Q1 2025 Koppers Holdings Inc Earnings Call
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Operator: Good morning, ladies and gentlemen. Thank you for standing by.
Good morning, ladies and gentlemen, thank you for standing by welcome to Koppers first quarter, 'twenty 25 earnings conference call and webcast.
Operator: Welcome to Koppers First Quarter 2025 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. If you need assistance, please alert a conference specialist by pressing star followed by zero. Following the presentation, instructions will be given for the question and answer session. Please note that this event is being recorded.
At this time, all participants are in listen only mode.
If you need assistance. Please alert a conference specialist by pressing star followed by zero.
Instructions will be given for the question and answer session.
Please note that this event is being recorded.
Quynh McGuire: I will now turn the call over to Quynh McGuire. Please go ahead. Thanks and good morning.
Speaker Change: I will now turn the call over to Quynh McGuire. Please go ahead.
Quynh McGuire: I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our first quarter 2025 earnings conference call. We issued our press release earlier today. You can access it via our website at www.koppers.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 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 August 9, 2025.
Speaker Change: 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.
Speaker Change: Consistent with our practice in prior quarterly conference calls, this has been broadcast live on our website and recording this call will be available on our website for replay through August 9th, 2025. At this time, I would like to direct your attention to our forward-looking disclosure statement, seen on site 2.
Quynh McGuire: At this time, I would like to direct your attention to our forward-looking disclosure statement seen on slide two. Certain comments made on this conference call may be characterized as forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of assumptions, risks, and uncertainties, including risks described in the cautionary statement included in our press release and in our company's filings with the Security 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: Certain comments made on this conference call may be characterized as forward-looking statements as defined under the Private Security's Literation Reform Act of 1995.
Speaker Change: The 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 our company's filings with the Security and Exchange Commission.
Speaker Change: 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 projective 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. The company assumes no obligation to update any forward-looking statements made during
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 may be made today to certain non-GAAP financial measures. 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.
Speaker Change: Joining me for our call today are Leroy Ball, Chief Executive Officer of Koppers, and Jimmy Su Smith, Chief Financial Officer. At this time, I will turn to the discussion over to Leroy.
Leroy Ball: 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 will turn the discussion over to Leroy. Thank you, Quynh. Good morning, everyone. I'm pleased to report that despite a decrease in sales in the first quarter, we delivered solid profitability on an adjusted basis. Now, as previously announced, we began taking steps in late 2024 to combat some market share loss and lingering softness in some of our end markets by resizing our employee base and improving our cost structure in anticipation of the challenges we knew were coming in 2025.
Leroy Ball: Thank you, Quynh. Good morning, everyone. I'm pleased to report that despite a decrease in sales in the first quarter, we delivered solid profitability on an adjusted basis.
Leroy Ball: No its previous as previously announced we began taking steps in late 'twenty 'twenty four to come back some market share loss and lingering softness in some of our end markets by resizing, our employee base and improving our cost structure in anticipation of the challenges we knew were coming in 2025.
Leroy Ball: Unsurprisingly, our first quarter results benefited from these actions and enabled us to offset the transitory headwind. Through Q1, our global employee base has been reduced by 5% and our SG&A finished the quarter $4.1 million lower than Q1 2024. We're also realizing cost benefits at the plant level that also helped Q1.
Leroy Ball: Not surprisingly our first quarter results benefited from these actions and enabled us to offset the transitory headwinds.
Leroy Ball: Through Q1, our global employee base has been reduced by 5% and our SG&A finished the quarter $4 $1 million lower than Q1 2024.
Leroy Ball: We're also realizing cost benefits at the plant level that also helped Q1.
Leroy Ball: We'll continue to focus on improving our business performance and margins through actions we're developing from the initial performance assessment we recently completed, and we'll share more with you as plans get finalized and implemented.
Leroy Ball: And we will continue to focus on improving our business performance and margins through actions. We're developing from the initial performance assessment, we risk we recently completed.
Leroy Ball: And we'll share more with you as plans get finalized and implemented.
Leroy Ball: Slide four highlights key metrics for the first quarter. We achieved consolidated sales of $456.5 million, compared with $497.6 million in the prior year. First quarter adjusted EBITDA was $55.5 million compared to $51.5 million in the prior year quarter. Our overall adjusted EBITDA margin was 12.2%, which compared favorably with 10.3% in the prior year quarter and represented our strongest Q1 margin since 2021. First quarter diluted loss per share was $0.68, compared with diluted earnings per share of $0.59 in the prior year quarter, driven by restructuring charges and a loss recorded from terminating the bulk of our U.S.
Slide four highlights key metrics for the first quarter, we achieved.
Leroy Ball: Consolidated sales of $456 $5 million compared with $497 6 million in the prior year.
Leroy Ball: First quarter, adjusted EBITDA was $55 5 million compared to $51 5 million in the prior year quarter.
Leroy Ball: Our overall adjusted EBITDA margin was 12, 2%, which compared favorably with 10, 3% in the prior year quarter and represented our strongest Q1 margin since 2021.
Leroy Ball: First quarter diluted loss per share was <unk> 68 cents compared with diluted earnings per share of 59 cents in the prior year quarter, driven by restructuring charges and a loss recorded from terminating the bulk of our U S defined benefit pension plan.
Leroy Ball: defined benefit pension plan. Adjusted earnings per share for the quarter were $0.71 compared with $0.62 in the prior year quarter, primarily due to benefits realized from cost action. Cash flow used in operations in the first quarter was $22.7 million, which included a $14 million payment associated with the termination of our U.S. pension plan. By comparison, we used $12.3 million of cash from operations in the prior year quarter. Capital expenditures, net of insurance proceeds, and sales of assets were $10 million for the first quarter compared with $25.8 million in the prior year quarter.
Leroy Ball: Adjusted earnings per share for the quarter were 71 cents compared with 62 cents in the prior year quarter, primarily due to benefits realized from cost actions.
Leroy Ball: Cash flow used in operations in the first quarter was $22 7 million, which included a $14 million payment associated with the termination of our U S pension plan.
Leroy Ball: By comparison, we used $12 3 million of cash from operations in the prior year quarter.
Leroy Ball: Capital expenditures net of insurance proceeds in the sales of assets were $10 million for the first quarter compared with $25 8 million in the prior year quarter.
Leroy Ball: Gross CapEx is now down to a normalized level and will provide a significant positive benefit to future free cash flow.
Leroy Ball: Gross Capex is now down to a normalized level and we will provide a significant positive benefit the future free cash flow.
Leroy Ball: On slide 6, we had 31 out of 41 facilities worldwide operating accident-free for the quarter. Our European CM&C, European PC, and Australasian PC businesses completed the quarter with zero recordable incidents. Leading activities designed to identify and eliminate hazards increased this quarter compared with last year, which is a good thing, and that led to reductions in recordable injuries and serious safety incidents. At Koppers, we continue to take our responsibility to operate sustainably seriously, and as shown on slide 7, our 2025 Zero Harm Plan includes improving our environmental performance across our operating footprint and reinforcing the foundational elements of zero harm to bring us closer to our goal of zero injuries.
Leroy Ball: On slide six we had 31 out of 41 facilities worldwide operating accident free for the quarter, our European CMC European P. C in Australasia, and PC businesses completed the quarter with zero recordable incidents.
