Q2 2024 Koppers Holdings Inc Earnings Call

August 8, 2024

Operator: Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Koppers second 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 key, 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 would now like to turn the conference over to Ms. Quynh McGuire. Please go ahead, ma'am.

Operator: Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Koppers' second 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 key, 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 would now like to turn the conference over to Ms. Quynh McGuire. Please go ahead, ma'am.

Operator: Following the presentation, instructions will be given for the question and answer session. Please note this event is being recorded. I would now like to turn the conference over to Ms. Quynh McGuire. Please go ahead, ma'am.

Quynh McGuire: Thanks and good morning. I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our second quarter of 2024 earnings conference call. We issued our press release earlier today. You may access it via our website at www.koppers.com.

Quynh 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 and prior quarterly conference calls, this call was broadcast live on our website, and a recording of this call will be available on our website for replay through November 8, 2024. At this time, I would like to direct your attention to our Forward-looking Disclosure Statement, scene on slide two.

Quynh 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 November 8, 2024. At this time, I would like to direct your attention to our forward-looking disclosure statement, seen on slide 2.

Quynh 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.

Quynh McGuire: 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 website for replay through November 8, 2024.

Quynh McGuire: At this time, I would like to direct your attention to our forward-looking disclosure statement, seen on slide 2.

Quynh 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. 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 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.

Quynh McGuire: Certain comments made on this conference call may be characterized as forward-looking statements and is defined under the Private Securities Litigation Reform Act of 1995.

Quynh 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 on our call today are Leroy Ball, Chief Executive Officer of Koppers, and Jimmi Sue Smith, Chief Financial Officer. I'll now turn the call over to Leroy.

Quynh McGuire: 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.

Quynh McGuire: 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.

Quynh McGuire: The company's actual results, performance, or achievements may differ materially from those expressed in or implied by such forward-looking statements.

Quynh McGuire: The company assumes no obligation to update any forward-looking statements made during this call.

Quynh McGuire: 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.

Quynh McGuire: Joining me for our call today are Leroy Ball, Chief Executive Officer of Koppers, and Jimmi Sue Smith, Chief Financial Officer. I'll now turn the call over to Leroy.

Leroy Ball: Thank you, Quynh. Good morning, everyone, from beautiful Denmark.

Leroy Ball: Thank you, Quynh. Good morning, everyone, from beautiful Denmark. The Koppers team finds themselves doing this call from the city of New York in Denmark, which is the site of one of our three strategically-situated carbon material and chemicals plants and where we recently conducted our board meeting, which included visiting our plant and spending time with our employees at the site. We have a great team in Europe, led by Christian Nielsen and Dr. Steve Krimp.

Leroy Ball: Thank you, Quynh. Good morning, everyone, from beautiful Denmark.

Leroy Ball: The Koppers team finds themselves doing this call from the city of New York in Denmark, which is the site of one of our three strategically-situated carbon material and chemicals plants and where we recently conducted our board meeting, which included visiting our plant and spending time with our employees at the site. We have a great team in Europe, led by Christian Nielsen and Dr. Steve Krimp. Christian and his team were able to show our board the recently commissioned enhanced carbon products plant that will enable us to improve our throughput of higher value carbon products while also opening up new and exciting market opportunities.

Speaker Change: The Koppers team finds ourselves doing this call from the city of New Oregon, Denmark, which is the site of one of our three strategically situated carbon material and chemicals plants, and where we recently conducted our board meeting, which included visiting our plant and spending time with our employees at the site.

Leroy Ball: We have a great team in Europe led by Christian Nielsen and Dr. Steve Krimp.

Leroy Ball: Christian and his team were able to show our board the recently commissioned enhanced carbon products plant that will enable us to improve our throughput of higher value carbon products, also opening up new and exciting market opportunities. In addition, Steve and his team were also able to show off the new European performance chemicals lab and pilot plant and review our opportunities for growing the PC business in Europe. It was a very productive week, and my thanks go out to the entire team here in Europe for their hospitality and commitment.

Leroy Ball: In addition, Steve and his team were also able to show off the new European performance chemicals lab and pilot plant and review our opportunities for growing the PC business in Europe. It was a very productive week, and my thanks go out to the entire team here in Europe for their hospitality and engagement. Now, as Quynh mentioned, joining me on this call today, as usual, is our CFO, Jimmi Sue Smith. But I also have our President and Chief Operating Officer, Jim Sullivan, who will be joining Jimmi Su and me for the question and answer session.

Leroy Ball: Now, as Quynh mentioned, joining me on this call today, as usual, is our CFO, Jimmi Sue Smith. But I also have our President and Chief Operating Officer, Jim Sullivan, who will be joining Jimmi Su and me for the question and answer session.

Leroy Ball: Now as Quynh mentioned joining me on this call today as usual is our CFO Jimmy Sue Smith but I also have our President and Chief Operating Officer Jim Sullivan who will be joining Jimmy Sue and I for the question and answer session.

Leroy Ball: I'm pleased to share the results of our very successful second quarter coming on the heels of our prior report that outlined some of the early challenges that we were facing in 2024. Now, while some of those market challenges still persist, we dove headfirst into focusing on the things that we could control, with cost being the largest element. The result was a new high in quarterly EBITDA and hopefully renewed confidence from the market that we remain on track to meeting our near-term goals for 2024 and 2025.

Leroy Ball: I'm pleased to share the results of our very successful second quarter coming on the heels of our prior report that outlined some of the early challenges that we were facing in 2024. Now, while some of those market challenges still persist, we dove head first into focusing on the things that we could control, with cost being the largest element. The result was a new high in quarterly EBITDA and hopefully renewed confidence from the market that we remain on track to meeting our near-term goals for 2024 and 2025.

Leroy Ball: I'm pleased to share the results of our very successful second quarter coming on the heels of our prior report that outlined some of the early challenges that we were facing in 2024.

Leroy Ball: Now, while some of those market challenges still persist, we dove head first into focusing on the things that we could control with cost being the largest element.

Leroy Ball: The result was a new high in quarterly EBITDA and hopefully renewed confidence from the market that we remain on track to meeting our near-term goals for 2024 and 2025.

Leroy Ball: So as a start, let's begin on slide 4 by looking at some of our key metrics for the quarter. Consolidated sales were 563.2 million, which was off by 14 million compared with 577.2 million in the prior year quarter. Now, we added a modest amount of sales during the quarter from our brown wood acquisition, some of which were offset by PC Chemical sales to Brown being classified now as intercompany, and also lower pricing and volume in the CM&C business, which drove the consolidated sales comparison lower.

Leroy Ball: So as a start, let's begin on slide four by looking at some of our key metrics for the quarter. Consolidated sales were 563.2 million, which was off by 14 million compared with 577.2 million in the prior year quarter. Now, we added a modest amount of sales during the quarter from our brown wood acquisition, some of which were offset by PC chemical sales to brown being classified now as intercompany, and also lower pricing and volume in the CM&C business, which drove the consolidated sales comparison lower.

Leroy Ball: So as a start, let's begin on slide four by looking at some of our key metrics for the quarter.

Leroy Ball: Consolidated sales were $563.2 million, which was off by $14 million compared with $577.2 in the prior year quarter.

Leroy Ball: Now, we added a modest amount of sales during the quarter from our brown wood acquisition, some of which were offset by PC Chemical sales to brown being classified now as intercompany, and also lower pricing and volume in the CM&C business, which drove the consolidated sales comparison lower.

Leroy Ball: Now even on lower cells, we were able to generate adjusted EBITDA of $77.5 million, a new high compared with $70.3 million in the prior year. Adjusted EBITDA margin was 13.8% versus 12.2% in the prior year. 13.8% represents our quarterly high margin mark since quarter two of 2021 and is a meaningful improvement over where we've been tracking. Second quarter diluted earnings per share was $1.25 compared with $1.15 in the prior year quarter, while adjusted earnings per share for the quarter were $1.36 compared with $1.26 in the prior year quarter.

Leroy Ball: Even on lower cells, we were able to generate adjusted EBITDA of $77.5 million, a new high compared with $70.3 million in the prior year.

Leroy Ball: Adjusted EBITDA margin was 13.8% versus 12.2% in the prior year. 13.8% represents our quarterly high margin mark since quarter 2 of 2021 and is a meaningful improvement over where we've been tracking.

Leroy Ball: Second quarter diluted earnings per share was $1.25 compared with $1.15 in the prior year quarter, while adjusted earnings per share for the quarter were $1.36 compared with $1.26 in the prior year quarter.

Leroy Ball: Q2 also represented a strong cash flow quarter as operating cash flow doubled our Q2 2023 number. The Koppers team has done a nice job over the past 18 months of understanding the connection and power of turning earnings into cash and continues to make it a focus of their everyday work. All three business segments showed significant sequential improvement in the second quarter, pushing consolidated results to new heights. Performance chemicals delivered the most improvement as demand for our residential wood treatment preservatives continued to be resilient, despite some unfavorable industry trends.

Leroy Ball: q two also represented a strong cash flow quarter as operating cash flow doubled our q two two thousand and twenty-three number

Leroy Ball: The Koppers team has done a nice job over the past 18 months of understanding the connection and power of turning earnings into cash and continues to make it a focus of their everyday work.

Leroy Ball: All three business segments showed significant sequential improvement in the second quarter, pushing consolidated results to new heights.

Leroy Ball: Performance chemicals deliver the most improvement as demand for our residential wood treatment preservatives continue to be resilient despite some unfavorable industry trends.

Leroy Ball: In addition, cost reduction measures across the board help to offset current market conditions and keep us on track for a strong 2024. Now, let's take a look at our continuing zero harm efforts on slide six. Zero Harm 2.0 remains our primary focus, re-energizing engagement at the front line of operations to accelerate our progress towards zero incidents. For the first half of 2024, 28 out of 47 facilities worldwide performed accident-free. We have two business units right here in Europe, our CM&C and Performance Chemicals businesses, that have had zero recordables year to date.

Leroy Ball: In addition, cost reduction measures across the board help to offset current market conditions and keep us on track for a strong 2024. Now, let's take a look at our continuing zero harm efforts on slide six. Zero Harm 2.0 remains our primary focus, re-energizing engagement at the front line of operations to accelerate our progress towards zero incidents. And for the first half of 2024, 28 out of 47 facilities worldwide performed accident-free. We have two business units right here in Europe, our CM&C and Performance Chemicals businesses, that have had zero recordables year to date.

Leroy Ball: In addition, cost reduction measures across the board help to offset current market conditions and keep us on track for a strong 2024.

Leroy Ball: Now let's take a look at our continuing Zero Harm efforts on slide 6.

