Mississauga (ON), May 10, 2019 - KP Tissue Inc. (KPT) (TSX: KPT) reports the Q1 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 15.5% interest in KPLP.
KPLP Q1 2019 Business and Financial Highlights
- Revenue increased by 8.4% to $351.0 million in Q1 2019 compared to Q1 2018
- Adjusted EBITDA was $23.6 million in Q1 2019 compared to $30.7 million in Q1 2018
- Pulp costs remained high in the quarter
- TAD Sherbrooke Project progressing on time and on budget
- Declared a quarterly dividend of $0.18 per share to be paid on July 15, 2019
“In the first quarter we posted solid revenue growth driven by both higher volume and the benefit from price increases. Given higher year-over-year input costs, we are very pleased by the performance of our consumer segment supported by the strength of our brand recognition and position. However, the Away-from-Home segment recorded disappointing results as it was negatively impacted by input costs, capacity-driven cost challenges and a competitive market, indicated Dino Bianco, CEO.
“In recent weeks, we started the site excavation for the TAD Sherbrooke Project. At this time, we have also purchased or contracted for most of the assets required for the project. In fact, this year we expect to invest between $250 and $275 million of the total project cost of $575 million.
“Looking forward, we have prioritized some operational excellence initiatives across the business, which we anticipate benefiting from in the second half of the year. We continue to invest in our business to build long-term value,” concluded Mr. Bianco.
Outlook KPLP will benefit from the Consumer Canada price increase implemented in Q4 2018, along with the Consumer US and Away-From-Home price increases announced in 2019. These price increases combined with cost reduction initiatives are expected to largely offset the continued high input costs and unfavourable impacts of foreign exchange fluctuations. For Q2 2019, Adjusted EBITDA is forecast to show sequential improvement compared to Q1 2019 while being lower than Q2 2018.
KPLP Q1 2019 Financial Results
Revenue was $351.0 million in Q1 2019 compared to $323.7 million in Q1 2018, an increase of $27.3 million or 8.4%. The increase in revenue was primarily due to the favourable impact of increased sales volume, the Consumer Canada price increase implemented in Q4 2018 and the benefit of foreign exchange fluctuations on U.S. sales.
Cost of sales was $320.1 million in Q1 2019 compared to $286.0 million in Q1 2018, an increase of $34.1 million or 11.9%. Manufacturing costs increased primarily due to increased sales volume, significantly higher pulp costs, the unfavourable impact of foreign exchange fluctuations on USD denominated costs and the cost of outsourced manufacturing. Freight costs were essentially flat in Q1 2019 compared to Q1 2018 and warehousing costs increased. As a percentage of revenue, cost of sales were 91.2% in Q1 2019 compared to 88.4% in Q1 2018.
Selling, general and administrative (SG&A) expenses were $22.1 million in Q1 2019 compared to $22.5 million in Q1 2018, a decrease of $0.4 million or 2.0%. The decrease was primarily due to lower advertising and promotion expenses. As a percentage of revenue, SG&A expenses were 6.3% in Q1 2019 compared to 6.9% in Q1 2018.
Adjusted EBITDA was $23.6 million in Q1 2019 compared to $30.7 million in Q1 2018, a decrease of $7.1 million. The decrease was primarily due to significantly higher costs for pulp and unfavourable net foreign exchange, which were partially offset primarily by higher sales volume and pricing.
Net loss was $3.2 million in Q1 2019 compared to net income of $1.6 million in Q1 2018, a decrease of $4.8 million. The decrease was primarily due to lower Adjusted EBITDA of $7.1 million as discussed above and a lower income tax recovery in Q1 2019 compared to Q1 2018 of $0.9 million, partially offset by a positive change in amortized cost of Partnership units liability of $1.2 million, a decrease in interest expense of $1.4 million and lower depreciation expense of $0.6 million.
Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $167.5 million as of March 31, 2019, compared to $178.7 million as of December 31, 2018. The March 31, 2019 balance includes $119.5 million of cash and cash equivalents held by KPSI and committed to the TAD Sherbrooke Project.
KPT Q1 2019 Financial Results
KPT had a net loss of $2.0 million in Q1 2019. Included in the net loss was $0.5 million representing KPT’s share of KPLP’s loss, depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition and an income tax expense of $0.1 million.
Dividends on Common Shares
The Board of Directors of KPT declared a quarterly dividend of $0.18 per share to be paid on July 15, 2019 to shareholders of record at the close of business on June 28, 2019.
Source: KP Tissue