Koppers Holdings Inc. Announces COVID-19 Communication Plan & Other Updates

Koppers Holdings, Inc. (“Koppers” or the “Company”), an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds, announced its intention to provide monthly updates to the investment community for the foreseeable future through a press release as well as a conference call and related webcast.  The company plans to issue its next monthly business update on May 20, 2020.

President and CEO Leroy Ball said, “We have significantly increased our communication with many stakeholders—which include our employees, customers, suppliers and banking group—during this period of great uncertainty.  Toward that end, we are increasing our frequency of communication to the public investment markets.  In a global crisis like the COVID-19 pandemic, we believe that ninety days is too long between business updates considering the frequency and magnitude of market movements.  It is my hope that by providing more frequent dialogue, all stakeholders will have the most up-to-date information to inform their decision making.”

Koppers believes its long-term prospects remain attractive given its industry-leading position, end markets served and proven business strategy. During this unprecedented time, Koppers purpose—protecting what matters; preserving the future—has never been more meaningful.  The company has mobilized to support the global response by continuing to supply essential products and services that help to maintain critical rail transportation and utility infrastructure.

Koppers remains focused on successfully navigating through this unprecedented period by aligning its business with the following key priorities:

– Protecting the health and safety of employees, customers and supply chain partners.

– Providing critical products and ongoing support to its essential customer base.

– Maintaining adequate liquidity and financial flexibility.

– Providing frequent and accurate communication to key stakeholders.

– Advancing key initiatives in order to emerge stronger from the crisis.

Due to the uncertainty of the scope, duration and impact of the pandemic, the company is currently unable to reasonably estimate its annual financial performance and is withdrawing previously communicated 2020 financial guidance, which was provided on February 27, 2020.

Mr. Ball stated, “It is impossible to confidently forecast the immediate future of our business, given the uncertainty of when businesses can begin to reopen and return toward pre-pandemic levels.  Due to the extreme uncertainty surrounding most major markets, we are withdrawing any future earnings guidance until further notice.  From a big-picture perspective, I am encouraged by both our nearly universal designation as an ‘essential’ business and the performance of our core wood technology business during these volatile and unpredictable times.

“We are dealing with new norms in our world, our personal lives, and our business and we deeply appreciate the hard work and dedication of our employees as they remain steadfast in serving our customers and providing mission-critical products and services.  Our heartfelt concern goes to those who have contracted the COVID-19 virus, and we salute the courage and empathy of the healthcare community worldwide.  Looking beyond COVID-19, we believe there will be opportunities for long-term growth and by protecting our employees, managing our operations and aligning our cost structure in support of our business priorities, we will be well prepared to emerge from this global crisis even stronger.”

For the first quarter of 2020, Koppers reported preliminary net loss attributable to Koppers of $1.4 million, or $(0.07) per diluted share, compared to net income of $11.5 million, or $0.56 per diluted share, in the prior year quarter.  Beginning in 2020, results from the pending divestiture of Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”) are classified as held for sale and as discontinued operations for the current year as well as the comparable prior year period. Preliminary net income from continuing operations attributable to Koppers for the first quarter of 2020 was $1.9 million, or $0.09 per diluted share, compared to $9.7 million, or $0.47 per diluted share, in the prior year quarter.

The preliminary adjusted net income and adjusted earnings per share (“EPS”) from continuing operations were $9.9 million and $0.47 per share for the first quarter of 2020, compared to $11.2 million and $0.54 per share in the prior year quarter, respectively.

Adjustments to pre-tax income totaled $10.6 million for the first quarter of 2020, compared with $3.8 million for the prior year quarter. For both periods, the adjustments included restructuring expenses as well as non-cash effects related to LIFO and mark-to-market commodity hedging.

The preliminary operating profit was $13.6 million, or 3.4 percent, compared with $24.3 million, or 6.4 percent, in the prior year period.  The operating profit margin is calculated as a percentage of sales.

For the first quarter of 2020, preliminary adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) was $37.6 million, or 9.4 percent, compared with $40.8 million, or 10.8 percent, in the prior year quarter.  The adjusted EBITDA margin is calculated as a percentage of sales.

Additional items excluded from adjusted EBITDA in the first quarter of 2020 totaled $10.0 million of pre-tax charges, compared with $2.3 million in the prior year quarter.  For both periods, the adjustments included restructuring expenses as well as non-cash effects related to LIFO and mark-to-market commodity hedging.

