Yes, you're good, Brad.
Okay. Thank you. The first slide is obviously our safe harbor statement. I will not, you know, read this for the group, but just, you know, wanted to remind, you know, everyone that any forward-looking statements, you know, that are made during this presentation that we undertake no obligation to update those forward-looking statements to reflect events or circumstances after this date. Starting with just an overview of the company and just a few comments on, you know, the investment thesis for investing in Koppers. You know, we believe that we operate, you know, from a position of strength across a number of key factors.
We've listed out, you know, five items here for you to consider as you participate in today's presentation. First of all, you know, we are, we believe, at an inflection point in our strategy. We went through a number of years where we've been making, you know, significant capital investments in the company. We are through that phase. We're through that heavy capital spending period, and we are, you know, now in the growth phase part of our strategy where again, these major capital projects are in place, they're completed, and we are expecting them again to, you know, make significant returns to the company. We'll go through a couple slides talking about the critical end markets that we serve.
You can see that each one of our major businesses are market leaders in those end markets. We have an experienced and tested management team. You know, if you look at the top level at Koppers, that team has been together, you know, for a significant number of years, you know, plus 10 years in most significant management team positions. You know, finally, we will talk a bit about our ability to generate strong cash flows. That profile is as we look out over the next three years, you know, we believe is set to dramatically improve.
You know, from an end market perspective, I had mentioned that we're, you know, a market leader in all of our major businesses. Listed down the left-hand side of this slide are the four major businesses that Koppers participates in. You know, first is the railroad products and services business. This business is a leading supplier of wooden cross ties, mainly to the Class I railroads across North America. You can see that, you know, we currently supply all six of the North American Class I railroads. Our second business is our utility industrial products business. We combine this from a segment reporting perspective with our railroad products and services business. This business is a leading supplier of wooden utility poles in both the U.S. and Australia.
Again, we have leading market position. We sell to eight of the ten largest utilities in the U.S. Our Performance Chemicals business is a global leader in the development and manufacturing of wood preservation chemicals that we sell to, you know, lumber treaters. These chemicals again are used to preserve wood. This business serves both, you know, residential lumber market as well as in an industrial lumber market. This business serves, you know, all ten of the largest lumber treating companies in the U.S. Finally, we have our Carbon Materials and Chemicals business.
This business is a key supplier of critical components both to the aluminum industry, and we'll talk a little bit later, has a key vertical integration with our railroad products and services business in supplying it with its treatment chemical used to preserve wooden cross ties. A little deeper into a business segment overview of the company. If you step back and look at where Koppers performed in 2025 on a consolidated basis. On an overall basis, we generated $257 million of adjusted EBITDA off of $1.9 billion in sales. Overall, that delivered an adjusted EBITDA margin of 13.6%. This business segment overview gives you a little further detail on our three business segments.
First, the Railroad and Utility Products and Services segment, which often we refer to just as RUPS. This is our largest segment in terms of sales. Just over $900 million. And at least in 2025, you know, delivered the most adjusted EBITDA at over $108 million. You know, this business is again really focused on wood preservation in the treating of wooden railroad cross ties and utility poles. This business also operates a number of ancillary businesses that are, you know, much smaller in the overall scale, you know, but do provide additional, you know, services to the railroads, including a cross tie recovery business and a rail joint bar business.
Our Performance Chemicals business has overall sales in 2025 of over $500 million, but is the business that delivers the highest adjusted EBITDA margin at around 19%. You know, this business, you know, if you look at it, you know, we are just manufacturing and producing the wood preservative chemicals and selling those to other treaters. We do not actually treat the lumber ourselves. A lot of that lumber that is being treated, you know, by the other companies, it's finding its way into you know, the big box retailers like Home Depot and Lowe's.
In the application of those products, we have a major market presence in residential construction, items such as you know, decking and also you know, structural lumber. Finally, our Carbon Materials and Chemicals business has net sales of around $400 million. In 2025, it was able to deliver you know, double-digit EBITDA margin. You know, this business, when you look at it has really two major customers. You know, one is the aluminum industry, where we are providing a product called carbon pitch. That carbon pitch is used in the smelting of aluminum.
I'd say the most important product produced by our Carbon Materials and Chemicals business is creosote, which is the predominant treatment chemical for railroad cross ties in North America. All of the creosote that we produce in North America, in Europe, is internally sold to our RUPS segment and used for the treatment of cross ties. With these three, you know, business segments that we operate in, you know, we believe it provides Koppers with a very balanced portfolio, and you know, helps us persevere through cyclical changes in each of those businesses.
