Koppers Reports Fourth Quarter and Full-Year 2023 Results; Provides 2024 Outlook

Record Fourth-Quarter Sales of $513.2 Million vs. $482.6 Million in Prior Year Quarter

Record Year Sales of $2.15 Billion vs. $1.98 Billion in Prior Year

Record Operating Profit of $195.2 Million, 25 percent higher than previous record

Koppers Holdings, Inc. (“Koppers”), an integrated global provider of treated wood products, wood treatment chemicals, and carbon compounds, reported net income attributable to Koppers for the fourth quarter of 2023 of $12.9 million, or $0.59 per diluted share, compared to $13.8 million, or $0.65 per diluted share, in the prior year quarter.

Adjusted net income attributable to Koppers and adjusted earnings per share (“EPS”) were $14.5 million and $0.67 per share for the fourth quarter of 2023, compared to $23.0 million and $1.09 per share in the prior year quarter. Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the fourth quarter of 2023 were $53.9 million, compared with $52.1 million in the prior year quarter.

Consolidated sales of $513.2 million increased by $30.6 million, or 6.3 percent, compared with $482.6 million in the prior year quarter.

The Railroad and Utility Products and Services (“RUPS”) business delivered record fourth-quarter sales and adjusted EBITDA as a result of pricing increases and higher volumes for crossties, which improved throughput, partially offset by increased raw material and operating costs. In addition, fourth-quarter records in operating profit and adjusted EBITDA from the domestic utility pole business contributed to the favorable performance.

The Performance Chemicals (“PC”) segment benefited from global pricing initiatives, as well as higher volumes.  Profitability returned to historical norms as renegotiated customer contracts allowed for price increases to address higher raw material and other operating costs experienced in the prior year.

The Carbon Materials and Chemicals (“CMC”) segment sales and profitability declined from the prior year, primarily due to lower market prices and weaker demand for most products, partly offset by higher carbon pitch volumes.

Chief Executive Officer Leroy Ball said, “We finished the year on a strong note near the top end of our adjusted EBITDA range of guidance.  Once again, for the things we control, our global team did an amazing job of executing by continuing to provide our customer base with the highest-quality products and services in a challenging environment.  Our diversified portfolio drove the strong performance, as our PC and RUPS business segments picked up a struggling CMC segment that continues to work through the trough of its business cycle.  As always, I credit our global team for remaining focused on performing safely and at a high level, as our success begins with them.”

Fourth Quarter Financial Performance

• RUPS reported record fourth-quarter sales of $216.4 million, an increase of $23.4 million, or 12.1 percent, compared to $193.0 million in the prior year quarter. The sales increase was largely due to $16.0 million of pricing increases across multiple markets, particularly for crossties and utility poles in the United States. In addition, increased volumes for Class I crossties contributed to the sales growth. The increases were partly offset by decreased volumes in utility poles. Adjusted EBITDA, a fourth-quarter record, was $20.7 million, or 9.6 percent, compared with $13.3 million, or 6.9 percent, in the prior year quarter. Profitability increased due primarily to net sales price increases and improved plant utilization, which more than offset higher raw material and operating costs and increased selling, general, and administrative expenses. The domestic utility pole business achieved fourth-quarter records in operating profit and adjusted EBITDA, which contributed to the strong results.
• PC delivered sales of $164.4 million, an increase of $23.6 million, or 16.8 percent, compared to sales of $140.8 million in the prior year quarter. Excluding a favorable foreign currency impact of $0.4 million, sales increased by $23.2 million, or 16.4 percent, from the prior year quarter. The year-over-year sales growth resulted from global price increases of $15.1 million, or 10.7 percent, particularly in the Americas, for copper-based preservatives. Volumes increased by 6.0 percent globally, including in the Americas, primarily for copper-based preservatives. As a result of these price and volume increases, adjusted EBITDA was $29.4 million, or 17.9 percent, compared with $17.6 million, or 12.5 percent, in the prior year quarter. These increases were slightly offset by higher raw material costs and increased selling, general, and administrative expenses.
• Sales for CMC of $132.4 million decreased by $16.4 million, or 11.0 percent, compared to sales of $148.8 million in the prior year quarter. Excluding a favorable foreign currency impact of $2.4 million, sales decreased by $18.9 million, or 12.7 percent, from the prior year quarter. The sales decline was driven by reduced market pricing, with $25.5 million of lower sales prices across most products, including carbon pitch, where prices were down 24.3 percent globally, partly offset by higher carbon pitch volumes. Adjusted EBITDA for the fourth quarter was $3.8 million, or 2.9 percent, compared with $21.2 million, or 14.2 percent, in the prior year quarter. The year-over-year profitability decrease was due to lower prices and a $2.8 million bad debt reserve, partly offset by reduced raw material costs and increased volumes, particularly in Europe.

