Koppers Holdings Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to COPPR's first quarter 2023 earnings conference call and webcast. At this time, all participants are in listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. Following the presentation, instructions will be given for the question and answer session. Please note that this event is being recorded. I will now turn the call over to Quinn McGuire. Please go ahead.

Thanks, and good morning. I'm Quinn McGuire, Vice President of Investor Relations. Welcome to our first quarter 2023 earnings conference call. We issued our press release earlier today. You may access it via our website at www.coppers.com. As indicated in our announcement, we've also posted materials to the Investor Relations page of our website that will be referenced in today's call. Consistent with our practice and 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 August 5th, 2023. At this time, I would like to direct your attention to our forward-looking disclosure statement seen on slide two. 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 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 company is provided with its press release, which is available on our website, Reconciliations of Non-GAAP Financial Measures to the Most Directly Comparable GAAP Financial Measures. Joining me for our call today are Leroy Ball, President and CEO of Coppers, and Jimmy Sue Smith, Chief Financial Officer. I will now turn this discussion over to Leroy.

Thank you, Quinn. Good morning, everyone. Thanks for taking time to join us today. As you may have seen in our announcement earlier and as shown on slide three, Coppers will be hosting an investor day scheduled for Thursday, September 14th, 2023, which will take place at the Intercontinental Chicago. On the prior day, Wednesday, September 13th, we'll be hosting a tour of our Stickney facility, which is in the Chicago area. I sincerely hope that you'll be able to join me and our senior management team for one or hopefully both of these events. We will, of course, closely monitor health and safety guidelines as appropriate. The management presentation portion of our investor day will also be available virtually with a live webcast. For those who will be attending the management presentation virtually, you'll have the opportunity to participate in real time in the question and answer session following the presentation. If you're not able to attend either in person or virtually, we will provide a replay of the webcast on our website following the conclusion of the event. Now let's review some of the headlines from our first quarter. We have a lot of exciting activities to report today that reinforce our work to strengthen our unique vertically integrated business models serving key infrastructure markets. We continue to make great progress in expanding our business by enhancing our comprehensive product portfolio, further penetrating certain geographic markets, entering new markets, and gaining market share. In addition, our work in optimizing our operating and logistics network not only reduces costs by making us more efficient, but opens up new business opportunities. We attribute this to the quality of products and services we provide while adhering to the strictest standards of safety and sustainability expected from our customer base. Now let's begin with a closer look at key metrics for Q1 on slide five. Consolidated sales of $513 million, the first quarter record increased by 54 million or 12% compared with 459 million in the prior year. Excluding an $8 million unfavorable impact from foreign currency changes, Sales increased by $62 million, or 13%. In addition, we generated adjusted EBITDA of $61.5 million, another first quarter record, compared with the prior year quarter of $52.6 million in EBITDA. Adjusted EBITDA margin was 12%, about a half percent higher than the 11.5% margin we generated in the first quarter of last year. First quarter diluted earnings per share were $1.19, a record first quarter, compared with $0.87 in the prior year quarter. Adjusted earnings per share were $1.12, compared with $0.91 for the prior year quarter. During the quarter, we used $15.3 million of cash in operations, a typical first quarter pattern for coppers as our business ramps up and we're building working capital heading into the second quarter. We deployed $37 million of cash in the first quarter, with $30 million going to capital expenditures, a little over $1 million to dividends, and just under $6 million to share repurchases. Later, I will highlight where we are gaining traction on our path to $300 million in adjusted EBITDA in 2025, along with potential opportunities and challenges ahead. Next, I'd like to provide an overview of the progress made regarding our Zero Harm 2.0 platform. Slide 7 shows that 35 out of our 45 operating facilities worked accident-free in the first quarter, along with a significant 30% reduction in recordable injuries. The acceleration of our Zero Harm 2.0 implementation continues throughout our organization in a number of ways, and re-energizes the engagement among our frontline employees. We have been actively hosting in-person zero harm safety training events and currently are focusing on the team members in our utility and industrial products business as their original sessions took place virtually due to COVID related protocols for the past several years. So far, approximately half of those managers have been trained on the initial module foundations and observations in the first quarter. And to date, more than half of all manufacturing employees have been trained in conducting peer-to-peer safety observations, and by the end of 2023, all of our frontline manufacturing employees will have completed peer-to-peer observations. We believe that colleagues who care about each other's safety is a powerful factor in the zero-harm culture, and peer-to-peer observations reinforce that mindset. As a result, our leading activities have increased by 14%, which helped to decrease serious safety incidents by 60% from the prior year. Also, we continue to work on our safety, health, and environmental management information system to improve overall user satisfaction, which includes using a single shared dashboard to measure our progress on key metrics. Furthermore, we are introducing toolbox talks in small groups at our facilities, which encourage more discussion and idea generation around personal safety. In April, we focused on emphasizing our life-saving rule of protect yourself while working at heights, in order to keep zero harm at a practical, relatable level for our frontline teams. As always, the safety and well-being of our employees and our communities remains the core principle of the zero harm culture at Coppers. Our teams worldwide deserve credit for staying focused on safety and for generating the impressive results as seen in the first quarter. Now I'll turn the discussion over to our Chief Financial Officer, Jimmy Sue Smith.

