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Kruger Products sees revenue dip in Q2 2021 with softer tissue demand

KP Tissue Inc. (KPT) has reported the Q2 2021 financial results for Kruger Products L.P. (KPLP), citing a decrease in revenue of $47.5 million, or 12.3 per cent, to $339.3 million in Q2 2021 compared to $386.8 million in Q2 2020.

KPT currently holds a 14.5 per cent interest in KPLP. KPT itself had a net loss of $1.2 million in Q2 2021.

Adjusted EBITDA for KPLP was $37.3 million in Q2 2021 compared to $64.4 million in Q2 2020, a decrease of 42.1 per cent, and similar sequentially to the $37.5 million in Q1 2021.

“Given continued soft demand resulting from COVID-19–related de-stocking by retailers and consumers, headwinds from high pulp prices and a gradual market recovery in the away-from-home segment, results for the quarter were largely in line with our expectations,” says Dino Bianco, CEO of KPT and KPLP.

“Consequently, revenues were under pressure and adjusted EBITDA for the quarter was down significantly compared to last year’s record level, but was stable when compared to the first quarter of this year.”

“Our share position remains strong in all tissue product categories and the launch of SpongeTowels UltraPro continues to exceed our expectations and led to important share gains in the category. TAD Sherbrooke’s start-up curve remains ahead of schedule and provides the paper tissue capacity required to meet our long-term growth plans.

“After several quarters of depressed end-user demand in away-from-home, volume has gradually picked-up with the easing of COVID-19 restrictions, particularly in the U.S. This, combined with the benefits of production efficiencies and less paper outsourcing, has resulted in an improved AFH adjusted EBITDA position for the quarter, providing a near-term path to a turnaround.

“With the situation gradually improving month-after-month in consumer tissue, we anticipate a return to more normal buying patterns and demand from retailers and consumers in the second half of the year. We have also worked hard to position AFH for a market recovery and expect improving sales as end-markets recover. High pulp prices and cost inflation will remain prevalent for the remainder of the year. We expect that, despite these factors, the pricing actions announced and a more favourable sales market should translate into a stronger performance in the second half of 2021.”

The company says it is beginning to see the risks and uncertainties associated with COVID-19 subside and expects to see activities and behaviour start to return to more pre-COVID levels in the second half of 2021, in both the consumer and away-from-home segments. Despite higher pulp prices, Kruger expects Q3 2021 adjusted EBITDA to be in a range which is higher than Q2 2021 and lower than Q3 2020.

For the full financial report from KP Tissue and Kruger Products, click here.