Q4 2024 Koppers Holdings Inc Earnings Call

Speaker Change: [music].

Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers' fourth 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.

Good morning, ladies and gentlemen, thank you for standing by welcome to Koppers fourth 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.

Speaker Change: Please note. This event is being recorded now I would now like to turn the conference over to Mr. Mcguire. Please go ahead ma'am.

Quynh McGuire: Now, I would now like to turn the conference over to Ms. Quynh McGuire. Please go ahead, ma'am. Thanks, and good morning. I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our fourth quarter and full year 2024 earnings conference call. We issued our press release earlier today. You may access it via our website at www.koppers.com. As indicated in our announcement, we've also posted materials to the Investor Relations page of our website that will be referenced in today's call. Consistent with our practice in prior quarterly conference calls, this is being broadcast live on our website, and a recording of this call will be available on our website for replay through May 27, 2025.

Thanks, and good morning, I'm Clay Mcguire, Vice President of Investor Relations.

Speaker Change: Beacon to our fourth quarter and full year 'twenty 'twenty four earnings conference call. We issued a press release earlier today, you may access it via our website at Www Dot hoppers Dot com.

Speaker Change: As indicated in our announcement, we've also posted materials to the Investor Relations page of our website that will be referenced in today's call.

Speaker Change: 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 May 27 2025.

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

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

Speaker Change: 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.

Speaker Change: 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 Securities and Exchange Commission.

Speaker Change: 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.

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.

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

Speaker Change: The company assumes no obligation to update any forward looking statements made during this call.

Quynh McGuire: Also, references may 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.

Speaker Change: Also references maybe made today to certain non-GAAP financial measures.

Speaker Change: The press release, which is available on our website also contains reconciliation 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. At this time, I'll turn the discussion over to Leroy. Thank you, Quynh. Good morning, everyone.

Speaker Change: Joining me for our call today are Leroy ball, Chief Executive Officer of Koppers, and Jimmi, Sue Smith, Chief Financial Officer.

Speaker Change: At this time I'll turn the discussion over to me right.

Speaker Change: Thank you Colin good morning, everyone. I'll begin this morning by stating my disappointment of falling short of our financial expectations for the fourth quarter and full year 2024.

Leroy Ball: I'll begin this morning by stating my disappointment in falling short of our financial expectations for the fourth quarter and full year 2024. We seem to be on our way to meeting our fourth quarter goal after posting a record October that followed a record second and third quarter for adjusted EBITDA. As the last two months of the year progressed, however, we experienced volume slowdowns in each of our businesses that could not be overcome by short-term cost measures. There are a number of factors for the drop, including the market share loss we called out in our PC business in November that began sooner than expected.

Speaker Change: We seem to be on our way to meeting our fourth quarter goal. After posting a record October followed a record second and third quarter for adjusted EBITDA.

Speaker Change: That's the last two months of the year progressed. However, we experienced volume slowdowns in each of our businesses that cannot be overcome by short term cost measures.

Speaker Change: There were a number of factors for the drop including the market share loss, we called out in our PC business in November that began sooner than expected some hurricane.

Leroy Ball: Some hurricane hangover as customers needed to absorb the influx of material from late September and October storm response. Issues with consistent car flow with rail customers that delayed shipments and backed up plants. And frankly, some of it was just companies pushing pause and proceeding with caution as they began assessing the outlook with the Republican White House and Congress.

Speaker Change: Hangover as customers needed to absorb the influx of material from late September and October storm response.

Speaker Change: Issues with consistent car flow with real customers that delayed shipments and backed up plants.

Speaker Change: And frankly some of it was just companies pushing pause in proceeding with caution as they began assessing the outlook with a Republican White House and Congress.

Leroy Ball: In anticipation of some of the challenges we knew we would face in 2025, we began in Q4 reducing our workforce through a series of actions that has, to date, resulted in a 5% reduction of our global employee base. that had very little impact on the fourth quarter, but will result in over $10 million in savings this year. I'll get into more detail later in the call on my thoughts for this year, but to set the stage, I still believe we're poised to post a strong year overall in every important metric in 2025. But it may not be a smooth and easy ride to get there.

Speaker Change: In anticipation of some of the challenges we knew we would face in 2025, we began in Q4, reducing our workforce through a series of actions that has to date resulted in a 5% reduction of our global employee base.

Speaker Change: That had very little impact on the fourth quarter, but will result in over $10 million in savings this year.

Speaker Change: I'll get into more detail later in the call my thoughts for this year, but to set the stage I still believe we're poised to post a strong year overall in every important metric in 2025.

Speaker Change: But it may not be a smooth and easy ride to get there.

Leroy Ball: We anticipate earnings to benefit from a combination of top-line improvements that will ramp up as the year progresses. greater operating efficiencies and continued aggressive cost containment measures across our business.

Speaker Change: We anticipate earnings to benefit from a combination of topline improvements that will ramp up as the year progresses.

Speaker Change: Later operating efficiencies and continued aggressive cost containment measures across our business.

Leroy Ball: We remain encouraged by the accomplishments of our Global Koppers team to create a foundation for a connected world through our leading portfolio of critical products and services.

Speaker Change: We remain encouraged by the accomplishments of our global Koppers team to create a foundation for our connected world through our leading portfolio of critical products and services.

Leroy Ball: I want to begin with a summary of key metrics for the fourth quarter as seen on slide four. We achieved consolidated sales of $477 million compared with $513 million in the prior year, reflecting the demand pullback I mentioned earlier. Despite the revenue shortfall, we still generated record fourth quarter adjusted EBITDA of $55.2 million compared with $53.9 million in the prior year quarter. Our adjusted EBITDA margin was 11.6% versus 10.5% in the prior year quarter. Fourth quarter diluted loss per share was $0.50 compared with diluted earnings per share of $0.59 in the prior year quarter. And while adjusted earnings per share for the quarter were $0.77 compared with $0.67 in the prior year quarter.

Speaker Change: I want to begin with a summary of key metrics for the fourth quarter as seen on slide four.

Speaker Change: We achieved consolidated sales of $477 million compared with 513 million in the prior year, reflecting the demand pull back I mentioned earlier.

Speaker Change: The revenue shortfall, we still generated record fourth quarter, adjusted EBITDA of $55 $2 million compared with $53 9 million in the prior year quarter.

Speaker Change: Our adjusted EBITDA margin was 11, 6% versus 10, 5% in the prior year quarter.

Speaker Change: Fourth quarter diluted loss per share was 50 cents compared with diluted earnings per share of 59 cents in the prior year quarter.

Speaker Change: Adjusted earnings per share for the quarter were 77 cents compared with 67 cents in the prior year quarter.

Leroy Ball: Gap EPS was negatively impacted by restructuring-related charges in addition to the standard LIFO and non-cash hedging impact. We generate a record fourth quarter operating cash flow of $74.7 million versus $66.6 million in the prior year quarter.

Speaker Change: GAAP EPS was negatively impacted by restructuring related charges. In addition to the standard LIFO and noncash hedging impacts.

Speaker Change: We generated record fourth quarter operating cash flow of $74 $7 million versus $66 6 million in the prior year quarter.

Leroy Ball: Slide 5 outlines our full-year key metrics for 2024, starting with consolidated sales of $2.09 billion compared with $2.15 billion in 2023. flight decline driven primarily by continued soft pricing in our CMC end market. Partially offset by a record sales year in our railroad and utility products and services business. Driven by added sales from our brown wood acquisition and some pricing benefits. Dodd was $261.6 million, representing our ninth consecutive record year in profitability. adjusted EBITDA margin for the year was 12.5% compared with 11.9% in the prior year. 12.5% margin represents our best annual margin since 2021, and continuing to move this number higher will be a primary focus in 2025.

Speaker Change: Slide five outlines our full year key metrics for 2024, and starting with consolidated sales of $2.09 billion compared with 2.15 billion in 2023.

Speaker Change: Slight decline driven primarily by continued soft pricing in our CMC end markets.

Speaker Change: This was partially offset by a record sales year in our railroad utility products and services business driven by added sales from a brown wood acquisition and some pricing benefit.

Speaker Change: Adjusted EBITDA was $261 6 million, representing our ninth consecutive record year of profitability.

