Full Transcript: Koppers Hldgs Q2 2026 Earnings Call

On Thursday, Koppers Hldgs (NYSE: KOP ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. This content is powered APIs. 7% adjusted EBITDA margin.

The company announced the accelerated closure of its Stickney facility, transitioning operations to the Nyborg, Denmark facility, expecting $15 to $20 million in annual adjusted EBITDA benefits. Koppers Hldgs' Performance Chemicals and utility pole businesses led volume growth, while profitability was affected by increased costs in coal tar, freight, and logistics. Operating cash flow for the first half of the year was a record $96 million, with free cash flow at $73 million, supporting shareholder returns and debt reduction.

The company remains committed to its long-term targets, including a 10% adjusted EPS CAGR and more than $300 million of cumulative free cash flow through 2028. Leadership changes were announced to enhance performance, with Stephanie Apostolu named Chief Legal and Strategy Officer and Jim Sullivan focusing on restructuring efforts. The company continues to face challenges due to volatile raw material costs and geopolitical factors but aims to mitigate these through contractual adjustments and the Catalyst transformation program. Koppers Hldgs maintains a positive long-term outlook, aiming for stronger returns and a sustainable mid-teens EBITDA margin profile.

Full Transcript OPERATOR Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers Hldgs second quarter 2026 earnings conference call and webcast. At this time, all participants are in a 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 today's event is being recorded, and at this time I'd like to turn the floor over to Quinn McGuire. Please go ahead.

Quinn McGuire, Vice President of Investor Relations Thanks, and good morning. I'm Quinn McGuire, Vice President of Investor Relations. Welcome to our second quarter 2026 earnings conference call. We issued our press release earlier today.

You can access it via our website at As indicated in our announcement, we've 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 September 6, 2026. At this time, I would like to direct your attention to our forward-looking disclosure statement seen on slide 2. 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 the company's filings with the Securities 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 inclusion of such information as a representation that its objectives, plans, and projected results will be achieved. 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. 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. Joining me for our call today are Leroy Ball, Chief Executive Officer and Chair of Koppers Hldgs, and Eric Brenner, Chief Financial Officer and Treasurer.

At this time, I'll turn the discussion over to Leroy. Leroy Ball, President and CEO Thank you, Quinn. Good morning, everyone. Thank you for joining us today.

The second quarter represented another important step forward in the execution of our transformation strategy. During the quarter, we continued to drive significant cash generation, improve our operating footprint, and advance several initiatives that we believe will create meaningful shareholder value over the long term. Most notably, in May we announced the decision to discontinue distillation and chemical operations at our Stickney facility and transition those activities to our Nyborg, Denmark facility, as referenced on page four.

Since then, we completed several significant milestones in the project, and we're now accelerating the closure by a quarter with a new target date of September 30, 2026 for the end of distillation activity at Stickney. This action contributed to significant non-cash charges in the quarter that impacted our reported net loss and GAAP earnings. 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. 20 per share annually, and reduce annual capital spending requirements going forward.

37 in adjusted earnings per share. Second quarter sales were $520 million, an increase of 3% compared with the prior year, led by volume growth in our Performance Chemicals and utility pole businesses. While we were pleased with our top-line performance, profitability was impacted by a challenging cost environment throughout the quarter. Coal tar costs increased approximately 12% year over year and 15% sequentially, while freight and logistics expenses also moved higher as energy markets and transportation networks remained volatile.

These pressures were most pronounced within our Carbon Materials and Chemicals business and portions of our Railroad and Utility Products and Services segment. Now, as we've discussed previously, there's often a timing lag between when these cost increases are incurred and when they are fully recovered through contractual mechanisms, pricing actions, and product mix improvements. We're actively working with customers across our portfolio to recover these higher costs and have historically demonstrated our ability to do so over time. Despite these headwinds, our teams remain focused on execution.

