Koppers (KOP) Q1 2026 Earnings Transcript

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Date

Friday, May 8, 2026 at 11 a.m. ET

Call participants

• Chief Executive Officer and Chair — Leroy Ball
• Interim Chief Financial Officer and Chief Accounting Officer — Brad Pearce
• Vice President of Investor Relations — Quynh McGuire

Takeaways

• Stickney facility closure -- Koppers Holdings (NYSE:KOP) conditionally announced an immediate wind-down of production at its Stickney, Illinois facility, targeting cessation of distillation by year-end, subject to union bargaining obligations.
• Stickney financial impact -- The discontinuation is expected to result in $227 million to $262 million in pre-tax charges through 2029, including $170 million to $195 million of non-cash charges in the current year’s second and third quarters, and $57 million to $67 million in cash charges over three years.
• Stickney-related free cash flow -- The closure is projected to generate $15 million to $25 million in annualized operating and capital cash benefits, with adjusted EBITDA savings reaching an annual run rate of $15 million to $20 million and 75 to 100 basis points of margin accretion by 2027.
• Consolidated Q1 sales -- Sales totaled $455 million, flat compared to the prior-year quarter.
• Segment sales dynamics -- RUPS sales decreased $15 million (6%), PC sales increased $21 million (18%), and CMC sales declined $7 million (7%).
• Adjusted EBITDA and margin -- Adjusted EBITDA was $49 million, equating to a 10.8% margin; by segment: RUPS $23 million (10.3%), PC $26 million (18%), and CMC $1 million (1%).
• Adjusted earnings per share -- Adjusted EPS was $0.57 for the quarter.
• Record cash generation -- Operating cash flow reached a record $46.3 million, and free cash flow $34.9 million, with trailing twelve-month figures at $192 million and $139 million, respectively.
• Capital allocation -- $11.4 million in capital expenditures, $29 million in share repurchases, and $1.9 million in dividends were executed, with debt levels stable versus December 2025.
• Dividend policy -- The Board declared a quarterly dividend of $0.09 per share, up 12.5% from the prior year, resulting in an implied annual dividend of $0.36 per share for 2026.
• Liquidity & leverage -- Available liquidity as of March 31 was $386 million, with net debt of $877 million and a net leverage ratio of 3.5 times; management reaffirmed a net leverage target of 2-3 times.
• 2026 sales and EBITDA guidance -- Consolidated sales guidance held at $1.9 billion to $2.0 billion, with adjusted EBITDA forecast reduced to $240 million to $260 million (previously $250 million to $270 million) owing to higher oil prices; 2025 adjusted EBITDA was $257 million.
• 2026 adjusted EPS outlook -- Projected at $3.80 to $4.60 per share, compared with $4.70 in 2025, with improvement driven largely by lower interest expense and share count reduction.
• Performance chemicals segment -- Sales climbed 18% on a 15% volume increase, comprised of 9% market share gains and 6% customer inventory build, with adjusted EBITDA rising to $26 million.
• CMC segment weakness -- Sales fell 7%, with adjusted EBITDA of $1 million versus $10 million prior year, reflecting lower volumes and pricing, continued market turmoil, and higher raw material costs.
• Catalyst transformation program -- Q1 realized $14 million in benefits across business segments; cumulative target is at least $90 million by 2028, with $30 million to $40 million expected in 2026.

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Risks

• The war in the Middle East and resulting rise in oil prices led to an estimated $10 million unmitigated impact on 2026 earnings and triggered a $10 million downward revision in adjusted EBITDA guidance.
• The CMC segment’s market remained "in turmoil," hitting the lowest point since 2016, with "rapidly escalating raw material costs" and further revenue and EBITDA guidance reductions for the year.
• Closure of the Stickney facility initiates substantial cash and non-cash charges totaling $227 million to $262 million through 2029, with anticipated impact on employees and near-term financial results due to "significant future capital requirements" and persistent "reliability issues."
• Performance Chemicals faces "more working against us than for us right now," with a net cost exposure of $5 million to $10 million due to tariffs, fuel, and copper volatility, requiring "at least $50 million in price adjustments in 2027" to recover input cost increases.

Summary

Koppers Holdings disclosed a conditional plan to cease operations at the Stickney, Illinois facility, a decision set to bring sizable restructuring costs but also projected to deliver substantial annual cost and cash savings approaching 2027. Management simultaneously reported record first-quarter operating and free cash flow, confirmed a $29 million share repurchase for the period, and announced an increased quarterly dividend rate. Updated consolidated sales guidance remains at $1.9 billion to $2.0 billion for the year, but adjusted EBITDA guidance was cut by $10 million due to oil-driven cost pressures stemming from the Middle East conflict. The Catalyst transformation program delivered $14 million of realized Q1 benefits and is on track to achieve at least $90 million over three years.

