Kp Tissue, Inc. · TSX:KPT
Kp Tissue — Q4 2022 Earnings Presentation
25 slides from Kp Tissue's earnings presentation, Mar 9, 2023
Slide 1: Q4 2022 Financial Results
Q 4 2 0 2 2 F I N A N C I A L R E S U LT S March 9, 2023
Slide 2: Forward-Looking and Cautionary Statements
F O RWAR D - L O O K I N G AN D C AU T I O N ARY S TAT E M E N T S Certain statements in this presentation about KPT's and Kruger Products’ current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or development
Slide 3: Corporate Structure
C O R P O R AT E S T R U C T U R E 1 100% 2 86.3% 13.7% 1On Jan, 1, 2023, KPLP undertook a corporate reorganization pursuant to which the limited partnership was essentially replaced by a corporate entity, Kruger Products Inc. ("Kruger Products"), without adversely affecting KPT. For more informatio
Slide 4: Underlying Strategies
5 U N D E R LY I N G S T R AT E G I E S Drive Strong Revenue, Profit and Shareholder Value in a Sustainable Manner 1 2 3 4 5 Consumer As Our Expand Our End-to-End Supply Deliver Winning Team Compass Business Footprint Chain Excellence Sustainability and Culture 4
Slide 5: Q4 2022 Highlights
Q4 2022 HIGHLIGHTS Revenue Adjusted EBITDA1 Net Income $458.1 M $44.4 M $16.0 M 8.0% 15.8% ($26.3 M) over Q4 2021 over Q4 2021 over Q4 2021 +7.0% +9.5% Revenue Canada Revenue U.S. 1 Non-GAAP measure – see MD&A for the definition and reconciliation of the most comparable GAAP measure. 5
Slide 6: FY 2022 Highlights
FY 2022 HIGHLIGHTS Revenue Adjusted EBITDA1 Net Loss $1,681.4 M $116.0 M ($56.9 M) 14.8% (24.4%) ($98.9 M) Over FY 2021 over FY 2021 over FY 2021 +11.4% +20.0% Revenue Canada Revenue U.S. 1 Non-GAAP measure – see MD&A for the definition and reconciliation of the most comparable GAAP measure. 6
Slide 7: Pulp Input Prices
PULP INPUT PRICES Q4 2022 NBSK average prices1 in CAD decreased 1.4%, while BEK average prices1 increased 1.1% from Q3 2022. Q4 2022 NBSK average prices1 in CAD increased 26.0% and BEK average prices1 increased 37.0% year-over-year. Based on industry forecasts for 2023, pulp prices and the Canadian
Slide 8: High Inflationary Pressures
H I G H I N F L AT I O N ARY P R E S S U R E Q4 2022 vs. Q4 2021 18-27% ~10% FIBRE FREIGHT ~4% ~8% LABOUR PACKAGING +$40 Million Impact ~25% ~10% NATURAL GAS OTHER Source: Industry and internal estimates. 8
Slide 9: Pricing Actions Implemented in 2022
P R I C I N G AC T I O N S I M P L E M E N T E D I N 2 0 2 2 Pricing Actions in 2022 Consumer Canada • Price increases in July and October Consumer U.S. • Price increases in Jan/Feb., July and 14% October Average Year-over-Year AFH • Price increases in January, May and Price Increase August in Q4 20
Slide 10: Network Modernization
NETWORK MODERNIZATION TAD Sherbrooke • Production capacity continues to exceed ramp-up curve • Deployment of new data historian software and visualization tool has begun in Q1 2023 • Digital twin tools expanding to include Sherbrooke paper machine • Phase 3 of AI implementation for supply chain impr
Slide 11: Memphis Operations
MEMPHIS OPERATIONS Memphis Performance • Certain legacy machinery shut down in early January to focus on TAD and facial tissue assets • Reduced annual production capacity by 25,000 MT to 85,000 MT • Operational benefits expected in 2023 New Facial Tissue Line in Memphis • Facial line continues to pe
Slide 12: Focused Brand Support
FOCUSED BRAND SUPPORT • Strong results from Kruger Shopper Big Assist program to drive in-store sales and mitigate price increase impact • Focus on awareness and trial-building activities behind Cashmere and Purex UltraLuxe, Sponge Towels UltraPRO, Bonterra and White Cloud • 19th Annual Cashmere Col
Slide 13: Brand Leadership Position
B R AN D L E AD E R S H I P P O S I T I O N Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 33.2% 36.0% 22.4% 15.7% 16.9% 10.4% 11.0% 0.8% 34.5% 1.2% 16.1% 0.2% 35.7% 36.0% 34.6% 33.2% 36.9% 34.6% 33.2% 31.6% 31.5% 31.5% 21.9% 20.6% 21.8% 24.0% 22.4% 2018 2019 2020 2021 2022 2018 2019 2020 2021 2
