Koppers Holdings Inc. Provides October 2020 Business Update; Reaffirms 2020 Outlook
PITTSBURGH, Nov. 19, 2020 /PRNewswire/ — Koppers Holdings Inc. (NYSE:KOP), an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds, today provided its monthly business update as part of the company’s ongoing communications to the investment community.
October Sales by Business Segment
For October 2020, consolidated sales were $135.2 million compared to $141.0 million in the prior year period, representing a decrease of $5.8 million, or 4.1 percent, which were consistent with the company’s expectations. Compared to prior year, the decrease was driven by lower contributions from Carbon Materials and Chemicals (CMC), while Railroad and Utility Products and Services (RUPS) reported sales at similar levels as prior year and Performance Chemicals (PC) continued to see strong demand for residential wood treatment preservatives in most geographic regions.
- Sales for RUPS of $60.3 million increased by $0.3 million, compared to sales of $60.0 million in the prior year month. Crosstie treating volumes were higher than prior year, consistent with the trend for most of 2020. The maintenance-of-way businesses benefited from increased projects in bridge repair and engineering, and saw improved demand for crosstie disposal services, partially offset by continued weakness in rail joints. The utility pole business in Australia and the U.S., on a combined basis, reported slightly lower year-over-year volumes due to normal month-to-month fluctuations.
- Sales for PC of $47.0 million increased by $4.8 million, or 11.4 percent, compared to sales of $42.2 million in the prior year month. The sales growth was primarily due to ongoing strong demand in the United States for residential treated lumber. As the pandemic continues, many homeowners are continuing to adapt their homes for work, school, and leisure, which has been resulting in increased remodeling activities. In addition, international markets continued to benefit from pent-up demand due to some months of restrictions associated with the pandemic.
- Sales for CMC of $27.9 million decreased by $10.9 million, or 28.1 percent, compared to sales of $38.8 million in the prior year month. The year-over-year decline was driven by the timing of sales between periods and lower average pricing associated with ongoing weakness in industrial production markets, such as aluminum, steel, energy and construction. In 2020, Koppers (Jiangsu) Carbon Chemical Company Limited (KJCC) results are classified as discontinued operations for the current year, as well as the comparable period in 2019 due to its divestiture.
President and CEO Leroy Ball said, “There were no surprises in October as we were able to maintain consistent production levels and continue to serve our essential customer base. The positive trends that we experienced in the third quarter have thus far carried into the early part of the fourth quarter, and are expected to persist for the remainder of the year.”
Koppers continues to expect 2020 sales to be approximately $1.6 billion, compared with sales of $1.65 billion (excluding KJCC) in 2019. The company anticipates that adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 2020 will be in the range of $204 million to $210 million, compared with $201.1 million in the prior year. Adjusted earnings per share (EPS) is projected to be in the range of $3.65 to $3.90 in 2020, compared with $3.18 in the prior year.
Capital expenditures for October 2020 were $10.2 million, compared with $3.7 million in October 2019. For the year-to-date period ended October 31, 2020, capital expenditures were $53.9 million compared with $30.6 million for the prior year period. Koppers is now on track to invest $60 million to $70 million in capital expenditures in 2020, compared with a prior forecast of $55 million to $60 million. The capital spending is primarily related to improving the safety and reliability of its existing infrastructure as well as a major treating expansion project.
Koppers continues to anticipate approximately $125 million of debt reduction in 2020. Based upon current adjusted EBITDA and debt reduction estimates, net leverage is projected to be at 3.5 to 3.6 at December 31, 2020, compared with 4.3 at December 31, 2019.
Mr. Ball commented on the outlook, “I remain comfortable with achieving our current earnings guidance for the year which would represent our highest recorded annual adjusted earnings per share. Our capital investment projections have increased for this year primarily due to the timing of spending on our North Little Rock treating plant expansion, but we still expect to achieve our debt reduction targets due to stronger cash flow and better working capital management.”
Koppers does not provide reconciliations of guidance for adjusted EBITDA, adjusted EPS, net debt or net leverage ratio to comparable GAAP measures, in reliance on the unreasonable efforts exception. Koppers is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include restructuring, impairment, non-cash LIFO charges, acquisition-related costs, and non-cash mark-to-market commodity hedging that are difficult to predict in advance in order to include in a GAAP estimate and may be significant.
Monthly Business Update
As previously announced, Koppers will report monthly sales by business segment for October 2020 and November 2020 via a press release without an accompanying conference call. For the remaining month in 2020, the company plans to provide …