Axalta Coating Systems Q3 2026 Earnings Call - AXALTA COATING SYSTEMS LTD

Ladies and gentlemen, thank you for standing by. Welcome to the Exalta Coding Systems Q3 2026 Earnings Call. All participants will be in a listen-only mode. A question and answer session will follow the presentation by management. Today's call is being recorded and a replay will be available through November 5. Those listening after today's call should please note that the information provided in the recording will not be updated and therefore may no longer be current. It is now my pleasure to turn the call over to Colleen Lubick, Vice President of Investor Relations. Please go ahead. Good morning, everyone, and thank you for joining us to discuss Exalta's third quarter 2026 financial results. I'm Colleen Kubik, Vice president of Investors Relations. Joining me today are Chris Bill Ryan, our chief executive officer, and Carl Anderson, our Chief Financial Officer. You can find today's presentation and supporting materials on the Investor Relations section of our website at exalta.com. Before we begin, please turn to slide two for our forward-looking statements and non-GAAP disclosures. Our remarks today and the slide presentation may include forward-thinking statements reflecting our current views of future events and their potential impact on Exalta's performance, and with respect to the proposed merger of equals between Exalta and AxoNobel. These statements involve risks and uncertainties, and actual results and outcomes may differ. We're under no obligation to update these statements. Our remarks and the side presentation also contain various non-GAAP financial measures. We have included reconciliations of these non-GAP financial measures to the most directly comparable GAAP financial measures. Please refer to our filings with the SEC for more information. With that, I will now turn the call over to Chris. Thank you, Colleen, and good morning, everyone. Let's turn to slide three. Net sales in the third quarter increased 2% year-over-year to $1.3 billion, with volume growth in three of our four end markets and three of OUR4 regions. Mobility codings performed exceptionally well, delivering record quarterly net sales and record third quarter adjusted EBITDA. Commercial vehicle net sales grew 24%. Light vehicle once again outperformed underlying global production trends and industrial showed modest growth. We delivered adjusted EBITA of $282 million and adjusted EBита margin of 21.5%, marking our 11th consecutive quarter above 20%. percent. While our performance in the quarter remained strong, results were below our expectations driven primarily by softer volumes in Europe refinish. Sales in the region were lower than anticipated following five consecutive quarters of record sales as a weakening macroeconomic environment led distributors to adopt more cautious ordering patterns during the quarter. Importantly, our pricing actions this year continue to offset inflation, resulting in positive price mix for the business. While the current operating environment is affected by sluggish end markets, geopolitical uncertainty, and rapidly increasing raw material and freight costs, we continue to strengthen our financial position. Free cash flow was $92 million, up 3% year-over-year, despite absorbing approximately $21 million of merger-related cash costs during the quarter. Year-to-date, free cash flow is up 25% compared to the prior year period, inclusive of approximately $42 million of M&A-related Cash Costs, while capital investment remained at record levels. Total net leverage ended at a record low 2.1 times, and gross debt fell below $3 billion for the first time in company history, approximately $500 million lower than two years ago. We're gaining new business in attractive markets, generating strong margins and converting earnings into cash at a high level. Through September, we have won approximately 2,600 net new body shops and believe the pipeline remains strong. Additionally, industrial sales in Asia Pacific grew again in the third quarter, marking seven straight quarters of net sales growth. And CTS grew double digits year over year to a quarterly net sales record. Combined with the strength of our balance sheet, were well-positioned to navigate the current environment. Now to Carl for the results. Thank you, Chris, and good morning, everyone. Turning to slide four. Third quarter net sales increased $23 million versus the prior year period, coming in at $1,311,000,000. The year-over-year improvement was driven by significant growth in commercial vehicle, favorable foreign currency, contributions from refinish acquisitions, and favorable price mix. Net income was $95 million for the quarter and adjusted EBITDA totaled $282 million, a decline of 4% compared to the prior year period. This decline was primarily driven by lower refinished volumes in Europe and higher freight rates due to the significant increase in diesel prices. Overall, freight costs were up over 15% year-on-year. SG&A was up 2%, while operating expenses declined 3%, reflecting strong cost discipline across the organization. As a result, adjusted EBITDA margin was 21.5%, a good outcome given the volatility in cost and demand experience during the quarter. Adjusted diluted earnings per share was $0.63, down 6% year-over-year as lower volumes, primarily in Refinish Europe, and higher variable costs were partially offset by lower interest expense. Cash provided by operating activities was $135 million, in line with the prior year period, and free cash flow increased 3% year-over-year to $92 million, inclusive of approximately $21 million of incremental merger-related cash costs incurred during the quarter. Let's turn to the segment results, beginning with performance codings on slide 5. Performance Codings net sales were $818 million in the third quarter, a decrease of 1% to the prior year. Refinished net sales for $504 million, a increase of 2%. Lower volumes in Europe were the primary headwind in the quarter, more than offsetting positive price mix and contributions from acquisitions. Encouragingly, on a year-to-date basis, prefinished net sales are modestly above prior year levels supported by contributions from acquisitions, new body shop wins, and positive price mix demonstrating our ability to outperform the market. Industrial net sales were $314 million, an increase