Kp Tissue, Inc. · TSX:KPT
Kp Tissue — Investor Presentation (November 2016)
37 slides from Kp Tissue's investor presentation, November 2016
Slide 1: KP Tissue Inc.
¢ KP Tissue Inc.
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: Investment Highlights
INVESTMENT HIGHLIGHTS Leading Canadian tissue brands with #1 overall market share Strong customer relationships - #1 in CPG survey for 4 consecutive years Away-From-Home (AFH) – Extend and leverage AFH N.A. platform Solid track record of EBITDA growth – YTD up 14% Growing US platform with significan
Slide 4: Corporate Structure
CORPORATE STRUCTURE @ Kruger... @KP —-@ KP Tissue Inc. 2.9 = ; PON Public Investors | @ Kruger usa Prod ucts L.P. Existing Memphis Operations TAD Project | mer 6EED tus: Stn pe Kruger Products L.P. is the operating company. KP Tissue Inc. is the publicly traded entity. * As of November 2, 2016 (16.2
Slide 5: Corporate Timeline
CORPORATE TIMELINE Kruger acquires Focus on Acquisition Successfully Scott Paper 100% of Scott Commercial Acquisition high-return of completes KP Tissue Limited Paper Limited launch of CAPEX Memphis transition of IPO Commences from KC for TAD Project Metro Paper including Plant KC brands Operations
Slide 6: Business Segments
BUSINESS SEGMENTS Consolidated LTM Revenue - $1.2 billion (1) CONSUMER AWAY - F R O M - H O M E LTM LT M Revenue R e v e n u e- $950 $ 9 5 0 million million LT M R e v e n u e $ 2 2 2 m i l l i o n (1) NotIncluded is the included in therevenue “Other”above segment is thewhich had “Other” LTM revenue
Slide 7: Geographic Revenues – YTD FY2016
GEOGRAPHIC REVENUES – YTD FY2016 ($C millions) $37 million +49.2% yr/yr Mexico 4% $537 million $314 million U.S. Canada +9.8% yr/yr 35% 61% +1.8% yr/yr Canada U.S. Mexico 7
Slide 8: Manufacturing and Distribution
MANUFACTURING AND DISTRIBUTION New Westminster, BC Crabtree, QC Gatineau, QC Sherbrooke, QC Trenton, ON Mississauga, ON Scarborough, ON Optimal shipping range approximately 500 miles Memphis, TN Reaching over 80% of the North American population KPLP represents one-third of total Canadian capacity 8
Slide 9: Canada's Leading Tissue Company
CANADA’S LEADING TISSUE COMPANY • Leading brands: Scotties, Cashmere, Purex, SpongeTowels • In 2016, once again, Cashmere was the best-selling bathroom tissue in Canada. In Western Canada, Purex was again the top brand 9
Slide 10: Canada's Leading Tissue Company Consumer Market Share
CANADA’S LEADING TISSUE COMPANY CONSUMER MARKET SHARE Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 36.8% 31.5% 23.8% 21.1% 20.3% 9.8% 10.2% 1.0% 32.3% 4.4% 18.2% 2.6% Source: Nielsen; dollar market share for the 52-week period ended September 17, 2016. 10
Slide 11: Strong Customer/Retailer Relationships
STRONG CUSTOMER/RETAILER RELATIONSHIPS of all branded tissue of all branded tissue product sales at the product sales in 5 largest Canadian Canada(1) Grocers(1) (1) ACNielsen data – October 15, 2016, on a dollar basis. 11
Slide 12: Strong Customer/Retailer Relationships
STRONG CUSTOMER/RETAILER RELATIONSHIPS 1 Vendor in 2010 2 Vendor in 2011 and 2012 1 Vendor in 2013, 2014, 2015 and 2016 Out of over 20 of the Largest CPG Companies in Canada(1) (1) Third-party annual survey of Canadian retailers, evaluating amongst other things, quality of personnel and services (1)
Slide 13: Technological Advantage
TECHNOLOGICAL ADVANTAGE Objective: Optimum Softness while Maximizing Bulk to reduce unit cost A significant portion of KPLP’s consumer tissue is manufactured using SRC TAD technology SOFTNESS Process • Recycled fibre, better quality • Lower production costs SRC TAD – Through-Air-Dried LDC • Softer,
