IXS Coatings, a Houston-based maker of industrial spray-on protective coating, is wrestling with slowing auto production and rising inflation as the company’s adjusted EBITDA for the second quarter ended June 30 dropped 33% year over year to $12 million, according to sources. Revenue fell 17% year over year to $173 million.
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The prolonged semiconductor shortage has idled global auto production. A pullback in consumer spending amid rising inflation has also affected the business. While higher raw material cost has chipped away at the company’s margins, the supply-chain disruptions caused by the Russia-Ukraine war and Covid-19 lockdowns in China continue to hurt the business, the sources said.
A Moody’s
report in July said labor shortages and freight logistics will also weigh on operating efficiencies of the business whose liquidity will remain weak with a modest cash position and negative free cash flow anticipated through fiscal 2023.
The company’s LTM EBITDA was $31 million, while pro forma EBITDA was $80 million, which included $48 million of addbacks, the sources said.
Gross margin in the second quarter was 18.5%, down from 23.5% a year earlier.
FCF was $4 million, inclusive of $14 million in cash flow from operations and $10 million spent on capital expenditures. Cash as of quarter-end was $10 million, while $20 million was drawn on its revolver.
Total debt stood at $648 million as of June 30.
The company’s $610 million L+425 bps term loan due 2027 was indicated today at 80.41/81.91, up from 70.52/73.71 a month ago, according to Solve Advisors.
Sponsor Clearlake Capital did not reply to a request for comment.
--Gaurav Sharma, Ellen Schneider