Axalta reviews Q1 earnings, shares more details on merger with AkzoNobel

Chris Villavarayan, Axalta’s CEO, president, and director, shared during the company’s Q1 2026 earnings call with investors that, “against the backdrop of macro uncertainty and elevated volatility,” Axalta remains focused on managing what it can control.

“While recent developments have increased uncertainty across cost and supply availability, our actions over the past several years have positioned us well to mitigate raw material inflation,” he said. “We’re closely monitoring developments across energy, logistics, and the broader supply and demand landscape as it relates to the evolving situation in the Middle East.”

From a purchasing perspective, Villavarayan added that Axalta delivered 12 consecutive quarters of year-over-year improvement in variable costs “due to strong productivity projects as well as focused implementation of procurement best practices.”

“In Refinish, we expect to implement mid-single-digit pricing in 2026, reflecting the value we deliver,” he said.

Axalta announced an average price increase effective March 2026. At that time, PPG had already notified U.S. Automotive Refinish Distributors in November 2025 of a January 2026 weighted average increase. BASF Automotive Refinish announced a weighted average price increase effective in March, and AkzoNobel announced an upcoming average price increase in May.

The announced increases for all four companies range from 6.8% to 7.6%.

Effective March 1, Axalta increased its Spies Hecker products. A letter to customers about the increase from Axalta Refinish North America Vice President Jeremy VanAlstyne states the products would continue to be “very competitively priced.”

Villavarayan told investors during the Q1 earnings call that more than 50% of Axalta’s Mobility revenue is now tied to raw material indices, which provide a natural hedge against cost volatility.

“Across the rest of the portfolio, we are prudent and proactive with the pricing actions and surcharges in place where appropriate to help protect margins,” Villavarayan said. “From a transportation and cost discipline standpoint, we continue to tightly manage our operating expenses.”

He added that during Q1, Refinish saw stabilization, at nearly $500 million in sales, consistent with the last five quarters.

Overall, Axalta generated net sales of $1.25 billion, adjusted EBITDA of $259 million, and adjusted diluted EPS of $0.56, which came in 12% above expectations, according to Villavarayan.

“These results reflect disciplined execution and a focus on the levers within our control,” he said. “We also set meaningful cash generation records this quarter with $68 million of cash from operations and $21 million of free cash flow, an improvement of $35 million year-over-year.”

Villavarayan noted that many of Axalta’s strategic supplier agreements are stronger and incorporate indexation, which is helping reduce volatility and improve visibility.

“As it relates to pricing, we plan to move quickly to offset the impact of inflation,” he said. “We’re driving solid discipline across the portfolio.”

Axalta is also experiencing a “resilient supply chain and cost structure,” with 90% of its direct buy being locally sourced, where variable costs represent about 60% of Cost of Goods Sold (COGS).

Inventory levels remain at roughly 115 days on hand, which Villavarayan said helps limit the impact of inflation, particularly moving into Q2.

He added that, in Refinish, net body shop “wins” increased 10% year-over-year and generated net sales growth in Q1 in three out of Axalta’s four regions.

“We’re also expanding with leading MSOs, which remain a key focus for the business,” he said.

Villavarayan said Axalta already contracts with nine out of 12 North American MSOs.

“With those MSOs, we continue to win more body shops, and on top of that, as I look at the economy mainstream, I believe this is going to be a very strong year for us,” he said.

Carl Anderson, senior vice president and chief financial officer, said Refinish net sales declined 3% to $498 million, “reflecting lower claims activity and shifting customer order patterns, as anticipated.”

“In Refinish, we are seeing signs of a more stable market as destocking trends are abating and claims activity is sequentially expected to improve,” he said. “Auto insurance premiums have moderated meaningfully. Used vehicle prices are rising and miles driven are trending favorably.

“At the same time, consumer sentiment and inflation concerns are more challenged. All this being said, we are planning for second half volumes to improve compared to last year.”

Axalta leadership also provided an update on the pending merger of equals with AkzoNobel.

“The transaction continues to progress very well, and we remain firmly on track with all of our key strategic work streams,” Anderson said. “Both teams are highly aligned and are working together seamlessly as we prepare for the shareholder vote, regulatory approvals, and day one readiness.

“A critical pillar of this combination is the substantial synergy opportunity we have identified. We remain confident in our ability to deliver $600 million in annual run rate synergies.”

He added that integration planning between both companies is “well underway” with dedicated teams established “to identify and accelerate these synergies, designed to capture value quickly and deliver a seamless transition at close.”

Regulatory filings are also underway, including in the U.S. and the EU, and progressing as planned, Anderson said.

“In parallel, we are maintaining active and constructive engagement with shareholders, and we expect the shareholder votes for both companies to take place by early July,” he said. “Overall, we are excited and energized and remain confident in our ability to deliver meaningful, substantial, and sustainable value creation through the combination with AkzoNobel.”

During the Q&A portion of the earnings call, an investor asked if destocking dynamics have changed to impact Automotive Refinish following the “abrupt spike” in raw material costs.

“As we see it right now, we’re certainly seeing stabilization,” Villavarayan said. “As April is closing and as we look at Q2, I would say we’re showing a bit of an increase in… sales in Q2, and we’re certainly seeing that come through. I would say the market is pretty stable, and we’re heading towards a recovery.

“Miles driven is up, insurance costs are starting to abate, and we can start seeing that flatline. And also, used car pricing is trending the right way, so all of this dynamic is heading the right way. For us, the incremental benefit here is also what’s happening with destocking. Destocking is starting to abate, and you can start seeing that in our guide for Q2. We’re essentially seeing price/mix start turn markedly positive, and it’s really driven by that.”

Anderson added that price actions Axalta is executing will likely inflect positively on price/mix during Q2 and will continue in the second half of the year.

“We’re also seeing the benefit from some of the more recent M&A transactions come through as well for the full year,” he said.

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Featured image provided by Axalta.