Axalta Coating Systems (NYSE:AXTA) reported fourth-quarter and full-year 2025 results, highlighting record cash generation and continued margin strength despite what management described as macro headwinds in North America. Executives also spent significant time discussing the company’s planned “merger of equals” with AkzoNobel, including expected synergies and the strategic rationale for combining the two coatings businesses.
Fourth-quarter results: margin resilience and record cash flow
CEO Chris Villavarayan said Axalta generated approximately $1.3 billion of fourth-quarter net sales, noting year-over-year growth in three of the company’s four regions despite weakness in North America. Adjusted EBITDA was $272 million, with an adjusted EBITDA margin of 21.5%, up 50 basis points from the prior year. Adjusted diluted EPS was $0.59, roughly flat year-over-year.
CFO Carl Anderson said fourth-quarter net sales declined 4% year-over-year due to lower volumes in North America across all businesses, which more than offset favorable foreign currency translation (primarily a stronger euro). Gross margin declined 70 basis points, primarily due to unfavorable geographic mix tied to lower North America net sales.
Net income was $60 million versus $137 million in the prior-year quarter. Anderson said the change was driven primarily by higher tax expense and $21 million in transaction costs related largely to the announced merger with AkzoNobel. He added that income tax expense rose by $57 million year-over-year in the quarter due to a one-time deferred tax benefit in fourth-quarter 2024 and a valuation allowance accrued in the current quarter.
Axalta posted record cash generation for the quarter, with cash from operations of $344 million and free cash flow of $290 million, driven primarily by improved working capital and lower interest payments.
Segment performance: Performance Coatings softness, Mobility strength
In Performance Coatings, fourth-quarter net sales declined 6% year-over-year to $791 million, primarily due to lower volumes and unfavorable price mix. Refinish net sales decreased 7% to $509 million, which management attributed to low levels of claim activity and adjusted order patterns as North America customers managed working capital. Industrial net sales declined 5% to $282 million due to volume declines in North America and Europe, partially offset by favorable currency.
Performance Coatings adjusted EBITDA was $180 million versus $198 million a year ago, with adjusted EBITDA margin declining 70 basis points to 22.8%, reflecting lower sales conversion partially offset by reduced operating expenses.
Mobility Coatings posted fourth-quarter net sales of $471 million, up 1% year-over-year. Light Vehicle net sales increased by $3 million due to positive price mix and favorable currency, offsetting volume declines in North America. Commercial vehicle net sales were flat, with new business wins, favorable foreign currency, and positive price mix offsetting lower North America Class 8 production. Anderson noted that North America heavy-duty truck production was down roughly 30% in the quarter.
Mobility Coatings adjusted EBITDA increased 20% to $92 million, with margin rising 300 basis points to 19.4%, driven by price mix and lower operating expenses.
Full-year 2025: record adjusted EBITDA, improved margins, de-leveraging
For full-year 2025, Axalta reported net sales of $5.117 billion, down 3% year-over-year, which Anderson attributed primarily to industry softness in Performance Coatings. Despite lower sales, the company delivered record adjusted EBITDA of $1.128 billion and adjusted EPS of $2.49, up 6% from 2024. Adjusted EBITDA margin improved 80 basis points to 22%, exceeding the company’s A-Plan target of 21% for the second consecutive year.
Axalta generated nearly $650 million of cash from operations and $466 million of free cash flow, driven by lower cash interest payments and improved working capital, partially offset by higher capital expenditures.
Management also highlighted cost and operational initiatives during the year, including more than $300 million in variable cost reductions through procurement and material productivity programs, lower fixed expenses (down over 6% on a constant currency basis), and $100 million in incremental structural benefits from transformation initiatives. The company invested $196 million in capital expenditures, described as a record level, and improved on-time delivery by 10%.
In capital allocation, Anderson said Axalta paid down approximately $230 million in gross debt, bringing net leverage to 2.3x at year-end, the lowest in the company’s history. Interest expense for 2025 was $176 million, down nearly $30 million year-over-year, and the company is targeting another $20 million reduction in 2026 to approximately $155 million. Axalta also repurchased $165 million of shares in 2025, but has ceased buybacks following the AkzoNobel merger announcement and said it is pivoting toward debt reduction.
2026 outlook: slower start, second-half recovery expected
Axalta’s outlook calls for a slower first quarter followed by improvement beginning in the second quarter and building into the second half, reflecting expectations for easing macro pressures. Management cited distributor order patterns in Refinish, continued softness in Industrial, and weak Class 8 production as key factors early in the year, while pointing to potential second-half catalysts such as interest rate reductions, easing insurance costs, higher used vehicle prices, and higher Class 8 production.
For the first quarter, the company plans for revenue to decline mid-single digits, driven primarily by Performance Coatings, and expects first-quarter adjusted EBITDA of $240 million to $250 million.
For full-year 2026, Axalta expects:
- Revenue: up low single digits, driven by positive price mix, favorable FX, and higher second-half volumes
- Adjusted diluted EPS: $2.55 to $2.70 (about 5% growth at the midpoint versus 2025)
- Adjusted EBITDA: $1.14 billion to $1.17 billion, which management said would be another record year
- Adjusted EBITDA margin: above 22%
- Free cash flow: greater than $500 million, with capex of $180 million to $200 million
Anderson said the company expects net leverage to be below 2x by year-end 2026.
Refinish trends, destocking, and merger discussion in Q&A
During the question-and-answer session, Villavarayan said distributor consolidation in North America has contributed to destocking-related volume pressure in Refinish. He said the consolidation of Axalta’s largest distributor, following an acquisition of “FM,” began in the second quarter of the prior year and that Axalta expects the destocking to end in the second quarter of the current year, based on company conversations and tracking.
On claims, Villavarayan said claims were down about 1% to 2% and pointed to “green shoots,” including insurance rate increases moderating from prior elevated levels. He also cited higher used vehicle prices and weather as potential factors supporting collision activity.
Axalta reiterated its Refinish growth priorities, describing four pillars: net body shop wins, expansion into adjacencies, growth in the economy segment, and M&A. Management said the company added over 2,800 net new body shops in 2025 and grew adjacencies by $25 million, while noting that CoverFlexx helped drive growth in the economy space.
On pricing in Refinish, Villavarayan said Axalta achieved 2% pricing in 2025 and is targeting 2% net pricing again in 2026, with one standard pricing action planned.
Regarding the AkzoNobel transaction, Villavarayan said the combination represents a value-creation opportunity and reiterated Axalta’s expectation of $600 million in synergy potential. Management said the combined company is expected to have “EBITDA margins approaching 20%,” significant free cash flow generation, and an investment-grade credit profile. Anderson told investors the companies see potential upside from revenue synergies, though management said additional detail would be provided later in the process.
Management also clarified that the combined company’s primary listing is intended to be on the New York Stock Exchange, with an expectation of a period of dual listing before ultimately moving to a single NYSE listing.
About Axalta Coating Systems (NYSE:AXTA)
Axalta Coating Systems is a global leader in the development, manufacture and sale of liquid and powder coatings. The company’s product portfolio spans refinish coatings for the automotive collision repair market, original equipment manufacturer (OEM) coatings for new vehicle production, and industrial coatings including electrodeposition (E-coat) and powder coatings for a variety of sectors such as architecture, heavy equipment and general industrial applications.
Tracing its roots to the 19th century and rebranded as Axalta following its separation from DuPont Performance Coatings in 2013, the company has built a presence in more than 100 countries.
