Slide 1: Q1 2023 Financial Results
Q 1 2 0 2 3 F I N AN C I AL R E S U LT S May 11, 2023
Slide 2: Forward-Looking and Cautionary Statements
F O RWAR D - L O O K I N G AN D C AU T I O N ARY S TAT E M E N T S Certain statements in this presentation about KPT's and Kruger Products’ current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or development
Slide 3: Corporate Structure
C O R P O R AT E S T R U C T U R E 1 100% 2 86.5% 13.5% 1On Jan. 1, 2023, KPLP undertook a corporate reorganization pursuant to which the limited partnership was essentially replaced by a corporate entity, Kruger Products Inc. ("Kruger Products"), without adversely affecting KPT. For more informatio
Slide 4: 5 Underlying Strategies
5 U N D E R LY I N G S T R AT E G I E S Drive Strong Revenue, Profit and Shareholder Value in a Sustainable Manner 1 2 3 4 5 Consumer As Our Expand Our End-to-End Supply Deliver Winning Team Compass Business Footprint Chain Excellence Sustainability and Culture 4
Slide 5: Q1 2023 Highlights
Q1 2023 HIGHLIGHTS Revenue Adjusted EBITDA1 Net Income $451.0 M $50.0 M ($49.3 M) 13.1% 71.9% ($50.7 M) over Q1 2022 over Q1 2022 over Q1 2022 +7.4% +22.1% 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 2023 NBSK average prices1 in CAD decreased 3.6%, and BEK average prices1 decreased 7.0% from Q4 2022. Q1 2023 NBSK average prices1 in CAD increased 10.3% and BEK average prices1 increased 15.3% year-over-year. Based on industry forecasts for 2023, pulp prices are expected to rem
Slide 7: Inflation, Pricing and Cost Management
I N F L AT I O N , P R I C I N G AN D C O S T M AN AG E M E N T Inflation • Inflation has slowed but still above prior year • Up 4-6% compared to Q1 2022 Pricing • All announced pricing has been implemented • Continuing to monitor market pricing to remain competitive Cost Management • Cost managemen
Slide 8: Sherbrooke Operations and Expansion
SHERBROOKE OPERATIONS AND EXPANSION • TAD operations continue to exceed ramp-up curve, including paper machine capacity improvement • Bathroom tissue line start-up surpassing expectations • Implementation of facial line (Q4 2023) and paper machine line (end of 2024) tracking to plan, but closely wat
Slide 9: Memphis Operations
MEMPHIS OPERATIONS • Shutdown of legacy assets completed as planned • Focusing on high-quality TAD and facial products • New facial line production above expectations, now deploying digital twin tool • TAD operations continuing to improve sequentially • Recovery enabling improved cost structure 9
Slide 10: Focused Brand Support
FOCUSED BRAND SUPPORT • Reinvesting to support brands and grow share • Quarterly marketing focused on multi-brand activities with 42nd Scotties Tournament of Hearts and third year of the Kruger Big Assist program • Significant investment around Made-in-Canada positioning • Bonterra continuing to mak
Slide 11: Brand Leadership Position
B R AN D L E AD E R S H I P P O S I T I O N Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 32.8% 35.8% 22.3% 15.6% 16.2% 9.9% 11.0% 0.8% 34.3% 1.1% 16.1% 0.2% 35.7% 36.0% 35.8% 36.9% 34.6% 31.5% 31.5% 24.0% 22.4% 22.3% 33.2% 33.2% 32.8% 20.6% 21.8% 2019 2020 2021 2022 2023 2019 2020 2021 2022 20
Slide 12: AFH Segment
AFH SEGMENT • Volume remained solid, 9% higher than Q1 2022 • Three consecutive quarters of positive Adjusted EBITDA • AFH operations performing above historical level • Monitoring potential impact of economic slowdown 12
Slide 13: Quarterly Financial Summary
