Hi.
Good.
You're the presenter for the next.
Yes
I'm Chris.
I'm with Planet AV.
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Right arrow moves forward, left arrow moves back. You have 35 minutes. The last three minutes of the event.
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Okay. Do you start.
You can start time.
I don't have to.
I don't have to hit a button.
Same as Chicago. If you want to.
If you think you're going to get.
A couple questions, allocate that time. However, if you want to just talk all the way through to lunch, you.
Can do that, too.
Yeah. Okay. All right.
The folks from HIMCO Pittsburgh were here yesterday.
Yeah, I saw. I saw them on the schedule.
I've been asking everybody how the new airport is.
Oh, yeah. My initial review is very nice. Yeah, you know, nice open space. A little bit more about TSA. In their wisdom, they said no. And I hate, hate the airports that have, like, the trays. Yeah, they instituted the tray.
Oh, they did that one where everything has to go to a tray.
They got to go tray. It seems like it's really slow.
Yeah.
Right.
Yeah.
Now again, maybe. Maybe they're still working out the kinks.
Could be.
Just seemed like it was really slow.
Yeah, I. I'm not quite enough, or I guess whichever one it is, to remember the old old airport.
I mean, I, you know, when I started flying, all I've known is the. The new. The new old airport right now. Yeah, the next time I go home, I'm looking forward to. Looking forward to checking it out. You know, it's been all over my feeds and everything. Everybody's, like, taking the last photos.
Yeah.
It'll be.
Yeah, I guess no more shuttle train,
no more train.
No more.
No more.
No more tile floors and things like that.
Yeah, I think that's definitely a nice thing. Yeah.
I'll give you the intro and then we'll get started so that we can go have lunch.
Good to go.
Okay, great. Good morning. Our next presenting company is Koppers, trades under the symbol KOP. Here today to speak on behalf of the company, and we're glad to have them back at the Southwest IDEAS Conference, is Brad Pierce, Chief Accounting Officer. With him here in the audience, and available for questions afterwards as well, is Quynh McGuire, VP of Investor Relations.
Great. Thank you, John. Thank you. Thanks everyone. We're happy to be here and give you the opportunity to learn a little bit about Koppers and who we are, you know, at a, at a high level. You know, we're a company, we've demonstrated, you know, strong profitability over the years. We've been able to generate, you know, meaningful cash flow that we've been able to use for a number of different purposes including, you know, acquisitions, debt pay down and all that we believe is, has the ability to create shareholder value. Of course we do. Like everybody else, we have a website, koppers.com that you can go to and visit to get any additional detailed information about the company. Here's our safe harbor statement.
I'm not going to take the opportunity to read this to you, but of course this presentation does include forward looking disclosure statements and we assume no obligation to update those forward looking statements that we might make during this presentation. Flipping forward to slide four, you know, this slide sort of outlines again, some of the key factors that we think can make Koppers a good investment. With these five things, you know, we believe that we operate from a position of strength across all these key factors, starting with, you know, our strategy.
If you go back and look at the strategy that we employed, we adopted a number of years ago, you know, we kind of looked at our company, we saw, you know, we had a number of capital investments we could make just in our own operations, sort of outside of acquisitions that we thought, you know, had the potential to return, you know, significant profitability to the company. We've now sort of, we've completed that phase and we're really now into the grow phase of our strategy. That means that again, a lot of those heavy capital spending that we had in the 2021- 2023 period, that is all behind us. We're a market leader in critical end markets. And you see as we go through the next couple of slides that we are market leaders in each one of our core businesses.
With that, you know, our focus really now is to go toward meaningful improvement, you know, in the margins in those businesses. We have an experienced management team. If you look at the top leadership at Koppers, all have been in the industry for many, many years and many of them have been with Koppers for many years and seen us through sort of all the different changes in markets over the years and finally, strong cash flow generation. You know, we have a track record of every year generating over $100 million of cash flow from operating activities. As we look to 2025, we believe we're going to be able to generate $135 million of operating cash flow.
With that reduced capital spending, you know, looking at free cash flow of in excess of $80 million this year, a lot of that is going to go toward debt pay down, share repurchases to increase our capital, increase the profile of our capital structure. Slide five. I want to talk a little bit about the markets that we serve and how we are market leaders in each one of these. Here are four core businesses, starting with railroad products and services. Really, this business is a leading supplier of cross ties primarily to the Class I railroads in North America. We serve all Class I railroads with, you know, with their cross tie requirements. Kind of closely related to that business is our utility and industrial products business. This is a business that manufactures wooden utility poles.
