Koppers (NYSE:KOP) 2025 Conference December 02, 2025 10:50 AM ET Company ParticipantsJimmi Sue Smith - CFOConference Call ParticipantsNone - AnalystNoneWe have with us this morning Jimmi Sue Smith, CFO, and Quynh McGuire, Vice President of Investor Relations. As a reminder, we are webcasting this event. Excuse me. Koppers reports in three segments: Performance Chemicals, or what they call PC, which Koppers sells, wood treatment production chemicals, e.g., wood preservatives, mainly for residential applicati ...

Core Viewpoint - Koppers Holdings Inc. reported a loss of $13.9 million or 68 cents per share for Q1 2025, contrasting with a profit of $13 million or 59 cents per share in the same quarter last year. Adjusted earnings were 71 cents per share, up from 62 cents year-over-year and exceeding the Zacks Consensus Estimate of 56 cents [1][2]. Financial Performance - Revenues for Koppers in Q1 2025 were $456.5 million, down approximately 8% year-over-year, missing the Zacks Consensus Estimate of $488 million [2]. - The company ended the quarter with cash and cash equivalents of $33.3 million, a decrease of around 24% from the previous quarter. Long-term debt increased to $975.9 million, up about 5% sequentially [5]. Segment Highlights - The Railroad and Utility Products and Services (RUPS) segment saw sales rise about 4% year-over-year to $235 million, surpassing the consensus estimate of $230 million, driven by increased volumes and price rises [3]. - The Performance Chemicals (PC) segment recorded sales of $120.9 million, down around 20% year-over-year, falling short of the consensus estimate of $139 million due to reduced volumes [4]. - Sales from the Carbon Materials and Chemicals (CMC) division fell approximately 18% year-over-year to $100.6 million, missing the consensus estimate of $119 million, attributed to lower volumes and reduced prices [4]. Outlook - Koppers anticipates sales for 2025 to be in the range of $2 billion to $2.2 billion, slightly lower than the previous expectation of $2.17 billion, considering the competitive landscape and global economic conditions. The company expects adjusted EBITDA to be around $280 million and adjusted earnings per share to be $4.75 for 2025 [6]. - Capital expenditures are projected at $65 million for the year, with operating cash flows expected to be $150 million in 2025 [7]. Stock Performance - Koppers' shares have declined by 31.7% over the past year, compared to a 25.4% decline in the Zacks Chemicals Diversified industry [8].

Financial Data and Key Metrics Changes - Consolidated sales for Q1 2025 were $456.5 million, down from $497.6 million in the prior year, representing a decrease of 8% [8][15] - Adjusted EBITDA for Q1 was $55.5 million, compared to $51.5 million in the prior year, with an adjusted EBITDA margin of 12.2%, up from 10.3% [9][16] - First quarter diluted loss per share was $0.68, compared to diluted earnings per share of $0.59 in the prior year, primarily due to restructuring charges [9] - Adjusted earnings per share for the quarter were $0.71, up from $0.62 in the prior year [10] - Cash flow used in operations was $22.7 million, including a $14 million payment related to the termination of the U.S. pension plan [10] Business Line Data and Key Metrics Changes - The RUPS business generated sales of $235 million, an increase of 4% year-over-year, driven by higher volumes and price increases [17] - Performance Chemicals (PC) sales decreased by 19.5% to $121 million, with a 21.5% volume decrease in wood treatment preservatives [15][19] - CMMC sales were $101 million, down from $122 million, impacted by lower volumes and prices [20] Market Data and Key Metrics Changes - Year-over-year first quarter crosstie procurement was down 19%, with treatment lower by 3% [18] - The average pricing of major products increased by 5% compared to the prior quarter, while average coal tar costs were higher by 6% [20] Company Strategy and Development Direction - The company is focusing on improving business performance and margins through cost structure adjustments and resizing the employee base [7][8] - The acquisition of Brownwood Preserving Company is expected to enhance product offerings and geographic reach [12][13] - The company aims to maintain a balanced approach to capital allocation, targeting $65 million in net capital expenditures for 2025 [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about economic uncertainty affecting discretionary spending on home projects, impacting the Performance Chemicals business [26] - The company anticipates a volume pickup in the second half of the year, driven by feedback from the market and increased activity in new geographic markets [28][52] - Despite challenges, management remains optimistic about long-term growth and profitability improvements across business segments [36] Other Important Information - The company reported a quarterly cash dividend of $0.08 per share, with an expected annual dividend of $0.32 per share for 2025, a 14% increase over 2024 [23] - The company has approximately $85 million remaining in its $100 million share repurchase program [22] Q&A Session Summary Question: How does the utility pole product mix help margins going forward? - The utility pole segment historically generates better margin performance, and growth in this area is expected to positively impact overall margins [42][43] Question: Is there still work to do on contracts with Class 1s? - There is still work to improve contracts, but the situation has improved compared to previous periods [45] Question: What drives the expected growth in the second half of the year? - Growth expectations are based on market feedback and increased activity in newer markets [51][52] Question: How will the company manage costs if sales trend towards the lower end of guidance? - The company has several cost measures in place to manage expenses and maintain EBITDA targets [63] Question: What are the priority uses of cash flow? - The focus is on share repurchases and deleveraging the balance sheet [72] Question: Are there attractive M&A opportunities due to economic uncertainty? - The company remains active in discussions for potential acquisitions, particularly in the utility and industrial products business [75][76] Question: Why not accelerate stock buybacks given the low share price? - There are limitations within credit agreements on annual buyback amounts, but the company is monitoring the situation for opportunities [82][84]