Thanks, Leroy. This morning's press release provided our first quarter 2023 results, and my comments today are based on that information. On slide nine, our consolidated sales were our first quarter record of 513 million, up 54 million, or 12%, over the first quarter of 2022. By segment, RUPS sales increased 30 million, or 16%, from the prior year quarter. PC sales increased 11 million, or 8%, and CM&C sales increased 14 million, or 10%. On slide 10, adjusted EBITDA was a first quarter record at 62 million, a 12% margin. By segment, RUPS generated EBITDA of 16 million, a 7% margin. PC had EBITDA of 26 million, an 18% margin, and CM&C had EBITDA of 19 million, a 13% margin. Moving on to our RUPS business, on slide 11, RUPS had record quarter sales of $213 million compared with $183 million in the prior year. The improvement was primarily the result of increased pricing for cross-ties and utility poles in the United States and higher volumes of untreated cross-ties enhanced by our acquisition of growth in Janes last year. In general, market prices for untreated cross-ties remain relatively high, but they are stabilizing. As a result, cross-tie procurement was higher by 64% compared to the first quarter of last year. Cross-tie treatment decreased by 11% versus the prior year. Adjusted EBITDA for RUPS was $16 million, up from $12 million in the prior year, on net sales price increases of more than $21 million, partly offset by higher raw material and operating costs. It's worth noting that the utility and industrial products portion of this business achieved record first quarter sales, adjusted EBITDA, and adjusted EBITDA margins, contributing significantly to the overall performance for Rupp. On slide 12, our performance chemicals business delivered record first quarter sales of 147 million, up from 136 million in the first quarter at 22, as a result of 25 million in global price increases, mostly associated with copper-based preservatives in the Americas. These increases were partly offset by declines in wood treatment preservatives primarily in Europe and Australasia. North American volumes were 4% lower year over year, which is slightly better than our expectations for this business. Adjusted EBITDA for PC in the first quarter was $26 million compared with $21 million in the prior year. On higher pricing from renegotiated customer contracts, which recaptured prior year cost increases and helped return EBITDA margins to normalized levels at 18%. Slide 13 shows CM&C first quarter sales of $153 million compared with $140 million in the prior year. This was driven by $37 million of higher prices, primarily for carbon pitch, partly offset by volume decreases in phallic anhydride, carbon pitch, and carbon black feedstock as we continue to see strong end markets while operating in a constrained raw material supply environment. CM&C adjusted EBITDA with $19 million, down slightly from $20 million in the prior year quarter. Although our Australian business delivered an all-time record quarter, raw material costs outpaced sales price increases in North America and Europe. Compared with the fourth quarter of 2022, the average pricing of major products increased 3%, and average coal tar costs were up by 6%. Compared with the prior year quarter, the average pricing of major products increased by 29%, while average coal tar costs rose by 32%. Slide 15 outlines our continued commitment to a balanced capital allocation approach that includes investment in the business, returning capital to shareholders through dividends and share repurchases, and reducing leverage as appropriate. At March 31st, 2023, we had $835 million of net debt and $400 million in available borrowing capacity. Our net leverage ratio at March 31st was 3.5 times, reflecting our normal first quarter working capital build. We continue to focus on a long-term target of two to three times net leverage ratio. On slide 16, we highlight our ongoing focus on enhancing our balance sheet flexibility which is one of Copper's core strategic pillars. In April, we closed on a seven-year, $400 million Senior Secured Term Loan B, which bears interest at Adjusted Term SOFR or Adjusted Daily Simple SOFR at our option, plus 4% with a floor of 50 basis points. Using the proceeds from the Term Loan B, along with cash on hand and borrowings under our existing revolving credit facility, we redeemed our $500 million 6% senior unsecured notes due in 2025. These actions are consistent with our stated capital structure priorities of reducing risk and gaining flexibility through extending our debt maturity profile. During the first quarter of 2023, we entered into a four-year $100 million interest rate swap in anticipation of the issuance of the Terminal B. The interest rate swap effectively converts the variable rate to a fixed rate of just under 7.5% for that portion of the loan. We will look to hedge additional portions of the Term Loan B over the next couple of quarters as we strive to maintain around a 50% mix of fixed versus variable debt. On slide 17, total capital expenditures for the first quarter of 2023 were $30 million, or $28.5 million net of cash proceeds. By category, we spent $12 million on maintenance $7 million on zero harm, and $12 million on growth and productivity projects. By segment, we spent $14 million on RUP, $1.5 million on PC, and $15 million on CM&C. On slide 19, as previously announced, our board of directors declared a quarterly cash dividend of $0.06 per share of Copper's Common Stock to be paid on June 12, 2023, to shareholders of record as of the close of trading on May 26, 2023. At this quarterly dividend rate, subject to review by the Board of Directors, the annual dividend will be $0.24 per share for 2023. And with that, I'll turn it back over to Leroy.

