Ladies and gentlemen, thank you for standing by. Welcome to Axalta’s Third Quarter 2022 Earnings Conference 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 2. Those listening after today’s call should please note that information provided in the recording will not be updated and therefore may be no longer current. I’ll now turn the call over to Chris Evans. Please go ahead, sir.

Thank you and good morning. This is Chris Evans, VP of Investor Relations. We appreciate your continued interest in Axalta and welcome you to our third quarter 2022 financial results conference call. Joining me today is Rakesh Sachdev, Interim CEO and President; and Sean Lannon, CFO. Yesterday afternoon we released our quarterly financial results and posted a slide presentation along with commentary to the Investor Relations section of our website at axalta.com, which we will be referencing during this call. Both our prepared remarks and discussion today may contain forward-looking statements, reflecting the company’s current view of future events and their potential effect on Axalta’s operating and financial performance. These statements involve uncertainties and risks and actual results may differ materially from those forward-looking statements. Please note that the company is under no obligation to provide updates to these forward-looking statements. Our remarks and this slide presentation also contain various non-GAAP financial measures. In the Appendix to the slide presentation we’ve included reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding forward-looking statements and non-GAAP financial measures, please refer to our filings with the SEC. I will now turn the call over to Rakesh.

Thank you, Chris. I’d like to welcome everyone to our third quarter 2022 earnings call and we’ll start by discussing the key highlights on Slide 3. I’m very proud of our team and what we were able to accomplish this quarter. We delivered adjusted EBIT of $148 million and adjusted EPS of $0.39. Both within our third quarter guidance range despite acute currency and inflationary headwinds plus pockets of softening regional demand within our industrial business. Constant currency, net sales growth of 20% was extremely strong, driven by both volume and price almost in equal parts. Volume increased 9% year-over-year as we benefited from market recovery and Refinish, Light Vehicle and Commercial Vehicle. Normalization of market demand and most of our businesses are being bolstered with new customer wins across our business portfolio. We again delivered strong year-over-year price mix growth of 10% in Q3, which more than offset inflation from raw material and logistics inflation costs in the period. This represents an important inflection point toward our goal of recovering lost profitability during this two year period of unprecedented inflation. Before I review the quarter in more depth, I wanted to take a moment to comment on our strategic prioritization, organization and my focus as Interim CEO, which is summarized on Slide 4. Let me begin by reiterating that it has been an honor to work alongside this accomplished leadership team. After spending the last two months with the team, I believe more than ever that there is a great future for this company and I share the team’s strategic vision to unlock value for shareholders. Axalta’s strategic priorities remain unchanged and focus on strengthening our industry leading positions. We are the number one or number two player in the majority of our end markets. We are investing to…

Thanks, Rakesh, and good morning everyone. Net sales were $1.2 billion, an increase of 14% year-over-year for the third quarter, while constant currency net sales increased 20%, driven by pricing actions, demand strength across most of our businesses, and benefits from our U-POL acquisition we completed in mid-September of 2021. Constant currency net sales growth included a 14% increase in Performance Coatings and an impressive 35% growth from Mobility Coatings both Light Vehicle and Commercial Vehicle showed strong year-over-year performance. Third quarter volume improved 9% year-over-year with positive contribution from three of four end-markets, offset by a mid-single digit percentage decline in Industrial volumes, due to supply chain constraints as well as the macroeconomic and geopolitical headwinds within our European and China regions. Backlog remained a challenge, as we were again unable to fully meet demand in the quarter for both our Industrial and Refinish businesses. Price-mix increased 10% year-over-year, or 14% better on a two-year stacked basis. Every end-market contributed positive price-mix and three of our four end-markets showed an impressive low double-digit growth. The drop through of better pricing more than offset the 20% year-over-year increase in variable cost inflation, which is an important milestone in our efforts to reverse the price-cost gap. Sequentially price-mix improved by 3% highlighting continued momentum and our prioritization of price-cost recovery. FX translation was a headwind of 6% on net sales for the third quarter, driven by a weaker Euro, Turkish Lira, British Pound, and the Chinese Renminbi. Third quarter adjusted EBIT was $148 million versus $146 million in the prior year quarter. The year-over-year comparison included approximately $16 million of EBIT headwinds associated with the impacts from the Russia-Ukraine conflict, China lockdowns and FX translation, implying a more favorable earnings growth comparison when excluding these effects. In the quarter and throughout…

Thank you. [Operator Instructions] Our first question comes from Mike Sison with Wells Fargo. Please proceed with your question.

