# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_KOP_2018/NYSE_KOP_2018.mmd` · pages 2-8_

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Dear Fellow Shareholders:

In 2018, the Koppers management team took important steps to solidify the company's position as the global market leader in wood preservation technologies through two key acquisitions and the further restructuring of the Carbon Materials and Chemicals business. In four years' time, our company has gone from surviving to thriving, setting several new milestones along the way. To further illustrate that fact, thanks to the hard work and dedication of our 2,200+ employees around the world, we are proud to say that 2018 represented our:

• Best safety rate ever,

• Highest sales ever, and

• Highest adjusted profitability ever.

Koppers delivered $1.7 billion in sales, making 2018 our highest sales year on record, and a 16 percent improvement over the prior year. Excluding the impact of sales from acquired businesses, sales still increased by 5 percent. We generated $222 million in adjusted earnings before income tax, depreciation, and amortization (EBITDA), an all-time high for our company. We improved upon our prior-year adjusted EBITDA record by approximately $21 million, or 11 percent. This year marked our fourth consecutive year of adjusted EBITDA improvement, also the longest such streak in the company's history.

Safety results for 2018 show that our global team achieved the lowest total recordable rate in our history. Moreover, 19 of 47 operating locations had no recordable injuries in 2018, continuing to prove that Zero is indeed possible.

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As a company that recycles waste streams generated from other industries into critical production feedstocks, while also utilizing renewable resources for another significant portion of our raw material requirements, Koppers has long been at the forefront of sustainability.

## Deepening Our Safety Culture

Our Zero Harm safety culture continues to be the foundation for how we operate, as it becomes more deeply ingrained across our worldwide organization. Safety results for 2018 show that our global team achieved the lowest total recordable rate in our history, a 7 percent improvement over the prior year. Moreover, 19 of 47 operating locations had no recordable injuries in 2018, continuing to prove that Zero is indeed possible. Our serious incident precursors also continued to decline year over year, reaffirming our efforts to prioritize training around hazard identification.

During the course of the year, we continued to roll out new components of our ongoing safety leadership training, including the introduction of Life Saving Rules designed to help mitigate the most high-risk activities while giving our people greater peace of mind about their safety on the job. As we continue to expand the scope of Zero Harm efforts to include all our people, we will focus particularly on our front-line employees.

## Extending Our Sustainability Model

While safety remains at the forefront, Koppers is always working to create a more environmentally responsible future. As our long-term strategy continues to evolve, so too will our sustainability efforts. As a company that recycles waste streams generated from other industries into critical production feedstocks, while also utilizing renewable resources for another significant portion of our raw material requirements, Koppers has long been at the forefront of sustainability.

In 2018, we extended our sustainability business model even further through our acquisitions—M.A. Energy Resources (renamed Koppers Recovery Resources) and Cox Industries (renamed Koppers Utility and Industrial Products)—with both businesses adding product life cycle management capabilities to help solve our customers' challenge of responsibly disposing of end-of-life crossties and utility poles.

## Leveraging Our Unified Focus, Diversified Portfolio

At Koppers, we have a Unified Focus, building on our reputation as a global leader in wood treatment technologies and continuing to expand our presence in attractive end markets. Our competitive advantages include a vertically integrated business model, premier brands, quality customer service, and strong capabilities in research and development, among many others.

Additionally, we offer a Diversified Portfolio of wood preservation technologies, which includes lifecycle management services through the responsible disposal of treated wood products. Koppers disposal services for used crossties and utility poles help solve a growing concern for railroads and utilities due to potential exposure to environmental liabilities if done improperly. Our program provides considerable benefits in risk management and long-term cost savings to the rail and utility sectors. Moreover, our approach of recycling used wood products—including as a fuel source—can further improve the environmental footprint of end-of-life ties and poles, contributing to a more sustainable environment.

Through a combination of strategic initiatives and integration synergies, we expect to deliver $25 million to $40 million in annualized benefits over five years, with $10 million to be realized in 2019.

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We will continue to play to our strengths in terms of managing our portfolio and enhancing the value of our overall brand.

## Demonstrating Our Core Competencies

As part of optimizing our business, we continue to evaluate a number of opportunities to improve efficiencies in our operational processes, people and facilities. With 18 treating facilities operating at less than full utilization, our goal is to either capture more volume through the existing facilities or consolidate our operating footprint. We are pursuing actions for both aspects, which should begin realizing bottom-line benefits in 2019. Overall, through a combination of strategic initiatives and integration synergies, we expect to deliver \(25 million to \)40 million in annualized benefits over five years, with $10 million to be realized in 2019.