Leroy Ball: harm two pointin o remains our primary focus reenergizing engagement the front line of operations to accelerate our progress towards zero incid

Leroy Ball: For the first half of 2024, 28 out of 47 facilities worldwide performed accident-free. We have two business units right here in Europe , our CM&C and Performance Chemicals businesses, that had zero recordables year-to-date.

Leroy Ball: Compared to the prior year, leading activities year-to-date through June 30th experienced a 2% decline while our recordable injury rate was lowered by 6%, and serious safety incidents improved by 22%. We're encouraged by these metrics, and we give credit to our team members worldwide. As always, we'll continue to strengthen our Zero Harm culture by focusing on the health and safety of our people. Now with an overview of our second quarter financials is our Chief Financial Officer, Jimmy.

Leroy Ball: Compared to the prior year, leading activities year-to-date through June 30th experienced a 2% decline while our recordable injury rate was lowered by 6%, and serious safety incidents improved by 22%. We're encouraged by these metrics, and we give credit to our team members worldwide. As always, we'll continue to strengthen our zero harm culture by focusing on the health and safety of our people. Now, with an overview of the second quarter financials, is our Chief Financial Officer, Jimmi Sue Smith.

Leroy Ball: compared to the prior year. Leading activities year-to-date through June 30th have experienced a 2% decline while our recordable injury rate was lowered by 6% and serious safety incidents improved by 22%.

Leroy Ball: Now, we're encouraged by these metrics and we give credit to our team members worldwide.

Speaker Change: as always well continue to strengthen our zero harm culture through focusing on the health and safety of our people now with an overview of second quarter financials is our chief financial officer jimmy suussmith

Jimmi Sue Smith: Thanks, Leroy. This morning, we issued a press release detailing our second quarter 2024 results, which include our recent acquisition of Brown Wood Preserving Company. My comments today are based on that information. On slide 8, as Leroy mentioned, second quarter sales were down $14 million, or 2.4% from the prior year. By segment, RUC sales increased $20 million, or 8.3%. TC sales decreased $4 million, or 2.2%.

Jimmi Sue Smith: Thanks, Leroy. This morning, we issued a press release detailing our second quarter 2024 results, which include our recent acquisition of Brown Wood Preserving Company. My comments today are based on that information. On slide 8, as Leroy mentioned, second quarter sales were down $14 million or 2.4% from the prior year. By segment, RUC sales increased $20 million or 8.3%, PC sales decreased $4 million or 2.2%, while CM&C sales decreased $30 million or 18.2% from the prior year quarter.

Jimmi Sue Smith: On slide 8, as Leroy mentioned, second quarter sales were down $14 million, or 2.4% from the prior year. By segment, rep sales increased $20 million, or 8.3%.

Jimmi Sue Smith: While CM&C sales decreased $30 million, or 18.2% from the prior year quarter, on slide 9, Adjusted EBITDA was a quarterly record $78 million, resulting in a 13.8% margin. By segment, RUPS generated Adjusted EBITDA of $22 million, with an 8.8% margin. PC delivered Adjusted EBITDA of $44 million, a 25% margin. And CM&C reported Adjusted EBITDA of $11 million, with an 8.2% margin. On 5-10, our RUPS business achieved record sales for the quarter of $254 million compared to $234 million in the prior year.

Jimmi Sue Smith: PC sales decreased $4,000,000 or 2.2%, while CM&C sales decreased $30,000,000 or 18.2% from the prior year quarter.

Jimmi Sue Smith: On slide 9, Adjusted EBITDA was a quarterly record $78 million, resulting in a 13.8% margin. By segment, RUPS generated Adjusted EBITDA of $22 million with an 8.8% margin. PC delivered Adjusted EBITDA of $44 million, a 25% margin, and CM&C reported Adjusted EBITDA of $11 million, with an 8.2% margin. On slide 10, our RUPS business achieved record sales for the quarter of $254 million compared to $234 million in the prior year. Price increases were at 12.7 million, mainly on cross ties, and cross tie utility pole volumes were higher by 9.4 million. We also saw lower activity during the quarter in our cross-tie recovery system. However, from a market trend perspective, prices for untreated cross pies remain relatively stable.

Jimmi Sue Smith: On slide 9, adjusted EBITDA was a quarterly record $78 million, resulting in a 13.8% margin.

Jimmi Sue Smith: By segment, RUPS generated adjusted EBITDA of $22,000,000 with an 8.8% margin. PC delivered adjusted EBITDA of $44,000,000, a 25% margin. And CM&C reported adjusted EBITDA of $11,000,000 with an 8.2% margin.

Jimmi Sue Smith: On slide 10, our RUPS business achieved record sales for the quarter of $254 million compared to $234 million in the prior year.

Jimmi Sue Smith: Price increases added $12.7 million, mainly on crossties, and crosstie and utility pole volumes were higher by $9.4 million. We also saw lower activity during the quarter in our cross-tire recovery system. From a market trend perspective, prices for untreated cross ties remain relatively stable.

Jimmi Sue Smith: Price increases added $12.7 million, mainly on crossties, and crosstie and utility pole volumes were higher by $9.4 million.

Jimmi Sue Smith: We also saw lower activity during the quarter in our cross-tire recovery business.

Jimmi Sue Smith: From a market trend perspective, prices for untreated crossties remain relatively stable. And compared to the prior year quarter, crosstie procurement was down by 10% and crosstie treatment was lower by 2%.

Jimmi Sue Smith: Compared to the prior year quarter, cross-tie procurement was down by 10%, and cross-tie treatment was lower by 2%. However, adjusted EBITDA for RUPS was consistent with the prior year at $22 million. Profitability was flat despite realizing sales price increases, a $4 million benefit from improved plant utilization, and higher cross-tie and utility pole volumes, as these gains were offset by approximately $14 million of higher raw material, operating, and SG&A expenses, along with lower activity in our cross-tie recovery business.

Jimmi Sue Smith: Adjusted EBITDA for RUPS was consistent with the prior year at $22 million.

Jimmi Sue Smith: Profitability was flat despite realizing sales price increases.

Jimmi Sue Smith: a $4 million benefit from improved plant utilization and higher cross-tie and utility pole volumes, as these gains were offset by approximately $14 million of higher raw material, operating, and SG&A expenses, along with lower activity in our cross-tie recovery business.

Jimmi Sue Smith: On slide 11, our performance chemicals business delivered second quarter sales of $177 million compared to $181 million in the prior year quarter. The sales decline was driven by a $3.5 million decrease in sales volumes in the Americas, primarily due to preservative sales to brown wood now being intercompany sales, along with pricing decreases globally. This was partly offset by higher volumes in Australasia.

Jimmi Sue Smith: On slide 11, our performance chemicals business delivered second quarter sales of $177 million compared to $181 million in the prior year quarter.

Jimmi Sue Smith: The sales decline was driven by a $3.5 million decrease in sales volumes in the Americas, primarily due to preservative sales to brown wood now being intercompany sales, along with pricing decreases globally. This was partly offset by higher volumes in Australasia.

Jimmi Sue Smith: Adjusted EBITDA for PC was $44 million for the quarter compared with $32 million in the prior year quarter. Profitability was higher as a result of lower raw material costs, offsetting lower sales prices and volumes. The reduced costs were favorably impacted by timing, including net gains realized from our copper hedging program, net at a higher copper cost recognized in cost of goods sold to date. We see that some copper prices spike quickly, as happened in the second quarter, and we will see the impact of the cost of goods sold in a later period.

Jimmi Sue Smith: Adjusted EBITDA for PC was $44 million for the quarter compared with $32 million in the prior year quarter. profitability was higher as a result of lower raw material costs offsetting lower sales prices and volumes. The reduced costs were favorably impacted by timing, including net gains realized from our copper hedging program, net at a higher copper cost recognized in cost of goods sold to date. We see that some copper prices spike quickly, as happened in the second quarter, and we will see the impact of the cost of goods sold in a later period.

Jimmi Sue Smith: Adjusted EBITDA for PC was $44 million for the quarter compared with $32 million in the prior year quarter.

Jimmi Sue Smith: Profitability was higher as a result of lower raw material costs, offsetting lower sales prices and volumes. The reduced costs were favorably impacted by timing, including net gains realized from our copper hedging program, net of the higher copper costs recognized in cost of goods sold to date.

Jimmi Sue Smith: We see that some copper prices spike quickly, as happened in the second quarter, and we will see the impact of the cost of goods sold in a later period. We continue to believe our normalized margins are in the high teens, as we have seen over the last 18 months.

Jimmi Sue Smith: We continue to believe our normalized margins are in the high teens, as we have seen over the last 18 months. On slide 12, our carbon materials and chemicals business reported second quarter sales of $132 million, compared to $162 million in the prior year quarter, on reduced market demand, especially in Europe, where sales were down $22 million on equal parts, pricing, and volumes, especially for carbon pitch. Globally, prices were down approximately $25 million for the quarter.

Jimmi Sue Smith: These decreases were partly offset by higher volumes for phthalic anhydride and carbon flaxseed stocks. However, adjusted EBITDA for CM&C in the second quarter was $11 million compared with $16 million in the prior year quarter as a result of lower prices globally and lower volumes in Europe. These decreases were partly offset by 16 million and lower raw material costs, particularly in Europe and higher volumes of delicate hydrods. Nevertheless, sequentially, the average pricing of major products was 3% lower, and average coal tar costs were flat.

Jimmi Sue Smith: On slide 12, our carbon materials and chemicals business reported second quarter sales of $132 million, compared to $162 million in the prior year quarter, on reduced market demand, especially in Europe , where sales were down $22 million on equal parts, pricing, and volumes, especially for carbon pitch.

Jimmi Sue Smith: Globally, prices were down approximately $25 million for the quarter. These decreases were partly offset by higher volumes for phthalic anhydride and carbon flaxseed stock.

Jimmi Sue Smith: These decreases were partly offset by higher volumes for phthalic anhydride and carbon flaxseed stocks. However, adjusted EBITDA for CM&C in the second quarter was $11 million compared with $16 million in the prior year quarter as a result of lower prices globally and lower volumes in Europe. These decreases were partly offset by $16 million in lower raw material costs, particularly in Europe, and higher volumes of phthalic anhydride. However, sequentially, the average pricing of major products was 3% lower, and average coal tar costs were flat.

Jimmi Sue Smith: Adjusted EBITDA for CM&C in the second quarter was $11 million, compared with $16 million in the prior year quarter, as a result of lower prices globally and lower volumes in Europe .

Jimmi Sue Smith: These decreases were partly offset by $16 million in lower raw material costs, particularly in Europe , and higher volumes of phthalic anhydride.

