Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Koppers Second Quarter 2024 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] Following the presentation, instructions will be given for the question-and-answer session. Please note, this event is being recorded. I would now like to turn the conference over to Ms. Quynh McGuire. Please go ahead, ma'am.

Thanks and good morning. I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our second quarter 2024 earnings conference call. We issued our press release earlier today. You may access it via our website at www.koppers.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 November 8, 2024. 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. References may also 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 of Koppers; and Jimmi Sue Smith, Chief Financial Officer. I'll now turn the call over to Leroy.

Thank you, Quynh. Good morning, everyone from beautiful Denmark. The Koppers team finds themself doing this call from the city of Nyborg in Denmark, which is the site of one of our three strategically situated Carbon Materials and Chemicals plants, and where we recently conducted our board meeting, which included visiting our plant and spending time with our employees at the site. We have a great team in Europe, led by Christian Nielsen and Dr. Steve Crimp. Christian and his team were able to show our board the recently commissioned enhanced carbon products plant that will enable us to improve our throughput of higher value carbon products, while also opening up new and exciting market opportunities. In addition, Steve and his team were also able to show off the new European Performance Chemicals lab and pilot plant and review our opportunities for growing the PC business in Europe. It was a very productive week and my thanks go out to the entire team here in Europe for their hospitality and engagement. Now, as Quynh mentioned, joining me on this call today, as usual, is our CFO, Jimmi Sue Smith, but I also have our President and Chief Operating Officer, Jim Sullivan, who will be joining Jimmi Sue and I for the question-and-answer session. I'm pleased to share the results of our very successful second quarter coming on the heels of our prior report that outlines some of the early challenges that we were facing in 2024. Now, while some of those market challenges still persist, we dove headfirst into focusing on the things that we could control with cost being the largest element. The result was a new high in quarterly EBITDA and hopefully renewed confidence from the market that we remain on track to meeting our near-term goals for…

Thanks Leroy. This morning we issued a press release detailing our second quarter 2024 results, which include our recent acquisition of Brown Wood Preserving Company. My comments today are based on that information. On Slide 8 as Leroy mentioned, second quarter sales were down $14 million, or 2.4% from the prior year. By segment, rep sales increased $20 million or 8.3%. PC sales decreased $4 million or 2.2%, while CM&C sales decreased $30 million or 18.2% from the prior year quarter. On Slide 9, adjusted EBITDA was a quarterly record $78 million, resulting in a 13.8% margin. By segment, RUPS generated adjusted EBITDA of $22 million with an 8.8% margin. PC delivered adjusted EBITDA of $44 million, a 25% margin and CM&C reported adjusted EBITDA of $11 million with an 8.2% margin. On Slide 10, our RUPS business achieved record sales for the quarter of $254 million compared to $234 million in the prior year. Price increases added $12.7 million, mainly on crossties. And crosstie and utility pole volumes were higher by $9.4 million. We also saw lower activity during the quarter in our crosstie recovery business. From a market trend perspective, prices for untreated crossties remain relatively stable. And compared to the prior year quarter, crosstie procurement was down by 10% and crosstie treatment was lower by 2%. Adjusted EBITDA for RUPS was consistent with the prior year at $22 million. Profitability was flat, despite realizing sales price increases, a $4 million benefit from improved plant utilization and higher crosstie and utility pole volumes as these gains were offset by approximately $14 million of higher raw material, operating and SG&A expenses along with lower activity in our crosstie recovery business. On Slide 11, our Performance Chemicals business delivered second quarter sales of $177 million, compared to $181 million in…