of approximately 1% compared to the prior year, driven primarily by volume growth in Asia Pacific. remain strong in energy solutions, Europe remained resilient, while demand in North America continues to be subdued. Performance coatings adjusted EBITDA was $188 million, a decrease of 11% versus the prior year period, and adjusted EBITA margin was 23%. This decline reflects lower volumes, higher raw material and freight costs, and increased investments to accelerate conversion of our recent MSO wins that we were awarded during the quarter. These headwinds were partially offset by positive price mix and contributions from acquisition. The velocity of body shop conversions are expected to increase in the fourth quarter, which speaks to the success of our team, however, it does create short-term margin compression as we finish out the year. Turning to slide six, mobility coatings was a clear bright spot in the third quarter. Net sales increased 7% year-over-year to a quarterly record of $493 million. White vehicle net sales were $374 million, an increase of 2%, driven primarily by favorable foreign currency translation. Global auto production was down almost 2% in the third quarter, while our volumes were roughly flat year-ever-year. Our commercial vehicle business delivered an outstanding quarter. That sales increased 24% year-over-year to $119 million, supported by volume growth across all four regions. Our commercial transportation solutions business continues to perform at exceptionally high levels, and we are benefiting from increased Class 8 production in North America. Momentum in the business has been building for several quarters, and with Class VIII production back above replacement demand levels, we believe the business is well-positioned to benefit from the expected production ramp into 2027. Adjusted EBITDA was $94 million, up 13% year-over-year, with adjusted EBITda margin expanding 100 basis points to 19%. percent this improvement reflects strong operational execution favorable volume leverage and disciplined cost management turning to slide seven during the first nine months of the year we reduced gross debt by 211 million bringing total debt below three billion dollars for the first time in the company's history in fact since september 2024 we have reduced debt by approximately 500 million dollars highlighting the consistent cash flow generation of our our business model. As a result, year-to-date interest expense declined by $22 million versus the prior year. Through the first nine months of the year, cash from operating activities increased 16% to $355 million. Free cash flow increased 25% to 220 million, inclusive of more than $40 million of merger-related cash payment. Excluding these costs, underlying free cash flow is up nearly 50% year-over-year. Total net leverage ended the quarter at 2.1 times, a record low for the company. This financial strength provides significant flexibility in positions as well as we prepare to close the merger with Axel Nobel in early 2027. Turning to slide 8. Based on our third quarter results and revised expectations for the fourth quarter, we are adjusting our full-year expectations for 2026. There are two primary factors driving this change. First, third quarter results were lower than planned, driven primarily by lower refinish volumes in Europe. Second, we are taking a more measured view of the fourth quarter given the recent increase in macroeconomic uncertainty in our end market. We now expect fourth quarter net sales to be approximately flat year over year compared to being up 3% previously. Additionally, we are accelerating investments to convert the strategic MSO winds announced in July, which sets us up for future growth that does create some near-term margin pressure. In the fourth quarter, we now expect adjusted EBITDA of $254 million to $264 million and adjusted diluted earnings per share of approximately $0.55. For the full year, we now anticipate adjusted EBITA of $1.1 billion to $1,110 million and adjusted diluted earnings per share of approximately $2.45. And we also expect free cash flow of approximately 450 million, resulting from the reduction in EBITDA and higher merger related costs as we get closer to deal closing. Excluding deal costs, we are generating greater than $500 million of free cash flow, highlighting the strength of our operating model, which is delivering another year of strong cash generation. Turning to slide 9, let me update you on the progress we have made towards closing our proposed combination with Axel Nobel. We have now secured regulatory clearance in two-thirds of the required jurisdictions, and the divestitures of Axel Noble's European Refinished Business and Exalta's North America Buildings Products business are underway. These are important milestones that keep us on track for an expected close in early 2027. This combination will create a premier global coatings company, NYSE-listed, with unmatched scale, technology breadth, and a global customer platform that neither company could replicate independently. The strategic and financial case has only strengthened since the initial announcement. We remain confident in approximately $600 million of an annual run rate cost synergies, with roughly 90% captured within the first three years following close, and also believe there are meaningful revenue synergy opportunities through cross-selling, technology sharing, and expanded customer access. Integration planning is advancing, our teams are energized, and we are focused on delivering substantial value creation. Now, I'll turn the call back to Chris. Earlier this month, we announced the name of the combined company, Exanzo. We believe this name unites the legacies of Exalta and ExoNoble under a single identity and reflects what the combination stands for. Honoring our heritage, the trusted brands, technology, and customer relationships both companies have built over generations. Creating a global coding leader, a diversified portfolio with scale, strength, and reach to accelerate sustainable growth, and engineering to outperform, a shared ambition to deliver breakthrough innovation and a new world performance. After closing, Exanso will trade on the New York Stock Exchange under the ticker AXZ. This is a pivotal moment, not only for the two companies, but also for the industry. Exalta will enter this combination from a position of strength, 11 consecutive quarters of adjusted EBITDA margin above 20%, and the strongest balance sheet in our history while investing in future growth. As we work towards the next chapter, our focus remains unchanged. serving customers, supporting our employees, and creating long-term value for shareholders. I believe more than ever that the combination with Axo Noble offers a unique opportunity to bring together two highly complementary businesses and create a stronger, more competitive global coatings company. I want to thank our employees customers and shareholders for their continued support. Operator, please open the line for questions. Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press start 2. Once again, that is star and 1 to ask the question. We'll take our first question from John McNulty with BMO Capital Markets. Please go ahead. Your line is now open. Hey, good morning. This is Caleb on for John. I just had a quick question on refinish. With insurance premiums starting to show some signs of moderation, but loss rates looks like they're continuing to push higher. So maybe just how do you think about these dynamics as they play out through 27 and then what that means for refinish for next year? Thank you. I do apologize for the delay. slightly down, which is a good story in terms of where we were. The difference here was our expectations versus what ended up in Europe. And in Europe, we certainly have had five quarters of record-on-record performance. And here, insurance rates have not gone through the experience in North America. So we were actually expecting growth, not stability. And that was the difference in our print in Q3. Got it. Okay, thanks. I don't know if it was just on my end, but you cut out halfway through the answer. I'll just try and follow up later to catch what I missed. Then maybe just in light vehicle, just kind of talk to your outperformance relative to global auto builds in Q4 and how you're thinking about Q4 with, it looks like Chinese production expected to step down further. Thank you. Yeah, I'd love to, Cale. So yeah, that's been a really, really good story for us in Q3. Here, actually, if you look at bills, bills are actually slightly down, but our sales were flat. So even on the light vehicle side, with our performance in Asia and our performance în Latin America, we were able to offset the weakness that we saw in North America and Europe. So that was a great story. But additionally, a lot of the great news that we saw here was also what happened in CV. CV was up 24% in the quarter. That certainly provided a tailwind, but additionally, all our wins on the CTS side just provided a great, great story for us and drove the margins that you saw. As I think about, let's call it the future, or as I look at Q4, yeah, we're seeing softness in Asia, but what we're also seeing is growth of what our customers are doing, shipping out of Asia into Southeast Asia. And that's actually driving a great amount of, let's call it, growth from our expectations. So, in terms of that, we're coming in slightly above our expectations in Asia, as well as the great winds in Latin America. All right. Thank you. You're welcome, Kyle. Thank you, Kyle, for that. Thank you. We'll take our next question from Kevin McCarthy with Vertical Research Partners. please go ahead. Your line is open. Yes, thank you, Anne. Good morning. Chris, within the performance coding segment, I appreciate your updated thoughts on price mix trends there. For example, can you comment on where pure price might be running versus the mix component? I know that can be quite volatile. What is your outlook for that component in the fourth quarter and beyond, and maybe can provide some color as to pricing trends on refinish versus the industrial lines within the segment. Thank you. Sure. Yeah, absolutely, Kevin. So pure price for refinish has been 4.8%, and as I look at consolidated for the company, pure price is running at 2%. To your question on what's happening with price mix, price mix for us is still positive through the year. But as you point out, you know, as you think about our strategy, we're moving, a mix has a part in terms of our strategy for growth here. So as you think about us entering adjacencies, as You think about entering the economy segments, these come in at a lower margin than what we have in terms of refinish. So overall, to the performance codings, or at least refinish margins, it's a little decretive. But to performance codings or to the entire company, I would say we're positive. And the best way to look at this and probably see how we've performed here is if you go back three years ago, Kevin, our sales was about $2.1 billion. If you look where we're going to close this year in refinish, we're gonna be around $2,1 billion, margins in 24 and 25 were 24 percent. Margins in performance codings this year, even with some of the uncertainty we have seen, will be 23 and a half percent. It just shows the strength of what we were able to overcome by putting in or growing in other areas, and we were able to still maintain that margin. Thank you very much. You're welcome. Thank you. We'll take our next question from David Begetler with Deutsche Bank. Please go ahead. Your line is now open. Thank you, good morning. Chris, just on industrial, two of your peers this week reported pretty strong sales in their industrial businesses. Your sales are a little more modest. How do you tie those trends together? Well, it's really mixed. Thanks for that question, David. It's a lot to do with mix and our channels as well as the areas that we play in. If you think about it, and the best way to describe our business is that there's a portion in Asia, but the majority of our business is North America and is tied to retail or residential. So as you know, with where interest rates are and what's happening with bills, that's the weakness we see. The bright spot for us is actually our Asia business. So here, what we provide for everything that is in what we call our electrical space, so impregnating resins for motors, as well as what we provide for battery coatings has actually gone seven quarters where we've continued to grow quarter over quarter over corner. So that business as it's tied to what we are doing in Asia is growing. But the reality is the rest of it, which is tied to residential, has been weak, specific to North