Cuộc họp công bố kết quả kinh doanh Q3 2026 của Koppers (KOP): Hạ định hướng khi chi phí đầu vào tăng

Những điểm nhấn chính

• Koppers ghi nhận doanh thu thuần quý 3 năm 2026 đạt $499 triệu, tăng khoảng 3% so với cùng kỳ năm trước, nhờ tăng trưởng sản lượng của Performance Chemicals và sản lượng tà vẹt Cấp I cao hơn.
• EBITDA điều chỉnh giảm 18% xuống còn $58 triệu, trong khi biên EBITDA điều chỉnh giảm xuống 11.6% từ mức 14.6%. Ban lãnh đạo ước tính chi phí đầu vào tăng cao đã làm EBITDA so với cùng kỳ năm trước giảm $16 triệu.
• EPS điều chỉnh giảm xuống $0.77 từ mức $1.21, phản ánh lợi nhuận hoạt động thấp hơn và thuế suất cao hơn.
• Dòng tiền từ hoạt động kinh doanh lũy kế từ đầu năm đạt mức kỷ lục $127 triệu, và dòng tiền tự do đạt mức kỷ lục $92 triệu, nhờ hàng tồn kho giảm và vốn lưu động được cải thiện.
• Ban lãnh đạo đã hạ dự báo năm 2026 xuống EBITDA điều chỉnh ở mức $220 triệu đến $225 triệu và EPS điều chỉnh ở mức $3.10 đến $3.25, với lý do lạm phát chi phí nguyên vật liệu, cước vận chuyển và logistics.
• Koppers kỳ vọng các biện pháp điều chỉnh giá có hiệu lực từ tháng 1 năm 2027, kết hợp với tối ưu hóa mạng lưới và các sáng kiến Catalyst, sẽ hỗ trợ lợi nhuận cải thiện đáng kể trong năm 2027.

Kết quả tài chính cốt lõi

Trong 9 tháng đầu năm, Koppers đã giảm nợ 34 triệu USD, mua lại 51 triệu USD cổ phiếu và chi trả 5 triệu USD cổ tức. Chi phí vốn lũy kế từ đầu năm đạt tổng cộng 35 triệu USD.

Kết quả kinh doanh và hoạt động

Hóa chất Hiệu năng cao

Doanh thu mảng Hóa chất Hiệu năng cao tăng 18 triệu USD, nhờ tăng trưởng sản lượng 10%, chủ yếu tại khu vực châu Mỹ. Koppers đã giành lại thị phần ở phân khúc dân dụng và tiếp tục mở rộng mảng kinh doanh công nghiệp bất chấp nhu cầu liên quan đến nhà ở vẫn còn ảm đạm.

EBITDA điều chỉnh tăng 4 triệu USD lên 30 triệu USD, nhờ sản lượng và hiệu suất sử dụng được cải thiện. Những lợi ích này đã bị bù trừ một phần bởi khoảng 5 triệu USD chi phí nguyên vật liệu tăng thêm, bao gồm đồng phế liệu, nguyên liệu đầu vào gốc dầu và cước vận chuyển.

Ban lãnh đạo cho biết biên EBITDA điều chỉnh quý II ở mức khoảng 22% đã giảm xuống còn khoảng 18% trong quý 3 và dự kiến sẽ tiếp tục suy giảm trong quý 4 trước khi biểu giá mới có hiệu lực.

Sản phẩm và Dịch vụ Đường sắt và Tiện ích

Doanh thu mảng RUPS gần như đi ngang ở mức 233 triệu USD. Sản lượng tà vẹt cao hơn cùng mức tăng 5% về sản lượng cột tiện ích nội địa đã bị triệt tiêu bởi giá bán thấp hơn, đặc biệt đối với tà vẹt Cấp I, cùng thương vụ bán mảng dịch vụ đường sắt trước đó.

EBITDA điều chỉnh giảm xuống còn 22 triệu USD từ mức 29 triệu USD. Giá bán tà vẹt thấp hơn, chi phí nguyên vật liệu và chi phí SG&A cao hơn, cùng với mảng dịch vụ đường sắt đã thoái vốn đã lấn át mức tăng trưởng sản lượng.

Mảng kinh doanh tiện ích ghi nhận biên lợi nhuận gộp cao hơn nhờ cải thiện sản lượng, cơ cấu sản phẩm và kiểm soát chi phí. Ban lãnh đạo cho biết doanh số cột tiện ích tại Mỹ đã tăng 5% trong quý và tăng 11% từ đầu năm đến nay, nhờ nhu cầu được hỗ trợ bởi hoạt động đầu tư vào hạ tầng tiện ích.

Koppers đang dần thu hẹp hoạt động tại cơ sở Florence để nâng cao hiệu quả mạng lưới đường sắt. Cơ sở này dự kiến sẽ chuyển sang trạng thái tạm dừng hoạt động sau khi lượng sản phẩm còn lại được giao đi, nhưng ban lãnh đạo vẫn chưa quyết định đóng cửa vĩnh viễn.

Vật liệu Carbon và Hóa chất

Doanh thu mảng CM&C giảm 3 triệu USD, do sản lượng thấp hơn đã lấn át mức tăng giá của hắc ín carbon và nguyên liệu than muội, cũng như tác động thuận lợi từ tỷ giá.

EBITDA điều chỉnh giảm 61% xuống còn 6 triệu USD từ mức 16 triệu USD. Chi phí nguyên vật liệu cao hơn đã tạo ra tác động 9 triệu USD so với cùng kỳ năm trước, trong khi tỷ lệ sử dụng công suất thấp hơn làm giảm EBITDA thêm 1,7 triệu USD.

Chi phí nhựa than đá đã tăng 30% so với cùng kỳ năm trước trong quý 3. Ban lãnh đạo cũng viện dẫn thị trường carbon biến động, chi phí cước vận chuyển cao hơn và các chi phí chuyển đổi tạm thời liên quan đến việc tái cấu trúc cơ sở Stickney.