Leading activities designed to identify and eliminate hazards increased this quarter compared with last year, which is a good thing and that led to reductions in recordable injuries and serious safety incidents.
Leroy Ball: At Koppers, we continue to take our responsibility to operate sustainably seriously and as shown on slide seven our 2025 zero harm plan includes improving our environmental performance across our operating footprint and reinforcing the foundational elements of zero harm to bring us closer to our goal of zero injuries.
Leroy Ball: Zero harm continues to be a core element of the Koppers culture and will remain so as we continue to look for ways to push our performance to new heights.
Leroy Ball: Zero harm continues to be a core element of the coppers culture and will remain so as we continue to look for ways to push our performance to new Heights.
Leroy Ball: As seen on slide nine, it's my pleasure to visit with two of our most recent additions to the Koppers network in Matheson, Mississippi and Kennedy, Alabama. These two facilities joined Koppers last year with the acquisition of Brown Wood Preserving Company, expanding our capabilities in the manufacture and sale of pressure-treated wood utility poles while growing our geographic reach in the Midwest and central regions of the U.S. And this expansion of our operating footprint greatly improves our ability to expand our product offerings and penetrate underserved geographic markets in a more cost-effective way than we were able to before the acquisition.
Leroy Ball: As seen on slide nine it's my pleasure to visit with two of our most recent additions to the copper network in math as to Mississippi and Kennedy, Alabama. These two facilities joined Koppers last year with the acquisition of Brown Wood preserving company expanding our capabilities in the manufacture and sale of pressure treated wood utility poles, while growing our geographic reach in the mid west and central regions of the U.
Leroy Ball: U S.
Leroy Ball: This expansion of our operating footprint greatly improves our ability to expand our product offerings and penetrate underserved geographic markets in a more cost effective way than we were able to before the acquisition.
Leroy Ball: Moving on to slide 10, we issued our 2024 annual report and 2025 proxy statement, which are available on the Koppers website. You can also access these materials using QR codes as shown.
Leroy Ball: Moving onto Slide 10, we issued our 2024 annual report in 2025 proxy statement, which are available on the Koppers website. You can also access these materials using QR codes as shown.
Leroy Ball: Our commitment to sustainability continues to garner positive attention, as shown on slide 11. For the third consecutive year, Koppers was named to USA Today's List of America's Climate Leaders, which recognizes companies that set a meaningful standard for emissions reduction in the U.S. In addition, Koppers gained further recognition by our customer, CSX, as they honored us with a Chemical Safety Excellence Award for Safely Transporting Hazardous Materials with Zero Non-Accidental Releases in 2024.
Leroy Ball: Our commitment to sustainability continues to garner positive attention as shown on slide 11 for the third consecutive year Koppers was named to USA. Today's list of America's climate leaders, which recognizes companies that set a meaningful standard for emissions reduction in the U S.
Leroy Ball: In addition, koppers gained further recognition by our customers see us X as they honored us with a chemical safety Excellence award for safely transporting hazardous materials with zero non accidental releases in 'twenty 'twenty four and summary, there continues to be a lot of positive development on multiple fronts at koppers.
Leroy Ball: In summary, there continues to be a lot of positive development on multiple fronts at Koppers.
Jimmi Sue Smith: I'll now turn the discussion over to our Chief Financial Officer, Jimmi Sue Smith. Thanks, Leroy. Earlier today, we issued a press release detailing our first quarter 2025 results. My comments this morning are based on that information. As seen on slide 13, we had consolidated first quarter sales at $457 million, a decrease of $41 million, or 8% from the prior year quarter. By segment, RUP sales increased by $10 million, or 4%, compared with the prior year, while PC sales were lower by $29 million, or 19.5%, and CM&C sales decreased by $22 million, or 18%. On slide 14, adjusted EBITDA for the first quarter was $56 million, with a 12.2% margin.
Speaker Change: I'll now turn the discussion over to our Chief Financial Officer, Jimmi Sue Smith.
Speaker Change: Thanks, Leroy earlier today, we issued a press release detailing our first quarter 2025, or so my comments. This morning are based on that information.
Speaker Change: As seen on slide 13, we had consolidated first quarter sales of 457 million, a decrease of 41 million or 8% from the prior year quarter.
Speaker Change: By segment sales increased by 10 million or 4% compared with the prior year, while PC sales were lower by $29 million or 19, 5% and C. M. A CS sales decreased by $22 million or 18% on <unk>.
Speaker Change: Slide 14, adjusted EBITDA for the first quarter with $56 million with a 12.2% margin.
Jimmi Sue Smith: By segment, RUP generated adjusted EBITDA of $26 million, with an 11% margin. PC delivered adjusted EBITDA of $20 million, and a 17% margin, while CM&C reported adjusted EBITDA of $10 million, with a 10% margin. On slide 15, our REPS business generated first quarter sales of $235 million compared with $225 million in the prior year. The sales increase was primarily due to higher volumes of Class 1 cross size, $4.6 million of price increases, and a 9% increase in domestic pull volume driven by the Brownwood acquisition and higher activity in the railroad bridge services business, partly offset by lower volumes of commercial cross size.
Rats generated adjusted EBITDA of $26 million with an 11% margin P. C delivered adjusted EBITDA of $20 million and a 17% margin well see in the theater reported adjusted EBITDA of $10 million with a 10% margin.
Speaker Change: Slide 15, our rep business generated first quarter sales of 235 million compared with $225 million in the prior year. The sales increase was primarily due to higher volumes.
Speaker Change: Kras lung crosstie, $4 6 million of price increases and a 9% increase in domestic coal volume driven by the Brown acquisition and higher activity in the railroad bridge services business, partly offset by lower volumes of commercial products side.
Jimmi Sue Smith: Market prices for untreated crossties remain stable. Year over year, first quarter crosstie procurement was down 19%, with crosstie treatment lower by 3%. RUFS also delivered adjusted EBITDA of $26 million compared with $18 million in the prior year. Profitability improved primarily due to increases in net sales volume and prices, along with a $2.2 million lower operating expenses, primarily in our cross-tie business, partly offset by $2.5 million of higher raw material and allocated SG&A expenses. On slide 16, our performance chemicals business reported first quarter sales of $121 million compared to $150 million in the prior year. We saw a 21.5 percent volume decrease of residential and industrial wood treatment preservatives in the Americas resulting from a market share shift in the U.S.
Speaker Change: Market prices for untreated crosstie. It remained stable year over year first quarter Crosstie procurement was down 19% with crosstie treatment lower by 3%.
Speaker Change: <unk> also delivered adjusted EBITDA of 26 million compared with $18 million in the prior year profitability improved primarily due to increases in net sales volume and prices along with a 2.2 million dollar lower operating expenses, primarily in our crosstie business, partly offset by $2 5 million of high.
Speaker Change: Raw material and allocated SG&A.
Speaker Change: On slide 16, our performance chemicals business reported first quarter sales of 121 million compared to $150 million in the prior year. We saw a 21, 5% volume decrease our residential and industrial wood treatment preservative in the Americas, resulting from a market share shift in the U S associated with the residue.
