Koppers (KOP) Acquires Brown Wood to Boost Utility Business
Koppers Holdings Inc. KOP recently announced that its subsidiary, Koppers Utility and Industrial Products Inc. (UIP), entered into an agreement to acquire the majority of assets belonging to Brown Wood Preserving Company, Inc. and select affiliates. The acquisition, valued at approximately $100 million in cash, is anticipated to be completed in the second quarter of 2024, pending customary closing conditions.
Brown Wood specializes in the manufacture and distribution of pressure-treated wood utility poles. Upon completion of the transaction, Brown Wood will be integrated into Koppers' operations, enhancing its service offerings and expanding its geographic presence. James Sullivan, president and chief operating officer of Koppers, expressed enthusiasm for the integration, emphasizing the potential synergies and expanded capabilities it brings to Koppers' utility business.
Koppers highlighted the strategic significance of the acquisition, aligning with its strategic goal to bolster its utility pole treatment business through organic growth and acquisitions. While the acquisition may not significantly impact 2024 financial results due to timing and integration expenses, Koppers anticipates that it will help it achieve an adjusted EBITDA in the range of $315-$325 million in 2025.
The acquisition agreement outlines that Koppers will purchase Brown Wood for a base price of $100 million in cash, subject to customary adjustments. Financing for the transaction will be sourced from a combination of cash reserves and borrowing capacity. Following the completion of the acquisition, Brown Wood will function as a part of Koppers Utility and Industrial Products.
Shares of Koppers are up 49.5% in the past year compared with the industry’s fall of 12.4% in the same period.
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In the fourth quarter, Koppers reported adjusted earnings of 67 cents per share, excluding one-time items, compared to $1.09 per share a year ago, falling short of the Zacks Consensus Estimate of 72 cents. However, the company saw a 6% year-over-year increase in revenues, totaling $513.2 million, surpassing the Zacks Consensus Estimate of $496 million. The upside was primarily driven by record sales in the Railroad and Utility Products and Services segment, which can be attributed to higher pricing and volumes.
Looking ahead to 2024, Koppers anticipates sales to reach approximately $2.25 billion, with adjusted EBITDA expected to be around $275 million for the year. The company forecasts adjusted earnings per share in the range of $4.60-$4.80 for 2024, along with capital expenditures of approximately $100 million for the year.
Koppers Holdings Inc. Price and Consensus
Koppers Holdings Inc. price-consensus-chart | Koppers Holdings Inc. Quote
Zacks Rank & Key Picks
Koppers currently carries a Zacks Rank #3 (Hold).
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