Jimmi Sue Smith: sequentially the average pricing of major products was three percent lower and average coldtar costs were flat

Jimmi Sue Smith: Compared to the prior year quarter, the average pricing of major products declined by 17%, while average coal tar costs decreased by 21%. Slide 14 details capital allocation for the quarter. For 2024, net capital expenditures were $42 million through June 30, with a full-year forecast of $80 to $85 million. We allocated $32 million to share repurchases year-to-date, all during the second quarter when our share price fell sharply. While we remain committed to a balanced capital allocation approach, this is an example of us being more aggressive with buybacks when we feel there's a dislocation in the share price. Further buybacks for the remainder of this year, if any, will depend on cash flows and stock performance during our open window period.

Jimmi Sue Smith: Compared to the prior year quarter, the average pricing of major products declined by 17%, while average coal tar costs decreased by 21%.

Jimmi Sue Smith: Slide 14 details capital allocation for the quarter.

Jimmi Sue Smith: For 2024, net capital expenditures were $42 million through June 30, with a full-year forecast of $80 to $85 million.

Jimmi Sue Smith: We allocated $32 million to share repurchases year-to-date, all during the second quarter when our share price fell sharply.

Jimmi Sue Smith: While we remain committed to a balanced capital allocation approach, this is an example of us being more aggressive with buybacks when we feel there's a dislocation in the share price.

Jimmi Sue Smith: Further buybacks for the remainder of this year, if any, will depend on cash flows and stock performance during our open window period.

Jimmi Sue Smith: We have 22 million remaining on our existing authorization. We also return capital to shareholders through a quarterly dividend of $0.07 per share this quarter, and we continue to focus on reducing our net leverage. We ended the quarter with 943 million in net debt, up 100 million for the Brownwood Acquisition and 325 million of available borrowing. As we had forecasted, our net leverage ratio increases as a result of Brownwood and our normal quarterly cycle to 3.7 times on June 30th, 2024.

Jimmi Sue Smith: We have $22 million remaining on our existing authorization. We will also return capital to shareholders through a quarterly dividend of $0.07 per share this quarter, and we continue to focus on reducing our net leverage. We ended the quarter with $943 million in net debt, up $100 million for the Brownwood acquisition, and $325 million of available borrowing. As we had forecasted, our net leverage ratio increased as a result of Brownwood and our normal quarterly cycle to 3.7 times at June 30, 2024.

Jimmi Sue Smith: We have $22 million remaining on our existing authorization.

Jimmi Sue Smith: We also returned capital to shareholders through quarterly dividend of seven cents per share this quarter, and we continue to focus on reducing our net leverage.

Jimmi Sue Smith: We ended the quarter with $943 million in net debt, up $100 million for the Brownwood acquisition, and $325 million of available borrowings.

Jimmi Sue Smith: As we had forecasted, our net leverage ratio increased as a result of Brownwood in our normal quarterly cycle to 3.7 times at June 30, 2024.

Jimmi Sue Smith: We continue to be confident in our ability to grow earnings and generate cash and anticipate exiting the year with a net leverage in the low threes. We remain committed to our long-term target of two to three times. Slide 15 shows we spent $42 million net, or $43 million gross, on capital expenditures through the second quarter. By category, $25 million was for maintenance, slightly under $3 million for zero harm, and nearly $16 million for growth and productivity initiatives. By business segment, we spent $21 million on RUPS, $6 million on PC, $13 million on CM&C, and $3 million on corporate projects, as seen on slide 17.

Jimmi Sue Smith: We continue to be confident in our ability to grow earnings and generate cash and anticipate exiting the year with a net leverage in the low threes. We remain committed to our long-term target of two to three times. Slide 15 shows we spent $42 million net, or $43 million in growth, on capital expenditures through the second quarter. By category, $25 million was for maintenance, slightly under $3 million for zero harm, and nearly $16 million for growth and productivity initiatives. By business segment, we spent $21 million on RUPS, $6 million on PC, $13 million on CM&C, and $3 million on corporate projects, as seen on slide 17.

Jimmi Sue Smith: We continue to be confident in our ability to grow earnings and generate cash, and anticipate exiting the year with a net leverage in the low threes. We remain committed to our long-term target of two to three times.

Jimmi Sue Smith: Slide 15 shows we spent $42 million net, or $43 million gross, on capital expenditures through the second quarter. By category, $25 million was for maintenance, slightly under $3 million for zero harm, and nearly $16 million for growth and productivity initiatives.

Jimmi Sue Smith: By business segment, we spent $21 million on RUPS, $6 million on PC, $13 million on CM&C, and $3 million on corporate projects.

Jimmi Sue Smith: We announced earlier today that our Board of Directors declared a quarterly cash dividend of $0.07 per share of Koppers common stock. This dividend will be payable on September 16th to shareholders of record as of the close of trading on August 30th. At this planned quarterly dividend, subject to review by the Board of Directors, the annual dividend will be $0.28 per share in 2024, a 17% increase over the 2023 dividend. And with that, I'll turn it back over to Leroy.

Leroy Ball: We announced earlier today that our Board of Directors declared a quarterly cash dividend of $0.07 per share of Koppers Common Stock. This dividend will be payable on September 16th to shareholders of record as of the close of trading on August 30th. At this planned quarterly dividend, subject to review by the Board of Directors, the annual dividend will be $0.28 per share in 2024, a 17% increase over the 2023 dividend. And with that, I'll turn it back over to Leroy.

Leroy Ball: As seen on slide 17.

Jimmi Sue Smith: we announced earlier today our boarded directors declared a quarterly cash dividend of seven cents per share of copference common stock

Jimmi Sue Smith: this dividend will be payable on september sixteenth to shareholders of record as of the close of trading on august thirtieth

Jimmi Sue Smith: At this planned quarterly dividend, 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.

Jimmi Sue Smith: And with that, I'll turn it back over to Leroy.

Leroy Ball: So now, let's take a look at some notable happenings from the second quarter. So, as I mentioned earlier, we're broadcasting from our Seam and Sea facility in Newborg, Denmark, as seen on slide 19. And the reason we brought our board to Newborg was to show off the $27 million enhanced carbon products production facility that we completed late last year. This is the unit of operation that upgrades distillate that would otherwise go into the carbon black feedstock market and instead turns it into a high-quality anode or impregnation pitch, which we're able to sell at higher prices than the alternative product I mentioned earlier. Carbon black feedstock.

Leroy Ball: So now, let's take a look at some notable happenings from the second quarter. So, as I mentioned earlier, we're broadcasting from our CM&C facility in Newburgh, Denmark, as seen on slide 19. And the reason we brought our board to Newburgh was to show off the $27 million enhanced carbon products production facility that we completed late last year. This is the unit of operation that upgrades distillate that would otherwise go into the carbon black feedstock market and instead turns it into a high-quality anode or impregnation pitch, which we're able to sell at higher prices than the alternative product I mentioned earlier, carbon black feedstock.

Jimmy: thank you jimmy so now let's take a look at some notable happenings in the second quarter

Leroy Ball: This is also a facility that can produce a high-quality coating for the lithium ion battery market, which we remain cautiously optimistic about and could hold the key to reducing the volatility we see in this segment from time to time. And we have also built a lab for our European performance chemicals business here at New Borg and are looking for other ways to take advantage of the synergy of having a concentration of very talented people here on a day-to-day basis.

Leroy Ball: So as I mentioned earlier, we're broadcasting from our CM&C facility in Newburgh, Denmark, as seen on slide 19. And the reason we brought our board to Newburgh was to show off the $27 million enhanced carbon products production facility that we completed late last year.

Leroy Ball: This is the unit of operation that upgrades distillate that would otherwise go into the carbon black feedstock market and instead turns it into a high quality anode or impregnation pitch for which we're able to sell at higher prices than the alternative product I mentioned earlier, carbon black feedstock.

Leroy Ball: This is also a facility that can produce a high-quality coating for the lithium ion battery market, which we remain cautiously optimistic about and could hold the key to reducing the volatility we see in this segment from time to time. And we have also built a lab for our European performance chemicals business here at Neuborg and are looking for other ways to take advantage of the synergy of having a concentration of very talented people here on a day to day basis.

Leroy Ball: This is also the facility that can produce a high-quality coating for the lithium-ion battery market, which we remain cautiously optimistic about and could hold the key to reducing the volatility we see in this segment from time to time.

Leroy Ball: Now, we also built a lab for our European performance chemicals business here at New Borg and are looking for other ways to take advantage of the synergy of having a concentration of very talented people here at this site on a day-to-day basis.

Leroy Ball: Speaking of day-to-day, our base business at Newborg is distilling coal tar into critical products that serve many important product and geographic markets, where we utilize the competitive advantage of our strategically situated harbor to move products to our customer base.

Leroy Ball: Speaking of day-to-day, our base business at Newborg is distilling coal tar into critical products that serve many important product and geographic markets where we utilize the competitive advantage of our strategically situated harbor to move products to our customer base.

Leroy Ball: Slide 20 features our recently issued corporate sustainability report for 2023, which outlines our achievements as they relate to our values of people, planet, and performance. Highlights from the 2023 CSR include achieving our goal of a 50% reduction in scope one and scope two emissions against our 2007 baseline, seven years ahead of schedule; and improving safety performance by achieving a total recordable injury rate of 2.73, which is our lowest rate since 2018. We introduce the new patented wood treatment product, MicroPro XPS, representing a breakthrough application for this key market.

Leroy Ball: Slide 20 features a recently issued corporate sustainability report for 2023, which outlines our achievements as they relate to our values of people, planet, and performance. Highlights from the 2023 CSR include achieving our goal of a 50% reduction in Scope 1 and Scope 2 emissions against our 2007 baseline, seven years ahead of schedule; and improving safety performance by achieving a total recordable injury rate of 2.73, which is our lowest rate since 2018. We introduce the new patented wood treatment product, MicroPro XPS, representing a breakthrough application for this key market.

Speaker Change: slide twenty features are recently issued corporate sustainability report for twothousand and twenty three which outlines ourachievements as they relate to our values of people planet and performance

Leroy Ball: Highlights from the 2023 CSR include achieving our goal of a 50% reduction in scope 1 and scope 2 emissions against our 2007 baseline, seven years ahead of schedule.

Leroy Ball: Improve safety performance by achieving total recordable injury rate of 2.73, which is our lowest rate since 2018.

Leroy Ball: We introduce the new patented wood treatment product, MicroPro XPS, representing a breakthrough application for this key market.

Leroy Ball: Newsweek named Koppers to its list of America's most responsible companies for the fourth straight year, and USA Today named Koppers to its list of America's climate leaders for the second straight year. As always, my deepest gratitude goes to our team members across the globe for their commitment to operating sustainably, and this dedication will help us to continually improve our overall performance going forward. Slide 21 shows our team members volunteering in support of Koppers' Preserving the Earth campaign.

