KP Tissue Inc. (KPT) (TSX:KPT) reports the Q3 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(R) brand and premium private label products. KPT currently holds a 16.0% interest in KPLP.
KPLP Q3 2017 Business and Financial Highlights
— Revenue increased by 7.5% to $336.3 million in Q3 2017 compared to Q3 2016
— Adjusted EBITDA was $39.4 million in Q3 2017 compared to $45.6 million in Q3 2016
— TAD Products sales and Adjusted EBITDA contribution continued to be strong, in line with previously set targets
— Successful start-up of new Paper Machine #8 and a new converting line in Crabtree, Quebec site
— Declared a quarterly dividend of $0.18 per share to be paid on January 15, 2018
“Third quarter results were in-line with our expectations, however they reflect the continued negative impact of rising pulp prices which have reached record levels, and also higher freight costs driven by the recent hurricanes in the southern U.S., said Mario Gosselin, CEO of KP Tissue and KPLP.
“Our new paper machine in Quebec started production during the third quarter, and as planned we incurred start-up costs. The project was completed on time and on budget, and we anticipate that it will positively contribute to our Away-from-Home business starting in the first quarter of Fiscal 2018.
“The selling price increase announced in the Canadian market in July has started to take effect in the fourth quarter. Given the further escalation in pulp prices, Adjusted EBITDA for Q4 2017 is expected to decrease compared to Q4 2016 Adjusted EBITDA of $42.9 million,” concluded Mr. Gosselin.
Revenue in Q3 2017 was $336.3 million, compared to $312.8 million in Q3 2016, an increase of $23.5 million or 7.5%. The increase in revenue was primarily due to higher sales volume, partially offset by the unfavourable impact of foreign exchange on U.S. dollar sales.
Cost of sales in Q3 2017 increased to $290.8 million from $256.8 million in Q3 2016, primarily due to higher sales volumes, a significant increase in fibre costs, as well as higher freight costs and PM#8 project start-up 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 86.5% in Q3 2017 compared to 82.1% in Q3 2016.
Selling, general and administrative (SG&A) expenses in Q3 2017 were $20.7 million, compared to $22.7 million in Q3 2016. The decrease was primarily due to the timing of spend and cost reduction initiatives. As a percentage of revenue, SG&A expenses were 6.2% in Q3 2017, compared to 7.3% in Q3 2016.
Adjusted EBITDA in Q3 2017 was $39.4 million, compared to $45.6 million in Q3 2016, lower by $6.2 million or 13.6%, primarily due to significantly higher fibre costs, increased freight costs, and start-up costs, partially offset by increased sales volume and lower SG&A costs.
Net income in Q3 2017 was $16.5 million, compared to $21.6 million in Q3 2016, primarily due to lower Adjusted EBITDA of $6.2 million and higher depreciation expense of $2.3 million. These items were partially offset by a change in foreign exchange gain of $2.0 million.
Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $76.0 million as of September 24, 2017, compared to $80.3 million as of June 25, 2017.
KPT incurred a net loss of $0.1 million in Q3 2017. Included in the net loss was $2.6 million representing KPT’s share of KPLP’s income. The income was reduced by depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition and income tax expense of $1.3 million.
more detail at: http://ir.kptissueinc.com/releasedetail.cfm?ReleaseID=1047699