Kp Tissue, Inc. · TSX:KPT
Kp Tissue — Q2 2021 Earnings Presentation
23 slides from Kp Tissue's earnings presentation, Aug 12, 2021
Slide 1: Q2 2021 Financial Results
Q2 2021 FINANCIAL RESULTS August 12, 2021
Slide 2: Forward-Looking and Cautionary Statements
Forward-Looking and Cautionary Statements This Presentation on behalf of KP Tissue Inc. (the “Corporation” or “KPT”) does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relie
Slide 3: Corporate Structure
Corporate Structure 100% 85.5% 14.5% *As of August 12, 2021 (14.6% as of June 30, 2021). 3
Slide 4: Kruger Products Overview
Kruger Products Overview 1 2 3 Canada’s Leading Strong Customer Strong Portfolio of Brands Tissue Company Relationships 4 5 6 Broad Manufacturing Growth Focused Experienced Infrastructure Management Team 4
Slide 5: Q2 2021 Highlights
Q2 2021 Highlights Decline due to a sales volume decrease in the Consumer $339.3 M segment compared to prior year high COVID-19 buying and continued inventory de-loading in Q2, and also from Revenue unfavourable FX impact on U.S. sales with constant (0.4%) (28.7%) 12.3% currency U.S. sales (-19.4%)
Slide 6: Pulp Input Prices
Pulp Input Prices Q2 2021 NBSK average prices in CAD increased 18.7% and BEK average prices increased 20.2% compared to Q1 2021. NBSK average prices in USD have increased 22.8% and BEK average prices increased 24.4% quarter-over- quarter in Q2 2021. Based on industry forecasts, both NBSK and BEK pri
Slide 7: Network Modernization: TAD Sherbrooke
NETWORK MODERNIZATION TAD Sherbrooke • Paper machine and converting productivity well above plan • $25 million investment to leverage Artificial Intelligence to optimize entire supply chain Sherbrooke Expansion ($240 million investment) • Financing secured • Project scope being finalized • Engineeri
Slide 8: Network Modernization: Memphis facial tissue line and OpEx
NETWORK MODERNIZATION New facial tissue line in Memphis • Current assets at capacity • Capable of producing both TAD and LDC products • Made in USA products • Provides opportunity for future growth in the U.S. • Start-up expected in Q2 2022 OpEx • Many improvements initiated for waste reduction and
Slide 9: Trademark: Investing and building our brands
TRADEMARK Continued focus on investing and building our brands • Continued to gain share for 52-week period • Incremental marketing investment for full year 2021 • “Unapologetically Human” campaign continues to gain traction winning several awards including a Bronze Lions at the International Cannes
Slide 10: Canada's Leading Tissue Company
Canada’s Leading Tissue Company Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 36.1% 34.0% 22.6% 18.2% 18.9% 13.1% 10.7% 0.5% 34.7% 1.3% 17.1% 0.9% Source: Nielsen; dollar market share for the 52-week period ended June 19, 2021 10
Slide 11: Brand Leadership Position
Brand Leadership Position #1 Bathroom Tissue #1 Facial Tissue #2 Paper Towel 36.3% 36.9% 36.1% 34.6% 33.2% 34.0% 31.4% 31.6% 31.5% 31.5% 22.3% 21.9% 21.8% 22.6% 20.6% 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 Source: Nielsen Canadian dollar market share for 52-week p
Slide 12: AFH Segment
AFH SEGMENT Performance Tied to End-Market Recovery • In-sourcing of paper capacity in Q2 2021 lowered outsourcing costs • Volume continued to improve sequentially with easing COVID-19 restrictions. Total cases sold were flat compared to Q2 2020 but remained approximately 25% below pre-pandemic leve