Hey guys, how are you doing? Nice quarter. I guess my first question, in terms of Mobility Coatings, and I look back historically, you’ve done several quarters of $400 million and adjusted EBIT tends to be in the $30 million to $40 million range. So, why wasn’t there more improvement, I guess sequentially given, volumes were really good.

Yes, Mike. Good morning. This is Rakesh. So listen, I’d start off by saying none of us are happy with the lack of profitability in the mobility business. But having said that, we know there are a few things we have to do to get this back to where the profitability used to be. Just to give you an idea, just to help you bridge what happened in Q3 versus Q3 of last year. We had about $90 million in higher volume sales. Well, if you include price and mix, we had a little more than a $100 million. We got about $45 million to the bottom-line. Good guy from that. Now we lost about $35 million from inflation of variable cost and freight, so we were down to about $10 million. We also reduced some costs in our plants, and then we had OpEx increases. So, we negated a lot of what we got from the new business, and by the way, the new business is quite profitable. The business that we are running in China has pretty good margins. What we have to do going forward is clearly we have to get more price, and I think the teams are fully committed. We are, you’re going to see some of that in Q4. We are going to take – try and get the benefit of the devaluation in the raw materials. I think that’s beginning to happen. As Sean said, $2 billion of our buy is in raw materials. Half of that, if you look at is additives. Its solvents, its monomers, and that’s already coming down. So to the extent that we can take out even a few percent of the raws, it’s going to help quite significantly. Now, obviously we have to hold onto the price, not only hold on, but we have to get extra pricing in the mobility business, which we will. But that’s where we are. It’s going to take some time. I think there’s a strong commitment in the company within the teams that we have to bring this back to, like the numbers you just said, $30 million a quarter is what we used to do, and you will see some improvement in Q4 in this business.

Got it. And as a quick follow up, when you think about 2023, I know it’s a little bit early and certainly uncertain times, but if you think about a lot of your end markets, Refinish, auto OEM and commercial, it does seem like there’s momentum there to grow next year, even if the economic environment continues to weaken. So, if you think about growth in 2023 given your wins and volumes trends recently, how do you think about the potential for EBIT growth, particularly with raw materials coming down?

Yes, so Mike, there’s still a lot of uncertainty about what’s going to happen in 2023, right? With the global recession discussion that’s happening, they’re going to be cautious as we put our plans together and the overall auto production, clearly as you know, there is pent-up demand for automotive bills, but, and we are also winning, as you said, we have conquest business mostly in Asia. That business is locked down. We are going to see that benefit next year. So this should be a growth business for us on a top line next year. And then, as I said, in terms of the EBITDA, our EBIT should grow much faster than our sales growth next year because of the things that I just mentioned.

Great, thank you.

You’re welcome.

Our next question comes from Mike Harrison with Seaport Research Partners. Please proceed with your question.

Hi, good morning.

Good morning, Mike.

I was just hoping that you could talk through a little bit more detail on Slide 10 and that cumulative price-cost gap. Was the progress that you made this quarter about what you expected when you gave guidance, or was there, were there some surprises, I guess either on the pricing side or on the cost side and I guess maybe specifically to mobility. Did you expect to lose a little bit of ground there? Or was that kind of a key surprise in the quarter?

Sean, you want to take that first and I can go on.

Yes, I mean, certainly the dynamic shifted in the sense that, the price-cost gap actually went down this quarter, which is clearly the dynamic, we’re heading for, but we saw a little bit more inflation and in particular on the mobility side, we saw a little bit more on the Performance Coating side we’re now in the positive. Industrial still lagging, but Refinish is overperforming, but mobility essentially jumped up to $115 million gap and, that was the big impact that Rakesh just walked through on the challenged as far as the profitability on the volume growth on the Mobility side.

