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Kruger Products sees revenue boosts in Q4, year-end 2020 financial results

KP Tissue (KPT) has reported the Q4 and full-year 2020 results for KPT and Kruger Products L.P. (KPLP), citing a revenue increase of 10.6 per cent for KPLP in Q4 20. KPT currently holds a 14.7 per cent interest in KPLP.

Revenue for KPLP was $385 million in Q4 2020 compared to $348.1 million in Q4 2019, an increase of $36.9 million or 10.6 per cent. Adjusted EBITDA for KPLP was $36.2 million in Q4 2020, including $4.5 million of TAD Sherbrooke start-up costs, compared to $46 million in Q4 2019, a decrease of 21.3 per cent.

“The year 2020 brought more than its share of challenges along with unprecedented market conditions that our team successfully tackled,” says Dino Bianco, chief executive officer of KP Tissue, in a statement.

“Strong demand across all consumer product categories and market share momentum translated into a record high adjusted EBITDA, while the away-from-home segment remained under pressure from the impact of COVID-19. Revenues increased a solid 11.7 per cent to just over $1.5 billion while adjusted EBITDA increased significantly by 36.4 per cent to $197.8 million.”

“Under the most challenging circumstances, our team did amazing work completing TAD Sherbrooke on time and on budget. Production on the new TAD paper machine has commenced and, at this stage, is tracking ahead of the ramp-up curve. To further support our North American footprint and consumer demand, we recently announced a new $240 million investment at our Sherbrooke site. A new facility will house a Light-Dry-Crepe paper machine and facial tissue converting line while a new bathroom tissue converting line will be added to the existing TAD Sherbrooke facility. At maturity, the combined annual capacity of the two facilities will reach over 100,000 metric tonnes.”

KPLP Q4 2020 results

Revenue was $385 million in Q4 2020 compared to $348.1 million in Q4 2019, an increase of $36.9 million or 10.6 per cent. Revenue continued to be favourably impacted primarily by COVID-19 buying activity, with volume increasing in the consumer segment while decreasing in the AFH segment. Geographically, revenue increased in Canada by 9.9 per cent and in the U.S. by 11.8 per cent.

Cost of sales was $332.2 million in Q4 2020 compared to $294.1 million in Q4 2019, an increase of $38.1 million or 13 per cent. The increase was primarily due to higher sales volume, additional manufacturing overhead costs, in part due to precautions taken in the company’s manufacturing facilities as a result of COVID-19 and a one-time hourly workforce bonus, start-up costs related to the TAD Sherbrooke Project, increased outsourcing costs compared to Q4 2019 required to meet continuing demand, and increased freight costs. These increases were partially offset by slightly lower pulp costs. As a percentage of revenue, cost of sales was 86.3 per cent in Q4 2020 compared to 84.5 per cent in Q4 2019.

Adjusted EBITDA was $36.2 million in Q4 2020 compared to $46.0 million in Q4 2019, a decrease of $9.8 million or 21.3 per cent. The decrease was primarily due to higher cost of sales as described above along with higher SG&A costs, partially offset by the favourable sales impact.

Net loss was $28.5 million in Q4 2020 compared to a net loss of $6.1 million in Q4 2019, an increase in the loss of $22.4 million. The increase was primarily due to lower EBITDA, a higher loss on the change in amortized cost of the partnership units liability and an impairment charge on AFH goodwill of $8.9 million, partially offset by a foreign exchange gain.

KPLP full-year 2020 results

Revenue was $1,516.0 million in fiscal 2020 compared to $1,434.1 million in fiscal 2019, an increase of $81.9 million or 5.7 per cent. Excluding revenue of $76.9 million from the divested Mexico business in fiscal 2019, revenue increased by $158.8 million or 11.7 per cent. Revenue was favourably impacted primarily by COVID-19 buying activity, with volume increasing in the consumer segment in Canada and the U.S. and decreasing in the AFH segment.

Adjusted EBITDA was $197.8 million in fiscal 2020 compared to $145.0 million in fiscal 2019, an increase of $52.8 million or 36.4 per cent. The increase was primarily due to favourable sales volume and mix impact, lower pulp prices, the OpEx program and the COVID-19 transition to a reduced SKU production environment that increased production efficiency, partially offset by additional manufacturing overhead costs in part due to precautions taken in our manufacturing facilities as a result of COVID-19 and a one-time hourly workforce bonus, start-up costs related to the TAD Sherbrooke Project, inflation, and higher SG&A costs.

Net income was $27.3 million in fiscal 2020 compared to $2.1 million in fiscal 2019, an increase of $25.2 million. The increase was primarily due to higher adjusted EBITDA and a foreign exchange gain, partially offset by a higher loss on the change in amortized cost of the partnership units liability, the impairment charge on AFH goodwill and higher depreciation expense.

KPT Q4 and year-end 2020 financial results

KPT had a net loss of $4.3 million in Q4 2020. Included in the net loss was $4.2 million representing KPT’s share of KPLP’s net loss and a dilution gain of $0.1 million, depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition and an income tax recovery of $1.2 million.

KPT had a net loss of 2.0 million in 2020. Included in net loss was $4.1 million representing KPT’s share of KPLP’s net income, a dilution gain of $0.6 million, depreciation expense of $5.5 million related to adjustments to carrying amounts on acquisition and income tax expense of $1.2 million.

Outlook for Q1 2021

Demand for KPLP’s products is expected to remain healthy and more stable in the consumer segment in Q1 2021. The AFH segment will however continue to see suppressed demand due to COVID-19 restrictions. For Q1 2021, with increased investments in marketing to support our brands, higher pulp prices and TAD Sherbrooke start-up costs, adjusted EBITDA is expected to be in the same range as Q4 2020.

“In 2021, we look forward to leveraging TAD Sherbrooke to further support our North American customers,” says Bianco.

“We are closely monitoring the unprecedented increase in pulp prices and developing action plans to address. Finally, we will be continuing further investments in our brands, and leveraging our innovation and marketing strategy to reinforce our leadership position.”

For the full Q4 and year-end 2020 financial report from KP Tissue, click here.