America. I will point out, though, Europe has been resilient. Actually, in Q2, we saw volumes pick up. And again, as you look at our guide for Q3 and what we were expecting in the back half, David, we were actually expecting 2% to 3% up. Part of it was a pickup in expectations also in industrial in Europe. But what we saw was more flat there, and that was what drove our results. I think that just the expectations for us was we weren't expecting stability, especially coming out of Q2 and our strong performance, we were expecting Q3 and Q4 to be up 2% to 3%. Very helpful. And just in European refish, it's been pretty weak there for a while. So what's causing the change in distributed behavior now? Thank you. Well, I wouldn't characterize it, at least for us, as being weak. Europe, for us has grown 4% to 5% the last three years. And actually, even to date, we're up 5% in Europe. It's been five quarters of record-on-record performance for us. And that was primarily why we thought Q3 would actually be a pickup. Now, just, David, in terms of how we approach the market, we approachthe market in Europe different than we do in North America. We have three channels to market. So we have our own retail shops, which is about 50. We have our own indirect, sorry, direct channel where we have our own distributors. And then we have indirect, which is similar to North America, which are distributors that we partner with. And what we saw in, let's call it late August and in September, is that indirect channel really look at the inventory levels. And based on the macro and a bit of the political environment decide to take a pause on filling inventory levels for Q4 as we normally expect. And that was primarily the driver here. Thank you. You're welcome. Brittany, I just want to interrupt real quick. Chris, we got a technical issue in the first question regarding refinish insurance inflation in North America. Can you just comment on that? That's the first part of your question that you answered. I think the best debate, so anything in as good news. In fact, if I look at our performance in Q3, North America refinish was volumes were actually down slightly, and it's been a very good quarter. We're starting to see stabilization in the marketplace. And especially with what we announced in Q2 with the 830 MSO wins, we do believe that as I look at Q4 and far more importantly into 2027, we'll certainly start seeing an uplift, especially as the market starts stabilizing. But in terms of insurance premiums, certainly insurance premiumS are starting to abate. Miles Driven is also growing slightly. And so, as I look at all of the impacts, overall, I would say we're starting to offset the declines, the high declines we had seen for the last few years. Great. Thanks, Chris. Finney, back to you. Thank you. We'll take our next question from Gasham Punjabi with Baird. Please go ahead. Your line is open. Hey, guys. Good morning. This is Josh Wesley on for Gansham. You know, maybe if I could just, you know, take a stab at a macro question, just, very high level. Obviously, Carly talked about, you know, the full year guide, you're kind of baking in some uncertainty on the macro front. And, you know, just given where interest rates are being higher, you know, cost inflation continuing to ramp, you know, I'm just curious what your thoughts are about the demand trend line on a go-forward basis, just a high level across your, you know, end markets and geographies, you know, especially in the context of, you know, you guys having exposure to, you know, interest rates sensitive end markets and, you know, with costs, you know, inevitably flowing through to the consumer. Thanks. Yeah, yeah. Thanks for the question. I think very short term, if you look at the Q4, we are guiding to about flat sales, and you should really think about it as refinished sales is expected to be flat on a year-over-year comparison. Industrial will also be roughly flat year-on-year. Our commercial vehicle business, as Chris talked earlier, will be up year-in-year, but light vehicle is probably going to be down to flattish. So that kind of walks through the very short-term demand picture for the fourth quarter as we finish out the year. As we pivot into 27, and we're not really, you know, kind of providing any views or guide yet. But, you know, I would look at commercial vehicle production is expected to take another increase in 27. So I think that's a positive tailwind that will be coming in next year. I think as Chris is answering a lot of questions on refinish, again, I think we're getting more and more bullish of what we're beginning to see here in North America. But also even with Europe, yes, you Know, even with what happened for us in the third quarter relative to expectations, we're still growing that business 4% to 5%. So I think our expectations as we continue to grow our acquisition strategies, especially in Europe when we finish with distribution, has worked extremely well. And if the team looks to evolve and drive more accessories in retail, all those are kind of positive trend lines as we get into next year. And to your point in interest rates, that is something that if you look specifically in the industrial business, we are always betting on at some point there will be a change in construction. I think that one is probably a little bit more tempered as we think about here in the near term. But overall, as we thank what's in front of us, we're pretty excited about what 27 could look like down the road. Perfect. Thank you. Thank you, we'll take our next question from Christopher Parkinson. in with Wolf Research. Please go ahead. Your line is now open. Great. Thanks, Ms. Harris. Fine. I'm for Chris. Just wanted to maybe talk a little bit about the net body shop wins you're seeing. You mentioned some upfront costs to onboard those customers. Just any color you can give on, you know, the timing of how those should flow in relative to when the business actually starts to flow in? And also, what is the rough geographic breakdown of those body shop wins that you're seeing year to date? Thanks. Sure. Good morning, Harris. So, you know, the cool part about, I think, our story, as I look through Q3, is what we normally win in a year we've been able to achieve by this quarter, which is around 2,600 body shops. But the real story for us was what happened in Q2. We won two very