All right. And then I was also hoping that you could talk a little bit more about this higher fixed operating cost issue. I think of Axalta as a company that over the years has really focused on reducing fixed operating costs. I understand that there are inflationary dynamics and playing here, but can you give a little bit more detail on what’s driving these costs higher and kind of why we’re seeing it now and as we get into Q4?

So maybe I’ll take a shot and then Sean you can. So really if you break down the OpEx expense, about half of the increase was in the Refinish business and a lot of that was because of sales commissions. The Refinish guys are doing a phenomenal job of growing the business. Some of the OpEx increase was obviously inflation, and the rest was where we had, by design as Sean said, had added people to help us in the growth around the world. Now, given what could happen next year, this is an area that we’ll be looking at very carefully, because as Axalta is very nimble in the sense of if we have to take out operating expense in the face of a slowing environment, we can absolutely do that and do that very quickly.

Yes, just to add on, I mean, top-line organic sales are going to grow 15% in 2022 and think it back all the way to 2020. We did a lot on temporary savings and not backfill on attrition, but quite frankly, we needed to backfill some of those positions in order to grow. And you’re saying that, and certainly merit, has uptick quite a bit. Labor historically has run around 3% this year. It’s much closer to 5%. So that’s adding incremental pressure.

All right, thank you very much.

Our next question comes from Steve Byrne with Bank of America. Please proceed with your question.

Hi, Rakesh, you just said that that Axalta can take out operating expenses quickly and easily from your fresh look at Axalta, would you say that the Mobility business has done that? I’m asking about, what fraction of COGS in Mobility is fixed versus variable, and clearly you have challenges on the variable side, but is that fixed cost structure of Mobility fairly significant and stuck? And is there anything that you can see to do to cut that to drive an improvement in earnings in Mobility?

Yes, so Steve, the fixed costs in this business, and let’s take Mobility, you’ve got obviously the fixed costs and the manufacturing plants. Some of our manufacturing plants are shared between the businesses, but then there’s also SG&A, right? So, if you look at the total fixed cost in the plants and the SG&A just a high level estimate, you’re talking about $0.5 billion of expense in the Mobility business. So it’s a big number. And, I’m not going tell you what we are going to do, because we are working through our plans, but obviously that’s an avenue for us to look at very carefully. But it’s a fairly significant number and we have the opportunity to address it and become more efficient.

Okay. And then on Refinish, it does seem like there are several players in Refinish that all seem to be gaining market share. Just wanted to ask about the structure of Refinish, is this something that, is just ripe for more consolidation, if the big players are all gaining share? Is there more to go on this consolidation and where would you see the most opportunity for you? Is it by region? Or is it by segments between premium and economy and mainstream?

So clearly there’s a consolidation that’s been taking place in the U.S. where the multiple shop operators have been consolidating and that has been helping Axalta in a big way, because I think with what we offer to the MSOs and the kind of productivity that we can provide to them, we’ve been signing up more and more of them. So, we’ve been gaining share here. In Europe, the MSO concept is just beginning to take hold. We just won some significant MSO business in the UK that is not yet existent in Asia, but in Asia, we are focused mostly on the premium segment. But if you look at overall globally, there’s no question that we are benefiting from the consolidation and we are benefiting from share gains. And not only that, I think this is a business where we are able to outstrip the cost increases that we have seen by higher prices. So it’s a great business. We are also adding content in the Refinish business. We’ve got into adjacency, so we are selling more than just paints and coatings. And that’s going to continue because once we have the pipe into the shop operators, we are able to supply additional content and that’s going to continue in the years to come.

Thank you.

You’re welcome.

Our next question comes from Josh Spector with UBS. Please proceed with your question.

