Koppers at 16th Annual Midwest Ideas Conference: Strategic Growth Focus

On Wednesday, 27 August 2025, Koppers Holdings Inc. (NYSE:KOP) presented at the 16th Annual Midwest Ideas Conference. Chief Accounting Officer Brad Pierce outlined the company’s strategic journey from capital investment to optimization, while addressing both opportunities and challenges in market expansion and financial performance.

Key Takeaways

• Koppers is shifting focus from capital investment to optimizing operations.
• Achieved over 15% adjusted EBITDA margins for the first time in eight years.
• Project Catalyst aims for sustainable EBITDA margins by 2027.
• Geographic expansion is key for growth in the utility pole and performance chemicals sectors.
• Capital expenditures are significantly reduced, focusing on maintenance and safety.

Financial Results

• Koppers achieved adjusted EBITDA margins greater than 15% in Q2 2024.
• The company generated over $50 million in Q2 cash flow, aiming for $150 million annually.
• Reduced SG&A costs by 13% and decreased headcount by 11% through a voluntary retirement program.
• Share repurchases reached approximately $30 million, with dividends increased for the fourth consecutive year to 8¢ per quarter.
• Long-term leverage target set below 3x, with Q2 2024 ending at 3.5x.

Operational Updates

• Transitioned from a "building phase" to an "expand and optimize" phase, reducing capital spending.
• Capital expenditures expected to be between $52 million and $58 million for 2024.
• Extended revolving credit facility to 2030, ensuring access to capital for growth.
• Project Catalyst initiated to enhance efficiency and cost savings, with external consultants aiding in benchmarking against top-performing companies.

Future Outlook

• Focus on organic growth in utility pole and performance chemicals businesses.
• Potential expansion in utility pole business within the U.S. and internationally.
• Continued international growth in performance chemicals, especially in South America.
• Anticipated CapEx spending of $60-$70 million over the next three years for maintenance and safety.

Q&A Highlights

• Geographic expansion targeted for utility pole business, re-entered in 2018 via acquisition.
• Growth expected in international markets for performance chemicals.
• Investment in a state-of-the-art crosstie plant in North Little Rock, Arkansas.
• New technology at Denmark plant for producing high-purity carbon products for the electrical battery industry.
• Acquisition of Brown Wood Preserving expands reach into Midwest and West U.S. regions.

Conclusion

For a detailed understanding of Koppers’ strategic initiatives and financial performance, readers are encouraged to refer to the full transcript below.

Full transcript - 16th Annual Midwest Ideas Conference:

Operator: Thank you for joining us for our next Midwest Ideas conference presentation. Presenting next is Koppers Holding, which trades on the New York Stock Exchange under the symbol k o p. Representing the company today is their Chief Accounting Officer, Brad Pierce. Brad?

Brad Pierce, Chief Accounting Officer, Koppers Holding: Okay. Thank you. It’s good to be here today. I appreciate you coming by to to hear a little bit a little bit about Koppers. So, again, yeah, name is Brad Pierce, Chief Accounting Officer.

I’ve been with Koppers for nineteen years. So, you know, I’ve quite a bit of change in the company over those nineteen years. So what I hope to accomplish today is obviously to give you an overview of Koppers, help you understand, you know, the the company and, you know, again, some of the things that we think, you know, create a simple, you know, straightforward game plan for for Koppers and what we can bring, which is, you know, strong profitability. We generate, you know, meaningful cash flows. We’ll be talking about, you know, the cash flow that the company has been able to generate over the years and with all that helps to create shareholder value.

With that, just again just to remind everybody about our forward looking disclosures. Certain comments might be characterized as forward looking statements under the Private Securities Litigation Reform Act of 1995. And the company assumes no obligation to update any of the forward looking statements made during this presentation. So slide four presents the investment thesis for Koppers and there’s really five things we want to have you keep in mind. First is our strategy.

So we came up with a strategy in 2021 that is going to take us through 2025. That strategy was really built upon focused capital investments that the company had planned on making to again help grow the company, improve our profitability. And we’ve essentially changed, we’ve sort of completed that building phase and now we are in the expand and optimize phase. That means from a cash flow perspective, a lot of that heavy capital spending that we incurred at the beginning of that 2021 cycle is now behind us. And as we get further in the presentation, you’ll see again how our capital spending plans are quite a bit lower at least now and going forward in the near term which will again help generate very positive cash flow for the company to invest in other ways including return to shareholders.

And then finally we do have a very experienced management team. If you look at the individuals at the top of the company, many of them date back many years with copper. So we’ve had a lot of stability at the top of the company and that has again enabled us to grow over the years. So Slide five talks a little bit about our market leading position in sort of some critical end markets. And particularly we provide critical products that are used in private and public infrastructure and that demand for infrastructure build is helping to drive our business.