large body shops that are in the top 10. Most of that volume is in North America. In terms of the launch of that, the velocity of, let's call it those implementations, are accelerating. A lot of that will start up in Q4 and then mostly in the front half of 27. In terms of our investments, just to give you a perspective, our investments in Q4 is almost $8 million. So that will just give you an overview of what it takes to be able to invest to get these up and running into next year. Thank you. We'll take our next question from Matthew Dio with Bank of America. please go ahead your line is now open um thank you i'd like to drill in a little bit on on the refinished volume side can you share how much volumes were down in europe and refinished just on a consolidated basis specifically i guess it feels like that one independent channel where you said pause like pause is probably more the right word than slow down i'm guessing and And as we think about 27, given your comments on the 830 MSOs, obviously, it's always a competitive environment. But, like, what do you think the tail went to volumes in 27 from market share wins? Is it, you know, like a 50 bips, 100 bips? Yeah. Yeah. Yeah. Thanks for the question. Yeah. You know, EMEA specifically, we were down year-on-year double-digit percent. So I think that's – and then overall, for refinished volumes, we're down about mid-single digits, just on volumes, only on a consolidated basis. As we think, to your point on 27 and what that looks like as far as incremental opportunity, it's probably in the range you kind of quoted as far als potential. Obviously, it should be more dictated to where the market is evolving to, if there's any additional growth above and beyond that. But overall, you know, I think it really highlights just the strength of Exalt, the brand, of our technology, and really our customer service and what we're able to do day in and day out with our customers. So that is something that will continue. But I think as far as, you Know, opportunities, it's just part of the overall strategy that we've been employing here in the last couple of years as far As New Body Shop wins. Thank you. Thank you. We'll take our next question from Dusty Fisher with Goldman Sachs. Please go ahead. Your line is now open. Yeah, good morning, guys. I guess I'm just trying to understand a little bit more the decremental margins that we're seeing from that European business. It seems like, I mean, EBITDA is down $23 million year over year. Roughly, how much of that is due to the lost volume versus other stuff? Well, yeah, I mean, I think if you look at the overall margin perspective, again, year-over-year basis, we're down about $12 million, if I look at it on a consolidated basis. I think in the quarter, especially as we kind of got into September, we saw pretty significant increases in freight rates that we have not been able to recover yet. And so that was probably at least about a $5 million to $6 million headwind that we had on that. And then you kind of couple that with what would happen just really in the quarter on European refinish. It is a relatively high margin business. And that was the other impact that we had there as far as for the quarter, along with what Chris has been talking about with our MSO wins as we continue to invest and really begin to accelerate some of the body shop conversions. Those are kind of the bridges on a year-over-year basis. Great. Thanks. And then just a question on raw materials. With oil where it's at, if oil stays at this level, would you anticipate more inflation rolling through your key raw materials versus where they sit today? And how big of an impact do you think that will have early next year? Yeah, as we assess it, you know, for the full year, we're still tracking year-on-year to be up about mid-single digits. But to your point, we are finishing out Q4, of running more at high single digits type inflation for the fourth quarter. So as we've been, you know, again, if it holds at those levels, that's kind of the run rate that we're exiting out of into next year. So I think as we, you Know, we're assessing it further as far as there will be additional pricing activities and actions that we will be implementing. You know, even if I think about what's happening on freight, there's going to, the teams are actively pricing diesel surcharges in many of our businesses. So I think the pricing will be very, very critical as we kind of get into next year as well, based off what we're seeing on RAS today. But as you know, it's a very volatile environment and they can move around pretty quickly, but that's what we'RE preparing for at this moment. Thank you, guys. Thank you. You're welcome. Thank you. We'll take our next question from Josh Spector with UBS. Please go ahead. Your line is now open yeah hi good morning uh i kind of want to put a finishing point here on refinish just you know you gave a lot of details on europe and the movements there do we need to annualize that so it seems like you still have a pretty decent decline every finish in fourth quarter should we assume some of that carries in the first half if inventories were higher or purchasing was higher or do you think that normalizes exiting this year thanks i don't believe so uh josh from my perspective, you know, I think this is just inventory timing. And because especially when I look at our retail and in our direct channels, that's down slightly. And I think it's, you Know, clearly, their direct channel is just taking a pause based on the current environment. But in terms of demand, you Now, there's no need for me stocking or there's no massive increase in insurance premiums. And just to remind you, year to date, we're still up 5%. So from my perspective, I certainly don't see that as I look at 2027. This business, one of the reasons we had such a bullish outlook in Q3 and for Q4, we expected this to go up 2% to 3% was we've been going up, you know, for five straight quarters, 2% to 3%. So almost, and actually for the full year last year, we were up 4%. The back half, the front half of this year, we were at 5%. So our expectations was this trend would continue. Additionally, I think, and this is, again, purely looking at Europe. And additionally, what we were doing into going into distribution, what we were doing also. We've done about almost 20 acquisitions into distribution over