Thanks, Jimmy Sue. Moving on to notable happenings around coppers, slide 21 offers highlights from our Global Leadership Conference. This event, the first in-person event like this that we've had since 2018, brought approximately 150 leaders from around the world to Pittsburgh in March to reconnect around our values of people, planet, and performance. On the people front, we spent time building leadership capabilities and gaining a greater understanding of the importance of creating and maintaining an inclusive culture. On the planet front, it was about delving deeper into the various environmental sustainability initiatives that will serve to validate our social license to operate for generations to come. And finally, on the performance front, we spent time creating alignment and building commitment to our 2025 goal of $300 million in profitability while ensuring that our short-term quest for financial performance doesn't come in conflict with our values for people and the planet. We're most successful when all three values are pursued in balance, which we will continue to strive to do. Also, we welcomed a new member of our board of directors during the first quarter. As seen on slide 22, Andrew Sandefur joined the board, bringing extensive experience and an international perspective from the manufacturing and service sectors. Andrew currently serves as a CFO of FMC Corporation, a global agricultural sciences company, and previously spent time at Aramark, a global food service organization. With Andrew's appointment, the Copper's Board of Directors expands from eight to nine members, and we look forward to benefiting from Andrew's valuable insights. During the past quarter, I visited three of our manufacturing facilities and met with our employees at those locations as seen on slide 23. In North Little Rock, I got to see firsthand the progress made by plant manager Chris Martin and his team as they continue to work with our engineering team to remake our treating operations at North Little Rock. Now I'll touch on where things are at later in my comments, but I'll just say it was exciting to see us so close to finishing this major project that commenced in the early days of COVID. Our team has had to deal with a lot of unexpected curve balls throughout and persevered at every turn. They deserve a chance to get back to doing what they do best, keeping our people safe while serving our customers with the highest level of quality and reliability. At our Stickney plant outside of Chicago, plant manager Seth Herring and his team have done a fantastic job of incrementally improving their facility by replacing and adding tanks that have enabled them to streamline production, make their operations more efficient, and most importantly, improve upon the safety and environmental footprint of the site. And finally, at our Millington, Tennessee facility, our largest performance chemicals operation, I was able to spend time with plant manager Greg Weiss and his team reviewing the various plans they have to improve the safety and reliability of their operations, which have grown immensely since ground contact treatment was adopted through the industry back in 2016. These visits certainly helped to validate our strategies, but the true value comes in talking with our people who transformed those strategies into actual performance. As a result, they have my deepest and most sincere appreciation. Moving on, in February, I outlined the keys to success in reaching our 2023 adjusted EBITDA goal of $250 million. So now let's take a look at what's happening in each of those businesses as we're a few months along. Starting on slide 25 with performance chemicals, we're focused on three key areas. The first is passing on price while maintaining market share. In February, I mentioned that we had enacted major price increases effective as of the first of the year that should net us over $60 million of top-line improvements and recapture the cost that we had absorbed throughout much of 2022. Well, through the first quarter, we're tracking even better than our original expectations as we realized $25 million of price increases across our global sales network, correlating to an 18% increase over Q1 2022 sales. In addition, we picked up some new residential business that we believe will offset volume losses experienced elsewhere. Therefore, through Q1, I'd score this as exceeding expectations. The second key to success for PC in 2023 is residential demand not declining greater than 10%. Now, we've modeled a 5% to 10% decline in year-over-year base volumes, and that excludes any net gain or losses in share, which to date have been flat. After a slow January, we finished the first quarter with U.S. residential volumes only 4% lower than last year's Q1 volumes. And while we're tracking better than expected through three months of the year, there are some moderate concerns going forward. Existing home sales saw their first gains in 12 months in February, posting largest monthly percentage increase since July 2020 before dipping again slightly in March. Now, the leading indicator of remodeling activity, however, projects a continued deceleration of remodeling spending, turning negative in the first quarter of 2024 after almost a decade of continuous growth. Now, a positive factor from the consumer's perspective regarding the treated wood market is that it's one category that is lower in price today than a year ago, and by a significant