You can see on the left side we list sort of our four business units that we break our company down into. The first is our railroad and products our railroad products and services business unit. This business is really focused on the manufacturing of wooden crossties which are used by you know class one railroads and all other like short line railroads in The U. S. The important thing to consider here is that we we supply all six of the class one railroads in in North America.

Our utility and industrial products segment, again this is closely aligned with our railroad business mainly because the manufacturing process is very, very similar. What happens with the utility businesses again where you’re manufacturing wooden utility poles which are obviously used by both you know the large publicly owned utility companies as well as there are a lot of sort of smaller locally owned utilities or co op utilities in The US. We’re a leading supplier in these markets and not only is that business located in The U. S, but it’s also in Australia. The third business unit is our performance chemicals business.

This business is a producer of wood preservation chemicals, Right? So there’s now a link between the performance chemicals business and our utility business and our railroad business. Our performance chemicals business, they are a global leader in that space both from a research perspective as well as again being a supplier. You know it’s important to note we have great market presence in North America related to that business and we do provide chemical to the 10 largest lumber treating companies in The U. S.

And then finally our carbon materials and chemicals business has again a direct link back to our railroad business. What the carbon materials and chemicals business does is it is a chemical operation. It acquires a a byproduct from the metallurgical coking process, refines that product into a number of different products. The most important to us being creosote, which is sold to our railroad business and that is used again for the treatment of wooden cross ties. Slide six provides a little bit more breakdown and some financial information on each of the segments.

So you can see we combine our railroad and utility business into the same reporting segment, which is know Railroad and Utility Products and Services or RUPS. You know this business is roughly half of our total company revenue, it totals around $950,000,000 And you know it’s I guess the footprint of this business is we operate eight wood treatment plants in North America, seven of them are located in The U. S. And one is located up in Canada. The our utility business is we operate seven plants in The US, most of those located in the Southeastern Part Of The US, which is where our main market is.

But I also mentioned this business operates in Australia. We have four utility pole treating plants in Australia. You’ll see a theme that I talk about probably throughout this presentation is a little bit about the vertical integration that our business units have with each other. So if you look at the the railroad business, it’s buying one of its key raw materials Creosote. It purchases that from our carbon materials and chemicals segment.

And our utility pole business purchases two treatment chemicals from our Performance Chemicals business. So again, we think that is an important aspect of the company both from shareholder value, but as well I think it’s extremely important to our customers knowing that they have that surety of supply on their critical raw materials. The performance Chemicals business, last year was around 700,000,000 of revenue. This is our basic our highest EBITDA margin business. Last year it was just over 20%.

This year it’s running a little bit lower around 18%. But this and again this business is unique compared to our other businesses in that it has a patented wood treatment technology, which is a chemical that is basically again used to treat residential lumber. So it is the the product is called MicroPro, and it it is again the predominant residential wood treatment chemical that’s used. So, you know, if you happen to walk into the the, you know, the lumber section of a a Home Depot or a Lowe’s and, you know, look at the treated lumber section, it’s very highly likely that that is getting treated with our chemical. Either chemical that we’ve manufactured and sold or that we’ve licensed again to another manufacturer to produce.

So, we think that gives us again a key competitive advantage that patent right now extends out to 2029. But we’ve been successful over the past years on improving the formulation, modifying it and getting the patent extended out into the future. This business also has a critical element of having R and D capabilities of working on and designing next generation wood treatment chemicals. And then, again, the Carbon Materials and Chemicals segment, that’s our smallest segment between 400 and $500,000,000 of revenue. We operate three plants in that business unit.

One is located in The U. S. Actually not too far from here in Stickney, Illinois is where our plant is. One in Denmark and one in Australia. And again this this business unit is you know key to our vertical integration story in that basically all of the creosote that is produced in both The US and Europe is used internally by Koppers in our railroad business.

Again, we think that’s very important to our customers to ensure that they have surety of supply on a chemical that, you know, is is becoming the supply of it is becoming, you know, less and less as we move forward with changing industries. Slide seven talks a little bit about the balanced portfolio that Koppers has, which we think is a real benefit to the company. It creates situations where we can have counter cyclicality in our different businesses. So, you know, a couple of the key things I wanted to point out here is both the utility business and the, you know, railroad business, the railroad crosstie business, those tend to have fairly steady demand year over year. So if you look at utility poles, there’s a 140,000,000 or so utility poles installed across The US.

