Slide 1: Q2 2022 Financial Results
Q 2 2 0 2 2 F I N A N C I A L R E S U LT S August 11, 2022
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 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
Slide 3: Corporate Structure
C O R P O R AT E S T R U C T U R E 100% 85.8% 14.1% *As of Aug. 10, 2022 (14.3% as of May 11, 2022). 3
Slide 4: 5 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: Q2 2022 Highlights
Q2 2022 HIGHLIGHTS Revenue Adjusted EBITDA1 Net Income $397.5 M $11.8 M ($35.5 M) 17.1% (68.3%) ($37.7 M) over Q2 2021 over Q2 2021 over Q2 2021 +9.1% +31.9% 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: Pulp Input Prices
PULP INPUT PRICES Q2 2022 NBSK average prices1 in CAD increased 15.1%, while BEK average prices1 increased 16.8% compared to Q1 2022. Q2 2022 NBSK average prices1 in CAD increased 13.4% and BEK average prices1 increased 21.0% year-over-year. Based on industry forecasts for 2022, NBSK and BEK prices
Slide 7: High Inflationary Pressure
H I G H I N F L AT I O N ARY P R E S S U R E Q2 2022 vs. Q2 2021 13-21% 35-40% FIBRE FREIGHT 4-6% 15-25% LABOUR PACKAGING +$45 Million Impact 150-170% 5-15% NATURAL GAS OTHER Source: Industry and internal estimates. 7
Slide 8: Pricing and Cost Management Adjustments
P R I C I N G AN D C O S T M AN AG E M E N T AD J U S T M E N T S Pricing Actions in 2022 Consumer Canada • Price increase in July • Further price hike in October Consumer U.S. 6-8% • Price increases in Jan/Feb and July Average Price Increase AFH • Price increases in January and May in Q2 2022 (YoY)
Slide 9: Network Modernization
NETWORK MODERNIZATION TAD Sherbrooke • Continuing to exceed ramp-up plans • Phase 2 of AI implementation progressing according to plan Sherbrooke Expansion • Increased total investment to ~$350 million • Start-up for bathroom tissue line expected in Q1 2023 with hiring and training phase on track •
Slide 10: Memphis Performance
Turnaround progressing into second half MEMPHIS PERFORMANCE Memphis Operations • Still a drag on overall business but recovering • Output improvement of 12% sequentially • Fully staffed and trained in Q2 2022 • Reigniting OPEX program with third-party partners to improve efficiency • Significant inv
Slide 11: Continuing to Invest in Brand Support
CONTINUING TO INVEST IN BRAND SUPPORT • Cutting discretionary marketing spending for full year • Remaining investments focused on in-store, purchase-driving actitivities to mitigate pricing increase impact • Strong awareness and trial-driving activities in place for Bonterra, UltraLuxe and White Clo
Slide 12: Brand Leadership Position
B R AN D L E AD E R S H I P P O S I T I O N Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 34.0% 36.7% 23.8% 15.6% 17.6% 11.2% 11.7% 0.7% 34.5% 1.3% 16.3% 0.2% 35.7% 36.7% 34.6% 33.2% 36.9% 34.6% 34.0% 31.6% 31.5% 31.5% 21.9% 20.6% 21.8% 24.0% 23.8% 2018 2019 2020 2021 2022 2018 2019 2020 2021 2
Slide 13: AFH Segment: Recovery Ongoing in Commercial Sector
RECOVERY ONGOING IN COMMERCIAL SECTOR AFH SEGMENT • Volume approximately 30% better than Q2 2021 • Market recovery continued in North America • Property management end-user segment still significantly below pre- pandemic levels • Inflation in transportation, fibre and energy persistent in Q2 2022 •
Slide 14: Quarterly Financial Summary