• Leroy Ball explained, "conditional decision impacting approximately 85 employees was driven by the continued challenging market conditions that have persisted for well over a decade."
• Management is targeting "We have talked about one of our transformation target goals being at a 15% or greater EBITDA margin from an overall company standpoint," company-wide and expects the CMC segment to align with this goal after Stickney’s closure.
• Segment performance diverged, with Performance Chemicals reporting "a healthy 15% top-line gain from volume," while CMC earnings collapsed to near break-even amid "lower sales prices and higher operating and raw material costs."
• Additional Catalyst initiatives are forecast to drive $30 million to $40 million in 2026 benefits, supporting multi-year EBITDA and free cash flow objectives that would shift the business mix toward higher-margin segments.

Industry glossary

• RUPS: Railroad and Utility Products and Services segment; provides crossties, utility poles, and related railroad infrastructure solutions.
• PC: Performance Chemicals segment; develops and sells copper-based wood preservatives and fire-retardant chemicals for wood products and construction.
• CMC: Carbon Materials and Chemicals segment; produces creosote, carbon pitch, naphthalene, phthalic anhydride, and carbon black feedstock for multiple industrial applications.
• Catalyst: Company’s transformation program aimed at driving operational efficiency, margin expansion, and strategic repositioning for 2025–2028.
• Zero Harm: Koppers Holdings’ global safety initiative aimed at achieving zero workplace injuries.
• Creosote: A distillate from coal tar used for wood preservation and as a chemical feedstock.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain non-recurring or non-operational items.

Full Conference Call Transcript

Quynh McGuire: Thanks, and good morning. I am Quynh McGuire, Vice President of Investor Relations. Welcome to our first quarter 2026 earnings conference call. We issued our press release earlier today; you can access it via our website at coppers.com. As indicated in our announcement, we have 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 06/08/2026. At this time, I would like to direct your attention to our forward-looking disclosure statement seen on Slide 2.

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 Holdings Inc., and Brad Pearce, Interim Chief Financial Officer and Chief Accounting Officer. At this time, I will turn the discussion over to Leroy.

Leroy Ball: Thank you, Quynh. Good morning, everyone. I am pleased to join you today to provide more insight on Koppers Holdings Inc.’s performance in 2026 as well as provide an update on how we are progressing towards our 2028 transformation targets. Let me start with our major news from this morning. At the present moment, I am in Chicago, where just a few hours ago I delivered the unfortunate news to our workforce here of our conditional decision to begin immediately winding down production at our Stickney, Illinois facility with a target to cease distillation by the end of this year.

I note that I am using the word “conditional” because the decision is subject to the satisfaction of any bargaining obligations that might exist with the union representing certain employees at the facility. As outlined on page 4, this conditional decision impacting approximately 85 employees was driven by the continued challenging market conditions that have persisted for well over a decade. When we made the decision to close our other two U.S. facilities for CMC in 2016, approximately 565 thousand metric tons of coal tar were being produced and readily available in North America.

After the most recent coke plant closure we announced earlier this year at Algoma Steel, the number has now dropped to 350 thousand metric tons, simultaneously putting pressure on raw material pricing and reducing our throughput. This has resulted in higher unit costs, which have not been able to be fully recovered in the form of higher pricing. Adding to the mix is that despite having spent over $100 million in capital at Stickney over the past five years, which is a multiple of the spending at any other Koppers Holdings Inc. site, we still find ourselves dealing with reliability issues, which means we would still have significant future capital requirements to address aging equipment.

This is not a people issue, as the team at Stickney has done heroic work over the past ten years to try to get us to a better place, and I sincerely thank them for their efforts. But the bottom line remains that we feel we have done everything we can to make this operation viable, and we just do not see a credible path to get there. At this time, we are tentatively targeting 2027 for shifting production to our coal tar distillation facility in Nyborg, Denmark.

In the meantime, we have further strengthened the supply chain from Nyborg to the U.S. through expanded shipping and terminal capabilities in order to ensure an effective transition for existing pitch and creosote customers. We anticipate investing between $10 million to $15 million to further strengthen that supply chain over the next few years, which can be done while staying within our annual $55 million maintenance CapEx as capital is freed up from Stickney.

The discontinuation of production activities at Stickney is anticipated to result in pre-tax charges to earnings of $227 million to $262 million through 2029, which includes $170 million to $195 million of non-cash charges projected to be recorded in the second and third quarters of this year. Cash closure charges of $57 million to $67 million will be spent over a three-year period beginning in 2026. These charges will be funded by the operating and capital cash benefits generated by this action, which are expected to total $15 million to $25 million on an annualized basis and therefore will have little impact on our near-term free cash flow projections except for timing.