We both have manufacturing operations here in the U.S. and Australia. You know, this business is selling utility poles to, you know, investor owned utilities and public utilities in the U.S. We sell to eight of the ten largest utilities in the U.S. Our Performance Chemicals business is a manufacturer and developer of wood preservation chemicals. Easiest way to think of this business is you walk into Home Depot or a Lowe's and you go to the treated lumber section in those stores. There's a high probability that the chemical that was used to treat that lumber was either manufactured by Koppers or licensed to another company to manufacture, you know, under a licensing agreement with another manufacturer. You know, we have tremendous market presence in North America. The wood treatment chemical that we produce is called MicroPro.
It's a patented technology and is the leading chemical used for residential lumber. You know, we are selling to the actually lumber treating companies and we sell to all of the major lumber treating companies in the U.S. and Canada. Finally, our carbon materials and chemicals business, this is a business that takes coal tar, which is a byproduct from the metallurgical coking process used by the steel industry. It takes that chemical, it runs it through a chemical operation and gets a couple of key chemicals off of that. One is carbon pitch. That carbon pitch is sold to aluminum companies. It's used in their smelting process for aluminum. From our perspective, a key chemical we get out of that is creosote. Creosote, all that creosote is sold to our railroad business to treat the cross ties with. There is a bit of vertical integration there.
If you look at that business, all these businesses have particularly have some sort of international presence. You'll see that a little bit later on. The carbon materials business, we really operate three plants, one in North America, one in Europe and one in Australia. Looking a little bit further into, you know, the financial contribution of each of these businesses, you know, if you look back at 2024, we generated around $260 million of adjusted EBITDA, adjusted EPS of just over, just over $4 off of sales of $2.1 billion. From an adjusted EBITDA margin perspective, last year we were at 12.5%. You know, this year, although we've seen a little bit of a decline in our top line, the good news is we've actually been able to increase our adjusted EBITDA margin this year up to above 14%.
That is really one of the main goals of the company, to get that return on our sales up into the higher double digits. A little bit of a profile on our RUPS business. This combines the railroad cross tie and the utility pole businesses. We have eight cross tie plants in the U.S. and Canada, and we have six utility pole plants in the U.S. along with four in Australia. We have a pretty wide footprint of plants. The reason why we have, again, multiple cross tie plants is what is very important to the Class 1 railroads, to which there are six that we sell to, is that those plants are online with their rail network. That gives us a key competitive advantage in the railroad cross tie business.
The performance chemicals business, you know, from a return perspective and a profitability perspective is our most profitable segment. You know, last year it generated over half of our adjusted EBITDA and clearly is the, is the leader in adjusted EBITDA margin, had margins in excess of 20%. If you look at where we are this year, we have had some reduction in our top line in our adjusted EBITDA margin on that business. We've talked about in our different calls about some of the competitive factors that we've encountered in that business. We did lose a little bit of market share last year, you know, to one of our main competitors, which has dropped our adjusted EBITDA margin contribution in that business to closer to, you know, 18% this year.
Finally, our carbon materials and chemicals business, which is our smallest business in terms of revenue, had revenue of around $500 million last year. If you look at these different businesses, our main growth opportunities lie with the railroad business, the utility business, and the performance chemicals business. The CM&C business, we are really focused on just maintaining that business and having it there as a supplier of creosote to our railroad business. A quick look at sales by end market and geography: if you look at the pie chart, roughly 75% of our business is connected in some way to the wood preservation business, whether it is treating wood or producing the chemical. From a geographic perspective, you can see we do have international presence.
We are around 75% focused though in North America. If you look at our sales by segment across our three different segments, we are well diversified in terms of sales and where we are generating our profit from, kind of a couple of key statistics that you always have to keep in mind with our businesses. From a utility pole perspective, you know, there are 140 million utility poles that are installed out in the network in North America. Obviously, you know, that is a huge replacement business. Right? 2 million-3 million poles just naturally need to be replaced every year along with, again, some opportunity for sort of, you know, network expansion. On the railroad cross tie side, you know, 18 million-20 million cross ties get replaced every year just through the railroad's regular maintenance activities.
Both of those businesses kind of replace, provide a great annuity business for the company. There's always going to be some level of just natural replacement that is going to occur. If you look at our Performance Chemicals business, what we really track closely there is the repair and remodeling industry. Again, you know, a lot of our chemical goes into things like residential decking. Again, as people invest in their homes, you know, that tends to drive the business for the Performance Chemicals. Moving to slide nine, just wanted to spend a few minutes to talk a little bit about Catalyst, which is a strategic transformation process that we began early this year.