Q U AR T E R LY F I N AN C I AL S U M M ARY % Change (Million CAD$, unless otherwise noted) Q1 2023 Q4 2022 Q1 2022 Y/Y Q/Q Revenue 451.0 458.1 398.7 13.1% (1.6)% Cost of Sales 389.0 416.4 363.8 6.9% (6.6)% Gross Profit 62.0 41.8 34.9 77.6% 48.4% Gross Margin 13.7% 9.1% 8.7% Adjusted EBITDA1 50.0 44
Slide 14: Quarterly Segmented Results
Q U AR T E R LY S E G M E N T E D R E S U LT S % Change (Million CAD$, unless otherwise noted) Q1 2023 Q4 2022 Q1 2022 Y/Y Q/Q Segmented Revenue Consumer 376.5 378.8 342.8 9.8% (0.6)% AFH 74.5 79.3 55.9 33.2% (6.1)% Total Segment Revenue 451.0 458.1 398.7 13.1% (1.6)% Segment Adjusted EBITDA1 Consum
Slide 15: Q1 2023 Revenue Compared to Q1 2022
Q 1 2 0 2 3 R E V E N U E C O M PAR E D TO Q 1 2 0 2 2 Increase due to the following factors: $52.3 M • Selling price increase carry-forward from 2022 across all segments and regions Q1 Revenue increase • Favourable sales mix in Consumer segment and higher sales volume in AFH segment 13.1% • Positiv
Slide 16: Q1 2023 Adjusted EBITDA Compared to Q1 2022
Q 1 2 0 2 3 AD J U S T E D E B I T D A 1 C O M PAR E D TO Q 1 2 0 2 2 $50.0M in Q1 2023 compared to $29.1M in Q1 2022 $20.9 M Q1 Adjusted EBITDA1 increase Increase primarily due to the following factors: 71.9% • Higher selling prices versus Q1 2022 over Q1 2022 • Favourable sales mix for Consumer se
Slide 17: Q1 2023 Revenue Compared to Q4 2022
Q 1 2 0 2 3 R E V E N U E C O M PAR E D TO Q 4 2 0 2 2 Sequential decrease in revenue due to: ($7.1 M) • Seasonally lower volume in AFH segment Q1 Revenue decrease • Lower volume in Consumer segment in the U.S. (1.6%) • Slightly negative FX impact on U.S. dollar sales over Q4 2022 ($1.5 M) ($5.6 M)
Slide 18: Q1 2023 Adjusted EBITDA Compared to Q4 2022
Q 1 2 0 2 3 AD J U S T E D E B I T D A 1 C O M PAR E D TO Q 4 2 0 2 2 $50.0M in Q1 2023 compared to $44.4M in Q4 2022 $5.6 M Q1 Adjusted EBITDA1 increase Variance due to: 12.5% • Favourable sales mix over Q4 2022 • Lower freight and warehousing costs • Memphis plant cost recovery Adjusted EBITDA Mar
Slide 19: Balance Sheet
B AL AN C E S H E E T (Million CAD$, unless otherwise noted) Q1 2023 Q4 2022 Cash 45.3 78.4 Current Portion of Long-term Debt 34.4 34.4 Long-term Debt 1,096.1 1,077.3 Net Debt 1,085.2 1,033.3 LTM Adjusted EBITDA1 136.9 116.0 Net Debt/LTM Adjusted EBITDA1 7.9x 8.9x • Cash decreased by $33.1 million f
Slide 20: Capital Expenditures
C AP I TAL E X P E N D I T U R E S CAPEX • Q1 2023 CAPEX was $34.6 million, $350 including $31.8 million related to $300 Sherbrooke Expansion Project $250 • Projected 2023 CAPEX of $200-$230 $200 million, including Sherbrooke Expansion Millions Project $150 $100 $50 $0 2019 2020 2021 2022 2023E TAD
Slide 21: Sustainability Focus
REIMAGINE 20S) TRANSFORMATIVE GROWTH SUSTAINABLE INNOVATION SUSTAINABILITY FOCUS PILLAR: PRODUCTS EMPOWER « FIBRE & FORESTS * PACKAGING * PRODUCT INNOVATION PILLAR: EMPLOYEE IMPACT * HEALTH & SAFETY * DIVERSITY & CULTURE * TRAINING & DEVELOPMENT OUR 2030 TARGETS To utilize 100% third-party certified
Slide 22: Progressing Along Recovery Curve to Drive Long-Term Value
P R O G R E S S I N G AL O N G R E C O V E RY C U R V E T O D R I V E L O N G - T E R M VAL U E • Continuing to deliver strong top-line growth • Monitoring pricing margins and input costs • Reinvesting in brands to grow share • Sherbrooke expansion moving forward and Memphis turnaround progressing •
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