You know, if you look at the utility pole business, you know, there is an installed base of around 140 million utility poles in North America, and around 2 million-2.5 million of those poles get replaced every year. Very similar story with our railroad business. You know, every year, there are 18 million-20 million cross ties that need to be replaced by the railroads in order to keep their networks, you know, running safely. You know, looking at our Performance Chemicals business, you know, I guess mention that business is providing the chemical used in residential lumber applications.
you know, the repair and remodeling markets really help to drive that business, and the volumes of chemical that are needed to meet that demand. Looking across at, you know, the sales by end market, if you add up the pieces of the pie, right, that are related to wood preservation in some form, whether we're producing the chemical or actually producing the product, that represents just short of 80% of our overall sales in 2025. We'll talk a little bit further on about our objectives going out to 2028. We look to grow that share of our business in wood preservation to a higher level over the next number of years.
From a geographic perspective, you know, a good concentration in North America, in the U.S., of where around 70% of our sales are, with the rest of our sales, you know, dispersed across different geographies internationally. Finally, over at the far right side, looking at adjusted EBITDA generated by segment. You can see we have pretty good balance between the three segments in generating EBITDA. Wanted to talk a few minutes about our strategic transformation project, which is Catalyst. This is a process that we kicked off in 2025, and it's providing benefits to the company both in 2025 and out through 2028.
you know, this is a multi-year process that we're going through, you know, that goes through a number of stages. Again, this is an aim to, you know, find ways in which to identify commercial and cost-saving opportunities, to grow the profitability and cash flow, of the company. you know, it starts with an operational assessment, goes through a detailed implementation plan, and finally into executing those initiatives, which we did start in 2025. In 2025, we believe that we achieved $46 million of benefit, coming out of Catalyst. you can see those benefits are spread across, all of our business units.
A couple of the examples of the things that we did, as part of this is, you know, looking at, plant closures, you know, where we can save, cash in procurement. There was a headcount reduction process that we went through. All these things are, again, helping to generate, you know, earnings growth and improve cash flow yield. Looking out to 2025-2028, we see an additional $75 million of benefit that we can achieve, you know, during those years. If you look at 2026, we think we can achieve, $20 million-$40 million of that $75 million, in 2026. Where is this all leading? By the time we get to, you know, 2028, we wanna have the,
Our objectives are, you know, to grow our adjusted EBITDA margin to greater than 15%, continue to focus and grow our EPS at 10%, at a 10% CAGR, and have free cash flow averaging, you know, $100 million in each of those years between 2026 and 2028. All of that will again help drive down our net leverage to below 2.5x. Through this process, again, we wanna grow PC and RUPS share of our business to 85%. We see those as the highest growth opportunities for Koppers. I wanna flip now forward to slide 15. Again, just wanna set a baseline for our full year 2025 and, you know, our achievements in the past year.
You can see, adjusted EBITDA was at $257 million, the second highest year for that on record. Continued to grow our adjusted EBITDA margin from adjusted earnings per share. We had our sixth consecutive year of earnings per share above $4. You know, probably one of the things that we are most encouraged by is, again, our ability to consistently be able to generate, you know, operating cash flow through our business. We had our seventh consecutive year of generating operating cash flow of greater than $100 million.
You know, with you know, getting out of the sort of heavy capital investment phase that the company was in, we are now down to around $55 million of capital expenditures on an annual basis. You know, looking at last year, that was able to generate free cash flow of just short of $70 million. We're able to use that free cash flow, you know, for returns to shareholders in a number of ways, both with you know, dividends, a focus on share repurchases, and also again, finding some key you know, bolt-on acquisitions, as well as continued debt reduction. Just wanted to make a few comments about our capital allocation and our balanced approach to using our cash.
You can see we are a dividend payer. We've increased the dividend, you know, $0.01 per quarter each of the last several years. We're now paying dividends at a rate of $0.09 a share per quarter in 2026. You know, we have a fairly robust share repurchase program. You know, we have 67 million authorized remaining on our share repurchase authorization, as well as you know a lot of focus on reducing the leverage of the company. We finished 2025 at 3.4x net leverage, and are driving toward you know our long-term target of being between 2x-3x net leverage. Let's spend the last few minutes here just talking about our 2026 guidance.
We finished 2025 with sales of $1.9 billion. You know, we're looking to grow the top line, both in our RUPS segment and in our PC business. You know, the outlook right now looks on the CMC side a bit uncertain. We will probably be relatively flat on the CMC side, but we'll be looking at increased sales, you know, between $1.9 billion and $2 billion in 2026. From an adjusted EBITDA perspective, we've indicated a range between $250 million and $270 million. Again, with most of that growth coming between our RUPS and PC segment. From an adjusted EPS perspective, we're projecting between $4.20 and $5 a share.
you know, as we're able to pay down debt, we are seeing interest rate savings in 2026, both from a rate perspective as well as a balance perspective. Again, we continue to get benefits from our share repurchase program, again, which will help contribute some additional adjusted EPS growth. From a free cash flow perspective, we're focused on between $150 million-$170 million of free cash flow in 2026. You can see a lot of that is being generated by, compared to 2025, a focus on improvements in working capital. We made, excuse me, some investments last year in our pension plan.