Leroy Ball: Newsweek named Koppers to its listing of America's most responsible companies for the fourth straight year. And USA Today named Koppers to its listing of America's climate leaders for the second straight year.

Leroy Ball: As always, my deepest gratitude goes to our team members across the globe for their commitment to operating sustainably, and this dedication will help us to continually improve our overall performance going forward.

Leroy Ball: Slide 21 shows our team members volunteering in support of Koppers' Preserving the Earth campaign.

Leroy Ball: From Earth Day on April 22 through World Environment Day on June 5, employees from our locations across the world pursued activities supporting the environment in ways that demonstrate protecting the planet, which is one of our core values. Our appreciation goes out to all of our eco-ambassadors for keeping our world beautiful today and for future generations.

Leroy Ball: From Earth Day on April 22nd through World Environment Day on June 5th, employees from our locations across the world pursued activities supporting the environment in ways that demonstrate protecting the planet, which is one of our core values. Our appreciation goes out to all of our eco ambassadors for keeping our world beautiful today and for future generations.

Leroy Ball: Our appreciation goes out to all of our eco-ambassadors for keeping our world beautiful today and for future generations.

Leroy Ball: So now on to a review of each of the businesses, and I'll start with performance chemicals on page 23. The second quarter played out almost as the first, as volumes finished flat compared to Q2 2023, while a focus on costs carried the day. After years of steady growth, repair and remodeling expenditures have seen their unsustainable pace slow over the past couple of years. Repair Remodeling Expenditures Moved into Negative Territory in Q1 of this year, and while that trend is expected to continue for the next several quarters, it appears that the year-over-year decline will hit a trough by the end of this year before beginning to improve in 2025.

Leroy Ball: So now on to a review of each of the businesses, and I'll start with performance chemicals on page 23. The second quarter played out almost as the first as volumes finished flat compared to Q2 2023, while a focus on costs carried the day on the first as volumes finished flat. After years of steady growth, repair and remodeling expenditures have seen their unsustainable pace slow over the past couple of years.

Unknown Attendee: Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Copper Second 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 key, followed by zero. Following the presentation instructions will be given for the question and answer session. Please note this event is being recorded.

Leroy Ball: So now on to a review of each of the businesses, and I'll start with performance chemicals on page 23.

Leroy Ball: The second quarter played out almost as the first, as volumes finished flat compared to Q2 2023, while a focus on costs carried the day. After years of steady growth, repair and remodeling expenditures have seen their unsustainable pace slow over the past couple of years.

Leroy Ball: Repair Remodeling Expenditures Moved into Negative Territory in Q1 of this year, and while that trend is expected to continue for the next several quarters, it appears that the year-over-year decline will hit a trough by the end of this year before beginning to improve in 2025. Now, despite that, and with existing home sales remaining in a slump, our residential chemical volumes continue to hang in at a level similar to the prior And we don't see that subsiding in the back half of this year.

Quynh McGuire: I would now like to turn the conference over to miss Quynh McGuire. Please go ahead, ma'am. Thanks, and good morning. I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our second quarter of 2024 earnings conference call. We issued our press release earlier today. You may access it via our website at www.coppers.com. 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 and prior quarterly conference calls. This has been broadcast live on our webcast website, and a recording of this call will be available on our website for replay through November 8, 2024.

Leroy Ball: Repair remodeling expenditures moved into negative territory in Q1 of this year and while that trend is expected to continue for the next several quarters it appears that the year-over-year decline will hit a trough by the end of this year before beginning to improve in 2025.

Leroy Ball: Now, despite that, and with existing home sales remaining in a slump, our residential chemical volumes continue to hang in at levels similar to the prior year, and we don't see that subsiding in the back half of this year. On top of that, we should get a little boost from some friendly treater consolidation that will add some incremental volumes, while industrial volumes also are expected to contribute slightly. The new grinding capacity that came online in Q2 is already contributing to the cost savings through faster cycle times, and we've pulled back on spending in all but the most necessary areas in order to help pick up the slack for our struggling CM&C segment.

Leroy Ball: despite that and with existing home sales remaining in a slump our residential chemical volumes continue to hang in at level similar to prior year

Leroy Ball: On top of that, we should get a little boost from some friendly treater consolidation that will add some incremental volumes, while industrial volumes are also expected to contribute slightly. The new grinding capacity that came online in Q2 is already contributing to cost savings through faster cycle times, and we've pulled back on spending in all but the most necessary areas in order to help pick up the slack for our struggling CM&C segment.

Leroy Ball: And we don't see that subsiding in the back half of this year. On top of that, we should get a little boost from some friendly treater consolidation that will add some incremental volumes, while industrial volumes also are expected to contribute slightly.

Quynh McGuire: At this time, I would like to direct your attention to our forward-looking disclosure statement. See it on slide two comments, 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, including our press release, and in the company's filings with the Securities and Exchange Commission.

Leroy Ball: The new grinding capacity that came online in Q2 is already contributing to cost savings through faster cycle times, and we've pulled back on spending in all but the most necessary areas in order to help pick up the slack for our struggling CM&C segment.

Leroy Ball: As a result, we're upping our estimate of full-year EBITDA improvement for our PC segment to a range of $12 to $16 million. Moving on to our utility and industrial products business, shown on page 24, we closed on the Brown acquisition in April and are well into the integration process.

Leroy Ball: As a result, we're upping our estimate of full-year EBITDA improvement for our PC segment to a range of $12 to $16 million.

Leroy Ball: Moving on to our utility and industrial products business shown on page 24. We closed on the Brown acquisition in April and are well into the integration process.

Quynh McGuire: In light of the significant uncertainties inherent in the forward-looking statements, including 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.

Leroy Ball: Operationally, things are going well, and we're already beginning to realize some of our identified synergies. Sales are starting to build some momentum after working through some early transition challenges, and we're happy to have the additional capacity and operational flexibility that the Brown acquisition brings. As for our Texas market entry, just six months in, we're already tracking towards 40% achievement of our long-term market penetration goal.

Leroy Ball: Operationally, things are going good and we're already beginning to realize some of our identified synergies.

Leroy Ball: Sales are starting to build some momentum after working through some early transition challenges, and we're happy to have the additional capacity and operational flexibility that the Brown acquisition brings.

Leroy Ball: As for our Texas market entry, just six months in, we're already tracking towards 40% achievement of our long-term market penetration goal, so we are making good progress on that front.

Quynh McGuire: References may also be made today to certain non-gap financial measures. The press release, which is available on our website, also contains reconciliation of non-gap financial measures to the most directly comparable gap financial measures.

Leroy Ball: So we are making good progress on that front, as projected on our Q1 call. Our legacy business experienced a little pullback from last year's Q2 as certain of our customers work through the stocking and project laser deferrals, but outside of a handful of customers, the rest of the market remains solid and growing.

Leroy Ball: As projected on our Q1 call, our legacy business experienced a little pullback from last year's Q2 as certain of our customers work through de-stocking and project laser deferrals. But outside of a handful of customers, the rest of the market remains solid and growing.

Leroy Ball: as projected on our q one call our legacy business experienced a little pullback from last year's q two as certain of our customers work through destocking and project delayasser deferrals

Unknown Attendee: Joining me for our call today are Lee Red Ball, Chief Executive Officer of Coopers, and Jimmy Sue Smith, Chief Financial Officer.

Leroy Ball: But outside of a handful of customers, the rest of the market remains solid and growing.

Leroy Ball: During the quarter, we also gained a little bit of price while also improving our cost profile by bringing more drying capacity online and pulling back on operating costs to align with lower Q2 volumes. On another bright note, our Australian pole business had its most profitable quarter since 2014, as that business continues to perform well. And we remain extremely pleased with our growing footprint in the UIP space and believe the future continues to look very bright. Our railroad products and services business is summarized on page 25.

Leroy Ball: During the quarter, we also gained a little bit of price while also improving our cost profile by bringing more drying capacity online and pulling back on operating costs to align with lower Q2 volumes. On another bright note, our Australian pull business had its most profitable quarter since 2014, as that business continues to perform well. And we remain extremely pleased with our growing footprint in the UIP space and believe the future continues to look very bright. Our railroad products and services business is summarized on page 25.

Leroy Ball: I'll now turn the call over to Lee Roy. Thank you, Quinn.

Leroy Ball: Good morning, everyone, from Beautiful Denmark. The Coopers team finds ourselves doing this call from the City of Newborg in Denmark, which is the site of one of our three strategically situated carbon material and chemicals plants, and where we recently conducted our board meeting, which included visiting our plant and spending time with our employees at the site. We have a great team in Europe, led by Christian Nielsen and Dr. Steve Krem. Christian and his team were able to show our board the recently commissioned enhanced carbon products plant that will enable us to improve our throughput of higher value carbon products, but also opening up new and exciting market opportunities.

Leroy Ball: on another bright note our australian poll business had its most profitable quarter since two thousand and fourteen as that business continues to perform well and we remain extremely pleased with our growing footprint in the uip space and believe the future continues to look the very bright

Leroy Ball: Our Railroad Products and Services business is summarized on page 25. While we still haven't resolved all of our issues on the customer front, as mentioned on our May call, we have taken various steps to change our approach, which is already paying some dividends.

Leroy Ball: While we still haven't resolved all of our issues on the customer front, as mentioned on our May call, we have taken various steps to change our approach, which is already paying some dividends. Through June, we increased prices by $17 million, which has helped to offset some but not all cost increases. Sales volumes for the quarter were up ever so slightly at 1%, and now we expect to finish the year flat from a volume standpoint, as we did have a customer pullback after some initial projections earlier this year had us at an overall 5% growth rate.

Leroy Ball: Through June , we've increased price by $17 million, which has helped to offset some, but not all, cost increases.

Leroy Ball: And now we expect to finish the year flat from a volume standpoint, as we did have a customer pullback after some initial projections earlier this year had us at an overall 5% growth rate. Our commercial business remains a bright spot as the backlog and profitability remain very strong. One positive on the sales front is that we've had a few customers indicate that in Q4 of this year, they will discontinue purchases of dull treated creosote borate cross ties and revert back to a higher retention creosote product. While our rail business is agnostic to the change, this is a positive for our CMC business, as we will treat with more creosote for the railroads making that switch.

Leroy Ball: Sales volumes for the quarter were up ever so slightly at one percent and now we expect to finish the year flat from a volume standpoint as we did have a customer pullback after some initial projections earlier this year had us in an overall five percent growth rate.

Leroy Ball: Now, as Quinn mentioned, joining me on this call today, as usual, is our CFO, Jimmy Sue Smith.