We are also intensely focused on our balance sheet. One of our core competencies is managing our leverage. For example, we reduced leverage by two full turns to get to 3.1 times during the 2015-2017 period. Our goal is to return to a net leverage ratio of 3 times by the end of 2020. To achieve that, I believe we have a number of levers. As a first step on that journey, we intend to reduce our net debt by a minimum of $80 million in 2019.

Additionally, we will continue to play to our strengths in terms of managing our portfolio and enhancing the value of our overall brand. In the past five years, we have made acquisitions, divested non-core businesses, streamlined our production footprint, minimized our exposure to legacy liabilities, and invested in the construction of a new naphthalene unit at our facility in Stickney, Illinois. At the same time, Koppers has been transformed into a world leader in wood protection solutions while reducing risk in our operations and significantly improving our financial profile.

## Looking to the Future

Like all companies, we deal with departures each year that require us to adapt and prepare for leadership changes. It was a particularly difficult year for us in that regard. In June, our Treasurer, Louann Tronsberg-Deihle, passed away unexpectedly as the result of an illness. Louann was an important part of the success we have achieved, and her blend of optimism and tenaciousness will forever be a part of our organization as we move forward. Also, two of our executives retired at the end of the year. Tom Loadman, Senior Vice President, Railroad Products and Services, served our company for 39 years as one of the most respected leaders in the railroad industry, and his steady guidance will be sorely missed. Steve Reeder, Senior Vice President, Performance Chemicals, retired after 33 years with the company including his service at Osmose, which we acquired in 2014. His career was marked by hard work and humility, a rare combination to find nowadays. Both Tom and Steve brought much to Koppers, and thankfully left their mark through the positive influence they had on many individuals throughout our company—including me.

I would like to thank our Board of Directors for their infinite commitment, wisdom, and enthusiasm. We have had several changes to our Board during this past year. In October 2018, David Hillenbrand resigned from our board for personal and health-related reasons after serving as Chairman for 10 years and as a member of the Board since 2004. I thank him for his expert leadership over the years and wish him the very best. I will never forget his strong support as I was transitioning to the CEO role during a trying time in our company's history. Subsequently, Steve Tritch was elected as Chairman of the Board, having served as a member of our Board since 2009. I look forward to continuing to benefit from his guidance as we evaluate opportunities for growth and focus on executing our strategic priorities.

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We are well-positioned to realize further organic and market share growth in our core businesses, benefit from additional contributions from current and future acquisitions, and achieve meaningful savings from identified operational efficiencies and synergies—all launched from a foundation of market leadership in wood-based technologies and strengthened by our product life-cycle management process.

In addition, we welcomed three new Directors as part of our Board succession process to prepare for the upcoming retirements of the Honorable Cynthia Baldwin and T. Michael Young in May 2019. Both Cynthia and Mike have contributed immensely to the success of Koppers over the years at the Board level and their collective experience will be missed as the company continues its evolution. Our three new Board members are:

• Traci L. Jensen, Senior Vice President, Global Construction Adhesives, at H.B. Fuller Company,

• David L. Motley, General Partner with BlueTree Venture Fund, a Pittsburgh-based venture capital firm, and

• Sonja M. Wilkerson, Executive Vice President and Human Resource Officer, at Bloom Energy Corporation.

Each of these accomplished leaders brings a different background enhanced by his or her own unique experiences, which further add to the depth and diversity of what continues to be a very strong board.

During the past year, Koppers met the challenges of 2018, a year when we examined, evaluated, and re-energized our enterprise. When I stepped into the CEO role in 2015, I made a commitment that our goal would be to achieve profitable growth averaging between 11 percent to 15 percent adjusted EBITDA margin through an economic cycle. At the time, we had not achieved this since 2010, when it was at the low end of that profitability range. Now, 2018 represents the third straight year that we have solidly delivered strong margin performance, finishing this past year at 13.0 percent. In addition, our 2018 results signified the fourth consecutive year of adjusted EBITDA improvement—the longest record in Koppers history.

With 2018 officially in the books, we look ahead to how we can continue to build upon the success we have already achieved. As we envision the coming years, we are well-positioned to realize further organic and market share growth in our core businesses, benefit from additional contributions from current and future acquisitions, and achieve meaningful savings from identified operational efficiencies and synergies—all launched from a foundation of market leadership in wood-based technologies and strengthened by our product life-cycle management process. For these reasons and more, I remain excited about the future of Koppers and honored to continue leading us down the path of sustained excellence.

I want to conclude by extending a deep thanks to our shareholders who endured a challenging year of share price performance that unfortunately did not mirror the success we had in so many other areas. My management team and I take such results personally and vow to continue doing everything in our power to strategically position the company for future success in all facets of performance to reward your patience and faith in us.
Sincerely,

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Leroy M. Ball

President and Chief Executive Officer