KP Tissue Inc. (KPT) (TSX:KPT) reports the Q4 and full year 2017 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 Full Year 2017 Business and Financial Highlights
•Revenue increased by 4.2% to $1,280.0 million in 2017 compared to $1,227.9 million in 2016
•Adjusted EBITDA was $144.2 million in 2017, down from $152.5 million in 2016, a 5.4% decrease
•TAD products Adjusted EBITDA contribution continued to be strong, reaching previously set target
KPLP Q4 2017 Business and Financial Highlights
•Revenue increased slightly to $340.0 million in Q4 2017 compared to Q4 2016
•Adjusted EBITDA was $33.7 million in Q4 2017 compared to $42.9 million in Q4 2016
•Experienced record high pulp and freight costs in the quarter
•Successful ramp-up of new Paper Machine #8 and a new converting line in Crabtree, Quebec
•Declared a quarterly dividend of $0.18 per share to be paid on April 16, 2018
“We are proud of the record revenue achieved in 2017 of nearly $1.3 billion. Our cost-saving initiatives, capital investment program and the selling price increase that took effect in Q4 in the Canadian Consumer market alleviated only part of the impact from the significant run-up in market pulp prices and the unprecedented increase in freight costs, impacting our results in the fourth quarter,” said Mario Gosselin, CEO of KP Tissue and KPLP.
“We continue to be #1 in the Canadian tissue market, and achieved our target for the TAD products Adjusted EBITDA contribution in the U.S. Furthermore, we ramped up production of our Crabtree (Quebec) paper machine, and improved our results for the Away-from-Home segment despite the impact of higher input costs.
We are committed to our long-term strategy of building our brands in Canada and growing our business in the United States. For the first quarter of 2018, even with the full impact of the Canadian Consumer price increase, we expect Adjusted EBITDA to decrease over Q1 2017, due primarily to the continued escalation of pulp and freight costs. We are implementing a value creation program to partially mitigate the impact of these extraordinary short-term market conditions,” concluded Mr. Gosselin.
KPLP Q4 2017 Financial Results
Revenue in Q4 2017 was $340.0 million, compared to $339.6 million in Q4 2016, an increase of $0.4 million or 0.1%. The increase in revenue was primarily due to a selling price increase in Canada, offset by lower Consumer sales volume in Canada and the unfavourable impact of foreign exchange on U.S. dollar sales.
Cost of sales in Q4 2017 increased to $296.0 million from $284.2 million in Q4 2016, primarily due to significantly higher pulp costs, as well as higher freight costs, partially offset by the favourable impact of foreign exchange on U.S. dollar denominated costs. As a percentage of revenue, cost of sales were 87.1% in Q4 2017 compared to 83.7% in Q4 2016.
Selling, general and administrative (SG&A) expenses in Q4 2017 were $23.7 million, compared to $26.4 million in Q4 2016. The decrease was primarily due to lower bonus compensation and cost reduction initiatives. As a percentage of revenue, SG&A expenses were 7.0% in Q4 2017, compared to 7.8% in Q4 2016.
Adjusted EBITDA in Q4 2017 was $33.7 million, compared to $42.9 million in Q4 2016, lower by $9.2 million or 21.4%, primarily due to higher pulp costs and increased freight costs, partially offset by lower SG&A expenses.
Net loss in Q4 2017 was $18.0 million, compared to $4.5 million in Q4 2016, primarily due to lower Adjusted EBITDA of $9.2 million, an increase in tax expense of $5.8 million, a decrease in the gain on sale of non-financial assets of $2.5 million and a change in fair value of derivatives of $0.4 million in Q4 2017. These items were partially offset by a decrease in the change in amortized cost of Partnership units liability of $3.3 million and lower depreciation expense of $0.5 million.
Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $53.3 million as of December 31, 2017, compared to $76.0 million as of September 24, 2017.
KPLP 2017 Financial Results
Revenue was $1,280.0 million in Fiscal 2017, compared to $1,227.9 million in Fiscal 2016, an increase of $52.1 million or 4.2%. The increase in revenue was primarily due to increased sales volume across all regions.
Adjusted EBITDA was $144.2 million in Fiscal 2017, compared to $152.5 million in Fiscal 2016. The decrease was primarily due to higher fibre costs, and increased freight and warehousing costs. These were partially offset by increased sales volume and lower SG&A expenses.
Net income was $15.3 million in Fiscal 2017, compared to $35.5 million in Fiscal 2016. The decrease in net income was primarily due to an increase in tax expense of $9.2 million, lower Adjusted EBITDA of $8.3 million, higher depreciation expense of $3.9 million, a decrease in the gain on sale of non-financial assets of $2.8 million and the change in fair value of derivatives of $0.4 million. These decreases were partially offset by a decrease in interest expense of $2.0 million, a change in the foreign exchange gain of $1.1 million, a decrease in restructuring costs of $0.8 million and a decrease in the change in amortized cost of Partnership units liability of $0.4 million
more detail at: http://ir.kptissueinc.com/releasedetail.cfm?ReleaseID=1060175