Koppers đã kết thúc hoạt động chưng cất tại Stickney vào ngày 30 tháng 9 và ngừng hoạt động sản xuất hóa chất còn lại trong tháng 10. Công ty tiếp tục kỳ vọng sáng kiến này sẽ mang lại 15 triệu đến 20 triệu USD lợi ích EBITDA điều chỉnh hằng năm và khoảng 1,00 đến 1,20 USD mức cải thiện EPS điều chỉnh hằng năm, đồng thời giảm bớt nhu cầu vốn trong tương lai.

Chuyển đổi Catalyst

Koppers đã tạo ra 42 triệu USD lợi ích từ Catalyst so với cùng kỳ năm trước tính đến ngày 30 tháng 9: 8 triệu USD ở mảng Hóa chất Hiệu năng cao, 13 triệu USD ở mảng RUPS, 11 triệu USD ở mảng CM&C và 10 triệu USD ở cấp độ tập đoàn.

Công ty cho biết các sáng kiến năm 2026 mang lại 136 triệu USD lợi ích từ quá trình chuyển đổi. Công ty cũng nâng mục tiêu lũy kế thêm 90 triệu USD tính đến năm 2028, tiếp nối mức 46 triệu USD đã đạt được trong năm 2025.

Định hướng của ban lãnh đạo

Ban lãnh đạo dự kiến các đợt điều chỉnh giá đáng kể sẽ có hiệu lực từ ngày 1 tháng 1 năm 2027. Hơn 80% sổ đơn hàng hiện tại của mảng Performance Chemicals cho năm 2027 đã được thống nhất ở mức giá nhằm ứng phó với áp lực lạm phát.

Về chi tiêu vốn, ban lãnh đạo cho biết 50 triệu USD nhiều khả năng sẽ là mức cận trên cho năm 2027 và chỉ ra rằng 40 triệu đến 45 triệu USD có thể là mức nhu cầu hàng năm điển hình hơn theo danh mục hiện tại.

Rủi ro và các yếu tố cần theo dõi

• Chi phí nhựa than đá, đồng, dầu diesel, phụ gia gốc dầu, cước vận chuyển và các chi phí đầu vào khác đang tăng nhanh hơn khả năng bù đắp của Koppers thông qua việc định giá.
• Biên lợi nhuận của mảng Performance Chemicals có thể tiếp tục suy yếu trong quý 4 trước khi các đợt tăng giá vào tháng 1 năm 2027 bắt đầu đóng góp kết quả.
• Nhu cầu nhà ở vẫn trầm lắng, và ban lãnh đạo mô tả môi trường nhà ở nội địa ở mức trung lập đến hơi tiêu cực.
• Giá tà vẹt đường sắt Cấp I thấp hơn cùng các nhượng bộ về giá trong ngắn hạn tiếp tục gây áp lực lên biên lợi nhuận mảng đường sắt.
• Mảng CM&C vẫn chịu rủi ro từ sự biến động giá nhựa than đá và hắc ín, sản lượng hắc ín carbon suy yếu cùng các chi phí chuyển đổi từ việc tái cấu trúc mạng lưới Stickney.
• Koppers kết thúc quý với tỷ lệ đòn bẩy ròng là 3,7 lần, cao hơn phạm vi mục tiêu dài hạn của ban lãnh đạo là 2 đến 3 lần.

Điểm nhấn phiên hỏi đáp với chuyên gia phân tích

• Phục hồi giá:Ban lãnh đạo bày tỏ sự tự tin cao đối với giá bán của mảng Performance Chemicals trong năm 2027. Các điều khoản điều chỉnh giá trong hợp đồng ngành đường sắt dự kiến sẽ mang lại mức độ phục hồi hạn chế hơn, trong khi giá bán cho mảng tiện ích sẽ phụ thuộc vào việc gia hạn hợp đồng và các điều kiện cạnh tranh. Sự phục hồi của mảng CM&C vẫn khó dự đoán hơn do các chỉ số giá đầu vào và giá bán biến động ở các thời điểm khác nhau.
• Cơ cấu mảng Performance Chemicals:Các ứng dụng công nghiệp đang tăng trưởng, bao gồm cả các hợp đồng kinh doanh mới được ký kết cho năm 2027, nhưng ban lãnh đạo nhấn mạnh rằng phân khúc dân dụng vẫn là động lực đóng góp lợi nhuận chính của mảng này.
• Khả năng sinh lời của mảng đường sắt:Ban lãnh đạo cho biết áp lực lên biên lợi nhuận phản ánh việc chủ động nhượng bộ về giá để đảm bảo sản lượng cùng với chi phí gia tăng. Khoản chi phí tiết kiệm được từ việc tạm dừng hoạt động nhà máy Florence dự kiến sẽ hỗ trợ khả năng sinh lời trong năm 2027.
• Phân bổ vốn:Koppers dự định cân đối giữa việc mua lại cổ phiếu và giảm nợ, đồng thời tiếp tục đánh giá các thương vụ mua lại tiềm năng trong mảng Performance Chemicals và các sản phẩm cơ sở hạ tầng tiện ích.
• Phát triển danh mục:Ban lãnh đạo kỳ vọng mảng Performance Chemicals và RUPS sẽ chiếm hơn 85% doanh thu vào năm 2028, chủ yếu thông qua tăng trưởng hữu cơ, dù các thương vụ mua lại trong mảng Performance Chemicals hoặc các sản phẩm tiện ích vẫn có khả năng diễn ra.

Toàn văn biên bản cuộc gọi công bố kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good morning ladies and gentlemen and thank you for standing by. Welcome to Koppers' third quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, instructions will be given for the question and answer session. Please note that this event is being recorded. I will now turn the call over to Quinn McGuire. Please go ahead.