Speaker Change: Adjusted EBITDA margin for the year was 12, 5% compared with 11, 9% in the prior year.

Speaker Change: The 12, 5% margin represents our best annual Martin since 2021.

Speaker Change: Continuing to move this number higher will be a primary focus in 2025.

Leroy Ball: Diluted earnings per share were $2.46 versus $4.14 in the prior year. Adjusted earnings per share were $4.11 compared with $4.36 in the prior year, representing our fifth straight year of crossing the $4 mark after never having reached it prior to 2020. We generated operating cash flow of $119.4 million in 2024, compared with a record $146.1 million in the prior year. More importantly, was our second straight year in the black from a free cash flow standpoint, following the investment-heavy early years of our 2025 strategy, which had put us in a free cash flow deficit. I expect the improved free cash flow trend to continue in 2025 as operating cash flow improves and capital expenditures continue to moderate.

Speaker Change: Diluted earnings per share were $2.46 versus $4.14 in the prior year adjust.

Speaker Change: Adjusted earnings per share were $4.11 compared with $4 36 in the prior year, representing our fifth straight year of crossing the four dollar Mark after never having reached it prior to 2020.

Speaker Change: We generated operating cash flow of $119 4 million in 2024, compared with a record $146 1 million in the prior year.

Speaker Change: More importantly, it was our second straight year in the black from a free cash flow standpoint, following the investment heavy early years or 2025 strategy, which should put us in a free cash flow deficit.

Speaker Change: I expect the improved free cash flow trend to continue in 2025 as operating cash flow improves and capital expenditures continue to moderate.

Leroy Ball: As seen on slide 6, Koppers will be hosting a virtual investor day on Thursday, September 18th.

Speaker Change: As seen on slide six koppers will be hosting a virtual investor day on Thursday September 18th our executive team will be unveiling the details of our 2030 strategic plan.

Leroy Ball: Our executive team will be unveiling the details of our 2030 strategic plan. Look for more details in the months to come, but in the meantime, please mark your calendars and plan to join us that day.

Speaker Change: For more details in the months to come but in the meantime, please mark your calendars and plan to join Us that day.

Leroy Ball: I want to highlight a few more things before turning the call over to Jimmy Hsu, as I don't believe that financial performance alone tells the full story of Koppers. If you move to slide 8, you'll see that about half our facilities worldwide, 23 out of 47, operated accident-free for the year. And notably, our Europe CMC and Europe PC businesses completed the year with zero record blunts. The relentless focus of our leaders on driving leading activities once again led to a new all-time low recordable injury rate across Koppers and enabled us to take our next step towards zero.

Speaker Change: I want to highlight a few more things before turning the call over to Jimmi. Sue is I don't believe that financial performance alone tells the full story of Koppers. If you move to slide eight you'll see that about half of our facilities worldwide 23 out of 47 operated accident free for the year.

Jimmi: And notably our Europe C M C. In Europe P. C businesses completed the year with zero recordable incidents.

Jimmi: Well that was focus of our leaders on driving leading activities. Once again led to a new all time low recordable injury rate across koppers and enabled us to take our next step towards zero.

Leroy Ball: And as I've said many times over, the safety and health of our people will always be a top priority, and the progress made in 2024 brings us closer to our goal.

Jimmi: I've said many times over the safety and health of our people will always be a top priority and the progress made in 2024 brings us closer to our goal.

Leroy Ball: by 10 shows an important achievement worth mentioning. We're honored to be again recognized by Newsweek as one of America's most responsible companies for the fifth consecutive year. Our move up the rankings to 113 overall is a recognition of our holistic approach to business, knowing that if we don't run responsible operations and value people as we seek to improve profitability, we jeopardize our future.

Jimmi: Slide 10 shows an important achievement worth mentioning we're honored to be again recognized by Newsweek as one of America's most responsible companies for the fifth consecutive year.

Jimmi: Our move up the rankings to mm 113 overall is a recognition of our holistic approach to business knowing that if we don't run responsible operations and value people as we seek to improve profitability, we jeopardize our future.

Leroy Ball: Moving on to slide 11, I want to point out the results of our 2024 Employee Engagement Survey, which were slightly better than 2023, resulting in our highest engagement scores to date. We know that our chances of success improve dramatically with an engaged workforce that feels valued, is rewarded for superior performance, and is informed and aligned to our long-term goals. Thanks to everyone that took part because it is your feedback that enables us to continue working on making Koppers a better place for everyone.

Jimmi: Moving on to slide 11, I want to point out the results for 'twenty 'twenty four employee engagement survey, which was slightly better than 2023, resulting in our highest engagement scores to date.

Jimmi: We know that our chances of success improve dramatically with an engaged workforce that feels valued is rewarded for superior performance and has informed and aligned to our long term goals.

Jimmi: Thanks to everyone that took part because it is your feedback and enables us to continue working on making koppers, a better place for everyone.

Jimmi Smith: I'll now turn the discussion over to our Chief Financial Officer, Jimmy Sousa. Thanks, Leroy. Earlier today, we issued a press release detailing our fourth quarter and year end 2024 results. My comments this morning are based on that information. As seen on slide 13, we had consolidated fourth quarter sales of $477 million, a decrease of $36 million or 7% compared with the prior year quarter, as Leroy said, all in the last two months of the year, following a record October. By segment, RUC sales were flat with the prior year, while PC sales were lower by 16.5 million, or 10%, and CM&C sales decreased by 19 million, or 14%.

Speaker Change: I'll now turn the discussion over to our Chief Financial Officer, Jimmi Sue Smith.

Speaker Change: Thanks, Lee Wright earlier today, we issued a press release detailing our fourth quarter and year end 2024 results. My comments. This morning are based on that information.

Speaker Change: As seen on slide 13, we have consolidated fourth quarter sales of 477 million, a decrease of 36 million or 7% compared with the prior year quarter as we referred all in the last two months of the year following a record October.

Speaker Change: By segment sales were flat with the prior year, while PC sales were lower by $16 5 million or 10% and it seem to see sales decreased by $19 million or 14%.

Jimmi Smith: As seen on slide 14, full year 2024 consolidated sales totaled $2.09 billion, a decrease of $62 million in 3% versus the prior year. by a segment throughout the chief record sales for the year, with sales increasing by 45 million or 5%, while PC sales were lower by 20 million or 3%, and CM&C sales decreased by 87 million or 15% compared to the prior year. On slide 15, adjusted EBITDA for the fourth quarter was $55 million within an 11.6% margin. By segment, Rucks generated adjusted EBITDA of $18 million with an 8% margin. PC delivered adjusted EBITDA of $29 million with a 19% margin.

Speaker Change: As seen on slide 14.

Speaker Change: Full year 2024, consolidated sales totaled 2.09 billion, a decrease of $62 million or 3% versus the prior year.

Speaker Change: By segment Roth Chief record sales for the year with sales, increasing by 45 million or 5%, while PC sales were lower by $20 million or 3% and see them and see sales decreased by 87 million or 15% compared to the prior year.

Speaker Change: On slide 15, adjusted EBITDA for the fourth quarter was $55 million with an 11, 6% margin.

Speaker Change: By segment <unk> generated adjusted EBITDA of $18 million with an 8% margin P. C. He delivered adjusted EBITDA of 29 million and 19% margin.

Jimmi Smith: And CM&C reported adjusted EBITDA of $9 million with an 8% margin. On slide 16, full year 2024 adjusted EBITDA was a record at $262 million with a 12.5% margin. By segment, RUPS generated adjusted EBITDA of $82 million, with a margin of approximately 9%. PC had adjusted EBITDA of $143 million, with a 22% margin, while CM&C provided EBITDA of $37 million, with a margin of over 7%. On slide 17, fourth quarter sales for our RUPS business were $216 million, consistent with last year. Sales were impacted by decreased volumes of Class 1 cross ties, partly offset by higher utility pull volumes driven by our acquisition of brown wood, and continued price increases across multiple markets, mostly commercial cross ties and Australian utility pull volumes.

Speaker Change: And see them as Ive reported adjusted EBITDA of $9 million with an 8% margin.

On slide 16 full year 2024, adjusted EBITDA was a record at $262 million with a 12, 5% margin.

Speaker Change: By segment reps generated adjusted EBITDA of $82 million with a margin of approximately 9%.

