US Axalta to miss guidance because of high inflation, supply constraints
HOUSTON (ICIS)–Axalta Coating Systems will miss its Q4 and 2021 full-year guidance, issued in October, mainly because of greater-than-expected adverse impacts from raw material price inflation and supply chain constraints, the US-based company said in an update on Tuesday.
Full-year adjusted earnings before interest and tax (EBIT) are now expected $30m below the midpoint of the October guidance range of $645m-665m.
Full-year sales are expected to have grown by 18.2%, compared with guidance of about 19% growth.
Limitations in availability of certain raw materials resulted in substantial unfulfilled orders during Q4, it added.
However, given strong underlying demand conditions across Axalta’s end-markets, the company believes 2022 should be a year of recovery in volume and profit terms, it said.
The majority of the recovery would be in H2, it said.
“The company also remains focused on addressing persistent inflationary pressures with price increases,” it added.
Axalta expects to offset 2021 inflation impacts during H1 2022.
The company expects to see continued inflation during 2022 from most cost categories, which will require incremental price actions.
However, the inflationary cost headwinds are expected to decrease sequentially during 2022 following Q1, when overall cost inflation is expected to remain fairly consistent with Q4 2021, it said.
Axalta uses thousands of different raw materials, which fall into seven broad categories: liquid resins, powder resins, pigments, solvents, monomers, isocyanates and additives.
On average, the company’s total raw material spend represents between 40% and 50% of cost of sales, according to its 2020 annual report.
Axalta expects to announce its Q4 and full-year 2021 results on 31 January.
Thumbnail shows automobiles, which represent a significant end market for Axalta. Photo by Ng Han Guan/AP/REX/Shutterstock