Koppers Holdings Inc. Provides Update on Fourth Quarter and 2020 Business Segment Performance
Koppers Holdings Inc. (“Kopper” or the “company”), an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds, today provided an update on its business segments for the fourth quarter and full-year 2020. While Koppers is still conducting financial closing procedures for the fourth quarter and full year 2020, the company is providing a preview of its financial results. The company plans to report final results for the fourth quarter and year ending December 31, 2020, on February 24, 2021, and will also conduct a conference call with the investment community on that day, which will be broadcast live on www.koppers.com, with a replay to be made available.
Consolidated sales for the fourth quarter of 2020, on a preliminary basis, were $393.1 million, an increase of $11.0 million, or 2.9 percent, compared with $382.1 million in the prior year quarter. Excluding a $3.4 million favorable impact from foreign currency translation, sales increased by 2.0 percent from the prior year.
The Performance Chemicals (“PC”) segment again delivered strong sales growth and expanded profitability, as it continued to serve the underlying demand driven by a strong home repair and remodeling pipeline, as well as increased demand in international markets.
The Railroad and Utility Products and Services (“RUPS”) segment reported slightly lower sales than prior year, primarily due to decreased crosstie treating activities; however, maintained its profitability as a result of increased demand in its utility pole business in the U.S. and Australia, and generally improved conditions in its maintenance-of-way businesses.
While sales and profitability for the Carbon Materials and Chemicals (“CMC”) segment decreased from the prior year due to ongoing demand weakness in its end markets, the sales decline has stabilized and the profitability showed continued improvement to generate double-digit margin performance for the fourth quarter as well as for the full year.
As previously announced, the divestiture of Koppers (Jiangsu) Carbon Chemical Company Limited (KJCC) was completed on September 30, 2020. Beginning in 2020, KJCC results are classified as held for sale and as discontinued operations for the current year as well as the comparable prior year period.
The company now anticipates that adjusted EBITDA in 2020 will be approximately $211 million to $212 million, which exceeds its most recent forecast of $204 million to $210 million, and compares with $201.1 million in the prior year. Adjusted earnings per share is projected to be in the range of $4.10 to $4.20, higher than its most recent forecast of $3.65 to $3.90 and, at the midpoint, reflects an approximate increase of 30 percent from $3.18 in the prior year.
Based upon current adjusted EBITDA estimates and the debt reduction that has been accomplished, the net leverage is projected to be approximately 3.5 at December 31, 2020, compared with 4.3 at December 31, 2019.
President and CEO Leroy Ball said, “While final results are being compiled, all signs point to Koppers meeting or exceeding all major goals set for 2020 prior to the pandemic. No one could have predicted the many unforeseen events that occurred in 2020 and I am extremely proud of Koppers global workforce who dug deep and persevered. As a result of their dedication, we are on track to: achieve a new high in profitability (post-KJCC); surpass the high end of our initial 2020 earnings target; exceed our original net debt reduction target of $120 million; and reduce our net leverage to 3.5, below our pre-pandemic 2020 goal of 3.6 to 3.8.
“When you add that we have closed on the sale of our KJCC business within targeted parameters, improved our underlying safety rates to an all-time best performance, initiated our sustainability journey, and strengthened our inclusion and diversity focus while supporting our team members and communities during a shared crisis, it makes for a truly historical year.”
Fourth-Quarter Preliminary Financial Performance
Sales for RUPS of $168.2 million decreased by $1.3 million, or 0.8 percent, compared to sales of $169.5 million in the prior year quarter. Excluding a favorable impact from foreign currency translation of $0.7 million, sales decreased by $2.0 million, or 1.2 percent, from the prior year quarter. The sales decrease was primarily due to lower overall crosstie volumes, largely offset by higher demand for utility poles in the U.S. and Australia, as well as increased activities in maintenance-of-way businesses in the U.S., related to bridge repair and engineering and crosstie disposal services. Preliminary operating profit for the fourth quarter was $6.3 million, or 3.7 percent, compared with operating profit of $4.0 million, or 2.4 percent, in the prior year quarter. Preliminary adjusted EBITDA was $10.3 million, or 6.1 percent, in the fourth quarter, compared with $10.2 million, or 6.0 percent, in the prior year quarter. The year-over-year profitability was relatively flat, in line with typical year-end slowdown.
