Axalta Responds to COVID-19 Impacts
Last week, global liquid and powder coatings supplier Axalta issued a press release regarding the impacts of the ongoing COVID-19 pandemic on its business and the actions it plans to take in order to protect it communities, employees, customers and shareholders.
"First and foremost, we are focused on protecting public health and the health and safety of our employees and customers, consistent with guidance issued by relevant authorities,” said Robert W. Bryant, Axalta's President and CEO.
“Where possible, our employees are working remotely, and we have instituted global travel restrictions for all employees. We are taking steps to promote social distancing and have instituted robust on-site hygiene practices and restrictions on visits to our facilities. We are continuing to monitor the situation closely and will take further action as appropriate."
Two of the main tasks taken in response to the virus, Axalta reports, will be to maintain a strong balance sheet and liquidity profile, in addition to withdrawing its 2020 Financial Guidance given inherent uncertainty in the outlook for customer demand.
When the demand becomes more visible, Axalta management intends to provide updated guidance and is working with suppliers to identify and mitigate potential risk and inventory. However, no significant disruptions have been reported at this time.
Bryant adds, “The fundamentals of our business remain strong. From a manufacturing standpoint, we continue to operate and meet customer demand around the world. We are also activating contingency plans designed to ensure our ability to continue to serve our customers in the event of possible operational limitations and also exploring ways to 'flex' as demand from customers changes.”
The press release also reports that management has already begun planning and addressing near-term impacts on the demand decline in specific portions of Axalta’s business. Additionally, the company plans to focus on dynamically adjusting cost structures as needed, including initial actions required to reduce discretionary spending.
Free cash flow is expected to maximize and will include modifying previous plans for capital spending as well as reducing working capital intensity across the business.
“The coatings industry in general has a very high variable cost structure, and Axalta is no exception—our costs are approximately 64% variable at the cost of goods sold level,” concluded Bryant.
“Through a combination of variable and directed fixed cost structure actions, coupled with a strong balance sheet, we believe we are well positioned to weather near-term reductions in customer demand and come out of this crisis an even stronger company."
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