Through productivity initiatives, network optimization efforts, and disciplined cost management, we were able to offset a meaningful portion of the inflationary pressure and deliver adjusted EBITDA of $71 million. During the quarter, our focus on cash generation continued to produce meaningful results. Operating cash flow for the first six months of the year was a record $96 million, compared with $28 million in the prior-year period. Free cash flow for the same period totaled a record $73 million, demonstrating the benefits of our inventory alignment efforts and operational improvements across the organization.

Our capital allocation priorities remain unchanged. We're continuing to invest in the business, reduce debt levels, and return capital to shareholders. During the first half of the year, we returned $47 million to our shareholders through share repurchases and our dividend program, while also reducing debt by $22 million. We believe the actions we're taking today better position Koppers Hldgs to deliver stronger returns and create long-term value for shareholders.

And to further support these efforts, we're implementing a realignment of roles and responsibilities among our leadership team to further enhance our performance and culture. Effective September 1st, Stephanie Apostolu will be taking on the role of Chief Legal and Strategy Officer, adding oversight of Catalyst, our transformation office, to her responsibilities in order to strengthen the link between strategy and execution. Coinciding with that change, Jim Sullivan is shifting his focus from our broader enterprise-wide transformation efforts to more specifically owning the restructuring and transformation efforts of CMC.

While Kristian Nielsen remains the global leader of CMC in running the day-to-day operations, Jim will own oversight of the Stickney closure, disposition of the remaining Stickney assets, and sourcing evaluation and recommendation of our options to reduce our risk and exposure in the CMC markets. These changes in our operating model will ensure that we're better aligned to execute our strategy, operate more effectively as one enterprise, and strengthen overall performance across the organization. Our broader outlook for the business remains intact.

The essential infrastructure markets we serve continue to benefit from long-term replacement and maintenance cycles, and our in-flight transformation initiatives continue to improve the quality, profitability, and cash generation characteristics of our portfolio. While demand remains uneven across certain end markets, we are encouraged by the momentum in markets served by Performance Chemicals, the strength of utility infrastructure demand, and the progress we're making against our Catalyst transformation objectives.

We remain committed to our long-term targets of generating greater than 10% adjusted EPS CAGR, more than $300 million of cumulative free cash flow through 2028, and taking the company to a sustainable mid-teens EBITDA margin profile. Next, I want to thank our employees around the world for their continued commitment to safety, operational excellence, and customer service. As seen on page 6, 22 of our 40 operating locations worked injury-free in the second quarter, and we remain committed to our zero-harm vision at the foundation of everything we do.

Turning to page eight, we issued our 2025 Corporate Sustainability Report, detailing the company's progress in advancing its sustainability goals and introducing the framework for our refreshed 2030 sustainability strategy, focusing on people, climate and energy, products, and supply chain. The Koppers team has embedded sustainability into our culture and core business processes, enabling us to better respond to changing market dynamics and customer expectations while supporting long-term resilience amid our continued evolution. For more information, please use the QR code to access this report.

As shown on page nine, Koppers Hldgs has gained additional recognition by being named to Time magazine's listing of America's Best Companies for 2026. Moving on to page 10, Koppers Hldgs will be hosting an investor day on Thursday, September 17th in Atlanta. Please mark your calendars and plan to join us for our investor day and related activities. Now, I'll return in a bit to provide my view on how we're seeing the current year within each business while also reviewing our outlook for the remainder of 2026.

But first, I'd like to formally introduce our new Chief Financial Officer and Treasurer, Eric Brenner, who joined Koppers Hldgs in late May. Eric has extensive experience in the chemicals and manufacturing sectors, combined with his proven ability to drive capital deployment, operational excellence, and strategic transformation. Please join me in welcoming Eric to the Koppers team. Now I will turn the call over to him to speak in more detail on our second quarter financial performance.

Eric. Eric Brenner, Chief Financial Officer & Treasurer Thanks, Leroy. Before discussing the quarter, I want to start by thanking Brad Pearce, our Chief Accounting Officer, and the entire finance team for their support. Throughout my transition over the past two months, I've had the opportunity to spend time with our leadership team, visit operations, meet employees across the organization, and engage with investors.