amount. Now that's driven by the settling of lumber prices back to pre-pandemic price levels. And while we can't control it, we will continue to keep close tabs on the demand trends as the year goes on. Now the third and final key for PC in 2023 is replacing the non-coppers produced industrial chemical Penta with coppers produced preservatives such as CCA and DCOI. In 2022, we experienced a 33% increase in our industrial sales volume. And in the first quarter of this year, we saw a volume bump of 24% over prior year. Through Q1, we are tracking in line with our projections and expect this trend to continue through the year as industrial demand looks to remain strong from increased infrastructure spending. The Utility and Industrial Products Division of our RUPS business, as seen on slide 26, continues to enjoy strong demand across the board. That's why the first key to success for UIP in 2023 is keeping our facilities running uninterrupted in order to serve customer demand. We did this in Q1 and posted our best first quarter ever, which also happened to be our second best quarter of all time, coming in slightly behind the fourth quarter of last year. Unfortunately, on April 1st, we had a fire destroy one of our dry kilns, which has added stress to an existing bottleneck in treating capacity. In the interim, we're bringing in higher volumes of third-party whitewood to cover some of that temporary loss, but that will eat away at profitability somewhat as that volume comes at a higher cost. Now, we're in the process of replacing the damaged kiln, and in addition, our board approved the construction of another kiln to further increase our drying capacity, which will enable us to maximize our treating capacity. Now, other than the loss of the kiln, all of our plants are running at high rates of efficiency and exceeding performance expectations. Even with the limits on internal drying capacity through one quarter, we're already on track to exceed last year's record profitability by well over 50%, and we don't believe that the recent hiccup of losing that kiln will materially impact that. The second key to success for UIP this year that I mentioned back in February is to bring online our facility in Leesville, Louisiana to produce dry product by Q3. This site will feed our Somerville, Texas, treating facility and serve the Texas market for creosote poles. We are currently tracking slightly behind with one wrinkle that could push the start date out further. We're evaluating the opportunity to redirect the currently constructed kiln for this property to replace the damaged kiln. If we do, we will replace the lost internal drying capacity faster, but this project completion would be pushed back as a replacement kiln is constructed. And while not great news, this business is already tracking to better than expected numbers for the year, even without capacity from Weasel. So any impact of this project being delayed, we believe, will be more than absorbed by an extremely strong end market driven by infrastructure spending. In the Railroad Products and Services Division of RUPS, on slide 27, our first key to success for 2023 remains rebuilding our dry inventory as soon as possible. Now, we're currently on pace to procure over 7 million ties, representing our highest year since 2015. We're also making up ground on building our dry inventory, currently up 20% over year end, and now totaling just over 5 million ties. Now, as this number grows, it lessens the need for boltonizing, an artificial drying process that makes our plants less efficient by taking up cylinder time. Through Q1, we are on track to reach our desired air-dried inventory levels by year-end. The second key for RPS is recouping the value of our creosote preservative in the market. Now, I mentioned in February that for the rail industry to maintain a healthy supply chain, it needs to pay fair value for its preservative. Costs have increased significantly due to several factors outside of our control. And while we have some ability contractually to pass on increased costs up to a certain level, Our preservative costs have far exceeded the price caps, and as a result, we need to increase prices further. Through Q1, we realized $13 million in price, which is not all preservative-related, and we will continue educating our customer base on the value of a properly treated creosote cross-tie, which includes sustainability lifecycle benefits as well. Presently, we have no incentive to treat and supply any more than our contractual minimums without price adjustments forthcoming, and we're optimistic that will occur. Our current guidance does not include anything more than we've already agreed upon, so risk to 2023 is non-existent. But we will definitely need further progress if we are to move the RUPS business back to double-digit margins by the end of 2025. Now, the final key for RPS in 2023 is getting the North Little Rock expansion finished by mid-year. The first of our three new cylinders was commissioned this week, and we've begun treating ties. The other two cylinders are on schedule to be commissioned later this quarter, with all three in production by the end of the second quarter. We should expect some startup issues, but once addressed, this will be the most efficient plant in our network. On another positive note, we're actively working on some promising leads to secure the remaining volume to maximize this plant's output. We're all very excited about the