Q U AR T E R LY F I N AN C I AL S U M M ARY % Change (Million CAD$, unless otherwise noted) Q2 2022 Q1 2022 Q2 2021 Y/Y Q/Q Revenue 397.5 398.7 339.3 17.1% (0.3%) Cost of Sales 372.5 363.9 295.0 26.3% 2.4% Gross Profit 25.0 34.9 44.4 (43.7%) (28.3%) Gross Margin 6.3% 8.8% 13.1% Adjusted EBITDA1 11.8
Slide 15: 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) Q2 2022 Q1 2022 Q2 2021 Y/Y Q/Q Segmented Revenue Consumer 326.3 342.8 292.3 11.6% (4.8%) AFH 71.2 55.9 47.0 51.4% 27.3% Total Segment Revenue 397.5 398.7 339.3 17.1% (0.3%) Segment Adjusted EBITDA1 Consum
Slide 16: Q2 2022 Revenue Compared to Q2 2021
Q 2 2 0 2 2 R E V E N U E C O M PAR E D TO Q 2 2 0 2 1 Increase due to the following factors: $58.2 M • Selling price increases in last 12 months Q2 Revenue increase • Slightly higher Consumer sales volume 17.1% • Significantly increased AFH sales volume over Q2 2021 • FX impact on U.S. dollar sales
Slide 17: Q2 2022 Adjusted EBITDA Compared to Q2 2021
Q 2 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 2 2 0 2 1 ($25.5 M) Decrease primarily due to the following factors: Q2 Adjusted EBITDA1 decrease • Significant inflation on pulp, manufacturing costs and freight 68.3% • Labour and productivity issues in Memphis over Q2 2021 • Higher SG&A
Slide 18: Q2 2022 Revenue Compared to Q1 2022
Q 2 2 0 2 2 R E V E N U E C O M PAR E D TO Q 1 2 0 2 2 Sequential decrease in revenue due to: ($1.2 M) • Lower Consumer volume in both Canada and US Q2 Revenue decrease • Mostly offset by strong AFH volume and price increase in both regions 0.3% over Q1 2022 $3.6 M $2.4 M -1.5% +1.5% Canada U.S. 18
Slide 19: Q2 2022 Adjusted EBITDA Compared to Q1 2022
Q 2 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 1 2 0 2 2 Variance due to: ($17.3 M) • Lower overall sales volume/mix Q2 Adjusted EBITDA1 decrease • Higher pulp and SOP costs 59.5% • Inflation on other input costs over Q1 2022 • Labour challenges in Memphis and higher maintenance costs •
Slide 20: Balance Sheet
B AL AN C E S H E E T (Million CAD$, unless otherwise noted) Q2 2022 Q1 2022 Cash 100.3 113.7 Current Portion of Long-term Debt 33.8 33.5 Long-term Debt 1,039.5 952.0 Net Debt 973.0 871.8 LTM Adjusted EBITDA1 119.5 145.0 Net Debt/LTM Adjusted EBITDA1 8.1x 6.0x • Total debt increased $87.8 million fr
Slide 21: Lowered CAPEX
L O W E R E D C AP E X CAPEX $350 • YTD 2022 CAPEX reached $55.7 million, $300 including $10.9 million related to TAD Sherbrooke Project and $20.7 million $250 related to Sherbrooke Expansion Project $200 Millions • Total 2022 CAPEX of $160-$180 million, $150 including Sherbrooke Expansion Project $
Slide 22: The Next 10 Years: 2030 Targets
The Next 10 Years PILLAR: PRODUCTS EMPOWER OUR 2030 TARGETS + FIBRE & FORESTS * PACKAGING T INNOVATION To utilize To reduce 100% Scopes 1+ 2 third-party GHG emissions by REIMAGINE certified fibres 25% 2 OS 62) PILLAR: EMPLOYEE IMPACT TRANSFORMATIVE GROWTH * HEALTH & SAFETY To reduce water To reduce
Slide 23: Growing Business Long-Term While Managing Inflationary Pressure
GROWING BUSINESS LONG-TERM WHILE M AN A G I N G I N F L AT I O N A RY P R E S S U R E • Continuing to deliver strong top-line growth • Price increases and cost efficiencies to begin mitigating inflationary pressure in the third quarter with full recovery expected at end of fourth quarter • Prudently
Slide 24: www.kptissueinc.com
WWW.KPTISSUEINC.COM