Jimmi Sue Smith: associated with the residential preservative market, lower activity due to winter weather, and an unfavorable impact of $2.4 million from foreign currency. Adjusted EBITDA for PCE came in at $20 million, compared to $30 million in the prior year. Profitability was impacted by the decrease in sales, as well as higher raw material costs, partly offset by $3.7 million of lower logistics and SG&A expenses, primarily in North America. Slide 17 shows first-quarter CM&C sales of $101 million compared to $122 million in the prior year. This decrease was driven by about $11 million of lower volumes for phallic and hydride as we exit that business, as well as approximately 8% lower sales prices for carbon pitch as a result of market dynamics, primarily in Australasia, and $2.3 million of unfavorable foreign currency impact.
Speaker Change: She'll preservative market lower activity due to winter weather and an unfavorable impact of $2 4 million from foreign currency.
Speaker Change: Adjusted EBITDA for P. C. He came in at $20 million compared to $30 million in the prior year profitability was impacted by the decrease in sales as well as higher raw material costs, partly offset by $3 7 million of lower logistics and SG&A expenses, primarily in North America.
Speaker Change: Slide 17 shows first quarter seemed to see sales of $101 million compared to $122 million in the prior year.
Speaker Change: This decrease was driven by about $11 million of lower volumes for phthalic anhydride.
Speaker Change: Exit that business as well as approximately 8% lower sales prices for carbon pitch as a result of market dynamics, primarily in Australasia, and $2 3 million of unfavorable foreign currency impact.
Jimmi Sue Smith: Adjusted EBITDA for CM&C in the first quarter was $10 million compared with $4 million in the prior year. This improvement in profitability was due to $7 million of lower raw material and allocated selling, general, and administrative expenses, particularly in North America, a favorable sales mix, and improved plant performance as a result of a plant outage in North America in the prior year period, which combined to more than offset the price decrease. Compared to the prior quarter, the average pricing of major products increased by 5 percent, and average coal tar costs were higher by 6 percent.
Speaker Change: Adjusted EBITDA for CMC in the first quarter was 10 million compared with $4 million in the prior year. This improvement in profitability was due to 7 million of lower raw material and allocated selling general and administrative expenses, particularly in North America, a favorable sales mix and improved plant performance as a result of a planned outage in north.
Speaker Change: America in the prior year period, which combine to more than offset the price decreases.
Speaker Change: Compared to the prior quarter, the average pricing of major products increased by 5% and average cold calls for higher by 6%.
Jimmi Sue Smith: Compared to the prior year quarter, the average pricing of major products was lower by 8 percent, while average coal tar costs decreased by 5 percent.
Speaker Change: Compared to the prior year quarter, the average pricing of major products have lower by 8%, while average coal tar costs decreased by 5%.
Jimmi Sue Smith: As shown on slide 19, we continue to pursue a balanced approach to capital allocation. Net of cash received from insurance proceeds and asset sales, we invested $10 million into our business in the first quarter. For 2025, we're targeting $65 million in net cash back. We repurchased $19 million through stock buybacks, including tax withholdings in the first quarter. We have approximately $85 million remaining in our $100 million share repurchase program. We also return capital to shareholders through our quarterly dividend of $0.08 per share this quarter. In terms of leverage, we finished the quarter with $948 million of net debt, $320 million in available liquidity, and net leverage of 3.6 times at March 31st, reflecting our typical seasonal cash flow pattern.
Speaker Change: As shown on slide 19, we continue to pursue a balanced approach to capital allocation net of cash received from insurance proceeds and asset sale, we invested $10 million into our business in the first quarter are 2025, we're targeting 65 million in net capex.
Speaker Change: We repurchased 19 million through stock buybacks, including tax withholdings in the first quarter, we have approximately 85 million remaining in our $100 million share repurchase program.
Speaker Change: We also returned capital to shareholders through our quarterly dividend eight cents per share this quarter.
Speaker Change: In terms of leverage we finished the quarter with $948 million of net debt $320 million in available liquidity and net leverage of three six times at March 31, reflecting our typical seasonal cash flow pattern. We remain committed to our long term target of two to three times net leverage ratio.
Jimmi Sue Smith: We remain committed to our long-term target of 2 to 3 times net leverage ratio. On slide 20, total capital expenditures for the first quarter were $14 million in growth or $10 million net. We spent $12 million on maintenance, $1 million on zero harm, and $1 million on growth and productivity projects. By business segment, we spent $5 million in rough, $3.5 million in PC, $5 million in CM&C, and under $1 million in corporate projects.
Speaker Change: On slide 20 total capital expenditures for the first quarter were 14 million growth or 10 million net.
Speaker Change: That 12 million on maintenance 1 million on zero harm and $1 million on growth and productivity projects.
Speaker Change: By business segment, we spent $5 million and rub $3 5 million and P. C.
Speaker Change: $1 million in CMC, and under $1 million and corporate projects.
Jimmi Sue Smith: And finally, on slide 22, our Board of Directors declared a quarterly cash dividend of $0.08 per share on Koppers Common Stock on May 8th.
Speaker Change: And finally on slide 22, our board of directors declared a quarterly cash dividend of eight cents per share on Congress common stock on May eight this dividend will be paid on June 17th to shareholders of record as of the close of trading on may 30th.
Jimmi Sue Smith: This dividend will be paid on June 17th to shareholders of record as of the close of trading on May 30th. 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 percent increase over the 2024 dividend.
Speaker Change: This planned 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.
Speaker Change: And with that I'll turn it back over to Leroy.
Leroy Ball: Thank you, Sue. Now on to a quick review of each of the businesses. As seen on page 24, our performance chemicals business finds itself in a challenging spot that it hasn't experienced in a few years as we've seen some residential preservative volume move away from coppers after many consecutive years of market share gains. To compound matters, after a solid start to the year, demand seemed to lose steam as the quarter progressed, partly due to a colder winter throughout the country and partly, we believe, to broader economic uncertainty, stifling individuals' decisions to spend discretionary dollars on outdoor projects.
Leroy Ball: Thank you Sue.
Leroy Ball: Now onto a quick review of each of the businesses.
Leroy Ball: As seen on page 24, our performance chemicals business finds itself in a challenging sponsored it hasnt experienced in a few years as we've seen some residential preservative volume move away from koppers. After many consecutive years of market share gains to.
Leroy Ball: To compound matters after a solid start to the year demand seem to lose steam as the quarter progressed, partly due to a colder winter throughout the country and partly we believe the broader economic uncertainty.
Leroy Ball: Rifling individuals' decisions to spend discretionary dollars on outdoor projects.
Leroy Ball: Now, nothing in the external data gets us really excited that spending on home projects will turn around soon. The continued backdrop of economic uncertainty driven by tariff activity and the direct and unintended consequences remain a concern that could continue to weigh on near-term demand, and we're hearing mixed messages from our customer base in regards to their optimism for volume improvement this year. We've enacted several tariff mitigation actions that have reduced the overall exposure from our cross-border transactions across all our business segments. As a result, at this point, we feel the situation is manageable, but as we know, it remains fluid.
Leroy Ball: Nothing in the external data gets us really excited that spending on home projects will turnaround soon the continued backdrop of economic uncertainty driven by tariff activity and the direct and unintended consequences remain a concern that could continue to weigh on near term demand and we're hearing mixed messages from our customer base in regards to their optimism for volume improve.
Leroy Ball: <unk> this year.
