KP Tissue Reports Second Quarter 2014 Financial Results
Aug. 13, 2014 - KP Tissue Inc. ("KPT") (KPT.TO) reports the Q2 2014 Financial and Operational Results of KPT and Kruger Products L.P. (KPLP):
- Revenue increased by 7.5% to $265.3 million in Q2 2014 compared to $246.8 million in Q2 2013
- EBITDA of $29.0 million in Q2 2014 compared to $31.7 million in Q2 2013
- TAD product sales continued to progress well, with EBITDA contribution of $7.8 million in Q2 2014
- Maintained number one overall consumer market share in Canada
- Acquired Metro Paper Canadian converting assets and North American customer base for cash consideration of $23.4 million
- Solid balance sheet with $40.5 million of cash at the end of the quarter
"TAD Product EBITDA of $7.8 million was an important contributor to second quarter EBITDA of $29.0 million. Our consumer and AFH businesses continued to face the challenge of high input costs and competitive environments during the quarter," said Mario Gosselin, CEO of KP Tissue and KPLP.
TAD product sales continued to ramp-up as planned and we expect fiscal 2014 TAD Product EBITDA to be in the previously provided range. Furthermore, we are now engaged in a study to evaluate capacity expansion and use of TAD technology.
"In the Canadian consumer market, our brands are maintaining their overall market share leadership. We are continuing our capital investment program as planned, to improve our profitability and reduce our manufacturing costs in Canada. We are currently realizing the benefits of two previously announced cost optimization projects and are planning to implement additional cost reduction initiatives in the back half of the year.
We expect EBITDA for the third quarter of 2014 to be higher than Q2 2014 and similar to or slightly higher than the third quarter of 2013. On a sequential basis, we anticipate an improvement in our Canadian consumer business reflecting normal seasonality," concluded Mr. Gosselin.
KP Tissue Inc.
KPT holds a 16.6% interest in KPLP. The highlights, discussion and analysis in this earnings release, unless identified specifically as representing the financial results of only KPT, relates entirely to the financial results of KPLP.
KPLP Q2 2014 Financial Results
Revenue in Q2 2014 was $265.3 million, compared to $246.8 in Q2 2013, an increase of $18.5 million. The increase was driven by improved Consumer segment revenue resulting from TAD product promotional activities in the U.S. and the favourable impact of foreign exchange on U.S. based sales. AFH segment revenue was positively impacted by the acquisition of Metro Paper on June 3rd. Revenue in Canada decreased as a result of lower promotional activity compared to Q2 2013.
Cost of sales in Q2 2014 was $226.5 million, compared to $201.7 million in Q2 2013 due to the impact of increases in commodity prices, particularly pulp fibre and natural gas, the unfavourable impact of foreign exchange, and an increase in freight and warehousing expenses related primarily to higher sales volume. As a percentage of revenue, cost of sales increased to 85.3 percent in Q2 2014 from 81.7 percent in Q2 2013.
Selling, general and administrative expenses in Q2 2014 were $19.6 million, compared to $22.4 million in Q2 2013 due to decreases in departmental spending and advertising and promotion expenses.
EBITDA in Q2 2014 was $29.0 million compared to $31.7 million in Q2 2013 as EBITDA was impacted by lower margins due to higher cost of sales. TAD Product EBITDA was $7.8 million in Q2 2014 compared to an EBITDA loss of $1.9 million, including start-up costs, in Q2 2013.
Net income in Q2 2014 was $8.1 million, compared to $15.4 million in Q2 2013. The decrease was due to lower EBITDA of $2.7 million, a decrease in the deferred tax recovery of $3.2 million, and a change of $1.5 million in the amortized cost of the Partnership unit liability.
The cash balance as of June 29, 2014 was $40.5 million compared to $52.7 million as of March 30, 2014. Cash generated from operating activities and a reduction in working capital requirements, was partially offset by cash used to acquire Metro Paper ( $23.4 million ) and to pay distributions.
KPT Q2 2014 Financial Results
- Net loss of $0.3 million in Q2 2014
- Loss per share of $0.03 in Q2 2014
Included in the net loss of $0.3 million in Q2 2014 was $1.4 million representing KPT's share of KPLP's profit. The profit was offset by depreciation expense of $1.5 million related to adjustments to carrying amounts on acquisition, and income tax expense of $0.2 million.
KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP. To learn more please visit: www.kptissueinc.com.
SOURCE: KP Tissue Inc.