Q1 2024 Koppers Holdings Inc Earnings Call

Good morning, ladies and gentlemen, thank you for standing by.

Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers' first quarter 2024 earnings conference call and webcast. At this time, all participants are in a listen-only mode. If you need assistance, please alert a conference specialist by pressing the star followed by zero. 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 Quynh McGuire. Please go ahead.

Welcome to Koppers' first quarter 'twenty 'twenty four earnings conference call and webcast.

At this time all participants are in a listen only mode. If.

If you need assistance. Please alert a conference specialist by pressing star followed by zero.

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.

Quynh T. McGuire: Thanks and good morning. I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our first quarter 2024 earnings conference call. We issued our press release earlier today. You may access it via our website at www.koppers.com.

Thanks, and good morning, I'm Quinn Mcguire, Vice President of Investor Relations welcome to our first quarter 2024 earnings Conference call. We issued a press release earlier today, you may access it via our website at Www Dot Koppers Dot com.

Quynh T. McGuire: As indicated in our announcement, we have also posted materials to the investor relations page of our website that will be referenced in today's call. Consistent with our practice in prior quarterly conference calls, this call is being broadcast live on our website, and a recording of this call will be available on our website for replay through August 3, 2024. At this time, I would like to direct your attention to our forward-looking disclosure statement, seen on slide two.

As indicated in our announcement, we have also posted materials to the Investor Relations page of our website that will be referenced in today's call consistent 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 three 2024.

At this time I would like to direct your attention to our forward looking disclosure statement on slide two.

Quynh T. McGuire: 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. Such 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 and Exchange Commission. In light of the 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.

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.

Quynh T. McGuire: 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 press release, which is available on our website, also contains reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures. Joining me for our call today are Leroy Ball, Chief Executive Officer of Koppers, and Jimmi Sue Smith, Chief Financial Officer. I will now turn over the discussion to Leroy.

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 and Exchange Commission.

In light of the significant uncertainties inherent in the forward looking statements included in the Companys comments you should.

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 press release, which is available on our website also contains reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Joining me for our call today are Leroy ball, Chief Executive Officer of Koppers, and Jimmi Sue Smith, Chief Financial Officer, I will now turn over the discussion to Leroy.

Leroy Mangus Ball: Thank you, Quynh. Good morning, everyone.

Leroy Mangus Ball: Thank you Quinn.

Leroy Mangus Ball: Morning, everyone.

Leroy Mangus Ball: I'll start by saying the obvious, which is that despite best efforts from the global Koppers team, our first quarter financial results were a disappointment. While we expected adjusted EBITDA to be lower year over year and signaled that in February, we fell short of our forecast and the consensus estimate by about 5%. Now, as expected, our performance chemicals business and our railroad and utility products and services business both showed strong year-over-year growth in sales and profitability.

Leroy Mangus Ball: I'll start by saying the obvious which is that despite best efforts from the global coffers team, our first quarter financial results were a disappointment.

Leroy Mangus Ball: While we expected adjusted EBITDA will be lower year over year and signaled that in February we fell short of our forecast and the consensus estimate by about 5%.

Leroy Mangus Ball: Now as expected our performance chemicals business in our railroad and utility products and services business. Both showed strong year over year growth in sales and profitability.

Leroy Mangus Ball: Those impressive gains, however, were more than negated by slumping CM&C markets, in particular in North America. An unplanned outage at our facility in Stickney, Illinois caused by weather-related factors that contributed to higher costs early in the quarter was far from the only factor, but ultimately made the challenging market dynamics even more difficult to offset. In these sorts of situations, we typically get help elsewhere to mitigate difficulties that we're encountering in specific parts of our portfolio.

Leroy Mangus Ball: Those impressive gains however were more than negated by slumping seem to see markets in particular in North America.

Leroy Mangus Ball: An unplanned outage at our facility in Stickney, Illinois caused by weather related factors that contributed to higher costs early in the quarter was far from the only factor, but ultimately made the challenging market dynamics, even more difficult to offset.

Leroy Mangus Ball: Now in these sorts of situations, we typically get help elsewhere to mitigate difficulties that were encountering in specific parts of our portfolio.

Leroy Mangus Ball: And while some help did come in the form of slightly better-than-expected Q1 performance from our PC business, that ended up getting washed away by a poorer-than-expected outcome from our Railroad Maintenance-of-Way business. Now, as I'll talk about later in my commentary, I believe that 2024 will still be a strong step forward for Koppers in our quest to reach our 2025 financial commitments, and we are taking additional measures to improve our chances of finishing towards the high end of our revised guidance for this year. We will take this opportunity, however, where we seem to be facing more uncertainty than since the pandemic, to temper our expectations slightly for the balance of this year.

Leroy Mangus Ball: And while somehow did come in the form of slightly better than expected Q1 performance from our PC business that ended up getting washed away by a poorer than expected outcome from our railroad maintenance of way business.

Leroy Mangus Ball: Now I will talk about later in my commentary I believe the 'twenty 'twenty four will still be a strong step forward for koppers in our quest to reach our 2025 financial commitments and we are taking additional measures to improve our chances of finishing towards the high end of our revised guidance for this year.

Leroy Mangus Ball: We will take this opportunity, however, where we seem to be facing more uncertainty than since the pandemic to temper our expectations slightly for the balance of this year.

Leroy Mangus Ball: Now let's take a quick look at the headline numbers for the first quarter, as seen on slide four. Consolidated sales totaled $497.6 million compared with $513.4 million in the prior year quarter. We generated adjusted EBITDA of $51.5 million compared with $61.5 million in the prior year quarter. As I mentioned, most of that drop was expected and factored into our projections, but we did finish about 5% off our internal projections. Those numbers work out to an adjusted EBITDA margin of 10.3% compared with 12% in the prior year quarter. We had diluted earnings per share of $0.59 compared with $1.19 in the prior year quarter, and adjusted earnings per share were $0.62 compared with $1.12 in the prior year quarter. Moving to slide six.

Leroy Mangus Ball: Now, let's take a quick look at the headline numbers for the first quarter as seen on slide four.

Leroy Mangus Ball: Holiday sales totaled $497 6 million compared with $513 $4 million in the prior year quarter.

We generated adjusted EBITDA of $51 5 million compared with $61 5 million in the prior year quarter.

Leroy Mangus Ball: As I mentioned most of that drop was expected and factored into our projections, but we did finish about 5% off our internal projections.

Leroy Mangus Ball: Those numbers work out to an adjusted EBITDA margin of 10, 3% compared with 12% in the prior year quarter.

Leroy Mangus Ball: We had diluted earnings per share of <unk> 59, compared with $1 19 in the prior year quarter and adjusted earnings per share were <unk> 62, compared with $1 12 in the prior year quarter.

Leroy Mangus Ball: Yeah.

Leroy Mangus Ball: Moving to slide six.

Jimmi Sue Smith: Now this shows some key results related to our Zero Harm 2.0 program to re-energize employee engagement at the front lines and accelerate our progress towards zero incidents. First quarter saw a 16% increase in the number of leading activities over the prior year quarter. We have talked in the past about how injuries have a negative correlation to leading activities and so as leading activities go up, injuries and incidents typically go down. And for the most part, we continue to see that as our recordable injury rate continues to trend once again to an all-time best mark.

Leroy Mangus Ball: Now that shows some key results related to our zero harm to point out a program to Reenergize employee engagement at the front lines and accelerate our progress towards zero incidents.

Leroy Mangus Ball: First quarter saw a 16% increase in the number of leading activities over the prior year quarter.

Leroy Mangus Ball: We've talked in the past about how injuries have a negative coral correlation to the leading activities and so that is leading activities go up injuries or incidents typically go down.

Leroy Mangus Ball: For the most part we continue to see that as a recordable injury rate continues to trend once again to an all time best Mark.

Jimmi Sue Smith: Now, of our 45 facilities around the world, 34 operated accident-free in the first quarter, with the following operations having zero recordable injuries: Australasia CMC, Australasia PC, Europe CM&C, and Europe Performance. These safety efforts helped to reduce our overall recordable injury rate by 7%, currently at its lowest ever rate through Q1. Now, I'd like to turn it over to Chief Financial Officer, Jimmi Sue Smith, to talk with you about our first quarter financials.

Now all of our 45 facilities around the World 34 operated accident free in the first quarter with the falling operations, having zero recordable incident.

Leroy Mangus Ball: Australasia, CMC, Australasia, PC Europes human Sea and Europe performance chemicals. These.

Leroy Mangus Ball: These safety efforts helped to reduce our overall recordable injury rate by 7% currently at its lowest ever right through Q1.

Now I'd like to turn it over to Chief Financial Officer, Jimmi Sue Smith to talk with you about first quarter financials.

