Axalta Says European Distributors Paused Restocking, Cutting Fourth-Quarter Sales Outlook To Flat
The CEO calls a third-quarter refinish miss "inventory timing," and the CFO says October is tracking to plan.
Axalta Coating Systems, which makes paints and finishes for vehicles and industrial products, blamed a third-quarter shortfall on European distributors that stopped restocking, not on weak repair demand, CEO Chris Villavarayan said on the company's earnings call Thursday. The company now expects fourth-quarter net sales to be about flat from a year earlier, after previously guiding to a 3% gain.
A pause in the indirect channel
Villavarayan said Axalta sells in Europe through three channels: about 50 company-owned retail shops, its own direct distributors, and partner distributors, the indirect channel. In late August and September, he said, those partners reviewed inventory and, given the macro and a bit of the political environment, decided to "take a pause on filling inventory levels for Q4."
The miss, he said, was against expectations. Management had planned for growth of 2% to 3% in the third and fourth quarters after five straight quarters of record European refinish sales, and instead got stability. European refinish is still up 5% year to date, he said, and "this is just inventory timing."
CFO Carl Anderson, answering an analyst at Bank of America, said European refinish fell by a double-digit percentage in the quarter, while consolidated refinish volumes fell about mid-single digits.
Guidance reset and margin squeeze
Third-quarter net sales rose 2% to $1.3 billion, while adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, adjusted) came in at $282 million, down 4%. Anderson tied the decline to lower European refinish volumes and freight costs up more than 15% on higher diesel prices. Adjusted earnings per share were 63 cents, down 6%.
Anderson said the fourth-quarter cut rests on two things: the weak third quarter and a more measured view given rising macroeconomic uncertainty across end markets. Axalta now expects fourth-quarter adjusted EBITDA of $254 million to $264 million and adjusted earnings per share of about $0.55. For the full year, it expects adjusted earnings per share of about $2.45 and free cash flow of about $450 million.
Performance Coatings margin is also under near-term pressure as the company spends to convert recently won body shops. Villavarayan said refinish revenue was about $2.1 billion three years ago and will end this year near that level despite more than $200 million of market impact, with Performance Coatings margins of 23.5% this year against 24% in 2024 and 2025.
October and the road to the merger
Asked by a KeyBanc analyst whether year-to-date growth might hide restocking that could unwind, Anderson said the implied fourth-quarter guide has European refinish roughly flat, with no further destocking, and that early October is tracking to expectations.
Axalta, with a market value of $7.4 billion in Thursday morning trading, also said it has cleared regulators in two-thirds of the required jurisdictions for its proposed combination with AkzoNobel, and expects to close in early 2027. The merged company will trade in New York under the ticker AXZ.
Fourth-quarter refinish results will show whether the distributor pause was timing, with Axalta guiding European refinish to roughly flat.
Sources
- Axalta Coating Systems (AXTA) Q3 Earnings and Revenues Miss Estimates — Yahoo Finance
- Axalta Coating Systems: Q3 Earnings Snapshot – WTOP News — wtop.com
- Axalta Coating Systems misses top-line and bottom-line estimates;gives Q4 and updates FY26 | Seeking Alpha — seekingalpha.com
- Axalta Releases Third Quarter 2026 Results — globenewswire.com
