KP Tissue sees revenue increase in Q1 2019 results
May 10, 2019 – KP Tissue Inc. (KPT) has reported the Q1 2019 financial and operational results of KPT and Kruger Products L.P. (KPLP), in which KPT holds a 15.5 per cent interest.
KPLP revenue was $351 million in Q1 2019 compared to $323.7 million in Q1 2018, an increase of $27.3 million or 8.4 per cent. The increase in revenue was primarily due to the favourable impact of increased sales volume, the consumer Canada price increase implemented in Q4 2018 and the benefit of foreign exchange fluctuations on U.S. sales.
Cost of sales was $320.1 million in Q1 2019 compared to $286.0 million in Q1 2018, an increase of $34.1 million or 11.9 per cent. Manufacturing costs increased primarily due to increased sales volume, significantly higher pulp costs, the unfavourable impact of foreign exchange fluctuations on USD denominated costs and the cost of outsourced manufacturing. Freight costs were essentially flat in Q1 2019 compared to Q1 2018 and warehousing costs increased. As a percentage of revenue, cost of sales were 91.2 per cent in Q1 2019 compared to 88.4 per cent in Q1 2018.
Adjusted EBITDA was $23.6 million in Q1 2019 compared to $30.7 million in Q1 2018, a decrease of $7.1 million. The decrease was primarily due to significantly higher costs for pulp and unfavourable net foreign exchange, which were partially offset primarily by higher sales volume and pricing.
Net loss was $3.2 million in Q1 2019 compared to net income of $1.6 million in Q1 2018, a decrease of $4.8 million. The decrease was primarily due to lower adjusted EBITDA of $7.1 million as discussed above and a lower income tax recovery in Q1 2019 compared to Q1 2018 of $0.9 million, partially offset by a positive change in amortized cost of partnership units liability of $1.2 million, a decrease in interest expense of $1.4 million and lower depreciation expense of $0.6 million.
Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $167.5 million as of March 31, 2019, compared to $178.7 million as of December 31, 2018. The March 31, 2019 balance includes $119.5 million of cash and cash equivalents held by KPSI and committed to the TAD Sherbrooke Project.
"In the first quarter we posted solid revenue growth driven by both higher volume and the benefit from price increases. Given higher year-over-year input costs, we are very pleased by the performance of our consumer segment supported by the strength of our brand recognition and position. However, the away-from-home segment recorded disappointing results as it was negatively impacted by input costs, capacity-driven cost challenges and a competitive market," says Dino Bianco, CEO.
Kruger's big deal
"In recent weeks, we started the site excavation for the TAD Sherbrooke project. At this time, we have also purchased or contracted for most of the assets required for the project. In fact, this year we expect to invest between $250 and $275 million of the total project cost of $575 million.
"Looking forward, we have prioritized some operational excellence initiatives across the business, which we anticipate benefiting from in the second half of the year. We continue to invest in our business to build long-term value," says Bianco.
KPT had a net loss of $2 million in Q1 2019. Included in the net loss was $0.5 million representing KPT’s share of KPLP’s loss, depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition and an income tax expense of $0.1 million.
Read the full Q1 2019 KPT financial report.
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