Koppers Holdings, Inc. Provides First in a Series of Monthly Updates
Koppers Holdings, Inc., an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds, today reported its regularly scheduled monthly business update and will conduct a conference call and related webcast at 11:00 a.m. Eastern Time today. This is part of an ongoing series to share recent developments and highlight strategic initiatives to the investment community. The company plans to issue its next monthly business update on June 17, 2020.
President and CEO Leroy Ball said, “We have received positive feedback since announcing our intention to provide monthly updates for the foreseeable future as the world continues to deal with the direct and indirect effects of the COVID-19 pandemic. This enhanced communication model is designed to provide more clarity and transparency to our ability to navigate the current business environment while also regularly updating current and prospective shareholders of the developing trends that could impact our sales, profitability and cash flow either positively or negatively in both the near and mid-term. While we continue to deal with rapidly changing impacts to parts of our business brought on by the pandemic, our overall business, on balance, has continued to remain on solid footing.”
The benefits of Koppers Zero Harm culture have never proven more important as employees throughout the organization are taking care of each other with great success. Maintaining the health and safety of employees has allowed Koppers to maintain critical business continuity in order to provide essential products and services. To date, approximately 7 percent of global employees tested or self-quarantined for a period of time with less than 1 percent of employees currently under self-quarantine. Currently, all the company’s continuing operations are running since the facility in Auckland, New Zealand resumed operations on April 28, 2020.
April Sales by Business Segment
For April 2020, consolidated sales were $135.8 million compared to $152.2 million in the prior year period, representing a decrease of $16.4 million, or 10.8 percent. The decrease was due primarily to lower sales from Carbon Materials and Chemicals (“CMC”) and Performance Chemicals (“PC”), partially offset by higher sales from Railroad and Utility Products and Services (“RUPS”). Sales for the month were negatively affected by softer demand in materials and chemicals brought on by the halting of major economies around the world, particularly those outside of the United States. In the meantime, the industrial wood treating business and related chemicals continued to generate strong volumes as did residential wood treatment preservatives in the United States.
– Sales for RUPS of $71.5 million increased by $6.0 million, or 9.2 percent, compared to sales of $65.5 million in the prior year month. The sales increase was primarily due to higher volumes of untreated crossties to Class I customers and higher volumes of treated crossties for commercial railroads as well as increased demand for utility poles.
– Sales for PC of $38.0 million decreased by $2.1 million, or 5.2 percent, compared to sales of $40.1 million in the prior year month. The year-over-year decrease was primarily due to the temporary shutdown in New Zealand and generally lower volumes in overseas markets, partially offset by strong demand in the U.S. and Australia.
– Sales for CMC totaling $26.3 million decreased by $20.3 million, or 43.6 percent, compared to sales of $46.6 million in the prior year month. The year-over-year decrease was driven by weak markets in all geographies, particularly in Europe.
– Capital expenditures for April 2020 were $3.6 million, compared with $3.1 million in April 2019. For the year-to-date period ended April 30, 2020, capital expenditures were $14.3 million compared with $14.1 million for the prior year period.
Mr. Ball commented, “In a normal business environment, April’s sales numbers would be disappointing. In the current environment, however, I am actually heartened that sales finished the month in line with and not below our expectations. If we experience similar dynamics in May, our chances of successfully managing through the worst period of the pandemic improve for the second quarter. Beyond that, it will depend upon whether the steel, aluminum, and oil markets stabilize and the U.S. demand for residential treated wood does not decline precipitously due to changes in discretionary spending brought on by the severe rate of unemployment.”
Beginning in 2020, in accordance with generally accepted accounting principles, results of Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”) are classified as discontinued operations for the current year as well as the comparable period in 2019 due to the pending divestiture. Accordingly, the unaudited information for 2019 regarding segment sales and operating profit have been restated to exclude KJCC. In addition, the company’s non-GAAP reporting of earnings before interest, taxes, depreciation and amortization and adjusted earnings per share also exclude KJCC.
Pending Divestiture of Koppers (Jiangsu) Carbon Chemical Company Limited
In February 2020, 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. The plant resumed operation in late March and suspended production again in early May to accommodate a previously scheduled maintenance turnaround at a major customer’s facility. The KJCC plant is scheduled to resume operations in June 2020.
Since receiving approval from the State Administration for Market Regulation of China (“SAMR”) on April 29, 2020, approximately 45 days early, the timeline to close on the sale has improved to as soon as July 2020, ahead of the original expected date of mid-August 2020. 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 April 30, 2020, Koppers was on target to be within its financial covenant metrics at the next remeasurement date of June 30, 2020. Likewise, the company expects to maintain an appropriate level of liquidity to operate its business without undue hardship. As of March 31, 2020, Koppers had $185 million of liquidity. 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.
For the full monthly update, click here.
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.”
Michael Zugay – Investor Relations – (412) 227-2231
Source: Koppers Holdings, Inc.