Leroy Ball: But I also have our President and Chief Operating Officer, Jim Sullivan, who will be joining Jimmy Sue and I for the question and answer session. Now, I'm pleased to share the results of our very successful second quarter coming on the heels of our prior report that outlined some of the early challenges that we were facing in 2024. Now, while some of those market challenges still persist, we dove headfirst into focusing on the things that we could control with cost being the largest element.

Leroy Ball: Our commercial business remains a bright spot as the backlog and profitability remain very strong. One positive on the sales front is that we've had a few customers indicate that in Q4 of this year, they will discontinue purchases of dull treated creosote borate cross ties and revert back to a higher retention creosote product. While our rail business is agnostic to the change, this is a positive for our CMC business, as we will treat with more creosote for the railroads making that switch.

Leroy Ball: Our commercial business remains a bright spot as the backlog and profitability remain very strong.

Speaker Change: one posit on thesalesfront is that we've had a few customers indicate that inq four of this year they will discontinue purchases of goal-treated crea o board cross-tize and revert back to a higher retention creaso product

Leroy Ball: The result was a new high and quarterly EBITDA and hopefully renewed confidence from the market that we remain on track to meeting our near term goals for 2024 and 2020. So as a start, let's begin on slide four by looking at some of our key metrics for the quarter consolidated sales were 563.2 million, which was off by 14 million compared with 577.2 in the prior year quarter. Now, we added a modest amount of sales during the quarter from our Brown Wood acquisition, some of which were offset by PC chemical sales to Brown being classified now as intercompany and also lower pricing and volume in the CMC business, which drove the consolidated sales comparison lower.

Leroy Ball: While our rail business is agnostic to the change, this is a positive for our CMC business, as we will treat with more creosote for the railroads making that switch.

Leroy Ball: On the cost side of the ledger, we reduced our boltonizing in Q2 to the lowest level since Q1 of 2022, which increases our asset efficiency. And we also began implementing $4 to $7 million of cost reductions to address the fact that we were continuing to incur millions of dollars of costs to serve certain customers in ways that they wanted but were reluctant to pay for. Now some of those savings began being realized during Q2, with the lion's share expected to occur over the back half of the year.

Leroy Ball: On the cost side of the ledger, we reduced our boltonizing in Q2 to the lowest level since Q1 of 2022, which increases our asset efficiency.

Leroy Ball: and we also began implementing four to seven million dollars of cost reductions to address the fact that we were continuing to incur millions of dollars of cost

Leroy Ball: to serve certain customers in ways that they wanted but were reluctant to pay for. Now some of those savings began being realized during Q2, with the lion's share expected to occur over the back half of the year.

Leroy Ball: Looking at our entire RUPS segment, we've trimmed the top end of our EBITDA guidance slightly and are now expecting $10 to $15 million of improvement for the year. Finally, on to the CMC business, which is summarized on page 26.

Leroy Ball: Now, even on lower sales, we were able to generate adjusted EBITDA of 77.5 million a new high compared with 70.3 million in the prior year. Adjusted EBITDA margin was 13.8% versus 12.2% in the prior year. 13.8% represents our quarterly high margin mark since quarter two of 2021 and is a meaningful improvement over where we've been tracking. Second quarter diluted earnings per share was $1.25 compared with $1.15 in the prior year quarter.

Leroy Ball: Looking at our entire RUPS segment, we've trimmed the top end of our EBITDA guidance slightly and are now expecting 10 to 15 million dollars of improvement for the year.

Leroy Ball: Finally, on to the CMC business, which is summarized on page 26.

Leroy Ball: While second-quarter results for CM&C were much improved over the first quarter, we still saw significantly lower pitch pricing and volumes compared to Q2 of 2023. Q3 of last year was when this business took its first step down, so our comps should improve in the back half of this year, which will help as we're still unable to see an improvement in the pitch markets through the balance of this year. Our ethylic anhydride business had a second consecutive strong quarter as we continue to catch a windfall from other production struggles in the industry.

Leroy Ball: While second-quarter results for CM&C were much improved over the first quarter, we still saw significantly lower pitch pricing and volumes compared to Q2 of 2023. Q3 of last year was when this business took its first step down, so our comps should improve in the back half of this year, which will help as we're still unable to see an improvement in the pitch markets through the balance of this year. Our phthalic anhydride business had a second consecutive strong quarter as we continue to catch a windfall from other production struggles in the industry.

Leroy Ball: While second quarter results for CM&C were much improved over the first quarter, we still saw significantly lower pitch pricing and volumes compared to Q2 of 2023.

Leroy Ball: Q3 of last year is when this business took its first step down, so our comps improve in the back half of this year, which will help as we're still unable to see an improvement in the pitch markets through the balance of this year.

Leroy Ball: While adjusted earnings per share for the quarter were $1.36 compared with $1.26 in the prior year quarter. Q2 also represented a strong cash flow quarter as operating cash flow doubled our Q2 2023 number. The copper's team has done a nice job over the past 18 months of understanding the connection and power of turning earnings into cash and continues to make a focus of their everyday work. All three business segments showed significant sequential improvement in the second quarter pushing consolidated results to new heights.

Leroy Ball: Our phthalic anhydride business had a second consecutive strong quarter as we continue to catch a windfall from other production struggles in the industry.

Leroy Ball: While we originally thought we could see that benefit subside by the end of Q2, it looks like we might be able to enjoy it for at least another quarter. Our Stickney plant's operating performance was better in Q2 when we began realizing some of our raw material cost reductions, which has also helped. And like the other businesses, we're taking a hard line on costs to help cover for the gaps brought on by some turbulent market conditions in the near term. This is somewhat specific to CMC.

Leroy Ball: While we originally thought we could see that benefit subside by the end of Q2, it looks like we might be able to enjoy it for at least another quarter.

Leroy Ball: Our Stickney plant's operating performance was better in Q2 when we began realizing some of our raw material cost reductions, which has also helped.

Leroy Ball: And like other businesses, we're taking a hard line on costs to help cover for the gaps brought on by some turbulent market conditions in the near term. Somewhat specific to CMC, we've also cut back planned capital expenditures for this year by $10 million as we evaluate our long-term operating strategy to see what we can do to not only boost profitability but get back to a positive free cash flow position for this business. With all the noise that remains in this business, we're reducing our guides for this segment by a year-over-year decline of $7 to $13 million.

Leroy Ball: And like the other businesses, we're taking a hard line on costs to help cover for the gaps brought on by some turbulent market conditions in the near term.

Leroy Ball: Performance chemicals deliver the most improvement as demand for our residential wood treatment preservatives continued to be resilient despite some unfavorable industry trends. In addition, cost reduction measures across the board helped to offset current market conditions and keep us on track for a strong 2024. Now let's take a look at our continuing zero harm efforts on slide six zero harm 2.0 remains our primary focus re energizing engagement the front line of operations to accelerate our progress toward zero incidents for the first half of 2024 28 out of 47 facilities worldwide performed accident free.

Leroy Ball: We've also cut back planned capital expenditures for this year by $10 million as we evaluate our long-term operating strategy to see what we can do to not only boost profitability but get back to a positive free cashflow position for this business. With all the noise that remains in this business, we're reducing our guidance for this segment to a year-over-year decline of $7 to $13 million.

Leroy Ball: Somewhat specific to CMC, we've also cut back planned capital expenditures for this year by $10 million as we evaluate our long-term operating strategy to see what we can do to not only boost profitability, but get back to a positive free cash flow position for this business.

Leroy Ball: With all the noise that remains in this business, we're reducing our guides for this segment to a year-over-year decline of $7 to $13 million.

Leroy Ball: Now bringing it all together with the usual puts and takes, I feel confident in reaffirming our full-year guidance now that the first half of the year is in the books. Although 2024 has been challenging from a market perspective across most of our businesses, our global team has done a great job of managing the controllables, and we've been able to deliver favorable results despite some tough near-term dynamics. The fact that we're performing at the level we are in the current environment gives me confidence that as markets turn in our favor, which they will, the upside for us is significant.

Leroy Ball: And bringing it all together with the usual puts and takes, I feel confident in reaffirming our full-year guidance now that the first half of the year is in the books. Although 2024 has been challenging from a market perspective across most of our businesses, our global team has done a great job of managing the controllables, and we've been able to deliver favorable results despite some tough near-term dynamics. The fact that we're performing at the level we are in the current environment gives me confidence that as markets turn in our favor, which they will, the upside for us is significant.

Leroy Ball: Now, bringing it all together, with the usual puts and takes, I feel confident in reaffirming our full year guidance, now that the first half of the year is in the books.

Leroy Ball: We have two business units right here in Europe are CM and C and performance chemicals businesses that had zero recordables year to date. Compared to the prior year leading activities here today through June 30th have experienced a 2% decline while our recordable injury rate was lower by 6% and serious safety incidents improved by 22%. Now we're encouraged by these metrics and we give credit to our team members worldwide. As always, we'll continue to strengthen our zero harm culture through focusing on the health and safety of our people.

Leroy Ball: Although 2024 has been challenging from a market perspective across most of our businesses, our global team has done a great job of managing the controllables and we've been able to deliver favorable results despite some tough near-term dynamics.

Leroy Ball: The fact that we're performing at the level we are in the current environment gives me confidence that as markets turn in our favor, which they will, the upside for us is significant.

Leroy Ball: On slide 28, we're adjusting consolidated sales growth to now be flat year over year. RUPS sales overall are now projected to see a $60 million top line increase. PC sales are forecasted to be flat year over year, and CMC sales are estimated to decrease by $60 million, due primarily to price and volume declines in carbon pitch, much of which we've already experienced, partially offset by volume increases in phthalic anhydride.

Leroy Ball: On slide 28, we're adjusting consolidated sales growth to now be flat year-over-year. Rough sales overall are now projected to see $60 million in top-line increase.

Jimmy Sue Smith: Now with an overview of second quarter financials is our chief financial officer Jimmy Su Smith. Thanks, Leroy. This morning, we issued a press release detailing our second quarter 2024 results which include our recent acquisition of Brown Wood Preserving Company. My comments today are based on that information. On slide 9, Adjustity Vada was a quarterly record, 78 million, resulting in a 13.8% margin. By segment, Rupp's generated Adjustity Vada of 22 million, with an 8.8% margin, PC delivered Adjustity Vada of 44 million, a 25% margin.

Leroy Ball: PC sales are forecasted to be flat year-over-year, and CMC sales are estimated to decrease by $60 million, due primarily to price and volume declines in carbon pitch, much of which we've already experienced.

