Net sales of Astor in the first quarter exceeded US $1.1 billion

Recently, Axel announced its financial results for the first quarter ended March 31, 2019. According to the performance report, in the first quarter of 2019, the net sales of Axel was $1113.3 million, down 4.5% year-on-year; the total operating revenue in the first quarter was $98.6 million, down 17.8% year-on-year; the adjusted EBIT in the first quarter was $143.9 million, down 9.3% year-on-year. Comprehensive financial performance in the first quarter of 2019 net sales of Axel in the first quarter of 2019 was $1113.3 million, down 4.5% year-on-year, of which 4.8% was the negative impact of foreign exchange. Fixed currency net sales rose 0.3% over the same period, partially offset by a 2.1% drop in organic production, driven by an increase in average prices and product mix and a modest acquisition contribution of 2.1%. In addition to the foreign exchange business, net sales growth in the first quarter was driven by moderate growth in the U.S. market (higher prices and product mix) and growth in the commercial vehicle end market, partially offsetting the decline in net sales in the Asia Pacific region as China's sales in the transport coatings sector continued to be under pressure. First quarter operating revenue totaled $98.6 million, down 17.8% from $120 million in the first quarter of 2018.

This is mainly due to the reported decline in net sales, including the negative foreign exchange impact and the continuing adverse impact of year-on-year variable cost inflation. The quarter was also impacted by accelerated depreciation charges of $6.1 million. Accelerated depreciation charges relate to the company's expected closure of its Belgian plant and the company's expected sale of a powder coating joint venture with a 60% stake in China, resulting in a loss of $5.2 million. Adjusted EBIT in the first quarter was $143.9 million, down 9.3% from $158.6 million in the first quarter of 2018. Factors contributing to this result include: the significant impact of year-on-year variable cost inflation, the negative impact of foreign exchange, and the negative impact of the decline in sales, mainly in the light vehicle sector, partially offset the strong contribution from the rise in average prices and product structure, as well as the increase in overall productivity. Robert W. Bryant, chief executive officer of Astor, said, "the first quarter's performance is in line with our previous guidance. Despite some adverse factors, including a significant increase in raw material costs and significant fluctuations in foreign exchange impact compared with the first quarter of 2018, the first quarter's performance has met expectations.

Our strong ongoing price and portfolio improvement in the high performance coatings sector offset slight negative sales in the quarter. In terms of transport coatings, we see a moderate increase in average prices, while the impact of the product mix has declined in the quarter. The slowdown in global production growth has also put pressure on light vehicle sales, especially the double-digit year-on-year drop from China. Our focus on productivity also helped reduce overall operating costs in the first quarter. " Results of high performance coatings: net sales of high performance coatings in the first quarter of 2019 was $713.3 million, down 2.4% year-on-year, including 4.8% negative currency impact. In the same period, the net sales of fixed currency increased by 2.4%, mainly due to the improvement of average price and combination, and the organic sales increased by 1.9%. Acquisitions contributed 0.5% to net sales growth. In the first quarter of 2019, net sales in the repair terminal market decreased by 2.1% to US $400.5 million (excluding foreign currency increase by 3.5%), strong average price and mixed contribution were partially offset by lower sales, and North America was mainly affected by the decrease of distributor channel inventory. Net sales in the industrial end market fell 2.8% to $307.8 million (excluding a 1% increase in foreign currencies), including positive pricing across all regions, partially offsetting the decline in organic production in Europe, the Middle East and Africa, with a smaller decline in Asia Pacific. The adjusted EBIT of the high performance coatings department in the first quarter was US $78.6 million, up 3.4% year on year.

The positive price and product mix, as well as the very modest acquisition contribution, to some extent offset the impact of raw material inflation, declining trading volume and adverse foreign exchange winds. The adjusted EBIT margin in the first quarter was 11%, up from 10.4% in the same period last year, as prices and product mix offset the adverse factors in the current raw material market. Traffic paint results: the net sales of traffic paint in the first quarter of 2019 was US $406 million, down 7.9% year-on-year, including 4.8% negative currency impact. Net fixed currency sales fell 3.1% over the same period, with sales down 3.3%, offsetting a 0.2% increase in average price and product mix effects. Net sales of light vehicles decreased by 10.6% to US $315.9 million (excluding a 5.4% decrease in foreign currencies) year on year, mainly driven by the decline in sales and the impact of foreign exchange, but the average price and product structure slightly improved. The overall average price remained positive during this period, partially offsetting the negative impact of the portfolio. Net sales of commercial vehicles increased by 2.6% from the first quarter of 2018 to US $90.1 million (excluding foreign currency increase by 6.6%), with strong sales growth in North America and basically stable global market. The average price is basically the same as the product structure. The adjusted EBIT generated by traffic coatings in the first quarter of 2019 was $34.2 million, a 24% decrease compared to the first quarter of 2018, due to the impact of rising raw material prices and declining production, while the average price and product mix slightly offset positively.

The Department's adjusted EBIT was 8.4% in the first quarter of 2019, compared with 10.2% in the first quarter of 2018. Balance sheet and cash flow highlights Axel's cash and cash equivalents at the end of the quarter were $501.1 million. As of March 31, 2019, the company's debt (net cash) was $3.4 billion, compared with $3.2 billion at the end of 2018. This is due to the use of operating cash flow in the first quarter and share repurchases in that quarter. As of the end of the quarter, Ashtar's net debt to adjusted EBITDA ratio for the past 12 months was 3.6 times. Axel repurchased 2.5 million common shares in the first quarter of 2019 at a total cost of $65.8 million. The total operating cash flow for the first quarter was $57 million 900 thousand, compared with $21 million used in the same quarter of 2018, reflecting a decrease in operating income and a moderate headwind in working capital, partly due to the timing of collections. The total use of free cash flow was $74.9 million compared to $60.5 million in the first quarter of 2018. "The company's overall operating performance in the first quarter was strong and in line with our guidance outline issued at the end of January," said Sean Lannon, chief financial officer of Astor. We are pleased that our business and financial performance are still on track for the full year, and we are still focused on achieving our goals despite the resistance in foreign currencies in the first quarter, as well as incremental sales pressures from our industrial and light vehicle end markets. We are also committed to the axalta way project to drive the productivity of the entire enterprise while achieving continuous incremental pricing offsets for variable input inflation. "