Axalta sees 7% year-over-year net sales decline in Refinish
Chris Villavarayan, Axalta president and CEO, said net sales in the company’s Refinish segment decreased 7% year-over-year from $554 million to $517 million — a decline the company says was caused by lower claims activity and shifts in customer order patterns within the North American market.
He added that the segment has generated $90 million this year in incremental net sales, in part from gaining new business from more than 2,200 body shops.
“We believe that we’re well-positioned for growth in the business as volumes are expected to stabilize and grow into next year,” he said during Axalta’s Q3 earnings call on Tuesday.
When asked about expectations for the company’s 2026 refinish pricing strategy, Villavarayan said the plan is to stick to a similar pattern as this year’s — 2% net pricing.
“It’s certainly a model that’s worked, and I don’t see us needing anything further than that as we pivot into, let’s call it ‘more mainstream’ as well,” he said.
While sharing details on the Q3 earnings, Villavarayan said Refinish net sales came in at $517 million, slightly up on a sequential basis from Q2, with lower body shop activity and customer order patterns driving declines in organic net sales compared to last year, impacting volume and price mix.
“Previously, we anticipated that the external environment in North America and Europe would pick up in the third quarter, which would’ve generated a sequential benefit to net sales in the fourth quarter,” he said. “However, this improvement did not materialize as expected, and we are adjusting our forecast for the softer demand. We also expect softer class A production levels and lower light vehicle builds in some regions. Given some of the temporary supply challenges that are impacting the industry in the fourth quarter, we now expect next sales to decline by mid-single digits.”
Axalta expects Refinish revenue and volumes to turn positive in Q2 2026.
“Overall, this industry has been very stable,” Villavarayan said. “I look at what happened this year as something that is more temporary… There’s a sense of stabilization that’s happening, and I certainly see it as I look at our sales quarter over quarter over quarter. …We’ve been very focused on cost. I think as I look at next year, we can certainly pivot towards growth, especially with the strength of the underlying business.”
Chief Financial Officer Carl Anderson added that, as the company has strategically held higher inventory levels this year to manage tariff uncertainty, Axalta anticipates that free cash flow will improve significantly in Q4.
Villavarayan added that as insurance rates have plateaued in more than half of the country, overall rates are stable, and repair costs are beginning to decrease.
“In 27 states, insurance costs are actually coming down quite a bit, and I would say overall, that would mean the other half of the states are going the wrong way,” he said. “As volumes and backlogs start reducing at the body shops, you can start seeing that folks are starting to drive to balance this out, so that’s one of the good perspectives that I think is driving a stable environment.
“As I think of how we’re preparing into 2026 from a perspective of what we are seeing on the premium side, especially with costs of vehicles going up as well as what’s happening with used car pricing, you can certainly see that work is also starting to drive back.”
When asked about how tariffs could further affect business, Anderson said Axalta believes it has overcome the impacts.
“I think solvents continue to be a very low pricing environment, and we can continue to see that benefit,” he said. “Same thing as it relates to isocyanate is another one that we’ve seen lower cost. There’s been some offsets to that and some of the other baskets, such as monomers, as well as some pigments. But net, very stable backdrop to raw materials at this point, and we do believe that’s going to continue on at least for the next three to four quarters.”
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