KP Tissue 4Q 2021 Results: Revenue up 10.2 Percent From Year Ago to C$424.1 million

KP Tissue Inc. (KPT) reports the Q4 2021 and full year 2021 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, White Swan and Bonterra) and the Away-From- Home (AFH) market, and continues to expand in the U.S. Consumer market with the White Cloud brand and premium private label products. KPT currently holds a 14.4 percent interest in KPLP.

KPLP Q4 2021 Business and Financial Highlights:

Revenue was $424.1 million in Q4 2021 compared to $385.0 million in Q4 2020, an increase of $39.1 million or 10.2 percent.
Adjusted EBITDA1 was $38.3 million in Q4 2021, compared to $36.2 million in Q4 2020, an increase of 5.8 percent.
Net income was $42.3 million in Q4 2021, compared to a loss of $28.5 million in Q4 2020, an increase of $70.8 million.
Announced additional investment of $111.5 million in the Sherbrooke Expansion Project, for a total investment of $351.5 million.
Declared a quarterly dividend of $0.18 per share to be paid on April 15, 2022.

KPLP Full Year 2021 Financial Highlights:

Revenue was $1,465.2 million in 2021 compared to $1,516.0 million in 2020, a decrease of $50.8 million or 3.4 percent.
Adjusted EBITDA1 was $153.4 million in 2021, down from $197.8 million in 2020, a decrease of 22.4 percent.
Net income was $42.0 million in 2021, up from $27.3 million in 2020, an increase of $14.7 million.

“We are pleased by our performance in the face of volatile market conditions and unprecedented headwinds in 2021 and contrasted against an extraordinary market environment in 2020. The first half of 2021 was marked by destocking challenges due to the COVID-19 pandemic, while mounting supply chain and inflationary pressures affected both our Consumer and Away- From-Home segments in the latter part of the year. We did regain sales momentum in the second half of 2021 and closed the fourth quarter on a high note with more than 10 percent revenue growth and improved adjusted EBITDA,” stated KP Tissue’s Chief Executive Officer, Dino Bianco.

“Against this backdrop, we continued to invest in the future through market-driven innovations. The successful launch of SpongeTowels Ultra Pro in 2021 delivered significant share gains in the paper towel category. This year we have introduced a new sustainably focused brand, Bonterra, to offer consumers a more environmentally conscious option with unique features addressing packaging, recycled fibre, a neutral carbon footprint and partnerships with 4Ocean and One Tree Planted. In addition, we have upgraded Cashmere and Purex UltraLuxe to offer our softest and most luxurious bathroom tissue ever.”

“In terms of network modernization, Year 1 of TAD Sherbrooke proved to be a major success with a ramp-up curve well above our expectations. We also announced the Sherbrooke expansion project early into 2021 and followed up with an incremental investment at the end of the year to double production capacity to over 60,000 metric tonnes by 2024. The project’s total value of approximately $350 million will effectively create a tissue hub in Canada using both TAD and conventional technologies.”

“Looking ahead to 2022, we intend to leverage our ongoing investments, innovations and share gains to drive revenue growth, while pricing the business and managing costs to offset inflation,” Mr. Bianco concluded.

Outlook for Q1 2022:

We anticipate Q1 sales momentum to continue in both AFH and Consumer as customer and consumer behaviour returns to more pre-COVID levels. However, cost inflation across the supply chain is expected to continue impacting results in the near- term, therefore Q1 2022 Adjusted EBITDA is expected to be in the range of $30-$35 million.

¹ Adjusted EBITDA is a non-GAAP financial measure. Refer to the Non-GAAP Financial Measures section of this news release for more information on these measures

KPLP Q4 2021 Financial Results:

Revenue was $424.1 million in Q4 2021 compared to $385.0 million in Q4 2020, an increase of $39.1 million or 10.2 percent. The increase in revenue was due to a selling price increase in Consumer Canada and higher sales volume in the Consumer segment compared to the year ago quarter, partially offset by the unfavourable impact of foreign exchange fluctuations on U.S. dollar sales.