Leroy Ball: We even got enacted several tariff mitigation actions that have reduced the overall exposure from our cross border transactions across all our business segments. As a result at this point, we feel the situation is manageable, but as we know it remains fluid.
Leroy Ball: On the cost front, we've pared back spending quite a bit and realigned costs to better fit a smaller top line in the near future and will continue to be aggressive in order to combat any potential market slowdown.
Leroy Ball: On the cost front, we've pared back spending quite a bit and realign cost to better fit our smaller topline in the near future and will continue to be aggressive in order to combat any potential market slowdown.
Leroy Ball: Moving on to our utility and industrial products business, shown on page 25. Demand in the early part of this year has been similar to 2024 levels, which was a softer year compared to 2023. While the second quarter isn't expected to look a whole lot different than the first, we continue to hear that volume is expected to pick up in the back half of the year. Like our PC business, I do have some worries that persistently high interest rates and fiscal policy uncertainties could dampen enthusiasm in the industry to move forward with projects. That, however, does not change my long-term view on this business as various demand drivers remain in place to support a bullish outlook.
Leroy Ball: Moving on to our utility and industrial products business shown on page 25 demand in the early part of this year has been similar to 2024 levels, which was a softer year compared to 23.
Leroy Ball: While the second quarter isn't expected to look a whole lot different than the first we continue to hear that volume is expected to pick up in the back half of the year.
Leroy Ball: Like our PC business I do have some worries that persistently high interest rates and fiscal policy uncertainties could dampen enthusiasm in the industry to move forward with projects.
Leroy Ball: That however, does not change my long term view on this business as various demand drivers remain in place to support our bullish outlook.
Leroy Ball: We're starting to see greater interest from the customer base in our new geographic markets and we continue to invest resources to build out our sales team and distribution network to support our expected growth in those underrepresented areas. As I mentioned earlier, the sites acquired from Brown Wood a little over a year ago play a key role in accessing some of these markets, and they're performing solidly.
Leroy Ball: We're starting to see greater interest from the customer base and our new geographic markets and we continue to invest resources to build out our sales team and distribution network to support our expected growth in those underrepresented areas.
Leroy Ball: As I mentioned earlier the sites acquired from Brown Wood, a little over a year ago play a key role in accessing some of these markets and they're performing solidly.
Leroy Ball: On a final note, our Australian pole business had its best Q1 since 2021, and we're anticipating another year of steady profitability.
Leroy Ball: On a final note our Australian pole business had its best Q1, since 2021, and we're anticipating another year of steady profitability.
Leroy Ball: Our Railroad Products and Services business is summarized on page 26. While volumes in Q1 weren't quite where we expected them to be, the combination of small contractual price increases and lower operating costs led to our best profit metrics in the cross-tie part of our business since 2016. Now, if our sales reach the 8% improvement we planned for coming into this year, then 2025 should represent one of our strongest years ever for the rail business. Presently, we have no major capital needs for this business and our inventory is at a good level, which means it should be back to generating significant free cash flow.
Leroy Ball: Our railroad products and services business as summarized on page 26, while volumes in Q1 weren't quite where we expected them to be the combination of small contractual price increases and lower operating costs led to our best profit metrics and the crosstie part of our business since 2016.
Leroy Ball: Our sales reach the 8% improvement we plan for coming into this year.
Leroy Ball: And then 'twenty 'twenty five should represent one of our strongest years ever for the rail business.
Leroy Ball: Presently we have no major capital needs for this business and our inventories at a good level, which means it should be back to generating significant free cash flow.
Leroy Ball: We've been able to avoid tariff impact for this business thus far, but we do worry about the tariff effect on some of our sawmill suppliers who rely heavily on hardwood exports to China, which have dried up. Our shift away from the disposal part of our cross-tie recovery model is already generating positive benefits, and we expect greater consistency in our financial performance from that piece of RPS as a result. Overall, our maintenance-of-weight business was a solid contributor to the RPS results in Q1, and as of now, are on pace for their best year since 2016.
Leroy Ball: We've been able to avoid tariff impact this business, thus far but we do worry about the tariffs effect on some of our sawmill suppliers, who rely heavily on hardwood exports to China, which have dried up or.
Leroy Ball: Our shift away from the disposal of part of our Crosstie recovery model was already generating positive benefits and we expect greater consistency in our financial performance from that piece of Rps as a result.
Leroy Ball: Overall, our maintenance of way business was a solid contributor to the Rps results in Q1 and as of now are on pace for their best year since 2016.
Leroy Ball: Next, on to the CMC business, which is summarized on page 27. Like last year's fourth quarter, the first quarter for CMC represented significant improvement over the prior year performance. That improvement came, despite a lower sales figure, with some due to the ramp down of our phthalic anhydride production, and the other half due to lower product prices. As in all our businesses, we remain focused on driving down costs to support better operating performance. Our exit of the sialic anhydride business in the U.S. supports that concept through reducing the complexity of our operations, which will improve our cost structure, as well as the safety and environmental footprint of our sticking We recently ceased production of phallic slightly ahead of our May target date and are working through the next steps of our closure.
Leroy Ball: Next onto the CMC business, which is summarized on page 27.
Leroy Ball: Last year's fourth quarter, the first quarter for CMC represented significant improvement over the prior year performance.
Leroy Ball: That improvement came despite a lower sales figure with some due to the ramp down of our phthalic anhydride production and the other half due to lower product pricing.
Leroy Ball: As in all our businesses, we remain focused on driving down cost to support better operating performance.
Leroy Ball: Our exit of the Silicon hydride business in the U S supports that concept through reducing the complexity of our operations, which will improve our cost structure as well as the safety and environmental footprint of our Stickney plant.
Leroy Ball: We recently ceased production of solid slightly ahead of our May target date and are working through the next steps of our closure.
Leroy Ball: We recently extended our raw materials supply in Australia and are looking to do the same in North America and Europe. While there's much we can do to improve the performance of the CM&C business that we're actively working on, the coal tar carbon products industry overall is in need of further rationalization to improve its overall health. And it's times like these that we've experienced in the past couple of years, which many times lead to that happening. So it's something we will definitely be keeping our eyes.
Leroy Ball: We recently extended our raw material supply in Australia and are looking to do the same in North America and Europe.
Leroy Ball: There is much we can do to improve the performance of the CMC business that we're actively working on the coal tar carbon products industry. Overall is in need of further rationalization to improve its overall health and it's times like these that we've experienced in the past couple of years, which many times lead to that happening. So it's something we will definitely be keeping our.
Leroy Ball: Our eyes on.
Leroy Ball: Moving on to our outlook for 2025. As shown on slide 29, we expect consolidated sales to reach $2 billion to $2.2 billion in 2025, compared with $2.1 billion in 2024. With lower volumes in PC and lower volumes in pricing in CMC, partially offset by higher volumes and some pricing improvement in RPS, in ROPS, I'm sorry, being the most likely outcome. On slide 30, we're maintaining our adjusted EBITDA forecast of $280 million compared with $262 million in 2024. In line with the sales changes reflected on the previous page, we expect to see significant year-over-year improvement in RUPS, which we've already begun to realize in Q1, while PC will take a hit in profitability in line with its reduced sales volume.