Quynh McGuire

Thanks, and good morning. I'm Quinn McGuire, Vice President of Investor Relations. Welcome to our third quarter 2026 earnings conference call. We issued our press release earlier today. You can access it via our website at www.coppers.com. As indicated in our announcement, we've also posted materials to the investor relations page of our website that will be referenced in today's call. Consistent with our practice in prior quarterly conference calls, this is being broadcast live on our website, and a recording of this call will be available on our website for replay through December 6, 2026. At this time, I would like to direct your attention to our forward-looking disclosure statement seen on slide two.

Certain comments made on this conference call may be characterized as forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of assumptions, risks, and uncertainties, including risks described in the cautionary statement included in our press release and in the company's filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included in the company's comments, you should not regard the inclusion of such information as a representation that its objectives, plans, and projected results will be achieved. The company's actual results, performance, or achievements may differ materially from those expressed in or implied by such forward-looking statements. The company assumes no obligation to update any forward-looking statements made during this call. Also, references may be made today to certain non-GAAP financial measures. The press release, which is available on our website, also contains reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures.

Joining me for our call today are Leroy Ball, Chief Executive Officer and Chair of Koppers, and Eric Renner, Chief Financial Officer and Treasurer. I'll turn the discussion over to Leroy.

Leroy M. Ball

Thank you, Gwen. Good morning, everyone, and thanks for joining us. The third quarter demonstrated both the underlying momentum in our portfolio and the near-term pressure created by continually rising input costs. The business Businesses that we've been investing to grow delivered solid performance. Despite an unfavorable macro backdrop and a domestic residential environment that remains neutral to slightly negative, performance chemicals again delivered strong volume growth driven by continued momentum in industrial applications and market share gains in our residential business. The utility and industrial products continues to benefit from a healthy infrastructure market for utility poles. At the same time, costs for coal tar, copper, diesel, freight, and other raw materials continued to rise and move through our businesses faster than we could recover them through pricing or cost reductions in other areas. reduced our margins, and led us to revise our earnings outlook for the remainder of 2026. During the third quarter, the cost environment became more challenging and outweighed the benefits we continue to deliver through Catalyst.

In most cases, we are absorbing higher raw material, additive, and logistics costs today before we are able to fully recover them through pricing. That dynamic will continue to affect our results through the balance of the year, but significant pricing actions will take effect in January 2027 and enable us to recover much of what we have absorbed this year. The actions within our control continue to move us in the right direction. We generated record year-to-date operating cash flow and free cash flow, completed another important step in repositioning CM&C with the end of distillation at Stickney, and delivered $42 million of year-over-year catalyst benefits through September. So, while the current year earnings picture is more difficult than we expected, our view that COPPERS will deliver significant earnings improvement in 2027 and continued strong cash generation has not changed. Our confidence rests on the resilience of demand in our most attractive markets and the structural actions underway that are already producing measurable benefits. benefits. Let me put some numbers around the quarter.

Turning to page four, third quarter sales were 499 million, an increase of 3% compared with the prior year, led by volume growth in our performance chemicals and class one cross tie businesses. Adjusted EBITDA was $58 million, down 18% from the prior year quarter, reflecting the higher raw material and logistics costs I just mentioned, as well as higher SG&A costs. Our focus on cash generation continued to deliver this quarter. Operating cash flow for the first nine months of the year was a record $127 million, up from 77 million in the prior year period. Free cash flow for the same period was a record $92 million, enabled by inventory alignment and operational improvements across the organization. Our capital allocation priorities remain unchanged. Through the first three quarters of the year, we paid down debt by 34 million and returned capital to our shareholders through 51 million of share repurchases and $5 million of dividend payments.

Capital expenditures total $35 million so far this year. We remain confident in the underlying drivers of our business, and we have managed through periods like these before. From 2021 through 2023, we faced rapidly escalating costs in all of our businesses with contractual timing differences in passing these costs through. In 2022 and 2023, we increased pricing actions across our businesses by over $500 million. We remain focused on disciplined commercial execution, productivity efficiencies, and taking costs out of our network. That is what our teams are working on today, and we expect to see the benefits flowing through our results in 2027. Our catalyst transformation is helping us move faster, and it gives our teams a common framework to identify the opportunities, put resources behind them, and hold ourselves accountable for delivering results.

Now, as shown on page 5, we recently reached two important milestones by ending distillation activities on September 30th and then discontinuing the remaining chemical production at Stickney in October. Now that production has stopped, the work shifts from closing the facility to capturing the value from the new network. That means completing the transition, improving utilization across the remaining footprint, and continuing to optimize our Europe to North America supply chain. continue to evaluate potential future uses for the Stickney site as we complete the wind down of the facility. This decision addresses long-standing structural challenges, including operating costs that outpaced our ability to recover through pricing, declining North American coal tar supply, and increasing capital requirements. This action represents an important step in repositioning our CMC network to create a smaller, more efficient, and less capital-intensive CMC business while continuing to reliably serve our core customers. We continue to expect this initiative to generate annual adjusted EBITDA benefits of approximately $15 to $20 million, improve adjusted earnings per share by roughly $1 to $1.20 annually. annually and reduce annual capital spending requirements going forward. Next is an overview of our Zero Harm safety performance for the quarter as seen on page six. 21 of our 40 operating locations worked injury-free in the third quarter, and our PC operations in Europe and Australasia and our CM&C team in Australasia achieved zero recordable accidents.

Our overall results fell short of the prior year quarter, and we have work to do to get back to that level. We remain committed to our zero harm vision as the foundation of everything that we do. Turning to page eight, we were proud to host Koppers' 2026 Investor Day in Atlanta this past September. Attendees toured our state-of-the-art performance chemicals research facility in Peachtree City and learned more about our PC business and how we create value through our technical capabilities. In addition, our management team highlighted our strategic plan progress, initiatives stemming from our Catalyst transformation process, and the financial framework supporting our objectives. We also held a special panel for a question and answer session featuring our business leaders who discussed our priorities and future growth opportunities. For an on-demand replay of the day's events, please use the QR code.