Cost of sales was $376.0 million in Q4 2021 compared to $332.2 million in Q4 2020, an increase of $43.8 million or 13.2 percent. Manufacturing costs increased primarily due to higher sales volumes, increased pulp costs, and the unfavorable impact of labor shortages in Memphis manufacturing, along with higher depreciation expense, overhead absorption resulting from reduced inventory levels during the quarter, and inflation. These increases were partially offset by the favourable impact of more in-house production in AFH and favorable foreign exchange fluctuations on U.S. dollar costs. Freight costs and warehousing expenses also increased compared to Q4 2020. As a percentage of revenue, cost of sales was 88.7 percent in Q4 2021 compared to 86.3 percent in Q4 2020.

Selling, general and administrative (SG&A) expenses were $31.7 million in Q4 2021 compared to $36.7 million in Q4 2020, a decrease of $5.0 million or 13.6 percent. The decrease was primarily due to lower advertising and promotion expenses, a lower foreign exchange loss in Q4 2021 compared to the year ago quarter and lower Information Technology spending in the fourth quarter. As a percentage of revenue, SG&A expenses were 7.5 percent in Q4 2021 compared to 9.5 percent in Q4 2020.

Adjusted EBITDA was $38.3 million in Q4 2021 compared to $36.2 million in Q4 2020, an increase of $2.1 million or 5.8 percent. The increase was primarily due to higher sales volume and the Consumer selling price increase in Canada, lower SG&A expenses, and the net favorable impact of foreign exchange fluctuations, partially offset by the unfavorable impact of sales mix, higher pulp prices and other inflation, labor shortages in Memphis manufacturing and higher freight rates and warehousing costs.

Net income was $42.3 million in Q4 2021 compared to a loss of $28.5 million in Q4 2020, an increase of $70.8 million. The increase was primarily due to higher income tax recovery, lower other expense, an impairment charge in Fiscal 2020 and higher Adjusted EBITDA as discussed above, partially offset by higher interest expense and other finance costs and higher depreciation and amortization.

KPLP Q4 2021 Liquidity:

Total liquidity, representing cash and availability under the revolving credit agreements, was $263.8 million as of December 31, 2021. In addition, $86.5 million of cash was held by KPLP for the TAD Sherbrooke and Sherbrooke Expansion Projects.

KPLP 2021 Financial Results:

Revenue was $1,465.2 million in Fiscal 2021 compared to $1,516.0 million in Fiscal 2020, a decrease of $50.8 million or 3.4 percent. The decrease in revenue was primarily due to a significant sales volume decrease in Canada resulting from the following: the comparison to high COVID-19 buying activity during the first half of 2020; the de-stocking of tissue inventories by both retailers and consumers in the Consumer segment during the first half of 2021; the unfavorable impact of COVID-19 related restrictions in the AFH segment that continued through the first half of 2021; and the unfavorable impact of foreign exchange fluctuations on U.S. dollar sales. The decrease was partially offset by a Consumer selling price increase in Canada in the second half of 2021 and an AFH selling price increase.

Adjusted EBITDA was $153.4 million in Fiscal 2021 compared to $197.8 million in Fiscal 2020, a decrease of $44.4 million or 22.4 percent. The decrease was primarily due to the impact of lower sales volumes net of overhead absorption, along with the unfavorable impact of higher pulp prices and higher freight rates and warehousing costs, partially offset by a selling price increase in Consumer Canada, lower SG&A expenses, and the favorable impact of foreign exchange fluctuations.

Net income was $42.0 million in Fiscal 2021 compared to $27.3 million in Fiscal 2020, an increase of $14.7 million. The increase was primarily due to higher income tax recovery, lower other expense and an impairment charge in Fiscal 2020, partially offset by lower Adjusted EBITDA as discussed above, higher interest expense and other finance costs and higher depreciation and amortization.

KPT Q4 2021 Financial Results:

KPT had a net income of $3.4 million in Q4 2021. Included in the net income was $6.1 million representing KPT’s share of KPLP’s net income and a dilution gain of $0.1 million, depreciation expense of $1.3 million related to adjustments to carrying amounts on acquisition and an income tax expense of $1.5 million.

KPT 2021 Financial Results:

KPT had a net income of $1.2 million in 2021. Included in net income was $6.1 million representing KPT’s share of KPLP’s net income, a dilution gain of $0.3 million, depreciation expense of $5.3 million related to adjustments to carrying amounts on acquisition and income tax recovery of $0.1 million.

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