the last three years. And we can see the pull, as I look at the pull there across, you know, northern and southern Europe, this trend still seems to exist. And this was just something that we noticed in the, let's call it late September, for what folks were doing to get inventory in place for Q4. And then we reached out and made sure as we looked at Q4, we adjusted accordingly just to, you know, this is from our perspective, we certainly don't want to miss or don't like missing. So we want to make sure that we were at a very good spot as we look at finishing off the year. Thank you. Thank You. We'll take our next question from John Roberts with Mrs. Ho. Please go ahead. Your line is now open. Thank you. Did the antitrust review focus on Europe market share overall, or did it focus on country-by-country market share? Yeah, I think, John, as we've assessed it, you know, as you see where we've announced that specifically for Europe, it is the Axel refinish business that will be divested. And so I think you can kind of really see where that stands as far as from Europe and what we're doing. Obviously, North America, you know, we publicly said that we are in the process of divesting our building products business as well. So don't want to get into the specific details as it relates to the exact question, but I would say those are the only two remedies that both companies are working on at this time. And was wood coatings ever integrated into the portfolio, or will that be a relatively clean separation with minimal stranded costs, just corporate overhead? It's pretty clean. Again, we did integrate it, but it is something that has its own manufacturing, and it's, let's call it, its own standout P&L. So it is Something that we can split out quickly. It is a process that we started out a month ago. And the best part about it is it's a quality asset, certainly, you know, quarter over quarter. We've talked about this in terms of what we've done to improve the business coming out of COVID, and we've made a significant effort in investing at the site. So we have quite a bit of interest in that business, and we're working through second-round bids right now. Thank you. Thank you, we'll take our next question from Abigail Eberts with Wells Fargo. Please go ahead. Your line is now open. Thanks for taking my question. Just another one on price. I thought you said that you achieved 2% pure price in the quarter. Just based on where raw materials are, it seems like there was opportunity to justify more. Are you consciously not pushing price because of demand elasticity concerns, or is this a realization issue? Thanks. Yeah, thanks for the question. Specifically for the third quarter, we had about 3% pure price in the quarter. For the full year, when you kind of look at it, it's about 2%. It does vary by our end markets in our businesses. So refinish, as you would expect, is running higher. We did close to 5% in Q3. We're probably running that 4% to 5%. Some of the other businesses, you have a little bit lower as it relates to overall price increases. But I think, again, as we assess it, especially where we are with the raw material environment, where we are with freight, as I said, there's probably some additional surcharges that I know that we're looking to execute. And then as we kind of get into next year, we're going to have another assessment, of course, about where pricing needs to go. But the reality is we're managing this holistically as well. So if you look at kind of the overall cost as a company and how we're managed, managing SG&A and operating expenses. We've also been able to do a very, very productive job on how we're handling that as well. So, we do look at this on an aggregate basis is how we go to market. Got it. Thanks. Thank you. Thank you, we'll take our next question from Alexi. Yes, from Barclays, please go ahead, your line is now open. Thanks, and good morning. This is Ryan Weiss on for Alexi, I know Josh tried to put a bow on the refinish question a little while ago, so I apologize to pile one more on you. But I just wanted to try and compare and contrast maybe your comments on European refinish versus what Axis said. I think Axis says European refinishment got a little bit better in the third quarter. So is this maybe differences in distribution models? Is it maybe just a comp issue? Just any thoughts on that would be much appreciated. Sure, Ron, no issues. As I look at it, I would say it is different because we do approach this through a distribution. Actually, we approach it through three different channels, and one of them is distribution. And specific to that, that's where we saw the delta. But don't forget, as I look as the full year, we are up. We are up 5%. This is just against our expectations. We weren't looking for stability or slightly up. We were expecting to be up 2% to 3%. and that's the delta difference that we see here. And then additionally, as I look at where Axel and we play, obviously we're not in the same, we play in the premium space. Axel is more in the economy space, so there's also a difference in what we each play in. But the reality of it is to where we are for the quarter, we're actually up through the full year. However, our expectations were higher. understood very helpful and then maybe just on mobility i guess pretty impressive quarter with margins being up year on year i mean i would figure maybe price cost is upside down still just kind of on raw material indices uh base pricing and light vehicle not coming through so maybe can you give us an update where you are in price cost there when you expect pricing to kind of inflect better um in light vehicle thanks yeah i think ryan if you look at it uh the real the The headwind, and if you just look at the price mix only in mobility coatings, it actually came a little bit more from CV than it did in our light vehicle business. And so a lot of that was just more mixed that was driving that impact in the short term. I think as it relates to our MIs and the pastures and the timing of that, I do think you'll start seeing that catch up a littlebit more as we get into Q1 of next year. But overall, I think that business and that team has done a phenomenal job and how it's been managed with, you know, in this environment, being up on our basis points and margin. This is very, very strong execution. And the good news is we're positioned, in