Koppers Reports First Quarter 2023 Results; Reaffirms 2023 Outlook
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 first quarter of 2023 of $25.5 million, or a first-quarter record of $1.19 per diluted share, compared to $18.8 million, or $0.87 per diluted share, in the prior year quarter.
Adjusted net income attributable to Koppers and adjusted earnings per share (EPS) were $24.0 million and $1.12 per share for the first quarter of 2023, compared to $19.7 million and $0.91 per share in the prior year quarter.
Consolidated sales of $513.4 million, which was a first-quarter record, increased by $54.1 million, or 11.8 percent, compared with $459.3 million in the prior year. Excluding a $7.9 million unfavorable impact from foreign currency changes, sales increased by $62.0 million, or 13.5 percent.
The Railroad and Utility Products and Services (RUPS) business generated record quarter sales and higher year-over-year profitability as a result of pricing increases and increased untreated crosstie volumes, partially offset by higher costs.
The Performance Chemicals (PC) segment delivered a first-quarter record in sales and higher year-over-year profitability driven by pricing increases from new customer contracts to offset higher costs experienced in the prior year.
The Carbon Materials and Chemicals (CMC) segment continued to generate strong sales on higher prices driven by strong end markets and constrained raw material supply, although, as predicted, first-quarter profitability declined as a result of higher raw material costs.
President and CEO Leroy Ball said, “I’m pleased to report another strong quarter of performance as all three business segments delivered better than expected results despite a challenging environment. Higher pricing in our PC segment helped to recapture the significant cost increases we absorbed last year, and sales volumes in North America were better than forecast. In combination, that easily propelled our PC business to its best-ever non-pandemic fueled first quarter profitability. Our RUPS segment produced solid year-over-year improvement in profitability, driven by pricing and strong demand from the U.S. utility market. The rail business continued to be weighed down by restocking costs associated with historically low inventory levels, but that’s expected to improve in each successive quarter throughout this year. Finally, our CMC segment saw lower margins, as expected, driven by a tight raw material market that continued to put pressure on costs while passing on higher pricing has become more challenging in the historically high-priced market for our products. On balance, I could not be happier about the efforts and results generated by our Koppers team members across the world.”
First Quarter Financial Performance
- RUPS delivered record first-quarter sales of $213.1 million, an increase of $29.7 million, or 16.2 percent, compared to $183.4 million in the prior year quarter. Excluding an unfavorable impact from foreign currency changes of $0.8 million, sales increased by $30.5 million, or 16.6 percent, from the prior year quarter. The sales growth was primarily driven by pricing increases across multiple markets, particularly crossties and utility poles in the United States. Also, untreated crosstie volumes increased year-over-year attributed to the Gross & Janes acquisition. Adjusted EBITDA for the first quarter was $15.8 million, or 7.4 percent, compared with $11.6 million, or 6.3 percent, in the prior year quarter. Profitability increased year-over-year as net sales price increases of $21.2 million exceeded higher raw material costs and operating expenses.
- PC generated record first-quarter sales of $146.9 million, an increase of $10.5 million, or 7.7 percent, compared to sales of $136.4 million in the prior year quarter. Excluding an unfavorable foreign currency impact of $2.5 million, sales increased by $13.0 million, or 9.5 percent, from the prior year quarter. The year-over-year sales growth was the result of $24.7 million in global price increases, particularly for copper-based preservatives in the Americas. This was partly offset by volume decreases of wood treatment preservatives across most markets, primarily Europe and Australasia, whereas North America was lower year-over-year by 4 percent. Adjusted EBITDA for the first quarter was $26.3 million, or 17.9 percent, compared with $20.9 million, or 15.3 percent, in the prior year quarter. Compared to the prior year, profitability benefited from higher pricing which recaptured prior year cost increases.
- Sales for CMC of $153.4 million increased by $13.9 million, or 10.0 percent, compared to sales of $139.5 million in the prior year quarter. Excluding an unfavorable impact from foreign currency changes of $4.6 million, sales increased by $18.5 million, or 13.3 percent, from the prior year quarter. Compared with the prior year period, the sales increase was driven by $37.1 million of higher sales prices, primarily for carbon pitch driven by strong underlying demand in a constrained raw material environment, partly offset by volume decreases of phthalic anhydride, carbon pitch and carbon black feedstock. Adjusted EBITDA for the first quarter was $19.4 million, or 12.6 percent, compared with $20.1 million, or 14.4 percent, in the prior year quarter. The year-over-year decrease in profitability reflected raw material cost increases outpacing sales price increases, particularly in North America and Europe.
- Capital expenditures for the three months ended March 31, 2023, were $30.4 million, compared with $26.2 million for the prior year period. Net of insurance proceeds and cash provided from asset sales, capital expenditures were $28.5 million for the current year period, compared with $22.0 million for the prior year period.
Koppers remains committed to expanding and optimizing its business and making continued progress on the company’s strategic pillars 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 continues to expect 2023 sales of approximately $2.1 billion, compared with $1.98 billion in the prior year, and 2023 adjusted EBITDA of approximately $250 million, compared with $228.1 million in the prior year.
The effective tax rate for adjusted net income attributable to Koppers in 2023 is projected to be approximately 30 percent, which is consistent with the adjusted tax rate in 2022. Accordingly, 2023 adjusted EPS is forecasted to be approximately $4.40, compared with adjusted EPS of $4.14 in 2022.
Koppers anticipates capital expenditures of approximately $110 million to $120 million in 2023, including capitalized interest, with $40 million to $50 million of the total allocated to discretionary projects that are expected to generate returns on investment of over 20 percent. Net of cash received from asset sales and property insurance recoveries, the net investment in capital expenditures is expected to be $105 million to $115 million.
Commenting on the forecast, Mr. Ball said, “Based upon our first quarter results, which were better than we had projected, we remain confident in reaffirming our full-year 2023 sales, adjusted EBITDA and adjusted EPS guidance. If current demand and pricing power hold up for the remainder of the year, we will likely have some upside above our forecast. However, given recessionary concerns and the potential impact on our markets, I am favoring a cautious outlook for the balance of the year. Longer-term, for the factors within our control, our team at Koppers continues to do amazing work in executing our strategy to expand our business into new products and markets while optimizing our operating footprint. As an organization, we remain focused on achieving our 2025 goal of $300 million of adjusted EBITDA and believe that our 2023 plan will continue to propel us forward on our path to success.”
Koppers does not provide reconciliations of guidance for adjusted EBITDA and adjusted EPS 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, but are not limited to, restructuring and impairment charges, acquisition-related costs, mark-to-market commodity hedging, and LIFO adjustments that are difficult to forecast for a GAAP estimate and may be significant.
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.”
Ms. Jessica Franklin Black – Media Contact – BlackJF@koppers.com – (412) 227-2025
Source: Koppers Holdings, Inc.