Speaker Change: D C had adjusted EBITDA of 143 million with a 22% margin well Stephen see provided EBITDA of $37 million with a margin at over 7%.

Speaker Change: On slide 17 fourth quarter sales for our erupted or.

Speaker Change: For $216 million consistent with last year.

Speaker Change: Sales were impacted by decreased volumes of class one cross side.

Speaker Change: We offset by higher utility coal volume driven by our acquisition of Roundwood and continued price increases across multiple markets, mostly commercial cross side in Australia in utility pole.

Jimmi Smith: The market prices for untreated crossties remain stable. Year over year, fourth quarter crosstie procurement was down 8% and crosstie treatment was down 11%. Adjusted EBITDA for RUPS was $18 million, compared with $21 million in the prior year quarter. Profitability declined primarily due to higher raw material, operating and allocated SG&A costs, offset in part by net sales price increases, insurance proceeds, and record fourth quarter operating profit and adjusted EBITDA in our domestic utility pole business. On slot 18, our performance chemicals business delivered fourth quarter sales of $148 million compared to $164 million in the prior year quarter.

Speaker Change: The market prices for untreated cross ties remains stable.

Year over year fourth quarter cross tie procurement was down 8%.

Speaker Change: Crosstie treatment went down 11%.

Speaker Change: Adjusted EBITDA for <unk> was 18 million compared with 21 million in the prior year quarter profitability declined primarily due to higher raw material operating and allocated SG&A costs offset in part by net sales price increases insurance pricing and record fourth quarter operating profit and adjusted EBITDA.

Speaker Change: And our domestic utility coal business.

Speaker Change: On slide 18, our performance chemical business delivered fourth quarter sales of 148 million compared to 164 million in the prior year quarter.

Jimmi Smith: This can be attributed to lower volumes of residential wood treatment preservatives related to market share shifts and reduced demand for industrial preservatives, which together drove an 8.5% volume decrease in the American economy. In general, prices remain relatively flat compared to prior years. Adjusted EBITDA for PCE came in flat year-over-year at $29 million. Profitability was impacted by volume decreases and higher raw material costs. However, margin improvement was achieved through cost-saving initiatives, including lower logistics and overhead. Slide 19 shows fourth quarter sales in our CM&C business of $114 million compared to $132 million in the prior year.

Speaker Change: This can be attributed to lower volumes of residential wood treatment preservative related to market share shifts and reduced demand for industrial preserve it which together drove an 8.5% volume decrease in email.

Speaker Change: In general prices remain relatively flat compared to prior year.

Speaker Change: Adjusted EBITDA for P. C came in flat year over year at 29 million profitability was impacted by volume decreases and higher raw material costs. However margin improvement was achieved through cost saving initiatives, including lower logistics and overhead et cetera.

Speaker Change: Slide 19 shows fourth quarter sales in our CMC business at $114 million compared to 132 million in the prior year quarter.

Jimmi Smith: This decrease was driven by reduced market pricing totaling $11.3 million across most products, including an 8% decline in carbon pitch prices and an 18% decrease in carbon pitch volume. These factors were partially offset by higher volumes of other products. Adjusted EBITDA for CM&C in the fourth quarter was $9 million compared with $4 million in the prior year quarter. This boost in profitability stemmed from lower raw material costs, lower allocated SG&A costs, and $2.8 million of bad debt reserve in the prior year quarter, partly offset by lower sales prices and volume. Compared to the prior quarter, the average pricing of major products was down 8% and average coal tar costs were lowered by 7%.

Speaker Change: This decrease was driven by reduced market pricing totaling 11 3 million across most products, including an 8% decline in carbon pitch prices and an 18% decrease in carbon pitch fun.

Speaker Change: These factors were partially offset by higher volumes of other problems.

Speaker Change: Adjusted EBITDA for salmon and sea in the fourth quarter was $9 million compared with $4 million in the prior year quarter.

Speaker Change: This boost in profitability stemmed from lower raw material costs, lower allocated SG&A costs, and $2 8 million of bad debt reserve in the prior year quarter, partly offset by lower sales prices and volumes.

Speaker Change: Compared to the prior quarter the average pricing of major products was down 8% in average coal tar costs were lower by 7%.

Jimmi Smith: Compared to the prior year quarter, the average pricing of major products was down 13%, while average coal tar costs were down $18.

Speaker Change: Compared to the prior year quarter, the average pricing of major products was down 13%, while average coal tar costs were down 18%.

Jimmi Smith: As shown on slide 21, we continue to pursue a balanced approach to capital allocation. We invested $74 million of capital back into our business in 2024, and we're targeting $65 million for 2025. We returned $43 million to shareholders through our stock buyback in 2024, and our board just authorized a new $100 million repurchase program. In addition, our board recently increased our quarterly dividend to $0.08 per share. In terms of leverage, we ended the year with $887 million of net debt and had $381 million in available liquidity at December 31. We finished the year with a net leverage of 3.4 times and remain committed to our long-term target of 2 to 3 times net leverage ratio.

Speaker Change: As shown on slide 21, we continue to pursue a balanced approach to capital allocation.

Speaker Change: We invested $74 million of capital back into our business in 'twenty 'twenty, four and we're targeting $65 million for 2025.

Speaker Change: We returned 43 million to shareholders through our stock buyback in 2024, and our board just authorized a new 100 million dollar repurchase program.

Speaker Change: In addition, our board recently increased our quarterly dividend to eight cents per share.

Speaker Change: In terms of leverage we ended the year with 887 million of net debt and had $381 million in available liquidity at December 31st.

Speaker Change: We finished the year with a net leverage of three four times and remain committed to our long term target of two to three times net leverage ratio.

Jimmi Smith: While we certainly see our normal increases in leverage in the first and second quarters, we expect to end 2025 at or below three times leverage for the first time since mid-2014.

Speaker Change: Well, we certainly see our normal increases in leverage in the first and second quarters, we expect to end 2025 at or below three times leverage for the first time since mid 2014.

Speaker Change: Yeah.

Jimmi Smith: As shown on slide 22, in December 2024, we successfully completed the repricing of our senior secured term loan B due April 2030. The credit spread over SOFR on the TLB was reduced by 50 basis points from 3% to 2.5%. This transaction contributes to our ongoing efforts to optimize our capital structure and reduce interest expense, and it did not alter our leverage, covenants, or maturity date. On slide 23, total capital expenditures in 2024 were $77.4 million growth for $74 million net of cash proceeds. We spent $54 million on maintenance, $5.5 million on zero harm, and $18 million on growth and productivity projects.

Speaker Change: As shown on slide 22 in December 'twenty 'twenty four we successfully completed the repricing of our senior secured term loan B due April 2030, the credit spread over so far on the T. L. D was reduced by 50 basis points from 3% to two and a half per cent.

Speaker Change: This transaction contributes to our ongoing efforts to optimize our capital structure and reduce interest expense and it did not alter our leverage covenant our maturity date.

Speaker Change: On slide 23 total capital expenditures in 2024 were $77 4 million growth of 74 million net of cash proceeds.

Speaker Change: We spent 54 million on maintenance.

Speaker Change: 5.50, harm and 18 million on growth and productivity projects.

Jimmi Smith: By business segment, we spent $32 million on RUPS, $15 million on PC, $27.5 million on CM&C, and nearly $3 million on corporate projects.

Speaker Change: By business segment, we spent $32 million at about 15 million on P. C $27 5 million on C. M C.

Speaker Change: Nearly 3 million on corporate projects and finally on slide 25 as announced on February 12, our board of directors declared a quarterly cash dividend of eight cents per share of Congress common stock the.

Jimmi Smith: And finally, on slide 25, as announced on February 12, our Board of Directors declared a quarterly cash dividend of $0.08 per share of Koppers Common Stocks. The dividend will be paid on March 24 to shareholders of record as of the close of trading on March 7. At this planned quarterly dividend rate, which is subject to review by the Board of Directors, the annual dividend is expected to be $0.32 per share for 2025, a 14% increase over the 2024 dividend.

Speaker Change: The dividend will be paid on March 24th to shareholders of record as of the close of trading on March seven at this playing quarterly dividend rate, which is subject to review by the board of directors. The annual dividend is expected to be 32 cents per share for 2025% to 14% increase over the 2024 dividend.