This is a transformation project that is looking across all of our businesses and it's looking at us from both from a cost perspective as well as the markets that we're in. Looking at our manufacturing process, it's literally involving hundreds of people across the organization. It's really broken down into three different phases. An operational assessment phase, a detailed implementation plan phase. We're through both of those processes now and we're really now into the process of executing on all of the initiatives that were identified through this process. Where we are now, we believe that through this process we're on pace to realize around $40 million of benefits, you know, this year. Again, you know, the savings are coming from a multitude of different places.
Both from procurement to headcount reduction, looking at our plant processes, closing down certain production lines, you know, that again, we don't believe justify, you know, the return on capital that we would have to be making in those businesses. Where do we want this to lead to? Again, a key metric that we have really been pushing on is improving the margin return in the business. By the time we get to 2028, we are looking for adjusted EBITDA margin returns in excess of 15%, reducing our leverage to well below 3x . You know, again focused on the cash flow generation and getting free cash flow, you know, above $100 million a year. You know, through that process it was really kind of focused us on what, where do we want to grow, where are our growth opportunities?
We view those growth opportunities being in the performance chemicals and the RPS and the RUPs business. By the time we get to 2028, we really want 85% of our sales concentrated in those two segments. Sorry, moving to slide 11. I just wanted to give a quick mention about sustainability and a couple of key things that we think helps us play in that market kind of boil down to just a couple things. One is, a lot of our products are related to renewable resources, which is lumber and wood, making wood last.
It's also very important if you look at the importance of our products on infrastructure, utility poles being focused on bringing electricity to homes and businesses and from the railroad cross tie business, keeping our logistics and our transportation systems moving. You know, we think that that is an important consideration when again when you think about sustainability. Moving to slide 15. I just wanted to talk a little bit about, you know, where the business is coming out of the third quarter and some of the things that we have done to again we think will help drive shareholder value. The first thing is a lot of focus on costs in the business, particularly SG&A expenses through a combination of headcount reduction and other focused cost saving measures. A lot of it being driven by this Catalyst initiative we've talked about.
You know, SGA is down 14% compared to the, to the prior year. With that lower SGA spending, you know, it is helping to drive improved cash flow in the company. Combined, you know, with our reduction in our capital spending that we're required to make, we've been able to redeploy a lot of that excess cash toward debt reduction, share buybacks and dividends. From a business perspective, we've done a few things again looking at our businesses. We do have some smaller businesses in our portfolio that frankly we think probably could be better served by a different owner. One thing we did is we had a small business which was basically a bridge repair business, Koppers Railroad structures. We ended up selling that business in the third quarter.
Secondly, again looking at our existing operations, we did have a phthalic anhydride plant which is sort of an ancillary operation to our CM&C. We were looking at some pretty heavy capital spending there in the next couple of years and basically decided to exit that business because the returns just were not there to justify that capital expenditure. A lot of focus on our CM&C business. That is a pretty cyclical business for us and we are really trying to sort of maximize the return of that business. Again, a lot of focus on that business and getting it right sized with our existing other businesses. Turning to talk on slide 22. Just talk a little bit about the uses of cash in our business and how we allocate capital.
You know, again, one of the, I think the favorable stories coming out of our business this year is again that focus on reducing capital spending down to $55 million of projected capital spending in 2025. That is down from over $75 million in 2024. If you go back to 2023, it was $120 million. You know, that excess cash, we have been deploying it a number of ways. One is share buybacks. We repurchased over $40 million of stock in 2024. This year through three quarters we are at over $30 million and have plenty of excess capacity in our share repurchase program to continue to look at share buybacks. Finally, we balance the debt reduction with again a small dividend that we do pay. We have been increasing it a penny per quarter for a number of years now.
We're now up to $0.08 a quarter on dividend. From a debt perspective, our long term goal is to get to below 3x leverage. We're currently about 3.5x . You know, we did take an increase in our leverage last year when we did make an acquisition in the utility pole space. Just a quick comment here on capital spending. You can see most of our capital spending is really focused on the maintenance area. Again with that large constellation of different plants that I've talked about. You know, you are required a certain level of maintenance spending to keep those plants operating safely and efficiently. Growth and productivity spending, you can see, is only around $4 million projected. Only $4 million incurred through the third quarter. You know, an interesting point.
Again, if you look at our different businesses, you can see that one of our least capital intensive businesses is that Performance Chemicals business, which has the highest return. That is a very, very efficient business in terms of cash generation. I think that was pretty much, I guess, the comments I want to make. There are about eight minutes left here, so I just want to open up to see if there are any questions you might have about Koppers. No? Okay. All right. Thank you very much for your time.