Koppers Reports Fourth Quarter and Full-Year 2021 Results; Provides 2022 Outlook

Koppers Holdings Inc. (“Koppers”), an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds, today reported net income attributable to Koppers for the fourth quarter of 2021 of $22.2 million, or $1.02 per diluted share, compared to $18.6 million, or $0.86 per diluted share, in the prior year quarter.

Adjusted net income attributable to Koppers and adjusted earnings per share (“EPS”) were $16.9 million and $0.77 per share for the fourth quarter of 2021, compared to $16.2 million and $0.75 per share in the prior year quarter, respectively. Adjusted net income included $5.3 million and $2.4 million of reductions for the fourth quarter of 2021 and 2020, respectively.

Consolidated sales were $405.3 million, an increase of $12.2 million, or 3.1 percent, compared with $393.1 million in the prior year quarter. Excluding a $2.2 million unfavorable impact from foreign currency changes, sales increased by $14.4 million, or 3.7 percent, from the prior year.

The Railroad and Utility Products and Services (“RUPS”) business experienced lower sales and profitability than the prior year, primarily driven by railroad customers deferring purchases due to higher prices for untreated crossties, lower volumes for the utility pole businesses, and non-recurring costs associated with transitioning to new preservative systems, partly offset by price increases across product lines.

The Performance Chemicals (“PC”) segment reported lower sales and profitability against strong results from the prior year quarter. This reflected softer customer demand in North America driven by a return to pre-pandemic volumes as well as higher raw material costs, partly offset by price increases implemented globally.

The Carbon Materials and Chemicals (“CMC”) segment delivered significantly higher sales compared with the prior year and record profitability for the quarter, due to strong end market demand which supported a favorable pricing environment that outpaced raw material cost increases.

As previously reported, the divestiture of Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”) was completed on September 30, 2020 and KJCC results were classified as held for sale and as discontinued operations beginning in 2020.

President and CEO Leroy Ball said, “I’m happy we finished the year strong, posting a new quarterly high in CMC adjusted EBITDA and setting a new annual high in PC adjusted EBITDA. Once again, the balance in our business portfolio paid off as strong CMC end markets more than offset difficult, but mostly transitory, cost and supply issues in RUPS. PC had a nice bounce-back quarter to finish at a new high for adjusted EBITDA, the second straight year of achieving above $100 million. I’m proud that despite pandemic-related challenges, the Koppers team continues to deliver value to our diverse markets by staying true to our purpose of Protecting what Matters and Preserving the Future.”

Fourth Quarter Financial Performance

• Sales for RUPS of $155.6 million decreased by $12.6 million, or 7.5 percent, compared to sales of $168.2 million in the prior year quarter.  Sales decreased from prior year, primarily driven by lower crosstie volumes from Class I and commercial customers as well as reduced volumes for utility poles in the United States and Australia, partly offset by pricing increases.  Market prices for untreated crossties remain elevated due to strong demand for lumber in construction markets, resulting in lower purchases by railroad customers.  Adjusted EBITDA was $6.2 million, or 4.0 percent, in the fourth quarter, compared with $10.3 million, or 6.1 percent, in the prior year quarter.  Profitability was unfavorably impacted by lower treating activities for crossties and utility poles, which resulted in reduced capacity utilization, costs related to the conversion to new preservative systems for pole treatment, and higher raw materials and transportation costs.
• Sales for PC of $118.9 million decreased by $11.0 million, or 8.5 percent, compared to sales of $129.9 million in the prior year quarter.  The decline in sales was primarily due to lower volumes of preservatives in North America as a shift in consumer spending habits have tempered customer demand, compared with high levels of demand in the prior year period as a result of the pandemic, partly offset by higher demand in international markets such as Brazil and New Zealand.  Adjusted EBITDA for the fourth quarter was $19.4 million, or 16.3 percent, compared with $23.0 million, or 17.7 percent, in the prior year quarter.  Profitability was lower than prior year due to decreased volumes along with higher input costs, partly offset by price increases.
• Sales for CMC totaling $130.8 million increased by $35.8 million, or 37.7 percent, compared to sales of $95.0 million in the prior year quarter. Excluding an unfavorable impact from foreign currency changes of $2.9 million, sales increased by $38.7 million, or 40.7 percent, from the prior year quarter.  Sales benefited from higher sales pricing for carbon pitch, distillates and chemicals, partly offset by lower sales volumes of carbon black feedstock in certain regions.  This was a record quarter for adjusted EBITDA, which was $24.9 million, or 19.0 percent, compared with $14.4 million, or 15.2 percent, in the prior year quarter.  The increase in profitability reflects a favorable demand and pricing environment, partly offset by higher raw material costs.
• Net income attributable to Koppers was $22.2 million, compared to $18.6 million in the prior year quarter.  Adjusted net income was $16.9 million for the fourth quarter, compared to $16.2 million in the prior year quarter.  Adjusted EBITDA was $48.8 million, or 12.0 percent, in the fourth quarter, compared with $47.1 million, or 12.0 percent, in the prior year quarter.
• Diluted EPS from continuing operations was $1.02, compared to $0.86 per diluted share in the prior year quarter.  Adjusted EPS for the quarter was $0.77, compared with $0.75 for the prior year period.