At the same time, the longer-term result of this move will be significantly accretive to free cash flow. We are estimating that the adjusted EBITDA savings related to this action will reach an annual run rate of $15 million to $20 million in 2027 and beyond, which would result in a 75 to 100 basis point bump in adjusted EBITDA margin. Translating the adjusted EBITDA benefit to adjusted EPS would result in an increase of $1.00 to $1.20 per share. We also anticipate $8 million to $15 million in reduced future annual capital expenditures. I again want to thank our Stickney employees for their continued hard work and determination while operating under persistently tough circumstances.

I understand that this situation is incredibly difficult and will have a real impact on our employees and their families, which we will make every effort to minimize. Our priority is to provide the support and assistance needed to help the employees navigate any transition as we map out the future of our CMC business. Now let us move on to page 5, which outlines our results for the first quarter, including adjusted EBITDA of $49.3 million, which is a 10.8% adjusted EBITDA margin. We had operating profit of $22 million and $0.57 in adjusted earnings per share.

We generated operating cash flow of $46.3 million and free cash flow of $34.9 million, both cash flow metrics representing a first-quarter record. On a trailing twelve-month basis, operating cash flow of $192 million and free cash flow of $139 million also represent new highs. Capital expenditures, net of insurance proceeds and sale of assets for the quarter, were $11.4 million, and we also deployed $29 million in share repurchases and $1.9 million in dividends while keeping total debt consistent with December 2025. Now let us move on to our Zero Harm accomplishments, as seen on page 6. Thanks to the commitment of our worldwide team, 30 of our 40 sites were accident-free in the first quarter.

Our European CMC and PC businesses, as well as our Australasian PC and CMC businesses, had zero recordables in the first quarter. Leading activities, a key contributor to our serious safety incidents, took a step back compared with the prior-year quarter; however, our recordable injury rate improved from prior year. The objective of Zero Harm is to constantly focus on what is most important, the health and safety of our team members, and we will never lose sight of our goal of zero by reinforcing the foundational elements of the safety culture, deploying additional tools and training, and driving environmental improvements in 2026 and beyond.

Turning to page 8, we issued our 2025 annual report and 2026 proxy statement, which are available on the Koppers Holdings Inc. website. For more information, please use the QR codes to access these materials. As shown on page 9, Koppers Holdings Inc. gained additional recognition by being named to Newsweek’s 300-member listing of America’s Most Charitable Companies for 2026. This honor reflects our employees’ ongoing commitment to volunteerism and our corporate support of community initiatives and causes. It joins previous recognition of Koppers Holdings Inc. as one of Newsweek’s America’s Most Responsible Companies, USA TODAY’s America’s Climate Leaders list, and TIME’s America’s Best Midsize Companies.

On March 30, our leadership team joined me to ring the closing bell on the New York Stock Exchange, celebrating 20 years of Koppers Holdings Inc. as a publicly traded company, as seen on page 10. In addition, I participated in an interview on the financial news program Taking Stock to share the story of our continuing path to sustainable profitability for our customers. Moving on to page 11, Koppers Holdings Inc. will be hosting an Investor Day on Thursday, September 17 in Atlanta. On September 16, the prior day, we will be conducting a tour of our research and development lab of our Performance Chemicals business.

On Wednesday evening, the Koppers Holdings Inc. executive team will also host a meet-and-greet reception. Look for more details in the months to come. In the meantime, please mark your calendars and plan to join us for our Investor Day and related activities. I will return in a bit to provide my view on how we are seeing the current year within each business while also reviewing our outlook for the remainder of 2026. For now, I am going to turn it over to Brad to speak in more detail on our first quarter financial performance. Brad?

Brad Pearce: My remarks today are based on the information in our press release. As seen on Slide 13, reported consolidated first-quarter sales of $455 million were essentially flat compared with prior-year sales. Relative to the prior-year quarter, RUPS sales decreased by $15 million, or 6%. PC sales were up $21 million, or 18%, and CMC sales decreased by $7 million, or 7%. On Slide 14, adjusted EBITDA for the first quarter was $49 million, representing a 10.8% EBITDA margin on sales, compared with $56 million and 12.2% in the prior-year quarter.

By segment, RUPS generated adjusted EBITDA of $23 million, or a 10.3% EBITDA margin; PC generated adjusted EBITDA of $26 million, or an 18% EBITDA margin; and CMC reported adjusted EBITDA of $1 million, or a 1% EBITDA margin. Turning to the RUPS business, Slide 15 shows first-quarter sales of $220 million compared with $235 million in the prior-year quarter. Of the $15 million change in sales, approximately $10 million of the decrease came from the Railroad Structures business that we sold in 2025. The remaining decrease in sales can be attributed to customer mix and price decreases in our Class I crosstie business and lower activity in the Maintenance of Way businesses.