Leroy Ball: And overall, our sales forecast for 2024 is approximately $2.15 billion, which would be similar to 2023. On slide 29, we're maintaining our forecast for adjusted EBITDA, which is expected to still be in a range of $265 million to $280 million, with some modest shifts in how we see the magnitude of change year over year. On slide 30, you see our adjusted earnings per share bridge, where we continue to expect a strong contribution from operations, offset somewhat by depreciation and amortization and interest expense.

Speaker Change: partially offset by volume increases in phthalic anhydride and overall our sales forecast for 2024 is approximately 2.15 billion which would be similar to 2023.

Leroy Ball: On slide 29, we're maintaining our forecast for adjusted EBITDA, which is expected to still be in a range of $265 million to $280 million, with some modest shifts in how we see the magnitude of change year-over-year.

Leroy Ball: On slide 30, you see our adjusted earnings per share bridge, where we continue to expect a strong contribution from operations, offset somewhat by depreciation and amortization, and interest expense.

Leroy Ball: For 2024, we're maintaining our previously communicated guidance of $4.10 to $4.60, with the upper end representing a new high for copper. On slide 31, we're further tightening our capital spending estimate to a range of $80 to $85 million in 2024, compared with $116 million in 2023 on a net basis. Spending on maintenance and zero harm is estimated to be at $58 million, with approximately $22 million to $27 million dedicated to our growth and productivity projects.

Speaker Change: For 2024, we're maintaining our previously communicated guidance of $4.10 to $4.60, with the upper end representing a new high for Koppers.

Jimmy Sue Smith: CM and C reported Adjustity Vada of 11 million, with an 8.2% margin. On slide 10, our Rupp's business achieved record sales for the quarter of 254 million, compared to 234 million in the prior year. Price increases added 12.7 million, mainly on cross ties, and cross tie at utility pole volumes were higher by 9.4 million. We also saw lower activity during the quarter in our cross tie recovery business. From a market trend perspective, prices for untreated cross ties remained relatively stable, and compared to the prior year quarter, cross tie procurement was down by 10%, and cross tie treatment was lower by 2%.

Leroy Ball: on slide thirty-one we're further tightening our capital spending estimate to a range of eighty to eighty-five million dollars in two thousand and twenty four compared with a addopt one hundred and sixteen million in two thousand and twenty three on a net basis

Leroy Ball: Spending on maintenance and zero harm is estimated to be at 58 million dollars with approximately 22 million to 27 million dedicated to our growth and productivity projects.

Leroy Ball: Jimmy Sue referred to reallocating capital-to-share repurchases when we saw the overreaction to our first quarter results, and we'll continue to do that as our belief in our long-term earnings potential has not wavered, even in the face of the short-term blips we may see in results from time to time, and we're continuing to target operating cash flow of $150 million for this year. Priority uses of cash also include our dividend, share repurchases, growth capital, and terminating our defined benefit pension plan.

Leroy Ball: Jimmy Sue referred to reallocating capital-to-share repurchases when we saw the overreaction to our first quarter results, and we'll continue to do that as our belief in our long-term earnings potential has not wavered, even in the face of the short-term blips we may see in results from time to time. We're continuing to target operating cash flow of $150 million for this year. Priority uses of cash also include our dividend, share repurchases, growth capital, and terminating our defined benefit pension plan.

Leroy Ball: jimmy su refer to reallocating capital to share repurchases when we saw the overreaction to our first quarter results and we'll continue to do that that is our belief and our long-term earnings potential has not waiavered even in the face of the short-term blips we may see results from time to time

Jimmy Sue Smith: Adjustity Vada for Rupp's was consistent with the prior year at 22 million. Profitability was flat, despite realizing sales price increases, a $4 million benefit from improved plant utilization and higher cross tie and utility pole volumes, as these gains were offset by approximately 14 million of higher raw material operating and SNA expenses, along with lower activity in our cross tie recovery business. On slide 11, our performance chemicals business delivered second quarter sales of 177 million, compared to 181 million in the prior year quarter.

Leroy Ball: We're continuing to target operating cash flow of $150 million for this year. Priority uses of cash also include our dividend, share repurchases, growth capital, and terminating our defined benefit pension plans.

Leroy Ball: 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, with the majority of that now expected to occur in the first quarter of 2025. Slide 32 shows the path to our goal of $315 million to $325 million in adjusted EBITDA by 2025, which I believe is still very achievable. There's a material portion of the projected improvement over this year that's in our own hands relative to cost reductions and incremental business that we know we have coming online in 2025 that gives me confidence in getting to our initial goal of $300 million.

Leroy Ball: Slide 32 shows the path to our goal of $315 to $325 million in adjusted EBITDA by 2025, which I believe is still very achievable.

Jimmy Sue Smith: The sales decline was driven by a 3.5 million decrease in sales volumes in the Americas, primarily due to preserve the sales to brown wood now being inter-company sales, along with pricing decreases globally. This was partly offset by higher volumes in Australasia. Adjusted EBITDA for PC was 44 million for the quarter, compared with 32 million in the prior year quarter. Profitability was higher as a result of lower raw material costs, offsetting lower sales prices and volumes.

Leroy Ball: There's a material portion of the projected improvement over this year that's in our own hands relative to cost reductions and incremental business that we know we have coming online in 2025 that give me confidence in getting to our initial goal of $300 million.

Leroy Ball: In general, recovery in the CM&C business and where we end up on PC contract renewals remain the biggest risk to making up the remaining difference in getting us to the $315 to $325 million range. We may have more to share when we report our Q3 results in November, but as I sit here today, I feel great about the progress we've made and where we are overall as a company and the promise the future holds for Koppers. So at this point, Jimmy Hsu, Jim, and I would be happy to take any questions you have.

Leroy Ball: We may have more to share when we report out our Q3 results in November , but as I sit here today, I feel great about the progress we've made, and where we are overall as a company, and the promise the future holds for Koppers.

Jimmy Sue Smith: The reduced costs were favorably impacted by timing, including net gains realized from our copper hedging program, net at a higher copper cost recognized in cost of goods sold to date. We see this from copper prices spike quickly, as happened in the second quarter, and we will see the impact of the cost of goods sold in a later period. We continue to believe our normalized margins are in the high teens, as we have seen over the last 18 months.

Leroy Ball: So, at this point, Jimmi Su, Jim, and I would be happy to take any questions you have.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster, and the first question will come from Liam Burke with B. Reilly, F.B.R. Please go ahead.

Leroy Ball: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Liam Burke with B. Reilly F.B.R.

Operator: 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're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster.

Jimmy Sue Smith: On slide 12, our carbon materials and chemicals business reported second quarter sales of 132 million, compared to 162 million in the prior year quarter. On reduced market demand, especially in Europe, where sales were down 22 million unequal parts pricing and volumes, especially for carbon hits. Globally, prices were down to approximately 25 million for the quarter. These decreases were partly offset by higher volumes for stallican high-dried and carbon-black seed stock. Adjusted EBITDA for CM&C and the second quarter was 11 million compared with 16 million in the prior year quarter as a result of lower prices globally and lower volumes in Europe.

Operator: And the first question will come from Liam Burke with B. Reilly FBR. Please go ahead. Thank you. Hi, Leroy, Jimmi, Sue. Jim, how are you?

Liam Burke: Thank you. Hi Leroy, Jimmi, Sue. Jim, how are you?

Operator: Thank you. Hi Leroy, Jimmi, Sue. Jim, how are you?

Liam Burke: I'm doing good, Liam. How are you doing?

Leroy Ball: I am doing good, Liam. How are you doing?

Unknown Speaker: Unknown Speaker Good. Thank you.

Liam Burke: Good, thank you. Could we talk a little bit more about the residential piece of performance chemicals? In your prepared comments, you said there was resilience there, but then you said that cells were declining but looked like they were troughing. Was that on a pricing or a volume basis, or both?

Speaker Change: Doing good, Liam. How you doing?

Unknown Speaker: Um, could we talk a little bit more about the residential piece of performance chemicals? In your prepared comments, you said there was resilience there. But then you said that sales were declining, but it looked like they were troughing. Was that on a pricing or a volume basis, or both?

Liam Burke: Good, thank you. Could we talk a little bit more about the residential piece of Performance Chemical? Your prepared comments, you said there's resilience there, but then you said that cells were declining but looked like they were troughing.

Leroy Ball: Yeah, sorry, Liam. I think maybe my comments got mixed up. When I was talking about reduction in tropping, I was really referring to repair remodeling expenditures. So, you know, we look at the leading indicator for remodeling activity, and we track that, and that has shown a decline year over year in repair remodeling spending, right, at large, that's been occurring really since the beginning of this year. And they're projecting that year over year decline to continue through the middle of next year but to really peak at the end of this year.

Speaker Change: Was that on a pricing or a volume basis or both?

Jimmy Sue Smith: These decreases were partly offset by 16 million in lower raw material costs, particularly in Europe and higher volumes of stallican high-dried. Sequentially, the average pricing of major products was 3% lower and average coal-tower costs were flat. Compared to the prior year quarter, the average pricing of major products declined by 17% while average coal-tower costs decreased by 21%. Slide 14 details capital allocation for the quarter. For 2024, net capital expenditures were 42 million through June 30th with a full year forecast of 80 to 85 million.

Leroy Ball: Yeah, sorry, Liam. I think maybe my comments got confused. When I was talking about the reduction in tropping, I was really referring to the repair and remodeling expenditures. So, you know, we look at the leading indicator of remodeling activity.

Leroy Ball: and we track that and that has shown a decline year-over-year in repair remodeling spending right at large

Leroy Ball: ...that's been occurring really since the beginning of this year. And they're projecting that year-over-year decline to continue through the middle of next year, but to really trough out at the end of this year. And from our business standpoint, we actually have seen flat volumes this year.

Leroy Ball: And from our business standpoint, we actually have seen flat volumes this year, despite the overall, if you will, headwind that the repair remodeling market has seen overall. And so that's what I was really referring to. Our business has remained, has hung in there through some macro indicators that might indicate, you know, that we wouldn't be doing as well as we are.

Jimmy Sue Smith: We allocated 32 million to share repurchases year to date all during the second quarter when our share price fell sharply. While we remain committed to a balanced capital allocation approach, this is an example of us being more aggressive with buybacks when we feel there's a dislocation in the share price. Further buybacks for the remainder of this year, if any, will depend on cash flows and stock performance during our open window periods.

Leroy Ball: Despite that overall, if you will, headwind.

Leroy Ball: that the repair and remodeling market has seen overall. And so that's what I was really referring to. Our business has hung in there through some macro indicators that might indicate that we wouldn't be doing as well as we are.

Leroy Ball: Great, okay that's the... That helps a great deal. Thank you.

Liam Burke: Great. Okay, that's... That helps a great deal. Thank you.