You know, every year, two to 3,000,000 of those poles just need to be replaced either through, you know, age or or through damage. Right? On the on the cross tie side, you know, if you go back historically, going back ten years, between eighteen and twenty two million cross ties get replaced every year just through the railroads maintenance programs. Obviously, you know, rail safety is is critical to the railroads. So as part of that they need to make sure that their their tracks have integrity.

And as a result, you know, they need to have a sort of annual recurring replacement and maintenance plan on their tracks. From a performance chemical side, know that business is largely demand for our products is largely driven by the repair and remodeling markets. So again, if you look go back to a five year period, we all know what happened during the pandemic. Everybody was investing in their homes. So that period was a tremendous period of growth for our company from a volume perspective.

And, you know, some of that spending is down a little bit now, but that has that spending on repair and remodeling tends to be pretty resilient year over year because again for most people their largest investment is their home and they will invest to, you know, in the upkeep of their home. Looking a little bit I guess at some of the charts on there, again what I want to draw to everybody’s attention is sort of the different colors and again kind of how balanced the company is you know both from an end market perspective right. We participate in a number of different markets meaning we don’t necessarily rely on one particular market year in and year out you know, for our ability to generate cash and profit. From a geographical perspective, around 70% of our business is located in The U. S.

With the other 30% internationally. So we do have some balance there from geographical perspective. And then finally kind of looking at sales and adjusted EBITDA by segment, you can see significant contributions by each one of those segments. Slide nine talks a bit about a project that we currently have ongoing at Koppers. We’ve termed sort of the initiative to be catalyst and really you know this is a strategic transformation process that we’re going through.

It was announced in February, really got kicked off in March and we’re currently in the middle of it. Basically you know at its core the project catalyst is trying to measure again how we measure up to other top performing companies in each area of our company. So that extends all the way from commercial to procurement to manufacturing to our corporate support functions. And it’s it’s a program we are getting help from some outside consultants who are helping take us through this process to identify ideas and where we can improve our processes and where we can you know perhaps cut costs, do things more more efficiently. We haven’t yet sort of publicly captured what we think this will you know save us other than you know this process will continue and we see ourselves when we come out of 2027 that it will help drive sort of recurring sustainable and achievable EBITDA margins in the business of at least 15% if not a little bit higher in the teens.

So there will be more news coming out on this as we go through the rest of this year and next year, but there’s a lot of energy in the company right now behind this initiative to really find benefits to the company both from profitability to enhanced cash flow. Just a quick question, not question, a quick point on sustainability. You know, we are sort of, we believe, kind of uniquely positioned to participate in like this, we call the circular economy where things get used and reused. Again, huge focus in the business on using wood, right, as a raw material, wood being a renewable resource. Our carbon materials and chemicals business is making its product from a byproduct from the metal metallurgical coking process.

So again, it’s finding a use for that project, for that product rather than just disposing of it. And then finally, our railroad business actually has a cross tie recovery business where at the end of life, we actually collect and dispose in environmentally correct way cross ties that met the end of their useful life. Slide 15. I’m I’m not gonna go too much in-depth about our q two results, but I think there were you know again a couple of key highlights coming out of the second quarter, right. So one is I had mentioned Project Catalyst, really kind of a lot of just looking at our structure, our costs really got kicked off at the in the 2024, you know, where we kind of began to look at headcount, particularly on the corporate side.

We went through in the fourth quarter a a voluntary retirement program. A number of people across the organization took advantage of that, but the key was to again be very careful trying not just refill positions. So as you can see you know from a headcount perspective you know we are our headcount was 11% lower in April of I’m sorry in in June compared to April the prior year. A lot of that has then contributed to lower SG and A costs. Those were down 13% compared to a prior year.

Importantly, a lot of this is we’re looking to generate positive cash flow for the company that can be used in other areas. Our cash flow for Q2 was in excess of 50,000,000 puts us well on track to again be over $100,000,000 of operating cash flow generation during the year. A lot of focus on again getting our adjusted EBITDA margins up. We did it through the second quarter, we achieved greater than 15% and that’s the first time we’ve gotten there in eight years. And that was done in spite of the fact that from a top line perspective we’re down a little bit.

So we think a lot of those cost savings are taking hold. And then finally, know, again focus on cash flow. We’re reducing our capital spend after those couple of years of heavy capital spending. And that excess cash is again a lot of it is going back to shareholders in dividends and share buybacks again with the primary focus being on debt reduction. Slide 22, just want to talk a little bit about our capital structure and then I will, there’ll be about ten minutes left or so I think and I can open it up to questions.

But one important thing coming out of the second quarter was we extended our revolving credit facility out to 2,030. It’s an $800,000,000 facility. So again looking again on the five year horizon we have sufficient access to capital again to help grow the business. You know we again believe we have a balanced approach to our use of cash. If you look at capital expenditures this year we’re only at $22,000,000 through the end of the second quarter.

