Koppers Reports Second Quarter 2024 Results; Reaffirms 2024 Outlook

Second Quarter Sales of $563.2 Million vs. $577.2 Million in Prior Year Quarter

Second Quarter Diluted EPS of $1.25 vs. $1.15 in Prior Year Quarter

Adjusted EPS of $1.36 vs. $1.26 in Prior Year Quarter

Koppers Holdings Inc., an integrated global provider of treated wood products, wood treatment chemicals, and carbon compounds, reported net income attributable to Koppers for the second quarter of 2024 of $26.8 million, or $1.25 per diluted share, compared to $24.5 million, or $1.15 per diluted share, in the prior year quarter.  The financial results in the current year quarter reflect the acquisition of Brown Wood Preserving Company (Brown Wood), which closed on April 1, 2024.

Adjusted net income attributable to Koppers and adjusted earnings per share (EPS) were $29.2 million and $1.36 per share for the second quarter of 2024, compared to $26.9 million and $1.26 per share in the prior year quarter.

Consolidated sales of $563.2 million decreased by $14.0 million, or 2.4 percent, compared with $577.2 million in the prior year quarter.  Excluding a $0.7 million unfavorable impact from foreign currency changes, sales decreased by $13.3 million, or 2.3 percent.

The Railroad and Utility Products and Services (RUPS) business generated record-quarter sales, but profitability remained flat, as higher costs and a decline in the crosstie recovery business offset top-line increases and improved plant utilization.

The Performance Chemicals (PC) segment saw a slight decline in sales, as sales to Brown Wood are now considered affiliate sales, along with pricing decreases, while profitability benefited from lower costs, some of which related to the timing of copper hedging.

The Carbon Materials and Chemicals (CMC) segment experienced ongoing softness in demand, with sales and profitability significantly impacted by lower prices and reduced volumes for carbon pitch globally.

Chief Executive Officer Leroy Ball said, “All three business segments showed significant sequential improvement in the second quarter, pushing consolidated results to new heights.  Performance Chemicals delivered the most improvement, as demand for our residential wood-treatment preservatives continued to be resilient despite unfavorable industry trends. In addition, cost reduction measures across the board helped to offset current market conditions and keep us on track for a strong 2024.”

Second Quarter Financial Performance

• RUPS delivered record sales for the quarter of $253.9 million, an increase of $19.5 million, or 8.3 percent, compared to $234.4 million in the prior year quarter. Excluding an unfavorable impact from foreign currency changes of $0.3 million, sales increased by $19.8 million, or 8.4 percent, from the prior year quarter. The sales growth was largely due to $12.7 million of pricing increases across multiple markets, particularly for crossties, and $9.4 million of volume increases for crossties and utility poles, partly offset by lower activity in the crosstie recovery business. Adjusted EBITDA for the second quarter of 2024 was $22.4 million, or 8.8 percent, compared with $22.3 million, or 9.5 percent, in the prior year quarter. Profitability was flat year over year as sales price increases, $3.9 million from improved plant utilization, and higher volumes for crossties and utility poles were offset by $13.8 million of higher raw material, operating and selling, general and administrative expenses, and lower activity in the crosstie recovery business.
• PC generated second quarter sales of $176.9 million, a decrease of $4.0 million, or 2.2 percent, compared to sales of $180.9 million in the prior year quarter. The reduction in sales was primarily driven by $3.5 million of lower volumes in the Americas, primarily as a result of sales to Brown Wood now being affiliated sales, and pricing decreases globally, partly offset by higher volumes in Australasia. Adjusted EBITDA for the second quarter of 2024 was $44.3 million, or 25.0 percent, compared with $32.3 million, or 17.9 percent, in the prior year quarter. Profitability increased as a result of lower raw material costs more than offsetting lower sales prices and volumes. The reduced costs were favorably impacted by timing, including net gains realized from the company’s copper hedging program, net of higher copper costs recognized to date in cost of goods sold.
• CMC reported second quarter sales of $132.4 million, a decrease by $29.5 million, or 18.2 percent, compared to sales of $161.9 million in the prior year quarter. Excluding an unfavorable impact from foreign currency changes of $0.3 million, sales decreased by $29.2 million, or 18.0 percent, from the prior year quarter. The sales decline was driven by reduced demand, especially in Europe where sales were down $22.0 million on equal parts pricing and volumes, primarily in carbon pitch markets. Globally, prices were down by $25.3 million. The decreases were partly offset by volume increases for phthalic anhydride and carbon black feedstock. Adjusted EBITDA for the second quarter of 2024 was $10.8 million, or 8.2 percent, compared with $15.7 million, or 9.7 percent, in the prior year quarter. Profitability was lower due to price decreases globally and volume decreases in Europe, partly offset by a $16.3 million reduction in raw material costs, particularly in Europe, and higher volumes of phthalic anhydride.
• Capital expenditures for the six months ended June 30, 2024, were $43.4 million, compared with $62.6 million for the prior year period. Net of insurance proceeds and cash provided from asset sales, capital expenditures were $41.8 million for the current year period, compared with $60.6 million for the prior year period.

2024 Outlook

Koppers continues to expand and optimize its business and make further 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 expects 2024 sales of approximately $2.15 billion, consistent with sales of $2.15 billion in 2023.  As a result, adjusted EBITDA is anticipated to be approximately $265 million to $280 million in 2024, including the acquisition of Brown Wood which closed on April 1, 2024, compared with $256.4 million in 2023.

The effective tax rate for adjusted net income attributable to Koppers in 2024 is projected to be approximately 28 percent, slightly above the adjusted tax rate in 2023.  Accordingly, 2024 adjusted EPS is forecasted to be in the range of $4.10 to $4.60 per share, compared with $4.36 per share in 2023.

Koppers continues to expect operating cash flows of approximately $150 million in 2024, excluding any impact from pension termination.  The company is pursuing a termination of its U.S. qualified pension plan and is targeting this effort for completion in the first quarter 2025.  An estimated $25 million of funding will be required when this is completed, which will impact operating cash flow in 2025.

Koppers continues to anticipate capital expenditures of approximately $80 million to $85 million in 2024, including capitalized interest, with approximately $22 million to $27 million allocated to discretionary projects.

Commenting on the forecast, Mr. Ball said, “With second quarter results on par with our expectations, I feel confident in reaffirming our full-year guidance as previously communicated.  Although 2024 has been challenging across most of our business lines, our global team has done a great job of managing the controllables, providing a clear line of sight to another year of top performance.  Delivering as we have amid some tough near-term dynamics gives me confidence that as markets improve, we will be poised to further capitalize on future growth opportunities.”

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.

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About Koppers

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.”

Contact:

Ms. Jessica Franklin Black – Media Contact – BlackJF@koppers.com – (412) 227-2025

Source: Koppers Holdings, Inc.