These factors were partly offset by volume increases in our domestic utility pole business, higher commercial volumes, and $1.4 million in favorable foreign currency changes compared with the prior-year period, mostly attributed to our Australian utility pole business. RUPS delivered adjusted EBITDA of $23 million compared with $26 million in the prior year due to lower sales and lower sales volumes. Turning to Slide 16, our Performance Chemicals business reported first-quarter sales of $142 million, up from $121 million in the prior-year quarter. This increase was primarily due to a 15% volume increase, higher sales activity primarily in the Americas, and $2.7 million in favorable foreign currency changes from international companies.

Adjusted EBITDA for PC increased to $26 million versus $20 million in the prior-year quarter. Profitability benefited from higher sales volumes and higher prices, partly offset by $2.4 million of higher raw material and operating costs. Slide 17 shows that sales in the first quarter for our CMC business were $93 million, compared to $101 million in the prior-year quarter. This decrease was primarily driven by $14 million of lower volumes related to our phthalic anhydride business, which was discontinued in 2025, and lower sales prices across most products, especially carbon pitch, which was down 9% globally.

These were partly offset by volume increases in carbon pitch, naphthalene, and carbon black feedstock, as well as $7.6 million in favorable foreign currency changes from international companies. Adjusted EBITDA for CMC in the first quarter was $1 million compared with $10 million in the prior-year quarter due to lower sales prices and higher operating and raw material costs, partly offset by operating cost savings associated with discontinuing the phthalic anhydride business. Compared with 2025, the average pricing of major products was lower by 11% while average coal tar costs were slightly higher. As shown on Slide 19, we continue to pursue a balanced approach to capital allocation in terms of investments to position the company for the future.

We spent $11.4 million in the first quarter for capital expenditures. We are anticipating a total of $55 million in gross capital spending for the full year of 2026. Our share buyback activity in the first quarter totaled approximately $29 million, including those associated with tax withholding from our incentive stock plans. We have approximately $45 million remaining on our $100 million repurchase authorization. We also continue to return capital to shareholders through our quarterly dividend of $0.09 per share. At March 31, we had $386 million in available liquidity and $877 million of net debt, representing a net leverage ratio of 3.5 times.

We remain focused on our long-term goal of reducing the net leverage ratio to 2 to 3 times. Slide 20 provides additional detail on our total capital expenditures for the first quarter of just over $11 million. We deployed approximately $7 million to maintenance capital spending, with the remaining balance allocated to Zero Harm initiatives and growth and productivity projects. Capital expenditures were approximately $5 million for RUPS and $3 million for both PC and CMC. As highlighted on Slide 21, the Board of Directors declared a quarterly cash dividend on May 7 of $0.09 per share, reflecting a 12.5% increase from the prior year.

The dividend will be paid on June 15 to shareholders of record as of the close of trading on May 29. While future dividends are subject to ongoing Board approval, maintaining a quarterly dividend at this rate will result in an annual dividend of $0.36 per share for 2026. With that, I will turn it back over to Leroy.

Leroy Ball: Thank you, Brad. I will now review the market outlook for each of our businesses, starting with Performance Chemicals on Page 23. Despite a number of different headwinds on demand, such as the Middle East conflict, higher mortgage rates, lower housing turnover, and general inflationary pressures, our PC business still posted a healthy 15% top-line gain from volume in Q1. As we expected, the gains came from market share growth of about 9% and customer inventory build added about 6%, while organic volumes were mostly flat.

Through Q1, that puts us reasonably on track to likely exceed our expected top-line increase of 11% as the inventory build will continue through Q2 and then taper off; however, we will only begin hitting our run rate for market share growth in Q2 as we finish the remaining plant conversions. As I mentioned, most external markers that drive the health of this business, such as mortgage rates, housing turnover, and repair and remodeling spending, are still lagging. But the recent move from our customers is more than it has been in some time that a recovery may be around the corner. We are discounting that optimism for now until we begin seeing it in the numbers.

As a result, we are still forecasting flat demand on the base residential business, with a mid–single-digit volume increase expected for our Industrial Products segment as driven by growth in utility pole demand. On the cost side of the equation, there is a lot of noise in the system between potential ITC tariff recoveries, net exposure to the across-the-board 10% tariffs that were put in place in response to the EPA ruling, higher fuel costs from the spike in oil, and copper volatility. I would say we have more working against us than for us right now.

With what amounts to a $5 million to $10 million current net exposure, our procurement team has been working hard to offset it by negotiating better pricing in certain materials, while our commercial team has been preparing to implement fuel surcharges. Copper has continued to hold its lofty pricing with modest periodic corrections, but it looks like mid- to high-$5 per pound copper is likely the new low water mark and we are now above the $6 threshold. That is going to require at least $50 million in price adjustments in 2027 to recover that increase.

