Koppers Holdings Stock

Koppers Holdings Inc. operates as an integrated global provider of treated wood products, wood preservation chemicals and carbon compounds.

The company's products and services are used in a variety of niche applications in a diverse range of end-markets, including the railroad, specialty chemical, utility, residential lumber, agriculture, aluminum, steel, rubber and construction industries. The company serves its customers through a comprehensive global manufacturing and distribution network, with manufacturing capabilities in North America, South America, Australasia and Europe.

Business Segments and Products

The company operates three principal business segments: Railroad and Utility Products and Services (RUPS), Performance Chemicals (PC) and Carbon Materials and Chemicals (CMC).

The company's three business segments command leading market positions. Through the company's RUPS business, the company is the largest supplier of railroad crossties to the Class I railroads in North America. Through the company's CMC business, the company is the largest global supplier of creosote to the North American railroad industry. Through the company's PC business, the company is the global leader in developing, manufacturing and marketing wood preservation chemicals and wood treatment technologies for use in the pressure treating of lumber for residential, industrial and agricultural applications.

The company's RUPS and CMC operations are, to a substantial extent, vertically integrated. Through the company's CMC business, the company processes coal tar into a variety of products, including creosote, which is an intermediate material necessary in the pressure treatment of wood crossties, other related railroad products and utility poles. The majority of the creosote the company produces in North America and Europe is sold internally to the company's RUPS business and consumed in the treating process.

The company's RUPS and PC operations are also vertically integrated. Through the company's PC business, the company produces a variety of products, including chromated copper arsenate (CCA) and dichloro-octyl-isothiazolinone (DCOI), which is used in the pressure treatment of utility poles and pilings. A portion of the CCA and DCOI the company produces in North America and a portion of the CCA the company produces in Australia is sold internally to the company's RUPS business for treating poles and pilings.

Railroad and Utility Products and Services

The company's RUPS business primarily sells pressure-treated railroad ties to the railroad industry in the United States and Canada and treated utility poles to utility markets in the eastern United States and Australia. Railroad products and services include procuring and treating items such as crossties, switch ties and various types of lumber used for railroad bridges and crossings. Utility products include the pressure treatment of transmission and distribution poles for electric and telephone utilities. In addition, the company provides untreated wood products and rail joint bars, which are steel bars used to join rails together for railroads, to the railroad markets and inspection services to the utility markets. The company also operates a railroad services business that conducts engineering, design, repair and inspection services for railroad bridges and a business related to the recovery of used crossties, serving the same customer base as the company's North American railroad business. The primary end-markets for RUPS are the North American railroad industry, which has an installed base of approximately 450 million wood crossties, and the U.S. and Australian utility industries, which utilize wooden distribution and transmission poles. Both crossties and utility poles require periodic replacement.

The RUPS business operates 18 wood treating plants and one rail joint bar manufacturing facility located throughout the United States, Canada and Australia. The company's network of plants is strategically located near timber suppliers to enable the company to access raw materials and service customers effectively. In addition, all of the company's crosstie treating plants are on the company's largest railroad customers' rail lines.

The company's RUPS business manufactures its primary products and sells them directly to the company's customers through long-term contracts and purchase orders negotiated by the company's regional sales personnel and coordinated through the company's marketing group at corporate headquarters.

In the United States, hardwood lumber for crossties is procured by the company from hundreds of small sawmills throughout the northeastern, midwestern and southern areas of the country. The crossties are shipped via rail car or trucked directly to one of the company's crosstie treating plants, all of which are on line with a major railroad. The crossties are either air-stacked for a period of six to nine months or artificially dried by a process called boultonizing. Once dried, the crossties are pressure treated with creosote, a product of the company's CMC business. A substantial portion of the company's crossties are treated with borate, which is purchased from PC, in combination with creosote.

The company is the largest supplier of railroad crossties to the Class I railroads in North America. The company has one principal competitor, Stella-Jones Inc., and several smaller regional competitors in the North American market.