Leroy Ball: And with that, I'll turn it back over to Leroy. Thanks, Jimmie-Sue. Now on to a review of each of the businesses, and I'll start with Performance Chemicals on page 27. Well, we expect a solid year overall for performance chemicals in 2025. That business is coming off an all-time best performance. It will not be able to repeat. As mentioned on our November call, as well as earlier on this call, we will experience some market share loss in our residential chemical business this year as we face a more aggressive industry competitor that is invested in bringing capacity online.

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

Leroy: Thanks Jimmi Sue.

Leroy: Now onto a review of each of the businesses and I'll start with performance chemicals on page 27.

Leroy: Well, we expect a solid year overall for performance chemicals in 2025 that business is coming off an all time best performance it will not be able to repeat it.

Leroy: As mentioned on our November call as well as earlier on this call we will experience some market share loss in our residential chemical business. This year as we face a more aggressive industry competitor that is invested in bringing capacity online.

Leroy Ball: Some of that conversion began earlier than expected in the fourth quarter and contributed to the volume reduction that Jimmy Su mentioned. On the positive side, it's given us an opportunity to further diversify our customer base by adding several smaller accounts to backfill part of the lost demand, and importantly, we still maintain just over 50% overall market share in the residential market. Focusing on the North American market, which drives the bulk of results in this segment, I would describe customer sentiment for this year as cautiously optimistic. Persistently elevated mortgage rates, existing home turnover seemingly stuck in neutral and declining consumer confidence due to policy concerns has treaters uneasy about whether we will see any growth in treated products this year.

Leroy: Some of that conversion began earlier than expected in the fourth quarter and contributed to the volume reduction that Jimmi Sue mentioned.

Leroy: On the positive side, it's given us an opportunity to further diversify our customer base by adding several smaller accounts to backfill part of the lost demand and importantly, we still maintain just over 50% overall market share in the residential market.

Leroy: Focusing on the North American market, which drives the bulk of results in this segment I would describe customer sentiment for this year is cautiously optimistic.

Leroy: Persistently elevated mortgage rates existing home turnover seemingly stuck in neutral and declining consumer confidence due to policy concerns as treaters uneasy about whether we will see any growth in treated products. This year.

Leroy Ball: But on the flip side, remodeling spending seems to have flattened out after eight straight quarters of year-over-year declines. And the Home Depot, on their call earlier this week, specifically called out decking and fencing as two of the categories that they saw strength in the fourth quarter. Our market forecast for 2025 is one of slight organic growth, while some hope also remains that spending to rebuild from the historic storms last year will begin in earnest. Anecdotally, excluding the market share loss I spoke to earlier, we have seen healthy comparative volumes in the early part of this year, and traders have been reporting that despite the frigid winter throughout the U.S., they've not seen an impact on demand.

Leroy: But on the flipside remodeling spending seems to have flattened out after eight straight quarters of year over year declines in the home depot on their call earlier. This week, specifically called out decking and fencing as two of the categories that they saw strength in the fourth quarter.

Leroy: Our market forecast for 2020 five as one of slight organic growth. While some hope also remains that spending to rebuild from the historic storms last year will begin in earnest.

Leroy: Anecdotally, excluding the market share loss I spoke to earlier, we have seen healthy comparative volumes in the early part of this year and treaters have been reporting that despite the frigid winter throughout the U S. They've not seen an impact on demand.

Leroy Ball: PC's industrial book of business remains robust, and we have more than enough capacity to satisfy increased demand when the utility pull market springs back. The share loss and relative economic uncertainty has us emphasizing the importance of cost control and efficiency gains, which we are pursuing across the organization, not just at PC. Tariffs remain somewhat the wild card in this business as we do source some components of our production from China and other countries that could be targeted for tariffs and the recent inclusion of copper in the discussion has created a new challenge with which to continue.

Leroy: P. CS industrial book of business remains robust and we have more than enough capacity to satisfy increased demand when the utility pole market Springs back.

Leroy: The share loss and relative economic uncertainty has us emphasizing the importance of cost control and efficiency gains, which we are pursuing across the organization not just at P. C.

Tariffs remain somewhat the wildcard in this business as we do source some components of our production from China and other countries that could be targeted for tariffs and the recent inclusion of copper and the discussion has created a new challenge with which to contend.

Leroy Ball: All this seems to change by the day. We currently estimate that tariffs on China, Canada, and Mexico could have an approximate $5 million impact on P.C., which doesn't include the potential impact of retaliatory tariffs. We do have mitigation options to address most of the U.S. tariffs and believe that any impact for P.C. would be negligible. The copper issue could be a little more problematic, and so we're keeping a close watch on where this goes. The copper we use is predominantly domestically sourced scrap which we hedge to smooth the volatility. Without getting too far into the weeds, the copper we purchase and the hedges we put in place are based off of pricing in two different markets that have traditionally been highly correlated.

Leroy: All of this seems to change by the day, we currently estimate the tariffs on China, Canada and Mexico.

Leroy: Could have an approximate $5 million impact on P. C, which doesn't include the potential impact of retaliatory tariffs.

And we do have mitigation options to address most of the U S tariffs and believe that any impact for P. C would be negligible.

Leroy: The copper issue could be a little more problematic and so we're keeping a close watch on where this goes the.

Leroy: Copper, we use is predominantly domestically sourced scrap, which we hedge to smooth the volatility.

Leroy: Without getting too far into the weeds, the copper we purchase and the hedges we put in place are based off of pricing in two different markets that have traditionally been highly correlated.

Leroy Ball: Now the noise around tariffs has caused a widening gap in the spread between those two markets which is causing our hedges and underlying purchases to not match as well as they traditionally have, which is creating additional expense that we may not be able to recoup. Now this is a new phenomenon that we're working to mitigate in case it does persist. The total unmitigated impact of this issue in 2025 could be as high as $10 million.

Leroy: Now the noise around tariffs has caused the widening gap in the spread between those two markets, which is causing our hedges and underlying purchases did not match as well as they traditionally have which is creating additional expense that we may not be able to recoup that.

Leroy: This is a new phenomenon that we're working to mitigate in case it does persist.

Leroy: The total unmitigated impact of this issue in 2025 could be as high as $10 million.

Leroy Ball: Factoring in the full impact of the copper issue just mentioned, we are projecting our PEC business to finish with adjusted EBITDA of about $113 million, down $30 million from 2024. Moving on to our utility and industrial products business, shown on page 28, fourth quarter 2024 sales and adjusted EBITDA were records as results were fueled by early strength from hurricane response and the contribution from Brownwood. Demand tailed off in the back half of November through the rest of the year and we took a late quarter inventory charge in Australia. Although not yet robust, demand in the early part of 2025 has recovered from the late fourth quarter hangover, and is at least back to levels seen for most of 2024 prior to the hurricane.

Leroy: Factoring in the full impact of the copper issue just mentioned, we are projecting our PC business to finish with adjusted EBITDA of about $113 million down $30 million from 'twenty to 'twenty four.

Leroy: Moving onto our utility and industrial products business shown on page 28 fourth quarter 'twenty 'twenty four shells and adjusted EBITDA were records as a results were fueled by early strength from Hurricane response, and the contribution from Brown wood.

Leroy: Demand tailed off in the back half of November through the rest of the year and we took a late quarter inventory charge in Australia.

Leroy: Although not yet although not yet robust demand in the early part of 2025 has recovered from the late fourth quarter Hangover and has at least back to levels seen for most of 2024 prior to the hurricane activity.

Leroy Ball: Customer sentiment is that demand levels will likely not change until at least mid-year. Now while customer demand is an important consideration, the linchpin of our growth in the utility market is through share growth in underserved geographic regions, which was the purpose of most of our investments in this business over the past couple of years. Now we are implementing the technology solutions and realigning the organization to more effectively expand the breadth of our sales reach. Now I'll repeat what I've said a number of times as it relates to greater market share penetration. We are not interested in participating in a race towards the bottom.

Leroy: Customer sentiment is that demand levels will likely not change until at least mid year.

Leroy: Now while customer demand is an important consideration the linchpin of our growth in the utility market is through share growth and underserved geographic regions, which was the purpose of most of our investments in this business over the past couple of years.