Slide 14: Away-From-Home (AFH)
AWAY-FROM-HOME (AFH) • Canadian market share leader with approximately 30% • 19% of Total Company LTM revenue • AFH covers multiple market channels: – Foodservice, property management, lodging, health care, public facilities, education and manufacturing • Our business is split approximately 2/3’s in
Slide 15: Away-From-Home (AFH) Market Share in Canada
AWAY-FROM-HOME (AFH) MARKET SHARE IN CANADA KPLP is the Canadian market leader in the AFH segment. 35% 30% 25% 20% 15% 10% 5% 0% Source: Industry data and management estimates 2016, based on total Canadian market 15
Slide 16: Pulp Input Prices
PULP INPUT PRICES • Pulp prices (NBSK) rose sequentially in 2016 in both USD and CAD and also year-over-year in CAD. Eucalyptus prices (BEK, not shown here) were lower however • Based on industry information, management expects pulp prices in USD to remain relatively stable in the near term. The con
Slide 17: Key Business Highlights & Strategy
KEY BUSINESS HIGHLIGHTS & STRATEGY 17
Slide 18: Business Highlights
BUSINESS HIGHLIGHTS Maintained positive Adjusted EBITDA trend for our 4th year as a public company – LTM run rate improvement to $140 million vs. $126 million in FY2015 Offset pulp increase/Cdn. dollar weakness by leading a price increase in Consumer Canada / AFH Implementing a $5 million cost
Slide 19: Business Highlights
BUSINESS HIGHLIGHTS White Cloud rated #1 best all-around U.S. bathroom tissue brand* Implementing action plan to improve AFH profitability Capital Program 2016/2017 of $145-160 million: low risk/high return government financing at low interest rates additional capacity to support Canadia
Slide 20: Financial Performance Trend
FINANCIAL PERFORMANCE TREND Revenue 1,189 Adjusted Adjusted Operating 1,139 EBITDA (1) 140 EBITDA Margin Income 1,046 126 122 12.0% 12.2% 11.8% 90.9 955 116 11.6% 923 11.1% 111 82.2 81.6 78.4 67.8 2012 2013 2014 2015 LTM 2012 2013 2014 2015 LTM 2012 2013 2014 2015 LTM 2012 2013 2014 2015 LTM 09/16 0
Slide 21: Strategic Initiatives
STRATEGIC INITIATIVES Maintain brand leadership and grow profitability in Canada Drive Growth in U.S. Consumer Premium Private Label Improve profitability and focus on U.S. growth in AFH Continue to focus on Operational Excellence including high return CAPEX projects 21
Slide 22: Brand Leadership Position in Canada
BRAND LEADERSHIP POSITION IN CANADA #1 Bathroom Tissue #1 Facial Tissue #2 Paper Towel 33.2% 24.9% 24.7% 37.1% 32.7% 36.8% 31.9% 24.3% 31.4% 31.5% 23.8% 36.2% 23.7% 30.2% 23.3% 35.2% 29.1% 22.2% 22.3% 34.8% 35.0% 34.7% 35.0% 21.9% 25.4% 25.6% 32.9% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2008 2
Slide 23: Consumer Canada Business
CONSUMER CANADA BUSINESS Canadian Consumer business initiatives include: Improve Adjusted EBITDA and CAPEX projects focused on maintain leading market share capacity growth and cost reduction/automation for Increase manufacturing performance Bathroom tissue and Facial tissue and operating effi
Slide 24: Net Capacity Change & Capacity Utilization
NET CAPACITY CHANGE & CAPACITY UTILIZATION Net Capacity Change* and Capacity Utilization in the North American Tissue Industry, 2002-2020 350 100 Capacity Change (L) 300 Capacity Utilization (R) 250 95 200 Annual Population Thousand Tonnes 150 Growth of 1.5%(1) = Percent 100 90 + 130,000 tonnes/year
Slide 25: Private Label – Market Share
