Slide 1: Q1 2022 Financial Results
Q1 2022 FINANCIAL RESULTS May 12, 2022
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% 85.7% 14.3% *As of May 11, 2022 (14.4% as of March 9, 2022). 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: Q1 2022 Highlights
Q1 2022 Highlights Revenue Adjusted EBITDA1 Net Income $398.7 M $29.1 M $1.4 M 28.5% 22.4% $5.4 M over Q1 2021 over Q1 2021 over Q1 2021 +24.8% +34.6% 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 Q1 2022 NBSK average prices1 in CAD increased 4.4%, while BEK average prices1 increased 3.5% compared to Q4 2021. Q1 2022 NBSK average prices1 in CAD increased 17.4% and BEK average prices1 increased 25.1% year- over-year. Based on industry forecasts for 2022, NBSK and BEK prices a
Slide 7: High Inflationary Pressure: Q1 2022 vs. Q1 2021
High Inflationary Pressure Q1 2022 vs. Q1 2021 17-25% 35-40% FIBRE FREIGHT 4-6% 15-25% LABOUR PACKAGING 50-55% 5-15% NATURAL GAS OTHER Source: Industry and internal estimates. 7
Slide 8: Network Modernization: TAD Sherbrooke and Expansion
NETWORK MODERNIZATION Creating Flexible Tissue Hub in Canada TAD Sherbrooke • Continues to exceed ramp-up plans • Phase 1 of AI implementation successful. Phase 2 in progress with new use cases to be delivered Sherbrooke Expansion (Doubling capacity) • ~$110 million for double-wide paper machine wit
Slide 9: Network Modernization: Memphis Facial Tissue Line and Operations
NETWORK MODERNIZATION New Facial Tissue Line in Memphis • Start-up pushed to Q3 2022 (global supply-chain issues) • Capable of producing both TAD and LDC products • Provides opportunity for future growth in the U.S. Memphis Operations • Labour challenges continuing to affect productivity in first ha
Slide 10: Investing in Innovation and Marketing to Support Brands
Investing in Innovation and Marketing to Support Brands • Strong distribution across customer base for newly launched, sustainable Bonterra • Cashmere and Purex UltraLuxe TAD upgrade tracking well against expectations • SpongeTowels UltraPro continues to drive share with consumers • Expanding distri
Slide 11: Brand Leadership Position
Brand Leadership Position Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 34.4% 36.2% 24.1% 15.7% 17.6% 11.7% 11.7% 0.6% 34.9% 1.4% 17.0% 0.8% 36.9% 35.7% 36.2% 34.6% 33.2% 34.6% 34.4% 24.0% 24.1% 31.6% 31.5% 31.5% 21.9% 21.8% 20.6% 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2018 2019 2020
Slide 12: AFH Segment
AFH SEGMENT Recovery ongoing in commercial sector • Volume approximately 30% better than Q1-2021 • Market recovery continues in Canada, while US volume has fully recovered • Inflation in raw materials, transportation and labour negatively affected Q1-2022 results • Price increases impacting financia
Slide 13: Quarterly Financial Summary
Quarterly Financial Summary % Change (Million CAD$, unless otherwise noted) Q1 2022 Q4 2021 Q1 2021 Y/Y Q/Q Revenue 398.7 424.1 310.4 28.5% (6.0%) Cost of Sales 363.8 376.0 263.3 38.2% (3.2%) Gross Profit 34.9 48.1 47.0 (25.8%) (27.4%) Gross Margin 8.8% 11.3% 15.2% Adjusted EBITDA1 29.1 38.3 37.5 (2
Slide 14: Quarterly Segmented Results
Quarterly Segmented Results % Change (Million CAD$, unless otherwise noted) Q1 2022 Q4 2021 Q1 2021 Y/Y Q/Q Segmented Revenue Consumer 342.8 364.0 271.4 26.3% (5.8%) AFH 55.9 60.1 39.0 43.3% (7.0%) Total Segment Revenue 398.7 424.1 310.4 28.5% (6.0%) Segment Adjusted EBITDA1 Consumer 35.4 43.7 44.1
Slide 15: Q1 2022 Revenue Compared to Q1 2021
Q1 2022 Revenue Compared to Q1 2021 Increase due to the following factors: $88.3 M • Selling price increase in all segments and regions Q1 Revenue increase • Higher Consumer sales volume • Increase in AFH sales volume 28.5% over Q1 2021 Geographic revenue segmentation $48.3 M $40.0 M +24.8% +34.6% C
Slide 16: Q1 2022 Adjusted EBITDA Compared to Q1 2021
Q1 2022 Adjusted EBITDA1 Compared to Q1 2021 Decrease primarily due to the following factors: ($8.4 M) • Higher pulp prices and other inflation Q1 Adjusted EBITDA1 decrease • Unfavourable impacts of overhead absorption • Labour shortages in Memphis manufacturing 22.4% over Q1 2021 • Higher freight r
Slide 17: Q1 2022 Revenue Compared to Q4 2021
Q1 2022 Revenue Compared to Q4 2021 ($25.4 M) Decrease due to: Q4 Revenue decrease • Lower seasonal Q1 volume in both segments 6.0% over Q4 2021 Geographic revenue segmentation $2.3 M $23.1 M -0.9% -12.9% Canada U.S. 17
Slide 18: Q1 2022 Adjusted EBITDA Compared to Q4 2021
Q1 2022 Adjusted EBITDA1 Compared to Q4 2021 Variance due to: ($9.2 M) • Lower sales volume Q1 Adjusted EBITDA1 decrease • Higher pulp costs and inflation • Increased freight costs 24.2% • Labour challenges in Memphis over Q4 2021 • Increased overhead absorption • Loss on foreign exchange Adjusted E
Slide 19: Balance Sheet
Balance Sheet (Million CAD$, unless otherwise noted) Q1 2022 Q4 2021 Cash 113.7 151.0 Current Portion of Long-term Debt 33.5 48.6 Long-term Debt 952.0 920.3 Net Debt 871.8 817.9 LTM Adjusted EBITDA1 145.0 153.4 Net Debt/LTM Adjusted EBITDA1 6.0x 5.3x • Total debt increased $16.6 million compared to
Slide 20: CAPEX
CAPEX CAPEX $350 • Q1 2022 CAPEX reached $16.3 million, including $5.3 million related to TAD $300 Sherbrooke Project and $6.0 million related to Sherbrooke Expansion Project $250 • Total 2022 CAPEX forecast reduced to $200 $160-$180 million, including Sherbrooke Millions Expansion Project $150 $100
Slide 21: Reimagine 2030 – A Critical Part of Our ESG Commitment
Reimagine 2030 – A Critical Part of Our ESG Commitment 21
Slide 22: Growing Business Long-Term While Managing Inflationary Pressure
Growing Business Long-Term While Managing Inflationary Pressure • Continuing to deliver strong top-line growth • Price increases and cost efficiencies to begin mitigating inflationary pressure in second half of 2022 • Newly launched Bonterra and UltraLuxe upgrade tracking against expectations • Cont
Slide 23: 23
23