As shown on page nine, Koppers received recognition from Newsweek by being named to its list of greenest companies, signifying measurable progress and reducing our environmental impact. earned four out of five stars in the performance and industrial chemicals category. This recognition is a credit to the efforts of our teams across the organization. We are proud of how far we have come while recognizing that there is always more work to do. I'll return in a bit to provide my view on how we're seeing the current year within each business while also reviewing our outlook for the remainder of 2026. I'll turn the call over to Eric Brenner, our Chief Financial Officer, to speak in more detail on our third quarter financial performance. Eric?.

Unknown Speaker

Thanks, Leroy. There are three financial takeaways from the third quarter. First, sales increased despite a mixed demand environment supported by strong volume growth in performance chemicals and higher Class I cross-tie volumes in our rail and utility business. Second, higher raw material and logistics costs, along with lower cross-tie pricing, pressured margins. We are addressing those headwinds through commercial actions, network optimization, and the broader catalyst transformation. Third, and importantly, we generated record year-to-date operating cash flow and record year-to-date free cash flow. That performance reinforces the structural improvement we are seeing in the cash generation profile of coppers. walk through each of those points, beginning with consolidated and segment performance. As shown on slide 11, net sales increased $14 million, or 2.8%, from the prior year quarter.

The increase was primarily driven by higher volumes in performance chemicals and our cross-tie business. Those benefits were partly offset by unfavorable pricing for cross-ties in our RUPS segment, the sale of our railroad service business, as well as product rationalization. Also, currency conversion had a favorable effect of $6 million on sales as compared to the prior year quarter. Adjusted EBITDA for the third quarter was $58 million, a decrease of $13 million, or 18%, compared to the prior year quarter. Adjusted EBITDA margin was 11.6% compared to 14.6% in the prior year quarter. The quarter reflected real margin pressure and we are not minimizing it. The earnings decline was driven primarily by higher raw material and logistics costs, lower CMC margins as we restructure our operating network, along with the impact of lower cross-tie pricing.

While favorable volumes in our PC and RUPS businesses partially offset the higher cost environment, we estimate the year-over-year impact of higher input costs to be $16 million in the third quarter, led by higher raw material costs in our CMC segment. Also, selling general and administrative, or SG&A, expenses were up $3.4 million year-over-year, mainly due to a compensation cost as well as higher technology costs. These increases were partly offset by lower professional service fees. In earnings per share, we reported adjusted EPS of 77 cents compared with $1.21 in the prior year quarter. The year-over-year decline primarily consists of lower earnings and a higher tax rate, with the latter having a negative impact of $0.07 per share when compared to last year. Compared to the second quarter, the change in our estimated tax rate for the year had a negative impact of 12 cents per share. Free cash flow generated for the third quarter was $19 million, compared with $38 million in the prior year quarter. lower for the quarter due to timing of working capital items.

Our trend of higher year-over-year free cash flow continued, as will be discussed later. Turning to slide 12, our rough segment net sales were essentially unchanged from 233 million in the prior year quarter. higher cross tie volumes and a 5% volume increase in our domestic utility pole business, which includes the contributions from the Douglas Fir pole procurement business we acquired late last year, were offset by lower pricing across multiple markets, particularly Class I cross-ties. Sales were also affected by approximately $6 million related to the sale of our railroad service business in the third quarter of 2025. As we have mentioned before, we have secured additional Class I cross-tie volume through selective pricing actions. The near-term impact is visible in current margins. However, the strategic value is the additional volume and asset utilization those agreements are intended to provide. As we complete the wind-down of our Florence facility in Q4, we are expecting to realize greater efficiency across our network as we go into 2027.

Adjusted EBITDA for RUPS was $22 million compared to $29 million in the prior year quarter. The decline was driven by lower cross-tie pricing, nearly $4 million of higher raw material and SG&A costs, and approximately $600,000 related to the sale of our railroad service business. These decreases were partly offset by an increase in sales volumes, primarily in the Class I cross-tie business. Moving on to slide 13, performance chemicals net sales increased $18 million compared to the prior year quarter. The sales increase was due to a 10% volume growth, primarily in the Americas. We remain focused on recapturing share in the muted domestic residential market while also leveraging strong industrial demand. The pricing impact in the quarter was insignificant, as lower prices in Europe were mostly offset by higher prices in the Americas and Australasia.

Foreign currency changes had a favorable impact of nearly $3 million on sales. Adjusted EBITDA for performance chemicals increased $4 million to $30 million. The increase was due primarily to higher sales volume and favorable utilization, partly offset by higher raw materials, which increased by approximately $5 million. Raw material costs were impacted by increased scrap copper cost net of our hedging program benefits. In addition, higher oil and energy prices are driving cost inflation in the oil-based raw materials, compounded by increased freight costs, which lowered our margins compared to our peak performance we saw in Q2. Turning to the CMC business as shown on slide 14, this remains the area in which the largest current cost and market pressures are concentrated. CMC sales were $3 million lower than the prior year quarter. impact of lower volumes was partly offset by higher carbon pitch and carbon black feedstock prices and a favorable foreign currency impact of nearly $3 million.

Sales declined 8% on lower sales volumes, mainly due to lower pitch sales in Australia and Europe, and lower sales volumes in North America, including lower margin byproduct sales associated with the wind down of Stickney. carbon pitch prices increased approximately 4% globally from the prior year period, driven by market dynamics in North America and Europe, but continue to lag the increase in input cost. Adjusted EBITDA for CMC was $6 million, down $10 million, or 61%, compared to the $16 million EBITDA recorded in the prior year quarter. This decrease was due to higher raw material costs, which had a $9 million impact over the prior year quarter. The carbon markets remain volatile as conflict in the Middle East and safety-related coal mine closures in China and late Q3 continue to push coal tar and pitch prices higher. In addition, adjusted EBITDA was impacted by a $1.7 million reduction from lower utilization, primarily in North America, due to the receipt of poor quality tar and the accelerated closure of our Stickney facility. We are also incurring transition and logistics costs as we reposition our supply network while continuing to provide reliable service to our critical North American customers. The Stickney closure and transition поэтому create near-term costs, but they are intended to reduce fixed costs, capital requirements, and earnings volatility over time.