In summary, PC has gotten off to a strong start, giving us confidence to move our sales projection up slightly from our initial view of the year while holding our EBITDA projection where it was, as those additional sales get offset by a net cost increase. That is contingent on base residential volumes holding steady, and our ability to mitigate some of our cost exposure via pricing pass-throughs and other cost reductions. Moving on to our Utility and Industrial Products business, shown on page 24, market sentiment remains bullish for all the reasons we have continued to talk about, which include increasing electrical demand related to buildout of AI infrastructure, crypto mining, EV development, and new manufacturing.

Our first-quarter sales increased by 12% due to volume, reflecting that bullishness, with 3% of that 12% resulting from the December 2025 acquisition of our Doug fir supply chain. In our targeted underserved regions, we grew volumes by 9% coming off growth in 2025 of 17%. Market demand remains concentrated on a limited range of pole sizes, and this has put pressure on fiber sourcing and driven up raw material costs, which we are working to recoup to return margins to our long-term target.

We expect some cost relief on the whitewood side when our peeler in Leesville, which was damaged by fire last September, comes back online, which will enable us to bring more peeling capacity back in-house and lower our third-party costs. As mentioned earlier, our Doug fir acquisition is showing early dividends by increasing our access to this important fiber, enabling us to better compete for previously unavailable business. On the flip side, the Southern Yellow Pine market is under pressure due to closures of pulp and paper mills and lumber mills, as well as fires that destroyed tracts of timber in the Southeast.

With sales volume strong and pricing relatively flat, we have more work to do to bring costs into check. Getting the Leesville peeler back online will help, along with the consolidation of Vance production into Kennedy, which began in Q1 and should contribute $2 million in savings by year-end. We are experiencing higher costs for fuel and freight that we are working to pass on. Additional Catalyst initiatives—our transformation program launched in 2025—are expected to generate further cost savings, which will help to overcome the additional corporate cost allocations that have been shifted to UIP this year and enable our pole business to contribute to the year-over-year EBITDA improvement projected for the RUPS segment.

The market outlook for our Railroad Products and Services business is summarized on page 25. Our Q1 top line was down compared to prior year despite crossties sold being consistent with prior year. After adjusting for the sale of our KRS business last August, the main driver of our revenue decline was an unfavorable mix, with lower pricing having a smaller impact. We had a greater proportion of treatment-service-only sales in Q1 compared to prior year, combined with lower green tie purchases and black tie shipments. The severe winter storms that hit much of the country in Q1 knocked our plants offline for a number of days.

This impacted production and shipping, which we began making up in March, but uneven customer car flow in and out of our plants also had an impact. Our customers have pledged to work on improving that situation, which should enable us to catch up as the year goes on. While we have had a few customers pull back on their demand for the year, most of it was known as we entered 2026, and a few others increasing demand are expected to more than offset the other railroad reductions. Commercial backlog remains as strong as ever, delivering 3% higher sales in Q1.

The price reductions we exchanged for growing our piece of a smaller market this year will be made up through the year as we work to idle the Florence, South Carolina facility by October. We also continue to relentlessly go after costs, with Q1 representing the eighth consecutive quarter of reduced operating expense and direct SG&A compared to the prior-year quarter. While we expect to be in good shape from a demand standpoint this year, the overall lower industry demand is wreaking havoc on sawmills, resulting in reduced production and widespread mill closures.

I mentioned our strong cash quarter during my earlier comments, while our RPS business led the way in that area with stellar working capital management, holding inventory in check during a period where we usually see a build. While we still expect strong sales in both RPS and UIP for the year, we are incorporating more of an unfavorable mix into our forecast for the year, also baking in some of the impact from higher oil. This is bringing our revenue projections down by $10 million on both the top and bottom end of our range, as well as bringing our EBITDA projections down proportionally. The outlook for our CMC business is summarized on page 26.

Overall, the market continues to be in turmoil, with Q1 results reaching their lowest point since the beginning of our major restructuring efforts in 2016. The war in the Middle East, which began two days after our last earnings call, has only made the situation in this business more challenging as oil price shocks have resulted in rapidly escalating raw material costs. As higher oil prices hold, we will be playing catch-up over the next couple of quarters regarding passing on higher pricing. This is estimated to have a $5 million impact on CMC over the remainder of the year, in addition to the $1 million impact it had on Q1 for this segment.

On the plus side, this could potentially create some market opportunity for Australian, European, and North American aluminum producers to fill the void of Middle East aluminum producers and will likely create an opportunity of more sales for Koppers Holdings Inc. The continued uncertainty in the carbon products markets only highlights the necessity to take a major action, which we are doing by ceasing production at our Stickney site. There is no need to repeat all the financial details I previously mentioned, but they are once again outlined on page 26 and speak for themselves.