Jimmi Sue Smith: Thanks, Leroy. Earlier today, we issued a press release detailing our first quarter 2024 results. My comments this morning are based on that information. On slide 8, we had consolidated first quarter sales of $498 million, down $16 million or 3.1% from the prior year quarter. By segment, RUP sales increased $12 million or 5.6%, PC sales increased $3 million or 2.2%, while CM&C sales decreased $31 million or 20.2% from the prior year quarter.

Speaker Change: Thanks, Leroy earlier today, we issued a press release detailing our first quarter 2024 results. My comments. This morning are based on that information.

Speaker Change: On slide eight we had consolidated first quarter sales of $498 million down $16 million or three 1% from the prior year quarter.

By segment sales increased $12 million or five 6% PC sales increased 3 million or two 2%, while <unk> sales decreased $31 million or 22% from the prior year quarter.

Jimmi Sue Smith: On slide 9, adjusted EBITDA for the first quarter was $52 million, resulting in a 10.3% margin. By segment, Rucks generated a Justity Bida'a of $18 million with a 7.9% margin. PC delivered a Justity Bida'a of $30 million, a 19.9% margin, and CM&C reported a Justity Bida'a of $4 million with a 3.3% margin.

Speaker Change: On slide nine adjusted EBITDA for the first quarter was $52 million, resulting in a 10, 3% margin.

Speaker Change: Segment, <unk> generated adjusted EBITDA of $18 million with a seven 9% margin PC delivered adjusted EBITDA of $30 million and $19, 9% margin and CMC reported adjusted EBITDA of $4 million with a three 3% margin.

Speaker Change: On slide 10.

Jimmi Sue Smith: On slide 10, the rough business achieved record first quarter sales of $225 million compared to $213 million in the prior year quarter. This increase in sales can be attributed to $9.6 million of volume increases for cross-ties and a net $8.1 million of pricing increases across multiple markets, particularly for cross-ties and domestic utility poles. These increases were partly offset by lower activity in our maintenance of way businesses and a 4.2% volume decrease in our domestic utility pole business, stemming from temporary customer overstock and budget realignment. Market prices for untreated cross ties are stable but remain relatively high.

Speaker Change: The business achieved record first quarter sales of $225 million compared to $213 million in the prior year quarter.

Speaker Change: This increase in sales can be attributed to $9 6 million of volume increases for cross ties and a net $8 1 million of pricing increases across multiple market, particularly for cross ties and domestic utility pole.

These increases were partly offset by lower activity in our maintenance of way businesses and a four 2% volume decrease in our domestic utility pole business stemming from temporary customer overstock and budget realignment.

Speaker Change: Market prices for untreated crosstie Theyre stable remained relatively high.

Jimmi Sue Smith: First quarter cross-tie procurement was up 2% from the prior year quarter, and cross-tie treatment was 7% higher. Adjusted EBITDA for RUPS was $18 million, compared with $16 million in the prior year quarter. Profitability increased due primarily to net sales price increases and $3.7 million from improved plant utilization. These gains were partly offset by $10.6 million of higher costs related to operating expenses, raw materials, and SG&A expenses. Margins for our CHI business increased slightly this quarter, reflecting some price increases, but continue to significantly underperform our pole business.

Speaker Change: First quarter Cross traffic cross tie procurement was up 2% from the prior year quarter and cross pad treatment with 7% higher.

Adjusted EBITDA for Rob with $18 million compared with $16 million in the prior year quarter.

Speaker Change: Profitability increased due primarily to net sales price increases and $3 7 million for the improved plant utilization.

Speaker Change: These gains were partly offset by $10 6 million of higher costs related to operating expenses raw material and SG&A expenses.

Speaker Change: Margins for our Thai business increased slightly this quarter.

Speaker Change: Reflecting some price increases that continue to significantly underperform our pull business.

Speaker Change: On slide 11, our performance chemicals business delivered strong first quarter sales of $150 million compared to $147 million in the prior year quarter.

Jimmi Sue Smith: On slide 11, our performance chemicals business delivered strong first quarter sales of $150 million compared to $147 million in the prior year quarter. This increase came as a result of volume increases of $6.8 million in the current year period, including a 6.1% volume increase in the Americas, primarily for our copper-based preservatives. These increases were partly offset by $3.3 million of lower prices in the Americas and Australasia driven by lower raw material costs. Adjusted EBITDA for PC was $30 million for the quarter, compared with $26 million in the prior year quarter.

Speaker Change: This increase came as a result of volume increases at $6 8 million in the current year period, including a six 1% volume increase in the Americas, primarily for our copper based preservative.

Speaker Change: These increases were partly offset by $3 3 million of lower prices in the Americas, and Australasia, driven by lower raw material costs.

Speaker Change: Adjusted EBITDA for PC was $30 million for the quarter compared with 26 million in the prior year quarter profitability.

Jimmi Sue Smith: Profitability in this business benefited from volume increases while the lower sales prices were offset by a decrease in raw material costs. On slide 12, you see our first quarter sales in CM&C of $122 million compared with $153 million in the prior year quarter. This decline was caused by $28.6 million of lower sales prices across most products, including carbon pitch, where prices were down 24.6% globally, along with $11.5 million of lower volumes of carbon pitch and carbon black feedstock. The decreases in carbon pitch prices and volumes were driven by reduced market demand in the current year period, partly offset by volume increases for felic and hydride.

Speaker Change: Profitability in this business benefited from volume increases.

Speaker Change: The lower sales prices were offset by a decrease in raw material costs.

Speaker Change: On Slide 12, you see our first quarter sales and seasoned team of $122 million compared with $153 million in the prior year quarter.

Speaker Change: This decline was caused by $28 6 million of lower sales prices across most product. This includes carbon pitch, where prices were down 24, 6% globally, along with $11 5 million of lower volume of carbon pitch and carbon black feedstock.

Speaker Change: The decreases in carbon pitch prices and volumes were driven by reduced market demand in the current year period, partly offset by volume increases for phthalic anhydride.

Jimmi Sue Smith: Adjusted EBITDA for CM&C in the first quarter was $4 million, compared with $19 million in the prior year quarter as a result of lower prices and volumes, combined with a weather-related January outage at our North American plant. These negatives were partly offset by $18.6 million in lower raw material costs in North America and Europe. Consequently, the average pricing of major products is 2% lower, and the average coal tar costs are 8% lower.

Speaker Change: Adjusted EBITDA for CMC in the first quarter was $4 million compared with $19 million in the prior year quarter as a result of lower prices and volumes combined with the weather related January outage in our North American plant.

Speaker Change: These negatives were partly offset by $18 6 million in lower raw material cost in North America and Europe.

Speaker Change: Sequentially the average pricing of major product is 2% lower than the average coal tar costs are 8% lever <unk>.

Jimmi Sue Smith: Compared to the prior year quarter, the average pricing of major products is down 18%, while average coal tar costs are down 16%. Slide 14 illustrates our continued balanced approach to capital allocation, with $25.8 million of capital invested back into our business in the first quarter. Net capital expenditures for the year are forecast to be $80 to $90 million. We continue to return capital to shareholders through a quarterly dividend of seven cents per share and to focus on our net leverage with $820 million in net debt and approximately $340 million in available borrowings at March 31, 2024.

Speaker Change: Compared to the prior year quarter, the average pricing of major products was down 18%, while average coal tar costs are down 16%.

Speaker Change: Slide 14 illustrates our continued balanced approach to capital allocation with $25 8 million of capital invested back into our business in the first quarter net capital expenditures for the year are forecast to be $80 million to $90 million.

Speaker Change: We continue to return capital to shareholders through a quarterly dividend of <unk> per share and to focus on our net leverage with $820 million and net debt and approximately $340 million and available borrowings at March 31 2020 for.

Jimmi Sue Smith: This is a net leverage ratio of 3.3 times as of March 31st and is indicative of where we expect to exit the year in the low threes. However, we do anticipate leverage to increase to the high threes in the second and third quarters as a result of borrowings to complete the acquisition of Brownwood.

Speaker Change: This is a net leverage ratio of three three times as of March 31, and is indicative of where we expect to exit the year in the low three however, we do anticipate leverage to increase to the high threes in the second and third quarters. As a result of borrowings to complete the acquisition of Roundwood, we remain committed to our long term target.

Jimmi Sue Smith: We remain committed to our long-term target of 2 to 3 times net leverage ratio and confident in our ability to grow and generate cash. Slide 15 details the recent repricing and upsize of our seven-year, $397 million Senior Secured Term Loan B due April 10, 2030. This transaction reduced the interest rate margin applicable to the TLB by 50 basis points and removed the 10 basis points credit spread adjustment from the TLB pricing structure.

Speaker Change: Two to three times net leverage ratio and confident in our ability to grow and generate cash.

