Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- KP Tissue Inc (KPTSF, Financial) reported a revenue increase of 10.1% year over year, driven by higher sales volume and favorable selling prices.
- The company's net income increased by $5.1 million from Q3 2023, totaling $18 million in Q3 2024.
- Revenue from the consumer business grew 10% year over year, with strong performance in both Canada and the US.
- The new paper machine in Sherbrooke is expected to reduce external paper outsourcing and increase overall capacity.
- KP Tissue Inc (KPTSF) successfully closed a $135 million offering for senior unsecured notes, improving its financial flexibility.
Negative Points
- Adjusted EBITDA decreased by $6.7 million year over year, resulting in a lower margin of 12.6% compared to 15.3% in the previous year.
- The away from home segment's adjusted EBITDA declined by $1.8 million year over year, with a margin decrease to 7.2%.
- Higher pulp prices, additional outsourcing activity, and rising freight rates negatively impacted profitability.
- The company's cash position decreased by $16 million from Q2 2024, and net debt increased by $4.5 million.
- The leverage ratio slightly increased to 4.1 times in Q3 2024, indicating higher financial risk compared to the previous quarter.
Q & A Highlights
Q: Can you provide an update on the ramp-up progress of the new paper machine in Sherbrooke?
A: It's still early in the ramp-up phase, and while there are fluctuations as we trial different paper grades, overall production is ahead of expectations. However, specific figures are not being disclosed at this time. The strong operational team is expected to maintain this positive trend. - Unidentified_1
Q: What is the status of the remaining CapEx for the Sherbrooke project, and what will the funds be used for?
A: With the paper machine operational since September, remaining CapEx will cover final payments to equipment providers and minor facility details. Any remaining spend into 2025 is expected to be below $20 million. - Unidentified_2
Q: How is the implementation of the recent Canadian consumer tissue price increase progressing, and is another increase necessary due to the weakening CAD?
A: The price increase from September is reflected in the market and will impact Q4 results. While the CAD's weakening is being monitored, decisions on further price adjustments will consider a range of input costs, including freight and energy. - Unidentified_1
Q: How would potential US tariffs impact your operations, particularly with the Sherbrooke facility now operational?
A: While scenarios are being considered, the US relies on imports for tissue supply. Tariffs could disrupt this balance. The company is prepared to adjust production and maintain strong relationships with US customers. - Unidentified_1
Q: With the exit of Kleenex from the market, what other market share gains are you experiencing?
A: The exit of Kleenex has contributed to growth in the facial tissue segment, supported by innovation and distribution efforts. There is potential for growth in paper towels, while the bath tissue market remains highly competitive. - Unidentified_1
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
