Koppers Holdings Inc. Q1 2023 Earnings Call
Good morning, ladies and gentlemen, thank you for standing by welcome to Koppers first quarter 'twenty twenty-three earnings conference call and webcast. At this time all participants are in a listen only mode.
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Following the presentation instructions will be given for the question and answer session.
Please note that this event is being recorded I will now turn the call over to Quinn Mcguire. Please go ahead. Thanks.
Thanks, and good morning, I'm, calling Mcguire Vice President of Investor Relations welcome to our first quarter 2023 earnings Conference call. We issued our press release earlier today, you may access it via our web site at Www Dot Koppers dotcom.
As indicated in our announcement, we've also posted materials to the Investor Relations page of our website and will be referenced in today's call.
Distant with our practice in prior quarterly conference calls this is being broadcast live on our website and a recording of this call will be available on our web site for replay through August 2023.
At this time I would like to direct your attention to our forward looking disclosure statement on slide two.
Certain comments made on this conference call may be characterized as forward looking statements as defined under the private Securities Litigation Reform Act of 1995.
These forward looking statements involve a number of assumptions risks and uncertainties, including risks described in the cautionary statement included in our press release and in the company's filings with the Securities Exchange Commission.
In light of significant uncertainties inherent in the forward looking statements included in the company's comments you should not regard the inclusion of such information as a representation that its objectives plans and projected results will be achieved.
The company's actual results performance or achievements may differ materially from those expressed in or implied by such forward looking statements.
The company assumes no obligation to update any forward looking statements made during this call.
References may also be made today to certain non-GAAP financial measures. The company has provided with its press release, which is available on our website reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures joined.
Joining me for our call today are Leroy ball, President and CEO of Koppers, and Jimmi Sue Smith, Chief Financial Officer.
I'll now turn the discussion over to Leroy.
Thank you Gwen and good morning, everyone and thanks for taking time to join us today.
You may have seen in our announcement earlier and as shown on slide three copies will be hosting an investor day scheduled for Thursday September 14th 2023, which will take place at the Intercontinental Chicago.
Prior day Wednesday September 13th we'll be hosting a tour of our Stickney facility, which is in the Chicago area and I sincerely hope that you'll be able to join me and our senior management team for one or hopefully both of these events. We will of course closely monitor health and safety guidelines as appropriate.
The management presentation portion of our Investor Day will also be available virtually with a live webcast for those who will be attending the management presentation virtually you'll have the opportunity to participate in real time and the question and answer session. Following the presentation if.
If you're not able to attend either in person or virtually we will provide a replay of the webcast on our website. Following the conclusion of the event.
Now, let's review some of the headlines from our first quarter.
We have a lot of exciting activities to report today that reinforce our work to strengthen our unique vertically integrated business model, serving key infrastructure markets. We continue to make great progress in expanding our business by enhancing our comprehensive product portfolio further penetrating certain geographic markets entering new markets and gaining market share.
In addition, our work in optimizing our operating and logistics network, not only reduces cost by making us more efficient, but it opens up new business opportunities.
We attribute this to the quality of products and services, we provide while adhering to the strictest standards of safety and sustainability expected from our customer base.
Now, let's begin with a closer look at key metrics for Q1 on slide five.
Consolidated sales of $513 million for the first quarter record increased by 54 million or 12% compared with 459 million in the prior year.
Excluding an $8 million unfavorable impact from foreign currency changes sales increased by $62 million or 13%.
In addition, we generated adjusted EBITDA of 61, and a half million another first quarter record compared with the prior year quarter of $52 6 million in EBITDA.
Adjusted EBITDA margin was 12% about 5% higher than the 11, 5% margin we generated in the first quarter of last year.
First quarter diluted earnings per share were $1 19, a record first quarter compared with 87 cents in the prior year quarter.
Adjusted earnings per share were $1 12, compared with 91 cents for the prior year quarter.
During the quarter, we used $15 $3 million of cash in operations of typical first quarter pattern for koppers as our business ramps up and we're building working capital heading into the second quarter.
We deployed $37 million of cash in the first quarter with 30 million going to capital expenditures, a little over 1 million of dividends and just under $6 million of share repurchases.
