Document Eqb1oyN1807nMdneqrRNMrk9V

7 Anomer challenge io wmch the Com pany can resoond lies m me largest segment of ihe 'J.5. coke industry--Blast furnace coke used by steel orooucers. Since :975,' 15% oi the inaustry's coKing cacacity has been shut down by a combination of envi ronmental regulations ana agmg facilities. .Numerous other plants nave suffered low ered production due to environmental pressures. The outlook is further darkened by the fact that 40% of domestic furnace coke production comes from facilities at least 25 years old. which is the approximate life expectancy of a furnace coke battery. As a result, the American steel industry imported a record 5.5 million tons of furnace coxe m 1978 to maintain primary steei pro duction at 85% of total capacity. Substan tially more coke will be needed in 1979. Much of this imported furnace coke comes from large inventories that had been built pri marily in Europe and that will not be availa ble beyond 1980. Contracts for construction of new fur nace coke capacity have been at a low level for more than two years, as steel producers have 'acea depressed operating rates, rising costs, a growing volume ol imported steel and increasingly complex environmental reg ulations at all levels of government. Obvi ously, this situation will have to be remedied if the industry is to remain viable. Koppers is positioned to participate in the expected turnabout. Road Materials. More than 20% of Koppers capital expenditures over the past five years have gone into expansion of road materials caoacity. in an industry essentially composed of regional markets, the Com pany's long-range objective is to become a nationwide integrated supplier of materials for construction and maintenance. More than one-half of the 3.8-millionmile U.S. road system is unpaved. Accord ing to the Federal Highway Administration, roads and streets are wearing out half again as fast as they are being replaced. About 900.000 miles ot roads urgently need repair or upgrading. Many parts of the interstate highway network are 20 years old. as against an av erage life expectancy of 16 years for paved road surfaces. Some 28,000 miles of the 38,900 now open do not meet current safety and other standards, and about 5.000 miles need to be resurfaced. Over-all, Koppers foresees that the moderate rise in public and private construc tion expenditures after a slowdown in 1975 and 1976 will develop into a much more rapid expansion in the 1980s. Engineered Metal Products. Capital investment in Engineered Metai Products over the past live years has prougnt aDout an extension of caoaou'ties. progressing from machinery ccmconents to cdmoiete machinery systems. in KcCDers masor comoone.o! line-- piston rings ana se3is--capacity nas risen by 40% since 1973 anc is undergoing con tinual expansion to succiy the 10% annual growth in demand exoected over me next several years. A woricwioe trend toward diesel power is prooeiimg this growth. Despite the current depressed state of investment in the ore processing industry, there will be pressure m a resource-nungry world to enlarge tne search for minerals and to use them more efficiently. Mineral proc essing systems maoe by Koppers should be increasingly active m this effort. The Company's SPROUT-WALDRON specialized food and feed processing ma chinery will find growing applications in areas that have large agricultural potentials. Particularly promising opportunities exist m the developing nations of the world as they progress toward more efficient food and grain processing. From SPROUT-WALDRON'S process technology has come tnermomechanical pulping (TMP). Applied in papermaking, TMP uses steam and pressure to convert wood chips to pulp with higher productivity and greater economy, with no environmental problems. The drive to improve and protect the en vironment has become an integral part of our culture and is being stimulated by efforts to conserve and recycle energy and natural resources. These trends will continue to pro vide growth opportunities for Koppers envi ronmental systems. Organic Materials. Allocation of a sig nificant portion ol Koppers total capital in vestment since 1973 has substantially in creased output of such traditional coalderived products as carbon binder pitch and various resms and industrial chemicals. These products are vital to the basic indus tries to which they are sold. From its chemical base. Koppers maxes some 60 lypes of polyester resms, which are used to form strong. Iightweignt. auraoie re inforced and unremforced clastic procucts being used in many industries to reouce weignt and thereby conserve energy. This year. Koppers will boost caoacny by 25% to neip nandie sales that nave grown by 15% a year. KMM roofing membrane, a relatively re cent addition to the Company's mix of offerings, was developed for use on sicoed roofs as well as flat, it enables Koppers to serve a far greater segment of the large North American roofing market. It is aootied cold and forms a monolithic membrane mat shuts out moisture. By speeding installation and cutting costs, it provides comoeutive ad vantages that should enable Koopers to fare well in the strong construction market ex pected over the years ahead. Forest Products. Koppers has main tained its position as the world's leading supplier of pressure-treated wood oroaucts. It has done so in anticipation of greater ac ceptance of these materials as oermanent building products. This also will serve as a base for our continuing interest in expanding our position as a supplier in the light indus trial and residential construction markets. Our expertise lies not only in the manufac ture of laminated and chemically treateo end products, but in the chemistry that underlies the process. Koppers should profit also from a -J.S. market for crossties that will be strengthened by the revival of long-deferred programs for railway roadbed improvement. Crossties ac count lor approximately 40% of Koppers pressure-treated wood sales and. as an indi cation of how this market is expected to im prove over the next decade, demand for crossties by Class I railroads should grow to 30 million ties per year, up from the current 25 million. These are only a few ol the areas m which Koppers capital investment strategylaunched in the mid-1960s to establish a solid base for diversity in manufacturing businesses--has paid off. As a result, me Company now enjoys the financial strength needed to take advantage of future oppor tunities. There is no cut-off point in this program. Koppers will continue lo use its strength m cash flow growth as the seed for further expansion. -.V