Koppers Holdings Inc., a producer of treated wood products and other services for industries including rail, has reported 2016 third quarter consolidated sales of $371.1 million, a decrease of 14.5 percent, or $62.7 million, from sales of $433.8 million for the same quarter in 2015. The decline was primarily related to the Carbon Materials and Chemicals (CMC) business. The Railroad and Utility Products and Services (RUPS) segment also experienced lower year-over-year sales volumes of treated crossties and utility products.
The 2016 third quarter had a net income of $12.1 million, or $0.58 per diluted share, compared to a net income of $10.1 million, or $0.49 per diluted share in the 2015 third quarter. Adjusted net income and adjusted earnings per share were $20.9 million and $0.99 per share compared to $13.8 million and $0.67 in the third quarter of 2015.
“Our strong operating performance in the third quarter demonstrates that our strategy continues to build momentum,” remarked Leroy Ball, Koppers president and CEO. “Our systematic approach of reducing our dependence on highly cyclical industries tied to oil and aluminum while becoming an enterprise focused on wood preservation and wood protection is gaining traction.”
The company’s Railroad and Utility Products and Services (RUPS) declined due to a reduction in crosstie purchases from lower spending by the Class I rail customers, a decline in utility product sales from reduced demand in the Australian utility pole market and reduced toll-treating of utility poles in the United States. Also, sales were unfavorably affected by lower pricing due to the pass-through of lower raw material costs related to hardwood pricing and greater competition related to non-Class I business.
Sales for RUPS in the third quarter decreased 18 percent, or $31.9 million, to $145.7 million compared to last year’s third quarter of $177.6 million. Adjusted EBITDA margin for the third quarter was 13 percent compared to 13.4 percent in the prior year period. This was relatively flat due to a favorable sales mix and cost savings related to a closure of the facility in Green Springs, W.Va.
“The RUPS business delivered solid margin performance despite the softening market conditions that we previously forecasted as a result of the North American rail industry's spending cutbacks. Additionally, our strategy to significantly reduce our coal tar distillation capacity is already starting to reap benefits in terms of increased profitability and a shrinking environmental footprint.”
“As our CMC restructuring plan reaches full implementation during 2018, we expect to have effectively decoupled our wood-preservation business from the significant volatility that has affected CMC throughout its history. Moving forward, we will continue to evaluate how to best optimize our strategy as it relates to our product portfolio and capital structure. We remain committed to delivering shareholder value as we transform into a global leader of wood-based technology," concluded Ball.
Koppers is maintaining its outlook for 2016 with sales expected at approximately $1.4 billion for 2016. Adjusted EBITDA is anticipated to increase to the range of $168 to $172 million, compared with a prior forecast of $162 to $172 million. Adjusted EPS guidance is being increased to between $2.40 and $2.54, compared with the previous range of $1.90 to $2.20. The stronger results from Performance Chemicals are expected to continue and should more than offset the expected softening in treated crosstie volumes.