and Mobility Coatings came from pricing adjustments implemented to offset broad-based inflationary pressure, while product mix was a moderate headwind for the period. Net sales were also broadly constrained during the fourth quarter by limitations in availability for key raw materials due to both supply availability and transportation bottlenecks seen during the period.
 
Income from operations for Q4 2021 totaled $94.7 million versus $163.2 million in Q4 2020. Net income to common shareholders was $53.2 million for the quarter compared with $69.7 million in 2020, and diluted earnings per share was $0.23 compared with $0.30 in Q4 2020. Results were significantly impacted by lower volumes from Mobility Coatings, substantial variable cost inflation, and other cost inflation in logistics, labor, and energy from the prior year quarter, and the lapse of certain temporary cost reductions from the prior year period. Partly offsetting this result was continued demand strength driving strong organic growth within Performance Coatings, pricing and acquisition contributions. Net income to common shareholders also benefited by approximately $42.9 million, net of tax, from the combined impacts of gains on the sales of facilities in the quarter as well as lower debt extinguishment and retention costs, and the release of unrecognized tax benefits offset by increased acquisition-related costs. 
 
Robert W. Bryant, Axalta's President and CEO, commented, "Axalta's fourth quarter results underscored strong continued operating execution during 2021. The business produced strong cash flow and managed well through a challenging environment marked by extensive cost inflation and supply chain headwinds, and also recent pandemic-driven labor constraints impacting Axalta and customer production sites. We continue to take active steps to offset these headwinds by implementing pricing and cost actions, though, exiting the year, a gap remains between cost inflation and realized offsets. As such, we are implementing additional price actions as required to offset cost increases across our enterprise. Our current expectation is that, in aggregate, remaining uncovered inflation from 2021 as well as incremental inflation expected this year will be offset fully during the course of 2022."
 
Bryant continued, "Axalta continues to enjoy strong demand across nearly every business line, though strong underlying consumer demand in Mobility Coatings continues to be unmet due to OEM customer production disruptions. Persistent global supply chain constraints have impacted volumes across the business, especially in the Light Vehicle end-market with semiconductors, while raw material availability has also limited volumes while driving further cost inflation across both segments. We are encouraged at early improvement in chip availability within automotive during the fourth quarter and remain optimistic that 2022 could see a solid rebound in light vehicle production, which, when coupled with strong consumer demand, has the potential to drive a multi-year recovery."

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