KP Tissue Releases Third Quarter 2024 Financial Results

KP Tissue Inc. reports the Q3 2024 financial and operational results of KPT and Kruger Products Inc. Kruger Products is Canada’s leading manufacturer of quality tissue products for the Consumer market (Cashmere®, Purex®, SpongeTowels®, Scotties®, White Swan® and BonterraTM) and the Away-FromHome (AFH) 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 12.6% interest in Kruger Products. 

KRUGER PRODUCTS Q3 2024 BUSINESS AND FINANCIAL HIGHLIGHTS 

• Revenue was $521.1 million in Q3 2024 compared to $473.4 million in Q3 2023, an increase of $47.7 million or 10.1%; 

• Adjusted EBITDA was $65.7 million in Q3 2024, compared to $72.4 million in Q3 2023, a decrease of 9.3%; 

• Net income was $18.0 million in Q3 2024 compared to $12.9 million in Q3 2023, an increase of $5.1 million; 

• Declared a quarterly dividend of $0.18 per share to be paid on January 15, 2025. 

“Our business continued to perform well with double-digit revenue growth in the third quarter of 2024 on the strength of higher sales volume and favourable selling prices across our North American network,” stated KP Tissue’s Chief Executive Officer, Dino Bianco. “Despite higher pulp prices and other manufacturing costs year-over-year, we generated solid Adjusted EBITDA of $65.7 million that was within our expectations. In the Consumer segment, we maintained strong revenue momentum through ongoing investments in innovation and brand support. The resulting impact has been highly encouraging with our leadership position rising above 44% in the Canadian facial tissue market, combined with share gains in the bathroom tissue and paper towel categories on a year-over-year basis. On the Away-from-Home front, sales volume slightly improved in the third quarter of 2024 compared to the same period in 2023, while profitability was tempered by additional outsourcing activity.” 

“The operational highlight of the quarter was the completed construction of our manufacturing plant in Sherbrooke, including the successful start-up of our LDC paper machine with added capacity of 60,000 metric tons. At maturity, the entire Sherbrooke site, which also contains the existing TAD facility along with recently deployed LDC facial tissue and bathroom tissue lines, will produce more than 130,000 metric tons of high-quality tissue products. As a result, we are fulfilling our vision of making Sherbrooke a major hub for tissue manufacturing, enabling additional share gains in North America and reducing our need for purchased paper,” Mr. Bianco added. 

For the last quarter of 2024, the company expect Adjusted EBITDA to be in the range of Q3 2024. 

KRUGER PRODUCTS Q3 2024 FINANCIAL RESULTS 

Revenue was $521.1 million in Q3 2024 compared to $473.4 million in Q3 2023, an increase of $47.7 million or 10.1%. The increase in revenue was primarily due to higher sales volume and favorable selling prices across both segments. Revenue was also favorably impacted by foreign exchange fluctuations on U.S. dollar sales. 

Cost of sales was $437.3 million in Q3 2024 compared to $386.3 million in Q3 2023, an increase of $51.0 million or 13.2%. The increase in cost of sales was primarily due to higher sales volume and pulp prices, additional outsourcing activity compared to Q3 2023 and the unfavorable impact of foreign exchange fluctuations on U.S. dollar costs, partially offset by lower manufacturing overhead costs due primarily to overhead cost absorption resulting from higher inventory levels in the quarter. Freight rates were higher compared to Q3 2023, while warehousing costs increased slightly as a result of handling costs related to higher sales volume. As a percentage of revenue, cost of sales was 83.9% in Q3 2024 compared to 81.6% in Q3 2023. 

Selling, general and administrative (SG&A) expenses were $46.5 million in Q3 2024 compared to $40.0 million in Q3 2023, an increase of $6.5 million or 16.3%. The increase was primarily due to additional investment in advertising and promotion, consulting and legal costs to support operational and corporate initiatives, higher selling expense to primarily support additional sales volume, higher IT spend and foreign exchange losses in Q3 2024 compared to gains in the year ago quarter. As a percentage of revenue, SG&A expenses were 8.9% in Q3 2024 compared to 8.4% in Q3 2023. 

Adjusted EBITDA was $65.7 million in Q3 2024 compared to $72.4 million in Q3 2023, a decrease of $6.7 million or 9.3%. The decrease was primarily due to higher pulp prices and other manufacturing costs as described above, along with higher freight rates and SG&A expenses, partially offset by higher sales volumes and selling prices along with lower manufacturing overhead costs. 

Net income was $18.0 million in Q3 2024 compared to $12.9 million in Q3 2023, an increase of $5.1 million. The increase was primarily due to a higher foreign exchange gain and lower income tax expense, partially offset by lower Adjusted EBITDA, higher depreciation expense and higher interest expense and other finance costs. 

KRUGER PRODUCTS Q3 2024 FINANCING ACTIVITY AND LIQUIDITY 

On November 1, 2024, Kruger Products issued $135 million in an aggregate principal amount of 6.625% Senior Unsecured Notes (the Notes) due November 1, 2031 through a private placement. Interest on the Notes is payable semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2025. The majority of the proceeds were used to redeem the $125 million Senior Unsecured Notes with the remainder being used for general corporate purposes. 

Kruger Products completed the previously announced redemption of its outstanding $125 million principal amount of 6.0% Senior Unsecured Notes on November 12, 2024 at a redemption price of 100% of the principal amount plus accrued and unpaid interest. 

Total liquidity, representing cash and availability under the revolving credit agreements, was $434.2 million as of September 30, 2024. In addition, $14.6 million of cash was held for the Sherbrooke Expansion Project. 

KPT Q3 2024 FINANCIAL RESULTS 

KPT had net income of $2.1 million in Q3 2024. Included in net income was $2.3 million representing KPT’s share of Kruger Products’ net income, a dilution gain of $0.1 million and depreciation expense of $0.3 million related to adjustments to carrying amounts on acquisition. 

DIVIDENDS ON COMMON SHARES 

The Board of Directors of KPT declared a quarterly dividend of $0.18 per share to be paid on January 15, 2025 to shareholders of record at the close of business on December 31, 2024. 

For additional information please refer to Management’s Discussion and Analysis (MD&A) of KPT and Kruger Products for the third quarter ended September 30, 2024 available on SEDAR+ at www.sedarplus.ca or the website at www.kptissueinc.com.