contributions to be realized from the long-awaited completion of this project. Slide 28 features our carbon materials and chemicals business. And the first key to success in 2023 for CMC is managing through this challenging raw material market. Between the Russia-Ukraine war, the earthquakes in Turkey, and the trend to decarbonize steel, our supply of traditional coal tar raw material was down 14% by volume in the first quarter. The drop in available volume has also contributed to higher raw material costs as distillers fight for the limited supply. Now, with our ability to supplement the coal tar with petroleum-based feedstock, we limited the impact on sales from the lower raw material volumes by half, while also continuing to pass on much of the increased costs through higher prices. There remains a juggling act in this segment, but we are in relatively good shape through the first quarter. The second key for CMC comes in continuing to push acceptance of petroleum blended products, which mitigates reductions in coal tar volumes. We currently have half the volume of our North American pitch customers taking a hybrid product and are troweling a petroleum-based pavement sealer, which will be crucial to meeting demand. In addition, we continue to work with various petroleum blends for Creosote products serving our RUPS business. Now, the challenges in raw material availability have created an environment that is more willing to try different material blends, which sets us up for continued success. The final key for CMC this year is seeing a demand environment not negatively impacted by a recession. Now, as we enter 2023, we modeled similar year-over-year demand. And volumes were down in Q1, but that was mostly due to lack of raw material supply, and we do not anticipate making that up throughout the year. We still face the risk of further aluminum curtailments due to persistently high energy costs and the threat of a recession bringing down prices. Now, at this point, we feel comfortable with demand through the second quarter, but there's too much market uncertainty to project it beyond that point. Moving to our 2023 guidance, on slide 30, our sales forecast for 2023 is approximately $2.1 billion compared with $1.98 billion in 2022, with all businesses expected to see some top-line increase. For UPS, it will be a combination of price and volume. For PC, it will be price and industrial volume growth offset by residential volume declines. For CMC, it is a little bit of price on slightly lower volumes. On slide 31, our 2023 EBITDA projection is at $250 million. On a comparable basis, this will be our ninth consecutive year of EBITDA growth and will be the largest year-over-year increase since 2015. For all the reasons previously mentioned, RUPS and PC should see nice gains in profitability in 2023, while CM&C is forecasted to take a step back. On slide 32, our adjusted EPS guidance for 2023 is approximately $4.40. compared with $4.14 in the prior year. Higher average interest costs will take a significant bite out of earnings growth generated through operations, but 2023 should still finish to our highest adjusted EPS in company history, surpassing the $4.21 achieved in 2021. On slide 33, we anticipate that our capital spending will be approximately $110 million to $120 million in 2023. That's $5 to $15 million higher than our 2022 levels. Required spending on maintenance and zero harm will approximate $68 million, with approximately $42 to $52 million dedicated to finishing our significant growth and productivity projects, which now include the addition of new drying capacity for UIP. Now, while we are increasing our 2023 capital spending estimate to accommodate the kilns, we're actively working to keep spending to no more than the $105 million original estimate by pushing certain projects out into 2024. Now moving to slide 34, you can see our expected path to $300 million in EBITDA from our 2020 base. The first two years in the books demonstrated very modest improvements as we began implementing the larger multi-year projects that are finally scheduled for completion during this year. And while the bridge to $300 million shows a pretty even progression over the remaining three years, I believe that most of the remaining $72 million will be captured by the end of next year. Now, I couch those comments, of course, in the context that a recession doesn't have a material impact on our business over that time frame. Otherwise, I feel good about our ability to meet or exceed this year's target, which will include little to no contribution from North Little Rock, Leesville, our two new dry kilns, enhanced carbon products, or our new micronizing mill. Now, that's over $100 million of capital projects, most of which will be completed by year-end, that are expected to generate over $30 million in annualized EBITDA, with much of that expected to be captured in 2024. In summary, I continue to feel really good about the progress we're making to expand and optimize our position as the global leader in wood preservation technologies. As we continue to strengthen our customer-focused solutions while adhering to our values of people, planet, and performance, we will unlock significant discretionary cash flow over the next several years and create top-tier shareholder value. And with that, I'd like to open it up for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question is from Liam Burke with B. Riley. Please go ahead.

