Koppers Holdings Inc. — Third Quarter 2026 Earnings Summary

Financial Performance

• Net sales for the three months ended September 30, 2026, were $499.1 million, a 2.8% increase compared to $485.3 million in the prior year quarter.
• Net income was $14.7 million, a 38.2% decrease from $23.8 million in the prior year quarter.
• Diluted EPS was $0.75, down 35.9% from $1.17 in the prior year quarter.
• Adjusted EPS was $0.77, down 36.4% from $1.21 in the prior year quarter.
• Adjusted EBITDA was $58.0 million, an 18.2% decrease from $70.9 million in the prior year quarter.
• Year-to-date operating cash flow for the nine months ended September 30, 2026, reached a record $126.9 million, up from $77.4 million in the prior year period.
• Year-to-date free cash flow was a record $92.0 million, compared to $39.0 million in the prior year period.
• Total debt was reduced by $31.0 million (net debt reduced by $35.8 million) in the year-to-date period.
• Capital expenditures for the nine months ended September 30, 2026, were $34.9 million, compared to $38.4 million in the prior year period.
• Selling, general, and administrative expenses were $3.4 million higher year-over-year, driven by increased compensation-related and technology costs.

Guidance and Future Outlook

• Updated 2026 Net sales forecast to approximately $1.9 billion (prior forecast: $1.9–$2.0 billion).
• Updated 2026 Adjusted EBITDA forecast to $220–$225 million (prior forecast: $240–$250 million).
• Updated 2026 Adjusted EPS forecast to $3.10–$3.25 (prior forecast: $3.80–$4.20).
• Updated 2026 Effective tax rate on adjusted net income to 31% (prior forecast: 28%).
• Maintained 2026 Operating cash flow guidance at $165–$185 million.
• Updated 2026 Free cash flow forecast to $115–$135 million (prior forecast: $110–$130 million).
• Maintained 2026 Capital expenditures guidance at $50 million (prior forecast: $55 million).
• Outlook cites higher-than-anticipated raw material and logistics costs, partially influenced by elevated energy prices, creating margin pressures expected to persist through 2026.
• Management expects positive volume trends and increasing benefits from operational improvement efforts in 2027.
• Commercial actions taking effect in 2027 are expected to reset earnings to a meaningfully higher level.
• Working capital initiatives are anticipated to generate additional cash flow, supporting the ability to maintain operating cash flow guidance.

Business Segments and Product Lines

• Railroad and Utility Products and Services (RUPS): Net sales were $232.8 million (flat vs. prior year); Adjusted EBITDA was $22.3 million, down 23.6% from $29.2 million. Sales increases were driven by higher volumes in Class I crossties and a 5% volume increase in domestic utility poles, including an acquisition of a western U.S. pole procurement business. These were offset by price decreases for crossties and the sale of a railroad services business in Q3 2025.
• Performance Chemicals (PC): Net sales were $161.5 million, up 11.9% from $144.3 million; Adjusted EBITDA was $29.6 million, up 13.4% from $26.1 million. Growth was driven by 10% volume growth in the Americas due to market share gains and inventory restocking. Adjusted EBITDA was impacted by $4.7 million in higher raw material costs, primarily scrap copper, partially offset by the copper-hedging program.
• Carbon Materials and Chemicals (CMC): Net sales were $104.8 million, down 3.2% from $108.3 million; Adjusted EBITDA was $6.1 million, down 60.9% from $15.6 million. Sales decreases were due to reduced volumes, particularly carbon pitch, offset by price increases. Adjusted EBITDA declined due to $9.0 million in higher raw material costs and $1.7 million in lower utilization caused by feedstock quality issues and the accelerated closure of the Stickney facility.

Market and Competitive Landscape

• Currency conversion had a favorable impact of $6.1 million on total net sales in the quarter.
• RUPS segment benefited from a $0.9 million favorable currency impact, mainly from the utility pole business in Australia.
• PC segment benefited from a $2.6 million favorable currency impact.
• CMC segment benefited from a $2.6 million favorable currency impact.
• Carbon pitch prices were approximately 4% higher globally, driven by market dynamics in North America and Europe.
• Lower prices in Europe for Performance Chemicals were mostly offset by higher prices in the Americas and Australasia.

Risks and Challenges

• Higher raw material and logistics costs are offsetting volume growth and cost improvement commitments in the near term.
• Weaker end market demand is impacting results.
• Feedstock quality issues have led to lower utilization in North America.
• The accelerated closure of the Stickney facility and idling of the Florence treating plant are ongoing restructuring actions.
• Forward-looking statements are subject to risks including fluctuations in raw material prices (coal tar, lumber, scrap copper), commodity prices (oil, copper, chemicals), geopolitical events, tariffs, and economic conditions.

Management Commentary and Tone

• CEO Leroy Ball stated that third-quarter results reflect continued challenges in the macroeconomic environment.
• Management noted that while they are delivering on commitments to grow volumes and improve costs, higher input costs are placing additional pressure on margins and earnings.
• The "Catalyst" transformation program is described as fundamentally changing how the organization drives performance improvement.
• Management expressed confidence in building a strong foundation for significant improvement in 2027 through self-help initiatives and commercial actions.
• The tone indicates a focus on generating cash and allocating capital with discipline to build long-term shareholder value despite near-term headwinds.

Other Key Points

• Returned $56.2 million to shareholders in the year-to-date period.
• Repurchased $51.0 million of common stock in the nine months ended September 30, 2026.
• Acquired a western U.S. pole procurement business in the RUPS segment.
• Sold a railroad services business in the third quarter of 2025, impacting prior year comparables.
• Total debt as of September 30, 2026, was $888.2 million, with net debt of $845.4 million.
• Cash and cash equivalents were $42.8 million as of September 30, 2026.
• The company does not provide reconciliations of guidance for adjusted EBITDA, free cash flow, and adjusted EPS to GAAP measures due to the "unreasonable efforts exception."
• Impairment and restructuring charges for the nine months ended September 30, 2026, were $233.4 million.