Koppers Reports First Quarter 2022 Results
Koppers Holdings Inc., an integrated global provider of treated wood products, wood treatment chemicals, and carbon compounds, today reported net income attributable to Koppers for the first quarter of 2022 of $18.8 million, or $0.87 per diluted share, compared to $25.9 million, or $1.18 per diluted share, in the prior year quarter.
Adjusted net income attributable to Koppers and adjusted earnings per share (EPS) were $19.7 million and $0.91 per share for the first quarter of 2022, compared to $22.3 million and $1.02 per share in the prior year quarter, respectively.
Consolidated sales of $459.3 million, a record quarter, increased by $51.8 million, or 12.7 percent, compared with $407.5 million in the prior year quarter. Excluding a $5.5 million unfavorable impact from foreign currency changes, sales increased by $57.3 million, or 14.1 percent, from the prior year.
The Railroad and Utility Products and Services (RUPS) business reported lower sales and profitability than in the prior year period, primarily driven by lower volumes in the utility pole business as well as continued supply chain challenges related to the availability of untreated crossties at acceptable price points.
The Performance Chemicals (PC) segment delivered record first-quarter sales; however, profitability was unfavorably impacted by higher raw material costs, partly offset by price increases implemented globally.
The Carbon Materials and Chemicals (CMC) segment again generated significantly higher sales and strong profitability compared with the prior year quarter, reflecting a favorable pricing environment driven by strong end market demand that continues to trend ahead of raw material cost increases.
President and CEO Leroy Ball said, “I am extremely pleased by our record sales and overall first-quarter performance, which demonstrates our ability to continue to successfully navigate through rapid changes and economic uncertainties. We achieved results beyond our internal expectations, supported by a robust global economy with healthy demand for our CMC products and a favorable pricing environment that continues to outpace increased costs in this segment. PC also had a solid quarter due to robust volumes and pricing, although the strong results were partly offset by higher costs that surpassed price increases in the quarter. As expected, RUPS struggled as hardwood supply continued to be below comparable levels in the prior year period, although we anticipate improvement in the second half of this year.”
First Quarter Financial Performance
- Sales for RUPS of $183.4 million decreased by $8.5 million, or 4.4 percent, compared to sales of $191.9 million in the prior year quarter. Sales decreased from prior year, primarily related to lower volumes of utility poles in the U.S. and Australia, along with lower sales volumes of crossties for both Class I and commercial railroads, partly offset by pricing increases and improved demand in maintenance-of-way businesses. Adjusted EBITDA for the first quarter was $11.6 million, or 6.3 percent, compared with $16.4 million, or 8.5 percent, in the prior year quarter. Profitability was unfavorably impacted by higher raw material and operating costs in the domestic utility pole business. The railroad business experienced lower absorption of fixed costs due to lower tie throughput as a result of decreased purchases of untreated crossties by our Class I customers.
- Sales for PC of $136.4 million, a first-quarter segment record, increased by $12.8 million, or 10.4 percent, compared to sales of $123.6 million in the prior year quarter. The increase in sales was primarily due to price increases implemented globally along with higher demand for preservatives in South America. Adjusted EBITDA for the first quarter was $20.9 million, or 15.3 percent, compared with $27.8 million, or 22.5 percent, in the prior year quarter. Profitability was lower than prior year due to higher raw material costs, including scrap copper.
- Sales for CMC of $139.5 million increased by $47.5 million, or 51.6 percent, compared to sales of $92.0 million in the prior year quarter. Excluding an unfavorable impact from foreign currency changes of $5.3 million, sales increased by $52.8 million, or 57.4 percent, from the prior year quarter. Sales benefited from higher pricing and volumes for carbon pitch, phthalic anhydride and carbon black feedstock, and higher sales prices for naphthalene. Adjusted EBITDA for the first quarter was $20.1 million, or 14.4 percent, compared with $10.4 million, or 11.3 percent, in the prior year quarter. The increase in profitability reflects a favorable demand and pricing environment, partly offset by higher raw material and selling, general and administrative costs.
- Net income attributable to Koppers was $18.8 million, compared to $25.9 million in the prior year quarter. Adjusted net income attributable to Koppers was $19.7 million for the first quarter, compared to $22.3 million in the prior year quarter. Adjusted EBITDA was $52.6 million, or 11.5 percent, in the first quarter, compared with $55.1 million, or 13.5 percent, in the prior year quarter.
- Diluted EPS from continuing operations was $0.87, compared to $1.18 per diluted share in the prior year quarter. Adjusted EPS for the quarter was $0.91, compared with $1.02 for the prior year period.
- Capital expenditures for the three months ended March 31, 2022, were $26.2 million, compared with $24.2 million for the prior year period. Net of insurance proceeds and cash received from asset sales, capital expenditures were $22.0 million for the current year, compared with $19.5 million for the prior year period.
Koppers remains committed to expanding and optimizing its business and making continued progress toward its long-term financial goals. After considering global economic conditions as well as the ongoing uncertainty associated with geopolitical and supply chain challenges, Koppers expects 2022 sales of approximately $1.9 billion, compared with $1.68 billion in the prior year, and adjusted EBITDA of approximately $230 million for 2022, compared with $223.5 million in the prior year.
The effective tax rate for adjusted net income in 2022 is projected to be approximately 32 percent, compared to the tax rate in 2021, excluding certain income tax effects relating to non-recurring items, of 27 percent. The higher 2022 tax rate is primarily due to higher anticipated interest expense deduction disallowances and the mix of income from domestic and foreign subsidiaries. Accordingly, the 2022 adjusted EPS is forecasted to be approximately $4.10, compared with adjusted EPS of $4.21 in the prior year. The higher tax rate anticipated in 2022 is estimated to have a negative impact on adjusted EPS of approximately $0.31 compared to the prior year.
Koppers expects capital expenditures of approximately $95 million in 2022. Net of cash received from asset sales and property insurance recoveries, Koppers expects its net investment in capital expenditures to be $80 million to $90 million.
Commenting on the forecast, Mr. Ball said, “Once again, it is a testament to the balanced and diversified nature of our business model that we are maintaining our 2022 expectations for adjusted EBITDA of $230 million. A strong economy, improved hardwood supply, and our ability to recapture higher costs from our customers are key factors underpinning our forecast. While a higher estimated effective tax rate will impact our adjusted EPS, we still anticipate that it will be solidly above $4 per share. I remain confident that our strategy of serving essential infrastructure markets will mitigate the impact of economic volatility and continue to sustain our business, as it has throughout the pandemic and now with the conflict in Ukraine.”
Koppers also announced that its Board of Directors declared a quarterly cash dividend of $0.05 per share of its common stock. The dividend is payable on June 13, 2022, to shareholders of record as of the close of trading on May 27, 2022.
Share Repurchase Program
During the first quarter, Koppers repurchased 225,683 shares of common stock for an aggregate of $6.4 million, or an average price per share of $28.52.
At March 31, 2022, $84.2 million remained available under the company’s stock repurchase authorization. On August 6, 2021, the Board of Directors authorized a $100 million share repurchase program, which has no expiration date.
For the full first quarter results, 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. 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: www.koppers.com.
Quynh McGuire – Investments – McGuireQT@Koppers.com – (412) 227-2049
Source: Koppers Holdings, Inc.