Thank you, Jimmi Sue. Now let’s take a look at some notable happenings from the second quarter. So, as I mentioned earlier, we’re broadcasting from our CM&C facility in Nyborg, Denmark, as seen on Slide 19. And the reason we brought our Board to Nyborg was to show off the $27 million enhanced carbon products production facility that we completed late last year. This is the unit of operation that upgrades distillate that would otherwise go into the carbon black feedstock market and instead turns it into a high quality anode or impregnation pitch for which we’re able to sell at higher prices than the alternative product I mentioned earlier, carbon black feedstock. This is also the facility that can produce a high quality coating for the lithium ion battery market, which we remain cautiously optimistic about and could hold the key to reducing the volatility we see in this segment from time to time. Now, we also built a lab for our European performance chemicals business here at Nyborg and are looking for other ways to take advantage of the synergy of having a concentration of very talented people here at this site on a day to day basis. Speaking of day to day, our base business at Nyborg is distilling coal tar into critical products that serve many important product and geographic markets, where we utilize the competitive advantage of our strategically situated harbor to move products to our customer base. Slide 20 features our recently issued corporate sustainability report for 2023, which outlines our achievements as they relate to our values of people, planet and performance. Highlights from the 2023 CSR include achieving our goal of a 50% reduction in Scope 1 and Scope 2 emissions against our 2007 baseline seven years ahead of schedule, improved safety…

We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Liam Burke with B. Riley FBR. Please go ahead.

Thank you. Hi, Leroy, Jimmi Sue, Jim, how are you doing?

Yes, good, Liam. How are you doing?

Thank you.

Good, thank you. Could we talk a little bit more about the residential piece of performance chemical, your prepared comments, you said there’s resilience there, but then you said that sales were declining but looked like they were troughing. Was that on a pricing or a volume basis or both?

Yes, sorry, Liam, I think maybe my comments got confused. When I was talking about the reduction in troughing, I was really referring to the repair and remodeling expenditures. So we look at the leading indicator remodeling activity and we track that, and that has shown a decline year-over-year in repair remodeling spending right at large. That’s been occurring really since the beginning of this year and they’re projecting that year-over-year decline to continue through the middle of next year, but to really trough out at the end of this year. And from our business standpoint, we actually have seen flat volumes this year despite that overall, if you will, headwind that the repair and remodeling market has seen overall. And so that’s what I was really referring to. Our business has remained, has hung in there through some macro indicators that might indicate that we wouldn’t be doing as well as we are.

Great. Okay. That helps a great deal. Thank you. And if we’re looking at RUP, you had nice sequential step up in EBITDA margins. Can we expect that to continue? You laid out a number of initiatives, plus when you add in the integration of Brown Wood and some operational efficiencies, can we expect that sequential step up in the second half of the year?

I do expect that our margins in that segment will continue to improve. Now we deal with some seasonality, right. So I would certainly expect some improvement in the third quarter as we realize some of the savings from the cost reduction projects that we have. As we have some additional business that comes online, I would expect to see some margin improvement there as well. Fourth quarter, I think overall, comparably to Q4 of 2023, we’ll absolutely see margin improvement. And again, our overall objective is to get that segment up into the double-digit margin territory. We believe we have a plan in place to get there. So you should expect to see continued improvement in margins in that business.

Great. Thank you, Leroy.

You’re welcome, Liam.

And our last question for today will come from Gary Prestopino with Barrington Research. Please go ahead.

Hey, good morning, all.

Hi, Gary.

The – Leroy, the RUPS segment where you’re starting to go back to your customers and say, we’re not doing what we used to do for you gratis [ph]. What’s been the reaction there? And has this led to any of them coming back to the table and wanting to negotiate further?

So this is Jim. So the reaction has been – when we first told them that obviously, they weren’t too happy because we were doing stuff for them for free, but we explained the status of the business. We explained that a lot of these smaller things that were not getting paid for, they understood, and that’s something that they were, for the most part, willing to help us out on. So I wouldn’t say there’s been any real negative pushback. We have one – we have sort of a little bit of a bigger issue with one particular customer. But other than that, it’s been pretty good. And that’s the area, of course, that we’ve had to look for cost savings in the R part of the RUPS business.

Was there any impact from this, from what you’re doing in Q2? Obviously, the adjusted EBITDA was flat. Or could we expect that to start trending better going forward?

Yes. So we just got this going in Q2. I didn’t really think there was much of an impact in Q2. So we’re going to start seeing some benefits in Q3 and Q4.

Okay. Thank you very much.

You’re welcome.

This concludes our question-and-answer session. I would like to turn the conference back over to the CEO, Mr. Leroy Brown, excuse me, Leroy Ball, for any closing remarks. Please go ahead, Mr. Ball.

Okay. I want to thank everyone for participating in today’s call and for your continued interest and confidence in Koppers.

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