Koppers 2025 Q3 Earnings Call: Conflicting Visions on RUPS Growth, PC Market Recovery, and UIP Strategy Raise Red Flags for Investors

Date of Call: November 06, 2025

Financials Results

• Revenue: $485M, down 12% YOY
• EPS: $1.21 per share, down from $1.37 in Q3 2024
• Operating Margin: Adjusted EBITDA margin 14.6%; adjusted EBITDA $70.9M vs $77.4M in Q3 2024

Guidance:

• 2025 consolidated sales revised to $1.9B (vs $2.1B in 2024).
• 2025 adjusted EBITDA forecast $255M–$260M (vs $262M in 2024).
• 2025 adjusted EPS guidance $4.00–$4.15 per share (on par with 2024 despite ~10% lower sales).
• 2025 capital spending expected $52M–$55M (down from $74M in 2024).

Business Commentary:

• Sales Decline and Cost Control:
• Koppers reported consolidated third-quarter sales of $485 million, down 12% from the prior year.
• Despite the decline, the company maintained profitability through diligent cost control, with adjusted EBITDA for the quarter at $70.9 million.

• The sales decrease was primarily due to market forces exerting headwinds on top-line performance.

• RPS and PC Segment Performance:

• RPS segment sales decreased by 15 million or 6%, while PC sales were down 32 million, 18%.
• The decline in RPS was driven by lower volumes of Class I cross-ties and maintenance of way business, partly offset by higher commercial cross-ties volumes.

• In the PC segment, sales were affected by market share shifts and reduced demand in North America.

• CM&C Segment and Strategy Adjustments:

• CM&C sales decreased by 21 million, 16% year-over-year, with profitability improving to $16 million.
• The decline was primarily due to the discontinuation of ThioLignin hydride and lower average pricing.

• The company is considering simplifying its U.S. distillation capacity to a single column to reduce costs and future capital outlay.

• Catalyst Program and Future Outlook:

• Catalyst is expected to deliver approximately $80 million of ongoing benefits by the end of 2028.
• The program aims to simplify the business, upgrade technology, and enhance employee skills, contributing to higher margins and cash flow.
• The company anticipates delivering another $40 million of benefits in the next three years, contingent upon market conditions.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management emphasized cost control and portfolio simplification: "diligent control of spending...deliver adjusted EBITDA" and highlighted Catalyst targeting ~$80M ongoing benefits by 2028 and $300M+ free cash flow over three years. They also raised the annual dividend 14% and continued share repurchases while maintaining leverage progress.

Q&A:

• Question from Gary Prestapino (Barrington Research): Looking at slide 23, you’ve taken expenses out of CM&C and RPS, yet PC shows the lowest expense capture and had a down quarter in adjusted EBITDA and margins. Is there something inherent preventing further cost cuts in PC, or are you choosing not to cut because you expect a market rebound? Also, regarding objectives with PC and RPS being greater than 85% of sales, does that entail further shrinking of CM&C?
  Response: PC has seen cost reductions (including corporate allocations) but management is deliberately cautious about deep cuts in PC because it’s strategic for growth (commercial expansion, winning back share); CM&C will be de-emphasized and is expected to be a smaller part of the business going forward, with limited new investment.

• Question from Liam Burke (B. Riley): Can you give color on strategy to grow the utility pole business organically or via acquisition? And regarding PC, after anniversarying your market share loss, do you have a baseline revenue for PC from which you can grow?
  Response: UIP growth will target underserved geographies and share gains using existing assets (Brown acquisition, new species capability like Douglas fir), focusing on stable supply rather than price competition; for PC, management views the ~3% market decline this year as a reset and expects normalized growth of ~3–4% year-over-year, though customers currently signal flat near-term volumes.

Contradiction Point 1

RUPS Volume Expectations and Market Share Losses

It reflects differing expectations for volume recovery and market recovery, which could impact investor expectations and strategic planning.

