KP Tissue 3Q 2019 Results: Revenue up 6 percent from Year ago to CDN$369.4 Million

KP Tissue has reported 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 US consumer tissue business with the White Cloud brand and premium private label products. KPT currently holds a 15.2 percent interest in KPLP.

Revenue increased by 6.0 percent to $369.4 million in Q3 2019 compared with Q3 2018.

Adjusted EBITDA increased sequentially by 39.8 percent to $44.0 million from $31.5 million in Q2 2019, and increased by 3% from $32.5 million in Q3 2018. TAD Sherbrooke facility progressing on time and on budget.

“We are very pleased by our adjusted EBITDA of $44 million for the third quarter, representing an increase of over 35 percent 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 favorable 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 US, with improved gross margins. The TAD Sherbrooke facility is on track as planned.

“While we did benefit from favorable 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.

Revenue was $369.4 million in Q3 2019 compared with $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.

Adjusted EBITDA was $44.0 million in Q3 2019 compared with $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 unfavorable 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 with $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 unfavorable change in amortized cost of Partnership units liability of $1.5 million, higher income tax expense of $1.2 million, and an unfavorable foreign exchange difference of $1.0 million.

KPT had a net loss of $0.4 million in Q3 2019. Included in the net loss was $1.6 million representing KPT’s share of KPLP’s net income, depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition and an income tax expense of $0.7 million.

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