And our closure activities continue at pace and are in line with our accelerated timeline. As shown on slide 16, we implemented structural improvements regarding cash flow, which supported meaningful shareholder returns. Our year-to-date operating cash flow through September 30th was a record $127 million, compared to $77 million in the prior year period. The increase primarily reflected improved working capital performance and approximately 14 million of lower pension funding in the current period, partially offset by lower underlying earnings. The improvement in working capital reflected the timing of customer receipts and vendor payments, as well as lower inventory. This also reflects the liquidation of byproduct inventory at Stickney as we complete the remaining closure activities. The deliberate working capital improvement reflects actions to reduce inventory to match customer demand.

Free cash flow on a year-to-date basis through September 30th was $92 million, also a record. Our 2026 year-to-date free cash flow run rate is above target. The drivers of improved cash flow generation include lower capital requirements going forward as we have completed our major growth investment cycle. catalyst initiatives are driving improved earnings and cash conversion, and cash taxes are projected to be significantly below our current adjusted tax rate of approximately 31% for the 2026 to 2028 time period. In the near term, we will have cash usages related to closure and transition costs for our Stickney plant. These actions create a pathway to generate average annual free cash flow of greater than $100 million. We continue to take a balanced approach to capital allocation, as detailed on slide 17, through September 30th, We've spent $35 million on capital expenditures. For the full year, we anticipate total gross capital expenditures of $50 million compared to our prior estimate of 55 million, primarily driven by lower maintenance spend in our RUPS segment.

Year-to-date share repurchases have totaled 51 million. We have approximately 23 million remaining under our 100 million repurchase authorization. We also continue to return capital to shareholders through our quarterly dividend of 9 cents per share, reflecting four consecutive years of annual dividend growth. At September 30th, we had $360 million in available liquidity and $845 million of net debt, representing a net leverage ratio of 3.7 times. We remain focused on our long-term goal of reducing net leverage to 2 to 3 times. As highlighted on slide 18, our Board of Directors declared a quarterly cash dividend on November 4th of $0.09 per share, payable on December 14th. This reflects a 12.5% increase from the prior year.

While future dividends remain subject to ongoing Board approval, maintaining a quarterly dividend at this rate would result in an annual dividend of $0.36 per share for 2026. In summary, our sales grew in the third quarter, but higher raw material and freight costs pressured margins and earnings. Year to date, we generated record operating cash flow and free cash flow while maintaining disciplined capital allocation. With that, I'll turn the call back to Leroy.

Leroy M. Ball

Thanks, Eric. I'd like to move now to a discussion of what we're seeing across our major end markets, how those views have evolved through the year, and how they are informing our outlook for the remainder of 2026. The macro environment is still somewhat uneven, but we continue to focus on areas of resilience and opportunity. These can generally be found in markets served by performance chemicals and utility and industrial products, the two businesses driving Koppers to a higher margin, stronger cash flow portfolio. So let's begin with performance chemicals on page 20. Here we go. Macro drivers of existing home sales, new home builds, and repair and remodeling spending continue to skew negative, keeping organic demand subdued in our largest market, even And so we delivered 10% year-over-year volume growth, primarily in the Americas, as we selectively regained market share following our setback in 2025, and we benefited from strength in the industrial market. The near-term challenge is on the cost side, driven by higher crude oil and commodity prices related to the Middle East conflict. We also saw freight costs increase further in the third quarter, while tariff uncertainty continues to create volatility in raw material pricing.

We have high confidence that we will address those pressures when the calendar turns to 2027, as about 80% of our current book of business is already agreed to for next year at prices that address the increases we are seeing across the board. Overall, our key takeaway for PC is that our business remains resilient amid flat organic demand and persistent cost inflation, and we expect our top line to take another step up in 2027 after our commercial actions take effect in January. Moving to utility and industrial products on page 21, UIP remains a constructive part of our portfolio with our U.S. utility pole business posting another solid quarter with year-over-year sales growth of 5% for the third quarter and 11% year-to-date. While we expect a typical seasonal slowdown in the fourth quarter, our sales pipeline remains healthy and the underlying demand outlook remains strong. Profitability improved supported by higher volumes and pricing, including modest price increases implemented during the quarter. We are seeing some pressure from inflation and higher diesel costs, but we are actively managing those impacts. Looking more broadly, market sentiment remains bullish.

Utility infrastructure investment is being driven by higher electricity rates and growing power requirements associated with AI infrastructure, crypto mining, EV development, and increased manufacturing activity. The demand outlook from investor-owned utilities remains strong through 2027, providing longer-term visibility even as pricing is expected to be relatively flat in the fourth quarter. On the supply side, fiber availability remains an area of focus as pole demand is concentrated within a relatively narrow range of sizes, creating a competitive procurement dynamic. Overall, we remain encouraged by the strength of the market and the healthy demand pipeline, and we are focused on capturing that growth while managing inflationary and supply-side pressures. We expect UIP to finish the year strong despite the typical fourth quarter seasonal slowdown, and we expect more of the same next year. Turning to page 22, and railroad products and services, sales volumes were up 3% year-to-date compared with the prior year, with both Class I and commercial volumes rebounding in September, despite overall softer demand. That said, price concessions that we made to secure future volumes have pressured margins in the near term, and we are responding by continuing to take costs out of the system.