Leroy: Now we were implementing the technology solutions and realigning the organization to more effectively expand the breadth of our sales reach and I'll repeat what I've said, a number of times as it relates to greater market share penetration, where noninterest in and participating in a race towards the bottom.

Leroy Ball: We believe that a large swath of the U.S. and Canada would like greater options for supply and that's what Koppers is interested in bringing to them. We have no big investments, organic or otherwise, teed up at the moment for UIP in 2025, although we will continue to remain open to opportunities as they arise. Our utility coal plants are all running well, and our new Kennedy, Alabama plant has begun treating Douglas fir, a western species critical for the transmission market all across the U.S., and key for Koppers' portfolio offering as we compete for certain customer accounts.

Leroy: We believe that a large swath of the U S and Canada would like greater options for supply and that's what koppers is interested in bringing to them.

Leroy: We have no big investments organic or otherwise teed up at the moment for you I P. In 2025, although we will continue to remain open to opportunities as they arise.

Leroy: Our utility coal plants are all running well and our new Kennedy, Alabama plant has begun treating Douglas fir, a western species critical for the transmission market all across the U S and key for koppers portfolio offering as we compete for certain customer accounts.

Leroy Ball: At this time, we have no heightened concerns on the fiber supply as worries about the impact from last year's hurricane damage seem to have abated, with overall pricing remaining largely intact. Other than potential follow-on impacts from tariffs in our PEC business on the chemical side, we have no current tariff exposure in our coal business as it relates to fiber or other major raw material expenditures.

Leroy: At this time, we have no heightened concerns on the fiber supply is worried about the impact from last year's hurricane damage seem to have abated with overall pricing remaining largely intact.

Leroy: Other than potential follow on impacts from tariffs in our PC business on the chemical side, we have no current tariff exposure in our poll business as it relates to fiber or other major raw material expenditure.

Leroy Ball: Our Railroad Products and Services business is summarized on page 29. We unfortunately finished 2024 in RPS with a disappointing fourth quarter. Similar to UIP, demand did drop more than expected as the fourth quarter went on, and despite personnel and cost reductions, we couldn't quite overcome an 18% decrease in quarterly sales volume. All but one Class 1 account fell lower sales in the fourth quarter, which was also the trend for the year, but the rate of decline was steeper than the first three quarters and larger than expected. Even commercial volumes were down in the fourth quarter despite being a bright spot for the full year.

Leroy: Our raw our railroad products and services business as summarized on page 29.

Leroy: We Unfortunately finished 'twenty 'twenty, four and Rps with a disappointing fourth quarter.

Leroy: Do you I P demand did dropped more than expected as the fourth quarter went on and despite personnel and cost reductions we couldn't quite overcome an 18% decrease in quarterly sales volumes.

Leroy: All but one class one accounts saw lower sales in the fourth quarter, which was also the trend for the year, but the rate of decline was steeper than the first three quarters and larger than expected.

Leroy: Even commercial volumes were down in the fourth quarter, despite being a bright spot for the full year.

Leroy Ball: On the good news front, we are projecting up to an 8% volume increase in 2025, which is based upon discussions with customers and some market share shifting our way. Our projections are based upon customer interactions, which of course can change as evidenced by customer feedback that had us expecting a 5% volume increase in 2024 at the beginning of last year, that ultimately turned into a 4% year-over-year deficit by the end of the year. While the performance of this business continues to be frustrating in many ways, I do see a path to measurable improvement in 2025 and beyond as our commitment to quality and reliability has led to market share gains and better pricing in certain Class 1 accounts.

Leroy: On the good news front, we are projecting up to an 8% volume increase in 2025, which is based upon discussions with customers and some market share shifting our way.

Leroy: Our projections are based upon customer interactions, which of course can change as evidenced by customer feedback that had us expecting a 5% volume increase in 2024 at the beginning of last year that ultimately turned into a 4% year over year deficit by the end of the year.

Leroy: And while the performance of this business continues to be frustrating in many ways I do see a path to measurable improvement in 2025 and beyond as our commitment to quality and reliability has led to market share gains and better pricing in certain class one accounts.

Leroy Ball: While we haven't given up hope on the two accounts where we haven't realized meaningful price improvement, we've pivoted our attention for now to improving our unit costs through targeted actions that include reducing operating costs, overhead, and material waste. We won't see any direct impacts from U.S. tariff actions on a rail business, but would have some exposure if Canada enacts retaliatory tariffs.

Leroy: While we haven't given up hope on the two accounts, where we haven't realized meaningful price improvement we've pivoted our attention for now two improving our unit costs through targeted actions that include reducing operating costs overhead immaterial waste.

Leroy: We won't see any direct impact from U S tariff actions on our rail business, but would have some exposure, if canada and acts retaliatory tariffs.

Leroy Ball: Finally, in 2025, we'll begin to shift our crosstie recovery and disposal business model to one of recovery only. We reluctantly accepted that the rail industry isn't quite ready to pay the full cost for Koppers to responsibly dispose of its end-of-life ties. We've ceased grinding at Somerville, Texas, and effective tomorrow we'll be closing our Launce Michigan collection and grinding yard. This is unfortunate for the small but dedicated group that has faithfully served our customer base over many years and was recently recognized with our Zero Harm CEO Award for Safety.

Leroy: Finally in 2025 will begin to shift our crosstie recovery and disposal business model to one of recovery only.

Leroy: We reluctantly accepted that the rail industry isn't quite ready to pay the full cost for coffers to responsibly dispose of its end of life ties.

Leroy: We've ceased grinding at Somerville, Texas, and effective tomorrow will be closing, our launch, Michigan collection and grinding yard.

Leroy: This is unfortunate for the small but dedicated group that is faithfully served our customer base over many years and was recently recognized with our zero harm CEO Award for safety.

Leroy Ball: I want to personally thank the launch team for their dedication and effort.

Leroy: I personally think the launch team for their dedication and efforts.

Leroy Ball: Next on to the CMC business, which is summarized on page 30. While the fourth quarter was much improved from prior year, it too fell short of expectations based upon softer volumes due to pullbacks in the latter half of the quarter.

Leroy: Next onto the CMC business, which is summarized on page 30, while the fourth quarter was much improved from prior year at two fell short of expectations based upon a softer volumes due to pullbacks in the latter half of the quarter.

Leroy Ball: has announced in December we are in the process of winding down phthalic anhydride production in our Stickney, Illinois plant due to declining market conditions over the past 10 years, coupled with major investments needed over the next five years that we're not able to justify. The original plan was to cease production by the end of May, but we are working to beat that timeline by one to two months. This closure is not expected to result in any EBITDA improvement due to stranded costs and will result in an additional $43 million to $47 million in charges above the $8 million recorded in the fourth quarter.

Leroy: As announced in December we are in the process of winding down Falcon hydride production at our Stickney, Illinois plant due to the declining market conditions over the past 10 years.

Leroy: Coupled with major investments needed over the next five years, but we're not able to justify.

Leroy: The original plan was to cease production by the end of May, but we are working to beat that timeline by one to two months.

Leroy: Disclosure is not expected to result in any EBITDA improvement due to stranded costs and will result in an additional $43 million to $47 million in charges above the $8 million recorded in the fourth quarter.

Leroy Ball: $22 million to $26 million of those charges will be cash expended for cleaning, waste disposal, and plant demolition. Expected to be spent by the end of 2026. At worst, we expect the plant closure to have up to $3 million of negative annual impact EBITDA, but it will save us $40 to $60 million of capital investment over the next 5 to 10 years.

Leroy: 22 million to 26 million of those charges will be cash expended for cleaning waste disposal implant demolition is expected to be spent by the end of 2026.

Leroy: At worst we expect the plant closure to have up to $3 million of negative annual impact to EBITDA, but it will save us $40 million to $60 million of capital investment over the next five to 10 years.

Leroy Ball: Like the launch closure, it's never easy to shut down operations because of the impact on employees' lives and the communities we operate in. Again, I extend my thanks and appreciation to the 25 affected employees for their service to Koppers and our customers, and I wish we could provide a better outcome. These actions are not the fault of anyone, but the result of an ever-shifting economic environment that will, at times, put us in the position of being the best owners of certain assets, and other times not. This level of portfolio repositioning that we've experienced in the past 10 years is somewhat indicative of the mature markets that we serve.

