Axalta Coating Systems Scandinavia Holding AB

Financial Analysis of Axalta Coating Systems Scandinavia Holding AB Annual Report 2023

1. Profitability

• Net Sales: The company did not generate any revenues in 2023 or prior years. This reiterates the company's function as a holding entity rather than an operational firm.
• Results After Financial Items: The company reported a loss of 4,445 Tkr in 2023, with a trend of losses each year, indicating that the company is struggling to break even.
• Return on Equity (ROE): Improved from -13.94% in 2022 to -9.70% in 2023. Even though it is negative, the improvement shows that the company’s equity generated fewer losses in 2023 compared to 2022.
• Return on Total Capital: Stable at -0.06% showing minimal return on the total assets employed.

2. Liquidity and Solvency

• Current Ratio: The company has current assets of 18,633 Tkr against current liabilities of 971 Tkr, giving a current ratio of approximately 19.2. This high ratio suggests very strong liquidity, meaning the company can easily cover its short-term obligations.
• Solidity: Improved to 32.2% in 2023 from 27.5% in 2022. Increasing solidity indicates strengthening in financial structure and reduced reliance on external financing.

3. Assets and Capital Structure

• Total Assets: Increased by 4.6% from 135,646 Tkr in 2022 to 141,905 Tkr in 2023. The bulk of these assets are tied up in holdings of other companies (long-term investments).
• Equity: The equity position improved significantly, with equity closing at 41,097 Tkr in 2023 compared to 34,836 Tkr in 2022. This improvement is due to retained earnings and shows a stronger capital foundation.

4. Income Statement

• Operating Costs: The company has demonstrated some control over administrative costs, decreasing slightly from 76 Tkr in 2022 to 68 Tkr in 2023.
• Financial Expenses: Financial expenses decreased significantly from 5,130 Tkr in 2022 to 4,399 Tkr in 2023. This could be due to either refinancing at a lower cost or reduced debt levels.

5. Cash Flows

• Cash Position: Increased significantly from 374 Tkr in 2022 to 3,633 Tkr in 2023. This suggests better cash flow management and possibly some recovery or optimization in financial management practices.
• Koncernbidrag (Group Contributions): Substantial group contributions received from subsidiaries, totaling 15,000 Tkr in 2023, which was key in achieving the reported year's results.

6. Future Outlook

• Dependence on Subsidiaries: The company's performance is highly dependent on its subsidiaries, from which it derives dividends and group contributions. Future performance will be significantly influenced by the operational success of these subsidiaries.
• Risk Management: The board mentions handling financial risks according to corporate policies, suggesting some level of financial risk management practices are in place.

7. Key Ratios Analysis

• ROE and ROA: Both return on equity and return on assets ratios indicate operational inefficiencies and ongoing losses despite improvements.
• Debt to Equity: The high equity component and low levels of debt suggest a conservative financial structure with low financial leverage.

Conclusion

Axalta Coating Systems Scandinavia Holding AB appears financially stable in terms of liquidity and solvency, but it has ongoing profitability challenges. The company heavily relies on its subsidiaries for income, and any adverse performance in these entities could impact the holding company's financial health. Strategies focusing on strengthening subsidiary performance and optimizing the capital structure could be beneficial.

Recommendations:

• Enhancing Group Contributions: Continuing to support and possibly expanding the performance of subsidiaries to secure group contributions.
• Cost Management: Further efforts to reduce administrative and financial costs could improve profitability.
• Strengthening Equity: Any opportunities to strengthen equity without adding significant debt should be pursued.
• Risk Management: Maintaining stringent financial risk management policies will be essential, especially given the reliance on external and macroeconomic conditions influencing subsidiary performance.

This analysis provides a snapshot of the company's current financial standing and potential pathways for future strategic financial planning.