Employee count at our treating plants is down 7% so far this year and down 22% from our high water mark in April of 2024. By the time the wind down of our Florence facility is complete, that reduction will be over 25%. There are some encouraging indicators of future demand. North American railroad traffic was up 3.1% year-over-year through early October, including a 3.5% increase in U.S. traffic, with intermodal up 4.2% and carloads up 2.7%. Higher rail traffic bodes well for long-term cross-tie demand, but it can slow tie purchases in the short term as railroads focus on moving freight while demand for their services remains strong. Commercial cross-tie backlog also remain robust heading into the fourth quarter, which puts us into a good position as we enter the new year. We're seeing the softer demand ripple through the cross-tie supply chain, putting pressure on sawmills and contributing to mill closures and reduced hardwood production.

From a working capital standpoint, Idling Florence is helping us take inventory out of the system. We're also aligning cross-tie purchases more closely with railroad programs and bringing overall inventory levels down. Overall, despite a pullback in Class 1 spending heading into 2027 and some price erosion, we stand to improve profitability on a go-forward basis as we complete our cost and network optimization actions. Moving now to carbon materials and chemicals on page 23, we are seeing weaker carbon pitch sales in both Europe and North America, while higher tar and freight costs are also affecting near-term performance. Tar costs increased 30% year-over-year in the third quarter and 13% year-to-date and sequentially. From an industry perspective, carbon markets remain volatile. The Middle East conflict, along with safety-related coal mine closures in China, continues to drive higher prices across oil, tar, naphthalene, and pitch.

Aluminum prices followed a different pattern, rising steadily during the first half of the year before easing to approximately $3,200 per metric ton during the third quarter. On the operational front, we reached an important milestone at Stickney ceasing tar distillation at that location in September. We We've also secured the feedstock needed to support the production transfer and successfully shipped tar cargo from North America to Europe. Our U.S. logistics network is also progressing as planned with coal tar pitch and creosote now being supplied through our U.S. terminals. The Europe to U.S. distribution model is operating effectively, and we see additional opportunities to optimize the network through the first half of 2027. We're already seeing the benefits of a more streamlined network. Nyborg Denmark supplied approximately 75% of the creosote delivered to our railroad business during August and September and achieved record pitch shipments in September, and With the transition ahead of our original schedule, we remain focused on successfully completing the shift to the new operating model and positioning C&C for more consistent performance going forward.

On page 24, you can see how our Catalyst Transformation Program is translating the actions we're taking across the portfolio into tangible results. There are three key drivers that underpin our Catalyst program. First, footprint consolidation to improve operational efficiencies. Second, Second, supply chain improvements to drive cost reductions. Third, operating leverage from market share gains and higher volumes in select businesses. We continue to make meaningful progress with 42 million in year-over-year benefits achieved through September 30, 2026. And by segment, that is 8 million in PC, 13 million in RUPs, 11 million in CM&C, and 10 million in corporate.

We're capturing those benefits through commercial excellence, network optimization, supply chain and work. improvements and discipline cost management. Our 2026 initiatives represent 136 million of transformation program benefits. Building on 46 million of program benefits in 2025, we raised our target an additional 90 million by 2028, reflecting the additional opportunities we see to drive value across the business. We're also seeing the benefit in cash as we reduced working capital by $12 million through September 30th compared with December 31st, 2025. We're seeing the powerful impact of Catalyst across the business. It's strengthening our performance today while creating a more efficient operating model that supports higher margins, stronger cash generation, and more consistent earnings as we execute our strategy and experience recovery in our end markets. Let's now take a look at our updated 2026 guidance summarized on page 26.

We've revised our forecast lower to reflect higher input costs, which are having a direct impact on profitability, but we are taking pricing actions to address these higher costs, although the benefits won't begin to be realized until January 2027. Page 27 shows the bridge for our 2026 sales of 1.9 billion, with PC contributing meaningful growth from market share gains and stronger industrial demand. Page 28 outlines our 2026 adjusted EBITDA forecast, which is now in the range of 220 to 225 million. This reflects the higher input costs already realized in our Q3 results and our expectation that they will continue throughout Q4. Page 29 provides our adjusted earnings per share forecast of $3.10 to $3.25 per share, reflecting the pullback in our earnings from operations, while all other categories show year-over-year improvement. Page 30 shows our free cash flow forecast of $115 to $135 million, which has improved due to a $5 million reduction in expected capital expenditures for this year. On page 31, we show the details of our 2026 capital expenditure forecast by business segment.

We now expect total capital expenditures of approximately 50 million, which is 5 million lower than our previous forecast. So to summarize, while 2026 has presented unexpected challenges, we continue to execute on what we control. We grew sales, delivered 42 million of catalyst benefits through September, ended production at Stickney, and generated record year-to-date operating and free cash flow. Higher raw material freight costs more than offset that progress in the near term, but the pricing actions taking effect in January, combined with the structural cost improvements already underway, position us for significant earnings improvement in 2027. We remain focused on strengthening earnings, cash generation, and capital efficiency as we work toward our 2028 objectives. That, we would be happy to take your questions.

Operator

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today is from Gary Prestopino with Barrington Research. Please go ahead.

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Gary Prestopino

Good morning, everyone. Hey, Leroy, I'm kind of trying to take notes reading through all of this and all with the performance of the segments and all that. Could we maybe just, for my purposes, just kind of work through each of the segments in terms of which ones are going to get the price increases? Is it kind of across the board? I know you said I thought you said PC was going to be the is it really the PC? is really the one that's impacted. But that would be really helpful.

Leroy M. Ball

Sure, yes. So starting with PC, we tend to operate under two year agreements. and we are at the end of that last two-year agreement that went into effect the beginning of 25. And so we have been in discussions all throughout probably the last three to four months. and working with customers to get new pricing that will go into effect on 1.1. And as I mentioned in my prepared comments, over 80% of our booked business, we have come to agreement with. those customers and have passed on the increases that we have seen. as well as a little bit beyond that that'll go into effect Jan 1. We have a little bit little bit of business left here to wrap up over the next couple of weeks which we expect to be able to do but similar to what we saw back in that again 22 23 time frame where we were under pressure with significant cost increases that came through as we were in that final year of that particular two-year contract run At that point in time, heading into, I think, 23, we were able to pass on significant price increases, one-one, started to see the benefits of that start to flow through immediately, essentially. And we'll be in that position again, from a PC standpoint, as we've been We enter 27. You know, RPS, most of that business is long-term contract-oriented. There are escalators in those contracts that enable us to, pass on some cost increases.

