KP Tissue Inc. (KPT) (TSX:KPT) reports the Q2 2018 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 15.9% interest in KPLP.
KPLP Q2 2018 Business and Financial Highlights
Revenue increased by 7.8% to $338.8 million in Q2 2018 compared to Q2 2017
Adjusted EBITDA was $26.7 million in Q2 2018 compared to $37.3 million in Q2 2017
Pulp and freight costs continued to escalate in the quarter
Announced a price increase in the Canadian consumer market effective mid-October
Declared a quarterly dividend of $0.18 per share to be paid on October 15, 2018
“We are pleased to report strong sales and volume growth for the quarter as we continue to maintain our market leadership position. Considering the significant negative impact of record-high pulp prices and freight costs on our results, we announced a price increase in the Canadian consumer business to take effect in mid-October. This increase is expected to provide a small benefit in our fourth quarter results and mainly impact 2019,” said Dino Bianco, CEO of KP Tissue and KPLP.
“During the second quarter, we made further progress on our value creation program, which, when combined with our recent capital projects, partially offset higher input costs. We do not expect changes in these challenging market conditions in the short-term and, consequently, anticipate third quarter Adjusted EBITDA to be lower than the same prior year period and also to reflect normal seasonality,” concluded Mr. Bianco.
KPLP Q2 2018 Financial Results
Revenue in Q2 2018 was $338.8 million, compared to $314.4 million in Q2 2017, an increase of $24.4 million or 7.8%. The increase in revenue was primarily due to increased sales volume and the Consumer selling price increase in Canada in Q4 2017, partially offset by the unfavourable impact of foreign exchange fluctuations on U.S. dollar sales.
Cost of sales in Q2 2018 increased to $304.9 million from $267.1 million in Q2 2017. Manufacturing costs increased primarily due to increased sales volume, significantly higher pulp costs and increased pension expense, partially offset by the favourable impact of foreign exchange fluctuations on U.S. dollar denominated costs and the benefits from cost reduction initiatives and capital projects. Freight costs increased primarily due to increased sales volume and higher carrier rates. As a percentage of revenue, cost of sales were 90.0% in Q2 2018 compared to 85.0% in Q2 2017.
Selling, general and administrative (SG&A) expenses in Q2 2018 were $20.1 million, compared to $22.5 million in Q2 2017. The decrease was primarily due to expense reductions. As a percentage of revenue, SG&A expenses were 5.9% in Q2 2018, compared to 7.2% in Q2 2017.
Adjusted EBITDA in Q2 2018 was $26.7 million, compared to $37.3 million in Q2 2017, lower by $10.6 million or 28.4%, due primarily to significantly higher pulp costs and increased freight costs. These were partially offset by increased sales volume, the Canadian Consumer selling price increase, the net favourable impact of foreign exchange fluctuations and the benefits from cost reduction initiatives and capital projects.
Net income in Q2 2018 was $1.6 million, compared to $9.9 million in Q2 2017, primarily due to lower Adjusted EBITDA of $10.6 million, an increase in interest expense of $1.7 million, a decrease in foreign exchange gain of $1.4 million and higher depreciation expense of $0.4 million. These items were partially offset by a decrease in the change in amortized cost of partnership units liability of $4.5 million and a decrease in tax expense of $1.7 million.
Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $64.5 million as of July 1, 2018, compared to $30.2 million as of April 1, 2018. KPLP issued $125 million of senior unsecured notes on April 24, 2018, and used the net proceeds to reduce the outstanding balance of the existing credit facility. KPLP also reduced the credit facility from $300 million to $200 million. With the issuance of the senior unsecured notes, total liquidity increased by $25 million.
KPT Q2 2018 Financial Results
KPT incurred a net loss of $1.3 million in Q2 2018. Included in the net loss was $0.3 million representing KPT’s share of KPLP’s income. The income was reduced by depreciation expense of $1.5 million related to adjustments to carrying amounts on acquisition, partially offset by an income tax expense of $0.2 million.
more detail at: http://ir.kptissueinc.com/news-releases/news-release-details/kp-tissue-releases-second-quarter-2018-financial-resultsaugust-9