Full-Year 2021 Financial Performance

• Consolidated sales of $1.679 billion increased by approximately $10 million, as compared to $1.669 billion in the prior year.  Despite continued challenges associated with the global pandemic, 2021 sales, excluding KJCC, represented the highest level of revenues in the history of the company.
• Sales for RUPS of $729.9 million decreased by $29.2 million, or 3.8 percent, compared to sales of $759.1 million in the prior year.  Adjusted EBITDA was $45.4 million, or 6.2 percent, compared with $65.3 million, or 8.6 percent, in the prior year.
• Sales for PC of $503.3 million decreased by $23.0 million, or 4.4 percent, compared to sales of $526.3 million in the prior year.  Adjusted EBITDA, a record, was $101.8 million, or 20.2 percent, compared with $100.7 million, or 19.1 percent, in the prior year.
• Sales for CMC totaling $445.4 million increased by $61.7 million, or 16.1 percent, compared to sales of $383.7 million in the prior year. Adjusted EBITDA was $76.3 million, or 17.1 percent, compared with $45.0 million, or 11.7 percent, in the prior year.
• Net income attributable to Koppers was $85.2 million, compared with $122.0 million in the prior year.  Adjusted net income was $92.3 million, compared with $88.0 million in the prior year.  Adjusted EBITDA was $223.5 million, or 13.3 percent, compared with $211.0 million, or 12.6 percent, in the prior year.
• Diluted EPS from continuing operations was $3.90, compared with $4.17 per share in the prior year.  Adjusted EPS was $4.21, compared with $4.12 for the prior year.
• Capital expenditures for the twelve months ended December 31, 2021, were $125.0 million, compared with $69.8 million for the prior year period.  Net of insurance proceeds and cash provided from asset sales, capital expenditures were $89.5 million for the current year.  The year-over-year increase was consistent with the company’s projected net capital investments, primarily driven by growth and productivity projects.

2022 Outlook

Koppers remains committed to driving improvements through the execution of its strategic initiatives and making continued progress toward its long-term financial goals.  Based on current global economic activity and in consideration of the ongoing economic uncertainty associated with the pandemic, Koppers expects that 2022 sales will be approximately $1.8 billion, compared with $1.68 billion in the prior year.  Koppers expects adjusted EBITDA will be approximately $230 million for 2022, compared with $223.5 million in the prior year.

The effective tax rate for adjusted net income in 2022 is projected to be approximately 30 percent, compared to the tax rate in 2021, excluding certain income tax effects relating to non-recurring items, of 27 percent.  The higher 2022 tax rate is primarily due to higher anticipated interest expense deduction disallowances.  Accordingly, the 2022 adjusted EPS is forecasted to be approximately $4.25, compared with adjusted EPS of $4.21 in the prior year.  The higher tax rate anticipated in 2022 is estimated to have a negative impact on adjusted EPS of approximately $0.17 compared to the prior year.

Koppers expects to invest approximately $95 million in capital expenditures in 2022.  Net of cash received from the sale of closed properties and property insurance recoveries, Koppers expects its net investment in capital expenditures to be $80 million to $90 million.

Commenting on the forecast, Mr. Ball said, “We are projecting 2022 to be our eighth straight year of adjusted EBITDA improvement and another new all-time high, excluding KJCC.  Accordingly and despite higher tax rates taking a bite out of EPS, we are also projecting our third straight new high for adjusted EPS.  Those expectations are based upon strong end markets supporting CMC, solid but normalized demand levels for PC, and an improving backdrop for hardwood sourcing in our RUPS business.  We are also expecting to achieve price increases totaling $80 million to $100 million, which will offset higher raw material and labor costs.  In addition, we continue to work a project funnel that’s estimated to generate approximately $100 million of benefits aimed at getting Koppers to our target of $300 million adjusted EBITDA in 2025.”

For the full fourth quarter results, click here.

About Koppers

Koppers, with corporate headquarters in Pittsburgh, Pennsylvania, is an integrated global provider of treated wood products, wood treatment chemicals, and carbon compounds. Our products and services are used in a variety of niche applications in a diverse range of end markets, including the railroad, specialty chemical, utility, residential lumber, agriculture, aluminum, steel, rubber, and construction industries. We serve our customers through a comprehensive global manufacturing and distribution network, with facilities located in North America, South America, Australasia, and Europe. The stock of Koppers Holdings Inc. is publicly traded on the New York Stock Exchange under the symbol “KOP.”

Contact:

Quynh McGuire – Vice President, Investor Relations – McGuireQT@koppers.com – (412) 227-2049

Source: Koppers Holdings, Inc.