And we'll be able to do that. It'll be at a much lower level than what we'll see in performance chemicals. But that will go into effect here as we turn the calendar. In UIP, there's a split between contractual business and spot business as well. We'll be working through that on the spot business, just essentially monitoring the competitive situation and obviously passing on what we can. And while, you know, contractual business comes up, obviously working cost increases into new pricing on a go-forward basis. And finally, CM&C. CM&C is an interesting one because where we have been hit the hardest in CM&C has been through some interesting anomalies that have worked to our favor in the past, but unfortunately in 26 have been working against us.

And that is the timing of the cost increases that we might see based upon certain indices versus our ability to pass them through based upon other indices. And it's primarily actually in our international business. And we're waiting for some of that stuff to step up. and we could see some impact early into next year, but it has been volatile throughout this year and we have been caught on the wrong side of that curve. We have been there before, except again on the plus side, and we know things will work their way out here as we go into 26, but that one is a little bit uncertain. So from an overall price increase standpoint, we're extremely confident on the PC piece, almost have all of that in hand. UIP will happen throughout the year. RPS will get a little bit at the beginning.

And then CM&C could get a little bit at the beginning, and we'll just have to see how the year goes on. I would like to think that we're about in as a worst position we can be in from a price versus cost standpoint on CM&C. Okay. And that things can only get better, but obviously, you know, we don't exactly know where that will settle out as we continue to move forward. Okay.

Gary Prestopino

Okay, that's really helpful. Thank you. And then just lastly, the Florence plant, you've idled that. Is that idled or permanently closed?.

Leroy M. Ball

We are in the process of idling it. We're not quite through the process fully through the treating yet. It'll finish up here likely at the end of this month. Definitely by the end of this year, we'll still have product to ship out. through at least part of 2027, and then it will go into idle status. So we, at this point in time, have not made a decision to permanently close it. It will be idled for the time being. Okay. Thank you very much. You're welcome.

Thank you. Yes.

Operator

The next question is from Liam Burke with B. Riley. Please go ahead.

Liam Burke

Thank you. Good morning, Leroy. Good morning, Eric. Morning. Leroy, talk about PC. I just had a couple of questions on that. You talked about recovering market share. Now, the past market share losses were almost dictated by the major customer. What you're suggesting is that customers come back and say, you know what, I would prefer to go to more concentrated services. performance chemical rather than the competitor that you lost the share to?.

Leroy M. Ball

I certainly don't want to speak for our customers. I'll just say we did have a significant share loss heading into 25, Getting into 26, we were able to recover some of that. And, you know, I'd like to, again, I'd like to think that was due to, you know, our performance. and focused attention on our customer service needs. There was a piece that we also were able to continue to grow from a share standpoint on the industrial side, which is different because we didn't really lose anything there. We have systematically grown our industrial market share over the past three to four years. Heading into 27, we're going to see some additional growth on the industrial side. We already have some of that booked.

We know that. As it relates to the residential side, you know, our expectation at the book of business that we have. And there could be a potential to pick up a little more than that, but we don't see at the moment substantial market share changes on the residential side heading into 27. But we do see a retention of what we have, maybe a little bit of growth there on the share side. And like I said, in the industrial side, we have grown it over the last three to four years and already have some additional growth booked on the market share side for industrial heading into 2017.

Liam Burke

Okay, just a quick follow-up, because you did bring in industrial, which was part of my next question was, is that beginning, I mean, PC, even on the discussion today, it was primarily residential. Is industrial creeping in to start moving the needle here? Yes.

Leroy M. Ball

It's not a needle mover at this point in time, Liam. It's a nice business to have, it's helpful. But the residential business in that particular segment, it is the lion's share of the business. It is the driver of the business. The industrial is helpful and it's good business to have, but at the end of the day, it will not be our savior. We need a strong residential market, which we haven't had in a number of years at this point in time. So that's the thing I continue to fall back on and say, look, this business has actually performed well through a down part of the cycle.

And we continue to put it in a strong position that when we do see it. an improvement in the residential side, we're going to see a nice, I think, a nice bump up as a result of that additional volume. In the meantime, we're going to focus on everything we can to continue to contain costs. work on next gen products that we can introduce that will be helpful to our customers and, uh, and put ourselves, uh, and be ready to go whenever the market does pick out, uh, pick back up. Cool.

Liam Burke

And then on RUP, obviously the EBITDA margins were down considerably year over year. Does that reflect both higher input costs and price concessions to the class ones?.

Leroy M. Ball

It does, and I'm going to make a comment and I'll toss it to Eric to provide some commentary there too. I want to say, you know, look, we have utility and rail in the Rups segment. You know, UIP or utility businesses actually expanded its gross margins year over year. That's not getting shown, obviously, through that segment profitability. So it is the smallest piece of our overall portfolio, but we're performing well overall on the utility side. And RUPS has been more challenged. We just haven't been able to get costs out as fast as we would like.

But I'm going to let Eric comment on that piece.

Eric Brenner

Yes, I think it's a really good summary. With UIP, we are definitely growing gross margin there year over year, and that's through higher volume, favorable product mix, and being very diligent on the cost side. In the rail part of the business, it is a little bit of a customer mix. as well as the deliberate price concessions that we made to secure volume this year and going into next year. As we look to idle Florence and those costs will come out going into 27. So it was a conscious decision to secure the volume so that we could plan and execute our network optimization. We are seeing higher cost in rail, but the cost impact that we refer to throughout our slides and material today, it's much larger in the PC and the CMC businesses. Great. Thank you very much. Appreciate it, Eric.

