KP Tissue Inc. (KPT) (TSX:KPT) reports the Q1 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 Q1 2018 Business and Financial Highlights
•Revenue increased by 11.9% to $323.7 million in Q1 2018 compared to Q1 2017
•Adjusted EBITDA was $27.0 million in Q1 2018 compared to $33.8 million in Q1 2017
•Experienced continuing escalation in pulp and freight costs in the quarter
•Issued $125 million of senior unsecured notes on April 24, and used the net proceeds to reduce the outstanding balance of the existing credit facility, and the credit facility was reduced from $300 million to $200 million
•Declared a quarterly dividend of $0.18 per share to be paid on July 16, 2018
“We continued to show revenue growth in the first quarter, driven by our leadership position in Canada, focused growth in the U.S., and last year’s selling price increase moving through the Canadian market. Despite this strong revenue growth, we faced sustained market headwinds from rising pulp and freight costs,” said Dino Bianco, CEO of KP Tissue and KPLP.
“We remain committed to our long-term strategy of building our brands in Canada and growing our business in the United States, for both the Consumer and Away-from-Home segments. Looking forward, with industry forecasters expecting input costs to continue to remain high all year, we will take the necessary steps to mitigate the impact on our results including additional cost reduction programs, but expect second quarter Adjusted EBITDA to be lower than Q2 2017,” concluded Mr. Bianco.
KPLP Q1 2018 Financial Results
Revenue in Q1 2018 was $323.7 million, compared to $289.3 million in Q1 2017, an increase of $34.4 million or 11.9%. The increase in revenue was due to the combination of: an additional 6 days of sales in Q1 2018 compared to Q1 2017; the favourable impact of increased sales volume; and a 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 Q1 2018 increased to $287.4 million from $244.3 million in Q1 2017. Manufacturing costs increased primarily due to increased sales volume and significantly higher pulp costs, partially offset by the favourable impact of foreign exchange fluctuations on U.S. dollar denominated costs. Freight costs increased primarily due to increased sales volume and higher carrier rates. As a percentage of revenue, cost of sales were 88.8% in Q1 2018 compared to 84.4% in Q1 2017.
Selling, general and administrative (SG&A) expenses in Q1 2018 were $22.9 million, compared to $23.2 million in Q1 2017. The decrease was primarily due to lower advertising and promotion expenses. As a percentage of revenue, SG&A expenses were 7.1% in Q1 2018, compared to 8.0% in Q1 2017.
Adjusted EBITDA in Q1 2018 was $27.0 million, compared to $33.8 million in Q1 2017, lower by $6.8 million or 20.1%, due to significantly higher pulp costs and increased freight costs. These were partially offset by increased sales volume, the Canadian Consumer selling price increase and the net favourable impact of foreign exchange fluctuations.
Net income in Q1 2018 was $1.6 million, compared to $6.9 million in Q1 2017, primarily due to lower Adjusted EBITDA of $6.8 million, higher depreciation expense of $1.1 million, an increase in interest expense of $1.0 million, a decrease in foreign exchange gain of $0.4 million and the loss on sale of fixed assets of $0.4 million. These items were partially offset by a decrease in tax expense of $3.8 million and the change in fair value of derivatives of $0.6 million.
Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $30.2 million as of April 1, 2018, compared to $53.3 million as of December 31, 2017. With the issuance of the senior unsecured notes on April 24, 2018, total liquidity increased by $25 million.
KPT Q1 2018 Financial Results
KPT incurred a net loss of $0.8 million in Q1 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 recovery of $0.3 million.
more detail at: http://ir.kptissueinc.com/releasedetail.cfm?ReleaseID=1067050