Later, I will highlight where we are gaining traction on our path to $300 million and adjusted EBITDA in 2025, along with potential opportunities and challenges ahead.
Next I'd like to provide an overview of the progress made regarding our zero harm to point out platform.
Slide seven shows that 35 out of our 45 operating facilities worked accident free in the first quarter, along with a significant 30% reduction in recordable injuries.
The acceleration of our zero harm 2.0 implementation continues throughout our organization in a number of ways and reenergize the engagement among our frontline employees.
We have been actively hosting in person zero harm safety training events and currently are focusing on the team members in our utility and industrial products business.
Their original sessions took place virtually due to COVID-19 related protocols for the past several years.
So far approximately half of those managers have been trained on the initial module foundations and observations in the first quarter.
And to date more than half of all manufacturing employees have been trained and conducting peer to peer safety observations and by the end of 2023 all of our frontline manufacturing employees will complete a peer to peer observations.
We believe the colleagues who care about each other safety is a powerful factor in the zero harm culture and peer to peer observations reinforced that mindset.
As a result of our leading activities increased by 14%, which helped to decrease serious safety incidents by 60% from the prior year.
Also we continue to work on our safety health and environmental management information system to improve overall user satisfaction, which includes using a single shared dashboard to measure our progress on key metrics.
Furthermore, we are introducing toolbox talks and a small groups at our facilities, which encourage more discussion and idea generation around personal safety.
In April we focused on emphasizing our lifesaving rules protect yourself, while working at heights in order to keep zero harm at a practical related bull level for our frontline teams.
As always the safety and wellbeing of our employees and our communities remains a core principle of zero harm culture at koppers.
Our teams worldwide deserve credit for staying focused on safety and for generating impressive results as seen in the first quarter.
Now I'll turn the discussion over to our Chief Financial Officer, Jimmi Sue Smith.
Thankfully right.
Mornings press release provided our first quarter 2023 results and my comments today are based on that information.
On slide nine our consolidated itself, where first quarter record of $513 million.
54 million or 12% over the first quarter of 2022.
By segment sales increased $30 million or 16% from the prior year quarter P. C sales increased $11 million or 8% and C. M. A C sales increased $14 million or 10%.
On slide 10, adjusted EBITDA was a first quarter record at 62 million a 12% margin.
By segment generated EBITDA of 16 million, 7% margin P. C had EBITDA of $26 million, an 18% margin in C. M. A C had EBITDA of $19 million, a 13% margin.
Moving on to our Rep business on slide 11 reps had record quarter sales of $213 million compared with $183 million in the prior year.
The improvement was primarily the result of increased pricing for cross ties and utility Poles in the United States.
And higher volumes of untreated crosstie enhanced by our acquisition of growth and change last year.
In general market prices for untreated cross ties remain relatively high but they are stabilizing as a result, crosstie procurement was higher by 64% compared to the first quarter of last year.
Well I've tried treatment decreased by 11% versus the prior year.
Adjusted EBITDA for rub 16 million up from $12 million in the prior year on net sales price increases of more than 21 million, partly offset by higher raw material and operating costs.
It's worth noting that the utility and industrial products portion of this business achieved record first quarter sales adjusted EBITDA and adjusted EBITDA margin contributing significantly to the overall performance for us.
On slide 12, our performance chemicals business delivered record first quarter sales of $147 million up.
From 136 million in the first quarter of 'twenty two as a result of 25 million in global price increases mostly associated with copper based preservative in the Americas.
These increases were partly offset by declines in wood treatment preservative, primarily in Europe and Australasia.
North American volumes were 4% lower year over year, which is slightly better than our expectations for this business.
Adjusted EBITDA for PC in the first quarter was $26 million compared with 21 million in the prior year on higher pricing from renegotiated customer contracts, which recaptured prior year cost increases and help return EBITA margin to normalize level at 18%.
Yeah.
Slide 13 shows C. M. A C first quarter sales of 153 million compared with $140 million in the prior year.
This was driven by 37 million of higher prices, primarily for carbon pitch, partly offset by volume decreases in phthalic anhydride carbon pitch and carbon black feedstock as we continue to see strong end market, while operating in a constrained raw material supply environment.
