Axalta expecting ‘some uncertainty’ for rest of 2026, positive outlook regarding AkzoNobel merger

Axalta Coating Systems reported favorable Q2 earnings on Tuesday, noting that the conflict in Iran, tariffs, and other factors create “some uncertainty” for the rest of 2026.

“[O]ur strong second quarter results and performance across the organization is putting us on an excellent path for 2026,” said Carl Anderson, Axalta senior vice president and CFO, during the company’s earnings call. “External forecasts and key performance indicators remain broadly consistent with the assumptions underpinning our prior guidance.

“That said, the situation in Iran, tariffs, and broader geopolitical tensions in the Middle East continue to create some uncertainty. As a result, we believe it is prudent to maintain our previously issued full-year guidance for net sales, adjusted EBITDA, adjusted diluted earnings per share, and free cash flow. Having said that, we continue to operate very effectively and are prepared to convert on higher volumes if they come in stronger than planned. Specifically for the third quarter, we expect net sales to increase by low-single-digit percent compared to the prior year period, with adjusted EBITDA in the range of $295 million to $305 million.”

Q2 earnings highlights include:

• • Net sales of $1.35 billion, an increase of $41 million, or 3%, year over year (YoY)
  • Refinish net sales increase of 6% YoY, to $545 million
  • Net income of $89 million, a decrease of $21 million, and net income margin of 6.6%
  • Record quarter for Adjusted EBITDA, up 5% to $305 million with an Adjusted EBITDA margin of 22.7%, up 3o basis points from Q2 2025
  • Diluted EPS of $0.41
  • Record quarter for Adjusted Diluted EPS of $0.72, an increase of 13% YoY
  • Cash provided by operating activities of $152 million, up 7% YoY, primarily driven by improved working capital and lower interest payments.
  • Free cash flow of $107 million, up 6% YoY, inclusive of the headwind from merger-related costs.
  • Total net leverage of 2.2 times, the lowest in Axalta’s history

“In July, we won approximately 800 new North American locations associated with leading MSOs,” said Chris Villavarayan, Axalta’s CEO and president, during the company’s earnings call. “This represents excellent wins for Axalta and further reinforces our growth momentum. As I’ve told you before, 90% of our 95,000 Refinish customers are small businesses. Time in a body shop is money, and we optimize this for them by creating productivity and efficiency improvement.”

In a press release, he added: “We delivered an excellent second quarter with record Adjusted EBITDA and Adjusted Diluted EPS, expanded margins and strong free cash flow generation demonstrating the earnings power of our business model. Our team continues to drive operational excellence that underpins our consistent financial performance, and we carry solid momentum into the second half of the year.”

In the earnings call with investors, Anderson said, related to costs and functions, that Axalta’s overall focus is “to be much more efficient as we progress.”

“I think the trajectory that we’re on continues,” he said. “We’re not done. There’s more opportunities as we continue to look at what we can do throughout the rest of this year. But more importantly, I think it provides a really, really strong building block of what we can be doing when we get this merger over the finish line to get that closed with AkzoNobel.”

Moving into Q3, when asked about Refinish volume expectations, Villavarayan said they will remain pretty much flat, and then increase in Q4.

“If I look at Q2 and Q3, destocking is mostly completely out, so let’s call it a net positive from where we were; essentially in line with what we’ve always said,” he said. As I think about stabilization and recovery, where that’s coming from is really the markets are starting to drop. The collision rate drops are more in line with our expectations; North America, that’s dropping about mid-single digits. Europe’s probably low single digits.

“But on top of that… I would say miles driven is up slightly. Nothing’s changed there in terms of insurance rates. Insurance rates continue to abate. And I would say that’s coming in slightly better than we’ve planned, and certainly used car pricing is also trending the right way. So destocking’s a positive, miles driven is a positive, insurance rates are slightly better, used car pricing is good, so that’s what’s driving, I would call it, the recovery or the expectations of a better future here.”

Villavarayan added that the counter to that is consumer affordability and that some still aren’t filing insurance claims.

“The last part of this is also total losses are going up because of the cost of repairs, so parts costs as well as cost of repairs are all having a bit of an impact on this,” he said.

When asked about increases in raw materials costs in the back half of the year, Anderson said the bulk of what Axalta expects is holding where they are now.

“We do see some pretty significant differences depending on what we are buying, so solvents, as you would expect, it’s been up probably 15%, 20% just based off what’s happening with oil prices,” he said. “Monomers have also been up as well, probably high single digits percentage basis, but others have been lower. It is definitely a mix that we’re seeing across the overall raw material basket that we’re buying at this point. But at this moment, we’re not forecasting really any significant changes, at least in the overall price levels for the rest of the year.”

Axalta’s earnings press release notes that Performance Coatings’ Q2 net sales were $872 million, up 4% YoY, “as favorable currency translation, contributions from acquisitions, and positive price mix more than offset slightly lower volumes.”

Axalta reports that the segment’s organic net sales increased YoY, supported by strong growth in Europe and Asia and favorable price mix, partially offset by lower volumes in North America. Adjusted EBITDA increased 10% YoY to $218 million compared with $200 million in Q2 2025. Axalta says the increase was driven by favorable price mix and lower variable and operating expenses.

The Refinish net sales increase was primarily driven by contributions from acquisitions, favorable price mix, and foreign currency translation, according to the release.

Regarding the proposed merger with AkzoNobel, Anderson said the fundamentals of the transaction are exactly where Axalta wants them.

Axalta expects $600 million annual run-rate cost synergies with roughly 90% captured within the first three years following closing of the transaction.

“We also see attractive revenue synergy opportunities through cross-selling, technology sharing, and expanded customer access across a broader global platform,” he said. “The planning we’ve completed to date has only strengthened our confidence in those numbers. Just as important, the results we’ve walked through today mean we’ll enter this combination from the strongest financial position in our history — record earnings, robust cash generation, and our lowest ever net leverage. Following the vote, integration preparation will accelerate as we prepare for day one.”

A special meeting of stockholders will be held at 9 a.m. on Aug. 5.

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