The company's RUPS business' largest customer base is the North American Class I railroad market, which buys approximately 80 percent of all crossties produced in the United States and Canada. Approximately 75 percent of the company's North American Railroad Products and Services sales are under long-term contracts, and the company supplies all North American Class I railroads. The company also has relationships with many of the approximately 615 short-line and regional rail lines. This also forms the customer base for the company's rail joint bar products.

The company's North American utility pole business is the second largest producer of utility poles in the United States, and the company's Australian utility pole business is the largest producer of utility poles in Australia. Utility poles are produced mainly from pine species in the United States and eucalyptus species in Australia. Most of these poles are purchased from large timber owners and individual landowners and shipped to one of the company's pole-peeling facilities. In North America and Australia, in addition to utility poles, the company markets pilings for marine applications and smaller poles to the agricultural landscape and vineyard markets. The company treats poles with a variety of preservatives, including CCA, DCOI and creosote, which the company produces internally and purchase from PC and CMC.

Performance Chemicals

The company's PC business maintains sales and manufacturing capabilities in the United States, Canada, Europe, South America, Australia and New Zealand. The primary products supplied by PC are copper-based wood preservatives, including micronized copper azole (MicroPro), micronized pigments (MicroShades), alkaline copper quaternary, amine copper azole, DCOI and CCA. The primary applications for these products include decking, fencing, utility poles, construction lumber and timbers, and various agricultural uses. Additionally, the company is a leading supplier of fire-retardant chemicals (FlamePro) for pressure treatment of wood, primarily in commercial construction, where applicable.

PC supplies all of the ten largest lumber treating companies in the United States, the largest treated wood market in the world, in addition to the three largest lumber treating companies in Canada. In North America, the company's PC business is vertically integrated through the manufacturing of copper compounds for the company's copper-based wood preservatives. The company purchases approximately 37 million pounds of scrap copper, the company's key raw material, in addition to other compounds containing copper which the company processes to meet the annual demand of this major market. When the company purchases scrap copper, it is shipped to the company's manufacturing plants in Hubbell, Michigan and Millington, Tennessee for further processing into other copper compounds. The company utilizes swap contracts to hedge the company's exposure to copper prices.

Being vertically integrated in copper manufacturing provides PC with an important competitive advantage and also provides the company's customers with the security of a supply of copper-based wood preservatives. Likewise, the company's marketing, engineering, and technical support services provide added value to the company's customer base, who supply pressure-treated wood products to large retailers and independent lumber dealers.

Carbon Materials and Chemicals

The company's CMC business manufactures its primary products and sells them directly to the company's global customer base under long-term contracts or through purchase orders negotiated by the company's regional sales personnel and coordinated through the company's regional marketing groups. The company's three coal tar distillation facilities and five carbon materials terminals give the company the ability to offer customers multiple sourcing options and a consistent supply of high-quality products.

The company's CMC business manufactures the following principal products: creosote, used in the treatment of wood or as a feedstock in the production of carbon black; carbon pitch, a critical raw material used in the production of aluminum and steel; naphthalene, used as a feedstock in the production of phthalic anhydride and as a surfactant in the production of concrete; and phthalic anhydride, used in the production of plasticizers, polyester resins and alkyd paints, respectively.

The company is the largest global supplier of creosote to the North American railroad industry. The company has one principal competitor, Rain Carbon Inc., in the North American and European markets.

Technology and Licensing

In 1988, the company acquired the Koppers trademark from Koppers Company, Inc. The association of the name with the chemical, building, wood preservation and coke industries is beneficial to the company, as it represents long-standing, high quality products. Trademarks relating to the company's PC business, such as MicroPro, FlamePro, Protim and Solignum are important in this segment of the company's business, and as long as the company continues to use the name Koppers and the trademarks associated with the company's wood preservation business and comply with applicable registration requirements, the company's right to use the name Koppers and the other trademarks should continue without expiration.

Seasonality

Historically, the company's operating results have been significantly lower in the first and fourth calendar quarters as compared to the second and third calendar quarters (year ended December 2023).

History

Koppers Holdings Inc. was founded in 1988. The company was incorporated in 2004.