KP Tissue Releases First Quarter 2020 Financial Results

KP Tissue Inc. (KPT) (TSX: KPT) reports the Q1 2020 financial and operational results of KPT and Kruger Products L.P. (KPLP). Kruger Products is Canada’s leading manufacturer of quality tissue products for the Consumer market (Cashmere, Purex, SpongeTowels, Scotties, and White Swan) and the Away-From-Home market, and continues to grow in the U.S. Consumer tissue business with the White Cloud® brand and premium private label products. KPT currently holds a 14.8% interest in KPLP.

KPLP Q1 2020 Business and Financial Highlights

  • Revenue increased by $24.1 million or 6.9% to $375.1 million in Q1 2020 compared to $351.0 million in Q1 2019. Excluding the divested Mexico business, Q1 2020 revenue increased by $50.2 million or 15.5%.
  • Adjusted EBITDA was $51.0 million in Q1 2020 compared to $23.6 million in Q1 2019, an increase of 116.4%.
  • TAD Sherbrooke site temporarily shutdown for one month due to COVID-19 pandemic, progressing well after restart.
  • Declared a quarterly dividend of $0.18 per share to be paid on July 15, 2020.

“In response to COVID-19, our company activated our pandemic response and business continuity plans early to ensure we could meet the increased demands while keeping our people safe. Our primary focus is on the safety of our people and we implemented significant practices to ensure we meet this challenge. On business continuity we have built several contingency plans and increased raw material supplies to manage any potential disruption,” stated KP Tissue Chief Executive Officer, Dino Bianco.

“We no doubt had an exceptional quarter driven by unprecedented consumer demand for all our products due to the COVID19 pandemic. As a result, Adjusted EBITDA was $51.0 million, up 116% over last year. We are proud that our employees successfully managed the tremendous surge in demand, under very challenging conditions and with all the uncertainty surrounding the COVID-19 crisis. Our plants ran full out to keep pace and performed very well, so we could continue to deliver essential products to our valued customers and consumers. This performance also reflects the benefits and progress of the OpEx program put in place early last year.

“We saw increased demand in all our categories as consumers stocked up and used more product at home given work from home mandates and increased hygiene, particularly in paper towels and facial tissue. We expect this demand spike will partially reverse in the coming months as consumers get back to work and are well stocked on tissue products. The Awayfrom-Home (“AFH”) segment is expected to face strong headwinds as end user markets have been severely impacted by COVID-19.

“Work on the TAD Sherbrooke construction site was temporarily halted for COVID-19 but resumed in late April. At this stage, we believe this interruption will not have any material impact on the timeline and budget of this project. The pandemic has clearly heightened the strategic importance of the TAD Sherbrooke facility and the new capacity it provides,” concluded Mr. Bianco.

KPLP Q1 2020 Financial Results
Revenue was $375.1 million in Q1 2020 compared to $351.0 million in Q1 2019, an increase of $24.1 million or 6.9%. The increase in revenue was primarily due to volume increases in Canada and the U.S., resulting primarily from COVID-19 buying activity, and the impact of favourable sales mix, partially offset by lower prices in the Consumer segment and no volume from Mexico as a result of the share sale at the end of Q3 2019. Mexico revenue in Q1 2019 was $26.1 million. Excluding the Mexico business, revenue increased by $50.2 million or 15.5%.

Net income was $8.4 million in Q1 2020 compared to a net loss of $3.2 million in Q1 2019, an increase of $11.6 million. The increase was primarily due to higher Adjusted EBITDA, partially offset by a foreign exchange loss on USD debt, expense from the change in amortized cost of partnership units liability and consulting costs related to operational transformation initiatives.
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