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KH

Koppers Holdings Inc. (KOP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $477.0M, down 7.1% YoY, with record Q4 adjusted EBITDA of $55.2M and adjusted EPS of $0.77; GAAP diluted EPS was a loss of $0.50 due to restructuring, pension settlement, LIFO, and hedging impacts .
  • Segment mix: PC margins improved on cost actions despite lower volumes; CMC profitability up on raw material/SG&A savings despite price declines; RUPS saw lower Class I crosstie volumes but utility poles set Q4 records in operating profit and adjusted EBITDA .
  • 2025 guidance: sales ~$2.17B, adjusted EBITDA ~$$280M, adjusted EPS $4.75, operating cash flow ~$150M, capex ~$65M; management highlights tariff and copper-hedging risks but expects cost actions to buffer uncertainty .
  • Capital return accelerators: new $100M buyback authorization and dividend raised to $0.08 quarterly; leverage targeted ≤3x by YE 2025; Term Loan B repriced to trim interest costs .

What Went Well and What Went Wrong

  • What Went Well

    • Record fourth-quarter adjusted EBITDA ($55.2M); adjusted margin 11.6% vs. 10.5% prior-year; cost actions and segment mix supported profitability despite revenue pullback .
    • Domestic utility pole business set Q4 records in operating profit and adjusted EBITDA; Brown Wood acquisition aided volumes and geographic reach .
    • CMC profitability improved YoY on lower raw material and overhead costs and absence of prior-year bad debt reserve; pricing headwinds were partly offset .

  • What Went Wrong

    • Late-quarter demand slowdown across all segments; PC residential market share loss began earlier than planned; hurricane hangover and rail car-flow issues delayed shipments in RUPS .
    • Q4 GAAP loss per share ($0.50) driven by impairment/restructuring ($16.9M), pension settlement ($4.0M), hedging losses, and LIFO impacts .
    • CMC sales declined (price-driven) including global carbon pitch price down ~8% and volumes down ~18% in Q4; PC volumes down in the Americas (-8.5%) with higher raw material costs .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$563.2 $554.3 $477.0
GAAP Diluted EPS ($)$1.25 $1.09 $(0.50)
Adjusted EPS ($)$1.36 $1.37 $0.77
Adjusted EBITDA ($USD Millions)$77.5 $77.4 $55.2
Adjusted EBITDA Margin (%)13.8% 14.0% 11.6%

Segment Breakdown (Net Sales and Adjusted EBITDA)

SegmentQ2 2024 Net Sales ($M)Q2 2024 Adj. EBITDA ($M)Q3 2024 Net Sales ($M)Q3 2024 Adj. EBITDA ($M)Q4 2024 Net Sales ($M)Q4 2024 Adj. EBITDA ($M)
RUPS$253.9 $22.4 $248.1 $24.7 $215.6 $17.5
PC$176.9 $44.3 $176.7 $40.0 $147.9 $28.6
CMC$132.4 $10.8 $129.5 $12.7 $113.5 $9.1

Key Performance Indicators (select)

KPIValue
Q4 Operating Cash Flow ($M)$74.7
YE 2024 Net Debt ($M)$887
YE 2024 Liquidity ($M)$381
YE 2024 Net Leverage (x)3.4x
2025 Capex Plan ($M)~$65
Buyback Authorization$100M new program
Quarterly Dividend (2025)$0.08 per share
Term Loan B SpreadReduced by 50 bps to SOFR + 2.50%

Non-GAAP Adjustments (Q4 2024 highlights): LIFO expense ($3.2M), impairment/restructuring ($16.9M), loss on sale of assets ($1.0M), mark-to-market commodity hedging losses ($10.9M), pension settlement ($4.0M) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales ($B)FY2025N/A~$2.17 New
Adjusted EBITDA ($M)FY2025Management commentary: “exceed consensus $285M; targeting $300M+” (Nov 2024) ~$280 Lower vs. prior commentary
Adjusted EPS ($)FY2025N/A~$4.75 New
Operating Cash Flow ($M)FY2025N/A (not quantified previously)~$150 New
Capex ($M)FY2025$65–$75 (Nov 2024) ~$65 Tightened to low end
Adjusted Tax Rate (%)FY2025N/A~28% New
Pension Termination Funding ($M)FY2025~$25 (Nov 2024) $13.9 (completed Feb 2025) Lower
Share Repurchase AuthorizationN/A~$11M remaining on 2021 plan (Nov 2024) New $100M program (Feb 2025) Increased
Quarterly Dividend2025$0.07 (2024) $0.08 (2025) Raised

