Slide 1: Q4 2021 Financial Results
Q4 2021 FINANCIAL RESULTS March 10, 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% 85.6% 14.4% *As of March 9, 2022 (14.5% as of December 31, 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: Q4 2021 Highlights
Q4 2021 Highlights Revenue Adjusted EBITDA1 Net Income $424.1 M $38.3 M $42.3 M 10.2% 5.8% $70.8 M over Q4 2020 over Q4 2020 over Q4 2020 +0.4% +27.0% 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: Fiscal 2021 Highlights
Fiscal 2021 Highlights Revenue Adjusted EBITDA1 Net Income $1,465.2 M $153.4 M $42.0 M 3.4% 22.4% $14.7 M over 2020 over 2020 over 2020 (2.5%) (4.6%) 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 2021 NBSK average prices1 in CAD decreased 4.6%, while BEK average prices1 decreased 5.1% compared to Q3 2021. Q4 2021 NBSK average prices1 in CAD increased 25.0% and BEK average prices1 increased 37.0% year- over-year. Based on industry forecasts for 2022, NBSK and BEK prices a
Slide 8: High Inflationary Pressure
High Inflationary Pressure Estimated impact on cost items versus prior year 40-45% 3-5% FREIGHT LABOUR 15-25% 50-55% PACKAGING NATURAL GAS 5-15% OTHER Source: Industry and internal estimates. 8
Slide 9: Network Modernization
NETWORK MODERNIZATION Creating Flexible Tissue Hub in Canada TAD Sherbrooke • Continues to stay ahead of ramp-up plans • Phase 1 of AI implementation successful. Phase 2 in progress with new use cases to be delivered Sherbrooke Expansion (Doubling capacity) • Additional investment of ~$110 million f
Slide 10: Network Modernization: Memphis
NETWORK MODERNIZATION New Facial Tissue Line in Memphis • Start-up in late Q2 2022 • Capable of producing both TAD and LDC products • Provides opportunity for future growth in the U.S. Memphis Operations • Labour challenges continued affecting productivity in Q4 2021 • Implementing turnaround with i
Slide 11: Operational Excellence
OPERATIONAL EXCELLENCE OpEx • All sites and most assets operating under OpEX • Increasing depth of OpEX knowledge: leveraging best practices • Focus on asset reliability and waste reduction in 2022 AI Implementation • AI targeting total supply chain • Developing plan to expand AI across network • AI
Slide 12: Trademark
TRADEMARK Continued focus on investing in our brands • Another year of incremental investment to drive equity of current brands and innovations • SpongeTowels Ultra Pro continues to outperform objectives and received three Best New Innovation Awards by consumers • New sustainable brand launch with B
Slide 13: Innovation
INNOVATION Bonterra • Offers consumers a sustainable solution with bundle of unique features: o Plastic-free paper packaging o High quality FSC® certified recycled fiber o Carbon neutral production o Partnerships with 4Ocean and One Tree Planted o Made in Canada • Bathroom tissue, facial tissue and
Slide 14: Canada's Leading Tissue Company
Canada’s Leading Tissue Company Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 34.6% 35.7% 24.0% 16.3% 17.7% 12.0% 11.5% 0.6% 35.2% 1.4% 17.4% 0.9% Source: Nielsen; dollar market share for the 52-week period ended January 1, 2022 14
Slide 15: Brand Leadership Position
Brand Leadership Position #1 Bathroom Tissue #1 Facial Tissue #2 Paper Towel 36.3% 36.9% 34.6% 34.6% 35.7% 33.2% 31.4% 31.6% 31.5% 31.5% 24.0% 22.3% 21.9% 21.8% 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 16: AFH Segment