Leroy Ball: Moving onto our outlook for 2025 as shown on slide 29, we expect consolidated sales to reach $2 2 billion to $2 2 billion in 2025, compared with $2 1 billion in 2024 with lower volumes in PC, and lower volumes and pricing and the CMC, partially offset by higher volumes and some <unk>.
Leroy Ball: Pricing improvement in Rps, and rubs, I'm, sorry, being the most likely outcome.
Leroy Ball: On slide 30, we're maintaining our adjusted EBITDA forecast of $280 million compared with $262 million in 2024.
Leroy Ball: In line with the sales changes reflected on the previous page, we expect to see significant year over year improvement in reps, which we've already begun to realize in Q1, while PC will take a hit and profitability in line with its reduced sales volumes.
Leroy Ball: Despite the lower top line from CMC, we expect to see its profitability improve due to lower raw material costs and lower operating costs, and the Q1 results from this year are already reflective of that.
Leroy Ball: Despite the lower top line from CMC, we expect to see its profitability improved due to lower raw material costs and lower operating costs in the Q1 results from this year are already reflective of that.
Leroy Ball: As mentioned on our previous call, our entire organization underwent a comprehensive performance assessment to determine how high our potential performance could be. And the initial output of that assessment uncovered quite a bit of opportunity. We're now in the process of prioritizing and developing the detailed plans for how we turn these opportunities into results. And I expect that we'll have more to share as the year progresses and the impact that could have on the remainder of this year and future years. Slide 31 shows our 2025 adjusted earnings per share bridge and the improvement we expect in 2025 driven by higher operating earnings and lower interest Accordingly, we're continuing to expect $4.75 per share in 2025 compared with $4.11 in 2024.
Leroy Ball: As mentioned on our previous call our entire organization underwent a comprehensive performance assessment to determine how high our potential performance could be and the initial I'll put it out assessment uncovered quite a bit of opportunity.
Leroy Ball: We're now in the process of prioritizing and developing the detailed plans for how we turn these opportunities into results.
Leroy Ball: But that will have more to share as the year progresses and the impact that could have on the remainder of this year and future years.
Leroy Ball: Slide 31 shows our 2025 of adjusted earnings per share bridge and the improvement we expect in 2025, driven by higher operating earnings and lower interest expense.
Leroy Ball: Accordingly, we're continuing to expect $4 75 per share in 2025, compared with $4 11 and 2024.
Leroy Ball: On slide 32, we're projecting net capital spending of $65 million in 2025 compared with $74 million in 2024, and based upon the run rate we saw in Q1, we're moving comfortably towards meeting that target, or even coming in a little less.
Leroy Ball: On slide 32, we are projecting net capital spending of $65 million in 2025, compared with 74 million in 2024 and based upon the run rate. We saw in Q1, we're moving comfortably towards meeting that target or even coming in a little less.
Leroy Ball: Now, the final point I will make before moving to Q&A is that despite the extreme uncertainty that exists in the markets right now, we are fighting our way through it and we'll come out the other side in an even stronger position due to the measures we've already taken as well as others that are near-term actionable. With no major capital expenditures looming and a portfolio of opportunities to act upon at our disposal, we find ourselves in a position to generate significant free cash flow over the next few years, which will be put to good use, delevering the balance sheet and returning capital to shareholders.
Leroy Ball: Now the final point I'll make before moving to Q&A is that despite the extreme uncertainty that exists in the markets right. Now we are fighting our way through it and we'll come out the other side in an even stronger position due to the measures we have already taken as well as others that are near term actionable with no major capital expenditures looming and a portfolio of opportunities to add.
Leroy Ball: Upon at our disposal, we find ourselves in a position to generate significant free cash flow over the next few years.
Leroy Ball: Which will be put to good use delevering the balance sheet and returning capital to shareholders now I would like to open it up to any questions.
Operator: Now I would like to open it up to any questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To draw your question, please press star then 2.
Leroy Ball: We will now begin the question and answer session.
Leroy Ball: To ask a question you May Press Star then one on your Touchtone phone.
Leroy Ball: If you were using a speakerphone please pick up your handset before pressing the keys.
Leroy Ball: To withdraw your question. Please press Star then two.
Operator: At this time, we will pause momentarily to assemble our roster.
Leroy Ball: At this time, we will pause momentarily to assemble our roster.
Liam Burke: Our first question today is from Liam Burke with B. Reilly Securities. Please go ahead. Thank you. Good morning, Leroy. Good morning, Jimmi. Good morning. Leroy, on the RUP business, you saw double-digit EBITDA margins. You highlighted some of the reasons why you're driving good year-over-year profitability results. Expectations for the rest of the year are better.
Speaker Change: Our first question today is from Liam Burke with B Riley Securities. Please go ahead.
Liam Burke: Thank you good morning, Leroy good morning, good morning.
Speaker Change: Leroy on the.
Our U K business, you saw double digit EBITDA margins.
Speaker Change: You highlighted some of the reasons why you're driving good year over year profitability results.
Speaker Change: Patients for the rest of the year a better I was just curious how much does the utility pole product mix help your are your margins going forward.
Leroy Ball: I was just curious, how much does the utility pull product mix help your margins going forward? That's a good question, Liam. I mean, you know, the utility piece of the business, the utility pull piece of the business is one that structurally has historically generated better margin performance. So, as we continue to grow that business, we would expect that to have a positive impact on our margins for that segment. At the same time, you know, in the rail piece of that business, again, we've been actively working on a number of things, both commercially as well as on the cost side, that are already starting to bear fruit and, you know, had a pretty good impact here in the first quarter, and we expect that to continue as well.
Leroy Ball: It's a good question Liam I mean.
Leroy Ball: The utility piece of the business utility pole piece of the business is one that structurally has historically.
Leroy Ball: We generated a better margin performance.
Leroy Ball: So as we continue to grow that business, we would expect that to have a positive impact on our margins for that segment at the same time in.
Leroy Ball: In the art and the rail piece of that business again, where we're active we've been actively working on a number of things both commercially as well as on the cost side are already starting to bear fruit and you know had a pretty good impact here in the first quarter and we expect that to continue as well so we're seeing improving improving.
Leroy Ball: So, we're seeing improving margins in the rail piece, and certainly as we continue to grow utility, you know, as that proportion becomes a segment, we would expect to see margin improvement as well.
Leroy Ball: Margins in the rail piece and certainly as we continue to grow utility as that proportion becomes a bigger piece of the of that segment, we would expect to see margin improvement as well.
Liam Burke: Okay, and just staying on Rupp, your contracts with the Class Ones, are you satisfied with all of them or do you still have work to do there? You know, look, I think there's certainly still work to do there and things that we would like to see improved, so it remains a work in progress. But we're in a better spot than we were, Liam, but I'd say there's still some more work Great. Thank you, Leroy. Yep. Thank you.
Leroy Ball: Okay.
Speaker Change: Just staying on Rob.
Speaker Change: Your contracts with the class ones are you satisfied with all of them or is there still work to do there.
Speaker Change: Look I think there's a there's certainly still a work to do there and things that we would like to to see improved so it remains a work in progress but we're.
Speaker Change: We're in a better spot than we were Liam, but I'd say, there's still some more work to do great.
Leroy Ball: Great. Thank you Leroy Yep. Thank you.
Gary Prestopino: The next question is from Gary Prestopino with Barrington Research. Please go ahead. Hey, good morning, Leroy, Jimmi, Sue, Quynh. How are you guys? Good. Hi, Gary.