our opinion, very, very well, both on the light vehicle side of our business and on the CV side of a business as we get into next year as well. Thank you. We'll take our next question from Laurent Favre with DNT. Please go ahead. Your line is now open. Yes, good morning. On the remedy packages that you've announced, I think they account for roughly half a billion of sales. So it wouldn't be crazy to assume that maybe you could have attached, I don't know, 50 million of synergies to those. So the fact that you kept the 600 million unchanged, I'm just wondering whether you had always assumed that those two assets would go into remedy, or did you use some of the headroom that maybe you had in mind to keep the 600 billion flat? Yes, good morning. It was the headroom that we had as we looked at this. Obviously, as we consistently talked from Greg, myself, Carl, Martin, we've always talked about 600B floor. So you know that we were consistently aiming for something better or higher than this. And as we went through the process and started working with the regulators, and we came to the conclusion that to your point, $500 million was coming out, we were able to find offsets, and that's why we still believe that $600 is the floor. Thank you. Thank you, we'll take our next question from Salvador Tiano from KeyBank Capital Markets. Please go ahead, your line is now open. Yes, sir, thank you very much. I just want to go back a little bit to the European refinance situation. And I understand, obviously, you said it's a 5% growth year-to-date so far. Firstly, can you clarify, are you talking net sales or is this volume? And secondly, always when there's this drastic, this talking kind of, it seems to imply that one-third of your channel essentially is stocked at a very, very high double-digit rate right throughout the quarter. How confident are you that this was more of a stocking that will need to be recuperated in the next two quarters versus potentially some of this year-to-date growth just representing big restocking from the channel that actually may have more to play out? Yeah, good morning, Sal. Yeah, I think as we look at, you know, the numbers we've been quoting, it's a pure sales number. Obviously, at the end of the day, that's how we're driving this business is on revenue. So all the percentages that we've been quoting is on that basis. But as we look forward, you know, even in the fourth quarter and what the implicit guide is, we are calling for our European business to be roughly flat and refinish on a year-over-year basis. And I think as we, you Know, so we're not seeing any further destocking or any challenges, at least when you compare in a year on year basis. And, in fact, when we look at, you know, October early, we're not done with the month now, but it's kind of tracking to our, you know, at least our expectations here as we kind of are finishing out the year. So not something that we're really that concerned about as far as what that means for the fourth quarter. And as I said earlier, you knows, as we get into 27, again, I think the team, the business continues to be very well positioned as we move forward into next year. Perfect. And on the mobility side, you know now that commercial vehicles are growing much more, can you talk a little bit about what may be the differences versus light vehicles in terms of pricing for the coatings or the incremental margins from differences in volume there? Yeah, I'll take that one. So, the best way to describe that is that our CV margins look more like our refinish margins. So it's actually a great story. However, the business is much smaller than, let's call it, the overall refinish business. So for example, it's about $500 million is our CV business inside the mobility overall business. But as you think about this way, the best way to describe it is North American truck bills are around $270 million. The expectations for next year is $300,000. But as Carl pointed out, you know, the one thing that that team has done just an exceptional job is beyond just growing on the light vehicle side, we're focused on commercial transportation solutions. And commercial transportation solution is everything outside just Class A trucks. So it's what we have in terms of ambulances, off-highway defense, And this business is also at a record level. So the fact that we're growing here between winning new business as well as where this market is, is also providing us a tailwind. Thank you very much. You're welcome. Thank you. We'll take our next question from Patrick Cunningham with Citibank. Please go ahead. Your line is open. Hi, good morning. Thanks for taking my question. I guess just on refinish, you know, maybe more of a general question on sort of year to date and the outlook. Are you seeing any divergences in premium versus mainstream risk economy within that business? And how should we think about the mix going forward? Yeah, I think the best way to describe this at a high level is premium. We are the leader in premium. Exalta is number one. We have about 40% of this market. So as I look at that business, that business is growing less than our economy segment. And that obviously has an impact on mix or margin. But if you think about our premium business, the good news, again, is the announcements we made in Q2, which will hit the P&L a bit in Q4, but certainly in 2027 with the 830 body shops we won. I know there's been a lot of questions on our refinish business. And I think the best way is I'd like to maybe take a moment and summarize this. I said this earlier on the call, but I know this business, if you think about this business over the last three years has faced a lot of market challenges between high single-digit claims declines, insurance premium increases, destocking, tariffs, inflation. But again, folks, I want you to remember that three years ago, our revenue was $2.1 billion. We're going to finish this year at $2,1 billion, despite, let's call it, over $200 million of market impact. It just talks to you about what we were able to do with the business while maintaining those margins at that premium level that you have seen through the year. So from my perspective, this is an incredibly resilient business. It's a strong business. And volume is the main factor here. And certainly our performance in Q2, you can see when volume comes in what happens to us. And my