Strong topline growth tempered by inflation headwinds
Mississauga (ON), May 12, 2022 - KP Tissue Inc. (KPT) (TSX: KPT) reports the Q1 2022 financial and operational results of KPT and Kruger Products L.P. (KPLP). Kruger Products is Canada's leading manufacturer of quality tissue products for the Consumer market (Cashmere®, Purex®, SpongeTowels®, Scotties®, White Swan® and BonterraTM) and the Away-From-Home (AFH) market and continues to expand in the U.S. Consumer market with the White Cloud® brand and premium private label products. KPT currently holds a 14.3% interest in KPLP.
KPLP Q1 2022 Business and Financial Highlights
- Revenue was $398.7 million in Q1 2022 compared to $310.4 million in Q1 2021, an increase of $88.3 million or 28.5%.
- Adjusted EBITDA1 was $29.1 million in Q1 2022, compared to $37.5 million in Q1 2021, a decrease of 22.4%.
- Net income was $1.4 million in Q1 2022 compared to $6.8 million in Q1 2021, a decrease of $5.4 million.
- Declared a quarterly dividend of $0.18 per share to be paid on July 15, 2022.
“We delivered strong sales growth of 28.5% year-over-year in the first quarter of 2022, driven by an ongoing market recovery, increased capacity driven by Sherbrooke and a pricing increase mainly impacting our Canadian operations. Robust top-line growth was tempered by escalating inflation across many essential cost items such as pulp, freight, natural gas, packaging and labour,” stated KP Tissue’s Chief Executive Officer, Dino Bianco.
“To counter inflationary pressure, we have adopted a multi-faceted strategy based on further price increases across all segments, cash management through reductions in working capital and discretionary capital spending, as well as incremental productivity programs. We believe price increases, combined with the aforementioned cost-saving initiatives, should begin catching up with inflation in the second half of the year.”
“In light of price increases in the marketplace, we believe it’s vital to continue supporting our brands through targeted innovation and marketing. Accordingly, we are seeing strong distribution for our new sustainably focused brand, Bonterra. Recently upgraded Purex® and Cashmere UltraLuxe® TAD products are also tracking well against expectations, while SpongeTowels UltraPro® continues to drive share with consumers since its introduction last year. More recently, we expanded the distribution of re-launched White Cloud in the United States as we continue to build that brand,” Mr. Bianco concluded.
Outlook for Q2 2022
We anticipate continued momentum in Q2 sales in both Consumer and AFH. However, cost inflation and supply chain issues are expected to continue to impact the business and as a result Q2 2022 Adjusted EBITDA1 is expected to bewell below Q1 2022 until selling price increases can restore margins in the second half of the year.
KPLP Q1 2022 Financial Results
Revenue was $398.7 million in Q1 2022 compared to $310.4 million in Q1 2021, an increase of $88.3 million or 28.5%. The increase in revenue was due to selling price increases in all segments and regions and higher sales volume in the Consumer segment compared to the year ago quarter that saw lower sales as a result of the de-stocking of tissue inventories by both retailers and consumers. The AFH segment also had significantly higher sales volume compared to Q1 2021 as the business continues to recover from the impact of COVID-19.
Cost of sales was $363.8 million in Q1 2022 compared to $263.3 million in Q1 2021, an increase of $100.5 million or 38.2%. Manufacturing costs increased primarily due to higher sales volumes, increased pulp costs, the impact of labour shortages in Memphis manufacturing, the unfavourable impact of overhead absorption as inventory levels were lower than the year ago quarter, along with higher depreciation expense and inflation.
Source: KP Tissue
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