Slide 1: Q3 2023 Financial Results
Q3 2023 FINANCIAL RESULTS November 8, 2023
Slide 2: Forward-Looking and Cautionary Statements
F O R W A R D - LO O K I N G A N D C AU T I O N A RY 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 develop
Slide 3: Corporate Structure
C O R P O R AT E S T RU C T U R E 100% 2 86.9% 13.1% 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 information,
Slide 4: Our Vision
OUR VISION TO BE THE MOST TRUSTED AND BEST LOVED TISSUE COMPANY IN NORTH AMERICA. eS MAKING EVERYDAY LIFE MORE COMFORTABLE.
Slide 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 5
Slide 6: Q3 2023 Highlights
Q3 2023 HIGHLIGHTS Revenue Adjusted EBITDA1 Net Income $473.4 M $72.4 M $12.9 M 10.9% 135.7% $51.7 M over Q3 2022 over Q3 2022 over Q3 2022 +7.1% +16.1% 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 Price
PULP INPUT PRICE Q3 2023 NBSK average prices1 in CAD decreased 14.5% and BEK average prices1 decreased 20.1% from Q2 2023. Q3 2023 NBSK average prices1 in CAD decreased 26.2% and BEK average prices1 decreased 35.0% year-over-year. After dropping near the bottom of the price curve, pulp prices are ex
Slide 8: Sherbrooke Operations and Expansion
SHERBROOKE OPERATIONS AND EXPANSION • TAD operations continue to perform well, surpassing production expectations on the paper machine and converting, including new bathroom tissue converting line • Given supply-chain inflation and higher interest costs, management anticipating capital cost increase
Slide 9: Facial Market Update
FACIAL MARKET UPDATE • Fulfilling demand following exit of Kleenex brand in Canada • Exploring opportunities for additional long-term facial capacity • Building Scotties brand through increased investment and innovation • Memphis facial tissue line continues to exceed ramp-up curve • Well-positioned
Slide 10: Memphis Operations
MEMPHIS OPERATIONS • Focus on reliability is delivering better results • Production volume and cost structure progressively improving • Deployment of digital twin AI tools successful on new facial line and will continue across TAD assets • Employee turnover remains stable • Leveraging best practices
Slide 11: Focused Brand Support
FOCUSED BRAND SUPPORT • Strong second-half investments to drive brand share • Multi-brand activities continued with Unapologetically Human “Love is Messy” campaign, including launch of ethnic versions and successful “Made in Canada” promotion • Increased media support of Scotties to build brand awar
Slide 12: Brand Leadership Position
BRAND LEADERSHIP POSITION Bathroom Tissue Facial Tissue Paper Towel #1 #1 #2 32.3% 35.6% 23.9% 14.9% 15.8% 8.9% 11.1% 0.8% 33.5% 1.1% 15.6% 0.2% 35.7% 36.0% 35.6% 36.9% 34.6% 31.5% 31.5% 24.0% 22.4% 23.9% 33.2% 33.2% 32.3% 20.6% 21.8% 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021
Slide 13: AFH Segment
AFH SEGMENT • Volume remained consistent in Q3 2023 and was stable year-over-year and sequentially • Sustainable recovery in AFH with robust EBITDA performance in seasonally strong third quarter • AFH asset performance continues to support further volume growth • Monitoring potential impact of econo
Slide 14: Quarterly Financial Summary
Q UA R T E R LY F I N A N C I A L S U M M A RY % Change (Million CAD$, unless otherwise noted) Q3 2023 Q2 2023 Q3 2022 Y/Y Q/Q Revenue 473.4 466.3 427.0 10.9% 1.5% Cost of Sales 386.4 395.7 394.6 (2.1%) (2.4%) Gross Profit 87.0 70.6 32.4 168.3% 23.3% Gross Margin 18.4% 15.1% 7.6% Adjusted EBITDA1 72
Slide 15: Quarterly Segmented Results
Q UA R 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) Q3 2023 Q2 2023 Q3 2022 Y/Y Q/Q Segmented Revenue Consumer 390.3 383.5 346.0 12.8% 1.8% AFH 83.1 82.8 81.0 2.6% 0.3% Total Segment Revenue 473.4 466.3 427.0 10.9% 1.5% Segment Adjusted EBITDA1 Consumer 65.
Slide 16: Q3 2023 Revenue Compared to Q3 2022
Q 3 2 0 2 3 R E V E N U E C O M PA R E D TO Q 3 2 0 2 2 Increase due to the following factors: $46.4 M • Higher sales volume and favourable sales mix in Consumer segment Q3 Revenue increase • Selling price increase carry-forward from 2022 across all segments and regions • Positive FX impact on U.S.
Slide 17: Q3 2023 Adjusted EBITDA Compared to Q3 2022
Q 3 2 0 2 3 A D J U S T E D E B I T DA 1 C O M PA R E D TO Q 3 2 0 2 2 $41.7 M $72.4M in Q3 2023 compared to $30.7M in Q3 2022 Q3 Adjusted EBITDA1 increase Increase primarily due to the following factors: 135.7% • Higher sales volume and favourable sales mix over Q3 2022 • Higher selling prices vers
Slide 18: Q3 2023 Revenue Compared to Q2 2023
Q 3 2 0 2 3 R E V E N U E C O M PA R E D TO Q 2 2 0 2 3 Sequential increase in revenue due to: $7.1 M • Higher sales volume primarily from the Consumer segment Q3 Revenue increase • Partially offset by higher promotional spending 1.5% over Q2 2023 $2.4 M $4.7 M 0.9% 2.3% Canada U.S. 18
Slide 19: Q3 2023 Adjusted EBITDA Compared to Q2 2023
Q 3 2 0 2 3 A D J U S T E D E B I T DA 1 C O M PA R E D TO Q 2 2 0 2 3 $17.4 M $72.4M in Q3 2023 compared to $55.0M in Q2 2023 Q3 Adjusted EBITDA1 increase Variance due to: 31.6% • Higher sales volume over Q2 2023 • Lower pulp costs • Reduced warehousing costs Adjusted EBITDA Margin1 • Increased pro
Slide 20: Balance Sheet
BA L A N C E S H E E T (Million CAD$, unless otherwise noted) Q3 2023 Q2 2023 Q3 2022 Cash 151.1 88.2 82.1 Current Portion of Long-term Debt 34.4 34.1 34.6 Long-term Debt 1,065.6 1,077.7 1,095.0 Net Debt 948.8 1,023.6 1,047.5 LTM Adjusted EBITDA1 221.8 180.1 109.9 Net Debt/LTM Adjusted EBITDA1 4.3x
Slide 21: Capital Expenditures
C A P I TA L E X P E N D I T U R E S CAPEX • Q3 2023 CAPEX was $28.5 million, including $350 $21.6 million related to Sherbrooke Expansion Project $300 • Year-to-date CAPEX stood at $105.9 million $250 $200 • Sherbrooke Expansion Project capital cost Millions forecast raised to $378 million from $35
Slide 22: Sustainability Focus
KEY TARGETS TO ACHIEVE BY 2030 S U S TA I N A B I L I T Y F O C U S 22
Slide 23: Strong Agility and Resilience Amid Uncertain Economic Environment
STRONG AGILITY AND RESILIENCE AMID U N C E R TA I N E C O N O M I C E N V I R O N M E N T • Broad top-line growth • Investing in brands to drive long-term growth • Increasing facial capacity to meet strong demand • AFH delivering against a sustainable profit model • Continued focus on asset producti
Slide 24: www.kptissueinc.com
WWW.KPTISSUEINC.COM