Slide 13: Quarterly Financial Summary
Quarterly Financial Summary % Change (Million CAD$, unless otherwise noted) Q2 2021 Q1 2021 Q2 2020 Y/Y Q/Q Revenue 339.3 310.4 386.8 (12.3%) 9.3% Cost of Sales 295.0 263.3 310.0 (4.8%) 12.0% Gross Profit 44.3 47.0 76.8 (42.3%) (5.9%) Gross Margin 13.1% 15.2% 19.8% Adjusted EBITDA1 37.3 37.5 64.4 (4
Slide 14: Quarterly Segmented Results
Quarterly Segmented Results % Change (Million CAD$, unless otherwise noted) Q2 2021 Q1 2021 Q2 2020 Y/Y Q/Q Segmented Revenue Consumer 292.3 271.4 338.2 (13.6%) 7.7% AFH 47.0 39.0 48.5 (3.1%) 20.5% Total Segment Revenue 339.3 310.4 386.8 (12.3%) 9.3% Segment Adjusted EBITDA1 Consumer 40.3 44.2 69.6
Slide 15: Q2 2021 Revenue Compared to Q2 2020
Q2 2021 Revenue Compared to Q2 2020 Impacted due to a combination of: $47.5 M • Sales volume decrease in the Consumer segment due to: Q2 Revenue Decrease – Comparison to high COVID-19 buying activity in Q2 2020 – De-stocking of tissue inventories by retailers and consumers in Q2 2021 12.3% • Unfavou
Slide 16: Q2 2021 Adjusted EBITDA Compared to Q2 2020
Q2 2021 Adjusted EBITDA1 Compared to Q2 2020 $27.1 M Primarily due to the following factors: Q2 Adjusted EBITDA1 decrease • Lower sales volume • Unfavourable impact of higher pulp prices • Increase in freight rates and warehousing costs 42.1% over Q2 2020 Partially offset by: • Favourable net impact
Slide 17: Q2 2021 Revenue Compared to Q1 2021
Q2 2021 Revenue Compared to Q1 2021 Increase due to a combination of: • Higher Consumer and AFH sales volume $28.9 M • Offset somewhat by: Negative FX impact on U.S. sales (in constant currency, Q2 Revenue increase total KP and U.S. revenue increased by 10.9% and 6.8%) 9.3% over Q1 2021 Geographic r
Slide 18: Q2 2021 Adjusted EBITDA Compared to Q1 2021
Q2 2021 Adjusted EBITDA1 Compared to Q1 2021 Variance due to the following factors: $0.2 M • Higher Consumer and AFH sales volume Q2 Adjusted EBITDA1 decrease • Higher AFH contribution 0.5% • Favourable F/X over Q1 2021 More than offset by: • Lower Consumer contribution Gross Margin • Higher pulp pr
Slide 19: Balance Sheet
Balance Sheet (Million CAD$, unless otherwise noted) Q2 2021 Q1 2021 Cash 129.7 57.6 Current Portion of Long-term Debt 22.1 9.9 Long-term Debt 935.2 842.8 Net Debt 827.6 795.2 LTM Adjusted EBITDA1 157.2 184.3 Net Debt/LTM Adjusted EBITDA1 5.3x 4.3x • In April, $135 million of 8-Yr Senior Unsecured N
Slide 20: CAPEX
CAPEX CAPEX $350 • YTD 2021 TAD Sherbrooke CAPEX was $75 million $300 • YTD 2021 CAPEX excluding TAD $250 Sherbrooke was $12.6 million $200 • 2021 TAD Sherbrooke CAPEX estimated Millions at approximately $110 million $150 • Total 2021 CAPEX of $150-$160 million $100 $50 $0 2017 2018 2019 2020 YTD 20
Slide 21: Reimagine 2030 – The Next 10 Years of Sustainable Development
Reimagine 2030 – The Next 10 Years of Sustainable Development 21
Slide 22: Reinvesting in the business to build a strong future
Reinvesting in the business to build a strong future Our focus going forward will be on: • Investing in our brands and innovation to build market share leadership in Canada while expanding White Cloud brand in the U.S. • Pricing in place to counter exceptional rise in costs • TAD Sherbrooke facility
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