Speaker Change: The next question is from Gary pressed to Pino with Barrington Research. Please go ahead.
Speaker Change: Hey, good morning, Leroy Jimmi Sue Queen how are you guys, good Hey, Geely.
Gary Prestopino: A couple of questions here, Leroy, and I'm going to refer to the state of the business and looking at the RUPS utility and industrial products. I mean, you're saying a pickup in the second half of the year, which you're also saying for the RUPS business. Um, is that based on, you know, business quotes that you have in hand from your end customers, or is there something going on there that is going to drive that growth that you're expecting, I guess is what I want to get at. Yeah, no, I understand. You know, I think, look, a lot of it is related to feedback from the market.
Speaker Change: Couple of questions here Leroy.
Speaker Change: Referring to the state of the business and looking at the rocks utility and industrial products.
Speaker Change: You're seeing a pick up in the second half of the year, which you're also saying well the rough sizes.
Speaker Change: Is that based on you know.
Speaker Change: Business quotes that you have in hand from your.
Speaker Change: And customers or is there something something going on there that is going up.
Speaker Change: Drive that growth that you're expecting I guess is what I want to get out and yeah. No I understand I think a look a lot of it is related to feedback from the market.
Leroy Ball: And so, like any of our businesses, we are somewhat subject to what we're hearing from our customer base. But there has continued to be a common refrain of the back half of this year seeing an expected volume pickup and moving forward of projects. As I mentioned, I do have some worries about that, just in terms of the overall economic uncertainty that's out there. But that's one of the bigger drivers. We are seeing some improvement in increased activity in some of the newer markets that we've been going after. So I'd say a combination of those two things is really what we're relying upon.
Speaker Change: And so you'll.
Speaker Change: You know like like any of our businesses. We are we are somewhat subject to you know what we're what we're hearing from our customer base, but there.
Speaker Change: There has continued to be a common refrain of the back half of this year I'm seeing a expected volume pick up and moving forward of projects.
Speaker Change: As I mentioned I E.
Speaker Change: I do have some worries about that just in terms of the overall the overall economic uncertainty that's out there.
Speaker Change: But that's that's you know one of the bigger drivers we are seeing some improvement and increased activity in some of the newer markets that we've been going after so I'd say a combination of those two things is really what is is what we're relying upon.
Leroy Ball: Okay, was it, you know, a lot of the companies that were speaking to it on the conference call, they basically had said that, you know, starting in March, things just fell off a cliff. Once Liberation Day came and it became clear what the tariff impacts could be, and then after that there was a lessening and they're starting to see a reinvigoration on their pipelines. Were your customers really impacted by this as well? Well, I think that's really consistent, I'd say, with more or less what we've seen, and I kind of refer to that particularly in the PC business where we seem to begin the year on a stronger note and then sort of saw that wane as the quarter went on.
Speaker Change: Okay was it.
Speaker Change: You know a lot of the companies that we're speaking to and on the conference calls.
Speaker Change: Basically you had said that starting in March things just fell off a cliff.
Speaker Change: Once liberation day came in the.
Speaker Change: It became clear what.
Speaker Change: The tariff impacts could be yep.
Speaker Change: And then after that you know there was a lessening and they're starting to see a reinvigoration on there their pipelines.
Speaker Change: Or is really impacted by this as well well I think that's you know that's probably it's really consistent I would say with what with you know more or less what we've seen and I kind of referred to that particularly in the PC business, where we seem to begin the year you know on a on a on a stronger note and then sort of solve that.
Speaker Change: Wayne as the quarter went on I would say in the other.
Leroy Ball: I would say in the other two segments it's been a little more consistent throughout the quarter. I think I don't know of an industry that's not experiencing some impact from the tariffs and the constant changing and moving of the ball there. Some of it comes directly, some of it comes in the form of some unintended consequences that you end up having to deal with. Again, I sort of mentioned the one on the rough side where our sawmill suppliers are having to deal with export volume that's drying up, which will ultimately end up having an impact on hardwood prices for cross ties that they more or less produce as a byproduct of their regular production.
Speaker Change: Two segments, it's been a little more consistent throughout throughout the quarter.
Speaker Change: I think our I think I don't know of a industry, that's not experiencing some impact from that.
Speaker Change: The tariffs and.
Speaker Change: The constant changing and moving of the ball there so.
Speaker Change: Some of it comes directly some of it comes in the form of some unintended consequences that you end up having to deal with it again.
Speaker Change: I've mentioned the one on the.
Speaker Change: Or upside.
Speaker Change: Where our sawmill suppliers or having to deal with.
Speaker Change: Export volume, that's drawing up which will ultimately end up having an impact on hardwood prices for cross ties that they more or less produced as a byproduct of the regular production. So you know those are the things that you know, we're still gonna have to see how they fare it out as time moves on.
Leroy Ball: Those are the things that we're still going to have to see how they ferret out as time moves on, but overall as we've assessed the current situation, there's several mitigation plans that we've already put in place for the things that are actually happening. Obviously, we're planning and doing some actions to try and get in front of other potential changes that could occur, but it's very tough because, again, things seem to change. Lately, it seems to be a little bit more settled down, but certainly for a period, things were changing day by day. It's the unintended consequences that tend to jump up and get you.
Speaker Change: But you.
Speaker Change: Overall as we've assessed the current situation.
Speaker Change: There are several mitigation plans that we've already put in place for.
Speaker Change: The things that are actually happening and obviously, we're planning and and doing some actions to try and get in front of of other potential changes that could occur.
Speaker Change: Very tough right because again, you know things seem to change.
Speaker Change: Lately it seems to be a little bit more settled down, but certainly for a period things are changing day by day.
Speaker Change: No.
Speaker Change: Yeah. So so it's the unintended consequences that tend to jump up and get you and and right now like I said the one that is near term on the radar as you know what's going on in the hardwood market.
Leroy Ball: Right now, like I said, the one that is near term on the radar is what's going on in the hardwood market.
Leroy Ball: Yeah, I don't envy you having to try to run a business in this environment.
Speaker Change: Yeah, I don't envy you haven't tried to run a business in this environment.
Leroy Ball: Yeah, and then I just wanted to drill back down to your forecasts here. I think you were at $2.17 billion in your prior forecast, but you really didn't change your adjusted EBITDA guidance, you're still at $2.80. So I guess what I want to ask you is, if you're trending more towards the low end of that guidance range on sales, do you have additional flex down on costs that would help you get to that $2.80 EBITDA? We do. We're actively going after a number of different cost measures there. Yeah, obviously the closer it gets down to the $2.00, the tougher that will be and the tougher it will make it, but we do have a number of items that, again, are already in process, and some of that you saw reflected in the first quarter, and we expect that to continue moving forward.
Speaker Change: And then I just wanted to drill back down to your forecast here.
Speaker Change: $2 billion to $2 2 billion of sales.
Speaker Change: Which is I think you were $2 $1 7 billion in your prior.
Forecast, yes.
Speaker Change: But you really Didnt give you really didn't change your adjusted EBITDA guidance, yes, you're still at $2 80, So I guess, what I want to what I wanted to ask you is if you're trending more towards the low end of that guidance range on sales do you have additional flex down on cost.
