MISSISSAUGA, Ontario, Aug. 06, 2020 (GLOBE NEWSWIRE) — KP Tissue Inc. (KPT) (TSX: KPT) reports the Q2 2020 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 14.8% interest in KPLP.
KPLP Q2 2020 Business and Financial HighlightsRevenue increased by $21.1 million or 5.8% to $386.8 million in Q2 2020 compared to $365.7 million in Q2 2019. Excluding the divested Mexico business, Q2 2020 revenue increased by $46.5 million or 13.7%.Adjusted EBITDA was $64.4 million in Q2 2020 compared to $31.5 million in Q2 2019, an increase of 104.6%.TAD Sherbrooke site progressing on time and on budget despite the temporary shutdown in Q1 2020 due to the implementation of strict COVID-19 protocols.Declared a quarterly dividend of $0.18 per share to be paid on October 15, 2020.         “Our robust second quarter results were driven by a consistent increased demand in our Consumer segment and strong operational performance. We continued to benefit from the trust in our brands, leading to market share gains that began at the end of last year. We also gained new listings and new customers, and saw good growth and increased distribution in our U.S. White Cloud brand. As expected, the Away-from-Home segment faced challenging market conditions during the quarter and the road to recovery in this market will depend on the evolving COVID-19 situation,” stated KP Tissue Chief Executive Officer, Dino Bianco.“Adjusted EBITDA performance was exceptional with growth of over 100% to $64.4 million. The increase reflects higher Consumer volume and a favourable cost environment as well as the sustainable benefits of our OpEx program across all operations.“Despite a temporary halt to construction as we implemented COVID-19 procedures, we are pleased to report that TAD Sherbrooke remains on time and on budget. As planned, the first converting-line started in July and the ramp-up is progressing well. With paper production expected to begin in early 2021, the new facility is central to our long-term North American growth strategy in the ultra-premium tissue segment. Furthermore, we have a fully committed sales pipeline in support of our largest investment in Kruger Products’ history. “In addition to robust quarterly performance, we continue to reinvest in our brands and business in order to build an even stronger future. Lastly, I would like to thank the entire Kruger Products team for working safe while driving strong performance during COVID-19,” concluded Mr. Bianco.Outlook
Demand for our products is expected to remain strong but at a diminishing growth rate in the Consumer segment and weaker in the Away-From-Home segment, with input costs expected to remain unchanged. As COVID-19 continues to evolve, there are many opportunities and uncertainties in the market. Given this, we are providing a wide range for Q3 2020 Adjusted EBITDA that is above Q3 2019 and below Q2 2020.KPLP Q2 2020 Financial Results
Revenue was $386.8 million in Q2 2020 compared to $365.7 million in Q2 2019, an increase of $21.1 million or 5.8%. The increase in revenue was primarily due to significant volume increases in the Consumer business segment, resulting primarily from COVID-19 buying activity and the favourable impact of foreign exchange fluctuations, partially offset by lower volume in the AFH business segment resulting from the ongoing impacts from COVID-19, Consumer selling prices moderating lower in response to lower pulp prices, and no volume from Mexico as a result of the share sale at the end of Q3 2019. Mexico revenue was $25.4 million in Q2 2019. Excluding the Mexico business, revenue increased by $46.5 million or 13.7%Cost of sales was $310.0 million in Q2 2020 compared to $325.8 million in Q2 2019, a decrease of $15.8 million or 4.8%. Manufacturing costs decreased primarily due to favourable pulp costs, the impact of operational transformation initiatives (OpEx) and the COVID-19 reduced sku production environment. The decreases were partially offset by the unfavourable impact of foreign exchange fluctuations, inflation and additional costs due to precautions taken in our manufacturing facilities as a result of COVID-19. Freight costs decreased compared to Q2 2019 while warehousing costs increased. As a percentage of revenue, cost of sales was 80.2% in Q2 2020 compared to 89.1% in Q2 2019.Selling, general and administrative (SG&A) expenses were $30.5 million in Q2 2020 compared to $25.4 million in Q2 2019, an increase of $5.1 million or 20.2%. The increase was primarily due to higher compensation and personnel related costs compared to Q2 2019 and higher selling expenses due to increased volume. As a percentage of revenue, SG&A expenses were 7.9% in Q2 2020 compared to 6.9% in Q2 2019.Adjusted EBITDA was $64.4 million in Q2 2020 compared to $31.5 million in Q2 2019, an increase of $32.9 million or 104.6%. The increase was primarily due to higher sales volume, the favourable impact of lower pulp prices and lower manufacturing costs compared to Q2 2019 as described above and favourable freight costs. The increases were partially offset by higher maintenance, warehousing and SG&A costs.Net income was $28.9 million in Q2 2020 compared to $0.9 million in Q2 2019, an increase of $28.0 million. The increase was primarily due to higher Adjusted EBITDA of $32.9 million as discussed, partially offset by higher income tax expense and an increase in depreciation expense.KPLP Q2 2020 Financing Activity