Leroy Ball: And if we're looking at RUP, you had a nice sequential step-up in EBITDA margins. Can we expect that to continue? You laid out a number of initiatives. Plus, when you add in the integration of brown wood and some operational efficiencies, can we expect that sequential step-up in the second half of the year?

Liam Burke: And if we're looking at RUP, you had a nice sequential step-up in EBITDA margins. Can we expect that to continue? You laid out a number of initiatives. Plus, when you add in the integration of brown wood and some operational efficiencies, can we expect that sequential step-up in the second half of the year?

Speaker Change: Great. Okay, that's the...

Liam Burke: That helps a great deal. Thank you. And if we're looking at RUP, you had nice sequential step up in EBITDA margins.

Jimmy Sue Smith: We have 22 million remaining on our existing authorization. We also return capital to shareholders through quarterly dividend of $0.7 for share of this quarter and we continue to focus on reducing our net leverage. We ended the quarter with $943 million in net debt, up to 100 million for the brownwood acquisition and $325 million of available borrowings. As we had forecasted, our net leverage ratio increases the result of brownwood and our normal quarterly cycle to 3.7 times at June 30th, 2024.

Liam Burke: Can we expect that to continue? You laid out a number of initiatives. Plus, when you add in the integration of brown wood and some operational efficiencies, can we expect that sequential step up to in the second half of the year?

Leroy Ball: I do expect that our margins in that segment will continue to improve. Now, you know, we deal with some seasonality, right?

Leroy Ball: i do expect that our margins in that segment will continue to improve now we deal with some seasonality right so we expect certainly expect some improvement in the third quarter as we realize some of the savings from the cost reduction projects that we have

Leroy Ball: So I would certainly expect some improvement in the third quarter as we realize some of the savings from the cost reduction projects that we have. Additionally, as we have some additional business that comes online, I would expect to see some margin improvement there as well. You know, fourth quarter, I think overall, comparably to Q4 of 23, we'll absolutely see margin improvement. And again, our overall objective is to get that segment up into the double-digit margin territory, and we believe we have a plan in place to get there. So you should expect to see continued improvement in margins in that business. Great Thank you, Leroy.

Leroy Ball: So I would certainly expect some improvement in the third quarter as we realize some of the savings from the cost reduction projects that we have. Additionally, as we have some additional business that comes online, I would expect to see some margin improvement there as well. You know, fourth quarter, I think overall, compared to Q4 of 23, we'll absolutely see margin improvement. And again, our overall objective is to get that segment up into the double-digit margin territory, and we believe we have a plan in place to get there. So you should expect to see continued improvement in margins in that business. Great Thank you, Leroy.

Jimmy Sue Smith: We continue to be confident in our ability to grow earnings and generate cash and anticipate exiting the year with a net leverage in the low threes. We remain committed to our long-term target at 2 to 3 times. Like 15 shows we spent 42 million net or 43 million gross on capital expenditures through the second quarter. By category, 25 million was for maintenance, slightly under 3 million for zero harm, and nearly 16 million for growth and productivity initiative. By business segment, we spent 21 million on rups, 6 million on PC, 13 million on CM&C, and 3 million on corporate projects.

Leroy Ball: As we have some additional business that comes online, I would expect to see some margin improvement there as well. You know, fourth quarter, I think overall, comparably to Q4 of 23, we'll absolutely see, you know, margin improvement.

Leroy Ball: And again, our overall objective is to get that segment up into the double-digit margin territory, and we believe we have a plan in place to get there. So you should expect to see continued improvement in margins in that business.

Leroy Ball: Thank you, Leroy.

Operator: And our last question for today will come from Gary Prestopino with Barrington Research. Please go ahead.

Gary Prestopino: And our last question for today will come from Gary Prestopino with Barrington Research. Please go ahead. Hey.

Jimmy Sue Smith: As seen on slide 17, we announced earlier today our Board of Directors declared a quarterly cash dividend of $0.7 per share of copper's common stock. This dividend will be payable on September 16th to shareholders of record as of the close of trading on August 30th. At this planned quarterly dividend, subject to review by the Board of Directors, the annual dividend will be $0.28 per share for 2024, a 17 percent increase over the 2023 dividend.

Liam Burke: You're welcome, Liam.

Gary Prestopino: And our last question for today will come from Gary Prestopino with Barrington Research. Please go ahead.

Gary Prestopino: Hey, good morning all, rough segment where you're starting to go back to your customers and say we're not doing what we used to do for you gratis. What's been the reaction there? And has this led to any of them coming back to the table and wanting to negotiate further?

Gary Prestopino: Hey, good morning, all. Rough segment where you're starting to go back to your customers and say we're not doing what we used to do for you gratis. What's been the reaction there? And has this led to any of them coming back to the table and wanting to negotiate further?

Gary Prestopino: Hey, good morning all.

Gary Prestopino: rough segment where you're starting to...

Gary Prestopino: Go back to your customers and say, we're not doing what we used to do for you, grottis.

Gary Prestopino: What's been the reaction there, and has this...

Leroy Ball: and with that, I'll turn it back over to Leroy. Thank you, Jimmy.

Gary Prestopino: led to any of them coming back to the table and wanting to negotiate further?

Jim: So this is Jim. So the reaction has been, you know, when we first told them that, obviously, they weren't too happy because we were doing stuff for them for free. But we explained the status of the business, and we explained that, you know, a lot of these smaller things that we're not getting paid for, they understood, and that's something that they were, for the most part, willing to help us out on.

Jim: So this is Jim. So the reaction's been, you know, it's when we first told them that, obviously, they weren't too happy because we were doing stuff for them for free. But we explained the status of the business, we explained that, you know, a lot of these smaller things that we're not getting paid for, they understood, they understood, and that's something that they were, for the most part, willing to help us out on.

Leroy Ball: So now let's take a look at some notable happenings from the second quarter. So as I mentioned earlier, we're broadcasting from our Seam and See facility and New Board Denmark is seen on slide 19. And the reason we brought our board to New Board was to show off the $27 million enhanced carbon products production facility that we completed late last year. This is the unit of operation that upgrades distillate that would otherwise go into the carbon black feedstock market.

Jim: So this is Jim. So the reaction's been, you know, it's, you know, when we first told them that, obviously they weren't too happy because we're doing stuff for them for free, but we explained the status of the business, we explained that, you know, a lot of these

Jim: Smaller things that were not getting paid for they understood and that's something that they were

Jim: For the most part, willing to help us out on. So I wouldn't say there's been any real negative pushback. We have one, we have, you know, sort of a little bit of a

Leroy Ball: And instead turns it into a high quality anode or impregnation pitch for which we're able to sell at higher prices than the alternative product I mentioned earlier, carbon black feedstock. This is also the facility that can produce a high quality coding for the lithium ion battery market, which we remain cautiously optimistic about and could hold the key to reducing the volatility we see in this segment from time to time. And we also build a lab for our European performance chemicals business here at New Board and are looking for other ways to take advantage of the synergy of having a concentration of very talented people here at this site on a day-to-day basis.

Jim: So I wouldn't say there's been any real negative pushback. We have one, we have, you know, sort of a little bit of a bigger issue with one particular customer. But other than that, it's been pretty good. And that's the area, of course, that we've had to look for cost savings in the R part of the RUPS business.

Jim: Bigger issue with one particular customer, but other than that...

Jim: It's been pretty good, and that's the area, of course, that we've had to look for cost savings in the R part of the RUPS business.

Gary Prestopino: Was there any impact from this from what you're doing in Q2? This is obviously the adjusted EBITDA was flat, or could we expect that to start trending better?

Jim: Was there any impact from this from what you're doing in Q2? This is obviously because the adjusted EBITDA was flat. Or could we expect that to start trending?

Speaker Change: As, was there any impact from this, from what you're doing in Q2? Because obviously the adjusted EBITDA was flat. Or could we expect that to start trending?

Leroy Ball: Speaking of day-to-day, our base business at New Board is distilling coal tar into critical products that serve many important product and geographic markets where we utilize the competitive advantage of our strategically situated harbor to move products to our customer base.

Speaker Change: better going forward.

Jim: Yeah, so we just got this going in Q2. I didn't really think there was much of an impact in Q2, so we're going to start seeing some benefits in Q3 and Q4. Okay, thanks.

Jim: Yeah, so we just got this going in Q2. I didn't really think there was much of an impact in Q2, so we're going to start seeing some benefits in Q3 and Q4.

Gary Prestopino: Okay, thank you very much.

Leroy Ball: Fly 20 features are recently issued corporate sustainability report for 2023, which outlines our achievements as they relate to our values of people, planet and performance highlights from the 2023 CSR include achieving our goal of a 50% reduction in scope one and scope two emissions against their 2007 baseline seven years ahead of schedule. Improved safety performance by achieving total recordable injury rate of 2.73, which is our lowest rate since 2018. We introduced a new patented wood treatment product micro pro XPS representing a breakthrough application for this key market.

Gary Prestopino: Okay, thank you very much.

Operator: This concludes our question and answer session. I would like to turn the conference back over to the CEO, Mr. Leroy Ball, for any closing remarks. Please go ahead, Mr. Ball.

Operator: You're welcome. This concludes our question and answer session. I would like to turn the conference back over to the CEO , Mr. Leroy Ball, for any closing remarks. Please go ahead, Mr. Ball.

Leroy Ball: Okay, I want to thank everyone for participating in today's call and for your continued interest and confidence in Koppers.

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

Leroy Ball: Okay, I want to thank everyone for participating in today's call and for your continued interest.

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

Speaker Change: and Confidence in Koppers.

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

Leroy Ball: Newsweek named coppers to its listing of America's most responsible companies for the four straight year. And USA today named coppers to its listing of America's climate leaders for the second straight year. As always, my deepest gratitude goes to our team members across the globe for their commitment to operating sustainably. And this dedication will help us to continually improve our overall performance going forward.

Leroy Ball: Slide 21 shows our team members volunteering in support of coppers preserving the earth campaign. From Earth Day on April 22nd through World Environment Day on June 5th employees from our locations across the world pursue activities supporting the environment in ways that demonstrate protecting the planet, which is one of our core values. Our appreciation goes out to all of our eco ambassadors for keeping our world beautiful today and for future generations.

Leroy Ball: So now on to a review of each of the businesses and I'll start with performance chemicals on page 23. The second quarter played out almost as the first as volumes finished flat compared to Q2 2023 while a focus on costs carried the day.

Leroy Ball: After years of steady growth, repair and remodeling expenditures have seen their unsustainable pace slow over the past couple of years. Repair and remodeling expenditures moved into negative territory in Q1 of this year. And while that trend is expected to continue for the next several quarters, it appears that the year of a year decline will hit a trough by the end of this year before beginning to improve in 2025. Now, despite that, and with existing home sales remaining in a slump, our residential chemical volumes continue to hang in at levels similar to prior year.