Consolidated sales, on a preliminary basis, were $401.9 million for the first quarter of 2020, an increase of $25.0 million, or 6.6 percent, from sales of $376.9 million in the prior year quarter.  Excluding a negative impact from foreign currency translation of $6.3 million, sales were higher by $31.3 million, or 8.3 percent.

The Railroad and Utility Products and Services (“RUPS”) performance reflected a generally favorable demand environment with increased crosstie volumes and favorable pricing in its commercial crosstie business as well as higher volumes of utility poles, partially offset by continued weaker demand in its Railroad Structures and Recovery Resources businesses.  The Performance Chemicals (“PC”) segment reported higher sales and profitability, on an adjusted basis, driven by organic growth as well as market share gains primarily in North America and lower year-over-year raw material costs, partially offset by lower demand in its European business.  The Carbon Materials and Chemicals (“CMC”) business was negatively affected by softening demand in the global aluminum markets, and lower pricing and inventory write-downs due to the steep decline in oil prices.

Mr. Ball commented, “I am pleased to report that, despite dealing with an incredibly fluid business environment brought on by the global pandemic, we completed the first quarter with only one of more than 2,100 global employees testing positive with COVID-19, and 31 of our 33 facilities worldwide continuing to operate without restriction, after being designated as ‘essential’ by the various jurisdictions in which we are located.  Also important is that many of the suppliers and service providers in our network are likewise deemed to be in the ‘essential’ business category.  Koppers is proud to do its part to keep railroads running safely so they can deliver critical shipments of food and other supplies; enable utilities to continue to keep homes and businesses powered to provide light, heat, and digital connectivity; and serve construction markets with products to maintain critical infrastructure.

“Our results for the first quarter are more encouraging than they may appear, once you examine the underlying fundamentals.  The core businesses of wood treatment and wood treatment chemicals, on a combined basis, exceeded prior year profitability by 11 percent.  Those gains, however, were negated by tough conditions in our Australian carbon products business, driven by lower Asian benchmark pricing and lower oil prices.  Additionally, our Railroad Structures bridge inspection and repair business encountered extreme difficulty working through various state restrictions meant to contain the spread of COVID-19.  On balance, it is important to note that our focus on serving customers in the wood preservation markets helped to lessen impact of these headwinds and kept our results from experiencing a more dramatic decline.”

Pending Divestiture of Koppers (Jiangsu) Carbon Chemical Company Limited

In February, Koppers announced that it entered into a definitive agreement to sell Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”), a 75-percent owned China coal tar distillation business with the remaining 25 percent owned by Yizhou Group Company Limited.

The KJCC facility, located in Pizhou City in Jiangsu Province, was shut down in the fourth quarter of 2019 for planned maintenance and remained closed through much of March 2020 due to concerns related to COVID-19.  At this time, Koppers employees in China have been reported safe and the facility is fully operational.

On April 16, 2020, the pending divestiture reached another milestone by filing for antitrust approval with China’s State Administration for Market Regulation of China (“SAMR”) and a decision is anticipated to be issued by June 2020.  The closing of the transaction is expected to be in August 2020, consistent with the original timeline that was previously announced.  Koppers expects to realize approximately $65 million of net cash, after taxes and expenses, and plans to apply the cash proceeds toward debt reduction.

Debt and Liquidity

As of March 31, 2020, Koppers was well within its financial covenant metrics and had $185 million of liquidity to continue operations with no major changes.  While a global economic downturn will negatively impact its earnings potential, the company has already launched several cost-reduction initiatives and contingency plans to maintain a strong foundation during this period.  Also, additional measures have been identified and can be enacted rapidly as needed to combat a longer or deeper downturn.  The company continues to intently focus on raising and conserving cash in all aspects of its operations as part of driving additional cushion in its financial covenants.  Moreover, Koppers has a track record of disciplined debt reduction and the company believes it is well positioned to navigate through the current crisis and, ultimately, capitalize on an eventual recovery.

About Koppers

Koppers, with corporate headquarters in Pittsburgh, Pennsylvania, is an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds.  Our products and services are used in a variety of niche applications in a diverse range of end markets, including the railroad, specialty chemical, utility, residential lumber, agriculture, aluminum, steel, rubber, and construction industries.  Including our joint ventures, we serve our customers through a comprehensive global manufacturing and distribution network, with facilities located in North America, South America, Australasia, China and Europe.  The stock of Koppers Holdings Inc. is publicly traded on the New York Stock Exchange under the symbol “KOP.”  For more information, visit us on the Web: www.koppers.com.

Contact:

Michael J. Zugay – Chief Financial Officer – zugaymj@koppers.com – (412) 227-2231

Source: Koppers Holdings, Inc.