Koppers Holdings, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Workforce reduction: A 5% reduction of global employee base in Q4 2024, resulting in over $10M savings in 2025.
• Safety: 23 out of 47 facilities operated accident-free in 2024, Europe CMC and PC businesses had zero recordable incidents, and a new all-time low recordable injury rate.
• Employee engagement: 2024 employee engagement survey results were slightly better than 2023, achieving highest scores to date.
• Strategic plan: Virtual investor day on September 18, 2025, to unveil 2030 strategic plan.
• Dividend: Board increased quarterly dividend to $0.08 per share, with annual dividend expected to be $0.32 per share in 2025 (14% increase from 2024).
• Capital structure: Successfully repriced senior secured term loan B, reducing credit spread by 50 basis points.

Segment Performance

• RUPS (Railroad Utility Products and Services): Fourth quarter sales were $216 million, consistent with the prior year. Full-year 2024 sales reached a record, increasing by $45 million or 5%. Adjusted EBITDA for Q4 was $18 million, and full-year adjusted EBITDA was $82 million with a margin of approximately 9%.
• PC (Performance Chemicals): Fourth quarter sales were $148 million, down $16.5 million or 10% from the prior year. Full-year 2024 sales decreased by $20 million or 3%. Adjusted EBITDA for Q4 was $29 million (flat y/y), and full-year adjusted EBITDA was $143 million with a 22% margin.
• CMC (Carbon and煤化工): Fourth quarter sales were $114 million, down $19 million or 14% from the prior year. Full-year 2024 sales decreased by $87 million or 15%. Adjusted EBITDA for Q4 was $9 million, and full-year adjusted EBITDA was $37 million with a margin of over 7%.

Guidance

• 2025 consolidated sales expected to reach $2.17 billion, a 4% increase from 2024's $2.09 billion.
• Adjusted EBITDA for 2025 expected to be $262 million, a 7% improvement from 2024's $261.6 million.
• Adjusted EPS for 2025 forecasted at $4.75, a 16% improvement from 2024's $4.11.
• CapEx in 2025 targeted at $65 million, down from $74 million in 2024.

Risks

• Market share loss: Performance Chemicals business experienced market share loss in residential chemical business due to aggressive industry competitors.
• Copper hedging issue: Widening spread in copper market causing additional expense, with potential unmitigated impact up to $10M in 2025.
• Plant closures: Closure of Stickney, Illinois plant expected to have negative annual impact on EBITDA up to $3M, but save $40-60M in capital investments over 5-10 years; closure of L'Anse, Michigan collection and grinding yard also mentioned.
• Tariffs: Potential tariff impacts on Performance Chemicals business, though mitigation plans in place.

Question and Answer

• Q: Liam Burke with B. Riley FBR asked about competitor strategy in PC regarding market share loss.

A: Leroy Ball responded that it's planned share loss for 2025, with competitors diversifying supply chains and being aggressive, leading to market share loss due to past success.

• Q: Gary Prestopino with Barrington Research asked about UIP expansion plans.

A: Leroy Ball said investments have been made to go after underpenetrated markets in Texas and Midwest, with further expansion to West expected in 2026-2027.

• Q: Michael Mathison with Sidoti and Company asked about free cash flow allocation.

A: Leroy Ball stated they'll allocate free cash flow to share repurchases opportunistically and debt paydown, aiming for below 3 times leverage by end of 2025.