We're trying to settle our pension plan, get it off of our balance sheet. Those pension payment contributions will not reoccur in 2026. Excuse me. With that, you know, predicting free cash flow of around $105 million. Again, we'll be redeploying, you know, that free cash flow back into the business or back to shareholders with dividends and share repurchases. That will leave, you know, around $60 million or so of free cash flow for debt reduction or M&A activities. Okay. Excuse me. With that, we have just a couple of minutes left. I'll stop sharing and open it up to any questions that you may have.
Thanks, Brad. Very informative. Turning to some questions, obviously, there's a lot going on in world affairs, and that's driven a huge increase in energy prices over the past couple of weeks. If that's sustained at that level, what impact would that have on Koppers business?
Yeah. You know, obviously the higher, you know, energy prices will have a headwind on the business. If you look at some of our, particularly on the CMC side, you know, it will have, over time, it will increase some of our raw material procurement costs for coal tar, which over time, we can begin to recover through, you know, increase in our sales price through our contracts with our aluminum customers. But that tends to be on a lag, right? That will cause some short-term issues for us from a profitability perspective. Of course, you know, anything with energy. You know, we'll begin to increase, you know, some of our costs of logistics.
Sounds good. Looking at your financials, you had very, very large expense reductions in 2025, and that drove a big increase in free cash flow. Kinda looking at how you deployed it in 2025, you reduced debt by 7%, you reduced the share count by 7%, and you did that while increasing the dividend. I saw your slide about the workup of free cash flow for 2026. In terms of priorities, do you feel like you'll put a little bit more emphasis on share repurchases versus debt pay down or vice versa? What looks most attractive to you?
Yeah. Well, I mean, certainly in 2025, you know, share repurchases, you know, looked more attractive to us, given where our share price was, right? You know, I think as we now look into 2026, you know, I would say it would still remain a kind of balanced approach. Obviously our. You know, we've had a nice run up in our share price here, in the first quarter. You know, from a full year perspective, we are always kind of focused on, you know, offsetting, trying to offset any dilution that we have through our employee LTIP Long-Term Incentive Plans.
I think you know as we go through 2026, we'll probably see more of a balanced approach between share repurchases and debt reduction. We think you know 2026 is a year where we do wanna focus probably a bit more on debt reduction.
Okay. Sounds good. Let's see. Also contributing to free cash flow last year, you cut CapEx a lot. You're operating at the same CapEx level in your guidance for 2026. Does this level, roughly $55 million in CapEx per year, feel like the new normal? I'm just wondering, 'cause you have an R&D advantage over your competitors, does that put you at risk of kind of falling behind in the IT race?
From a capital expenditure perspective, I think, you know, $55 million is the level, you know, we see going out here for a number of years. We would say that's, you know, representative of a more, you know, normalized CapEx spend rate than what we would've had if you go back a couple of years where CapEx averaged greater than $100 million a year. You know, in those years, we had a couple of key CapEx projects going on. You know, we were effectively building a new railroad cross tie treating plant, you know, making some pretty big investments over in Europe in our CMC operations. That's all behind us now.
We believe that at $55 million, that keeps our plants operating safely and productively. On the R&D side, most of our R&D is really focused in the Performance Chemicals business in developing next generation treatment chemicals for wood, as well as improving the formulations that we currently have. We think that aspect of our business is a competitive advantage compared to our competitors. We will continue to invest sufficient dollars in that R&D effort in developing those next generation treatment chemicals.
Great. We're almost out of time, but let me squeeze in one more question. The Class I railroads that have been big purchasers of the railroad ties, their purchases were down in 2025. On the last earnings call, Leroy Ball said that a couple of them had already announced further cuts in purchases in 2026. I'm just wondering how demand looks with that client base.
Yeah. I think again, demand is again remains relatively steady. You know, looking into 2026, at least two of our customers, you know, they are looking at somewhat lower volumes on an overall basis. I think the key there is we were successful in, you know, negotiating with them in exchange for some price reductions, you know, effectively able to get sort of a larger piece of the pie, right? In 2026, we were largely able to, you know, offset some of those overall decreases in demand that we were anticipating.
Well, excellent. That puts us at the end of our scheduled time. Brad and Quynh, thanks so much for joining us. Brad, thank you for presenting. Is there anything you'd like to say by way of closing remarks or wrap-up?
No, I'd say thank everybody for their time. Again, I think, you know, Koppers is again well positioned over the next, you know, couple of years to be, you know, generating free cash flow, which, you know, will go toward either returns to shareholders or reduction of our leverage. You know, from that perspective, I think, you know, the management team here is pretty excited about the next couple of years at Koppers.
Great. Thank you again for presenting, Brad and Quynh. Thanks for participating, and we'll look forward to seeing you at the next conference. Thanks again.
Thank you, Michael.