Do you even see adjusted EBITDA was $19 million down slightly from $20 million in the prior year quarter, Although our Australian business delivered an all time record quarter raw material costs outpaced sales price increases in North America, and Europe , compared with the fourth quarter of 2022, the average pricing.
Major product increased 3% and average coal tar costs were up by 6% comp.
Compared with the prior year quarter, the average pricing.
Major products increased by 29%, while average coal tar costs rose by 32%.
Slide 15 outlines our continued commitment to a balanced capital allocation approach that includes investment in the business returning capital to shareholders through dividends and share repurchases and reducing leverage is appropriate.
At March 31st 2023, we had 835 million of net debt and 400 million in available borrowing capacity.
Our net leverage ratio at March 31st of three five times.
Selecting our normal first quarter working capital build.
We continue to focus on our long term target of two to three times net leverage ratio.
On slide 16, we highlight our ongoing focus on enhancing our balance sheet flexibility, which is the last Congress core strategic pillars.
In April we closed on a seven year 400 million junior secured term loan B, which bears interest at adjusted terms sofa or a desk adjusted daily simple sofa.
At our option plus 4% with a floor of 50 basis points.
Using the proceeds from the term loan b, along with cash on hand, and borrowings under our existing revolving credit facility, we redeemed our 500 million, 6% senior unsecured notes due in 2020 five.
These actions are consistent with our stated capital structure priority of reducing risks and gaining flexibility through extending our debt maturity profile.
During the first quarter of 2023, we entered into a four year 100 million dollar interest rate swap in anticipation of the issuance of the term loan b.
The interest rate swap effectively converts the variable rate to a fixed rate of just under seven and a half per cent for that portion of the loan.
We will look to hedge additional portions of the term loan b over the next couple of quarters as we strive to maintain around a 50% mix of fixed versus variable debt.
On slide 17, total capital expenditures for the first quarter of 2023 with $30 million or 28, and a half million net of cash proceeds.
By category, we spent 12 million on maintenance 7 million on zero harm and $12 million on growth and productivity projects.
By segment, we spent $14 million on route one 5 million on P C and $15 million on CMC.
On slide 19, as previously announced our board of directors declared a quarterly cash dividend of six cents per share of coffers common stock to be paid on June 12, 2023 to shareholders of record as of the close of trading on May 26 2023.
At this quarterly dividend rate subject to review by the board of directors. The annual dividend will be 24 cents per share for 2023.
And with that I'll turn it back over to Leila.
Thanks Jimmi Sue.
Now moving on to notable happenings around Koppers Slide 21 offers highlights from our global leadership conference. This event. The first in person event like this that we've had since 2018 brought approximately 150 leaders from around the world of Pittsburgh in March to reconnect around our values of people planet and performance.
On the people front, we spent time building leadership capabilities and gaining a greater understanding of the importance of creating and maintaining an inclusive culture.
On the planet front it was about delving deeper into the various environmental sustainability initiatives that will serve to validate our social license to operate for generations to come.
And finally on the performance front, we spent time, creating alignment and building commitment to our 2025 goal of $300 million and profitability, while ensuring that our short term quest for financial performance doesn't come in conflict with their values for people and the planet.
We're most successful when all three values are pursued imbalance, which we will continue to strive to do.
Also we welcomed a new member of our board of directors during the first quarter as seen on Slide 22, Andrew Sandifer joined the board, bringing extensive experience and an international perspective from the manufacturing and service sectors.
Drew currently serves as the CFO of FMC Corporation, a global Agricultural Sciences Company and previously spent time at Aramark, our global Foodservice organization.
With Andrews appointment the Coppers board of directors expands from eight to nine members.
We look forward to benefiting from Andrew's valuable insights.
During the past quarter I visited three of our manufacturing facilities and met with our employees at those locations as seen on slide 23.
In North Little rock I got to see firsthand the progress made by plant manager, Chris Martin and his team as they continue to work with our engineering team to remake our treating operations at North Little rock now.
Now I'll touch on where things are at later in my comments, but I'll just say it was exciting to see are so close to finishing this major project that commenced in the early days of Covid are.