Speaker Change: Help you get to that $2 80 EBITDA.
Speaker Change: We do we're actively you know are going after a number of different cost measures. There yeah, obviously the closer it gets down to the to the tougher that will be in a tougher it'll make it but what.
Speaker Change: But we do have a number of items that again are already in process and some of that you saw reflected in the first quarter.
Speaker Change: And we expect that to continue moving forward. So yeah like like like you would expect the closer it gets to the to the lower end of that range you know the more challenging it'll be to reach the number.
Gary Prestopino: So yeah, like you would expect, the closer it gets to the lower end of that range, the more challenging it will be to reach the number, and the closer it ends to the higher end of that range, I'd say we have a pretty good room, but that's not going to stop us from continuing to try and drive the performance improvement through the various... Okay, great. Thank you very much. You're very welcome.
Speaker Change: And you know the closer it adds to the higher end of that range I would say we have we have.
Speaker Change: Pretty good room, but that's not going to stop us from continuing to to try and drive the AR the performance improvement through through the various businesses. Okay. Great. Thank you very much they're very welcome.
David Marsh: The next question is from David Marsh with Singular Research. Please go ahead. Hey, thank you guys so very much for taking the questions. I have to say that the EBITDA result in the CMC business in light of the revenue is really pretty impressive and it really speaks to the efforts you guys undertook to cut costs. Could you talk about, you know, to the extent that you see recovery there, you know, what the kind of incremental revenue dollar looks like on the EBITDA line? Yeah, that's been a challenged business, certainly, in the past couple of years, as we've talked about.
Speaker Change: The next question is from David Marsh with singular research. Please go ahead.
David Marsh: Hey, Thank you guys, so very much for taking the questions.
Speaker Change: And I have to say that the EBITA result in in the CMC business in light of the revenue is really pretty impressive.
Speaker Change: And it really speaks to.
Speaker Change: Yeah. The efforts you guys undertook to cut costs or could you talk about.
Speaker Change: You know to the extent that you see recovery there.
Speaker Change: You know what kind of incremental revenue dollar looks like.
Speaker Change: On the EBITDA line.
Speaker Change: Yeah, that's so.
Speaker Change:
Speaker Change: You know that's been a challenged.
Speaker Change: Business certainly in the past couple of years as we've talked about.
Leroy Ball: And I even referenced in my prepared comments how the industry really is at a point, and it's been at a point for a while, where it does need some further rationalization. We feel like we did our part back in the 2015 to 2020 time frame, where we took a bunch of capacity out of the industry. You know, we feel that, you know, it's past time for some others probably to consider doing the same. You know, but, you know, as As end markets get stronger and pricing improves, obviously that will work its way down to the bottom line.
Speaker Change: And I even referenced in my in my prepared comments, how the industry really is at a point and it's been at a point for a while where you know it does need some further rationalization.
Speaker Change: We feel like we did our part back in the 2015 to 2020 timeframe, where we took a bunch of capacity out of the industry.
Speaker Change: We feel that Oh.
Speaker Change: <unk> past time for some others probably to consider doing the same.
Speaker Change: But.
As.
Speaker Change: As end markets get stronger and pricing improves obviously that will work its way down to the bottom line in terms of volumes certainly throughput as an issue as well and you know while.
Leroy Ball: In terms of volumes, certainly throughput's an issue as well. While overall we did pretty well in Q1 from a volume standpoint, we've taken a hit on volumes in the past year to 18 months as, again, things have gotten more challenging. But there's no question if we can see the health of our end markets improve, which will enable us to get more throughput through the plant, we're going to be able to improve efficiency, drive down our unit costs, and improve profitability. So all that is absolutely connected. At the same time, simplifying our operations as we're in the process of doing at Stickney and trying to make that operation very similar to our other two, the one in Australia and the one in Denmark, I think the more that we can drive improved margins through that business.
Speaker Change: While we did overall overall, we did pretty well in Q1 from a volume standpoint, we we've taken a hit on volumes in the past.
Speaker Change: Year to 18 months is.
Speaker Change: As again things have gotten more challenging but theres no question. If we if we can see the <unk>.
Speaker Change: All of our end markets improve which will enable us to get.
Speaker Change: More throughput through the plant.
Speaker Change: We're gonna be able to improve efficiency drive down our unit costs and improve profitability. So all that is absolutely connected at the same time simplifying our operations as we are in the process of doing it sticky and trying to make that operation I'm very similar to our other two are the one in.
Australia and one in Denmark.
Speaker Change: Think the more that we can drive it.
Speaker Change: <unk> margins through that business. So we've seen that business before it at its peak being in the high teens in terms of margins. There is no reason, we can't get back to that point in a healthy environment, especially with with some of.
David Marsh: So we've seen that business before at its peak being in the high teens in terms of margins. There's no reason we can't get back to that point in a healthy environment, especially with some of the actions we're taking now to simplify our operating process. I appreciate that. It's helpful. Your debt did kick up a little bit year over year.
Speaker Change: The actions were taken out to simplify our operating footprint.
Speaker Change: I appreciate that that's helpful.
Speaker Change: That did tick up a little bit year over year would you know.
Leroy Ball: Would you talk about priority uses of cash flow and how managing your leverage factors into that, please? Yeah. So actually, I think the first quarter I was pleased with where we ended up in the first quarter considering we had the pension termination and put $14 million in to do that. Taking that out, we actually had better cash flow, operating cash flow, a lower negative operating cash flow with that out of the picture. We have that behind us. So even though our contributions have been lower in the past few years, we now have that and any potential volatility from that behind us.
Speaker Change: Talk about priority uses of cash flow and how I'm managing your leverage factors into that please yeah. So so actually.
Speaker Change: I think the first quarter I was pleased with where we ended up in the first quarter, considering we had the pension termination and put $14 million and to do that.
Speaker Change: Taking that out we actually had better cash flow operating cash flow a you know a lower negative operating cash flow with that out of the picture we have that behind us. So you know even though our contributions have been lower in the past few years, we now have that and any potential.
Speaker Change: Utility from that behind us.
Leroy Ball: First quarter is always a working capital draw, so absolutely that had an impact as well. We're still expecting a pretty strong cash flow year, and the near-term focus is in two areas. We continue to remain undervalued. Certainly, we will allocate cash to repurchase shares. That's the reason why we enacted the $100 million share repurchase program last quarter. And of course, we will put the remainder towards delevering the balance sheet. So those are the two primary focuses in the near-term as it relates to cash. Yeah, that's fair.
Speaker Change: First quarter is always a working capital draw. So so absolutely that had an impact as well, where we're going to we're still expecting a pretty strong cash flow year end.
Speaker Change: And the focus the near term focus is is in two areas as we continue to remain undervalued certainly we will allocate.
Speaker Change: We will allocate cash to repurchase shares as the reason why we enacted the $100 million share repurchase program last quarter and of course, we will.
Speaker Change: Put the remainder towards Delevering the balance sheet. So those are the two primary focus is in the near term as it relates to cash.
Speaker Change: Yeah, that's fair.
