KP Tissue Inc. (KPT) (TSX: KPT) reports the Q3 2019 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 15.2% interest in KPLP.
KPLP Q3 2019 Business and Financial Highlights
- Revenue increased by 6.0% to $369.4 million in Q3 2019 compared to Q3 2018
- Adjusted EBITDA increased sequentially by 39.8% to $44.0 million from $31.5 million in Q2 2019, and increased by 35.3% from $32.5 million in Q3 2018
- TAD Sherbrooke facility progressing on time and on budget
- Amended Senior Credit Facility to increase overall borrowing capacity by $50 million
- Declared a quarterly dividend of $0.18 per share to be paid on January 15, 2020
“We are very pleased by our Adjusted EBITDA of $44 million for the third quarter, representing an increase of over 35% compared to the prior year. This solid performance reflects pricing across all business segments, higher sales volumes, and the benefits from our Operational Excellence (OpEx) program, all within a more favourable cost environment,” indicated Dino Bianco, KP Tissue CEO.
“As expected, the Away-From-Home (“AFH”) segment continued its trend of quarterly sequential improvements, while the Consumer segment was quite strong in both Canada and the U.S., with improved gross margins. The TAD Sherbrooke facility is on track as planned.
“While we did benefit from favourable input costs in the third quarter and we anticipate a similar dynamic for the fourth quarter, the trend in input costs could reverse itself in upcoming quarters. As we complete fiscal 2019 and think about 2020, we remain focused on building our brands, executing the OpEx program and AFH turnaround and completing the TAD Sherbrooke facility,” concluded Mr. Bianco.
KPLP Q3 2019 Financial Results
Revenue was $369.4 million in Q3 2019 compared to $348.6 million in Q3 2018, an increase of $20.8 million or 6.0%. The increase in revenue was primarily due to the benefit of pricing across all business segments in 2019 and higher sales volumes.
Cost of sales was $317.0 million in Q3 2019 compared to $311.4 million in Q3 2018, an increase of $5.6 million or 1.9%. Manufacturing costs increased primarily due to higher sales volume, the cost of outsourced manufacturing and higher maintenance spending, while lower pulp costs and the operational transformation initiatives had a favourable impact in the quarter. Freight costs decreased primarily due to lower carrier rates, particularly in the U.S. while warehousing costs increased compared to Q3 2018. As a percentage of revenue, cost of sales were 85.8% in Q3 2019 compared to 89.3% in Q3 2018.
Selling, general and administrative (SG&A) expenses were $25.8 million in Q3 2019 compared to $20.6 million in Q3 2018, an increase of $5.2 million or 25.3%. The increase was primarily due to increased compensation related costs compared to Q3 2018, and higher advertising and promotion expenses. As a percentage of revenue, SG&A expenses were 7.0% in Q3 2019 compared to 5.9% in Q3 2018.
Adjusted EBITDA was $44.0 million in Q3 2019 compared to $32.5 million in Q3 2018, an increase of $11.5 million. The higher Adjusted EBITDA resulted from the positive impact of pricing across all business segments, lower pulp costs and higher sales volumes along with the benefit from operational transformation initiatives, partially offset by unfavourable sales mix, the cost of outsourced manufacturing and maintenance costs, and higher SG&A costs.
Net income was $10.5 million in Q3 2019 compared to $4.2 million in Q3 2018, an increase of $6.3 million. The increase was primarily due to higher Adjusted EBITDA of $11.5 million as discussed above and a decrease in interest expense of $2.1 million, partially offset by restructuring costs of $1.6 million, an unfavourable change in amortized cost of Partnership units liability of $1.5 million, higher income tax expense of $1.2 million, and an unfavourable foreign exchange difference of $1.0 million.
more detail at: https://www.kptissueinc.com/gpc/_media/Document/kp-tissue-inc-q3-2019-earnings-release-eng-vf.PDF