News Financial Reports & Markets Tissue
K.P. Tissue shares results for year-end and Q4 of 2022

KP Tissue (KPT) reported the financial and operational results of KPT and Kruger Products L.P. (KPLP) for the fourth quarter and full year of 2022.

KPLP Q4 2022 business and financial highlights include the following.

• Revenue was $458.1 million in Q4 2022 compared to $424.1 million in Q4 2021, an increase of $34 million or eight percent.
• Adjusted EBITDA was $44.4 million in Q4 2022, compared to $38.3 million in Q4 2021, an increase of 15.8 percent.
• Net income was $16 million in Q4 2022, compared to net income of $42.3 million in Q4 2021, a decrease of $26.3 million.
• The company declared a quarterly dividend of $0.18 per share to be paid on April 17, 2023.

KPLP full year 2022 financial highlights include the following.

• Revenue was $1,681.4 million in 2022 compared to $1,465.2 million in 2021, an increase of $216.2 million or 14.8 percent.
• Adjusted EBITDA was $116.0 million in 2022, down from $153.4 million in 2021, a decrease of 24.4 percent.
• Net loss was $56.9 million in 2022, compared to net income of $42.0 million in 2021, a decrease of $98.9 million.

“We are highly encouraged by the ongoing recovery of our financial results in 2022 despite uncertain market conditions and
persistent inflationary pressure,” noted KP Tissue’s chief executive officer, Dino Bianco, in a press statement. “Revenue improved 15 percent year-over-year to $1.7 billion mainly due to selling price increases across all segments and regions to counter higher pulp, manufacturing and freight costs. In the Consumer segment, we witnessed lower volume in the latter part of the year as some consumers traded down on purchases given higher market pricing. Away-From-Home had a strong quarter driven by greater volume as the segment continues to recover.”

He further added, “Adjusted EBITDA was lower in 2022 as price increases did not fully catch up to inflation until later into the year, while cost management initiatives helped mitigate the impact. Our solid performance in the fourth quarter reflects that we are headed in the right direction with revenue growing eight percent to $458 million and Adjusted EBITDA rising 16 percent to $44.4 million vs. Q4 2021.

In January 2023, we further enhanced profitability by shutting down certain legacy assets at our Memphis plant, including a paper machine and six converting lines. The impact on U.S. customers has been negligible as we refocus production capacity on TAD and facial tissue products. In addition, our Sherbrooke expansion project will become a key, long-term catalyst with two new lines starting up this year.”

Looking ahead to the first quarter of 2023, KPT states that price increases are in place. The company believes that inflationary pressure has stabilized. Its operating efficiency continues to gain traction and the company is tightly managing its discretionary spending. As a result, it expects Adjusted EBITDA in Q1 2023 to be similar to Q4 2022 and to significantly exceed Q1 2022.

KPLP Q4 financial results

Revenue was $458.1 million in Q4 2022 compared to $424.1 million in Q4 2021, an increase of $34 million or eight percent. The increase in revenue was due to selling price increases in all segments and regions partially offset by lower sales volume in the Consumer segment and an unfavourable mix. Revenue was also favourably impacted by foreign exchange fluctuations on U.S. dollar sales.

Cost of sales was $416.4 million in Q4 2022 compared to $376.0 million in Q4 2021, an increase of $40.4 million or 10.7 percent. Manufacturing costs increased primarily due to significantly increased pulp costs and high inflation on other input costs, along with the unfavourable impact of foreign exchange fluctuations on U.S. dollar costs, partially offset by lower sales volumes. Depreciation expense increased compared to Q4 2021 primarily due to accelerated depreciation related to the shutdown of certain LDC assets at the Memphis plant. Freight costs increased compared to Q4 2021 primarily due to increased freight rates resulting from cost inflation. As a percentage of revenue, cost of sales was 90.9 percent in Q4 2022 compared to 88.7 percent in Q4 2021.

Net income was $16 million in Q4 2022 compared to net income of $42.3 million in Q4 2021, a decrease of $26.3 million. The decrease was primarily due to a significantly lower income tax recovery and higher depreciation expense and restructuring costs. This was partially offset by higher Adjusted EBITDA of $6.1 million, a higher change in the amortized costs of the partnership units liability, a higher foreign exchange gain and lower interest expense and other finance costs.

KPLP 2022 financial results

Revenue was $1,681.4 million in Fiscal 2022 compared to $1,465.2 million in Fiscal 2021, an increase of $216.2 million or 14.8 percent. The increase in revenue was due to selling price increases in all segments and regions, and significantly higher sales volume in the AFH segment as the business recovered from the impact of COVID-19. Revenue was also favourably impacted by foreign exchange fluctuations on U.S. dollar sales.

Adjusted EBITDA1 was $116.0 million in fiscal 2022 compared to $153.4 million in Fiscal 2021, a decrease of $37.4 million or
24.4 person. The decrease was primarily due to significant inflation on pulp and manufacturing and freight costs, higher SG&A
expenses and the unfavourable impact of foreign exchange fluctuations, partially offset by selling price increases and higher
sales volume.

Net loss was $56.9 million in fiscal 2022 compared to net income of $42 million in fiscal 2021, a decrease of $98.9 million.
The decrease was primarily due to lower Adjusted EBITDA of $37.4 million as discussed above, a lower income tax recovery, a
higher foreign exchange loss and higher depreciation and interest expense, partially offset by a decrease in the amortized costs
of the partnership units liability.