Can you explain your strategy for growing the utility pole business organically or through acquisition? - Liam Burke (B. Riley Securities, Inc., Research Division)

2025Q3: There is optimism that volume in 2026 will be up year-over-year significantly more than the 5% increase we expect this year. - [Leroy Ball](CEO)

How are the contracts with Class I customers progressing, and are you satisfied with the current agreements in place? - Liam Dalton Burke (B. Riley Securities, Inc., Research Division)

2025Q2: We still expect low single-digit growth in 2026. - [Leroy Mangus Ball](CEO)

Contradiction Point 2

PC Market Share Recovery and Growth Expectations

It involves differing expectations for market recovery and growth, which are crucial for strategic planning and investor expectations.

Can you establish a baseline PC revenue level after accounting for market share loss, given that existing home-derived demand appears to be stabilizing? - Liam Burke (B. Riley Securities, Inc., Research Division)

2025Q3: The company sees this year's market decline as a temporary setback. With the market stabilizing, there is potential for growth in line with historical trends (3-4% annually). - [Leroy Ball](CEO)

Is the Catalyst transformation a new approach beyond the strategic five-year plan? - Gary Frank Prestopino (Barrington Research Associates, Inc., Research Division)

2025Q2: For Fiscal Year 2026, we expect PC segment sales to be down in the low single-digit range to the prior year. - [Leroy Mangus Ball](CEO)

Contradiction Point 3

Cost-Cutting vs. Growth Strategy for PC

It reflects differing emphasis between cost-cutting and growth investments for the PC segment, affecting strategic focus and resource allocation.

You've reduced expenses in CM&C and RPS, but PC has seen the least expense reduction. Is it due to inherent factors or the expectation of a market rebound? - Gary Prestapino (Barrington Research)

2025Q3: There are costs being taken out of PC, including corporate allocations and overhead costs. PC is viewed as a future growth area, and the company wants to avoid cutting costs too deeply, especially in areas like sales and marketing, which are important for future expansion and winning back business. - [Leroy Ball](CEO)

Is the Catalyst transformation a new approach outside your 5-year strategic plan? - Gary Frank Prestopino (Barrington Research Associates, Inc., Research Division)

2025Q2: We have and will continue to take out costs in the PC segment and are seeing significant progress on those efforts. - [Leroy Mangus Ball](CEO)

Contradiction Point 4

PC Revenue and Market Share Recovery

It involves differing expectations for the PC segment's revenue recovery and market share regain, which are crucial for assessing the company's financial outlook and strategic direction.

Does your goal of increasing PC and RPS to over 85% of sales lead to further reduction of CM&C? - Gary Prestapino(Barrington Research)

2025Q3: The company sees this year's market decline as a temporary setback. With the market stabilizing, there is potential for growth in line with historical trends (3-4% annually). Customers are currently not expecting significant growth but could adjust if market conditions improve. - [Leroy Ball](CEO)

What is your competitive strategy for PCs—pricing or a different formula? - Liam Burke(B. Riley FBR)

2024Q4: This isn't new market share loss, it's planned for in 2025. Competitor actions include diversifying customer supply chains and aggressive capacity investments to gain market share. - [Leroy M. Ball](CEO)

Contradiction Point 5

UIP Growth Strategy

It highlights differing perspectives on the growth strategy for the Utility, Industrial, and Railroad Products (UIP) segment, impacting investment decisions and growth expectations.

Can you explain your strategy for growing the utility pole business organically or through acquisition? - Liam Burke(B. Riley)

2025Q3: There's a strong business in traditional markets, but limited coverage in the Midwest and Southwest. Opportunities exist for expansion in these regions by leveraging wood preservative and treating technologies. The company aims to provide a stable supply option, focusing on expanding sales and technology capabilities. - [Leroy Ball](CEO)

Are there no acquisition opportunities or do other projects offer better returns? - Liam Burke(B. Riley FBR)

2024Q4: We've made investments for future expansion. Current focus is on utilizing existing capacity and monitoring potential opportunities. We're not seeing immediate needs for capital investment. - [Leroy M. Ball](CEO)