Speaker Change: Slide 15 details the recent repricing and upsize of our seven year $397 million senior secured term loan B due April 10 2030.

Jimmi Sue Smith: In addition, the TLB was upsized at par by $100 million, increasing the principal balance to $497 million as of April 12, 2024. Proceeds from the Term Loan Fee will be used for general corporate purposes and to reduce borrowings under a revolving credit facility, including the recent borrowings to fund the acquisition of Brownwood. We experience strong market demand for our TLB and are pleased with the enhanced liquidity and financial flexibility this transaction provides the company.

Speaker Change: This transaction reduced the interest rate margin applicable to the T. L. B by 50 basis points and remove the 10 basis point credit spread adjustment from the <unk> pricing structure.

In addition, the T. L. D was upsized at par by $100 million, increasing the principal balance to $497 million as of April 12, 2024.

Proceeds from the term loan B will be used for general corporate purposes and to reduce borrowings under our revolving credit facility, including the recent borrowings to fund the acquisition of Brown Wood.

Speaker Change: We experienced strong market market demand for our T. L. P and are pleased with the enhanced liquidity and financial flexibility. This transaction provides the company.

Speaker Change: We spent $25 8 million net on capital expenditures in the first quarter as seen on slide 16.

Jimmi Sue Smith: We spent $25.8 million net on capital expenditures in the first quarter, as seen on slide 16. Excluding cash proceeds, the total was $26.3 million. Of that, we spent $14.3 million on maintenance, $1.1 million on zero harm, and $10.9 million on growth and productivity initiatives. By business segment, we spent $13.5 million on RUPS, $3.2 million on PC, and $7.9 million on CM&C, along with $1.7 million on corporate projects.

Speaker Change: Excluding cash proceeds the total was $26 3 million.

Speaker Change: Of that we spent $14 3 million on maintenance $1 1 million on zero harm and $10 9 million on growth and productivity initiatives.

Speaker Change: By business segment, we spent $13 5 million umbrella $3 2 million on PC and $7 9 million on CMC, along with $1 7 million on corporate projects.

Jimmi Sue Smith: On slide 18, as announced on May 2nd, our Board of Directors declared a quarterly cash dividend of $0.07 per share of Koppers Common Stock. This dividend will be paid on June 10th to shareholders of record as of the close of trading on May 24th. At this planned quarterly dividend rate, subject to review by the Board of Directors, the annual dividend will be $0.28 per share for 2024, a 17% increase over the 2023 dividend. And with that, I'll turn it back over to Leroy.

Speaker Change: On slide 18 as announced on May 2nd our board of directors declared a quarterly cash dividend of seven <unk> per share of <unk> common stock. This dividend will be paid on June 10 to shareholders of record as of the close of trading on May 24.

Speaker Change: At this planned quarterly dividend rate subject to review by the board of directors. The annual dividend will be 28 per share for 2024% to 17% increase over the 2023 dividend.

Speaker Change: And with that I'll turn it back over to Leroy.

Leroy Mangus Ball: Thanks, Jimmi-Sue. Let's take a quick look at some notable happenings. As seen on slide 20, we issued our 2023 Annual Report and Proxy Statement, which are available on our Koppers website. You can also access these materials using the QR codes as shown.

Leroy Mangus Ball: Thanks, Jamie so let.

Leroy Mangus Ball: Let's take a quick look at some notable happenings.

Leroy Mangus Ball: As seen on slide 20, we issued our 2023 annual report and proxy statement, which are available on our Koppers website. You can also access these materials using a QR codes as shown.

Leroy Mangus Ball: As seen on slide 21, we recently completed the acquisition of Brownwood Preserving Company, bringing its assets into our UIP portfolio. This transaction enables us to increase our presence in existing markets and offers an attractive entry point to new geographic markets for our utility pole business, which we believe continues to have strong macro trends supporting growth potential for the foreseeable future. The integration of the Brownwood team and related capabilities is well underway, and we're very pleased to welcome them into the Koppers family.

Leroy Mangus Ball: As seen on slide 21, we recently completed the acquisition of Brown wood preserving company, bringing its assets into our U IP portfolio. This.

Leroy Mangus Ball: This transaction enables us to increase our presence in existing markets and offers an attractive entry point to new geographic markets for utility pole business, which we believe continues to have strong macro trends supporting growth potential for the foreseeable future.

Leroy Mangus Ball: The integration of the Brown wood team and related capabilities is well underway, we're very pleased to welcome them into the coffers family.

Leroy Mangus Ball: Slide 22 shows the added capacity at our facility in Leesville, Louisiana, We now have a new poll pillar and killed in place increasing our trailing of drawing capacity to cost effectively serve an underserved geographic market, where we have historically lacked a presence.

Leroy Mangus Ball: Slide 22 shows the added capacity at our facility in Leesville, Louisiana. We now have a new pole peeler and kiln in place, increasing our peeling and drying capacity to cost-effectively serve an underserved geographic market where we have historically lacked a presence. The Leesville site is close to sources of raw material, and once poles are peeled and dried, they're sent to our underutilized treatment facility in Somer

Leroy Mangus Ball: The Leesville site is close to sources of raw material and once pulls our appeal to dried or sent to our underutilized treatment facility in Somerville, Texas.

Leroy Mangus Ball: Having this operation in place will improve our production efficiencies as well as expand our presence in new utility markets such as Texas. Now under review of each of the businesses. Now I'll start with performance chemicals on page 24.

Leroy Mangus Ball: Having this operation in place will improve our production efficiencies as well as expand our presence in new utility markets such as Texas.

Now onto a review of each of the businesses and I'll start with performance chemicals on page 24.

Leroy Mangus Ball: Q1 for our PC business played out almost exactly as we had planned it heading into the year. We projected flat residential volumes for the year, and in Q1, they finished off by about 1%. As anticipated, we realize the annualization of new residential and industrial business in Q1 that will temper as the year progresses. Adding Brownwood as an internal customer will have some negative impacts on our year over year sales dollars and volume comparisons.

Leroy Mangus Ball: Q1 for our PC business played out almost exactly as we had planned it heading into the year.

Leroy Mangus Ball: We projected flat residential volumes for the year and in Q1, they finished off by about 1%.

Leroy Mangus Ball: As anticipated, we realize the annualized <unk> of new residential and industrial business in Q1 that will temper as the year progresses.

Adding brown wood as an internal customer will have some negative impacts on our year over year sales dollars and volume comparisons, but we still expect better year over year industrial business due to some customer additions in 2023.

Leroy Mangus Ball: But we still expect better year-over-year growth in the industrial market due to some customer additions in 2023. Even though the pull market seems to be taking a temporary breather from the frantic pace in 2023, which I'll touch upon when I cover UIP, the overall backdrop for the industrial markets remains strong and should underpin our expected continued growth in this market segment in 2024 and beyond. From an operations standpoint, our new micronizing capacity has been completed and should begin its first production in May, which will help reduce operating costs in the back half of the year.

Even though the pole market seems to be taking a temporary breather from the frantic pace in 2023, which I'll touch upon when I cover you IP. The overall backdrop for the industrial markets remains strong and should underpin our expected continued growth in this market segment in 2024 and beyond.

Leroy Mangus Ball: From an operation standpoint, our new Micronize and capacity has been completed and it should begin its first production in may which will help reduce operating costs in the back half of the year.

Leroy Mangus Ball: On the raw materials side, copper prices have taken a significant uptick in April and are up 17% this year. This should not generally have an impact on our results this year as we're fully hedged for our 2024 requirement. However, it could complicate discussions for 2025 contract extensions as these higher costs will need to be passed on through the supply chain if they don't revert back to the price band in which they fluctuated during 2023.

Leroy Mangus Ball: On the raw materials side copper prices have taken a significant uptick in April and are up 17%, thus far this year.

Leroy Mangus Ball: It should not generally have an impact on our results. This year as we're fully hedged for our 2024 requirements. However, it could complicate discussions for 2025 contract extensions as these higher costs will need to be passed on through the supply chain. If they don't revert back to the price band in which they have fluctuated during 2023.

Leroy Mangus Ball: While we remain cautious on the demand outlook for the remainder of 2024, we're not adjusting our original expectations. If demand continues to be in line with our original expectations, we think we can generate at least a few million more in profitability above our original expectation for the year of $7 million and instead finish with an EBITDA improvement of somewhere between $9 to $11 million. Moving on to our utility and industrial products business, shown on page 25.

Leroy Mangus Ball: And while we remain cautious on the demand outlook for the remainder of 2024, we're not adjusting our original expectations. If demand continues to be in line with our original expectations. We think we can generate at least a few million dollars more profitability above our original expectation for the year of $7 million.

Leroy Mangus Ball: Instead finished with EBITDA improvement of somewhere between $9 million to $11 million.

