Axalta Coating Systems (NYSE:AXTA) reported higher second-quarter sales, record adjusted EBITDA and its lowest net leverage ratio to date, while maintaining its full-year outlook amid uncertainty tied to tariffs, geopolitical tensions and raw-material costs.
Chief Executive Officer Chris Villavarayan said the coatings maker’s adjusted EBITDA rose 5% from a year earlier to a record $305 million. Adjusted diluted earnings per share increased 13% to $0.72, while adjusted EBITDA margin expanded 30 basis points to 22.7%.
Cash generation and balance sheet strengthen
Cash provided by operating activities totaled $152 million in the quarter, while free cash flow was $107 million, up 7% and 6%, respectively, from the prior-year period. Chief Financial Officer Carl Anderson said the improvement reflected better working-capital performance and lower interest payments.
Anderson said Axalta improved its cash conversion cycle by about 10% year over year and reduced inventory days by roughly eight days. Excluding deal-related fees, free cash flow would have risen close to 20% from a year earlier, he said.
The company reduced gross debt by $80 million during the quarter and by $135 million through June. Interest expense in the first half was 16% lower than in the prior-year period. Net leverage ended the quarter at 2.2 times, the lowest level in Axalta’s history, and management said it remains on track to exit 2026 below 2 times.
Performance Coatings leads sales and margin gains
Performance Coatings net sales rose 4% year over year and 9% sequentially. Segment adjusted EBITDA increased 10% to $218 million, while adjusted EBITDA margin expanded 130 basis points to 25.1%.
Refinish sales increased 6% to $545 million, supported by volume growth in three of four regions, positive price mix and the normalization of channel inventories in North America. Villavarayan said Europe, Axalta’s largest Refinish region, posted record quarterly sales.
The company secured more than 1,900 net new body shops in the first half and approximately 800 additional North American locations in July associated with large multi-shop operators. Management later described the July wins as including a 600-body-shop customer among North America’s top five MSOs, along with another large North American MSO win.
Villavarayan said destocking pressure was largely behind the business and expects Refinish volumes to be approximately flat in the third quarter before improving in the fourth quarter. For the second half, he expects volumes to be slightly higher despite an anticipated mid-single-digit decline in collision claims.
Industrial sales rose 2% to $327 million, as volume growth in Europe and Asia and positive price mix more than offset weaker North American volumes. Villavarayan said Industrial volume was down about 1% in the second quarter, but cited European E-Coat demand and Asia Energy Solutions demand as areas of strength. North American Industrial conditions remain “choppy and challenged,” he said, particularly in building-products-related markets.
Mobility reaches quarterly sales record
Mobility Coatings generated record second-quarter sales of $474 million, up 1% from the prior year. Commercial Vehicle sales increased 7%, supported by volume growth in all four regions and favorable currency translation, while Light Vehicle sales declined slightly.
Management said North American Class 8 truck production has begun improving and is expected to continue in the second half. Villavarayan also highlighted growth in commercial transportation solutions, including off-highway, military, ambulance, fire truck and recreational vehicle applications. That business now represents about half of Axalta’s Commercial Vehicle operations and was up 5% year over year, he said.
Mobility adjusted EBITDA was $87 million and margin was 18.4%, up 90 basis points sequentially. Compared with a year earlier, higher Commercial Vehicle volumes were more than offset by favorable one-time items recorded in the second quarter of 2025 that did not recur. Anderson said the prior-year one-time benefit was about $7 million.
Guidance maintained as costs rise
Axalta retained its existing full-year outlook for sales, adjusted EBITDA, adjusted diluted EPS and free cash flow. Anderson said external forecasts and internal key performance indicators remain broadly consistent with the assumptions underlying prior guidance, but management cited uncertainty surrounding Iran, tariffs and broader Middle East geopolitical tensions.
For the third quarter, Axalta expects low-single-digit year-over-year sales growth, adjusted EBITDA of $295 million to $305 million, and adjusted diluted EPS of about $0.70, up 4% from a year earlier.
The company expects raw-material costs to represent a mid-single-digit headwind for the full year. The impact was low single digits in the second quarter and is expected to rise toward the high-single-digit range as the company exits the year. Anderson said solvent costs were up roughly 15% to 20%, while monomer costs were up in the high single digits, though management is not forecasting significant changes in overall raw-material price levels for the remainder of the year.
AkzoNobel vote approaches
Shareholders are scheduled to vote Aug. 5 on the proposed merger of equals with AkzoNobel. Axalta said regulatory reviews are continuing and the transaction remains on track to close in late 2026 or early 2027.
Management continues to expect approximately $600 million of annual run-rate cost synergies, with about 90% captured within the first three years after closing. The company also cited potential revenue opportunities from cross-selling, technology sharing and expanded customer access.
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.