Once we felt comfortable that we had the capacity to reliably absorb the U.S. volume in Denmark and could beef up our logistics assets to further improve reliability, it became a very unfortunate but obvious no-brainer to move forward with shifting production to Europe. While there are no celebrations at Koppers Holdings Inc. to commemorate this action, it is an unquestionable win for our shareholders. This action is expected to pay for itself over the next few years while improving earnings and long-term cash flow significantly. In addition, by significantly strengthening our European operation, we increase the likelihood that weaker European competitors will eventually succumb to the challenging market conditions.

For this year, though, we are going to have to reduce both our revenue and EBITDA estimates for CMC due to impacts from higher oil and generally worse market conditions. As shown on page 27, we are a little over a year into our Catalyst transformation and executing successfully on many initiatives. In Q1, we realized $14 million of benefits spread across our business segments and corporate functions. In PC, the driver was market share growth and new products. In RUPS it was the plant consolidation at Vance and market share growth. For CMC and corporate it was procurement savings.

In addition, we are using Catalyst to improve our working capital discipline, delivering $16 million in benefits in Q1, driven primarily by inventory control in RPS. Adding the benefits from our Stickney announcement, we have now identified a minimum of $90 million of benefits to be realized from 2026 through 2028. Of that, we expect $30 million to $40 million of benefits in 2026, which is up by $10 million on the low end.

This puts us squarely on track to deliver on our 2028 goals of adjusted EBITDA greater than 15%, a three-year EPS CAGR of more than 10%, net leverage of lower than 2.5 times, a three-year free cash flow average of a minimum of $100 million, and our combined PC and RUPS segments making up 80% to 85% or more of our sales. The result of reaching those metrics should result in significant shareholder value creation. Moving on to page 29, our consolidated sales guidance remains at $1.9 billion to $2.0 billion in 2026 compared with $1.88 billion in 2025, with higher sales in PC and RUPS more than offsetting lower CMC sales.

The foundation of customer demand is proving to be solid four months into the year, especially for our PC and RUPS segments, as we have now turned the corner on PC market share loss from last year and are starting to see the needle move in the other direction. On Slide 30, we are lowering our adjusted EBITDA forecast to $240 million to $260 million in 2026 compared with $257 million in 2025. The major reason for shifting our previous range of guidance down by $10 million is the impact of higher oil across our entire enterprise. The war in the Middle East was not a variable we had contemplated when we communicated our 2026 guidance in February.

While we believe it is contained to less than 5% on our consolidated EBITDA, we believe it is prudent to incorporate it into current guidance at this point while the various other puts and takes are projected to offset each other. Slide 31 shows our adjusted earnings per share bridge, which reflects a range of $3.80 to $4.60 per share in 2026 compared with $4.70 in 2025. Year over year, that represents a 3% increase at the midpoint and a 13% increase at the high end. Most of our projected improvement is expected to come from lower interest expense and benefits from a lower share count.

On Slide 32, we now expect an even higher jump in both operating cash flow and free cash flow this year. This will provide the most cash we have had for debt paydowns since 2020, when we received the cash proceeds from selling our KJCC business. Not only would operating cash flow and free cash flow represent new highs at these projected levels, but more importantly, 2026 will represent an inflection point for our step change in cash generation as we expect these new higher levels to become the norm.

Our current market cap equates to a 10% to 15% free cash flow yield and places Koppers Holdings Inc. at the top end of whatever industry you want to compare us to and provides several attractive options for how we deploy our excess cash. On Slide 33, in terms of capital spending, we continue to forecast $55 million for the year, consistent with $55 million spent in 2025. Currently, we are spending at a run rate lower than $55 million, but we will still likely spend at that rate for the year as we take dollars that we would have spent at Stickney this year and put them towards bulking up our logistics assets.

The foundation we have built over the past decade has set us up to create significant shareholder value over the next several years, and I am confident we will deliver. We still maintain leading shares in niche markets that utilize our essential products with low capital requirements going forward. Coupled with the unlocking of significant cash flow, we find ourselves in a strong position to deliver shareholder value in multiple ways. While today represents a difficult next step, I believe it is the right one for our customers, our team members at Koppers Holdings Inc., and our shareholders who have patiently hung in while we have methodically built a model that is built to last.

We will now open the call for questions.

Operator: Thank you. We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble the roster. The first question will come from Gary Prestopino with Barrington Research. Please go ahead.

Leroy Ball: Hi, good morning all. Hey, Gary—

Gary Prestopino: Throughout your narrative on what you are looking for going forward in a couple of your segments, you mentioned you have to get some price increases to offset some of these input increases. In the past, how successful have you been at driving those kinds of price increases, and what is generally the lag? How long does it usually take relative to where we are right now in the next cycle?

