Kp Tissue, Inc. · TSX:KPT
Kp Tissue — Q1 2018 Earnings Presentation
25 slides from Kp Tissue's earnings presentation, May 10, 2018
Slide 1: Q1 2018 Financial Results
Q1 2018 FINANCIAL RESULTS May 10, 2018
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 *As of April 1, 2018 (15.9% as of May 10, 2018) 3
Slide 4: Kruger Products Overview
Kruger Products Overview 1 2 3 Canada’s Leading Strong Customer Relationships Efficient Manufacturing Tissue Company Reinforced by Compelling Infrastructure Retail Proposition 4 5 6 Strong Balance Sheet Prudent Growth Experienced Management Supported by Free Cash Strategy Team with Demonstrated Flow
Slide 5: Q1 2018 Highlights
Q1 2018 Highlights $323.7 M 11.9% $27.0 M 20.1% Revenue over 2017 Adjusted EBITDA1 over 2017 • A decrease of $6.8 million or 20.1% Revenues increased in both geographic regions, • Primarily due to the continuous run-up in pulp prices and all segments and increase in freight costs $1.6 M Net Income o
Slide 6: Pulp Input Prices
Pulp Input Prices Q1 2018 market pulp prices rose sequentially compared to Q4 2017, and also year-over-year, in both USD and CAD. Based on industry forecasts, pulp prices in USD are expected to remain high for the balance of 2018. The volatile CAD will create further fluctuations in pulp input costs
Slide 7: Freight Cost Index
Freight Cost Index Freight costs have risen significantly since the beginning of 2017 and reached an all-time high in Q4 2017. Management expects these costs to remain high for the balance of 2018. Cass Truckload Linehaul Index™ (Q1 2018 +7% YOY) 140.0 The Cass Truckload Linehaul Index™ is an accura
Slide 8: Price Increase and Cost Reductions
Price Increase and Cost Reductions Selling price increase to Canadian retailers Value creation program Selling price increase implemented in Q4 2017, Value added program to be much larger in started to impact Q1 2018 scope and size compared to the past As the market price leader, market share were S
Slide 9: Quarterly Financial Summary
Quarterly Financial Summary % Change (Million CAD$, unless otherwise noted) Q1 2018 Q4 2017 Q1 2017 Y/Y Q/Q Number of days in quarter 91 98 85 7.1% (7.1)% Revenue 323.7 340.0 289.3 11.9% (4.8)% Cost of Sales 287.4 296.0 244.3 Gross Profit 36.3 44.0 45.0 (19.3)% (17.5)% Gross Margin 11.2% 12.9% 15.6%
Slide 10: Quarterly Segmented Results
Quarterly Segmented Results % Change (Million CAD$, unless otherwise noted) Q1 2018 Q4 2017 Q1 2017 Y/Y Q/Q Number of days in quarter 91 98 85 7.1% (7.1)% Segmented Revenue Consumer 267.7 276.4 238.9 12.1% (3.1)% AFH 53.5 62.2 48.7 9.9% (14.0)% Other 2.5 1.4 1.7 Total Segment Revenue 323.7 340.0 289
Slide 11: Q1 2018 Revenue Compared to Q1 2017
Q1 2018 Revenue Compared to Q1 2017 $34.4 M 11.9% Geographic revenue segmentation Q1 revenue increase over Q1 2017 $14.8 M $10.8 M Impacted by a combination of: • Additional 6 days of sales (or 7.1% of sales) in Q1 2018 versus Q1 2017 • Favourable impact of increased sales volume • Consumer selling
Slide 12: Q1 2018 Adjusted EBITDA Compared to Q1 2017
Q1 2018 Adjusted EBITDA Compared to Q1 2017 $6.8 M 20.1% Q1 Adjusted EBITDA decrease over Q1 2017 Primarily due to the following factors: • Significantly higher pulp costs • Increased freight costs • Partially offset by increased sales volume, the Canadian selling price increase, net favourable impa
Slide 13: Q1 2018 Revenue Compared to Q4 2017
Q1 2018 Revenue Compared to Q4 2017 $16.3 M 4.8% Geographic revenue segmentation Q1 revenue decrease over Q4 2017 $14.9 M $4.6 M Primarily due to the following factors: • Q1 2018 consisting of 91 days and Q4 2017 consisting of 98 days • AFH segment revenue decreased by $8.7 million or 14.0% • Consum