What has stood out most to me is the strength of the culture, our commitment to safety and sustainability, as well as the dedication of our people serving our customers every day. I joined Koppers Hldgs because I believe we are really well positioned. We have leading positions in the markets we serve and we have a robust $90 million pipeline of improvement initiatives that can unlock significant value through capturing above-market growth in the utility and performance chemicals businesses, optimizing our production network, and stepping up our performance and culture. I have seen firsthand a team that is focused on execution and committed to creating long-term value.

With that, let me turn to our results for the quarter. I'll begin with the consolidated results, then cover segment performance, cash flow, and capital allocation before turning the call back to Leroy. As shown on Slide 12, second quarter net sales were $520 million, up $15 million, or 3%, from the prior year quarter. 1%.

The increase was driven primarily by growth in our Performance Chemicals business and higher utility pole volumes, partly offset by unfavorable pricing and sales mix. 9%, from the prior year quarter. This decrease was driven by higher raw material cost, unfavorable pricing in RUPS, higher freight and legal costs, as well as the impact of the 2025 divestitures. These unfavorable changes were partially offset by lower operating costs and improved throughput from our network optimization efforts.

Turning briefly to cash flow, operating cash flow for the six months ended June 30 was a record $96 million compared to $28 million in the prior year period. The improvement was driven primarily by working capital gains as we deliberately aligned inventories with forecasted demand and leveraged our production network optimization efforts. The timing of the quarter end also favorably impacted our change in working capital in Q2 26. S.

pension plan de-risking activities. Free cash flow was also a record at $73 million compared to $1 million in the prior year period. Now looking to segment performance, I'll begin with our Railroad and Utility segment on Slide 14. RUPS' second quarter sales totaled $246 million compared to $250 million in the prior year quarter.

Excluding the impact of acquisitions, divestitures, and foreign currency, sales increased 2%, led by volume growth. The sale of our railroad services business in the third quarter of 2025 reduced sales by $12 million year over year. We also experienced price decreases in multiple markets, primarily in cross ties. As mentioned earlier in the year, we made certain price concessions in 26 in order to secure additional contractual commitments.

, and by approximately 2% higher cross tie volume year over year. RUPS delivered adjusted EBITDA of $26 million in the second quarter compared to $32 million in the prior year period. Profitability declined due to higher raw material cost and lower maintenance-of-way activity primarily related to the sale of the railroad service business. Net sales price decreases and unfavorable sales mix were partly offset by higher sales volumes in the utility pole business.

We continue to make progress moving our Florence cross tie and our advanced utility pole production to other facilities to improve the RUPS overall cost position for 2027. Turning to Slide 15, our Performance Chemicals business reported second quarter sales of $168 million, up from $151 million in the prior year quarter. Excluding favorable foreign currency changes of $2 million, sales increased 10%. We saw strong volume gains in all regions, including 11% sales growth in the Americas excluding foreign currency impact with market share gains in an otherwise flat demand environment; sales in Australasia increased 26% year over year.

These volume gains were partly offset by lower pricing, primarily in Europe. Adjusted EBITDA for the PC business increased to $38 million in the second quarter compared with $29 million in the prior year quarter. The 31% increase was driven by higher sales volumes and lower material cost. Note that the impact of increased copper cost was partially offset by our copper hedging program.

These benefits were also partially offset by higher logistics expense. Slide 16 shows that the CMC sales reached $106 million in the second quarter compared to $104 million in the prior year period. Excluding the impact of the phthalic shutdown and foreign currency, sales increased 4% driven by higher volumes, primarily in Australasia. We saw volume and price increases for carbon black feedstock and volume increases for carbon pitch.

However, global prices for carbon pitch declined by 2% driven by market dynamics, particularly in Australasia. Foreign currency changes from international markets had a favorable impact on sales by $4 million.