Koppers Holdings (KOP) Misses Q3 EPS by 22c, Offers Guidance

Koppers Holdings (NYSE: KOP) reported Q3 EPS of $1.01, $0.22 worse than the analyst estimate of $1.23. Revenue for the quarter came in at $424.8 million versus the consensus estimate of $445.97 million.

GUIDANCE:

Koppers Holdings sees FY2021 revenue of $1.7 billion, versus the consensus of $1.72 billion.

• Koppers remains committed to driving improvements through the execution of its strategic initiatives and making continued progress toward its long-term financial goals. Based on current global economic activity and in consideration of the near-term economic uncertainty associated with the pandemic, the company expects that 2021 sales will be approximately $1.7 billion. By comparison, sales were $1.67 billion in 2020, excluding Koppers (Jiangsu) Carbon Chemical Company Limited, which was sold on September 30, 2020. Koppers expects adjusted EBITDA will be approximately $220 million for 2021, compared with $211.0 million in the prior year.
• The effective tax rate for adjusted net income in 2021 is projected to be approximately 27 percent, compared to the tax rate in 2020, excluding certain income tax effects relating to non-recurring items, of 20.1 percent. The higher 2021 tax rate is primarily due to benefits in the prior year related to the federal Coronavirus Aid, Relief, and Economic Security Act and other tax regulations that are not expected to continue in 2021. Accordingly, the 2021 adjusted EPS is forecasted to be approximately $4.12, compared with adjusted EPS of $4.12 in the prior year. The higher tax rate anticipated in 2021 is estimated to have a negative impact on adjusted EPS of approximately $0.40 compared to the prior year.
• Koppers does not provide reconciliations of guidance for adjusted EBITDA and adjusted EPS to comparable GAAP measures, in reliance on the unreasonable efforts exception. Koppers is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include, but are not limited to, restructuring and impairment charges, acquisition-related costs, mark-to-market commodity hedging, and LIFO adjustments that are difficult to predict in advance in order to include in a GAAP estimate and may be significant.
• Koppers expects to invest $115 million to $120 million in capital expenditures in 2021. Net of cash received from the sale of closed properties and property insurance recoveries, Koppers expects its net investment in capital expenditures to be $80 million to $85 million.
• Commenting on the forecast, Mr. Ball said, "Higher uncovered costs and global macro supply chain inefficiencies combined to chip away at third quarter profitability. While these issues are not unique to Koppers, we are actively addressing them by implementing historic price increases in certain relevant business segments beyond the modest increases already made earlier this year. We believe that nagging supply chain issues related to unexplained production delays, clogged ports, rail delays and inefficiency, and trucking shortages will continue into next year. As such, we are deploying a number of measures to mitigate future short-term disruptions. Those measures, plus over $50 million in 2022 annualized price increases, should keep us solidly on the path of growing EBITDA by almost one third to $300 million by 2025."Koppers remains committed to driving improvements through the execution of its strategic initiatives and making continued progress toward its long-term financial goals. Based on current global economic activity and in consideration of the near-term economic uncertainty associated with the pandemic, the company expects that 2021 sales will be approximately $1.7 billion. By comparison, sales were $1.67 billion in 2020, excluding Koppers (Jiangsu) Carbon Chemical Company Limited, which was sold on September 30, 2020. Koppers expects adjusted EBITDA will be approximately $220 million for 2021, compared with $211.0 million in the prior year.
• The effective tax rate for adjusted net income in 2021 is projected to be approximately 27 percent, compared to the tax rate in 2020, excluding certain income tax effects relating to non-recurring items, of 20.1 percent. The higher 2021 tax rate is primarily due to benefits in the prior year related to the federal Coronavirus Aid, Relief, and Economic Security Act and other tax regulations that are not expected to continue in 2021. Accordingly, the 2021 adjusted EPS is forecasted to be approximately $4.12, compared with adjusted EPS of $4.12 in the prior year. The higher tax rate anticipated in 2021 is estimated to have a negative impact on adjusted EPS of approximately $0.40 compared to the prior year.
• Koppers does not provide reconciliations of guidance for adjusted EBITDA and adjusted EPS to comparable GAAP measures, in reliance on the unreasonable efforts exception. Koppers is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include, but are not limited to, restructuring and impairment charges, acquisition-related costs, mark-to-market commodity hedging, and LIFO adjustments that are difficult to predict in advance in order to include in a GAAP estimate and may be significant.
• Koppers expects to invest $115 million to $120 million in capital expenditures in 2021. Net of cash received from the sale of closed properties and property insurance recoveries, Koppers expects its net investment in capital expenditures to be $80 million to $85 million.
• Commenting on the forecast, Mr. Ball said, "Higher uncovered costs and global macro supply chain inefficiencies combined to chip away at third quarter profitability. While these issues are not unique to Koppers, we are actively addressing them by implementing historic price increases in certain relevant business segments beyond the modest increases already made earlier this year. We believe that nagging supply chain issues related to unexplained production delays, clogged ports, rail delays and inefficiency, and trucking shortages will continue into next year. As such, we are deploying a number of measures to mitigate future short-term disruptions. Those measures, plus over $50 million in 2022 annualized price increases, should keep us solidly on the path of growing EBITDA by almost one third to $300 million by 2025."

For earnings history and earnings-related data on Koppers Holdings (KOP) click here.

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