Leroy Ball: Yes, that is a good question. I think it varies and it varies depending upon business unit as well, but I would say for the most part we have been successful. There is a timing aspect to it. There have been some changes that we have made in some of our agreements, coming through COVID in that big inflationary environment that we were in, where we got caught for a period and were hamstrung in terms of being able to pass on some of these increases. We were able to make some changes in certain contracts that give us more flexibility to pass stuff on a little more currently.

Generally, as it relates to passing on fuel surcharges and those sorts of things, I think we have an ability to do that more or less currently, so there is little to no lag that needs to happen there. We have tried, with some of the larger relationships we have, to understand whether this stuff was going to be sustainable or short term, but we have obviously gotten to the point now where we are moving forward on trying to work with passing that on.

As it relates to some of the bigger issues in terms of impacts on raw materials that we know are going to linger for a bit, most of our contracts on the CMC side are at least a quarter to six months from being able to pass that on, which is why we talk about the impact we see more or less in the back half of the year that we will get to catch up on until we probably turn the page into either the fourth quarter or into 2027.

On the PC side, we tend to go through multi-year agreements and the latest cycle wraps up this year, so discussions will be happening in the back part of this year. Actually, discussions are currently happening about trying to give them some insight into where their overall cost structure looks at this point and what to expect. We will have more news on that as we get to the back half of the year. As we talk about often, we are mostly hedged for the biggest piece of that as it relates to copper, but there will be a reset on that as we head into next year.

We are also continuing to work on new products that can help minimize the amount of copper that needs to go in and/or retention rates, so there are all kinds of things that we are working on to try to mitigate and minimize the impact on our customer, hopefully put a few more dollars in their pockets as well as ours, and create more success for the industry.

It is a mixed bag, Gary, but bringing the guidance down by $10 million on both the top and bottom end of the range was our best attempt at, from an unmitigated standpoint, what we would expect for the year related to the oil impact, which is the biggest—other than copper, it is the biggest impact that we are currently facing on an ongoing basis. We feel pretty good that we have that captured there with a little opportunity for upside on pass-throughs.

Gary Prestopino: That is a good explanation. As it relates to what you are doing within the CMC business, I realize it is a difficult decision. It is always hard to tell people of a decision. Is it mostly cutting excess capacity—there just is not the end demand there—and by folding everything into Nyborg, you would expect that you would get more utilization of that facility and you can get your margins up that way? Is that how we should think about it?

Leroy Ball: It is another consolidation play, yes. We have excess capacity at Nyborg that has freed itself up over the past couple of years. At the same time, raw material availability in North America has come down. With what we have remaining here in North America, we found that we could comfortably fit that into our Nyborg operation and have very little incremental cost to do so. We could essentially source raw material from North America, process it there, and still serve the vast majority of our customer base here in North America, and cut out a significant level of fixed cost in the process. So it is a consolidation play.

Gary Prestopino: Thank you very much.

Operator: The next question will come from Liam Burke with B. Riley Securities.

Liam Burke: Thank you.

Leroy Ball: Good morning, Liam.

Liam Burke: With the shifting of production from Stickney to Nyborg, do you anticipate any competitive disadvantage? Having your in-house creosote for the coatings has been a competitive advantage. Does the greater distance affect that competitive advantage?

Leroy Ball: No, we do not believe so. That is really happening today. We already bring a significant amount of creosote into North America. With where the cost structure was at, we believe we will be able to actually improve the reliability of the supply chain because, while certainly distilling in Chicago is closer to your customers, there is no question, the aging equipment that we have there has created a host of reliability issues over the years. We would find ourselves scrambling at times despite the fact that we had operations right here. Nyborg is a beautiful facility, it has been incredibly well maintained, and we do not deal with those sorts of issues there.

Yes, you are extending the time to get product back and forth, but we are adding tank capacity here. We already have terminal setups and a fairly mature logistics operation that has been doing this for a while, and our competitor makes similar shipments back and forth across the pond as well. This is not unique, it is not new, and we believe it actually improves the reliability and competitiveness for us, which is a driver for making the decision.

Liam Burke: Great. On copper pricing, you have been able to increase prices to your customer with margin, or is that going to create a competitive pricing problem?

Leroy Ball: We will be pricing to market because we are not the only one in this situation. Our margins fluctuate; they range anywhere in that 17% to 22% range over time. We had one year where it fell below that—in 2022 or 2023—when we ate a lot of cost, and it was not necessarily on the copper side; it was on other raw material pieces that we were not able to pass through at that point in time. That was an anomaly. On occasion we have bumped above the 22% range. I see no reason why, going through this round, we will not end up somewhere in that range coming out of it.

