• Consolidated Sales: $554.3 million, a record third quarter, compared to $550.4 million in the prior year.
• Adjusted EBITDA: $77.4 million, a new third quarter record, compared to $70.7 million in the prior year.
• Adjusted EBITDA Margin: 14% versus 12.8% in the prior year.
• Diluted Earnings Per Share: $1.09 compared to $1.22 in the prior year quarter.
• Adjusted Earnings Per Share: $1.37 compared to $1.32 in the prior year quarter.
• Operating Cash Flow: $29.8 million for the third quarter, $44.7 million year-to-date through September 2024.
• Railroad and Utility Products and Services (RUPS) Sales: $248 million, a third quarter record, up from $234 million in the prior year.
• Performance Chemicals (PC) Sales: $177 million, down from $179 million in the prior year.
• Carbon Materials and Chemicals (CM&C) Sales: $130 million, down from $137 million in the prior year.
• Net Capital Expenditures: $55 million through September 30, with a total forecast of $80 million for 2024.
• Share Repurchases: $42 million year-to-date, including $10.4 million in the third quarter.
• Net Debt: $936.4 million with $332 million of liquidity.
• Net Leverage Ratio: 3.6 times.
• Quarterly Dividend: $0.07 per share, with an annual dividend of $0.28 per share for 2024.

• Warning! GuruFocus has detected 5 Warning Signs with KOP.

Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Koppers Holdings Inc (NYSE:KOP) achieved record third quarter sales of $554.3 million, surpassing the previous year's $550.4 million.
• The company reported a record third quarter adjusted EBITDA of $77.4 million, with a margin increase from 12.8% to 14%.
• The railroad and utility products and services segment achieved record third quarter sales, driven by price increases and increased activity in the railroad bridge services business.
• Koppers Holdings Inc (NYSE:KOP) has made significant progress in safety, with a 42% decrease in serious safety incidents and 25 out of 47 facilities operating accident-free in 2024.
• The company has successfully reduced its capital expenditures, forecasting $80 million for 2024 compared to $116 million in the prior year, allowing for $42 million in share repurchases.

Negative Points

• The performance chemicals segment experienced a decline in sales due to higher raw material costs and market share losses.
• Operating cash flow decreased significantly to $29.8 million for the third quarter, compared to $81.6 million in the prior year.
• The carbon materials and chemicals segment faced a 5.5% sales decline due to lower sales prices and demand weakness.
• Koppers Holdings Inc (NYSE:KOP) is experiencing competitive pressures and share losses in the performance chemicals business, impacting future growth.
• The company is dealing with higher raw material, operating, and SG&A costs, which have offset some of the gains from increased sales and improved plant utilization.

Q & A Highlights

Q: Leroy, you mentioned some competitive issues and share losses in PC. Could you go into that a little bit more, please? What's going on? A: Sure. We've traditionally had two- to three-year agreements with our major customers in performance chemicals. During the last renewal, we pushed through significant price increases due to inflationary pressures. This has created an opportunity for competitors to make a case for shifting some volume. We expect some erosion in our customer base, but this is a normal competitive action. We've been gaining share for years, and now there's a slight shift back. However, we are also gaining some share from other customers.

Q: On your overall summary, you mentioned contemplating sale or shutdown of various operations. Can we assume that this would be some manufacturing capacity or a significant restructuring within your business segments? A: I wouldn't go as far as significant restructuring. We have some smaller businesses that may not align perfectly with our core. If there's an opportunity to move these businesses at the right price, we might consider it. We've already gone through major restructuring in the past, reducing facilities significantly. We're evaluating options to make the right decision for Koppers and our shareholders.

Q: How does the acquisition pipeline look? After Brown Wood, would you have an appetite for doing something in 2025? A: We continue to maintain relationships and express interest in growing our business. The timing depends on the other party's readiness. While it's hard to predict if anything will materialize in 2025, we remain open to opportunities that align with our strategic goals.

Q: Your SG&A was down sequentially in the current quarter. Can you talk about the sustainability of that in light of your comments around potential reductions? A: We're always looking to improve profitability and respond to market conditions. We've had an aggressive growth plan, and now we're resizing to fit a year of flat sales. We see opportunities to streamline SG&A and operations. The expectation is that this performance will continue moving forward.

Q: Interest expense was up due to acquisition-related debt. With recent interest rate cuts, can you quantify the impact on interest expense? A: You would apply the rate cuts to about $500 million of our debt, as we are hedged for a significant portion. This should help reduce our interest expense moving forward.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.