Koppers Holdings Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Lowered year-to-date SG&A by 13% and reduced FTEs by 11% since April '24.
• Generated over $50 million in cash flow for the quarter, achieved adjusted EBITDA margins north of 15% for the first time in 8 years.
• Capital spend annual run rate reduced below $60 million.
• Signed definitive agreement to sell Railroad Structures business, ceased phthalic anhydride production a month earlier than planned.
• Deployed $24 million to dividends, share repurchases, and debt reduction.
• Launched Catalyst transformation process to drive mid- to high-teen EBITDA margins by 2027.
• 26 out of 41 facilities worldwide operated accident-free in Q2; Susquehanna facility won 2025 Zero Harm CEO award.
• Issued 2024 Corporate Sustainability Report and named TIME Magazine America's Best Midsized Companies 2025.
• Postponed Investor Day due to global economic uncertainty and Catalyst progress.

Segment Performance

• RUPS: Second quarter sales were $250 million (down from $254 million prior year). Adjusted EBITDA was $32 million (up from $22 million prior year) with a 12.6% margin. Revenue contribution % not explicitly stated but is part of overall $505M consolidated sales.
• PC: Second quarter sales were $151 million (down from $177 million prior year). Adjusted EBITDA was $29 million (down from $44 million prior year) with a 19% margin.
• CM&C: Second quarter sales were $104 million (down from $132 million prior year). Adjusted EBITDA was $17 million (up from $11 million prior year) with a 16.2% margin.

Guidance

• Reduced consolidated sales guidance for 2025 to $1.9 billion to $2 billion (down from $2.1 billion).
• Revised adjusted EBITDA forecast to $250 million to $270 million (down from $262 million).
• Lowered capital spending target for 2025 to $52 million to $58 million (down from $74 million).
• Expected adjusted EPS for 2025: $4 to $4.60 per share, a 5% increase at midpoint.

Risks

• Sluggish demand across all segments, including PC volumes down, Class I demand tailing off, CM&C markets at trough, and UIP improvement slower than signaled.
• Uncertainty in the global economy impacting markets served.
• Potential impact of tariff changes on the PC business.

Question and Answer

• Q: On RUPS, how have the contracts with Class I customers been going? A: Long-term contracts with varying expiration dates. Focus on cost reduction and volume, but revised volume improvement forecast to 4% for the year instead of 8% initially.
• Q: On PC, what follow-through is expected from the industrial side? A: Industrial side shows some life, but meaningful movement in PC results requires pickup in the residential side, which is currently stagnant.
• Q: Is Catalyst a new restructuring beyond the strategic plan? A: Catalyst is a change management process to unlock opportunities for sustainable improvement, focusing on technology upskilling and process improvement rather than brute-force cost cutting.
• Q: What's the adjusted EBITDA margin target? A: Mid- to high teens, achievable through volume recovery across diverse businesses and ongoing cost savings.
• Q: Impact of proposed rail company merger? A: Uncertain, but hope to continue serving merged companies in a similar capacity as currently.
• Q: Margin improvement to high teens? A: Driven by volume recovery across businesses like RUPS, PC, CM&C, and UIP, with cost savings contributing to sustainable margin growth.