Koppers Q2 Earnings Call Highlights

Key Points

• Koppers lowered its 2026 adjusted EBITDA outlook to $240 million–$250 million from ongoing cost pressures, particularly higher coal tar, freight and logistics costs in Carbon Materials and Chemicals. The company maintained its sales forecast of $1.9 billion–$2 billion.
• Second-quarter sales increased 3% to $520 million, but adjusted EBITDA fell 7.9% to $71 million. Performance Chemicals delivered strong growth, while RUPS and Carbon Materials and Chemicals experienced profitability declines.
• Koppers generated record first-half operating cash flow of $96 million and free cash flow of $73 million, enabling $22 million of debt reduction and $47 million in shareholder returns. The company is accelerating the Stickney, Illinois, distillation shutdown to September 2026 and expects the transition to provide $15 million–$20 million in annual adjusted EBITDA benefits.

Koppers NYSE: KOP reported second-quarter sales growth and record first-half cash generation, while higher coal tar, freight and logistics costs pressured profitability in its Carbon Materials and Chemicals segment and prompted the company to lower its full-year adjusted EBITDA outlook.

Second-quarter sales rose 3% year over year to $520 million, while adjusted EBITDA declined 7.9% to $71 million. Adjusted EBITDA margin was 13.7%, and adjusted earnings per share totaled $1.37. The company reported a net loss and negative GAAP earnings per share during the quarter, reflecting significant non-cash charges associated with its planned Stickney, Illinois, facility changes.

CEO and Chair Leroy Ball said the company accelerated the planned discontinuation of distillation activity at Stickney by one quarter, now targeting Sept. 30, 2026. Koppers plans to transition those activities to its Nyborg, Denmark, facility.

“This action represents exactly the type of difficult but disciplined decision required to optimize our asset network and improve the long-term earnings power of the company,” Ball said.

The company continues to expect the Stickney initiative to provide approximately $15 million to $20 million of annual adjusted EBITDA benefits, improve adjusted earnings per share by roughly $1 to $1.20 annually, and reduce future annual capital-spending needs.

Cash Flow and Capital Allocation

Operating cash flow for the first six months of 2026 reached a record $96 million, compared with $28 million in the prior-year period. Free cash flow was $73 million, up from $1 million a year earlier. CFO and Treasurer Eric Brenner said the improvement was driven primarily by working-capital gains, including inventory alignment with anticipated demand and production-network optimization.

During the first half, Koppers used approximately $24 million for capital expenditures, returned $47 million to shareholders through dividends and share repurchases, and reduced debt by $22 million. Share repurchases totaled about $44 million, including shares withheld for tax obligations. The company had approximately $30 million remaining under its $100 million repurchase authorization.

At June 30, Koppers had $390 million of available liquidity and $857 million of net debt, representing a net leverage ratio of 3.5 times. The company said it remains focused on reducing leverage to between 2 times and 3 times.

The board declared a quarterly dividend of $0.09 per share on Aug. 5, a 12.5% increase from the prior year. Maintaining that rate would result in an annualized 2026 dividend of $0.36 per share, subject to future board approvals.

Segment Results Reflect Uneven Markets

Railroad and Utility Products and Services, or RUPS, posted quarterly sales of $246 million, down from $250 million a year earlier. Excluding acquisition, divestiture and currency effects, sales increased 2%, aided by higher volumes. Utility pole volumes in North America rose approximately 16%, including the effect of an acquired pole procurement business in the Western U.S., while crosstie volume increased roughly 2%.

RUPS adjusted EBITDA fell to $26 million from $32 million in the prior-year quarter, as higher raw-material costs, pricing concessions, unfavorable sales mix and lower maintenance-of-way activity outweighed higher utility pole volumes. Ball said the company expects its Florence crosstie facility consolidation to improve the segment’s cost position for 2027.

Performance Chemicals sales increased to $168 million from $151 million. Excluding currency effects, sales rose 10%, supported by volume gains across all regions. Adjusted EBITDA increased 31% to $38 million, driven by higher volumes and lower material costs, partly offset by higher logistics expenses.

Ball said residential treated-wood demand remained generally flat, but market-share gains, industrial demand and utility-pole-related chemical demand supported the segment. He also said elevated copper prices could require meaningful pricing actions in 2027 as copper hedges roll off.

Carbon Materials and Chemicals sales increased to $106 million from $104 million, with volume growth in Australasia and favorable currency effects. However, adjusted EBITDA declined to $8 million from $17 million as raw material, operating and selling, general and administrative expenses increased. Coal tar costs rose about 12% year over year and 15% sequentially, while pricing for major products did not keep pace.

Ball said the financial effect on CMC from higher oil prices was approximately $2.3 million in the second quarter, with another $4.6 million impact anticipated in the second half. Koppers expects to retain most Stickney customers and volumes, although certain product lines will not continue and remaining supply will primarily come from Europe.

Guidance Updated as Cost Pressures Persist

Koppers maintained its 2026 sales outlook of $1.9 billion to $2 billion but reduced its adjusted EBITDA forecast to $240 million to $250 million, excluding special charges. The company now expects adjusted earnings per share of $3.80 to $4.20, also excluding special charges.

The updated outlook assumes continued strength in Performance Chemicals and utility infrastructure demand, alongside weaker railroad demand and ongoing volatility in carbon markets. Koppers continues to forecast about $175 million of operating cash flow and $120 million of free cash flow for the year after approximately $55 million of capital expenditures.

Management said its Catalyst transformation program generated $33 million in year-over-year benefits through June 30, including gains across Performance Chemicals, RUPS, CMC and corporate functions. Ball told analysts that Catalyst benefits could exceed the company’s previous $30 million to $40 million target for 2026, though the additional gains are expected to offset broader business headwinds.

Koppers reiterated its longer-term targets, including adjusted EBITDA margins above 15%, adjusted EPS compound annual growth above 10% through 2028, average annual free cash flow of $100 million and a sales mix in which Performance Chemicals and RUPS account for more than 85% of revenue.

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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