# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_KOP_2020/NYSE_KOP_2020.mmd` · pages 2-8_

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Dear Fellow Shareholders:

For Koppers, 2020 brought a number of undeniable strengths to the forefront despite the difficulties and challenges associated with the COVID-19 pandemic: the power of our strategy, the dedication of our worldwide team, and the connection between our people-first culture and achieving outstanding results.

The core attributes of Koppers – Enduring, Essential, and Sustainable – combined to produce record results in our underlying safety metrics and our financial performance in 2020, even amid a global pandemic.

We are proud to report that 2020 marked the all-time best core Zero Harm safety performance at Koppers. Despite difficult conditions, our team members all over the world elevated their attention and actions regarding protecting themselves and their colleagues to new levels across our company. We saw increased diligence to COVID-19 protocols, which included providing personal protective equipment, encouraging employees to work remotely wherever possible, and adding a new Life Saving Rule regarding pandemic-related preventative practices in the workplace.

This year validated our belief that placing the care and protection of our people, communities, and environment first creates a culture of enhanced performance overall.
We delivered record results in a number of financial metrics, excluding Koppers (Jiangsu) Carbon Chemical Company Limited (KJCC), which was divested in September 2020, as highlighted below:

• Consolidated sales of $1.7 billion, marking our fourth consecutive year of growth, resulting in a record sales year.

• Operating profit of $157 million, also a record year, achieving a 25 percent increase from prior year results.

• Adjusted EBITDA (earnings before income tax, depreciation, and amortization) of $211 million, a record year.

• Adjusted EBITDA margin of 12.6 percent, our highest since 2017, and the fifth consecutive year in the 12 percent to 14 percent range.

• Diluted earnings per share of $5.71, our highest since 2008.

• Adjusted earnings per share of \(4.12, another record, representing a 30 percent increase from prior year and including \)9.5 million in SG&A cost savings.

• Operating cash flow of \(127 million, the second-highest ever; operating cash flows have exceeded \)100 million in five of the past six years.

• Record amount in debt paydown, reducing net debt by $131.5 million.

• Reduced net leverage ratio to 3.5, compared with 4.3 at prior year.

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Delivering our best year in safety, operating performance, and profitability did not happen by chance. It was driven by the steps we have taken to create and deliver upon a strategy that leveraged the enduring, essential, and sustainable elements of our business model.

## ENDURING: We delivered record performance despite challenging market environments.

Despite the many issues related to COVID-19, our business model held firm and our strategy led the way to historic highs in 2020:

• Performance Chemicals achieved record sales and profitability due to strong demand for its wood-treatment preservatives driven by a robust home repair and remodeling pipeline in the United States.

• Railroad and Utility Products and Services generated year-over-year sales growth and increased profitability, due to a continued need to bolster the rail and utility infrastructure which resulted in increased crosstie volumes and pricing, higher volumes of utility poles in the U.S. and Australia, and generally improved conditions in most maintenance-of-way businesses.

• Carbon Materials and Chemicals experienced overall weakness in its industrial markets brought on by the early economic shock of the pandemic and still managed to rebound to produce double-digit profit margin performance for the year.

• We completed the sale of KJCC despite handling the majority of the transaction virtually, exiting a non-core business and applying the proceeds to reduce debt.

• Our relentless focus on optimizing our operations and distribution network resulted in the decision to consolidate our crosstie treating footprint by ceasing production activities at our Denver, Colorado, treating facility and transitioning production to our facility in North Little Rock, Arkansas (NLR). The resulting benefits enabled us to secure a key Class I contract extension and commit to investing over $40 million of capital improvements over several years to significantly upgrade and modernize the NLR facility.

## ESSENTIAL: We provide products and services that build and support the backbone of our global infrastructure.

While our customers always saw Koppers as essential, it took a global pandemic to make it official. Koppers was deemed an "essential" business, enabling us to continue providing critical products and services across our global footprint, and serving elevated demand levels for our residential treatment preservatives, which largely contributed to our record-setting performance in 2020.

Variations of Koppers products have been around for over 100 years and are key to the construction and enhancement of infrastructure projects around the world. That means providing utility poles to keep power and digital connectivity flowing, supplying products and services so the North American railway network may safely ship products and goods to markets, manufacturing high-demand materials and chemicals crucial to infrastructure and transportation markets, and producing wood treatment preservatives for the home construction and repairs, industrial, and agricultural markets. Koppers reputation as a long-standing leader in its markets has made these products an essential part of the global economy since the end of the Second Industrial Revolution. While our business portfolio may be considered mature, we know that we are crucial in the global economy, as was unequivocally confirmed in the COVID-19 crisis.

Delivering our best year in safety, operating performance, and profitability did not happen by chance. It was driven by the steps we have taken to create and deliver upon a strategy that leveraged the enduring, essential, and sustainable elements of our business model.

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Leadership Council \( ^{(1)} \) 

## SUSTAINABLE: We are committed to creating a better future.

We define Sustainability as our responsibility to be future-focused as a thriving long-term partner to our varied stakeholders through the value we place on people, planet, and performance. In 2020, we built on this history by further ramping up these efforts. As our world continues to face increasingly complex challenges, Sustainability has evolved from an aspiration to an expectation as society-at-large begins to align around its critical importance. Realizing that what we do and how we do it will have lasting impact, we therefore approach Sustainability with the following goals:

• We Value People – by protecting individuals and communities while preserving the future of our workforce. We believe that the way an organization interacts with people strongly influences its long-term viability and success. Our Zero Harm safety systems place the health and welfare of our people first and drive our people-first culture. We were also pleased to increase financial rewards to many team members so crucial to our success in an extremely challenging year. Early in 2020, we added leadership to build a more inclusive environment and broaden and elevate a more diverse talent base to mirror more closely that of the communities where we operate. We saw a continuation in 2020 of our longstanding tradition of active community involvement, with Koppers team members worldwide participating in programs and fundraising campaigns to support those impacted by COVID-19 – a further reflection of the value we place on people both inside and outside of Koppers.

