Koppers Reports Third Quarter 2022 Results
Koppers Holdings Inc. (“Koppers”), an integrated global provider of treated wood products, wood treatment chemicals, and carbon compounds, today reported net income attributable to Koppers for the third quarter of 2022 of $19.1 million, or $0.91 per diluted share, compared to $10.2 million, or $0.47 per diluted share, in the prior year quarter.
Adjusted net income attributable to Koppers and adjusted earnings per share (“EPS”) were $25.1 million and $1.19 per share for the third quarter of 2022, compared to $22.0 million and $1.01 per share in the prior year quarter, respectively.
Consolidated sales of $536.1 million, which was a quarterly record, increased by $111.3 million, or 26.2 percent, compared with $424.8 million in the prior year. Excluding a $17.1 million unfavorable impact from foreign currency changes, sales increased by $128.4 million, or 30.2 percent.
The Railroad and Utility Products and Services (“RUPS”) business reported record third-quarter sales and improved profitability compared with the prior year period primarily driven by pricing increases across multiple markets, particularly crossties and utility poles, and higher activity in its maintenance-of-way businesses.
The Performance Chemicals (“PC”) segment delivered a second consecutive record sales quarter; however, profitability continued to be unfavorably impacted by higher overall raw material costs, partly offset by global price increases.
The Carbon Materials and Chemicals (“CMC”) segment continued to generate strong sales and profitability in a favorable pricing environment, which more than offset higher raw material costs.
President and CEO Leroy Ball said, “I’m excited to report that we finished the third quarter with record sales and record CMC adjusted EBITDA performance, which keeps us on track for another record year. The fact that we overcame dual headwinds of a stronger U.S. dollar on our foreign earnings and an increase in our effective tax rate is equally impressive and speaks to the ongoing strength of our diversified business model.”
“Our CMC business generated record quarterly results, driven by stronger pricing supported by a balanced supply and demand environment and continued operations improvements. Demand for our PC business remained healthy, while we continued working down higher cost inventory impacting margins, a situation that’s expected to reverse in January 2023 with additional price increases. RUPS improved sequentially and year-over-year as hardwood supply continued to increase and demand for utility infrastructure remained robust. My thanks go out to our incredible team worldwide who keeps finding ways to overcome challenging market conditions by continuing to execute on our expand and optimize strategy.”
Third Quarter Financial Performance
- RUPS delivered record third quarter sales of $207.7 million, an increase of $20.8 million, or 11.1 percent, compared to $186.9 million in the prior year quarter. Excluding an unfavorable impact from foreign currency changes of $0.7 million, sales increased by $21.5 million, or 11.5 percent, from the prior year quarter. The sales increase was driven by higher pricing, particularly for crossties and utility poles, and higher activity in the railroad bridge services business, partly offset by volume decreases in utility poles due to labor-driven capacity and transportation constraints. Adjusted EBITDA for the third quarter was $15.5 million, or 7.5 percent, compared with $10.7 million, or 5.7 percent, in the prior year quarter. Profitability increased year-over-year as a result of improvements in the utility pole and maintenance-of-way businesses from price increases and favorable cost absorption, partly offset by higher raw material and operating costs. The railroad business continued to see higher procurement volumes of green ties, consistent with expectations for the second half of 2022.
- PC generated record quarter sales of $153.1 million, an increase of $37.9 million, or 32.9 percent, compared to sales of $115.2 million in the prior year. Excluding an unfavorable foreign currency impact of $3.4 million, sales increased by $41.3 million, or 35.9 percent, from the prior year quarter. The year-over-year sales growth was primarily due to volume increases of 30 percent in the Americas and global price increases for copper-based preservatives, partly offset by volume decreases in Europe. In the third quarter of 2021, volumes in the Americas were unfavorably impacted by high lumber prices and a shift in consumer spending habits that tempered customer demand. Adjusted EBITDA for the third quarter was $16.7 million, or 10.9 percent, compared with $20.2 million, or 17.5 percent, in the prior year quarter, reflecting higher overall raw material costs, including working through higher cost inventory in a falling copper price environment, partly offset by higher volumes in the Americas and global price increases.
- Sales for CMC of $175.3 million increased by $52.6 million, or 42.9 percent, compared to sales of $122.7 million in the prior year quarter. Excluding an unfavorable impact from foreign currency changes of $12.9 million, sales increased by $65.5 million, or 53.4 percent, from the prior year quarter. Compared with the prior year period, sales benefited from higher prices for carbon pitch, phthalic anhydride, carbon black feedstock and naphthalene, driven by strong demand and a higher raw material price environment, partly offset by volume decreases. Adjusted EBITDA was a quarterly record of $36.6 million, or 20.9 percent, compared with $22.5 million, or 18.3 percent, in the prior year quarter. The year-over-year increase in profitability reflects higher sales prices, partly offset by an increase in raw material and other operating costs and an unfavorable effect from foreign currency.
- Total adjusted EBITDA was $68.8 million, or 12.8 percent, in the third quarter, compared with $53.9 million, or 12.7 percent, in the prior year quarter.
- Capital expenditures for the nine months ended September 30, 2022, were $80.0 million, compared with $87.6 million for the prior year period. Net of insurance proceeds and cash received from asset sales, capital expenditures were $75.1 million for the current year, compared with $78.7 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 $2.0 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 attributable to Koppers in 2022 is projected to be approximately 35 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 $4.00, 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 $0.60 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 $85 million to $90 million.
Commenting on the forecast, Mr. Ball said, “We remain on track to finish this year with record sales and profitability, and more importantly, on target to reach our $300 million adjusted EBITDA goal in 2025. We continue to strengthen the competitive moat around our business that puts us in the best position to assure a stable and secure supply chain. The recent acquisition of crosstie supplier Gross & Janes, the addition of DCOI to our product portfolio, and the most recent new contract to recover and dispose of end-of-life crossties are all examples of Koppers continuing to find success in our vertically integrated business model. This enables the reliable delivery of critical top-quality products to a customer base placing ever-greater emphasis on sustainable solutions and demonstrating a willingness to pay for them. We remain committed to helping our customers run uninterrupted while taking care of our team members around the globe and driving returns for our shareholders.”
Koppers 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 December 12, 2022, to shareholders of record as of the close of trading on November 25, 2022.
For the full third 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.”
Ms. Jessica Franklin Black – Media Relations – BlackJF@koppers.com – (412) 227-2025
Source: Koppers Holdings, Inc.