Koppers Q1 Earnings Call Highlights

Key Points

• Koppers will shut down its Stickney, Illinois, carbon materials facility by the end of 2026, shifting production to its Nyborg, Denmark plant. The move affects about 85 workers and is expected to generate annual cash and EBITDA benefits while reducing future capital spending.
• First-quarter results were mixed: sales were essentially flat at $455 million, but adjusted EBITDA fell to $49.3 million from $56 million a year earlier. Performance Chemicals was the strongest segment, while Carbon Materials and Chemicals saw a sharp drop in EBITDA.
• The company trimmed its 2026 profitability outlook, lowering adjusted EBITDA guidance to $240 million-$260 million because of higher oil costs, while keeping sales guidance at $1.9 billion-$2.0 billion. Koppers also highlighted ongoing transformation savings and raised its quarterly dividend by 12.5%.

Koppers NYSE: KOP reported essentially flat first-quarter 2026 sales but lower adjusted EBITDA, while announcing a major restructuring move in its Carbon Materials and Chemicals business that could reshape its cost structure over the next several years.

Chief Executive Officer and Chair Leroy Ball said the company made a “conditional decision” to immediately begin winding down production at its Stickney, Illinois, facility, with a target to cease distillation by the end of 2026. Ball said the decision affects about 85 employees and remains subject to any bargaining obligations with the union representing certain workers at the facility.

“The bottom line remains that we feel we've done everything we can to make this operation viable, and we just don't see a credible path to get there,” Ball said.

Stickney Shutdown Expected to Shift Production to Denmark

Ball said the decision was driven by long-running challenges in North American coal tar availability, higher unit costs and ongoing reliability issues at the Stickney site. He noted that North American coal tar production has fallen from about 565,000 metric tons in 2016 to 350,000 metric tons following the recently announced closure of Algoma Steel’s coke plant.

Koppers expects to shift production to its coal tar distillation facility in Nyborg, Denmark, with Ball saying the company has expanded shipping and terminal capabilities to support pitch and creosote customers in the United States. Koppers expects to invest $10 million to $15 million over the next several years to strengthen that supply chain, while remaining within its annual $55 million maintenance capital expenditure plan.

The closure is expected to result in pre-tax charges of $227 million to $262 million through the end of 2029, including $170 million to $195 million in non-cash charges projected for the second and third quarters of 2026. Cash closure costs are expected to total $57 million to $67 million over three years beginning in the second quarter.

Ball said the action is expected to generate annualized operating and capital cash benefits of $15 million to $25 million, with adjusted EBITDA savings reaching an annual run rate of $15 million to $20 million in 2027 and beyond. He said that would translate to a 75- to 100-basis-point improvement in adjusted EBITDA margin and an adjusted earnings-per-share benefit of $1.00 to $1.20. Koppers also expects $8 million to $15 million in reduced future annual capital expenditures.

First-Quarter Sales Flat as EBITDA Declines

For the first quarter, Koppers reported consolidated sales of $455 million, essentially unchanged from the prior-year period. Adjusted EBITDA was $49.3 million, compared with $56 million a year earlier, and adjusted EBITDA margin declined to 10.8% from 12.2%.

The company reported operating profit of $22 million and adjusted earnings per share of $0.57. Ball said operating cash flow of $46.3 million and free cash flow of $34.9 million were first-quarter records. On a trailing 12-month basis, operating cash flow was $192 million and free cash flow was $139 million, which Ball also described as new highs.

Koppers deployed $29 million toward share repurchases during the quarter and paid $1.9 million in dividends, while keeping total debt consistent with December 2025 levels. Interim Chief Financial Officer and Chief Accounting Officer Brad Pearce said the company had $386 million in available liquidity and $877 million of net debt as of March 31, representing a net leverage ratio of 3.5 times. He said Koppers remains focused on reducing net leverage to a long-term target range of 2 times to 3 times.

Performance Chemicals Offsets Weakness in CMC

Segment results were mixed across Koppers’ three businesses.

• Railroad and Utility Products and Services: Sales fell to $220 million from $235 million a year earlier. Pearce said about $10 million of the decline came from the 2025 sale of the Railroad Structures business, with the rest tied to customer mix, lower Class I crosstie pricing and lower maintenance-of-way activity. Adjusted EBITDA declined to $23 million from $26 million.
• Performance Chemicals: Sales rose to $142 million from $121 million, driven mainly by a 15% volume increase, higher sales activity in the Americas and favorable foreign currency changes. Adjusted EBITDA increased to $26 million from $20 million, helped by higher volumes and prices, partly offset by higher raw material and operating costs.
• Carbon Materials and Chemicals: Sales declined to $93 million from $101 million, reflecting lower volumes tied to the discontinued phthalic anhydride business and lower pricing across most products, especially carbon pitch. Adjusted EBITDA fell to $1 million from $10 million due to lower sales prices and higher operating and raw material costs.

Ball said Performance Chemicals posted a strong start despite headwinds including higher mortgage rates, lower housing turnover and inflationary pressures. He said first-quarter volume gains included about 9% from market share growth and about 6% from customer inventory build, while organic volumes were mostly flat.

Guidance Revised for Higher Oil Costs

Koppers maintained its 2026 consolidated sales guidance of $1.9 billion to $2.0 billion, compared with $1.88 billion in 2025. Ball said higher expected sales in Performance Chemicals and Railroad and Utility Products and Services are expected to more than offset lower Carbon Materials and Chemicals sales.

However, the company lowered its adjusted EBITDA forecast to a range of $240 million to $260 million, compared with $257 million in 2025. Ball said the $10 million reduction from the prior range was primarily due to higher oil costs following the war in the Middle East, which he said was not included in the company’s February guidance assumptions.

Koppers expects adjusted earnings per share of $3.80 to $4.60 in 2026, compared with $4.07 in 2025. Ball said most of the projected improvement is expected to come from lower interest expense and a lower share count.

The company continues to forecast $55 million in capital spending for the year. Pearce also said Koppers’ board declared a quarterly cash dividend of $0.09 per share, a 12.5% increase from the prior year, payable June 15 to shareholders of record as of May 29.

Management Points to Transformation Program

Ball said Koppers is about a year into its Catalyst transformation program and realized $14 million of benefits in the first quarter across business segments and corporate functions. He said the company has now identified at least $90 million of benefits to be realized from 2026 through 2028, including expected 2026 benefits of $30 million to $40 million.

During the question-and-answer session, Ball said Koppers generally has been successful passing through cost increases, though timing varies by business. He said fuel surcharges can be implemented with little lag, while some Carbon Materials and Chemicals contracts may take a quarter to six months to reflect cost changes.

Asked about the Stickney closure, Ball described the move as “a consolidation play,” saying Koppers has excess capacity at Nyborg and can serve much of its North American customer base from Denmark while reducing fixed costs.

“While today represents a difficult next step, I believe it's the right one for our customers, our team members at Koppers, and our shareholders,” Ball said.

About Koppers NYSE: KOP

Koppers Company, Inc is a global specialty chemicals and materials manufacturer serving diverse industrial markets. The company operates through two primary segments: Carbon Materials & Chemicals, which produces a range of coal tar–based products, phenolic specialties and carbon compounds; and Railroad Products & Services, which offers wood treating and infrastructure services for rail and utility customers.

In its Carbon Materials & Chemicals segment, Koppers supplies coal tar pitch, refined creosote, coal tar‐based distillates and phenolic resins used in aluminum smelting, graphite electrode manufacture, carbon fiber production, and water treatment applications.

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