Our team has had to deal with a lot of unexpected curve balls throughout and persevered at every turn.
They deserve a chance to get back to doing what they do best keeping our people safe, while serving our customers with the highest level of quality and reliability.
At our Stickney plant outside of Chicago plant manager, Seth Herring and his team have done a fantastic job of incrementally improving their facility by replacing and adding tanks that have enabled them to streamline production make their operations more efficient and most importantly, approve upon the safety and environmental footprint of the site.
And finally at our Millington, Tennessee facility, our largest performance chemicals operation I was able to spend time with plant manager, Greg vis and his team reviewing the various plans they have to improve the safety and reliability of their operations, which have grown immensely since ground contact treatment was adopted through the industry back in 2016.
These visits certainly helped validate our strategies, but the true value comes in talking with our people who transform those strategies into actual performance as.
As a result, they have my deepest and most sincere appreciation.
Now moving on in February I outlined the keys to success in reaching our 2023 adjusted EBITDA goal of $250 million. So now let's take a look at what's happening in each of those businesses is where few months alone.
Starting on slide 25 with performance chemicals, we're focused on three key areas. The first is passing on price while maintaining market share in February I mentioned that we had enacted major price increases effective as of the first of the year that should net us over $60 million of top line improvement and recapture the cost that we had absorbed throughout much of 2022.
Well through the first quarter, we're tracking even better than our original expectations as we realized $25 million of price increases across our global sales network correlating to an 18% increase over Q1 2022 sales.
In addition, we picked up some new residential business that we believe will offset volume losses experienced elsewhere.
Therefore through Q1 I'd score this is exceeding expectations.
The second key to success for P. C. In 2023 as residential demand not declining greater than 10%.
And we've modeled a five to 10 per cent decline in year over year base volumes and that excludes any net gain or losses and share which to date have been flat.
After a slow January we finished the first quarter with U S residential volumes only 4% lower than last year's Q1 volumes.
And while we're tracking better than expected through three months of the year. There are some moderate concerns going forward.
Existing home sales saw their first gains in 12 months in February posting the largest monthly percentage increase since July 'twenty 'twenty before dipping again slightly in March I.
So the leading indicator of remodeling activity. However, projected continued deceleration of remodeling spending turning negative in the first quarter of 'twenty 'twenty four after almost a decade of continuous growth now a positive factor from the consumer's perspective regarding the treated wood market is that its one category that is lower in price today than a year ago and by a significant amount.
Now that's driven by the selling of lumber prices back to pre pandemic price levels and while we can't control. It we will continue to keep close tabs on the demand trends as the year goes on.
The third and final key for P. C in 2020 three is replacing the non koppers produced industrial chemical Penta with Koppers produced preservatives, such as C. C. A N D C O y.
In 2022 we experienced a 33% increase in our industrial sales volume and in the first quarter of this year, we saw a volume bump of 24% over prior year.
Through Q1, where you're tracking in line with our projections and expect this trend to continue through the year as industrial demand looks to remain strong from increased infrastructure spending.
The utility and industrial products division of our rubber business as seen on slide 26 continues to enjoy strong demand across the board.
That's why the first key to success for you I P. In 2020 three is keeping our facilities running uninterrupted in order to serve customer demand.
And we did this in Q1 and posted our best first quarter ever which also happened to be our second best quarter of all time coming in slightly behind the fourth quarter of last year.
Unfortunately on April 1st we had a fire destroyed one of our dry kilns, which has added stress to an existing bottleneck in treating capacity.
In the interim where you're bringing in higher volumes of third party whitewood to cover some of that temporary loss, but that will eat away at profitability somewhat as that volume comes at a higher cost.
And we're in the process of replacing the damaged Joan and in addition, our board approved the construction of another channel to further increase our drying capacity, which will enable us to maximize our treating capacity.
No other than the loss of the killing all of our plants are running at high rates of efficiency and exceeding performance expectations, even with the limits on internal drying capacity through one quarter, we're already on track to exceed last year's record profitability by well over 50% and.
We don't believe that the recent hiccup of losing that kill will materially impact that.