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
PC residential market share/competitionVolumes resilient; cost actions; hedging timing benefits Planned share loss in Q4/Q1; strong Q3 PC margins on cost timing Share loss began earlier; PC Americas volumes -8.5%; margin improved via cost savings Rising competitive pressure; mitigation via cost and customer diversification
Tariffs/macro uncertaintyLimited discussionExpect 2025 improvement, cost controls; macro caution Tariffs could swing tens of millions; copper hedging spread risk up to $10M Heightened risk; management doubling down on cost/efficiency
Utility poles (UIP) demand/shareBrown Wood integration; Texas penetration ~40% of long-term goal ~40k storm-response poles; record October; expect 2025 UIP profitability high Q4 utility poles set records; demand tailed off late; expanding TX/Midwest coverage Structurally positive; near-term demand normalization
Railroad crossties volumes/pricingPrice increases; volumes flat; cost savings in RPS Expect flat; switch back to higher retention creosote supports CMC Downtick in Class I volumes; car-flow issues; 2025 +8% volume expected; pricing higher Short-term weakness; improvement expected
Carbon pitch pricing/costsPricing -17% YoY; raw material costs down in Europe Pricing -20% YoY; profitability up on raw material/SG&A savings Pricing down 8% seq/13% YoY; profitability higher on cost actions; Stickney PA exit Stabilizing; cost-driven margin support; portfolio rationalization
Capital allocation$32M buybacks YTD; focus on leverage $42M buybacks YTD; plan dividend increase; leverage low 3s YE New $100M buyback; dividend $0.08; leverage ≤3x YE 2025 target More aggressive returns as FCF rises
Balance sheet/financing——Term Loan B repriced (-50 bps spread); interest savings Lower funding costs

Management Commentary

  • “We experienced volume slowdowns in each of our businesses... market share loss in our PC business... hurricane hangover... issues with consistent car flow... and companies pushing pause... We began in Q4 reducing our workforce... 5% reduction... will result in over $10 million in savings this year.” .
  • “Tariffs and their follow-on impacts could potentially benefit or hurt Koppers profitability on the scale of tens of millions... we are doubling down on cost and efficiency... now poised to maximize... increased earnings and free cash flow... primarily direct that cash to reducing our debt and repurchasing shares.” .
  • “The copper... hedges and underlying purchases... causing additional expense... total unmitigated impact... in 2025 could be as high as $10 million.” .
  • “We finished the year with a net leverage of 3.4x and remain committed to... 2 to 3x... expect to end 2025 at or below 3x leverage...” .
  • “We are forecasting $4.75 per share in 2025... and adjusted EBITDA of $280 million... capital spending of $65 million... significant free cash flow... planned for debt reduction and share repurchases.” .

Q&A Highlights

  • PC competition and share loss: “Diversification of risk... an aggressive competitor invested in capacity... some conversion started in Q4... we still maintain just over 50% overall market share in the residential market.” .
  • UIP expansion cadence: Existing investments (Texas, Brown) to drive share; modest near-term capex; broader western expansion more likely in 2026–2027 .
  • Stickney plant closure scope: Phthalic operation exit; sales impact ~$30–$35M; saves $40–$60M capex over 5–10 years; additional $43–$47M charges beyond $8M in Q4 .
  • Free cash flow allocation: Opportunistic buybacks within credit constraints when undervalued; remainder to debt paydown; target ~3x leverage by YE 2025 .
  • RUPS volumes/pricing: Expect ~8% increase in crosstie volumes and higher contract pricing in 2025 .

Estimates Context

  • Wall Street consensus for Q4 2024 via S&P Global was unavailable at time of request due to SPGI access limits; therefore, estimate comparisons cannot be provided. Values retrieved from S&P Global were unavailable for this period.
  • Management’s 2025 outlook of $280M adjusted EBITDA is below its November commentary to “exceed consensus $285M” and target $300M+, implying estimates may reset lower versus prior management tone .

Key Takeaways for Investors

  • Mix/margin resilience despite revenue softness: Q4 set a record for adjusted EBITDA margins vs. prior-year Q4; cost controls and segment mix are offsetting demand volatility .
  • Near-term risks: Tariff uncertainty and copper hedging spread mismatch (up to $10M impact) represent key 2025 swing factors; monitor policy developments and management mitigation actions .
  • RUPS trajectory improving: 2025 crosstie volumes guided up ~8%; expect pricing tailwinds; utility poles show structural share gains with Brown/Texas footprint .
  • CMC rationalization: Stickney phthalic exit reduces future capex burden; profitability improvement driven by cost reductions; pricing stabilization would be additive .
  • Capital returns and deleveraging: New $100M buyback and dividend increase signal confidence in FCF; leverage targeted ≤3x by YE 2025 aided by TLB repricing .
  • Guidance reset: 2025 adjusted EBITDA ($280M) and EPS ($4.75) reflect conservative stance amid macro/policy noise; upside tied to execution on cost/efficiency and demand normalization .
  • Actionable: Watch PC competitive dynamics and margin preservation, tariff headlines (especially copper), and sequential demand recovery in RUPS/UIP into mid-2025 as potential stock catalysts .