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"Axalta’s 2016 financial period ended on a strong note, with fourth quarter net sales and operating performance slightly exceeding the expectations set in October. This was driven by volume and favourable product mix. For the full year, we also met our key objectives in terms of financial and operating performance, despite a somewhat greater foreign currency headwind,” said Charles W Shaver, Axalta’s Chairman and Chief Executive Officer. "We are proud of the progress we made this year, including achieving positive growth in a tough global economy, successfully executing on our M&A strategy, meeting our leverage target ahead of plan, and improving productivity through our Axalta Way initiatives. Key milestones were also met in new product technology introduction, refinancing our capital structure, and progressing our product globalisation and commercial excellence objectives. We look forward to ongoing momentum in each of these areas in 2017.”
Q4 2016 Consolidated Financial results
Net sales of US$1,029.4M for Q4 benefited from both volume and pricing growth, offset by a 3.0% negative impact from foreign currency translation. Constant currency net sales increased 5.6% yr-on-yr, driven by 2.2% higher average selling prices and 3.4% volume growth. Acquisitions contributed 3.1% of the volume growth in the quarter. Net sales growth in the quarter was led by Asia Pacific and North America and Axalta posted positive overall volume growth in all regions except Latin America, which remains challenged in both segments.
We reported a net loss attributable to Axalta of US$36.5M for Q4 of 2016 compared with net income attributable to Axalta of US$38.6M yr-on-yr. The net loss in Q4 2016 was primarily driven by severance charges related to planned productivity initiatives, the write-down of long-lived assets in Venezuela and charges related to the refinancing of our Term Loans during Q4. Adjusted net income attributable to Axalta of US$68M for Q4 2016 increased 18.3% compared to US$58.0M yr-on-yr.
Adjusted EBITDA of US$226.5M for Q4 increased 6.4% compared to US$212.8M in Q4 2015. This result benefited from lower variable costs, acquisitions, improved average pricing, as well as incremental savings from our operating enhancement initiatives. These factors were somewhat offset by negative foreign currency translation and operational expenditures to support planned growth.
Performance Coatings results
Performance Coatings net sales were US$608.8M in Q4 2016, an increase of 3.4% yr-on-yr including a 4.3% unfavourable foreign currency translation impact. Constant currency net sales increased 7.7%, driven by a 2.5% increase in volumes and higher average selling prices of 5.2% in the period. Acquisitions added 4.3% to volume growth in the quarter. Refinish end-market net sales increased 0.1% to US$422.4M (increased 4.9% excluding foreign currency translation), while our Industrial end-market increased 11.8% to US$186.4M (increased 14.8% excluding foreign currency translation).
The Performance Coatings segment generated Adjusted EBITDA of US$138.5M in the Q4, a 5.8% yr-on-yr increase. Contribution from acquisitions, positive pricing, coupled with variable cost savings, were partially offset by negative foreign currency translation and incremental operating expense to support growth initiatives. Q4 segment Adjusted EBITDA margin of 22.7% reflected a 50 basis point increase yr-on-yr.
Transportation Coatings results
Transportation Coatings net sales were US$420.6M in Q4 2016, an increase of 1.3% yr-on-yr including a 1.4% unfavourable foreign currency translation impact. Constant currency net sales increased 2.7% versus Q4 2015, driven largely by 4.7% volume growth, partially offset by a 2.0% negative price impact. Acquisitions added 1.5% to volume growth in the period.
Light Vehicle net sales increased 5.0% to US$342.8M yr-on-yr (increased 6.6% excluding foreign currency translation), driven principally by growth in Asia Pacific and North America versus last year, offset by modest decline in EMEA. Latin America saw the first positive revenue growth in several years, driven largely by Mexico with stable South America results versus prior periods. Commercial Vehicle net sales decreased 12.2% to US$77.8M yr-on-yr (decreased 11.5% excluding foreign currency translation), driven by lower heavy truck production and on going slower volumes from other non-truck customers.
Transportation Coatings generated Adjusted EBITDA of US$88.0M in Q4 2016, an increase of 7.4% yr-on-yr, with positive volume and variable cost contributions partially offset by somewhat lower average pricing, and on going operating expense increases to support planned growth. Segment Adjusted EBITDA margin of 20.9% in Q4 represented a 120 basis point increase from 19.7% in the prior year quarter.
"We are very pleased that in the fourth quarter we were able to demonstrate strong operating and financial performance, including solid revenue growth as well as record Adjusted EBITDA margins. We also completed additional refinancing to further optimise our capital structure, and ended the year with very strong cash flow,” said Robert W Bryant, Axalta’s Executive Vice President and Chief Financial Officer. "As we noted in December and affirm today, we continue to expect 2017 to show incremental progress across the organization, including on going above-market growth in net sales, modest incremental margin expansion, continued benefit from our acquisition strategy, and improvement in free cash flow and associated metrics.”
