Axalta Lowers 2026 Profit Outlook as European Refinish Weakens

Axalta Coating Systems (AXTA) narrowed its 2026 adjusted EBITDA outlook below its previous range after third-quarter earnings declined, as lower European Refinish volumes and higher raw-material and freight costs outweighed strong growth in its Mobility Coatings business.

The coatings company now expects full-year adjusted EBITDA of $1.10 billion to $1.11 billion, compared with its prior forecast of $1.14 billion to $1.17 billion. Adjusted diluted earnings per share are projected at approximately $2.45, down from the previous range of $2.55 to $2.70. Axalta also expects about $450 million of free cash flow, including roughly $80 million of merger- and acquisition-related cash costs, versus its earlier forecast of more than $500 million.

Full-year net sales are still expected to increase by a low-single-digit percentage. For the fourth quarter, the company projects approximately flat year-over-year sales, adjusted EBITDA of $254 million to $264 million and adjusted diluted EPS of about $0.55.

European Refinish Weakness Pressures Profitability

Third-quarter net sales rose 2% year over year to $1.31 billion, supported by Commercial Vehicle growth, foreign-currency translation, acquisitions and price mix. Volume growth was recorded in three of Axalta’s four end markets.

Adjusted EBITDA declined 4% to $282 million, while the adjusted EBITDA margin contracted 130 basis points to 21.5%. The company attributed the decrease primarily to lower European Refinish volumes and higher raw-material and freight costs, partly offset by favorable price mix and a $10 million reduction in operating expenses. Despite the decline, the quarter marked Axalta’s 11th consecutive quarter with an adjusted EBITDA margin above 20%.

GAAP net income fell 14% to $95 million, or $0.44 per diluted share, from $110 million, or $0.51 per share, a year earlier. Results included an incremental $14 million of merger- and acquisition-related costs, mainly associated with the proposed merger with AkzoNobel. Adjusted net income was $136 million, and adjusted diluted EPS decreased 6% to $0.63.

Mobility Growth Offsets Performance Coatings Decline

Performance Coatings sales decreased 1% to $818 million. Refinish revenue fell 2% to $504 million as weaker European volumes more than offset acquisition contributions and price mix. Industrial sales increased 1% to $314 million, driven mainly by volume growth in Asia Pacific.

The segment’s adjusted EBITDA declined 11% to $188 million, and its margin fell to 23.0% from 25.5%. In addition to lower European Refinish volumes, Axalta cited investments supporting recently awarded business, partially offset by lower operating expenses, acquisitions and price mix.

Mobility Coatings produced record quarterly sales of $493 million, up 7%. Light Vehicle sales increased 2% to $374 million, primarily because of currency translation, while Commercial Vehicle revenue jumped 24% to $119 million. Axalta said the Commercial Vehicle gain was mainly driven by higher volumes linked to increased Class 8 truck production in North America.

Mobility adjusted EBITDA rose 13% to a third-quarter record of $94 million, reflecting volume growth and lower operating expenses. The segment’s margin expanded 100 basis points to 19.0%.

Cash Flow and Debt Reduction

Operating cash flow was $135 million, compared with $137 million a year earlier, and included almost $21 million of payments for merger- and acquisition-related costs. Free cash flow increased 3% to $92 million.

For the first nine months of 2026, operating cash flow rose 16% to $355 million and free cash flow increased 25% to $220 million, despite $42 million of merger- and acquisition-related payments. Capital expenditures totaled $144 million.

Axalta ended September with $2.995 billion of total debt, down by more than $500 million over two years and the lowest balance in its history. Its total net leverage ratio declined to a record-low 2.1 times, and the company expects the measure to be approximately 2.0 times at year-end.

AkzoNobel Merger Remains Targeted for Early 2027

Axalta said regulatory clearance for its proposed merger of equals with AkzoNobel was progressing, with two-thirds of the required approvals secured. Shareholders of both companies approved the transaction in August, and completion remains estimated for early 2027, subject to regulatory processes.

The companies have identified approximately $600 million of pre-tax run-rate cost synergies, with about 90% expected to be captured during the first three years after closing. Preparations are underway for integration and initial synergy capture. Divestiture processes are also in progress for Axalta’s North America Building Products business and AkzoNobel’s European Refinish business.

The outlook remains subject to risks surrounding completion and integration of the merger, execution of the planned divestitures, tariff mitigation measures, raw-material and freight costs, geopolitical conditions and broader economic and competitive factors. Axalta does not provide forward-looking GAAP reconciliations for several non-GAAP guidance measures because the necessary reconciling items cannot be estimated without unreasonable effort.