AFH SEGMENT Recovery ongoing in commercial sector • Market recovery continued in Q4 2021 with volume approximately 15% better than Q4 2020 and 5% below pre-COVID volume levels (Q4 2019) • Recovery in the U.S. still outpacing Canada • Price increases announced in Q4 2021 effective on Jan. 1st • Infla
Slide 17: Quarterly Financial Summary
Quarterly Financial Summary % Change (Million CAD$, unless otherwise noted) Q4 2021 Q3 2021 Q4 2020 Y/Y Q/Q Revenue 424.1 391.4 385.0 10.2% 8.4% Cost of Sales 376.0 345.6 332.2 13.2% 8.8% Gross Profit 48.1 45.8 52.8 (8.9%) 5.0% Gross Margin 11.3% 11.7% 13.7% Adjusted EBITDA1 38.3 40.3 36.2 5.8% (5.0
Slide 18: Quarterly Segmented Results
Quarterly Segmented Results % Change (Million CAD$, unless otherwise noted) Q4 2021 Q3 2021 Q4 2020 Y/Y Q/Q Segmented Revenue Consumer 364.0 332.4 333.2 9.2% 9.5% AFH 60.1 59.0 51.8 16.0% 1.9% Total Segment Revenue 424.1 391.4 385.0 10.2% 8.4% Segment Adjusted EBITDA1 Consumer 43.7 39.1 44.2 (1.1%)
Slide 19: Q4 2021 Revenue Compared to Q4 2020
Q4 2021 Revenue Compared to Q4 2020 Increase due to the following factors: $39.1 M • Higher Consumer sales volume in US Q4 Revenue increase • Selling price increase in Consumer Canada • Increase in AFH sales volume 10.2% Partially offset by: over Q4 2020 • Unfavourable FX impact on U.S. sales Geogra
Slide 20: Q4 2021 Adjusted EBITDA Compared to Q4 2020
Q4 2021 Adjusted EBITDA1 Compared to Q4 2020 Increase primarily due to the following factors: $2.1 M • Higher sales volume Q4 Adjusted EBITDA1 increase • Selling price increase in Consumer Canada • Lower SG&A expenses 5.8% over Q4 2020 • Net favourable impact of FX fluctuations Partially offset by:
Slide 21: Q4 2021 Revenue Compared to Q3 2021
Q4 2021 Revenue Compared to Q3 2021 $32.7 M Increase due to: Q4 Revenue increase • Higher Consumer sales volume in US and Canada 8.4% over Q3 2021 Geographic revenue segmentation $11.7 M $21.0 M +5.0% +13.3% Canada U.S. 21
Slide 22: Q4 2021 Adjusted EBITDA Compared to Q3 2021
Q4 2021 Adjusted EBITDA1 Compared to Q3 2021 Variance due to: ($2.0 M) • Higher pulp costs and inflation Q4 Adjusted EBITDA1 decrease • Increased freight costs • Labour challenges in Memphis 5.0% • Increased overhead absorption over Q3 2021 • Higher advertising expenses • Loss on foreign exchange Ad
Slide 23: Balance Sheet
Balance Sheet (Million CAD$, unless otherwise noted) Q4 2021 Q3 2021 Cash 151.0 118.6 Current Portion of Long-term Debt 48.6 39.2 Long-term Debt 920.3 915.1 Net Debt 817.9 835.7 LTM Adjusted EBITDA1 153.4 151.3 Net Debt/LTM Adjusted EBITDA1 5.3x 5.5x • Total debt increased $14.6 million compared to
Slide 24: CAPEX
CAPEX CAPEX $350 • 2021 TAD Sherbrooke CAPEX was $98.0 million $300 • $6.9 million of accrued and unpaid capital $250 spending at year-end $200 • 2021 CAPEX was $48.6 million, excluding Millions TAD Sherbrooke $150 • Total 2022 CAPEX between $190-$210 million, including Sherbrooke Expansion $100 pro
Slide 25: Reimagine 2030 – The Next 10 Years of Sustainable Development
Reimagine 2030 – The Next 10 Years of Sustainable Development 25
Slide 26: Reinvesting in the Business to Pursue Growth
Reinvesting in the Business to Pursue Growth • Continuing to deliver strong top-line-driven growth • Pursuing additional options to offset costs with pricing and productivity • Launching Bonterra and UltraLuxe upgrade • Investing in our brands and innovation to build market share leadership in Canad
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