Sales for PC of $129.9 million increased by $25.3 million, or 24.2 percent, compared to sales of $104.6 million in the prior year quarter. Excluding an unfavorable impact from foreign currency translation of $1.0 million, sales increased by $26.3 million, or 25.1 percent, from the prior year quarter. The sales increase reflects continued demand strength for copper-based preservatives in the U.S. that are, in turn, driven by a strong housing market and the diversion of discretionary funds from leisure and entertainment categories to home repair and beautification projects. International markets benefited from improved industrial and agricultural demand as most economies have reopened. Preliminary operating profit was $21.5 million, or 16.6 percent, for the fourth quarter, compared with $13.6 million, or 13.0 percent, in the prior year quarter. Preliminary adjusted EBITDA for the fourth quarter was $23.0 million, or 17.7 percent, compared with $14.4 million, or 13.8 percent, in the prior year quarter. The increased profitability was primarily due to higher sales volumes, a favorable product mix and improved cost absorption.
Sales for CMC totaling $95.0 million decreased by $13.0 million, or 12.0 percent, compared to sales of $108.0 million in the prior year quarter. Excluding a favorable impact from foreign currency translation of $3.7 million, sales decreased by $16.7 million, or 15.5 percent, from the prior year quarter. Lower average oil prices, as well as a slowdown of markets during the pandemic, have resulted in lower pricing and volumes for carbon pitch globally, and weaker demand for phthalic anhydride in the U.S., partially offset by improved demand for carbon pitch in Europe and carbon black feedstock in Australia. Preliminary operating profit was $7.5 million, or 7.9 percent, in the fourth quarter, compared with $8.9 million, or 8.2 percent, in the prior year quarter. Preliminary adjusted EBITDA was $14.4 million, or 15.2 percent, in the fourth quarter, compared with $15.6 million, or 14.4 percent, in the prior year quarter. The year-over-year profitability was consistent with expectations and reflects continued margin recovery in the second half of 2020.
Operating profit margin and adjusted EBITDA margin are calculated as a percentage of sales. Additional items excluded from adjusted EBITDA include restructuring expenses as well as non-cash effects related to LIFO and mark-to-market commodity hedging.
Full-Year 2020 Preliminary Financial Performance
Consolidated sales of $1.669 billion increased by $32.1 million, or 2.0 percent, as compared to $1.637 billion in the prior year. Excluding an unfavorable impact of $2.8 million from foreign currency translation, sales increased by 2.1 percent from the prior year. Despite headwinds associated with the global pandemic, 2020 sales represented the fourth consecutive year of growth as well as the highest level of revenues in the history of the company.
Sales for RUPS of $759.1 million increased by $25.6 million, or 3.5 percent, compared to sales of $733.5 million in the prior year. Preliminary operating profit was $46.7 million, or 6.2 percent, compared with operating profit of $35.8 million, or 4.9 percent, in the prior year. Preliminary adjusted EBITDA was $65.4 million, or 8.6 percent, compared with $60.2 million, or 8.2 percent, in the prior year.
Sales for PC of $526.3 million increased by $78.0 million, or 17.4 percent, compared to sales of $448.3 million in the prior year. Preliminary operating profit was $88.6 million, or 16.8 percent, compared with $52.1 million, or 11.6 percent, in the prior year. Preliminary adjusted EBITDA was $100.7 million, or 19.1 percent, compared with $68.6 million, or 15.3 percent, in the prior year.
Sales for CMC totaling $383.7 million decreased by $71.5 million, or 15.7 percent, compared to sales of $455.2 million in the prior year. Preliminary operating profit was $23.4 million, or 6.1 percent, compared with $39.2 million, or 8.6 percent, in the prior year. Preliminary adjusted EBITDA was $45.0 million, or 11.7 percent, compared with $73.5 million, or 16.1 percent, in the prior year.
Capital expenditures for the twelve months ended December 31, 2020, were $69.8 million, compared with $37.2 million for the prior year period. The year-over-year increase is consistent with the company’s most recent projections for capital investments in 2020, primarily driven by improving the safety and reliability of its existing infrastructure as well as a major treating expansion project.
At December 31, 2020, total debt was $775.9 million and, net of cash and cash equivalents, the net debt was $737.4 million, compared with total debt of $901.2 million and net debt of $868.9 million at December 31, 2019. Compared to December 31, 2019, total debt was lower by $125.3 million and net debt was lower by $131.5 million.
Koppers does not provide reconciliations of guidance for adjusted EBITDA, adjusted EPS, net debt or net leverage ratio to comparable GAAP measures, in reliance on the unreasonable efforts exception. Koppers is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include restructuring, impairment, non-cash LIFO charges, acquisition-related costs, and non-cash mark-to-market commodity hedging that are difficult to predict in advance in order to include in a GAAP estimate and may be significant.
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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. We serve our customers through a comprehensive global manufacturing and distribution network, with facilities located in North America, South America, Australasia 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.
Michael J. Zugay – Chief Financial Officer – email@example.com – (412) 227-2231
Source: Koppers Holdings, Inc.