For the full year we’re projecting to be between 52,000,000 and 58,000,000 If you go back two years, our capital spending, again, because we were investing in the business on particular projects, we had three consecutive years of over $100,000,000 of capital spending. So we have brought that that level down. With that excess cash, you know, we are doing a couple things with it in addition to just again focusing on debt pay down. One is been fairly aggressive in share repurchases. Through the second quarter we’ve repurchased close to $30,000,000 worth of stock.

And I guess for the fourth consecutive year we increased the quarterly dividend. Right? So we’re now up to 8¢ a quarter or 32¢ a year. So with that all and that focus on cash generation, we’re hoping our operating cash flow this year, our target is to get to $150,000,000 and a lot of that again is going to go toward reducing debt. Our long term target is to get below three times, finished the second quarter at three and a half times, so we have some work to do.

Our leverage bounced up in early twenty twenty four when we made an acquisition in the utility pole area. So I think that was it for my prepared remarks. Looks like we have about ten minutes left. Do you have any questions you’d like to ask? Yes.

Yeah. So the the question is how do we get some growth in in the business because we’ve been, you know, pretty it gets stagnant for a number of years. And we we the folks that’s always again a particular challenge for our company because if you look at our our business units particularly with the railroad business, the performance chemicals business, and the carbon materials business where where in those markets we have very high market share. Right? So it it limits first the ability to make acquisitions in in that space and plus with already high market shares it’s kinda hard to penetrate.

Right? Because our customers are always going to want you know not to have just one sole supplier. We looked at that, I mean that was one of the main reasons why we basically reentered the utility pole market back in 2018. Because again we saw that as being adjacent business to the ones that we already had. It’s actually a business that we used to be in but had exited a number of years ago.

And we found a good opportunity to make an acquisition of another company who was working on kinda, you know, helping to roll up the industry, but they were number two player, right, in in North America. And geographically, again, the utility pole business is kind of like a regional business. It was located really concentrated in the Southeastern Part of The US. Right? So we see the utility business as having you know growth potential because we can expand geographically you know moving west in The US.

And also you know potentially know probably a lower strategic plan to expand sort of more geographically and internationally. So I think utility pole prices are good measure of growth. Our performance chemicals business, again we think there’s the potential for growth there, particularly internationally. We’ve done a great job over the past ten years of developing and penetrating like the wood treatment business in South America. So countries like Brazil and Chile are now pretty good profit contributors to the company.

So we see growth, there’s still being growth potential in our performance chemicals business. If you look at the Railroad business in Centimeters and C, that’s probably, you know, maybe some targeted investments there. Those will both be low growth. The key there is we’ll use those as cash generators so that we can invest in areas where we can grow. Yes?

Yes, so know, one of the investment in the past years, one key investment we made was in the railroad cross tie business. We actually we had two plants that both served one of the railroads. One plant was in North Little Rock, Arkansas. The other plant was in Denver. Right?

We went to the railroad and said, look, we we can invest in a project to basically effectively almost build a state of the art crosstie plant in North Little Rock and serve all of your needs out of that plant because we’ll have the sort of the most modern technology there. So that was probably, you know, around the 60 to 70,000,000 investment. That plant opened probably two years ago. And the key to us there is enable us to actually close our Denver plant. And because Denver has grown so much, right, actually sell that property and that helped fund about a third of that capital project.

So yes, the returns on that project have been very good and again helped us serve I think our customer better and it’s a it’s a much more efficient processing plant. We made some, you know, investments in some actual, you know, kind of new technology in our Denmark plant, is a seam and c plant to basically find different ways to process the coal tar to to develop sort of a very highly pure carbon product. And we believe that product has the potential to make inroads sort of into the electrical battery industry. So that’s again some of the those are a couple of the investments that we’ve made. The other investment, again, doesn’t show up as CapEx, but we acquired Brown Wood Preserving last year, which was a utility pole processor, a manufacturer.

They operated a plant in Alabama and with that acquisition that has created opportunities for us to you know, up into the Midwest of of the country and also a bit into the West because of its connections with the with the rail system. So that those are some of things we’ve done. I think from a CapEx spending, as I look out over the three years, I think that CapEx is going to stay in that sixty to seventy million range. Most of it really being focused on maintenance, right, of our of our plants and safety. Okay.

Alright. Well, it looks like we are at time. So I certainly appreciate your your attending this session. And if you, you know, do have any questions for us, you know, feel free to reach out to myself or Quinn McGuire who’s here from our investor relations department. Thank you.

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