Leroy Mangus Ball: Now moving onto our utility and industrial products business shown on page 25.

Leroy Mangus Ball: Both in the US as well as globally, Q1 produced record first quarter profitability, although only nominally higher than the record Q1 in 2023. Excluding our entry into the Texas market, lower volumes had an approximate 7% impact on sales for the first quarter.

Leroy Mangus Ball: Both in the U S as well as globally Q1 produced record first quarter profitability, although only nominally higher than the record Q1 in 2023.

Leroy Mangus Ball: Excluding our entry into the Texas market lower volumes had an approximate 7% impact on sales for the first quarter.

Leroy Mangus Ball: Now we were able to make that up with $2.6 million in price, some of our first real sales into Texas, and better cost management at the plant to bring results in for the quarter slightly ahead of last year. Contributing to the better cost was the new drying capacity that came online in December, which enabled us to take more capacity in house. The second half of the 2.5 million cubic feet of drying capacity is scheduled to come online in Q2 and will help our cost position further.

Leroy Mangus Ball: Now we were able to make that up with $2 6 million of price some of our worst first real sales into Texas and better cost management at the plants to bring results in for the quarter slightly ahead of last year.

Leroy Mangus Ball: Contributing to the better cost was the new drying capacity that came online in December which enabled us to take more capacity in house.

Leroy Mangus Ball: The second half of the $2 5 million cubic feet of drying capacity scheduled to come online in Q2 and will help our cost position further.

Leroy Mangus Ball: The volume drop we experienced in the first quarter was not broad-based but isolated among a segment of our customer base that panicked bought in 2023 as the hot infrastructure market and its various funding mechanisms set the industry off on a buying spree. Now, for those that exhibited more patients, they're sitting on a normal inventory level, and we're seeing regular order patterns.

Leroy Mangus Ball: The volume drop we experienced in the first quarter was not broad based but isolated among this segment of our customer base that panic bought in 2023 is the hard infrastructure market and its various funding mechanisms set the industry off on a buying spree.

Leroy Mangus Ball: Now for those that exhibited more patients theyre sitting on a normal inventory level and were seeing regular order patterns.

Leroy Mangus Ball: Those that worried about industry bottlenecks affecting their projects widened their net of supply to ensure they got everything they wanted and a little bit more. These customers are now sitting on higher inventories they need to work through. That situation has been made a little harder by projects that have been slower to get off the ground due, in some cases, to delays in grant funding and higher... Now, whether it's a quarter or two, demand levels will pick back up to where they were, and I believe that those with a strong network of assets like Koppers will be in the best position to benefit.

Leroy Mangus Ball: Those that worried about treating industry bottlenecks affecting their projects widened their net of supply to ensure they've got everything they wanted and a little bit more.

Now these customers are now sitting on higher inventories they need to work through that.

Leroy Mangus Ball: Situations have been made a little harder about projects that have been slower to get off the ground do in some cases, the delays in grant funding and higher interest rates.

Leroy Mangus Ball: So whether its a quarter or two demand levels will pick back up to where they were and I believe that those with a strong network of assets like coppers will be in the best positioned to benefit.

Leroy Mangus Ball: I want to continue to stress that the long-term fundamentals of this business remain strong due to the macro trends of aging infrastructure, grid hardening, broadband expansion, electrification, and the expansion of renewable energy that will continue to drive a healthy demand for utility poles. Finally, on the UIP front, as I previously mentioned, we closed on Brownwood on April 1st and have been familiarizing ourselves with their operations and customers. This quarter will be spent finishing some of their in-process projects and sorting out opportunities to redirect sales resources and open doors with new accounts.

Leroy Mangus Ball: I want to continue to stress that the long term fundamentals of this business remains strong due to the macro trends of aging infrastructure grid hardening broadband expansion electrification and the expansion of renewable energy that will continue to drive a healthy demand for utility poles.

Leroy Mangus Ball: Finally on the IP front as I previously mentioned, we closed on Brown Wood on April one and had been familiarizing ourselves with their operations and customer base.

Leroy Mangus Ball: This quarter will be spent finishing some of their in process projects and sorting out opportunities to redirect sales resources and open doors with new accounts.

Leroy Mangus Ball: While we expect this acquisition to contribute $15 million in EBITDA from a base business standpoint in 2025, meaning pre-synergies, we're conservatively modeling only $8 million into our 2024 results as we work to get that business fully integrated. Now, our Railroad Products and Services business is summarized on page 26. Despite the rail business contributing to our year-over-year increase in profitability, higher operating costs and a worse-than-expected first quarter from our maintenance-of-way business prevented them from having an even more positive impact on results. Part of the operating cost increase resulted from weather-related impacts, while other increases came from higher labor costs in the form of headcount, rates, and overtime.

Leroy Mangus Ball: While we expect this acquisition to contribute $15 million in EBITDA from our base business standpoint in 2025, meaning pre synergies were conservatively modeling only $8 million into our 2024 results as we work to get that business fully integrated.

Leroy Mangus Ball: Now our railroad products and services business as summarized on page 26.

Leroy Mangus Ball: Despite the rail business contributing to our year over year increase in profitability and rubs higher operating costs in a worst than expected first quarter from our maintenance of way business prevented them from having an even more positive impact on results.

Leroy Mangus Ball: Part of the operating cost increase resulted from weather related impacts while other increases came from higher labor costs in the form of head count rates and overtime the.

Leroy Mangus Ball: The increased labor costs were driven by the need to rebuild inventories up from historically low levels brought on by the railroad's decisions to defer purchasing during the hot hardwood market of 2021 and 2022. Now, we're still continuing to pay, literally, for the decisions made by certain customers that, despite our best efforts, we could not enforce. One of the fundamental flaws of the current contract model that needs to change. As a critical supplier, we need to provide ourselves better protection against the whims of railroad purchasing groups, which we will do through the next contract cycle, or else we'll have fundamentally different relationships. At Koppers, we go to great pains to ensure that our customers receive top quality ropes that will last for their expected life and provide a safe base for them to transport their goods.

Leroy Mangus Ball: The increased labor cost were driven by the need to rebuild inventories up from historically low levels brought on by the railroads decisions to defer purchasing during the hot hardwood market of 2021 and 2022.

Leroy Mangus Ball: Now, we're still continuing to pay literally for the decisions made by certain customers that despite our best efforts, we could not influence.

Leroy Mangus Ball: One of the fundamental flaws of the current contract model that needs to change.

Leroy Mangus Ball: As a critical supplier, we need to provide ourselves better protections against the whims of railroad purchasing groups, which we will do through the next contract cycle or else, we'll have fundamentally different relationships.

At Koppers, we go to great pains to ensure that our customers receive top quality ties that will last further expected life and provide a safe base for them to transport their goods.

Leroy Mangus Ball: That comes at a cost. Certain railroads have understood the value of quality over price and have been willing to pay for it, as demonstrated by their agreement to price increases, while also under contract, to help us cover the historic inflationary cost increases all companies have seen over the past several years. However, others have elected not to do so.

Leroy Mangus Ball: That comes at a cost.

Leroy Mangus Ball: Railroads have understood the value of quality over price and had been willing to pay for it as demonstrated by their agreement to price increases while also under contract to help US cover the historic inflationary cost increases all companies have seen over the past several years.

Leroy Mangus Ball: There's have elected not to do so as.

Leroy Mangus Ball: As a result, we've revisited our business model to align it with our customers' true priorities. For some, that's quality and service. For others, it's pure price. To be clear, Koppers will not compromise safety or product quality, but we've probably been going too far to satisfy what the industry says it values.

As a result, we've revisited our business model to align with our customers' true priorities for some that's quality and service for others, It's pure price.

To be clear coffers will not compromise safety or product quality, but we've probably been going too far to satisfy with the industry says at values.

Leroy Mangus Ball: And we need to shift our focus and priorities to producing a product that's in line with what certain customers' behaviors say about what they really value, which is price. As you might be able to infer from my comments, even though we realized some pricing benefits in Q1 from adjustments that went into effect throughout last year, we still haven't been able to reach an agreement with all of our contracted customer base. So we're going to begin approaching things from the other side of the income statement and go hard at cost, which means that we won't be doing anything that isn't explicitly called for under our contract.

Leroy Mangus Ball: And we need to shift our focus and priorities to producing a product that's in line with what certain customers behaviors say about what they really value which is price.

As you might be able to infer by my comments, even though we realized some pricing benefit in Q1 from adjustments that went into effect throughout last year, we still haven't been able to reach an agreement with all of our contracted customer base. So we're going to begin approaching things from the other side of the income statement and go hard at costs, which means that we won't be doing anything.

Leroy Mangus Ball: That isn't explicitly call for under our contracts.