The second key to success for you I P. This year that I mentioned back in February is to bring online our facility in Leesville, Louisiana to produce dry product by Q3.
This site will feed our Somerville, Texas treating facility and serve the Texas market for creosote Poles.
We are currently tracking slightly behind with one wrinkle that could push the start date out further.
We're evaluating the opportunity to redirect it currently constructing chunk for this property to replace the damaged Joan.
If we do we will replace the lost internal drying capacity faster, but this project completion would be pushed back his replacement Joan is constructed.
While not great news this business is already tracking to better than expected numbers for the year, even without capacity from leesville. So any impact of this project being delayed we believe will be more than absorbed by an extremely strong end market driven by infrastructure spending.
And the railroad products and services Division of Rubs on Slide 27, our first key to success for 2023 remains rebuilding our dry inventory as soon as possible.
Now we're currently on pace to procure over 7 million ties representing our highest year. Since 2015, we're also making up ground on building our dry inventory currently up 20% over year end and now totaling just over 5 million ties.
Now is this number grows it lessens the need for bolt nizing artificial drawing process that makes our plants less efficient by taking up cylinder time.
Through Q1, we are on track to reach our desired air dried inventory levels by year end.
The second key for Rps as recouping the value of our creosote preservative in the market.
Now I mentioned in February that for the rail industry to maintain a healthy supply chain it needs to pay fair value for its preservative.
Cost have increased significantly due to several factors outside of our control and while we have some ability contractually to pass on increased cost up to a certain level or preservative cost so far exceeded the price caps and as a result, we need to increase prices further.
Through Q1, we realized $13 million in price, which is not all preservative related and we will continue educating our customer base on the value of a properly treated creosote crosstie, which includes sustainability lifecycle benefits as well.
Presently we have no incentive to treat and supply any more than our contractual minimums without price adjustments forthcoming and we're optimistic that will occur.
Our current guidance does not include anything more than we've already agreed upon so risk to 'twenty to 'twenty three is nonexistent, but we will definitely need further progress. If we were to move the rubber business back to double digit margins by the end of 2025.
Now the final key for our P. S. In 2023 is getting the north little rock expansion finished by mid year.
The first of our three new cylinders was commission this week, we've begun treating ties.
Other two cylinders are on schedule to be commissioned later this quarter with all three in production by the end of the second quarter.
We should expect some startup issues, but wants to dress boots will be the most efficient plants in our network.
On another positive note we're actively working on some promising leads to secure the remaining volume to maximize this plant's output.
We're all very excited about the contributions to be realized from a long way to completion of this project.
Slide 28 features our car materials and chemicals business in the first key to success in 2020 three for CMC is managing through this challenging raw material market.
Between the Russia, Ukraine War, the earthquakes in Turkey, and the trend to Decarbonize steel our supply of traditional coal tar raw material was down 14% by volume in the first quarter.
The drop in available volume is also contributed to higher raw material costs as distillers fight for the limited supply.
And with our ability to supplement the coal tar with petroleum based feedstock, we limited the impact on sales from the lower raw material volumes by half while also continuing to pass on much of the increased costs through higher prices.
It remains a juggling act in this segment, but we are in relatively good shape through the first quarter.
The second key for CMT comes in continuing to push acceptance of petroleum blended products, which mitigates reductions in cold tour volumes.
We currently have half the volume of our North American pitch customers, taking a hybrid product in our trailing of petroleum based payments sealer, which we crucial to meeting demand.
In addition, we continue to work with various petroleum blends for creosote product, serving our rubber business.
Now the challenge is in raw material availability have created an environment that is more willing to try different material blends which sets us up for continued success.
The final key for C. M. C. This year, we're seeing a demand environment not negatively impacted by a recession.
Now as we enter 2023, we modeled similar year over year demand and volumes were down in Q1, but that was mostly due to lack of raw material supply and we do not anticipate making that up throughout the year.
We still face the risk of further aluminum curtailments due to persistently high energy costs and the threat of a recession, bringing down prices.
At this point, we feel comfortable with demand through the second quarter, but theres too much market uncertainty to project beyond that point.
