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Spike in tissue demand leads to strong Q1 for Kruger Products

KP Tissue Inc. (KPT) has reported the Q1 2020 financial and operational results of KPT and Kruger Products L.P. (KPLP).

KPT currently holds a 14.8 per cent interest in KPLP.

KPLP highlights

Revenue increased by $24.1 million or 6.9 per cent to $375.1 million in Q1 2020 compared to $351.0 million in Q1 2019. Excluding the divested Mexico business, Q1 2020 revenue increased by $50.2 million or 15.5 per cent.

Adjusted EBITDA was $51.0 million in Q1 2020 compared to $23.6 million in Q1 2019, an increase of 116.4 per cent.

The company’s TAD Sherbrooke site was temporarily shut down for one month due to COVID-19 pandemic but is progressing well after restart.

The company declared a quarterly dividend of $0.18 per share to be paid on July 15, 2020.

‘Exceptional quarter’

“In response to COVID-19, our company activated our pandemic response and business continuity plans early to ensure we could meet the increased demands while keeping our people safe. Our primary focus is on the safety of our people and we implemented significant practices to ensure we meet this challenge. On business continuity we have built several contingency plans and increased raw material supplies to manage any potential disruption,” says Dino Bianco, chief executive officer of KP Tissue, in a statement.

“We no doubt had an exceptional quarter driven by unprecedented consumer demand for all our products due to the COVID-19 pandemic. As a result, adjusted EBITDA was $51.0 million, up 116 per cent over last year. We are proud that our employees successfully managed the tremendous surge in demand, under very challenging conditions and with all the uncertainty surrounding the COVID-19 crisis.

“Our plants ran full-out to keep pace and performed very well, so we could continue to deliver essential products to our valued customers and consumers. This performance also reflects the benefits and progress of the OpEx program put in place early last year.

“We saw increased demand in all our categories as consumers stocked up and used more product at home given work-from-home mandates and increased hygiene, particularly in paper towels and facial tissue. We expect this demand spike will partially reverse in the coming months as consumers get back to work and are well-stocked on tissue products. The away-from-home segment is expected to face strong headwinds as end user markets have been severely impacted by COVID-19.

“Work on the TAD Sherbrooke construction site was temporarily halted for COVID-19 but resumed in late April. At this stage, we believe this interruption will not have any material impact on the timeline and budget of this project. The pandemic has clearly heightened the strategic importance of the TAD Sherbrooke facility and the new capacity it provides.”

KPT results
KPT had net income of $1.7 million in Q1 2020. Included in net income was $1.3 million representing KPT’s share of KPLP’s net income, depreciation expense of $1.4 million related to adjustments to carrying amounts on acquisition and an income tax recovery of $1.6 million.

For full KPLP results, read the Q1 2020 KP Tissue financial report.