Slide 14: AFH Segment
AFH SEGMENT • Volume remained strong, 4% higher than Q4 2021 • Market recovery completed in Canada and U.S. • Pricing actions have been fully realized • EBITDA was strong in Q4 2022 • Capacity remains highly utilized • AFH moving to a sustainable profit model, but could experience seasonal softness
Slide 15: Quarterly Financial Summary
Q U AR T E R LY F I N AN C I AL S U M M ARY % Change (Million CAD$, unless otherwise noted) Q4 2022 Q3 2022 Q4 2021 Y/Y Q/Q Revenue 458.1 427.0 424.1 8.0% 7.3% Cost of Sales 416.4 394.6 376.0 10.7% 5.5% Gross Profit 41.8 32.4 48.1 (13.1%) 28.8% Gross Margin 9.1% 7.6% 11.3% Adjusted EBITDA1 44.4 30.7
Slide 16: Quarterly Segmented Results
Q U AR T E R LY S E G M E N T E D R E S U LT S % Change (Million CAD$, unless otherwise noted) Q4 2022 Q3 2022 Q4 2021 Y/Y Q/Q Segmented Revenue Consumer 378.8 346.0 364.0 4.1% 9.5% AFH 79.3 81.0 60.1 31.9% (2.1)% Total Segment Revenue 458.1 427.0 424.1 8.0% 7.3% Segment Adjusted EBITDA1 Consumer 42
Slide 17: Q4 2022 Revenue Compared to Q4 2021
Q 4 2 0 2 2 R E V E N U E C O M PAR E D TO Q 4 2 0 2 1 Increase due to the following factors: $34.0 M • Selling price increases across all segments and regions Q4 Revenue increase • Positive FX impact on U.S. dollar sales 8.0% • Partially offset by lower sales volume in Consumer segment and unfavour
Slide 18: Q4 2022 Adjusted EBITDA Compared to Q4 2021
Q 4 2 0 2 2 AD J U S T E D E B I T D A 1 C O M PAR E D TO Q 4 2 0 2 1 Q4 2022 $44.4M compared to $38.3M in Q4 2021 $6.1 M Q4 Adjusted EBITDA1 increase Increase primarily due to the following factors: 15.8% • Higher selling prices over Q4 2021 • Lower SG&A expenses Adjusted EBITDA Margin1 Partially o
Slide 19: Q4 2022 Revenue Compared to Q3 2022
Q 4 2 0 2 2 R E V E N U E C O M PAR E D TO Q 3 2 0 2 2 Sequential increase in revenue due to: $31.1 M • Price increases in Consumer Canada and US Q4 Revenue increase • Volume up in Consumer segment in both regions, mostly offset by seasonally lower volume in AFH segment in both regions 7.3% • Positi
Slide 20: Q4 2022 Adjusted EBITDA Compared to Q3 2022
Q 4 2 0 2 2 AD J U S T E D E B I T D A 1 C O M PAR E D TO Q 3 2 0 2 2 Q4 2022 $44.4M compared to $30.7M in Q3 2022 $13.7 M Q4 Adjusted EBITDA1 increase Variance due to: 44.6% • Higher selling prices over Q3 2022 • Lower freight costs • Increased productivity Adjusted EBITDA Margin1 • Lower SG&A spen
Slide 21: Balance Sheet
B AL AN C E S H E E T (Million CAD$, unless otherwise noted) Q4 2022 Q3 2022 Cash 78.4 82.1 Current Portion of Long-term Debt 34.4 34.6 Long-term Debt 1,077.3 1,095.0 Net Debt 1,033.3 1,047.7 LTM Adjusted EBITDA1 116.0 109.9 Net Debt/LTM Adjusted EBITDA1 8.9x 9.5x • Net debt decreased by $14.4 milli
Slide 22: Lowered Capex
L O W E R E D C AP E X CAPEX • FY 2022 CAPEX was $115.6 million, $350 including $20.7 million related to TAD $300 Sherbrooke Project and $53.4 million related to Sherbrooke Expansion Project $250 $200 • 2022 CAPEX was lower than originally Millions forecasted due to reductions in $150 discretionary
Slide 23: Sustainability Focus
PILLAR: PRODUCTS EMPOWER OUR 2030 TARGETS FIBRE & FORESTS AGING To utilize To reduce 100% Scopes 1+ 2 third-party GHG emissions by REIMAGINE certified fibres 25% Q2OS®) PILLAR: EMPLOYEE IMPACT TRANSFORMATIVE GROWTH T To reduce water To reduce virgin SUSTAINABLE INNOVATION consumption by plastic pack
Slide 24: Progressing Along Recovery Curve
P R O G R E S S I N G AL O N G R E C O V E RY C U R V E T O D R I V E L O N G - T E R M VAL U E • Continuing to deliver strong top-line growth • Price increases implemented in 2022 to offset inflation • Prudently investing in brands to support price increases and innovations • TAD Sherbrooke capacit
Slide 25: 25
25