Leroy: Like the launch closure, it's never easy to shut down operations because of the impact on employees lives in the communities we operate in.

Leroy: Once again I extend my thanks, and appreciation to the twenty-five affected employees for their service to koppers, and our customers and I wish we could provide a better outcome.

Leroy: These actions are not the fault of anyone but the result of an ever shifting economic environment that will at times put us in a position of being the best owners of certain assets and other times not.

Leroy: This level of portfolio repositioning that we've experienced in the past 10 years is somewhat indicative of the mature markets that we serve when we've made these decisions will continue to make them as necessary to make our remaining businesses more competitive and put the business on stronger ground for many team members.

Leroy Ball: We've made these decisions, we'll continue to make them as necessary to make our remaining businesses more competitive and put the business on stronger ground for our remaining team members. Stepping back to look at the global view of CM&C in 2025, we've not modeled much improvement in our end markets except for creosote, due to an increase in treating demand, as I mentioned earlier. Now our view on the market could change if the variety of measures taken by the new administration spur any restart of idled aluminum cap capacity, but we've not factored that into our current expectations.

Leroy: Stepping back to look at the global view of Siemens Sea in 2025, we've not modeled improvement in our much improvement in our end markets, except for creosote due to an increase in treating demand as I mentioned earlier.

Leroy: Now our view on the market could change with a variety of measures taken by the new administration spur any restart of vital to aluminum cap capacity, but we've not factored that into our current expectations.

Leroy Ball: Direct tariff impacts, as of now, are expected to be small with mitigation plans in place. As of now, we're expecting that the creosote volume improvement, along with further cost reductions and improved variable margin spread, will drive a $14 million increase in adjusted EBITDA compared with 2024. On slide 32 we expect consolidated sales to reach $2.17 billion in 2025 compared with $2.09 billion in 2024, which would represent a 4% increase, more than all of it attributed to stronger volumes and some pricing improvement in our RUP segment, partially offset by net market share loss in performance. On slide 33, we're forecasting adjusted EBITDA of $280 million, which represents a 7% improvement over 2024 adjusted EBITDA of $262 million.

Leroy: Direct tariff impacts as of now are expected to be small with mitigation plans in place.

Leroy: As of now we're expecting that the creosote volume improvement along with further cost reductions and improved variable margin spread will drive a $14 million increase in adjusted EBITDA compared with 2024.

Leroy: On slide 32, we expect consolidated sales to reach $2 $1 7 billion in 2025, compared with 2.09 billion in 2024, which would represent a 4% increase more than all of it attributed to stronger volumes and some pricing improvement in our rough segment, partially offset by net market share loss in performance chemicals.

Leroy: On slide 33, we are forecasting adjusted EBITDA of $280 million, which represents a 7% improvement over 2024, adjusted EBITDA of $262 million.

Leroy Ball: And while there's a massive amount of noise in the system right now, we believe we can still show measurable improvement in 2025 as three of our four businesses are already at trough levels, with nothing but upside in front of them, and cost and other benefit measures in progress that will more than offset the challenges in front of them.

Leroy: While there's a massive amount of noise in the system right. Now we believe we can still show measurable improvement in 2025 or three of our four businesses are already at trough levels with nothing but upside in front of them and costs and other benefit measure is in progress that will more than offset the challenges in front of us.

Leroy Ball: Also, we're a few weeks from completing a comprehensive assessment of each of our businesses and functions, which will provide more insight into how much opportunity we believe exists beyond our current performance, and what portfolio realignment is needed, if any, in order to reach our full potential. Part of the final touches to our 2030 strategy that we plan to showcase in detail at our September 2025 investment. As we think ahead to Investor Day and the metrics we plan to use to measure success, expect us to place a greater emphasis on earnings per share moving forward, which justifiably includes the depreciation and interest burden of investments made to drive the EBITDA improvement we've been building towards through the current strategy.

Leroy: Also we're a few weeks from completing a comprehensive assessment of each of our businesses and functions, which will provide more insight into how much opportunity. We believe exists beyond our current performance and what portfolio realignment as needed if any in order to reach our full potential.

Leroy: It's part of the final touches to our 2030 strategy that we plan to showcase in detail at our September 2025 Investor day.

Leroy: As we think ahead to Investor day, and the metrics we plan to use the measure of success I expect us to place a greater emphasis on earnings per share moving forward, which justifiably includes the depreciation and interest burden of investments made to drive the EBITDA improvement we've been building towards through the current strategy.

Leroy Ball: And now that the major investments have been made, I believe we can improve EPS by greater than 10% per year through 2030 due to multiple levers, which would be remarkable. And I'll use that as a seg to direct you to slide 34, which shows our 2025 adjusted earnings per share bridge and the strong improvement we expect in 2025, driven by higher operating earnings and lower interest. Accordingly, we're forecasting $4.75 per share in 2025, representing a new high for Koppers and a 16% improvement over 2024. On slide 35, we're projecting capital spending of $65 million in 2025 compared with $74 million in 2024.

Leroy: And now that the major investments have been made I believe we can improve EPS by greater than 10% per year through 2030, due to multiple levers which would be remarkable.

Leroy: And I'll use that as a segue to direct you to slide 34, which shows our 2025 adjusted earnings per share bridge and the strong improvement we expect in 2025, driven by higher operating earnings and lower interest expense.

Leroy: Accordingly, we are forecasting $4 75 per share in 2025, representing a new high for koppers, and a 16% improvement over 2024.

Leroy: On slide 35, we are projecting capital spending of $65 million in 2025, compared with $74 million in 2024 or.

Leroy Ball: 2025 CapEx spending reflects an ongoing normal run rate and will enable us to generate significant free cash flow over the next several years. Much of that cash flow is planned for debt reduction, as well as share repurchases if our shares remain undervalued. We've completed the heavy investment period of our growth strategy and are now poised to maximize the value of those investments as market conditions eventually improve.

Leroy: Our 2025, Capex spending reflects an ongoing normal run rate and will enable us to generate significant free cash flow over the next several years.

Leroy: Much of that cash flow is plan for debt reduction as well as share repurchases of our shares remain undervalued.

Leroy: We've completed the heavy investment period of our growth strategy and are now poised to maximize the value of those investments as market conditions eventually improve.

Leroy Ball: And as I wrap up my prepared comments, I'll leave you with a few points I want you to take away from the call today. First, despite the uncertain economic environment we find ourselves in, we expect earnings to improve meaningfully in 2025 as we place even greater emphasis on driving improvement through actions that we control. Our business remains resilient and our products remain critical elements of markets they serve and will continue to be needed long into the future. Second, we're moving into a more normalized capital investment period beginning this year that will unlock significant free cash flow that will prioritize to reduce debt and leverage and buy back undervalued shares.

Leroy: As I wrap up my prepared comments I'll leave you with a few points I want you to take away from the call today.

Leroy: First despite the uncertain economic environment, we find ourselves in we expect earnings to improve meaningfully in 2025, as we place even greater emphasis on driving improvement through actions that we control.

Leroy: Our business remains resilient and our products remain critical elements of markets. They serve and we will continue to be needed long into the future.

Leroy: Second we're moving into a more normalized capital investment period, beginning this year that will unlock significant free cash flow that we'll prioritize to reduce debt and leverage and buyback undervalued shares.

Leroy Ball: Third, we believe that we have multiple ways to improve shareholder value through consistent double-digit EPS growth over our 2030 strategy timeframe that we look forward to discussing in greater detail over the coming months, culminating in our Virtual Investor Day in September.

Leroy: Third we believe that we have multiple ways to improve shareholder value through consistent double digit EPS growth over our 2030 strategy timeframe that we look forward to discussing in greater detail over the coming months, culminating in our virtual investor day in September and with that I would like to now open it up for any questions.

Operator: And with that, I would like to now open it up for any questions. We will now begin the question and answer session. To ask a question, you may press star, then one 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 two.

Leroy: We will now begin the question and answer session.

Leroy: To ask a question you May Press Star then one on your Touchtone phone if.