Thank you. Good morning, Leroy. Good morning, Jimmy, Sue. Hi, Liam. Hi, Liam. Leroy, you talked about the pricing in terms of crust high. Do you have any potential lifecycle management contracts in the works that could help offset some of that pricing pressure?

Well, I mean, we continue to have discussions in that regard. I'd say we're working with almost all of the class ones at this point in time on their life cycle management of cross ties. So we continue the discussions. I'd say there's nothing that I'm aware of that is imminent. And I'd say from our perspective, Liam, it's, again, we think it's an important part of the overall value proposition. But, you know, the bigger driver for us in terms of, you know, trying to push to get results in this business is really being able to recoup the significant cost increases that we've incurred over the past several years. Getting the industry to understand that a creosote-treated wood cross tie is the best overall lifecycle solution for them, and then the willingness to pay for the product is what we continue to work on. And we've made some progress, I'd say, across the board, but there's still more progress to be made We think that the demand environment for this market is promising over the next few years. And so if we can get the pricing aligned with what we've seen from a cost standpoint, I think we have a pretty good runway out over the next couple of years in the RPS business.

Great. And on PC... The existing home sales used to be a pretty good benchmark to the demand for domestic wood protection. You seem to be seeing some disconnect between the bouncing around of existing home sales and the demand for that product being pretty steady. Am I reading that right?