So moving to our 2023 guidance on slide 30, our sales forecast for 2023 is approximately $2 1 billion compared with 1.98 billion in 2022 with all businesses is expected to see some topline increase for.
Perhaps it will be a combination of price and volume.
P C will be price and industrial volume growth offset by residential volume declines.
For C. M C is a little bit of price on slightly lower volumes.
On slide 31, our 2023 EBITDA projection is at $250 million on a comparable basis. This will be our ninth consecutive year of EBITDA growth. It will be the largest year over year increase since 2015.
For all the reasons previously mentioned Robson P. C should see nice gains in profitability in 2023 P. M. A C is forecasted to take a step back.
On slide 32, our adjusted EPS guidance for 2023 is approximately $4 40, compared with $4.14 in the prior year.
Higher average interest costs will take a significant bite out of earnings growth generated through operations. The 20th twenty-three should still finished or our highest adjusted EPS in company history, surpassing the $4.21 achieved in 2020 one.
On slide 33, we anticipate that our capital spending will be approximately 110 million to $120 million in 2023 that's $5 million to $15 million higher than our 2022 levels.
Required spending on maintenance and zero harm will approximate 68 million with approximately 42 to 52 million dedicated to finishing our significant growth and productivity projects, which now include. The addition of new drying capacity for you I P.
Now, while we are increasing our 2023 capital spending estimate to accommodate the kilns were actively working to keep spending to no more than the 105 million original estimate by pushing certain projects out into 2024.
Now moving to slide 34, you can see our expected path to $300 million in EBITDA from our 2020 base.
The first two years in the books demonstrated very modest improvements as we began implementing them larger multi year projects that are finally scheduled for completion during this year.
And while the bridge the 300 million shows a pretty even progression over the remaining three years I believe that most of the remaining 72 million will be captured by the end of next year.
A couch those comments of course in the context of the recession doesn't have a material impact on our business over that time frame.
Otherwise I feel good about our ability to meet or exceed this year's target, which will include little to no contribution from north Little rock Leesville, our two new dry kilns enhanced carbon products or our new micronize email and that's over $100 million of capital projects, most of which will be completed by year end that are expected to generate over $30 million and Andy.
EBITDA with much of that expected to be captured in 2024.
In summary, I continue to feel really good about the progress, we're making to expand and optimize our position as the global leader in wood preservation technologies as.
As we continue to strengthen our customer focused solutions, while adhering to our values of people planet and performance, we will unlock significant discretionary cash flow over the next several years and create top tier shareholder value.
And with that I'd like to open it up for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your Touchtone phone. If you were using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question is from Liam Burke with B Riley. Please go ahead.
Thank you.
Good morning, Leroy good morning, Jimmi Sue.
Hi, Liam.
Leroy you talked about the pricing in terms of cross tie do.
Do you have any potential lifecycle management contracts in the works that could help offset some of that pricing pressure.
Well I mean, we continue to have discussions in that regard I'd say, we're working with almost all of the class ones at this point in time.
On.
Their lifecycle management of cross ties.
So we continue the discussions I'd say, there's nothing that that that I'm aware of that that is imminent and I'd say from our perspective, Liam. It's again, we think it's an important part of the overall value proposition.
But the bigger driver for us in terms of.
You know trying to to push.
To get results in this business is really being able to recoup the cost the significant cost increases that we've incurred over the past several years and so you know getting the industry to understand that a a chris so treated wood cross tie is the best overall lifecycle solution for them and.
And then the willingness to pay for the product.
His is what we continue to work on it we've made some progress I'd say across the board, but there is still more progress to be made we think that the demand environment for this this market is as promising over the next few years and so.
If we can get the pricing aligned with what we see from a cost standpoint, I think our I think we have a pretty good runway out over the next couple of years in the Rps business.
Okay.
On a P C.
The existing home sales used to be a pretty good benchmark.
The demand for domestic one protection.
You seem to be seeing some.
Disconnect between you know the bouncing around of existing home sales and the demand for that product being pretty steady am I reading that right.
Yeah. It's you know, it's one of those ones, where yes since we've owned that business that was Uh huh.
Leading indicators that RPC management group always looked at.
But but you know.
Yeah.