Leroy Mangus Ball: In the meantime, we continue to explore other uses for our trading assets so that we can get back to earning our cost of capital on our investments if we can't figure out a way to make it work with certain real customers. As for time volumes, demand met expectations in Q1 and will still be better than 2023, although slightly less than original projections. Commercial demand remains as robust as it's been in many years and is still expected to be a strong contributor to 2024 results.

Leroy Mangus Ball: In the meantime, we continue to explore other uses for our trading assets. So that we can get back to earning our cost of capital on our investments if we can't figure out a way to make it work with certain rail customers.

Leroy Mangus Ball: As for tie volumes demand met expectations in Q1, and will still be better than 2023, although slightly less than original projections.

Leroy Mangus Ball: <unk> demand remains as robust as it's been in many years and is still expected to be a strong contributor to 2024 results.

Leroy Mangus Ball: Finally, our maintenance of way business detracted from our Q1 improvement by over $1 million in EBITDA and will be a net negative to our year-over-year results for the remainder of the year, but to a lesser extent than what was seen in the first quarter. In February, we projected $12 million of year-over-year improvement for our Rail Plus utility, or ROPSPITZ.

Finally, our maintenance of way business detracted from our Q1 improvement by over $1 million in EBITDA and will be a net negative to our year over year results. The remainder of the year, but to a lesser extent than what was seen in the first quarter.

In February we projected $12 million of year over year improvement for our rail plus utility or rubber business.

Leroy Mangus Ball: Our current projections are being modified to a range of $10 to $18 million of improvement in EBITDA from 2023. That range includes $8 million of net contribution from the Brownwood acquisition, which would imply a $2 million to $10 million reduction of our base estimate, driven by lower projected sales volumes in the rail business combined with the localized excess inventory in the utility business. Finally, on to the CMC business, which is summarized on page 27.

Leroy Mangus Ball: Our current projections are being modified to a range of $10 million to $18 million of improvement in EBITDA from 2023.

Leroy Mangus Ball: That range includes $8 million of net contribution from the Brown Wood acquisition, which would imply a 2 million to $10 million reduction of our base estimate driven by lower projected sales volumes in the rail business combined with the localized excess inventory in the utility business.

Leroy Mangus Ball: Finally onto the CMC business, which is summarized on page 27.

Leroy Mangus Ball: Despite what looks like a poor first quarter compared to last year's Q1, we actually only finished $3 million in EBITDA off of our expectations for global CM&C. And while Europe and Australia came in slightly better than expected in Q1, North America drove the negative variance.

Despite what looks like a poor first quarter compared to last year's Q1, we actually only finished $3 million in EBITDA off of our expectations for global CMC.

Leroy Mangus Ball: And while Europe, and Australia came in slightly better than expected in Q1, North America drove the negative variance.

Leroy Mangus Ball: Even with higher phthalic anhydride volumes, which received a boost due to backfilling for another producer's outage, we endured higher plant costs due to weather-related unplanned downtime early in the year, higher raw material costs working their way through inventory, and lower pitch volumes in plant throughput. Pitch volumes and throughput will likely be an issue throughout the year, so we need to reduce costs to offset that headwind, which we're in the process of doing.

Leroy Mangus Ball: Even with higher salary and hydride volumes, which received a boost due to back filling for another producers outage, we endure at higher plant costs due to weather related unplanned downtime early in the year higher raw material costs working their way through inventory.

Lower pitch volumes in plant throughput.

Leroy Mangus Ball: Pitch volumes and throughput will likely be an issue throughout the year. So we need to reduce costs to offset that headwind, which we're in the process of doing.

Leroy Mangus Ball: We're projecting some raw material cost relief beginning in Q2, which will work its way through cost of goods over the remainder of the year, and we're working hard to see if we can reduce our raw material costs further. We also expect a continued benefit from elevated phthalic anhydride volumes to last into the second quarter, which will provide at least a short-term benefit.

Leroy Mangus Ball: We're projecting some raw material cost relief beginning in Q2, which will work its way through cost of goods over the remainder of the year and we're working hard to see if we can reduce our raw material costs further.

Leroy Mangus Ball: We also expect a continued benefit from elevated Falcon hydride volumes to last into the second quarter, which will provide at least a short term benefit.

Leroy Mangus Ball: For the remainder of 2024, given the Q1 shortfall and lack of end market visibility beyond the next quarter or two, we're bringing our full-year EBITDA expectations for global CM&C down to $5 to $10 million below 2023, compared to our original projection earlier this year of EBITDA remaining flat for this segment. We believe that the aluminum markets in the U.S. have hit their bottom and we will see improved demand sometime in the not-too-distant future; we just can't say exactly when.

Leroy Mangus Ball: For the remainder of 2024, given the Q1 shortfall and lack of end market visibility beyond the next quarter or two.

Leroy Mangus Ball: We're bringing our full year EBITDA expectations for global team and see down to $5 million to $10 million below 2023 compared to our original projection earlier this year of EBITDA remaining flat for this segment.

Leroy Mangus Ball: We believe that the aluminum markets in the U S have hit their trough and we will see improved demand sometime in the not too distant future. We just can't say exactly when.

Leroy Mangus Ball: The recent momentum around tariffs on steel and aluminum will have a positive impact on our business as it helps drive more U.S. production of those materials. Longer term, Century Aluminum's announcement of their intention to build a new aluminum smelter in the U.S. is great news for U.S. manufacturing and a positive sign that there will always be a critical need for primary aluminum production in the U.S. and, therefore, a need for Koppers carbon-based products.

Leroy Mangus Ball: The recent momentum around tariffs on steel and aluminum will have a positive impact on our business as it helps drive more U S production of those materials.

Leroy Mangus Ball: Longer term century aluminum was announcement of their intention to build a new aluminum smelter in the U S is great news for U S manufacturing and a positive sign that there will always be a critical need for primary aluminum production in the U S and therefore, a need for koppers carbon based products.

Leroy Mangus Ball: Moving to our 2024 guidance on slide 29, we're maintaining consolidated sales growth of four to 5%. Prop sales overall are projected to see $160 million in top-line increase with contributions from Brownwood and higher sales in RPS, partially offset by a short-term pullback in utility volume. PC sales are forecast to be flat year over year, and CM&C sales are estimated to decrease by $60 million due primarily to price and volume declines in carbon pitch, partially offset by volume increases in phthalic anhydrides.

Leroy Mangus Ball: Moving to our 2024 guidance on slide 29, where maintaining consolidated sales growth of 4% to 5% Rob.

Leroy Mangus Ball: We're up sales overall are projected to see $160 million in topline increase with contributions from brown wood and higher sales in Rps, partially offset by short term pullback in utility volumes.

Leroy Mangus Ball: PC sales are forecasted to be flat year over year and <unk> sales are estimated to decrease by $60 million due primarily to price and volume declines in carbon pitch, partially offset by volume increases in salary and hydride.

Leroy Mangus Ball: Overall, our sales forecast for 2024 is approximately $2.25 billion compared with $2.15 billion in 2023. On Slide 30, we're now targeting a range of $265 million to $280 million in adjusted EBITDA for 2024, which includes $8 million from the Brown-Wood Act. While we expect CM&C to show definite improvement for the remainder of this year, making up the first quarter shortfall will be difficult unless there is an uptick in our end markets before year end. We're pursuing several initiatives for long-term improvement in CM&C, but most will not materialize until 2025. All options for improving the CM&C business are on the table, and decisions will be made in short order.

Leroy Mangus Ball: Overall, our sales forecast for 2024 is approximately 2.25 billion compared with $2. One 5 billion in 2023.

Leroy Mangus Ball: On slide 30, we're now targeting a range of $265 million to $280 million and adjusted EBITDA for 2024, which includes $8 million from the Brown Wood acquisition.

While we expect <unk> to show a definite improvement for the remainder of this year, making up the first quarter shortfall will be difficult unless there is an uptick in our end markets before year end.

Leroy Mangus Ball: We're pursuing several initiatives for long term improvement in seamless sea.

<unk> will not materialize until 2025.

Leroy Mangus Ball: All options for improving the CMC business are on the table and decisions will be made in short order.

Leroy Mangus Ball: On the positive side, we're projecting that our PC business will sustain its first quarter outperformance through the rest of the year and likely add to it. On Slide 31, a strong contribution from operations, including the Brownwood acquisition to adjusted EPS, will be offset somewhat by depreciation and amortization and interest, which are both coming in a little higher than originally forecast. For the year, we expect to finish 2024 with a range of $4.10 to $4.60 per share, with the upper end of that range representing a new high for Koppers.

Leroy Mangus Ball: On the positive side, we are projecting that our PC business will sustain its first quarter outperformance through the rest of the year and likely add to it.