Yes. Hi, thanks for taking my question. I guess just coming back to price cost and the cumulative gap closure, I mean, I think Axalta in the past used to give some type of timeline on when you expect to kind of get over the hump there. Do you have any estimate on or visibility to when you actually may be closing this gap? And as you think about pricing in Mobility, I mean, you talked about some lower raws, you talked about going after additional pricing. What’s the mindset in terms of how much price needs to be captured? Are you capturing pricing kind of regardless of raw material decline to close that gap? Or are you thinking of being a blend of kind of both playing into that?

Yes, listen, we know we’ve got about a $100 million gap plus or minus. And we are going to get part of that through pricing, and we’re going to get part of that through deflation, no question about it. And part of it is, has to come from operating efficiencies. The one of, the one thing that I have found since, in the time that I’ve been here in the short time that I’ve been here, is I think we have a lot, and we haven’t talked about this, but we have a lot more opportunities in just the way we run a manufacturing operations and the amount of cost we can take out and increase the capacity. And that, that’s more to be discussed perhaps in the coming call, but clearly we have several levels. I know Sean, if you want to add any color to this?

I guess the other note is, our price is typically pretty sticky. We’re expecting this cycle to be no different. If we see the face of deflation, as we think about next year, we’ll certainly be pushing price on the Refinish side. And then it’s a question mark on how much deflation we see on how much incremental price we get. But you think about that $100 million gap, that represents 2% price. So it certainly feels like we’re on track to cover that as part of 2023, just given the pricing today.

So, I guess, what if we’re wrong on raws deflation, oil moves up, inflation starts to pick up again. I mean, is there anything that’s being done, so if that cycle picks up, changes direction that you can act differently or react differently to that environment?

Well, I mean, if we go back into an inflationary environment, we have to just be more aggressive on price and more aggressive on our costs. But that’s the commitment that we all have.

Sean, I was going to say one wildcard. I think we feel pretty good about, that we are entering into a deflationary environment on the commodities. The one wildcard that we are all watching is the cost of energy in Europe. Now, having said that, in the last few days, I’ve been pretty encouraged to see what’s happened in cost of natural gas and energy in Europe. The spot market prices are down quite significantly. That doesn’t mean it’s going to continue to stay down, but that’s something that we are going to continue to watch.

Okay, thank you.

Our next question comes from Christopher Parkinson with Mizuho. Please proceed with your question.

Great. You have a helpful Slide 7 and just kind of overlaying, where we stand versus the – in the marketplace versus 2019 on Refinish. Could you just further kind of, broadly speak about your conviction and the – specifically in the U.S. Refinish’s business it’s ability to grow next year? Just given what you’re hearing from body shops, labor shortages, kind of easing collision rates up, totals down, it seems like a lot of things are moving the right direction, low inventories, just given the macro environment, what we’re in seems like a pretty big question. So, can you just hit on kind of your outlook over let’s say the next, six months to nine months and what you’re currently seeing in the marketplace? Thank you.

Sean, you want to take a start? And I’ll give more color?

Yes, I mean, we’re feeling really good on the trending, Chris, thus far through the year. Office occupancy rates, and I wouldn’t say it’s the hardest data point, but certainly ticked up post of summer, we hit 46% in September, October month to date it’s up to 48%. So, as folks are getting back in the office, I’m expecting congestion to pick up, which should hopefully correlate the body shop activity. But the U.S. market still down 10% to 11%. So, I do expect recovery next year, even if, there are some recession fears out there. When you think about whip at body shop level, it continues to be fairly high. So I think as the labor shortages get filled, that’s also a potential tailwind for us. And then just the MSOs, continue to do very well as far as picking up market share. And I think we’re really well positioned on from that front. Our Refinish team is doing a fantastic job just as far as the productivity of our paint systems, the technicians that we bring and the overall service requirements there. I think that business is doing really well. What sets us up really good for 2023.

I mean, just to add to what Sean said, I think labor issues and the body shops actually helps us because of our technology and our paint. We have a single application versus our competitors who have to have multiple applications. So, we definitely add productivity in the body shops and that helps us.