• We Value the Planet – by protecting infrastructure while preserving the environment. As an American Chemistry Council Responsible Care \( ^{®} \)  company, we take our obligation to the environment seriously. Through our product stewardship process, we work to improve the production and handling of our products in ways that represent value to our essential customer base. This past year we worked closely with the utility industry to help them transition from the non-Koppers produced preservative (pentachlorophenol) now being phased out of production. We introduced DuraClimb \( ^{®} \)  poles, a more attractive product at an affordable price that addresses the issue of climbability for utility

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workers. We continued to invest in improving our safety and environmental footprint, putting $14 million of capital toward these efforts in 2020, with another $29 million expected to be spent in 2021.

• We Value Performance – by protecting shareholder value while preserving stakeholder interests. By focusing on an integrated business model that provides essential products and services to a diverse range of industries that primarily serve infrastructure, we have demonstrated consistent financial improvement over the past six years, reaching our peak during a global pandemic. Better yet, we believe we have room to grow, based on the strong foundation that we have in place. Through efforts to enhance our product portfolio, optimize our network, expand our footprint in regions we don't currently serve, build upon the circular nature of our business model, realign our business portfolio, and strengthen our balance sheet, we believe we have a credible path to $300 million in EBITDA generation by the end of 2025.
CONCLUSION: We are a compelling investment with a sound strategy, a history of strong execution, and attractive growth opportunities.

In many ways, 2020 felt like the ultimate justification for the strategy we embarked upon nearly six years ago to become the global leader in wood technologies. Just as we were completing a few of the remaining initiatives, we faced a global pandemic. We quickly found our footing, saw the importance of what we bring to the global economy, and forged ahead toward record-setting performance. It was disappointing that the financial markets failed to recognize our resilience, putting us in the penalty box early in the year and not letting us out, despite outperforming the majority of our peers. We are poised for shareholder value creation as we emerge from the pandemic even stronger and with many initiatives in progress to collectively add significant growth in the future.

My gratitude goes to our Board of Directors, whose counsel helped guide us through a year like no other. Koppers is fortunate to have such

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Board of Directors \( ^{(2)} \)

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wisdom and experience on our Board, and the input from our Directors remains an invaluable component of our success. Through the grit and determination of our team across the globe, we confidently move forward with a unified purpose of Protecting What Matters and Preserving The Future. That simply means doing the right things the right way for the right reasons, and continuing to deliver on our enduring, essential, and sustainable business model so that we can continue to thrive by creating value for all our stakeholders. Of the many accolades Koppers received in 2020, one of the most affirming and rewarding came with our designation for the first time by Newsweek magazine as being among America's Most Responsible Companies.

This past year saw several key longtime employees retire after long and successful careers, most notably our former Chief Administrative Officer, Steve Lacy, who retired after 19 years with the company. Of Steve's many contributions to Koppers success, perhaps none was as significant as the sale of KJCC. His calm and steady leadership, friendly demeanor, and sense of humor will be missed by his many friends at Koppers and throughout the industries we serve.

While we were fortunate to not lose any employees to COVID-19, several people we care about did lose friends and family members. Our hearts go out to all who have had to deal with the loss of a loved one, whether directly or indirectly, as a result of this virus. While we can't turn back time, we can look forward toward a more hopeful future where we retain the best of life's lessons from this past year – reconnecting with the outdoors, the reminder that all professions hold value, and the importance of time with family – to create a better tomorrow.

Thank you for your investment in Koppers.

Sincerely,

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Leroy M. Ball
President and Chief Executive Officer

We are poised for shareholder value creation as we emerge from the pandemic even stronger and with many initiatives in progress to collectively add significant growth in the future.

## (1) Leadership Council

Front, left to right:

Daniel Groves
Vice President,
Culture and Engagement

James Sullivan
Executive Vice President and
Chief Operating Officer

Leslie Hyde
Senior Vice President and
Chief Sustainability Officer

Tushar Lovalekar
Vice President,
Information Technology

Back, left to right:

Quynh McGuire
Vice President,
Investor Relations

Michael Zugay
Chief Financial Officer

Leroy Ball
President and Chief
Executive Officer

Joseph Dowd
Global Vice President,
Zero Harm

Stephanie Apostolou
General Counsel and
Secretary

## (2) Board of Directors

Front, left to right:

Traci Jensen
Vice President
Global Business Process
Improvement
H.B. Fuller Company

David Motley
Managing Partner
Bluetree Venture Fund

Stephen Tritch
Non-Executive
Chairman of the Board
Retired Chairman
Westinghouse Electric
Company

Xudong Feng
Director of Science and
Technology and Global
Analytical Sciences
PPG Industries, Inc.
Back, left to right:

Albert Neupaver
Chairman
Westinghouse Air Brake
Technologies Corporation

Louis Testoni
Former Lake Erie
Managing Partner
PricewaterhouseCooper LLP

Leroy Ball
President and Chief
Executive Officer
Koppers Holdings Inc. and
Koppers Inc.

Sonja Wilkerson
Executive Vice President and
Chief Human
Resource Officer
Bloom Energy Corporation