Leroy Mangus Ball: On slide 31, a strong contribution from operations, including the Brown Wood acquisition to adjusted EPS will be offset somewhat by depreciation and amortization and interest which are both coming in a little higher than originally forecast.

For the year, we expect to finish 2024 with a range of $4 10 to $4 60 per share with the upper end of that range, representing a new high for koppers.

Leroy Mangus Ball: On slide 32, we're reducing our capital spending estimate to a range of $80 to $90 million in 2024, compared with $116 million in 2023 on a net basis. Required spending on maintenance and zero harm has been cut by $14 million from our beginning of year estimate and is now estimated to be $57 million, with approximately $23 million to $33 million dedicated to our growth and productivity projects.

Leroy Mangus Ball: On slide 32, we're reducing our capital spending estimate to a range of $80 million to $90 million in 2024, compared with $116 million in 2023 on a net basis.

Leroy Mangus Ball: Required spending on maintenance and zero harm has been cut by $14 million from our beginning of your estimate and is now estimated to be 57 million with approximately 23 million to $33 million dedicated to our growth and productivity projects.

Leroy Mangus Ball: We're continuing to target operating cash flows of $150 million, and uses of cash will also include our dividend and some share repurchases that we may do to offset share dilution. We're still preparing for the termination of our U.S. pension plan, which would result in a top-up contribution of approximately $25 million, but the majority of that is now expected to occur in the first quarter of 2025. Slide 33 shows the path to our goal of $315 million to $325 million in adjusted EBITDA by 2025, which includes the contributions from the Brownwood Acquisition.

Leroy Mangus Ball: We're continuing to target operating cash flows of $150 million and.

Leroy Mangus Ball: And uses of cash will also include our dividend and some share repurchases that we may do to offset share dilution.

Leroy Mangus Ball: We are still preparing for the termination of our U S pension plan, which would result in a top up contribution of approximately $25 million, but the majority of that is now expected to occur in the first quarter of 2025.

Slide 33 shows the path to our goal of $315 million to $325 million and adjusted EBITDA by 2025, which reflect the contributions from the Brown Wood acquisition.

Leroy Mangus Ball: I recognize that there are many moving parts to our business that sometimes make it difficult to fully understand our short-term prospects at any given moment, but I truly believe that our diversity is one of our most underappreciated strengths that we will continue to realize the benefits of as time goes on and that our 2025 goals remain squarely within our sights. Now, I would like to open it up to questions. We will now begin the question and answer session.

Leroy Mangus Ball: I recognize that there are many moving parts to our business at sometime make it difficult to fully understand our short term prospects at any given moment, but I truly believe that our diversity is one of our most underappreciated strengths that we will continue to realize the benefits of as time goes on and that our 2025 goals remains squarely within our sites.

Speaker Change: Now I would like to open it up to questions.

Speaker Change: We will now begin the question and answer session.

Operator: To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question is from Liam Burke with B Reilly FBR. Please go ahead. Yeah, thanks.

Speaker Change: 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.

Speaker Change: Our first question is from Liam Burke with B Riley FBR. Please go ahead.

Liam Dalton Burke: Yeah, thank you. Good morning, Leroy. Good morning, Jimmi. Good morning, Liam.

Yes. Thank you good morning, Leroy good morning, Jimmi Sue.

Liam Dalton Burke: Good morning Liam.

Leroy Mangus Ball: Leroy, CMC, after you had resized the infrastructure, it had been a pretty consistent, you know, low single-digit grower, low to mid-teen EBITDA margin generator. And then, I guess over the last three or four quarters, that EBITDA generation has fallen into the mid to low single digits. Has something changed in the business? Or is just the pricing on pitch, um, just been so onerous that it's affected the margins here?

Liam Dalton Burke: Leroy CMC after you had resize the infrastructure.

Had been a pretty consistent low single digit grower.

Liam Dalton Burke: Low to mid teen <unk>.

Liam Dalton Burke: EBITDA margin generator, and then I guess over the last three or four quarters.

And that EBITDA generation has fallen into the mid to low single digits is something changed in the business or is just the pricing.

Liam Dalton Burke: Pitch.

Liam Dalton Burke: Just been so onerous.

Liam Dalton Burke: Effected the margins here.

Leroy Mangus Ball: Yeah, it's a good question. You know, we operate now out of three regions, right, with three facilities, and so, you know, I'd say, as it relates to this business, in general, right, goes through its cycles. We talk about that. 2022 was a situation that we knew was at the top end of the cycle, and we had foreshadowed that that was not going to repeat in 23, and of course, it didn't. Australia and Europe are in solid places, right; they still go through their cycles, but they're in solid places.

Speaker Change: Yes, so it's a good question.

Yes.

Speaker Change: We operate now out of three regions right with with three facilities.

Speaker Change: And so.

Speaker Change: I'd say as it relates to in this business in general rate goes through its cycles, we talk about that two.

Speaker Change: <unk> 2022.

Speaker Change: Was a was a situation that we knew was at the top end of the cycle when we had.

Speaker Change: We had foreshadowed that that was not going to repeat in 'twenty three and of course it didn't.

Speaker Change: In Australia, and Europe are in solid places right. They still go through their cycles, but they are in solid places.

Speaker Change: Sure.

Speaker Change: Now with that they're they're not at the peaks of where they were at but there is still generating good margins good profitability and theres not a lot of capital that has to go back into those businesses. So they are in good spots.

Leroy Mangus Ball: Now, with that, you know, they're not at the peaks of where they were, but they're still, you know, generating good margins, good profitability, and there's not a lot of capital that has to go back into those businesses. So they're in good spots.

Leroy Mangus Ball: North America is a different situation, and it's really not a pricing issue, actually. You know, we get some of the best pricing globally, you know, on our products coming out of the CM&C business in North America. The North American situation is a volume issue and a cost issue. So, you know, when we restructured and went down to one facility in the U.S. and took down, you know, the two remaining, you know, we also, which we talked about, but we don't give a lot of play to since we went through a situation where we restructured our supply contracts as well, and, if you will, reset pricing and how we were going to, you know, price the raw material that we were buying on a go-forward basis.

Speaker Change: North America is a different situation.

Speaker Change: And it's really not a <unk>.

Speaker Change: Pricing issue actually.

Speaker Change: We get some of the best pricing globally on our products coming out of the CMC business in North America.

Speaker Change: North American situation is is a it's a volume issue and a cost issue. So when we restructured and went down to one facility in the U S and took down the two.

Speaker Change: Two remaining we also which we talked about what we don't we don't give a lot of play too since we we went through a situation, where we restructured our supply contracts as well and if you will reset pricing and how we were going to.

Speaker Change: Price the raw material that we were buying on a go forward basis and what has happened over the course of time is.

Leroy Mangus Ball: And what has happened, you know, over the course of time, is that the aluminum markets have contracted and run into a tougher situation from an overall demand standpoint here in the U.S., meaning that there's less demand today than there was. So, while coal tar availability has also shrunk, it's put us in a situation where there's much less throughput. It's put the plant in a situation where it's having a tough time covering, you know, its fixed costs.

The aluminum markets have contracted.

Speaker Change: And run into a tougher situation from an overall demand standpoint here in the U S, meaning that there's less.

Speaker Change: <unk> demand today than there was so.

Speaker Change: While coal tar.

Speaker Change: Availability has also shrunk.

Speaker Change: It's it's put us in a situation where there is more.

Speaker Change: Much less throughput.

Speaker Change: Coming through the plant today than there was.

Speaker Change: Eight years ago, and maybe even two or three years ago, and so as that has fallen.

Speaker Change: And we have pricing of raw materials that are.

Speaker Change: Elevated because our end market pricing is in a good spot.

Speaker Change: It's put the plant in a situation, where it's having a tough time covering fixed costs and so.

Leroy Mangus Ball: And so we, you know, have been going through an assessment of what we can do to to take fixed costs out. And, and we're, you know, we're trying to work on, Unknown Attendee, Leroy Ball, Christian Nielsen, Douglas Fenwick, Jim Healey, Leslie Hyde, Travis Gross, Koppers Holdings Inc., Leroy Ball, Christian Nielsen, Douglas Fenwick, James Sullivan, Leroy Ball, Christian Nielsen, Douglas Fenwick, James Sullivan, Gary Spitz, Gary Prestopino, Unknown Attendee, Leroy Ball, Christian Nielsen, Douglas Fenwick, James Sullivan, Quynh McGuire, James Sullivan, Leroy Ball, Christian Nielsen, Douglas Fenwick, James Sullivan, Unknown Attendee, Leroy Ball, Christian Nielsen, Douglas Fenwick, James Sullivan, Unknown Attendee, Lee Healey, Leslie Healey, Bruce Smiley, William Smith, Thomas [inaudible] in North America currently.