Thanks, Lee. Thanks, Liam.

Operator

The next question is from Michael Matheson with Sidoti & Company. Please go ahead.

Michael Mathison

Good morning, you guys. Congratulations on the free cash flow. Thank you. Turning to the CapEx part of free cash flow, I noticed your guidance is down another 5 million versus the prior forecast. extending a long-term decline. Do you feel that this new level of CapEx is sustainable at that level? Is that the new normal, or does it need to rebound at some point?.

Leroy M. Ball

And maybe that's part of, again, a misperception on our capital needs going forward, because we did have several years, I know, in the past five years where we were, you know, plus 100 million or just under 100 million, you know, We were going through a phase where we were building out some capabilities in different parts of the business. We have, as we stated several times, no near-term large capital requirements. we you know we're still sorting through whether we have whether we'll have a need to put some capital into to build out and strengthen our logistics on the CM&C side as we make this transition to Denmark. But on a long-term basis and going forward, I'll just say, looking at even next year, my expectation is that 50 would be the high watermark. There's a greater likelihood we'll be below 50. in 27. And I would say on a go-forward basis, under our current portfolio, you know, something in the 40 to 45 million range would be more of the ongoing capital requirements within our businesses.

Michael Mathison

Thank you. That's very helpful for modeling. Looking at how you're deploying capital, you're putting a lot into share repurchases, a lot into debt pay down. I kind of see sort of a 60-40 ratio more or less of repurchases versus pay down. Is that reflecting your ongoing priorities for how you'll be deploying capital?.

Leroy M. Ball

I think we, you know, I think our expectation is by the end of the year we might be closer to 50-50 there, but, you know, We believe, again, based upon our cash generation and that's on a go-forward basis, that our share price remains at a very attractive level. With the response and reaction to the news today, it only further solidifies that. over the next three years, right, at the pace that we have talked about, which we have not moved off of, of at least 100 million a year, we'll generate over the next three years, that'll represent close to half of our market cap, which for us creates an opportunity to continue to repurchase shares at an attractive price. At the same time, we do want to reduce our leverage. And so there will be a healthy amount that will get directed towards debt reduction as well. And as we see EBITDA, you know, begin to move back up, um, we'll get the benefit both of a reduction in debt as well as an increase in EBITDA that'll work to get our leverage down into the long-term range that we've been talking about for some time now. So I don't see our capital deployment uh, philosophy really changing. The only thing that obviously we haven't talked a lot about is, you know, what might be out there on the, on the, uh, acquisition front, which we continue to, to look at different things.

Um, you know both in the UIP space as well as in the performance chemicals space And we'll continue to look and if there's something there, we'll be mindful of that. of that particular business, how it fits into our overall portfolio and the valuation metrics associated with it. I think Eric kind of went through that at our investor day in terms of how we view that, but that's the only other piece that I would say that we haven't given much discussion to, but it certainly is part of our... our thought process moving forward. Okay. Thank you, Mike. Thank you. That's very helpful, and that runs me out of questions. Thanks again.

Operator

The last question today is from Garvit Bhandari with Singular Research. Please go ahead.

Unknown Speaker

Yes, hi, good morning. Good morning. Firstly, yes, firstly on the PC segment, just wanted to, to understand a bit on the margins, the EBITDA margins for the segment were put down sequentially. So how should we think about margins going forward, particularly as the remaining copper hedges roll off?.

Eric Brenner

Yes, thank you for the question on the PC margins. Yes, we had peak margins of roughly 22% in Q2, and we did expect that to moderate to more normal levels in the second half of the year. Yes, we dropped to roughly 18%, and we would expect that to deteriorate a little bit further in the fourth quarter, primarily due to the higher raw material cost that we mentioned before in advance of those price increases going into effect for 2027. I think if you look back at the historical averages, we will kind of remain in that, and we're very focused on executing those price increases for 27 that fully cover the inflationary cost pressures that we saw across copper, the oil-related additives, and other logistics costs going into our materials.

Unknown Speaker

okay understood uh and then uh you've st i think you've stated in the previous call or in the past that you know the pc segment combined with the RUPS segment will contribute more than 85% of your sales by 2028. So just trying to understand would that primarily come from organic initiatives or do you expect some kind of portfolio actions or inorganic initiatives to be involved to take the combined segment to that level?.

Leroy M. Ball

Yes, I would say that we expect that to be primarily, right now, organic, right? So we have, again, opportunities to expand in both those businesses. At the same time, you know, CM&C, you know, depending upon where that particular business is at from an overall, you know, pricing and volume, standpoint could represent a smaller portion of the business. We also know that, yes, if we are going to do anything on the inorganic side, it's going to be in PC or UIP. And so there's no question that over the course of time, you know, those two areas pieces of our overall portfolio are going to continue to grow as a portion of the overall portfolio and throw rail into that mix. And I see that percentage continuing to grow and get larger as a portion of our overall sales. So I'd say we're We're pretty much on target as we sit here today and look out through the rest of the next couple of years. Okay. Yes, that's all from my side.

Thank you. Okay. Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to CEO Leroy Ball for any closing remarks.

Leroy M. Ball

Okay, thank you. I just want to thank everybody for taking the opportunity to join us today. We recognize the near-term challenges reflected in our updated outlook, but we also see the clear evidence that our strategy is working from record cash generation and growing contributions from Catalyst to the successful of our operating network. Our intentional shift to focus on building out our PC and utility businesses are showing merit as both businesses' profitability is up year over year. And as our pricing actions take hold and the structural improvements in our RPS and CMC businesses continue to build, we're confident in our ability to deliver stronger earnings, greater confidence in consistency and meaningful value for our shareholders in 2027 and beyond. Thank you. Look forward to talking to you again next quarter.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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