David Marsh: And then just, you know, as we, you know, have this little bit of economic uncertainty here, are you seeing any disruption that might lead to some attractive M&A opportunities for you? I mean, potentially, potentially, because, you know, as you point out, yes, right, that it's times in this sort of disruption where those sorts of opportunities do tend to surface. We always remain active in our conversations and looking at opportunities, and so, you know, it takes two parties, obviously, in a meeting of the minds in terms of what fair value is, so that always tends to be the toughest point, but, you know, we continue to remain active in our discussions, and, you know, maybe this current environment will shake some things out, but we'll just have to wait and see.
Speaker Change: And then just you know as we you know have this little bit of economic uncertainty here are you seeing any disruption that might lead to some attractive M&A opportunities for you.
Speaker Change:
Speaker Change: Potentially potentially because as you point out yes, right now it's at times and this sort of disruption where.
Speaker Change: Where.
Speaker Change: Those sorts of opportunities do tend to surface.
Speaker Change: We always remain active in our conversations and looking at opportunities and so.
Speaker Change: It takes two parties, obviously in a meeting of the minds in terms of what fair value is so that's always tends to be the the toughest point, but we continue to remain active in our discussions and and.
Speaker Change: Maybe this current environment will shake some things out, but we'll just have to wait and see.
Speaker Change: Okay is there I mean would you would it would you most be most interested in looking at potential targets in the rubber business or are all businesses really yeah, you know well depth and definitely not yeah, yeah, No I'd say I'd say certainly our focus as we have.
Leroy Ball: I mean, would you be most interested in looking at potential targets in the RUPS business or are all businesses really, you know, under construction? Well, definitely not. Yeah.
Leroy Ball: No, I'd say certainly our focus is we have been talking about now for several quarters is on, you know, growing our utility and industrial products business. So if there's ways to do that faster with acquisitions that make sense, you know, we'll look to do that. You know, the acquisition of Brownwood Preserving was an important acquisition for us here a year ago. And it's opened up opportunities for us to expand our product portfolio, expand our geographic reach. And, you know, we're going to see significant returns from that as the overall market improves. If we have other sorts of opportunities that will help us get into markets faster and those sorts of things, we would absolutely entertain that.
Speaker Change: We been talking about now for several quarters is on <unk>.
Speaker Change: Growing our utility and industrial products business. So.
Speaker Change: If there's ways to do that faster with acquisitions that makes sense.
Speaker Change: We'll look to do that you know the acquisition of Brown wood preserving.
Speaker Change: <unk> was an important acquisition for us here, a year ago, and it's opened up opportunities for us to expand our product portfolio expand our geographic reach and we're going to see significant returns from that as the overall market improves if we have other sorts of opportunities.
Speaker Change: That that will help us get into markets faster and those sorts of things are we would absolutely entertain that I don't think we I wouldn't say, we have a broad our M&A strategy as it relates to across the business segments, but again, we will.
Leroy Ball: I don't think we – I wouldn't say we have a broad M&A strategy as it relates to across the business segments. But again, we'll always remain open to opportunities. And so there's no absolute nos in any particular area. It'll come down to what makes sense at what point.
Speaker Change: There will always remain open to opportunities and so.
Speaker Change: There's no absolute nos in any particular area.
Speaker Change: It'll it'll come down to what makes sense at what price.
David Marsh: Hey, thanks so much. Appreciate it. Thank you.
Speaker Change: Got it hey, thanks, so much appreciate it thank you.
Jamie Weiland: And the last question today comes from Jamie Weiland with Weiland Management. Please go ahead. Yes, I think it's truly amazing that you're able to take $4 million year-over-year out of SG&A. I think it's fantastic to have that reduction.
Speaker Change: And the last question today comes from Jamie Wilen with Wilen management. Please go ahead.
Jamie Wilen: Yes, I think it's truly amazing that you were able to take $4 million year over year out of SG&A I think it's fantastic to have that reduction. Thank you Brad.
Leroy Ball: Given the new cost structure and a strong outlook looking forward and a stock trading at five to six times what you expect in EBITDA this year, I know that stock repurchase is part of the program, but why would you not at this point in time accelerate what you're doing and buy back stock in greater quantities today while you do have an unusually depressed share price? Well, we don't speak specifically about any intentions that we have in any particular quarter. We did repurchase 15 million shares in our open window period in the first quarter from the new plan.
Jamie Wilen: The new cost structure.
Jamie Wilen: Our.
Jamie Wilen: Our strong outlook looking forward.
Jamie Wilen: And the stock trading at.
Jamie Wilen: Five to six times would you expect an EBITDA this year.
Jamie Wilen: I know that stock repurchase as part of the program.
Jamie Wilen: Why would you not at this point in time.
Jamie Wilen: Accelerate what you're doing and buy back stock in greater quantities today, while you do have an unusually depressed share price.
Jamie Wilen: Well, we don't speak specifically about.
Jamie Wilen: Any intentions that we have in any particular quarter, we did repurchase 15 million shares and our open window period in the first quarter from the new plan, we do have limitations within our credit agreements in terms of what we're able to do on an annual basis. So we try to manage that but but.
Leroy Ball: We do have limitations within our credit agreements in terms of what we're able to do on an annual basis, so we try to manage that. But I share your interest in taking advantage of the opportunity when we're in the position that we're in. And I think we stated that actually when we announced the share repurchase plan that as long as we view our future or certainly at least our near-term operating performances being improved over prior periods and we remain at historic low trading multiples, that we're going to use that lever. And so we didn't approve the share repurchase program to have it sit on the shelf, and so we will continue to monitor the situation and I think be consistent in our approach to repurchasing shares as the year goes on.
Jamie Wilen: I share your interest in and taking advantage of the opportunity when.
Jamie Wilen: We're in a position that we're in and I think we stated that actually when we announced the share repurchase plan as long as we view.
Jamie Wilen: Our our future or certainly at least our near term operating performance is being improved over prior periods and we remain at historic low trading multiples that we're going to we're going to we're going to use that lever and so we didn't.
Jamie Wilen: Enact we didn't had approved the share repurchase program to have it sit on the shelf and so.
Jamie Wilen: We will continue to monitor the situation and I think <unk> be consistent in our approach to repurchasing shares as the year goes on.
Jamie Weiland: Very good. I hope you can be as aggressive as possible in the near term while you have this window that probably will not be here longer. I appreciate that, Jamie. Thank you.
Jamie Wilen: Alright, good hope for Japan as aggressive as possible in the near term while you can.
Jamie Wilen: This window that probably will not be your longer term.
Jamie Wilen: So I appreciate that Jamie Thank you.
Operator: This concludes our question-and-answer session.
Jamie Wilen: This concludes our question and answer session I would like to turn the conference back over to CEO Leroy ball for any closing remarks.
Leroy Ball: I would like to turn the conference back over to CEO Leroy Ball for any closing remarks. Yeah, I would just like to thank everybody for your continued interest in Koppers, and we'll continue working on improving the results of the overall business. We really do believe we have a bright future ahead of us, not just this year, but beyond that in terms of free cash flow performance, operating performance, and we're looking forward to executing.
Jamie Wilen: Yeah, I would just like to thank everybody for your continued interest in koppers and we will continue working on improving the results of the overall business. We really do believe we have a.
A bright future ahead of us not just this year, but beyond that in terms of free cash flow performance operating performance and and we're looking forward to executing so look forward to talking to everybody again in August. Thank you.
Leroy Ball: So, look forward to talking to everybody again in August. Thank you.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Jamie Wilen: Okay.
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