Understood. And just very quickly, just on the Mobility side of it, when you take a step back and look out in the 2023, there’s clearly a lot of, let’s say, longer term pent-up demand. You see, the market’s seen some growth in China at the same time, there’s some, let’s say teetering in the western world. Just going back to previous analyst question, just how quickly could you actually react, on the cost front if and when you, start hearing from your customers of incremental shutdowns or production rates being slightly lower than expected, is that a case of weeks? Or is that a case of let’s say, a month or two?

Well, we’ve had a precedent when the pandemic hit and, I know I wasn’t in the seat, but Sean you were and make, you might want to say what we did, and but I can tell you is that we would react as fast anybody can, and we’d be very meticulous about it. But Sean, you want to just give a recap a little bit of what we did?

Yes. And Chris it feels like we’re close to a bottom. I mean, we’ve been in that recession on the Mobility side for two and a half years. So it’s hard to foresee that, we’d be below 81 million [ph], 82 million builds for 2023, but we’re somewhere probably between weeks and months if we see a clear sign that there’s demand destruction. And just as a reminder, we took $130 million out back in 2020, and we acted pretty quickly once, we actually knew that the demand destruction was going to be there. I think we have the playbook and we showed that we can execute against it. And I think, in another hypothetical scenario, we could do the same.

Helpful colors always Sean, thank you so much.

Our next question comes from Ghansham Panjabi with Baird. Please proceed with your question.

Yes. Good morning everybody. I just want to go back to the Mobility segment and the questions on the widening of the price-cost gap in 3Q. Was that bias to a specific region, Europe or some sort of impact from mix because China was up so significantly. I’m just asking, because inflation has been pretty visible in terms of what’s been happening and your pricing initiatives have been pretty substantial over the last few quarters. So what specifically changed in 3Q?

Sorry, go ahead, Sean.

Yes, it was really across the board, Asia was actually a bright spot for us, just given all the volume improvement, that region now we’re – it’s the bright spot of the Light Vehicle business just given all the incremental wins, coming in and improved variable margins. But we saw the inflation really across the board and it’s a global issue on the Mobility side that we need to get more price Ghansham.

Got it. And the $100 million price-cost gap on a cumulative basis, what sort of buckets would you have us think about in terms of price recovery, volume maybe some level of deflation, and then, separately Sean, maybe you can give us some indication in terms of what the high level variances would be for 2023 EBITDA especially on FX?

Yes, we’re going to steer away from giving any guidance on 2023 at this point, Ghansham. But Mobility, earlier in the year, when we thought of, think about back to 2019 profitability, we had a roughly $140 million gap. We’ve couched that it’s 50-50 between volume and price cost. The price cost has gotten worse as we’ve progressed through the year. So it’s probably more on the 75% on the price cost versus the volume. But certainly as we see stability on the inflationary aspect, our pricing will start to catch up. And I mean, it’s notable in the third quarter, we would’ve expected a lot more drop through from a profitability perspective, but we did see that inflation, and that’s where fourth quarter, and Rakesh alluded to this, we are fully expecting to see a nice step up in profitability in the fourth quarter as we see stability and pricing starting to catch up. And then also the volume impacts as far as the incrementals on that.

Okay. Very good. Thank you.

Our next question comes from Kevin McCarthy with Vertical Research Partners. Please proceed with your question.

Yes, good morning. With regard to your Mobility segment, you’ve spoken in the past about certain customers with whom you have formulaic contractual relationships. And so I guess my questions would be, are you observing a meaningful difference in profitability between those customers and customers who aren’t on a formulaic relationship? And as it relates to these formulas, do you feel as though you’re capturing all of inflation? Or are the formulas capturing mostly just the raw material aspect of it? I’d be curious to hear your thoughts on basically how you think underlying price will flow through for those two buckets over the next few quarters.

Well, what I would say is that clearly we have contracts with a number of our OEM customers and we have taken the initiative of having discussions even before normally the contracts would open up for price discussions. As you can imagine, I think everybody’s doing that. And yes, so, we have indices that are tied to inflation that drive pricing up or down. Now, as you know that what actually happened in the supply chain is different than what happened with the broad indices. So essentially because there were significant supply chain constraints, many companies, including us, paid more for raw material than what the indices would’ve suggested. Now, as they go down, we are going to benefit more because we will not have to give the same pricing back to the OEMs as, because we didn’t get it on the way up. And that’s – that should board well for us as we look at in the face of a deflation. But yes, I think every – we have different situations, I won’t name customer names, but we have some customers that we are going – we are getting pretty aggressive with. And you’re going to see some of that benefit flow even in Q4.

