Koppers Reports Second 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 second quarter of 2022 of $11.7 million, or $0.55 per diluted share, compared to $26.9 million, or $1.22 per diluted share, in the prior year quarter.

Adjusted net income attributable to Koppers and adjusted earnings per share (EPS) were $20.5 million and $0.97 per share for the second quarter of 2022, compared to $30.9 million and $1.41 per share in the prior year quarter, respectively.

Consolidated sales of $502.5 million, a record quarter, increased by $61.5 million, or 14.0 percent, compared with $441.0 million in the prior year quarter.  Excluding a $14.5 million unfavorable impact from foreign currency changes, sales increased by $76.0 million, or 17.2 percent, from the prior year.

The Railroad and Utility Products and Services (RUPS) business reported improved sales and profitability compared with the prior year period, primarily driven by pricing increases as well as favorable cost absorption from increased tie procurement levels.

The Performance Chemicals (PC) segment delivered record-quarter sales; however, profitability was unfavorably impacted by increased year-over-year raw material costs, partly offset by global price increases.

The Carbon Materials and Chemicals (CMC) segment again generated significantly higher sales than the prior year quarter, reflecting a favorable pricing environment.  Profitability was higher in the second quarter than the prior year; however, the margin was lower year-over-year due to an insurance recovery recorded in the prior year quarter.

President and CEO Leroy Ball said, “The underlying fundamentals of our business remained strong in the second quarter with a stronger U.S. dollar and persistent inflationary cost increases having the biggest impact on results.  We achieved record second quarter sales due to $95 million of higher price impacts across all of our business segments.  While we are not yet whole in terms of covering all of our increased costs, we continue to make progress and see the situation improving in the back half of this year.”

Second Quarter Financial Performance

• Sales for RUPS of $204.2 million increased by $8.7 million, or 4.5 percent, compared to sales of $195.5 million in the prior year quarter.  Excluding an unfavorable impact from foreign currency changes of $1.1 million, sales increased by $9.8 million, or 5.0 percent, from the prior year quarter.  Sales increased from prior year, primarily related to pricing increases across multiple markets, particularly crossties and utility poles, and volume increases in the railroad bridge services business, partly offset by volume decreases in the utility pole business.  Adjusted EBITDA for the second quarter was $13.2 million, or 6.5 percent, compared with $12.0 million, or 6.1 percent, in the prior year quarter.  Profitability was positively impacted by these price and volume increases and favorable absorption as procurement  of untreated crossties improved over the prior year period, partly offset by higher raw material, freight and fuel costs.
• Sales for PC of $149.6 million, a record quarter, increased by $4.0 million, or 2.7 percent, compared to sales of $145.6 million in the prior year quarter.  Excluding an unfavorable impact from foreign currency changes of $2.7 million, sales increased by $6.7 million, or 4.6 percent, from the prior year quarter.  The increase in sales was primarily due to global price increases for copper-based preservatives, partly offset by volume decreases for preservatives in Europe.  Volumes in the Americas were down only slightly from prior year record levels.  Adjusted EBITDA for the second quarter was $20.4 million, or 13.6 percent, compared with $34.5 million, or 23.7 percent, in the prior year quarter.  Profitability was lower than prior year primarily driven by higher raw material costs, which were exacerbated by working through higher cost inventory in the current falling copper price environment, and decreased volumes, partly offset by global price increases for copper-based preservatives.
• Sales for CMC of $148.7 million increased by $48.8 million, or 48.8 percent, compared to sales of $99.9 million in the prior year quarter. Excluding an unfavorable impact from foreign currency changes of $10.7 million, sales increased by $59.5 million, or 59.5 percent, from the prior year quarter.  Sales benefited from higher pricing across all product lines.  Adjusted EBITDA for the second quarter was $21.0 million, or 14.1 percent, compared with $18.6 million, or 18.6 percent, in the prior year quarter.  The increase in profitability reflects a favorable pricing environment; however, the margin was lower year over year due to insurance proceeds received in the prior year.
• Net income attributable to Koppers was $11.7 million, compared to $26.9 million in the prior year quarter.  Adjusted net income attributable to Koppers was $20.5 million for the second quarter, compared to $30.9 million in the prior year quarter.  Adjusted EBITDA was $54.6 million, or 10.9 percent, in the second quarter, compared with $65.6 million, or 14.9 percent, in the prior year quarter.
• Diluted EPS was $0.55, compared to $1.22 per diluted share in the prior year quarter.  Adjusted EPS for the quarter was $0.97, compared with $1.41 for the prior year period.
• Capital expenditures for the six months ended June 30, 2022, were $55.8 million, compared with $60.9 million for the prior year period.  Net of insurance proceeds and cash received from asset sales, capital expenditures were $51.1 million for the current year, compared with $55.8 million for the prior year period.

2022 Outlook

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 in 2022 is projected to be approximately 33 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 $0.40 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, “We expect an extremely strong second half of 2022 that should carry into next year.  Crosstie procurement in our Railroad Products and Services business is now tracking on a pace well above last year and demand and pricing in our Utility and Industrial Products business have never been stronger.  Add in a favorable near-term backdrop for pricing and demand in our Carbon Materials and Chemicals segment and a solid backlog of projects that underpins Performance Chemicals demand and the back half of the year should represent record financial performance.”

Dividend Declaration

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 September 12, 2022, to shareholders of record as of the close of trading on August 26, 2022.

Share Repurchase Program

During the second quarter, Koppers repurchased 287,962 shares of common stock for an aggregate of $7.3 million, or an average price per share of $25.34.

At June 30, 2022, $76.9 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.

Credit Agreement

During the quarter, Koppers entered into a Credit Agreement for an $800 million revolving credit facility, a $50 million swingline facility and one or more incremental revolving or term loan facilities.  The new agreement replaces a prior agreement for a $600 million senior secured revolving credit facility and a $100 million senior secured term loan facility.  The new agreement provides lower pricing tiers and additional financial flexibility to support the company’s ongoing growth strategy as well as sustainability initiatives.

For the complete press release, click here.

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.” For more information, visit: www.koppers.com.

Contact:

Quynh McGuire – Investments – McGuireQT@Koppers.com – (412) 227-2049

Source: Koppers Holdings, Inc.