expectations is with the new wins and if the market stabilizes, we'll have a great news story to say in 2027. Great. And then maybe just a quick one on industrial. I guess, you know, you talked about some of the strengths in Asia. What are the specific end markets or product areas where you're seeing strength? And, you know what have you sort of seen year to date in terms of, you building products volumes, you now, given some of those under performance relative to peers? So certainly, as I look at our performance in Asia, it's primarily in what we call our electrical segment, what we provide in terms of impregnating resins for motors, so motors that go into electric vehicles. And these, as you could imagine, that market expanding with China being a strong provider of this, we certainly see growth there, as well as we provide coatings for battery enclosures. And so this is something that's certainly been driving our performance. I would say ASHA's continues to be up. Even as we look at Q4, our volume expectations are up. As we look a 27, our expectations at this point are also up. We've had seven quarters of success here. Europe, I would call somewhat stable. We had, again, a good Q2. Q3 came in somewhat less or flat, but my expectations is this market has been stable. But coming back to North America, North America obviously with all the weakness that we have seen, but whether it's interest rates, whether it spills, that has continued to be weak for us. Thank you. We'll take our next question from Arun Viswanathan with RBC Capital Markets. Please Go ahead. Your line is now open. Great. Thanks for taking my question. I guess I just wanted to follow up on refinish. So, you know, I know that volumes have been weak for a little while. And could you just maybe recount your thinking on when claims and collision rates could maybe normalize? Is that going to require some deflation? Yeah, I guess that's it. Thanks. Yeah, thanks, Arun. Yeah, I think we're actually beginning to see, you know, that market, especially, and usually the questions we get is more about North America. Specifically in that market. We are beginning to that stabilize as we think about where claims are, you know, the year-on-year declines are getting less and less as we think about what that business is from insurance claims. I think as it relates to overall kind of collision rates are kind of right in line with expectations. And so I think as we look at that business, especially here, or getting into Q4 and early next year, we're in a pretty stable environment. So I think that's the first point, North America. In Europe, as Chris said, that market actually did not have the same type of impact that North America had over the last couple of years. So it's been a much more steady market, and we do expect that to continue as well. So all of that speaks to where, again, as you get into next year and beyond, then we kind of get into the normal, we believe, algorithm of Exalta always being able to outperform the market, not only with market share wins, what we're doing with adjacencies, what we're dealing with retail, what were doing with overall distribution, all of that, and plus obviously what we can do on pricing. And so I think it sets us up well as we kind of get into next year and beyond. Thanks. Thank you. We'll take our next question from Garth Alexander with Jefferies. Please go ahead. Your line is now open. Hi. Just want to touch on a more structural question. Like a lot of the narrative earlier in the year was this expectation that the inflation wave would crash. I mean, not just from yourselves, but I think from a lot OF companies. And clearly, we're heading into next year with another surge. Are you getting feedback from your customers? I'm more curious on the industrial side about how they're going to react if this environment, this is the new normal. You know, every year there's another shock, but the system just is tight enough that inflation persists. I mean, just do you have a sense for how your customers are preparing you for how they're thinking about more structural changes and how they approach their value propositions to their customers? Do you see what I mean? Yeah, good morning, Garth. That's a very good question. I think, you know, to your point, you Know, it feels like quarterly or at least maximum, it's six months where you're having a conversation on pricing. And as many of our customers are also pricing for obviously all the reasons beyond just us, those conversations as I get involved in them are becoming more straightforward and constructive. You would imagine the counter of that, but it is that because I think it's almost become where it's expected, it's data-driven, and these conversations have become more of a norm. And I think in terms of, as you can see, in many cases, many of our customers, as we are, are passing that pricing through to the end consumer. And at this point, I would say the conversations, from my perspective, across all our four end markets are very constructive and have become very data- driven and aligned with our customer expectations because they've gone through so much of it. But in terms of the consumer, look, I think the simple perspective there is we can see that markets in North America remain muted primarily because some of that is driving that. But beyond that, obviously, the interest rates also have an impact. But specific to what I would call the industrial and residential market, That's the end impact of that is, I would call it, the weakness that we're seeing in the marketplace. Europe, we see more stability, as I mentioned. And again, you know, demand being pulled in Asia, if we're staying consistent on, let's call it industrial, despite the, let'S call it the pressures of inflation, which obviously also exist in Asia. And maybe at some point at a higher level, we're still able to see the demand primarily because of the high demand for the products that are, let's call it either the EV vehicles or the battery enclosures we provide. So in that sense, I would say the conversations continue to happen. The inflation continues to be smoother or the pricing discussions seem to continue to be constructive. but at the end of the day, the consumer, depending on the region, is reacting differently. Thank you. You're welcome. Thank you, this brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.