Okay. And then as a follow up, in your prepared remarks, I think you made a comment that you’re sold out through the remainder of the year for certain Industrial Coatings. And I guess my question would be, in which product lines are you sold out and given that circumstance, do you think you’ll need to invest in new capacity? Or might it be the case that growth is cooling and we’re fine on capacity?

No, listen, I think we have work to do to remove the bottlenecks and increase capacity in our existing plants. I don’t see us having a need to add more capacity by way of equipment and facilities. Yes, we’ve got a great new team that’s working on this now. I think as Sean said, we’ve had, we’ve not been able to deliver all our demand through at the end of last quarter, but I think we are making good progress.

And Kevin, just to add on, I know you asked specifics. Yes, we ended the quarter with roughly $50 million in backlogs, all Performance Coatings, $10 million to $15 million of that’s coming through Industrial. And it’s specific to building products. Building products is really where we’re essentially sold out through the rest of the year. And so sort of that backlog on remodel and new home builds, continues to benefit that part of the business at least through the end of the year.

Great. Thank you both.

Our next question comes from David Begleiter with Deutsche Bank. Please proceed with your question.

Thank you. Good morning. Rakesh and Sean, how much did the in Mobility Coatings, how much did the raw material price cost gap widened in Q3 versus Q2?

It was about $20 million, Dave.

Very good. And Sean, in Q4 you mentioned improvement Mobility versus Q3. How much are you thinking about in that segment?

Yes, we’re not going to call out that specifically, but I mean, it’s going to be a nice uptick. It’s not going to be quite back to 2019 levels, but somewhere in between where we are today, and 2019 levels as far as the quarterly contributions.

Very good. Thank you.

Our next question comes from John McNulty with BMO Capital Markets. Please proceed with your question.

Yes, good morning. Thanks for taking my question. Maybe just another one on the Light Vehicle side I guess, admittedly Rakesh, we were surprised on the lack of operating leverage, and it sounds like some of it was tied to the raw materials for sure. But I guess maybe two questions around it. One is, on the new business that you’re bringing in, since it was kind of one last year, have you had an ability to actually raise the price on that business yet? Because inflation has been so extreme, I guess, how should we be thinking about that? And then also when you – it sounds like you’ve been really kind of digging into the business pretty hard. Are there any – there any business or contracts where you go this just doesn’t make sense, we shouldn’t be doing this business. Like, is there anything that we should be thinking about where you might be walking away going forward from low margin, no margin type business? How should we think about that?

Yes, let me answer your last question first. So clearly we do have some customers where we are, the margins are below our threshold. And I think it’s, we have to prove to ourselves that we can get these margins up to where they need to be, or yes, we will trade volume for profit for sure. I mean, I – listen, it’s not like we are going to try and get every business at any margin. We’re not going to do that anymore. So having said that, I think the teams are really working to trying to address it. This is an interesting space. You only have two or three large players in this business, and hopefully our OEM customers will give us the appropriate prices that I think all of us need. It’s not just us and we will see where we go. But just to make sure you understand, we are not trying to get volumes at any cost. I forget your first part of the question. Can you repeat that again?

Just around the new business that you won? Because I think you won it last year, and yet inflation’s been so strong. Have you been able to reprice that?

I can’t answer that question, if we’ve been able to reprice it. I know the margins we got on the new business and the quarter, and they were very good, but it’s – let’s get back to you on that.