Unique time, so I would just say that rate coming through the pandemic and all of the the money. That's been spent on repair remodeling now with higher interest rates, having people make different.
Different decisions in terms of weather too.
To enter into a new mortgage for a new home or where in many cases, unfortunately getting priced out of that and making a decision to instead spend on their current home you have those sorts of decisions that we think are impacting this somewhat you have you know we were just talking actually the other day about the fact that.
With a lot of the new home construction that happened again through the pandemic and that boom that.
Now. These these homes are at the point in time, where they're they're doing the if you will cosmetic.
Landscaping and an outdoor structural features that tend to get added after a new home is built and that's having some impact on things and we can't discount. The fact that everybody's had I think inflation fatigue and when you go into again, a big box retailer and everything that you see is some significant percentage higher from a car.
Standpoint that was just a few years ago, but you can go to the treated wood all and know that the project that you wanted to get done that would have been significantly higher a year or so ago was one of the few areas, where you feel like youre getting some value for your money I think that that we can't discount the fact of what impact that might be having on the market as well.
Great. Thank you Leroy.
Youre welcome.
The next question is from Gary Presta, Pinot with Barrington Research. Please go ahead.
Hey, good morning, everyone, Hey, Leroy.
You put them all these price increases at the beginning of the year right across your segments.
Okay.
In terms of the.
Highest peak.
Important input costs were where did they really peaked last year and then start to come down or.
Well I don't think we've actually seen them really comes on at this point I mean, we're looking at P. C, which is where we were where we were we were.
Significantly underwater.
The biggest cost component that we have in there is as is copper and so copper continues to bounce around that you know that $4 a pound level.
And so you know that's that's you know.
At least a buck 50 to a buck and a quarter over sort of where we were at.
For a couple of years, they're sort of pre pandemic.
So you have that with the expiring of of the agreements that have enabled us to reset pricing and do some catch up there, but a lot of the other components that go into our micronize copper product as well as some of our industrial products you know they they have all gone up considerably as well.
And most of them have have remained elevated you know some some bounce around a little bit but most of it still remained elevated. So this this it was important for us to be able to be able to get get that price hold onto it and we'll see where the Costco you know as we look out further beyond this year, but right now we're in a pretty decent position from a performance chemicals.
Standpoint, the big the big change in carbon materials, and chemicals, which has a downstream effect on the Rps businesses is in the coal tar raw material and and so with the elevated price of oil that was impacted that we saw basically coming out.
The early parts of the pandemic and with the war in Ukraine again earthquakes in Turkey.
De carbonization is still there's just a whole host of factors that have contributed to a tightening of raw material, which is increase the costs, which have increased obviously are our cost of material and a seamless C N and so when we may creosote is at a significantly higher <unk>.
Cost to produce than what it was prior to that and that's obviously being used to treat railroad cross ties and so it's not a koppers issue. It's it's it's an overall market an industry issue and.
Every every every treater out there is dealing with this issue and has a need to be able to recoup.
To recoup their cost to maintain a healthy business.
Look to your IP and it was in the cost of freight, which we actually saw increased costs across the board there as well cost of preservative certainly.
And so all of these different businesses that need to be able to pass on our cost increases were significant we were at different stages and each of them.
Throughout the last couple of years, even see the way that business is sort of structure, we were able to get out in front of a lot of the cost increases and that's why you saw the year. They had this last year and a little bit of a reversion back.
This year you IP, we were playing catch up, but but but we're able to begin getting caught up at about this point last year and Rps, we're still behind and so you know.
The hopes there is that we will get caught up.
Or or certainly make a lot more progress before we get to the end of this year with P. C basically getting caught up at the beginning of the year. So they've all been in different stages in a different time frames.
But we haven't really seen an easing I would say of any of our major cost components are in any of our businesses at this point.
Okay. Thank you very much.
Welcome.
This concludes our question and answer session I would like to turn the conference back over to CEO Leroy ball for any closing remarks.
Now I'd just like to thank again, everybody for your continued confidence in koppers and we will continue to work on executing on our strategy for 2025 and get to that $300 million of EBITDA, while focusing on people planet and performance.
Our zero harm culture. So thanks, everybody for tuning in today.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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