Koppers Completes Acquisition of Brown Wood Preserving Company
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Insights
The acquisition of Brown Wood Preserving Company by Koppers Holdings represents a strategic expansion, aiming to bolster Koppers' position in the utility pole market. The move should be seen in the context of the company's efforts to diversify its sales and production capabilities, as well as to penetrate new geographic markets. The deal's value at approximately $100 million in cash suggests a significant investment, reflecting confidence in the utility pole sector's growth potential.
From a market perspective, this acquisition could enhance Koppers' competitive edge by broadening its product offerings and customer base. The anticipated EBITDA contribution of $15 to $25 million by 2025 indicates a positive outlook on the financial benefits of the integration. Investors should monitor the performance metrics closely, particularly during the upcoming earnings call, to assess the immediate impact on 2024's financials and the progress of the integration.
Investors should consider the financial implications of Koppers' latest acquisition. The cash transaction indicates a leveraged purchase, which could affect the company's liquidity and debt levels in the short term. However, the expected EBITDA increase suggests a favorable long-term financial return. The integration of Brown Wood into Koppers' operations is key to realizing these financial projections.
Efficiencies in production and distribution, as well as cross-selling opportunities, are likely to be critical factors in achieving the projected EBITDA. It's important to evaluate how this acquisition aligns with Koppers' overall financial strategy, particularly in terms of capital allocation and debt management. The forthcoming earnings call may provide further clarity on how this acquisition fits into the company's financial roadmap.
The utility pole market is a niche but essential segment of the infrastructure sector. Koppers' acquisition of Brown Wood suggests a move to capitalize on positive industry dynamics, such as the ongoing need for electrical grid modernization and expansion. The integration of Brown Wood's pressure-treated wood utility poles into Koppers' portfolio can be seen as a strategic effort to address supply chain efficiencies and meet rising demand.
Given the specialized nature of the utility pole market, the acquisition could also provide Koppers with an increased ability to influence market prices and standards due to enhanced market share. The long-term health of the utility pole market, as mentioned by Koppers' CEO, will depend on factors such as regulatory changes, environmental considerations and advancements in alternative materials. These industry-specific factors should be carefully monitored by stakeholders to understand their potential impact on Koppers' growth trajectory in this sector.
James Sullivan, President and Chief Operating Officer of Koppers, said, "The addition of the Brown Wood assets to our portfolio provides sales and production support in our existing markets. More importantly, this addition offers an attractive entry point to new geographic markets. I'm excited to get started on the integration and begin capitalizing on the combined resources of our two businesses."
Chief Executive Officer Leroy Ball added, "I am happy to be closing on this acquisition and welcoming the Brown Wood team into the Koppers culture. We continue to see the utility pole market as an attractive growth engine for Koppers, given UIP's smaller exposure relative to our other businesses. As well, we anticipate that positive industry dynamics will support a healthy end market in the utility pole business for the foreseeable future."
As previously announced, the transaction is expected to contribute
About Koppers
Koppers, with corporate headquarters in
For more information, visit: https://www.koppers.com/. Inquiries from the media should be directed to Ms. Jessica Franklin Black at BlackJF@koppers.com or 412-227-2025. Inquiries from the investment community should be directed to Ms. Quynh McGuire at McGuireQT@koppers.com or 412-227-2049.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures. Koppers believes that adjusted EBITDA provides information useful to investors in understanding the underlying operational performance of the company, its business and performance trends, and facilitate comparisons between periods and with other corporations in similar industries. The exclusion of certain items permits evaluation and a comparison of results for ongoing business operations, and it is on this basis that Koppers management internally assesses the company's performance. In addition, the Board of Directors and executive management team use adjusted EBITDA as a performance measure under the company's annual incentive plans and for certain performance share units granted to management.
Although Koppers believes that these non-GAAP financial measures enhance investors' understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP basis financial measures and should be read in conjunction with the relevant GAAP financial measure. Other companies in a similar industry may define or calculate these measures differently than the company, limiting their usefulness as comparative measures. Because of these limitations, these non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP.
Koppers does not provide reconciliations of guidance for adjusted EBITDA to the comparable GAAP measure, 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 forecast for a GAAP estimate and may be significant.
Safe Harbor Statement
Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and may include, but are not limited to, statements about sales levels, acquisitions, restructuring, declines in the value of Koppers assets and the effect of any resulting impairment charges, profitability and anticipated expenses and cash outflows. All forward-looking statements involve risks and uncertainties.
All statements contained herein that are not clearly historical in nature are forward-looking, and words such as "outlook," "guidance," "forecast," "believe," "anticipate," "expect," "estimate," "may," "will," "should," "continue," "plan," "potential," "intend," "likely," or other similar words or phrases are generally intended to identify forward-looking statements. Any forward-looking statement contained herein, in other press releases, written statements or other documents filed with the Securities and Exchange Commission, or in Koppers communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, regarding future dividends, expectations with respect to sales, earnings, cash flows, operating efficiencies, restructurings, the benefits of acquisitions, divestitures, joint ventures or other matters as well as financings and debt reduction, are subject to known and unknown risks, uncertainties and contingencies.
Many of these risks, uncertainties and contingencies are beyond our control, and may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. Factors that might affect such forward-looking statements include, among other things, the impact of changes in commodity prices, such as oil and copper, on product margins; general economic and business conditions; potential difficulties in protecting our intellectual property; the ratings on our debt and our ability to repay or refinance our outstanding indebtedness as it matures; our ability to operate within the limitations of our debt covenants; unexpected business disruptions; potential impairment of our goodwill and/or long-lived assets; demand for Koppers goods and services; competitive conditions; capital market conditions, including interest rates, borrowing costs and foreign currency rate fluctuations; availability and fluctuations in the prices of key raw materials; disruptions and inefficiencies in the supply chain; economic, political and environmental conditions in international markets; changes in laws; the impact of environmental laws and regulations; parties' failure to perform their indemnity obligations to us; unfavorable resolution of claims against us, as well as those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by Koppers, particularly our latest annual report on Form 10-K and any subsequent filings by Koppers with the Securities and Exchange Commission. Any forward-looking statements in this release speak only as of the date of this release, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.
For Information: | Quynh McGuire, Vice President, Investor Relations |
412 227 2049 | |
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SOURCE KOPPERS HOLDINGS INC.
FAQ
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