Speaker Change: We have been going through an assessment of what we can do to to take fixed costs out and.

Speaker Change: And we're trying to work on.

Speaker Change: The supply side to see what we can do around pricing and contracts as well going forward, but the situations seem to see it as north American base is U S based and it is a it is a cost.

Speaker Change: It is a cost situation ratio and demand to some extent, but that's that's the pitch.

Speaker Change: We're facing and it's kind of accelerated here over the past probably six to nine months, we had a we had a raw material supplier that was that was down for a period of time last year, which which caused us late in the year to bring over some higher cost material from.

Speaker Change: From overseas, which elevated our costs that we're still working through the system and then we had a we had a a.

Speaker Change: A customer a good customer of ours on the aluminum side.

Speaker Change: Took capacity down at the end of last year and so there was just more more aluminum capacity was coming out of the market and so all of that has kind of worked its way into.

Speaker Change: Whereas the alumina.

Speaker Change: In North America currently sits.

Leroy Mangus Ball: And then on PCs, it looked like the industrial business was up, well, it was up 15% for the quarter, but you talked about moderation through the balance of the year. That business looked like it was on a steady upward trajectory.

Speaker Change: Alright, thank you.

Speaker Change: And then on PC.

Speaker Change: <unk> it looks like the industrial business was up well it was up 15% for the quarter, but you talked about moderation for the balance of the year.

Speaker Change: That business looked like it was on a steady upward trajectory.

Leroy Mangus Ball: Yeah, yeah, so what I mean by that is, I think, you know, in my initial comments at the beginning of the year, and I still stand by them, I think we were thinking, you know, throughout the entire year, we'd see about an overall five to six percent uptake, I think, in industrial, which would include, you know, some of the annualization of new business that we took on last year. And so, you know, we brought business in throughout the year last year.

Speaker Change: Yeah, Yeah, so what I mean by that is.

Speaker Change: I think in my in my initial comments at the beginning of the year and I still stand by them I think we were thinking.

Speaker Change: Throughout the entire year, we'd see about an overall, 5% to 6% uptake I think in industrial which would include some of the annualized <unk> of new business that we took on last year and so.

Speaker Change: We brought business on throughout the year last year. So certainly in the early part of the year Youre going to have.

Leroy Mangus Ball: So certainly in the early part of the year, you're going to have higher variances, if you will, from new customers that might have been added a little later in the year, and that's going to pop the numbers up in the early going to levels like that 15%. As the year goes on, and we get, you know, we basically Unknown Attendee, Leroy Ball, Christian Nielsen, Douglas Fenwick, Jim Healey, Leslie Hyde, Travis Gross, Koppers Holdings Inc.

Speaker Change: Higher variances, if you will from new customers that might've been added a little later in the year and Thats going to pop the numbers up in the early going to levels like that 15% as the year goes on and we get we basically.

Speaker Change: The lap the origination of our supply agreement with them.

Speaker Change: Those variances will be much smaller which will bring the number down as the year goes on but we still expect that we'll be in that 5% to 6% overall increase range.

Leroy Mangus Ball: Great. Thank you, Leroy.

Speaker Change: Alright, Thank you Leroy.

Leroy Mangus Ball: Youre welcome.

Leroy Mangus Ball: The next question is from Gary <unk> with Barrington Research. Please go ahead.

Gary Frank Prestopino: The next question is from Gary Prestopino with Barrington Research. Please go ahead.

Gary: Hi, good morning, everyone.

Gary Frank Prestopino: All right. Good morning, everyone.

Leroy Mangus Ball: Unknown Speaker Hey Leroy, you're talking about what you're doing on the railroad side, which you know you're pretty adamant about that if you didn't get these price increases, you're going to take some kind of drastic action. Unknown Speaker You're now attacking it from the cost side, which I guess I'd like to know, what are you going to do differently now versus what you had done? And then with the entities that have accepted a price increase, is there a risk there that they'll come back to you and say, hey, you didn't increase prices for X customer, why us? Yeah, so I think there's always that risk. And look, we've had customers who have, you know, been great about understanding and working with us on this. You know, all these relationships ebb and flow.

Gary: You're talking about what Youre doing on the railroad side.

Gary: Which.

Gary: You were pretty adamant about that if you.

Gary: Didn't get these price increases youre going to take some kind of drastic action.

Gary: You are now attacking it from the cost side, which I guess.

Gary: I'd like to know what are you going to do differently now versus what you had done and then.

Gary: The entities that have accepted the price increase or is there a risk there that they'll come back to you and say Hey, you didn't increase.

Gary: Increased prices to X customer why us.

Speaker Change: Yes. So I think there is always there is always that risk and what you look we've had we've had customers who have been great about understanding and working with us on this.

Speaker Change: All of these relationships ebb and flow.

Leroy Mangus Ball: And to be honest, a lot of them ebb and flow based upon, you know, where the pressure is coming from, if you will, from an investor standpoint, right? So, we all know going back six, seven, eight years ago, the heavy push towards precision schedule railroading, which, you know, really had a heavy emphasis on cost as well. And so, I can tell you, you know, the relationships during those periods of time, in most cases, for the railroads who were going hard at it, were not great.

And to be honest, a lot of an ebb and flow based upon.

Speaker Change: Where the pressure is coming if you will from an investor standpoint, right. So we all know going back 678 years ago.

Speaker Change: Heavy push towards precision scheduled railroading, which.

Speaker Change: Yes.

Speaker Change: We really had a heavy emphasis on cost as well and so I can tell you the relationships during those periods of time.

Speaker Change: Most cases for the railroads, who we're going hard at that were not great.

Speaker Change: Some of those.

Speaker Change: Turned around and are in better spots now.

Leroy Mangus Ball: Some of those have turned around and are in better spots now. I guess really what I'm trying to say is, as we sit here today, there's a certain portion of our customer base that I think has recognized the value of having a healthy supplier who produces high quality products and services them well. And for those, they've been willing to, Unknown Attendee, Leroy Ball, Christian Nielsen, Douglas Fenwick, Jim Healey, Leslie Hyde, Take a consistent approach as we probably have in the past. For those who have drawn a hard line, just more or less say, yeah, you know what, that's your problem.

Speaker Change: Really what I'm trying to say is as we sit here today. There is a certain portion of our customer base and I think has recognized the value of.

Speaker Change: Having a healthy supplier who.

Speaker Change: Produces high quality products and services.

Speaker Change: Services them, well and for those they've been willing to.

Step up and say, we understand we've all gone through unprecedented times and we understand that you might be contractually.

Speaker Change: Constricted in terms of what you can pass on to us.

Speaker Change: But we're willing to help you through this.

Speaker Change: So for them, we're going to take the.

Speaker Change: Take a consistent approach as we probably have in the past for those who have drawn a hard line just more of lets say you know what.

Speaker Change: That's your problem.

Leroy Mangus Ball: Then, you know, in terms of what we're going to do differently, Well, that's going back to, you know, looking hard at what we're doing today that falls outside of the contract. It costs us money, real money, and those are the things that we're going to quit doing, which will enable us to cut out a large swath of overtime that we're incurring. It'll enable us to likely go down to less people in the plant because we won't always be having to juggle things around, you know, those particular customer priorities.

Speaker Change: Then.

In terms of what are we going to do differently, we'll that's going back to looking hard at what we're doing today that falls outside of the contract that cost us money.

Money.

Speaker Change: And that's.

Speaker Change: And those are the things that we're going to quit doing which will enable us to cut out a large swath of overtime, but we're incurring.

Speaker Change: Unable us to likely go down too so.

Speaker Change: So less people in the plant.

Speaker Change: As we won't always be having to juggle things around those particular customer priorities and.

Leroy Mangus Ball: And, you know, there's things that we do for those customers that end up being in front of, you know, commercial business that we end up sacrificing. And I think the approach we're going to take there is different, in which case, we're going to prioritize, again, the business that we need to be able to make an acceptable profit. So we're going to be able to take out, we think, a good portion of the cost. But is it going to be able to get us back to where we want entirely? No.

Speaker Change: There are things that we do for those customers.

Speaker Change: That.

Speaker Change: End up being in front of commercial business that we ended up sacrificing and I think the approach we're going to take there is.

Speaker Change: Is it different in which case.

Speaker Change: We're going to prioritize again, the business that we need to be able to make the certain acceptable profit. So we're going to be able to take out we think.

Speaker Change: A good portion of cost is it going to be able to to get us back to where we want entirely no.

Speaker Change: But but it'll it'll certainly I think.

Leroy Mangus Ball: But it'll certainly, I think, if nothing else, send the message that if what you value truly is price, and that's what you care about most, then we're going to do everything we can to put our cost structure in line to give you the lowest cost or cross-tie as possible. And it's up to them to decide whether the service that they're getting, the lesser service than what they're used to getting, is worth that price or not.