Yeah, it's, you know, it's one of those ones where, you know, since we've owned that business, that was a leading indicator that our PC management group always looked at. But, you know, it's unique times, I'll just say that, right, coming through the pandemic and all of the money that's been spent on repair remodeling now with higher interest rates, having people make – you know, different decisions in terms of whether to enter into a new mortgage for a new home or in many cases unfortunately getting priced out of that and making a decision to instead spend on their current home. You have those sorts of decisions that we think are impacting this somewhat. You have, you know, we were just talking actually the other day about the fact that with a lot of the new home construction that happened, again, through the pandemic and that boom, that now these homes are at the point in time where they're doing the, if you will, cosmetic landscaping and outdoor structural features that tend to get added after a new home is built and that having some impact on things. And we can't discount the fact that everybody's had, I think, inflation fatigue. And when you go into, again, a big box retailer and everything that you see is some significant percentage higher from a cost standpoint than it was just a few years ago, but you can go to the treated wood owl and know that the project that you wanted to get done that would have been significantly higher a year or so ago is one of the few areas where you feel like you're getting some value for your money. I think that we can't discount the fact of what impact that might be having on the market as well.

Great. Thank you, Leroy.

Yeah, you're welcome, Ian.

The next question is from Gary Prestapino with Barrington Research. Please go ahead.

Hey, good morning, everyone. Hey, Leroy, you put in all these price increases at the beginning of the year, right? Across your segments? Okay. In terms of the highest peak of where your input costs were, where did they really peak last year and then start to come down or

Well, I don't think we've actually seen them really come down at this point. I mean, when you look in a PC, which is where we were significantly underwater, you know, the biggest cost component that we have in there is copper. And so, you know, copper continues to bounce around that, you know, that $4 a pound level. And so, you know, that's, you know, at least $1.50 to $1.25 over sort of where we were at, you know, for a couple years there sort of pre-pandemic. So you have that with the expiring of the agreements that have enabled us to reset pricing and do some catch up there. But a lot of the other components that go into our micronized copper product, as well as some of our industrial products, they've all gone up considerably as well. and most of them have remained elevated. Some bounce around a little bit, but most have still remained elevated, so it was important for us to be able to get that price, hold on to it, and we'll see where the costs go as we look further beyond this year, but right now we're in a pretty decent position from a performance chemical standpoint. The big change in carbon materials and chemicals, which has a downstream effect on the RPS business, is is in the coal-tar raw material. And so with the elevated price of oil that was impacted that we saw basically coming out of the early parts of the pandemic and with the war in Ukraine, again, earthquakes in Turkey, decarbonization of steel, there's just a whole host of factors that have contributed to a tightening of raw material, which has increased the cost. which have increased, obviously, our cost of material on the seam and sea end. And so when we make creosote, it is at a significantly higher cost to produce than what it was prior to that. And that's obviously being used to treat railroad cross ties. And so it's not a coppers issue. It's an overall market and industry issue. And, you know, every treater out there is dealing with this issue and has a need to be able to recoup their costs to maintain a healthy business. You look to UIP and, you know, it was in the cost of freight, which we actually saw, you know, increased costs across the board there as well. Cost of preservative, certainly. And so, you know, in all these different businesses, you know, the need to be able to pass on our cost increases were significant. We were at different stages in each of them. know throughout the last couple years cmc um the way that business is sort of structured we were able to get out in front of a lot of the cost increases and that's why you saw the year they had this last year and and a little bit of a reversion back uh this year uip we were playing catch up but but but we're able to begin getting caught up at about this point last year And RPS, we're still behind. And so, you know, the hopes there is that we'll get caught up or certainly make a lot more progress before we get to the end of this year with PC basically, you know, getting caught up at the beginning of the year. So they've all been in different stages and in different timeframes. But we haven't really seen an easing, I would say, of any of our major cost components in any of our businesses at this point.

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 CEO Leroy Ball for any closing remarks.

I'd just like to thank again everybody for your continued confidence in COPPRS and we'll continue to work on executing on our strategy for 2025 and get to that $300 million of EBITDA while focusing on people, planet, and performance in our zero harm culture. So thanks everybody for tuning in today.

The conference is now concluded. you for attending today's presentation. You may now disconnect.