Total liquidity, representing cash and availability under the Senior Credit Facility within covenant limitations, was $271.7 million as of June 30, 2020. In addition, $37.8 million of cash was held by KPSI and committed to the TAD Sherbrooke Project.KPT Q2 2020 Financial Results
KPT had a net loss of $0.1 million in Q2 2020. Included in net loss was $4.3 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 income tax expense of $3.3 million.Dividends on Common Shares                                                     
The Board of Directors of KPT declared a quarterly dividend of $0.18 per share to be paid on October 15, 2020 to shareholders of record at the close of business on September 30, 2020.Additional Information
For additional information please refer to Management’s Discussion and Analysis (MD&A) of KPT and KPLP for the second quarter ended June 30, 2020 available on SEDAR at www.sedar.com or our website at www.kptissueinc.com.Second Quarter Results Conference Call Information
KPT will hold its second quarter conference call on Thursday, August 6, 2020 at 8:30 a.m. Eastern Time.Via telephone:  1-877-223-4471 or 647-788-4922Via the internet at: www.kptissueinc.comPresentation material referenced during the conference call will be available at www.kptissueinc.com.A rebroadcast of the conference call will be available until midnight, August 13, 2020 by dialing 1-800-585-8367 or 416-621-4642 and entering passcode 1935229.The replay of the webcast will remain available on the website until midnight, August 13, 2020.About KP Tissue Inc. (KPT)
KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP, which is accounted for as an investment on the equity basis. KPT currently holds a 14.8% interest in KPLP. For more information visit www.kptissueinc.com.About Kruger Products L.P. (KPLP)
KPLP is Canada’s leading manufacturer of quality tissue products for household, industrial and commercial use. KPLP serves the Canadian consumer market with such well-known brands as Cashmere®, Purex®, SpongeTowels®, Scotties® and White Swan®. In the U.S., KPLP manufactures the White Cloud® brand, as well as many private label products. The Away-From-Home division manufactures and distributes high-quality, cost-effective product solutions to a wide range of commercial and public entities. KPLP has approximately 2,500 employees and operates eight FSC® COC-certified (FSC® C-104904) production facilities in North America.  For more information visit www.krugerproducts.ca.Non-IFRS Measures
This press release uses certain non-IFRS financial measures which KPLP believes provide useful information to management of KPLP and the readers of the financial information in measuring the financial performance and financial condition of KPLP. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other companies. An example of such a measure is Adjusted EBITDA. Beginning with Q4 2015 in accordance with Canadian Securities Administrators Staff Notice 52-306 (Revised), we have referenced Adjusted EBITDA as a non-IFRS financial measure. This term replaces the previously referenced non-IFRS financial measure EBITDA. Adjusted EBITDA is not a measurement of operating performance computed in accordance with IFRS and should not be considered as a substitute for operating income, net income or cash flows from operating activities computed in accordance with IFRS. “Adjusted EBITDA” is calculated by KPLP as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, (iv) amortization, (v) impairment (gain on sale) of non-financial assets, (vi) loss (gain) on disposal of property, plant and equipment, (vii) foreign exchange loss (gain), (viii) costs related to restructuring activities, (ix) changes in amortized cost of Partnership units liability, (x) change in fair value of derivatives, (xi) consulting costs related to operational transformation initiatives, (xii) corporate development related costs and (xiii) loss (gain) on sale of shares. A reconciliation of Adjusted EBITDA to the relevant reported results can be found in the MD&A of KPT and KPLP for the year ended December 31, 2019 available on SEDAR at www.sedar.com.COVID-19