Got it. Fair enough. And then it, just as a follow up. So Sean, it sounds like you’re looking to unlock a decent amount of working capital as you look to 2023, and at least by our numbers, it looks like there could easily be a couple $100 million of a tailwind if things kind of play out, right. I guess, how should we think about the uses for that going forward? I know historically Axalta is very comfortable with reasonable amounts of debt. Is that changing Rakesh under your watch? And also maybe can you give us thoughts on the potential for a dividend at some point for Axalta, if that might be in the cards? Or that might be a change in terms of how you’re thinking about things?

Yes. Maybe I’ll start, and Rakesh you want to add on. So working capital absolutely will be a benefit as, as we circle in the 2023. We ended the quarter with working capital as a percentage of sales, close to 14%. We expect to be closer to 12% by the end of the year. And back 2019, 2020 we’ve been running it about 8%. So clearly we’re seeing the inflationary pressures and inventory as well as we’ve just seen a build-up in raws given sort of the instability of supply chain us building safety stock levels. So that’s going to be a core part of our focus and getting that out, certainly starting in the fourth quarter and continuing in the 2023. But Dave, on capital allocation near term, we’re going to be building cash and looking to potentially paying down gross debt. I covered in my remarks; we are very focused on refinancing the term loan. Interest rates continue up, it’s going to be a little bit more attractive to actually pay down some of that gross debt, but over time it’s going to be share buybacks and M&A and getting back to sort of the old playbook once we get pass this high inflation time.

Got it. Thanks very much for the color.

Our next question is from Mike Leithead from Barclays. Please proceed with your question.

Great, thanks. Good morning. First question, maybe a little bit more higher level. Rakesh, you’ve been in seat now for a few months. Any initial impressions with the business or just discoveries that, that might be different from when you were only on the board and not in the Interim CEO role?

Listen. Yes, I have several observations. When I think about the business and I look at our ability to get top-line growth, I think we are in a great place. We are gaining share in several businesses. We haven’t talked about some of our new product launches. Our pipeline for new business in the Industrial business is very healthy. So, I feel good about the top-line growth and the ability to get top-line growth. Obviously the three or four things where I see significant opportunities, and we’ve had this discussion on this call, the price cost gap has to be closed. And it comes in the form of pricing with customers, which I’ve talked previously about having commercial courage to go after the pricing. The raw material has to be – we have taken $650 million in raw material increases, and we need – given that the environment is changing. We need to get our fair share back. And the other one that I think I’ve become acutely aware is just the opportunity in our operations and supply chain. I think we have a significant opportunity both in terms of improving deliveries, clearing backlogs, lowering our costs, the fixed costs in the plants. And I think when you take all that in total. I think the business can be at a different place a year from now.

Great. That’s it for me. Thank you.

Sure.

Our next question comes from Alex Yefremov with KeyBanc Capital Markets. Please proceed with your question.

Thanks and good morning everyone. I just wanted to come back to Mobility, it quite stark contrast between 5% price and 20% in cost inflation. And perhaps there was some surprise and inflation, but I thought you’d typically have a couple of quarter’s worth of inventory. So there is some visibility into that inflation. I guess with that in mind, are you disappointed with the pricing efforts that the team has been able – the pricing that the team has been able to achieve? And if so, what is changing in terms of improving the pricing execution?

Yes, obviously we’re disappointed that we have this gap and the gap grew in the quarter. Having said that, I think the teams who are running this business fully understand what we must do – having said that, we are not trying to close the entire gap by just pricing the customers because we know that things that we can do internally that we control, that’ll also help offset that. And you’re going to see some of that benefit in Q4. And I think as we march into 2023, I think you’ll see fairly big chunks of improvement there.

Thanks, Rakesh. In EMEA, Refinish volumes were pretty stable in the third quarter. This business is generally less cyclical, but still is subject to weaker consumer demand. Could this weaken in the fourth quarter or next year, or do you expect continued stability here?

Yes, go ahead Sean.

No, I was saying we are expecting a little slow down in the fourth quarter in Refinish, in EMEA. That’s part of, some of that is seasonality in December, but we are still pretty bullish about where this business is going other than seasonality we don’t see any fundamentally things changing that, that should reduce this business.

Thanks a lot.

Ladies and gentlemen, we have reached the end of our question-and-answer session, and I would now let – this concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.