2023 Financial Performance

• Consolidated sales of $2.15 billion, a record year, increased $174 million, or 8.8 percent, compared to $1.98 billion in the prior year.
• RUPS delivered a record $897.9 million in sales for the year, an increase of $109.6 million, or 13.9 percent, compared to sales of $788.3 million in the prior year. Adjusted EBITDA was $84.0 million, or 9.4 percent, compared with $53.6 million, or 6.8 percent, in the prior year.
• PC reported $671.6 million in sales for the year, an increase of $91.7 million, or 15.8 percent, compared to sales of $579.9 million in the prior year. Adjusted EBITDA was $123.1 million, or 18.3 percent, compared with $75.5 million, or 13.0 percent, in the prior year.
• Sales for CMC, totaling $584.7 million, decreased by $27.6 million, or 4.5 percent, compared to sales of $612.3 million in the prior year. Adjusted EBITDA was $49.3 million, or 8.4 percent, compared with $99.0 million, or 16.2 percent, in the prior year.
• Net income attributable to Koppers was $89.2 million, compared with $63.4 million in the prior year. Adjusted net income attributable to Koppers was $94.0 million, compared with $88.3 million in the prior year. Adjusted EBITDA was $256.4 million, compared with $228.1 million, in the prior year.
• Diluted EPS was $4.14, compared with $2.98 per share in the prior year. Adjusted EPS was $4.36, compared with $4.14 for the prior year.
• Operating cash flows were $146.1 million, a record year, compared with $102.3 million in the prior year.
• Capital expenditures for the year ended December 31, 2023, were $120.5 million, compared with $105.3 million for the prior year period. Net of insurance proceeds and cash provided from asset sales, capital expenditures were $116.0 million for the current year period, compared with $100.1 million for the prior year period.

2023 Accomplishments

In 2023, Koppers continued implementing its value creation strategy and further positioned the company for long-term growth and profitability, as highlighted by the following:

• Record sales for the 5th straight year.
• Record operating profit.
• Record operating cash flow and the 5th consecutive year of more than $100 million.
• 2nd highest diluted EPS from continuing operations.
• 2nd best-ever safety rate.
• 3rd year named to Newsweek’s list of Most Responsible Companies.
• Named to USA Today’s inaugural list of America’s Climate Leaders.

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 $2.25 billion, compared with $2.15 billion in 2023.  Adjusted EBITDA is anticipated to be approximately $275 million in 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 $4.60 to $4.80 per share, compared with $4.36 per share in 2023.

Koppers expects 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 fourth quarter 2024.  An estimated $25 million of funding will be required when this is completed, which will impact operating cash flow.

Koppers anticipates capital expenditures of approximately $100 million in 2024, including capitalized interest, with approximately $29 million allocated to discretionary projects.

Commenting on the forecast, Mr. Ball said, “I feel good about meeting our 2024 targets, as long as demand in our segments meets our projections of flat to slightly up from 2023 in existing markets.  Factors driving the 7 percent increase in adjusted EBITDA include some carry-over pricing benefits from prior year; contributions from our Leesville, Louisiana, facility coming online to feed the Texas pole market; and the benefits of a full year of cost efficiencies from our North Little Rock, Arkansas, treating facility.  We anticipate softer results in early 2024 versus strong comps from the first quarter of 2023 as we emerge from the bottom of the carbon markets cycle and recover from the intense winter storm activity in the U.S. which affected much of Koppers and our customers’ operating network.  I expect that as the year progresses, we will make up any ground lost in the first quarter and deliver another year of record performance.”

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 fourth quarter results, 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.”

Contact:

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

Source: Koppers Holdings, Inc.