Koppers Holdings Inc. (NYSE:KOP) Q2 2018 Earnings Conference Call - Final Transcript
Aug 09, 2018 • 11:00 am ET
(Operator Instructions) Roger Spitz, Bank of America Merrill Lynch.
Can you remind us how, with Class I crosstie volumes going lower, as customers -- or the customer moves from a fully treated crosstie from the treatment-only service model? It sounds like that would increase volume, but maybe I'm not understanding that correctly.
So the two are actually separate, right. So the industry has been moving now for some time to a treated tie model. And as you transition, you're basically taking untreated work -- untreated crosstie working capital, that is on the railroad books and essentially, over time, converting it into our working capital. And so rather than bifurcating the sales process into an untreated tie, and then the treatment preservative and treatment process, you are now waiting until the end, carrying all the working capital and selling a fully treated tie. So you have to work through their inventory to get to the point where you are now selling a fully completed product as opposed to just the treatment process and the treatment preservative. So when we talk about the industry itself demonstrating lower demand, it doesn't have anything to do with that change in the business model, it's more just a relative demand dynamic as they have pulled back on their tie insertions over the past year or so. So we've seen a step back in demand from that, but that's unrelated to the tie program.
Okay. All right. I was planning to tie them together, but that was incorrect.
And phthalic anhydride volumes, maybe you mentioned this in the prepared remarks, but why were those volumes are down?
It's a good question, we have a good portion of that market. Sometimes we -- again, we just see some shifts and changes in a given quarter. I'd say our volumes really overall have been down across basically all of our product categories as we've scaled back and essentially shrunk our operating footprint; so some of that could be due to just us contracting in the volume that we're actually producing and some of it is likely market related, but I don't have a specific answer to point to. I'd say, overall, the business is pretty healthy, so even the fact that volumes might be down, obviously when you take everything into account the markets in general have never really been better.
Obviously, I answer same on the covering pitch volumes, and I don't think this has to do with your past shutdowns because I think that's been fully anniversaried. So -- or maybe is that incorrect, that has not been part of the reason volumes are down across the segment is partly due to the higher shutdowns?
Well, you know we operate around the globe and again, different regions are going to be in different spots at different time. I did mention the fact that our China business essentially did very little activity in the second quarter as our large customer was working through their maintenance turnaround; so