Leroy: If youre using a speakerphone please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

Operator: 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. Reilly FDR. Please go ahead. Yes. Thank you. Good morning, Leroy. Good morning, Jimmi. So. Leroy, you mentioned in your prepared comments about PC, there was market share loss, and you mentioned it last quarter, but it's moved into this quarter as well. What is your competitor's strategy? Is it a pricing strategy or is there an alternative formula that's competitive? No, Liam. And just to be clear, this isn't new market share loss, right? What we announced in November was planned for in 2025. Some of that started happening in terms of plant conversions in the fourth quarter, which was before we had expected, but it's the same share loss that we had mentioned back in November.

Speaker Change: And the first question will come from Liam Burke with B Riley FBR. Please go ahead.

Liam Burke: Yes, Thanks, good morning, Leroy good morning, Larry.

Speaker Change: Right.

Speaker Change: Leroy you mentioned in your prepared comments about P C.

Speaker Change: It is market share loss and you mentioned it last quarter, but it's moved into this quarter as well what is your competitive strategy is it a pricing strategy or is there an alternative.

Speaker Change: A formula that's a competitive no no no limits.

Speaker Change: And just to be clear this isn't new market share loss rate than what we announced in November was planned for in 2025.

Speaker Change: Some of that started happening in terms of plant conversions in the fourth quarter, which was which was before we had expected but it's the same it's the same share loss that we had.

Speaker Change: Mentioned back in November Yeah. It's look it's we have we have grown market share significantly.

Leroy Ball: Yeah, look, we have grown market share significantly in the time that we've owned that business to the point where most of the top traders were sole sourced with us. And I think over time, as they look to diversify their supply chain and mitigate some risk, they were looking to split a little bit of that business. And you had a competitor that had changed hands in terms of ownership. Some investments were made to be more aggressive in going after business. And that's purely what it is. I think it's a diversification of risk on some of our customers' ends and an aggressive competitor who put some money into capacity to try and improve their overall business.

Speaker Change: Time that we've owned that business to the point, where most of the top treaters were sole sourced with us and I think.

Speaker Change: Over time.

Speaker Change: They look to do too.

Speaker Change: Diversify their supply chain and mitigate some risk there you know they were looking to.

Speaker Change: Split a little bit of that business and you had a competitor that had changed hands in terms of ownership. Some investments were made to be more aggressive in going after business and and that's purely what it is I think it's a diversification of risk on on some of our customers ends and a.

No and aggressive.

Speaker Change: Competitor, who are who put some money into capacity to to try and improve their overall business.

Leroy Ball: Yeah, it's one of those things is, you know, as you continue to grow and get bigger and, and increase market share, you get to a point where obviously, there's a greater risk and likelihood that you, you know, you're going to go backwards and go forwards. And so that's kind of where we found ourselves. And we're a little bit of victim of our own success over the past 10 years.

Speaker Change: It's one of those things as you know as you continue to grow and get bigger in and increase market share you get to a point, where obviously there is a greater risk and likelihood that you you know you're going to go backwards and go forward and so that's kind of where we found ourselves in with a little bit of a victim of our own success over the past 10 years.

Liam Burke: Great. Thank you, Leroy.

Speaker Change: Great. Thank you Leroy and you discussed on the U K.

Leroy Ball: And you discussed on the UIP that there are no immediate plans of investment on expansion either. Is it because the acquisitions aren't out there or you just have other projects that have better opportunities to invest in? Yeah, I'd say it's a couple things. I'd say that we made some investments that are already going to provide us opportunities to grow share in markets that we don't have a lot of presence in right now. So we're working to start to deliver on those investments. And there's discussions going on and things that we're looking at relative to other geographic markets here in North America that we'll see how it develops over time.

Sure.

Speaker Change: No immediate plans of investment on expansion either.

Speaker Change: Is it because the acquisitions arent out there or.

Speaker Change: You just have other projects that have better opportunities to invest and yeah. I'd say, it's a couple of things I'd say I'd say that you know we made some investments that are already going to provide us opportunities to grow share.

Speaker Change: And in markets that we don't have a lot of presence in right now so so we're working to stop.

Speaker Change: Start to deliver on those investments and we're is there's there's discussions going on and things that we're looking at relative to you know.

Speaker Change: Two other geographic markets here in North America that.

You know, what we will see how it develops over time some of it could happen.

Leroy Ball: Some of it could happen this year. If so, we're not talking about big numbers at all. And so at this point in time, I'd say from a capital standpoint, we just don't see a lot of immediate near term needs. Now, as we move into 26, again, we'll be reassessing as we go throughout the year. But overall, I think for us to be able to continue to grow, a lot of the investments have been made. There's still some more to make. They're not huge in the overall scheme of things relative to the money that we spent in the last three plus years.

Speaker Change: This year, if so we're not talking about big numbers at all and so at this point in time.

Speaker Change: Say from a capital standpoint, we just don't see.

Speaker Change: A lot of in immediate near term needs now as we move into 'twenty six.

Speaker Change: Again, we'll be reassessing as we go throughout the year, but overall I think for us to be able to continue to grow a lot of the investments have been made there is still some more to make they're not they're not huge in the overall scheme of things relative to the money that we spent in the last <unk>.

Speaker Change: Three plus years.

Liam Burke: Great. Thank you, Leroy.

Liam Burke: Great. Thank you Leroy.

Gary Prestopino: The next question will come from Gary Prestopino with Barrington Research. Please go ahead. Good morning, Leroy, Jimmi, Sue and Quynh. Leroy, I just wanted to ask a couple of questions here. I'm going to jump around. You talked about Your goal of share growth in underpenetrated regions, utility. I assume you're hiring more salespeople, but what, have you actually started to pursue? these underpenetrated markets? Or is that something that's going to start coming through in 2025 with a bigger impact in 2026?

Speaker Change: The next question will come from Gary pressed a piano with Barrington Research. Please go ahead.

Speaker Change: Good morning, Leroy Jimmy soon claim.

Speaker Change: We really just wanted to ask about a couple of questions here just going to jump around.

Speaker Change: You talked about you.

Speaker Change: Your goal of share growth.

Speaker Change: Underpenetrated regions, Yeah utility yes.

Speaker Change: I assume you're you're hiring more salespeople, but what they.

Speaker Change: Have you actually started to pursue.

Speaker Change: These under penetrated markets or is that something that's going to start.

Speaker Change: Coming through in 2025 with a bigger impact in 2026, yeah. Yeah. So so we've already been down that path right. Some of it is through through the through.

Leroy Ball: Yeah, so we've already been down that path, right? Some of it is through the investments we've made to go into Texas. And so we've already been actively, you know, adding some business in that particular market. You know, the Brown acquisition really opened up more opportunity for us to go up into the Midwest in terms of where those assets are situated. You know, we're, you know, we're in the, we will be in 2025, I believe, starting to see some of the benefits of that in terms of being able to go up into and having more of a presence up in that area.

Speaker Change: Through the investments we've made to go into Texas.

Speaker Change: And so we've already been actively adding.

Speaker Change: Some business in that particular market. The Brown acquisition really opened up more opportunity for us to go up into the Midwest in terms of where those assets are situated we're you know we're in the we will be in 2025, I believe starting to see some of the benefits of that in terms of being able to go up into it.

Speaker Change: Having more of a presence up in that area.

Leroy Ball: And then as it relates to really going further west, you know, that's still, you know, a little bit out in the future. We're just not really set up at the moment from an overall operations and distribution standpoint to go after those markets. You know, it's kind of what Liam was alluding to, I guess, with his question around the investments in UIP that, you know, and sort of where we sit at the moment as it relates to, you know, expansion plans. So, like, we're set up right now where I think we can actually have, we have more than enough capacity to go after, you know, continue to make penetration into Texas in the Midwest.

Speaker Change: And then as it relates to really going further west that's still you know a little bit out in the future. We're just not really set up at the moment from an overall operations and distribution standpoint to go after those markets. As you know is kind of what Liam was alluding to I guess with his question around the investments.

Speaker Change: And you IP that.

Speaker Change: And sort of where we sit at the moment as it relates to expansion plan. So like we're set up right now where I think we can actually have we have more than enough capacity to go after.

To make penetration into Texas, and the Midwest were not yet really set up to two go out west just yet, but that's the you know the.

Leroy Ball: We're not yet really set up to go out west just yet, but that's the, you know, the sort of the next phase of things. And that will be, you know, that will be out sometime probably 26, 27 times.