We will have to be competitive, and we will be, while demonstrating to our customers our commitment to them and to the industry in terms of developing new products for them to take to market and helping them from a profitability standpoint. I think we are in a good position to maintain that 17% to 22% margin range overall.

Liam Burke: Great. Thank you, Leroy.

Leroy Ball: You are welcome, Liam. Thank you.

Operator: The next question will come from Michael Mathison with Sidoti & Company. Please go ahead.

Michael Mathison: Congratulations on the quarter—you guys were very impressive. Just turning to my questions, you mentioned a $10 million impact this year from the increase in oil prices, which of course fluctuate. They were down a lot the past few days. Is there a rule of thumb that we can use that if oil prices move by X, impact to Koppers Holdings Inc. is Y percent?

Leroy Ball: I wish it were that simple because there are so many tentacles to it that it is tough to put your finger on it with that level of precision. You can look at the current situation as a bit of a guide. With oil prices rising suddenly in February up into the $100 to over $100 per barrel range, we are saying that is going to have what we believe up to a $10 million unmitigated impact over the year. That gives you some sense in terms of that level of sensitivity.

We do have abilities to pass some of that on, to negotiate higher pricing, because these sorts of things do not just impact us; they impact our competition as well. It is not a situation where any of this is Koppers Holdings Inc.–specific. I believe we will get it back over a reasonable timeframe, and that is what we will work to do. Overall, I mentioned this number is going to be less than a 5% impact. It is meaningful to the numbers we gave out, but in the grand scheme of things, not necessarily so, and it is something that we will be able to pull back in over the next three to twelve months, I would say.

Michael Mathison: Fair enough. Turning to the future of the CMC business, if we look forward to 2027 after the planned shutdown at Stickney, is there an EBITDA margin target for CMC that you can share with us?

Leroy Ball: We have run those numbers internally, and I would say it would be in line with our overall consolidated margin target. We have talked about one of our transformation target goals being at a 15% or greater EBITDA margin from an overall company standpoint, and our expectation is that this particular business will be right around that number.

Michael Mathison: Perfect. Very helpful. Turning to PC, the sales growth there was especially striking. With flat overall market residential sales, what drove the market increase?

Leroy Ball: It was a stark change last year as we took a market share hit. We had talked in the back part of last year that we thought we had opportunities to win back some of that market share, and we were able to do that to some extent, while also picking up additional market share from some of our larger customers who still had a little bit of business out there with other suppliers. Through product development we had done, we were able to get them comfortable to make some conversions on plants that were not in our network and get them moved over.

On the industrial side, Tommy Kaiser and his team in PC have done a really good job of continuing to develop that business; it is in a nice, healthy spot right now too. Our sales team has consistently done a good job of building that customer and relationship network, and we have been successful more often in winning that business than losing it. You go through phases—we went through a good eight years of wins, and that just made us more vulnerable at some point that some business was going to move away, which happened last year.

We did a reset and have proven to our customer base that we understand they are incredibly important to us and it is our job to help them be more profitable and open doors for them to be successful, because their success is ultimately ours. We had signaled that near the end of last year, and now it is being put into action.

Michael Mathison: Thanks for the information, and good luck in the coming quarter.

Leroy Ball: You are very welcome. Thank you.

Operator: The final question will come from an Analyst with Singular Research. Please go ahead.

Analyst: Good afternoon, gentlemen. My question is with regards to all this volatility in commodity markets and inflationary pressure. What are you sensing with regards to your competitors? Are you finding any M&A activity opportunities as a result of all this volatility in the markets?

Leroy Ball: Yeah— that is a good question. Three of our four businesses hold such significant share that any sort of M&A consolidation activities for us in those businesses are really unlikely from an antitrust standpoint. It does not really matter at the end of the day as it relates to RPS and, for the most part, PC—certainly in North America—as well as CMC. UIP is a different animal and certainly we would have much more flexibility in terms of M&A in that space. We continue to keep up our relationships and have our conversations and see where they go.

There are a lot of companies, certainly on the smaller end, that are feeling the pinch, but there is nothing that we have to report at this moment as it relates to that. We continue to monitor and keep our eyes on it, and if something pops up, we will evaluate it. If it makes sense, we will do it. If it does not, we will pass and go on from there. It is really only one business—UIP—where we have that sort of opportunity as it relates to the core business.

Analyst: Thank you very much for that insight.

Leroy Ball: You are very welcome. 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 Ball: Thank you. I really appreciate everybody’s patience and hanging in. It has been a tough, hard-fought last year, but the company and our team continue to do an amazing job keeping their fellow teammates safe and keeping everybody focused on the bigger goals at hand. While today is an unfortunate and painful chapter in our history from a people standpoint, for shareholders it is clearly a win, and we are seeing that reflected in the market today. We look forward to continuing to execute on our plans and updating you in the future. Thank you, everybody, for tuning in today.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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