Leroy Ball: And we don't see that subsiding in the back half of this year. On top of that, we should get a little boost from some friendly treated consolidation that will add some incremental volumes while industrial volumes also are expected to contribute slightly. The new grinding capacity that came online in Q2 is already contributing to cost savings through faster cycle time and we pulled back on spending at all, but the most necessary areas in order to help pick up the slack for our struggling Siemens C segment. As a result, we're upping our estimate of full year EBITDA improvement for our PC segment to a range of $12 to $16 million.

Leroy Ball: Moving on to our utility and industrial products business shown on page 24, we closed on the brown acquisition in April and are well into the integration process. Operationally, things are going good and we're already beginning to realize some of our identified synergies. Sales are starting to build some momentum after working through some early transition challenges and we're happy to have the additional capacity and operational flexibility that the brown acquisition brings. As for our Texas market entry, just six months in, we're already tracking towards 40% achievement of our long term market penetration goal. So we are making good progress on that front.

Leroy Ball: As projected on our Q1 call, our legacy business experienced a little pull back from last year's Q2 as certain of our customers work through destocking and project laser deferrals, but outside of a handful of customers, the rest of the market remains solid and growing. During the quarter, we also gained a little bit of price while also improving our cost profile by bringing more drying capacity online and pulling back on operating costs to align with lower Q2 volumes.

Leroy Ball: On another bright note, our Australian pull business had its most profitable quarter since 2014, as that business continues to perform well. And we remain extremely pleased with our growing footprint in the UIP space and believe the future continues to look very bright.

Leroy Ball: Our real road products and services business is summarized on page 25 while we still haven't resolved all of our issues on the customer front. As mentioned on our May call, we have taken various steps to change our approach, which is already paying some dividends. Through June, we've increased price by $17 million, which has helped to offset some, but not all cost increases.

Leroy Ball: Sales volumes for the quarter were up ever so slightly at 1%, and now we expect to finish the year flat from a volume standpoint, as we did have a customer pullback after some initial projections earlier this year had us in an overall 5% growth rate. Our commercial business remains a bright spot as a backlog and profitability remain very strong. One positive on the sales front is that we've had a few customers indicate that in Q4 of this year, they will discontinue purchases of dull treated Creosote Borey cross ties and revert back to a higher retention Creosote product.

Leroy Ball: While our rail business is agnostic to the change, this is the positive for CMC business as we will treat with more Creosote for the railroads making that switch. On the cost side of the ledger, we reduced our boltinizing in Q2 to the lowest level since Q1 of 2022, which increases our asset efficiency. We also began implementing $4 to $7 million of cost reductions to address the fact that we were continuing to incur millions of dollars of cost to serve certain customers in ways that they wanted, but were reluctant to pay for. Some of those savings began being realized during Q2 with the lion's share expected to occur over the back half of the year.

Leroy Ball: Looking at our entire rough segment, we've trimmed the top end of our EBITDA guide slightly, and are now expecting 10 to $15 million of improvement for the year.

Leroy Ball: Finally, onto the CMC business, which is summarized on page 26. While second quarter results for CMC were much improved over the first quarter, we still saw significantly lower pitch pricing in volumes compared to Q2 of 2023. Q3 of last year is when this business took its first step down.

Leroy Ball: So our comps improve in the back half of this year, which will help is we're still unable to see an improvement in the pitch markets through the balance of this year. Our phallic in hydride business had a second consecutive strong quarter as we continued to catch a windfall from other production struggles in the industry. While we originally thought we could see that benefit subside by the end of Q2, it looks like we might be able to enjoy it for at least another quarter.

Leroy Ball: Our Stickney Plant Operating Performance was better in Q2 when we began realizing some of our raw material cost reductions, which has also helped. And like the other businesses, we're taking a hard line on costs to help cover for the gaps brought on by some turbulent market conditions in the near term. Somewhat specific to CMC, we've also cut back planned capital expenditures for this year by $10 million as we evaluate our long term operating strategy to see what we can do to not only boost profitability, but get back to a positive free cash flow position for this business.

Leroy Ball: With all the noise that remains in this business, we're reducing our guides for this segment to a year over year decline of $7 to $13 million. Now bringing it all together with the usual puts and takes, I feel confident in reaffirming our full year guidance now that the first half of the year is in the books. Although 2024 has been challenging from a market perspective across most of our businesses, our global team has done a great job of managing the controllables and we've been able to deliver favorable results despite some tough near term dynamics. The fact that we're performing at the level we are in the current environment gives me confidence that as markets turn in our favor, which they will, the upside for us is significant.

Leroy Ball: On slide 28, we're adjusting consolidated sales growth to now be flat year over year. Rough sales overall are now projected to see $60 million in top line increase. PC sales are forecasted to be flat year over year and CMC sales are estimated to decrease by $60 million. Do primarily to price and volume declines and carbon pitch, much of which we've already experienced. Partially offset by volume increases in silica and hydride. And overall, our sales forecast for 2024 is approximately 2.15 billion, which would be similar to 2023.

Leroy Ball: On slide 29, we're maintaining our forecast for adjusted EBITDA, which is expected to still be in a range of 265 million to 280 million with some modest shifts in how we see the magnitude of change year over year. On slide 30, you see our adjusted earnings per share bridge where we continue to expect a strong contribution from operations offset somewhat by depreciation and amortization and interest expense. For 2024, we're maintaining our previously communicated guidance to $4.10 to $4.60 with the upper end representing a new high for copper.

Leroy Ball: On slide 31, we're further tightening our capital spending estimate to a range of 80 to $85 million in 2024 compared with a $116 million in 2023 on a net basis spending on maintenance and zero harm is estimated to be at $58 million with approximately 22 million to 27 million dedicated to our growth and productivity projects. And we'll continue to do that as our belief and our long-term earnings potential has not wavered even in the face of the short-term blips we may see in results from time to time.

Leroy Ball: We're continuing the target operating cash flow of $150 million for this year. And priority uses of cash also include our dividend, share repurchases, growth capital, and terminating our defined benefit pension plans. We're still preparing for the termination of our US pension plan, which would result in a top-up contribution of approximately $25 million with the majority of that now expected to occur in the first quarter of 2025.

Leroy Ball: Slide 32 shows the path to our goal of 315 to 325 million in adjusted EBITDA by 2025, which I believe is still very achievable. There's a material portion of the projected improvement over this year that's in our own hands relative to cost reductions and incremental business that we know we have coming online in 2025 that give me confidence in getting to our initial goal of 300 million.

Leroy Ball: And general recovery in the CMNC business and where we end up on PC contract renewals remain the biggest risk to making up the remaining difference in getting us to the $315 to $325 million range.

Leroy Ball: We may have more to share when we report out our Q3 results in November, but as I sit here today, I feel great about the progress we've made and where we are overall as a company and the promise the future holds for coppers.

Unknown Attendee: So at this point, Jimmy Sue, Jim and I would be happy to take any questions you have. We will now begin the question and answer session. To ask a question, you may press star than one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. And to withdraw your question, please press star than two. And at this time, we'll pause momentarily to assemble our roster.

Liam Burke: And the first question will come from Liam Burke with B Riley FBR. Please go ahead. Thank you. Hi, Lee Roy, Jimmy Sue. Jim, how are you? You're good. Liam, how are you doing? Good, thank you. Could we talk a little bit more about the residential piece of performance chemical? You prepared comments. You said there's resilience there, but then you said that sales were declining, but looked like they were trapping. Was that on a pricing or a volume basis or both?

Liam Burke: Yeah, sorry, Lee, and I think maybe my comments got confused. When I was talking about reduction in trapping, I was really referring to the repair and modeling expenditures. So, you know, we look at the leading indicator of remodeling activity, and we track that. And that has shown a decline year over year in repair and modeling spending, right, at large. That's been occurring really since the beginning of this year, and they're projecting that year over year to climb to continue through the middle of next year, but to really trough the end of this year.

Liam Burke: And from our business standpoint, we actually have seen flat volumes this year, despite that overall, if you will, headwind that the repair and modeling market has seen overall. And so, that's what I was really referring to. Our business has remained hung in there through some macro indicators that might indicate that we wouldn't be doing as well as we are.

Leroy Ball: Great. Okay, that helps a great deal. Thank you. And if we're looking at RUP, you had nice sequential step up in EBITOM margins. Can we expect that to continue? You laid out a number of initiatives plus when you add in the integration of Brownwood and some operational efficiencies, can we expect that sequential step up in the second half of the year? I do expect that our margins in that segment will continue to improve.

Leroy Ball: Now, you know, we deal with some seasonally, right? So, we expect certainly expect some improvement in the third quarter as we realize some of the savings from the cost reduction projects that we have. As we have some additional business that comes online, I would expect I would expect to see some margin improvement there as well. You know, fourth quarter, I think overall comparably to Q4 of 23, we'll absolutely see, you know, margin improvement.

Leroy Ball: And again, our overall objective is to get that segment up into the double digit margin territory. We believe we have a plan in place to get there. So you should expect to see continued improvement in margins in that business.

Leroy Ball: Great. Thank you, Lyra.

Gary Prestopino: You're welcome, and our last question for today will come from Gary Presipino with Barrington Research. Please go ahead. Hey, the morning all.

Jim Sullivan: Hey, Lyra, the rough segment where you're starting to go back to your customers and say, we're not doing what we used to do for you, grottis. What's been the reaction there and has this led to any of them coming back to the table and wanting to negotiate further? So this is Jim. So the reaction has been, you know, when we first told him that, obviously they weren't too happy because we were doing stuff for them for free.

Jim Sullivan: But we explained this status of the business. We explained that a lot of these smaller things we're not getting paid for, they understood and that's something that they were, for the most part willing to help us out on. So I wouldn't say there's been any real negative pushback. We have one, we have sort of a little bit of a bigger issue with one particular customer, but other than that, it's been pretty good.

Jim Sullivan: And that's the area, of course, that we've had to look for cost savings in the R part of the R UPS business. As was there any impact from this from what you're doing in Q2? Obviously the adjusted EBITDA was flat. Could we expect that to start trending better going forward? Yeah, so we just got this going in Q2. I didn't really think there was much of an impact in Q2. So we're going to start seeing some benefits in Q3 and Q4. Okay. Thank you very much. You're welcome.

Unknown Attendee: This concludes our question and answer session.

Leroy Ball: I would like to turn the conference back over to the CEO, Mr. Leroy Brown, excuse me, Leroy Ball for any closing remarks. Please go ahead, Mr. Ball. Okay.

Leroy Ball: I want to thank everyone for participating in today's call and for your contingent interest in confidence and confidence.

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

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