Speaker Change: For the next phase of things and that will be you know that would be out sometime probably 'twenty six 'twenty seven time frame.

Leroy Ball: Okay, and then that's great.

Speaker Change: Okay and then that's great and then just a question on the closure of the Stickney plant again I'm not.

Leroy Ball: And then just a question on the closure of the Stickney plant. Again, I'm not really a chemical analyst, but First of all, what level of sales, can you quantify that coming out of that Stickney plant? Yeah, so what that particular unit of operation is, is one that actually consumes a byproduct of our distillation process, right? So basically what we'll be losing is a little bit of, if you will, incremental added value pricing and the coverage of costs associated with taking that byproduct that we make and making phthalic anhydride into it. So the naphthalene that we used to basically consume in that process, we'll be selling out into the merchant market.

Speaker Change: Not really a chemical analyst but.

Speaker Change: First of all what.

Level of sales can you quantify that we're coming out of that sticky plant. Yeah. So so this so what that particular unit of operation is is one that actually consumes a byproduct of our distillation process right. So you know it is theirs.

Speaker Change: Basically what will be what will be losing is a little bit of a of a <unk> of it if you will incremental added value pricing and AR and the coverage of costs associated with taking that byproduct that we make and making phthalic anhydride.

Speaker Change: Into it so the naphthalene that we used to basically consume and that process will be selling out into the merchant market. So.

Leroy Ball: So I forget what the overall impact on sales, we had estimated that to be, but it's maybe, I don't know, $30 million, $35 million or something like that. Okay. And this plant... was not producing any creosote that you use in your other divisions. Stickney does. It's just a different unit operation. So, like I say, we have tar distillation, which basically takes our raw material and produces carbon pitch, and creosote, and carbon black feedstock, and then this naphthalene that essentially goes into the phthalic anhydride production, and then that gets sold out into the market. We're closing down the phthalic operation.

Speaker Change: So.

Speaker Change: Forget what the overall impact on sales, we had estimated that to be but it's you know, it's it's maybe not on a $30 million $35 million or something like that.

Speaker Change: Okay and then in this plant.

Speaker Change: It was not producing any creosote, but he doesn't your wells.

Speaker Change: Stickney does its just through it and now it's just a different unit operation. So like I say, we you know we have tar distillation, which basically takes our raw material and produces carbon pitch creosote carbon.

Speaker Change: Carbon black feedstock and then there's naphthalene.

Speaker Change: That essentially goes into the Falcon hydride production and then and then that gets sold out into the market, we're closing down a solid operation.

Gary Prestopino: Okay, thank you.

Speaker Change: Okay. Thank you yep.

Michael Mathison: The next question will come from Michael Mathison with Stodoti and Company. Please go ahead. Good morning, you guys, and thanks for taking my question. My question relates to forecasting on what you'll be doing with your free cash flow on next year. Just some back of the envelope figures with your reduction in capex and factoring out the brown acquisition, that's incremental gain in free cash flow of around 110 even before any improvements in operating income. I know you'll be buying back shares opportunistically, but can you give us any kind of a guesstimate about how you'll be allocating free cash flow to share repurchases versus debt paid out?

Michael Mattson: The next question will come from Michael Mattson with Sidoti <unk> Company. Please go ahead.

Michael Mattson: Good morning, guys and thanks for taking my questions sure.

Michael Mattson: My question relates to forecasting what you'll be doing with your free cash flow next year.

Michael Mattson: Some back of the envelope figures with your reduction in Capex and factoring out the Brown acquisition, that's incremental gain in free cash flow of around 110, even before any improvements in operating income.

I know you'll be buying back shares opportunistically, but can you give us any kind of a guesstimate about how you'll be allocating free cash flow to share repurchases versus debt pay down.

Jimmi Smith: Sure. So I think we tried to provide some clarity in the release that went out this morning. Look, our shares have been trading at a significant discount to our long-term average of enterprise value multiple. We see continued growth in our business, which will only continue to push that side of the equation up. So, you know, to the extent that the share price doesn't move, it's going to get even more undervalued, and we're going to buy back shares within our window and within our credit constraints under our current facility, you know, as that situation is in place.

Michael Mattson: Yeah sure. So I think we even we tried to provide some clarity in the in the release that went out this morning look R. R.

Michael Mattson: Our shares have been have been trading.

Michael Mattson: Trading at a significant discount to our long term average of of enterprise value multiple we see continued growth in our business, which will only continue to push that side of the equation up. So you know to the extent that the share price doesn't move it's going to get even more undervalued and we're going to we're going to buy.

Michael Mattson: Back shares.

Michael Mattson: Within within our window and within our credit constraints.

Michael Mattson: Under our current facility.

Michael Mattson: You know as that situation is.

Jimmi Smith: And then beyond that, we're allocating, you know, the additional free cash flow to pay down debt. And we believe that the combination of the two will get us, you know, by the end of this year to, you know, right around that three times leverage mark and put us in a position to get meaningfully below it as we go into 2020.

Michael Mattson: Is in place and then beyond that we're allocating.

Michael Mattson: The additional free cash flow to pay down debt and we believe that the combination of the two will get us.

Michael Mattson: You know by the end of this year to right around that three times leverage Mark and put us in a position to get meaningfully below it as we go into 'twenty six.

Michael Mathison: Terrific.

Michael Mattson: Oh terrific.

Leroy Ball: If you'll permit one more question, it looked like the key difficulty in Q4 for the REPS segment was cross-tie volumes for rails. I'm wondering if you've seen any improvements there in either volume or pricing. Yeah, so yes, and look, I think that was, I think that was, you know, certainly short-term. Again, the discussions we've had with customers as it relates to volumes in 2025 would have us expecting an 8% increase in cross-tie volume this year. And so, you know, we're planning for 2025 to be a pretty good year overall from a volume standpoint. As it relates to pricing, there's some contractual pricing that will definitely come through.

Michael Mattson: If you'll permit one more question.

Speaker Change: It looked like the key difficulty in Q4 for the Rep segment.

Michael Mattson: Cross tie volumes for rail.

Michael Mattson: I'm wondering if you've seen any improvements there on either volume or pricing.

Michael Mattson: Yeah. So so yes, and look I think that was a I think that was.

Michael Mattson: Certainly short term again the.

Michael Mattson: The discussions we've had with customers as it relates to volumes and 25 would have us have us expecting and 8%.

Michael Mattson: <unk>.

Michael Mattson: Increase in crosstie volumes this year and and so we're planning for 25 to be a pretty good year overall from a volume standpoint as it relates to pricing. There is there are some contractual pricing that will definitely come through and we continue to have discussions again.

Leroy Ball: And, you know, we continue to have discussions, again, with a couple of the customers that we've not been able to push the more meaningful price increases through. And there's some potential for some movement there, we believe. So, you know, right now I'd say pricing, we do expect to be higher in 2025 overall in volumes. Right now our projections are for an 8% increase.

Michael Mattson: With a couple of the customers that are that we've not been able to push the more meaningful price increases through and there's some potential for some movement. There we believe.

Michael Mattson: So you know right.

Michael Mattson: Right now I'd say pricing, we do expect to be higher than 25 overall in volumes.

Michael Mattson: Right now our projections are for an 8% increase on crosstie.

Michael Mathison: Thank you and good luck in the coming quarter and coming year. Thank you.

Speaker Change: Oh, Thank you and good luck in the coming quarter and coming year.

Michael Mattson: Thank you Michael.

Operator: This concludes our question-and-answer session.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to our CEO. Mr. Leroy Brown excuse me Mr. Leite Leroy ball for any closing remarks. Please go ahead Sir.

Leroy Ball: I would like to turn the conference back over to our CEO, Mr. Leroy Brown, excuse me, Mr. Leroy Ball, for any closing remarks. Please go ahead, sir. Okay, thank you everyone. I appreciate everyone's taking the time to participate on the call today and your continued interest in Koppers. We'll talk to you again next quarter. Thank you.

Speaker Change: Okay. Thank you everyone. I appreciate everyone's are taking the time to participate on the call today and your continued interest in koppers.

Speaker Change: Talk to you again next quarter. Thank you.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. © BF-WATCH TV 2021

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

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