Speaker Change: Ill send the message that.

Speaker Change: Yes.

Speaker Change: If what you value truly is price and Thats, what you care about most and we're going to do everything would be into what our cost structure aligns with the lowest cost.

Speaker Change: Crosstie as possible and it's up to them to decide whether the service that they're getting the lesser of servicing what they're used to getting his works at that price or not we'll see where it goes but it's going to be more of a.

Speaker Change: Pay as you go in terms of what you want.

Speaker Change: As we get to the end of <unk> again.

Speaker Change: Contracts, we'll work on trying to get something in place.

Leroy Mangus Ball: And we'll see where it goes, but it's going to be more of a pay-as-you-go in terms of what you want, that put this in a much better position to work through the ups and downs of some of these markets. One other example, Gary, I'll give you just in this is one, that has hurt us pretty, pretty badly in different periods, which is the green tie procurement, right? And when we have to take the direction of our customer base in terms of sort of where we can be at or what they're willing to pay for the untreated cross ties that go into our plant, that ultimately feed the cylinders when they air dry.

Speaker Change: That puts us in a much better position to work through ups and downs of some of these markets. One of the example, Gary I'll give you just and this is one.

Speaker Change: That has hurt us pretty pretty badly.

Speaker Change: In different periods.

Speaker Change: Which is the.

Speaker Change: Green tie procurement right.

Speaker Change: When we have to take the direction of our customer base in terms of sort of where we can be at.

What they are willing to pay for the untreated cross ties that go into our plant.

Speaker Change: That ultimately feed the cylinders when they are dry.

Leroy Mangus Ball: And, you know, in a stronger environment for hardwoods when pricing is going up, and they're reluctant to pay the price to get the ties that we need to keep a consistent flow through our plants. You know, that doesn't have an impact, you know, on the front end of things so much, but when you draw inventories down to a certain level. You've got to get them built back up, and all of a sudden you're killing your plants by just flooding them with tides everywhere.

Speaker Change: And we're in a stronger environment for hardwood pricing is going up and they are reluctant to pay the price to get the ties that we need to keep a consistent flow through our plants.

Speaker Change: That doesn't have an impact.

Speaker Change: On the front end of things so much but when you drove inventories down to a certain level.

Speaker Change: You've got to get them built back up and all of a sudden you're killing your plants by just flooding them with ties everywhere we had increases.

Leroy Mangus Ball: It increases, you know, the labor cost significantly. And there's no mechanism within the contracts to be able to charge any of that back. We eat it all. We eat it all. And that just can't happen. Thank you.

Speaker Change: The labor cost significantly and there is no. There is no mechanism within the contracts to be able to charge any of that back we eat it all we eat at all and.

Speaker Change: That just can't happen.

Speaker Change: Okay. Thank you I appreciate it.

Yes.

Speaker Change: Yeah.

Michael Matheson: The last question today comes from Michael Matheson with Singular Research. Please go ahead. Good morning, you guys, and thanks for joining us.

Speaker Change: The last question today comes from Michael Madison with singular research. Please go ahead.

Michael Matheson: Good morning, you guys, and thanks for taking my question. I'd like to start with, oh thank you, I'd like to start with the round acquisition. Just some quick arithmetic, it looks to me like your utility poll volumes will increase by about a third. When the integration is complete, what do you foresee is the impact on Rupp's margins overall?

Michael Madison: Good morning, guys and thanks for taking my question.

Michael Madison: Good morning, I'd like to start with I think you're right right.

Michael Madison: To start with the Brown acquisition.

Michael Madison: Just some quick arithmetic it looks to me like your utility coal volumes will increase by about a third.

Michael Madison: When the integration is complete.

Michael Madison: What do you foresee as the impact on <unk> margins overall.

Michael Madison:

Michael Madison: So it's a good question. It's a good question and Jimmy Sue I'm going to defer to you to sort.

Jimmi Sue Smith: So it's a good question. It's a good question, and you know, Jimmy Hsu, I'm gonna defer to you to sort of take a first crack at this, and then I'll provide any supporting comments.

Jimmi Sue Smith: I'll take a first crack at this and then I'll provide some any sort of any supporting comments.

Jimmi Sue Smith: Sure so.

Jimmi Sue Smith: In terms of the utility business margins.

Jimmi Sue Smith: I would characterize it as the Brown acquisition margins were similar to the margins that we are experiencing in the utility space, so I don't think it will significantly impact the margins there. Your comment on volumes, I think Did you say you thought they were going to go down by a third?

Jimmi Sue Smith: I think the I would characterize it as the Brown acquisition margins were similar to the margins that we are experiencing in the utility space. So.

Jimmi Sue Smith: I don't think it will significantly impact the margins there.

Jimmi Sue Smith: Not a comment on volumes I think.

Did you say you thought they were going to go down by a third.

Michael Matheson: No, up by a third. Up by a third.

Speaker Change: Okay alright, thank you.

Jimmi Sue Smith: Okay. All right. Thank you. So, yeah, I think the margins will, once we sort through sort of integration and supply channels, I think the margins will be in the ballpark of where they have been for the last year or so. Thank you. Looking at performance chemicals in your release, you noted a little bit of pricing weakness despite a volume increase. How do you see pricing for the balance of the year?

Speaker Change: So, yes, I think the margins will once we sort through them.

Speaker Change: Sort of integration and and and supply channel I think the margins will be in the ballpark of where where they have has been for the last year or so.

Speaker Change: Okay. Thank you.

Looking at performance chemicals.

Speaker Change: In your release, you noted a little bit of pricing weakness despite the volume increase.

Speaker Change: How do you see pricing for the balance of the year.

Leroy Mangus Ball: We're more or less locked in on most of our pricing, other than spot stuff, and so I don't expect much of an impact at all, and you know, the dollars that we saw in the first quarter... really nothing compared to some of the movements we've seen over the past few years. So it will have little to no effect, I think, this year. And then, of course, we'll be coming up on renewals at the end of the year, and we'll see where that goes. But we're pretty much locked into prices for all of our largest customers. And so you're not going to see much. Anything you see on a pricing thing is probably more mix-related than anything else.

Speaker Change: Well pricing, we're more or less locked in for our most of our pricing other than spot stuff.

Speaker Change: And so I don't expect much of an impact at all in the.

Speaker Change: The dollars that we saw in the first quarter.

Speaker Change: Really.

Speaker Change: Nothing compared to some of the movements, we've seen over the past few years. So.

Speaker Change: It will have little to no effect I think in this year and then of course, we'll be coming up on renewals at the end of the year, and we'll see where that goes but yes.

Speaker Change: Yes.

Speaker Change: We're pretty much locked into pricing for all of our largest customers and so youre not going to see much anything you see on the pricing things can probably more mix related than anything else.

Speaker Change: Great well, thank you for the information in the background and congratulation.

Michael Matheson: Great. Well, thank you for the information and the background, and congratulations. Thank you, Michael.

Speaker Change: Thank you Michael.

Leroy Mangus Ball: This concludes our question and answer session. I would like to turn the conference back over to CEO Leroy Ball for any closing remarks.

This concludes our question and answer session I would like to turn the conference back over to CEO Leroy ball for any closing remarks.

Leroy Mangus Ball: Thank you I, just again want to thank everybody for their support as I mentioned at the top of the.

Leroy Mangus Ball: Thank you. I just again want to thank everybody for their support.

Leroy Mangus Ball: The call.

Leroy Mangus Ball: The first quarter financial results were not where we wanted them to be or expected them to be.

Leroy Mangus Ball: As I mentioned at the start of the call, you know, the first quarter financial results were not where we wanted them to be or expected them to be. But we still think we have the opportunity to finish the year strong and actually finish the year, hopefully, towards the higher end of the range that we put out there right now. A lot of work is going on within the various businesses to improve them going forward, and we remain committed to our 2025 goals while we also shape the plan beyond that. I appreciate everybody's interest in Koppers and your support, and thank you for that. I look forward to catching up with you again next quarter. Thank you.

Leroy Mangus Ball: We still think we have.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Leroy Mangus Ball: The opportunity to two.

Leroy Mangus Ball: <unk> finished the year strong and actually finished the year hopefully towards the higher end of the range that we put out there right now a lot of work is going on.

Leroy Mangus Ball: Within the various businesses too.

Leroy Mangus Ball: To improve them going forward and we remain committed to our 2025 goals. While we also shape the planned beyond that so we appreciate everybody's interest in koppers and your support.

Speaker Change: And thank you for that.

Speaker Change: Look forward to catching up with you again next quarter. Thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: ??? ??? ??? ??? ??? ??? ??? ???

Speaker Change: Yeah.

Speaker Change: [music].