In March 2020, the World Health Organization characterized the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, as a global pandemic. This has resulted in local governments enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses in the United States of America and Canada resulting in an economic slowdown. Equity markets have experienced significant volatility and weakness and the local governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. There is significant uncertainty as to the likely effects of this outbreak. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments to quantify the impact this pandemic may have on the financial results and condition of KPLP in future periods.Forward-Looking Statements
Certain statements in this press release about KPT’s and KPLP’s current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. Forward-looking statements in this press release include, but are not limited to, statements regarding the projected capacity of the TAD Sherbrooke Project, the anticipated benefits of the TAD Sherbrooke Project and the expected dates for commencement of construction and production of the TAD Sherbrooke Project. The words “may”, “will”, “would”, “should”, “could”, “expects”, “plans”, “intends”, “trends”, “indications”, “anticipates”, “believes”, “estimates”, “predicts”, “likely” or “potential” or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. The forward-looking statements are based on certain key expectations and assumptions made by KPT or KPLP. Although KPT and KPLP believe that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking statements since no assurance can be given that such expectations and assumptions will prove to be correct.The outlook provided in respect of Adjusted EBITDA for Q3 2020 is forward-looking information and is subject to the risk and uncertainties referred to below. The purpose of the outlook is to provide the reader with an indication of management’s expectations, at the date of this press release, regarding KPLP’s future financial performance. Readers are cautioned that this information may not be appropriate for other purposes.Many factors could cause KPLP’s actual results, level of activity, performance or achievements or future events or developments (which could in turn affect the economic benefits derived from KPT’s economic interest in KPLP), to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, which are discussed in greater detail in the “Risk Factors – Risks Related to KPLP’s Business” section of the KPT Annual Information Form dated March 30, 2020 available on SEDAR at www.sedar.com: Kruger Inc.’s influence over KPLP; KPLP’s reliance on Kruger Inc.; consequences of an event of insolvency relating to Kruger Inc.; risks associated with the TAD Sherbrooke Project; operational risks; significant increases in input costs; reduction in supply of fibre; increased pricing pressure and intense competition; KPLP’s inability to innovate effectively; adverse economic conditions; dependence on key retail trade customers; damage to the reputation of KPLP or KPLP’s brands; KPLP’s sales being less than anticipated; KPLP’s failure to implement its business and operating strategies; KPLP’s obligation to make regular capital expenditures; KPLP’s entering into unsuccessful acquisitions; KPLP’s dependence on key personnel; KPLP’s inability to retain its existing customers or obtain new customers; KPLP’s loss of key suppliers; KPLP’s failure to adequately protect its intellectual property rights; KPLP’s reliance on third party intellectual property licenses; adverse litigation and other claims affecting KPLP; material expenditures due to comprehensive environmental regulation affecting KPLP’s cash flow; KPLP’s pension obligations are significant and can be materially higher than predicted if KPLP Management’s underlying assumptions are incorrect; labour disputes adversely affecting KPLP’s cost structure and KPLP’s ability to run its plants; exchange rate and U.S. competitors; KPLP’s inability to service all of its indebtedness; exposure to potential consumer product liability; covenant compliance; interest rate and refinancing risk; risks relating to information technology; cyber-security; insurance; internal controls; trade; and risks related to COVID-19.Readers should not place undue reliance on forward-looking statements made herein. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information contained herein is made as of the date of press release and KPT undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws.INFORMATION:Francois Paroyan
General Counsel and Corporate Secretary
KP Tissue Inc.
Tel.: 905.812.6936
[email protected]INVESTORS:Mike Baldesarra
Director of Investor Relations
KP Tissue Inc.
Tel.: 905.812.6962
[email protected]

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