Kp Tissue, Inc. · TSX:KPT
Kp Tissue — Q3 2020 Earnings Presentation
23 slides from Kp Tissue's earnings presentation, Nov 5, 2020
Slide 1: Q3 2020 Financial Results
Q3 2020 FINANCIAL RESULTS November 5, 2020
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% 85.3% 14.7% *As of November 5, 2020 (14.8% as of September 30, 2020). 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: Q3 2020 Highlights
Q3 2020 Highlights $369.1 M Volume increases in Consumer, partially Revenue Excluding Mexico offset by AFH +4.7% +11.5% (0.1)%* 7.3%* Canada U.S. Over Q3 2019 over Q3 2019 $46.2 M The increase was primarily due favourable sales impact and product Adjusted EBITDA1 mix, and slightly lower cost of sale
Slide 6: Pulp Input Prices
Pulp Input Prices Q3 2020 NBSK prices in CAD decreased 6.1% and BEK prices decreased 4.0% compared to Q2 2020. NBSK prices in USD have slightly decreased while BEK prices remained the same during Q3 2020. For the remainder of 2020 and based on industry forecasts, NBSK and BEK prices in USD are expec
Slide 7: COVID-19 Impact
COVID-19 Impact • Enhanced our safety protocols in wake of wave 2 • Strong performance of assets with no major disruptions • Running fewer SKUs with priority on top selling products leading to improved productivity • Extended our raw material purchases to secure business continuity • Consumer trust
Slide 8: TAD Sherbrooke
TAD SHERBROOKE Site construction near completion • On time and on budget • All converting lines are operational and performing well • Trying to exceed planned production to meet increased demand • $2.1 million in start-up costs incurred in Q3 • Paper machine remains on track for Q1 2021 start-up • S
Slide 9: Driving more capacity, asset reliability, cost savings and cultural shift
Driving more capacity, asset reliability, cost savings and cultural shift • OpEx program tracking to overall plan and rolled out to all sites • High level of employee engagement and culture shift in motion • Plants operating very well in Q3 • SKU consolidation helped run more efficiently and increas
Slide 10: Trademark: Continued focus on investing and building our brands
TRADEMARK Continued focus on investing and building our brands • Share gains continued in Q3 supported by strong shipments • Planned higher advertising and promotion spend in 2H of 2020 • Focus on connecting with consumers with purpose-driven messaging through new media campaign • Cashmere Collectio
Slide 11: Canada's Leading Tissue Company
Canada’s Leading Tissue Company Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 36.4% 31.7% 22.0% 18.9% 19.2% 12.5% 10.1% 0.6% 34.2% 1.3% 18.0% 0.8% Source: Nielsen; dollar market share for the 52-week period ended October 3, 2020. 11
Slide 12: Brand Leadership Position
Brand Leadership Position #1 Bathroom Tissue #1 Facial Tissue #2 Paper Towel 36.3% 36.4% 34.3% 34.6% 33.2% 33.3% 31.4% 31.6% 31.5% 31.7% 22.9% 22.3% 22.0% 21.9% 20.6% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Source: Nielsen Canadian dollar market share for 52-week p
Slide 13: AFH Segment
AFH SEGMENT Doing the right things to rebuild the business • Market conditions remain challenging for Foodservice, Lodging and Property Management • End-user consumption has improved from Q2 but stabilized at 15% to 20% below prior year volume • Heightened focus on hand hygiene has kept towel volume
Slide 14: Quarterly Financial Summary
Quarterly Financial Summary % Change (Million CAD$, unless otherwise noted) Q3 2020 Q2 2020 Q3 2019 Y/Y Q/Q Revenue 369.1 386.8 369.4 (0.1%) (4.6%) Revenue, excluding Mexico1 369.1 386.8 344.0 7.3% (4.6%) Cost of Sales 307.7 310.0 317.0 (2.9%) (0.7%) Gross Profit 61.4 76.8 52.4 17.2% (20.0%) Gross M
Slide 15: Quarterly Segmented Results
Quarterly Segmented Results % Change (Million CAD$, unless otherwise noted) Q3 2020 Q2 2020 Q3 2019 Y/Y Q/Q Segmented Revenue1 Consumer 319.9 338.2 305.1 4.9% (5.4%) Consumer, excluding Mexico2 319.9 338.2 279.7 14.4% (5.4%) AFH 49.2 48.5 64.3 (23.5%) 1.5% Total Segment Revenue 369.1 386.8 369.4 (0.
Slide 16: Q3 2020 Revenue Compared to Q3 2019
Q3 2020 Revenue Compared to Q3 2019 Excluding Mexico Impacted due to a combination of: • Strong volume increases in Canada and the U.S. $0.3 M $25.1 M primarily related to COVID-19 demand Q3 Revenue decrease Q3 Revenue increase • Partially offset by lower AFH revenue impacted by 0.1% 7.3%* COVID-19
Slide 17: Q3 2020 Adjusted EBITDA Compared to Q3 2019
Q3 2020 Adjusted EBITDA1 Compared to Q3 2019 $2.2 M Primarily due to the following factors: Q3 Adjusted EBITDA1 increase • Favourable sales impact and mix • Lower pulp costs 5.1% • Benefits of the OpEx program over Q3 2019 • Reduced number of SKUs Partially offset by: Gross Margin • Increased SG&A c
Slide 18: Q3 2020 Revenue Compared to Q2 2020
Q3 2020 Revenue Compared to Q2 2020 Decrease due to a combination of: • Lower volume in U.S. Consumer segment following significant Q2 demand spike $17.7 M • U.S. Consumer segment contractual selling prices tied to pulp moderating lower Q3 Revenue decrease • Unfavourable F/X rate on U.S. sales • Par
Slide 19: Q3 2020 Adjusted EBITDA Compared to Q2 2020
Q3 2020 Adjusted EBITDA1 Compared to Q2 2020 Due to the following factors: $18.2 M Q3 Adjusted EBITDA1 decrease • Lower sales in U.S. Consumer segment following significant Q2 demand spike 28.2% • Higher SG&A expenses related to increased over Q2 2020 advertising spend • Higher negative Adjusted EBI
Slide 20: Balance Sheet
Balance Sheet (Million CAD$, unless otherwise noted) Q3 2020 Q2 2020 Cash 117.5 144.2 Current Portion of Long-term Debt 4.9 4.9 Long-term Debt 705.0 700.4 Net Debt 592.5 561.1 LTM Adjusted EBITDA1 207.6 205.4 Net Debt/LTM Adjusted EBITDA1 2.9 2.7 • Leverage increased slightly due to the higher level
Slide 21: CAPEX
CAPEX CAPEX, excluding TAD Sherbrooke Facility $90 • Q3 and YTD 2020 TAD Sherbrooke CAPEX $80 was $65.1 million and $201.3 million. $70 • $43.3 million of accrued and unpaid capital spending at quarter-end $60 • 2020 TAD Sherbrooke CAPEX estimated $50 Millions at between $300 and $320 million $40 •
Slide 22: Reinvesting in the business to build a strong future
Reinvesting in the business to build a strong future Our focus going forward will be on: • Continuing to drive consumer revenue growth • Investing in our brands to build market share leadership in Canada while expanding White Cloud in the U.S. • Completing the TAD Sherbrooke facility, successful sta
Slide 23: AL STORE
{ 7% AL STORE WWW.KPTISSUEINC.COM 23