PRIVATE LABEL – MARKET SHARE 40 PRIVATE LABEL MARKET SHARE 35 USA Canada 30 25 20 15 10 2006 2008 2010 2011 2012 2013 2014 2015 Management forecast is for U.S. Private Label share to grow to 30% by 2020 Source: RISI 25
Slide 26: TAD Product Financials
TAD PRODUCT FINANCIALS • YTD 2016 Adjusted EBITDA from TAD products of $35.2 million, up from $32.1 million in YTD 2015 • Adjusted EBITDA from TAD products for Q4 2016 expected to be higher than Q4 2015, primarily due to sales ramp-up from new customers ADJUSTED EBITDA from TAD products (In millions
Slide 27: TAD Project
TAD PROJECT • Our outlook for Fiscal 2017 Adjusted EBITDA remains at $60 million for TAD products • Capacity filled for FY2017 with three new private label customers – machine now fully booked • Quality at highest level National Brand Equivalent • Production on target learning curve, increased machi
Slide 28: Away-From-Home (AFH)
AWAY-FROM-HOME (AFH) • Completed Metro Paper acquisition in 2014 adding approximately $50 million of revenue • Consolidation of converting operations in Trenton / Scarborough with new CAPEX • Significant CAPEX commitment in 2015-2017 of over $25 million. Payback period of 4 years with benefits start
Slide 29: High Return CAPEX Projects
HIGH RETURN CAPEX PROJECTS Total Company year-to-date CAPEX of $58.7 million, up from $35.1 million last year, 2016 estimated at approximately $80-$90 million CAPEX COMPONENTS Fiscal 2016 % Capacity/Growth 48% Cost reductions 27% Maintenance 25% Total 100% Focus is on high return CAPEX involvi
Slide 30: Looking Ahead
LOOKING AHEAD • Maintain market share leadership in Canadian consumer segment • Continue to mitigate impact of high commodity prices and weak Canadian dollar • Continue to leverage our TAD product manufacturing capacity to take advantage of growth opportunities in the U.S. premium private label mark
Slide 31: Looking Ahead
LOOKING AHEAD • Benefits from Metro Paper acquisition and CAPEX ramp-up in AFH will start in FY2017 • New paper machine in Crabtree. Expected benefits starting in Fiscal 2018 • Focus on high-return CAPEX projects aimed at improving profitability and manufacturing efficiencies 31
Slide 32: Supplementary Information: Appendix
SUPPLEMENTARY INFORMATION: APPENDIX 32
Slide 33: Quarterly Financial Summary
QUARTERLY FINANCIAL SUMMARY % Change (C$ millions, unless otherwise noted) Q3 2016 Q2 2016 Q3 2015 Y/Y Q/Q Revenue 312.8 295.8 293.6 6.5% 5.7% Cost of Sales 256.8 249.9 248.0 Gross Profit 56.0 45.9 45.6 22.8% 22.0% Gross Margin 17.9% 15.5% 15.5% Adjusted EBITDA 45.7 35.9 34.8 31.3% 27.3% Adjusted EB
Slide 34: Quarterly Segmented Results
QUARTERLY SEGMENTED RESULTS QUARTERLY SEGMENTED RESULTS % Change (C$ millions, unless otherwise noted) Q3 2016 Q2 2016 Q3 2015 Y/Y Q/Q Segmented Revenue Consumer 248.8 232.4 230.2 8.1% 7.1% AFH 59.4 59.1 59.5 (0.2)% 0.5% Other 4.6 4.3 3.9 Total segment revenue 312.8 295.8 293.6 6.5% 5.7% Segment Adj
Slide 35: Balance Sheet
BALANCE SHEET (C$ millions, unless otherwise noted) Q3 2016 Q2 2016 Cash & cash equivalents 19.5 10.1 Current portion of long-term debt 9.0 9.1 Long-term debt 415.7 408.4 Net Debt 405.1 407.5 LTM EBITDA 139.9 129.0 Net Debt/LTM EBITDA 2.9 3.2 35
Slide 36: CSR: Programs Versus Objectives
CSR: PROGRAMS VERSUS OBJECTIVES Component Objective Actual Energy -15% - 5% Emissions -15% -16% Water -15% -18% Packaging - 5% -13% Logistics +15% +10% Certified Fibre 100% 100% FSC® Chain of Custody Yes Yes Certified Products 100+ 144 http://www.sustainability2015.ca/ 36
Slide 37: KP Tissue Inc.
KP Tissue Inc.