Slide 14: Q1 2018 Adjusted EBITDA Compared to Q4 2017
Q1 2018 Adjusted EBITDA Compared to Q4 2017 $6.7 M 19.9% Q1 Adjusted EBITDA decrease over Q4 2017 Due to the combination of the following factors: • Q1 2018 consisting of 91 days and Q4 2017 consisting of 98 days • Higher pulp cost • Increased freight costs Gross Margin 11.2% 12.9% Q1 2018 Q4 2017 G
Slide 15: Balance Sheet
Balance Sheet (Million CAD$, unless otherwise noted) Q1 2018 Q4 2017 Cash and Bank Indebtedness 1.3 (0.2) Current Portion of Long-term Debt 198.2 190.9 Long-term Debt 262.3 225.4 Net Debt 459.2 416.5 LTM Adjusted EBITDA 137.4 144.2 Net Debt/LTM Adjusted EBITDA 3.3 2.9 On April 24, 2018, Kruger Produ
Slide 16: CAPEX
CAPEX CAPEX, excluding TAD Project $90 Q1 2018 CAPEX of $15.7 million, up Millions $80 from $12.7 million in Q1 2017 due to project timing $70 $60 2018 focus on high return CAPEX projects – total estimated at $50 to $50 $60 million $40 Cost reduction and Capacity/Growth $30 projects generally have 3
Slide 17: TAD2 Project
TAD2 Project Part of KPLP’s long-term strategy is to increase premium paper capacity A decision to proceed with the project is subject Studying the potential for a second TAD paper machine with to a number of state-of-the-art converting capability (“TAD2”) factors, including • Potential sites in Can
Slide 18: AFH Segment
AFH Segment Resetting the AFH business to create a more efficient manufacturing and logistics footprint: • In progress with a CAPEX program to improve manufacturing and logistics costs • Results are also affected by pulp prices and freight costs • Crabtree PM8 paper machine is now being partially us
Slide 19: Stable Underlying Demand for Consumer Tissue
Stable Underlying Demand for Consumer Tissue • Tissue demand has been relatively stable over time • Demand typically supported by overall population growth and high household penetration rates Total Consumer Retail Sales in Canada C$ millions Bathroom Tissue Paper Towels Facial Tissue CAGR: 2.2% $1,
Slide 20: U.S. Tissue Demand is Stable
U.S. Tissue Demand is Stable U.S. demand for tissue products has grown consistently at a CAGR of 1.4% from 2001 – 2016 • CAGR of 1.6% expected from 2017E to 2026E • Consumer represents ~67% of U.S. tissue demand • AFH has shown similar growth to consumer segment; typically greater sensitivity to eco
Slide 21: Canada's Leading Tissue Company
Canada’s Leading Tissue Company Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 35.3% 31.5% 22.3% 18.8% 18.9% 11.5% 11.6% 0.7% 33.2% 3.2% 18.2% 1.7% Source: Nielsen; dollar market share for the 52-week period ended March 31, 2018. 8 21
Slide 22: Brand Leadership Position
Brand Leadership Position #1 Bathroom Tissue #1 Facial Tissue #2 Paper Towel 33.2% 24.9% 24.7% 37.1% 32.7% 31.9% 24.3% 24.1% 31.4% 31.4% 31.4% 31.5% 23.7% 36.2% 36.3% 30.2% 35.3% 22.6% 22.3% 34.8% 35.0% 34.7% 35.0% 21.9% 2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018
Slide 23: Business Strategy Focused on Building Great Brands and Products
Business Strategy Focused on Building Great Brands and Products Build Consumer and • Drive marketing and sales excellence Brand Leadership in • Strengthen our brands Canada • Increase innovation • Leverage TAD capabilities and focus on the high-end private label business • Invest in technology to su
Slide 24: Conclusion
Conclusion • Continue to build revenue, maintain market share leadership, secure our private label activities, and focus on opportunistic growth for AFH • A price increase to Canadian retailers was implemented in Q4 2017 and was working through the system in Q1 2018 • Initiated an escalated value cr
Slide 25: KP Tissue Inc.
KP Tissue Inc.