Koppers (NYSE:KOP) lowered its 2026 earnings outlook after rising raw material and freight costs outpaced the company’s ability to recover them through pricing, even as third-quarter sales grew and year-to-date cash flow reached a record.
The company reported third-quarter sales of $499 million, up 2.8% from a year earlier. Adjusted EBITDA fell 18% to $58 million, while adjusted earnings per share declined to $0.77 from $1.21. Adjusted EBITDA margin narrowed to 11.6% from 14.6%.
CEO and Chair Leroy Ball said increases in coal tar, copper, diesel, freight and other costs moved through the business faster than Koppers could offset them. The company expects pricing actions, particularly in its Performance Chemicals business, to begin taking effect in January 2027.
Lower earnings outlook, stronger cash flow
Koppers now forecasts 2026 adjusted EBITDA of $220 million to $225 million and adjusted earnings of $3.10 to $3.25 per share. The company expects sales of $1.9 billion and free cash flow of $115 million to $135 million.
The free cash flow forecast improved as Koppers reduced its expected capital spending by $5 million to approximately $50 million. During the first nine months of 2026, operating cash flow rose to a record $127 million from $77 million a year earlier, while free cash flow reached a record $92 million.
CFO and Treasurer Eric Brenner attributed the operating cash flow improvement primarily to better working capital performance and approximately $14 million in lower pension funding, partly offset by weaker underlying earnings. Working capital benefited from the timing of customer receipts and vendor payments, as well as lower inventory, he said.
Koppers paid down $34 million of debt and repurchased $51 million of shares in the first nine months. It ended September with $845 million in net debt and a net leverage ratio of 3.7 times, above its long-term target of two to three times.
Performance Chemicals growth offsets some pressure
Performance Chemicals sales increased by $18 million year over year, supported by 10% volume growth, primarily in the Americas. Adjusted EBITDA rose $4 million to $30 million as higher volume and better utilization outweighed approximately $5 million of higher raw material costs.
Ball said the business regained some residential market share lost in 2025 and continued to grow in industrial applications. He cautioned, however, that residential customers remain the segment’s largest driver and that industrial growth alone would not offset a weak residential market.
More than 80% of Performance Chemicals’ booked business has agreed to new pricing for 2027, Ball said. Brenner expects the segment’s adjusted EBITDA margin, which declined to roughly 18% in the third quarter from about 22% in the second, to weaken further in the fourth quarter before the price increases take effect.
In Railroad and Utility Products and Services, third-quarter sales were essentially unchanged from $233 million a year earlier. Higher crosstie volumes and a 5% increase in domestic utility pole volume were offset by lower pricing and the prior-year sale of a railroad services business. Segment adjusted EBITDA fell to $22 million from $29 million.
Ball said utility gross margins improved year over year, while rail profitability was pressured by price concessions made to secure crosstie volume. Koppers expects the wind-down of its Florence facility to improve network efficiency in 2027. Ball clarified that the facility is being idled, not permanently closed, and that product shipments are expected to continue through at least part of 2027.
Stickney transition and 2027 plans
Carbon Materials and Chemicals faced the largest concentration of cost pressures. Its adjusted EBITDA fell to $6 million from $16 million, with higher raw material costs accounting for a $9 million year-over-year impact. Lower utilization and transition costs associated with the Stickney facility also weighed on results.
Koppers ended distillation at Stickney on September 30 and stopped remaining chemical production in October. The company continues to expect the initiative to generate annual adjusted EBITDA benefits of approximately $15 million to $20 million and reduce future capital spending requirements.
Ball said the company’s Catalyst transformation delivered $42 million in year-over-year benefits through September. He expects pricing and structural improvements to support significant earnings improvement in 2027, though he noted that the timing of cost recovery in Carbon Materials and Chemicals remains uncertain.
Asked about capital spending, Ball said he expects $50 million to be the high end for 2027 and sees ongoing requirements of roughly $40 million to $45 million under the current portfolio. The company is still evaluating whether it needs additional investment in logistics as it shifts production to Denmark.
About Koppers (NYSE:KOP)
Koppers Holdings Inc (NYSE:KOP) is a global provider of treated wood products, carbon compounds and performance chemicals. The company serves infrastructure, industrial and utility markets with products designed to preserve, protect and extend the service life of wood and other materials.
Koppers operates through two primary business areas: Railroad and Utility Products and Services, and Performance Chemicals. Its offerings include treated railroad crossties, utility poles, pilings and other wood products, as well as wood preservatives and related treatment services.
