Mr. Mario Gosselin reports
KP TISSUE RELEASES THIRD QUARTER 2015 FINANCIAL RESULTS
KP Tissue Inc. (KPT) has released the third quarter 2015 financial and operational results of KPT and Kruger Products LP (KPLP). Kruger Products is Canada's leading manufacturer of quality tissue products for the consumer market (Cashmere, Purex, SpongeTowels, Scotties, and White Swan) and the away-from-home market, and continues to grow in the U.S. consumer tissue business with the White Cloud brand and premium private-label products. KPT currently holds a 16.3-per-cent interest in KPLP.
KPLP business and financial highlights
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Revenue increased by 9.7 per cent to $293.6-million in the third quarter of 2015 compared with the third quarter of
2014;
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EBITDA (earnings before interest, taxes, depreciation and amortization) was $34.8-million in the third quarter of 2015, higher than the second quarter of 2015 by $4.6-million
and lower than the third quarter of 2014 by $3.2-million;
-
TAD (through air drying) product third quarter EBITDA increased by $4.7-million year over year to $11.2-million;
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Strong brands supporting overall consumer market share leadership in
Canada;
-
Redeemed $175-million of senior notes by increasing existing credit
facility to $300-million, resulting in interest expense savings of
approximately $9-million annually at current interest rates;
-
Declared a quarterly dividend of 18 cents per share to be paid on Jan. 15, 2016
"I am pleased with our financial results for the third quarter, considering the ongoing negative impact of foreign exchange and the timing of our marketing expenses. In particular, the Canadian consumer and away-from-home segments continue to be unfavourably impacted by the purchase of pulp in U.S. dollars. We continue to see good progress in the U.S. consumer business with our TAD products. The away-from-home segment registered solid organic growth and its EBITDA contribution remained stable over last year. Finally, interest expense savings of $9-million from the senior note redemption can be dedicated to strategic capital projects to reduce our manufacturing costs and improve our bottom line," said Mario Gosselin, chief executive officer of KP Tissue and KPLP.
"Our EBITDA outlook for Q4 2015 is expected to be similar to Q4 2014 despite the ongoing negative impact of foreign exchange. While we continue to mitigate this foreign exchange impact through various cost-reduction programs, we remain optimistic about our solid market position in the Canadian consumer market, our expansion in the U.S. premium private-label business and the ability to build a North American platform in the away-from-home segment," concluded Mr. Gosselin.
KPLP third quarter 2015 financial results
Revenue in the third quarter of 2015 was $293.6-million, compared with $267.6-million in the third quarter of 2014, an increase of $26-million or 9.7 per cent. The increase in revenue was primarily due to additional sales volumes in the U.S consumer business from the TAD products and organic growth in the away-from-home business. In addition, U.S. sales were favourably affected by foreign exchange.
Cost of sales in the third quarter of 2015 increased to $248-million compared with $219.9-million in the third quarter of 2014, primarily due to the negative effect of foreign exchange, slightly offset by a decline in natural gas prices. Freight and warehousing costs increased due to higher sales volumes and inventory levels. Cost-reduction initiatives partially offset the above increases in cost of sales. As a percentage of revenue, cost of sales was 84.5 per cent in the third quarter of 2015, compared with 82.2 per cent in the third quarter of 2014.
Selling, general and administrative (SG&A) expenses in the third quarter of 2015 were $21.6-million, compared with $17.7-million in the third quarter of 2014, primarily due to higher advertising and promotion and selling expenses and the unfavourable effect of foreign exchange. As a percentage of revenue, SG&A expenses were 7.4 per cent in the third quarter of 2015, compared with 6.6 per cent in the third quarter of 2014.
EBITDA in the third quarter of 2015 was $34.8-million, compared with $38-million in the third quarter of 2014, as the positive effect of increased sales was more than offset by the net negative effect of foreign exchange. As indicated above, SG&A, freight and warehousing costs increased over the same period last year. TAD product EBITDA increased to $11.2-million in the third quarter of 2015 from $6.5-million in the third quarter of 2014, due to increased sales volume, favourable foreign exchange and the continued ramp-up in manufacturing efficiencies.
The net loss in the third quarter of 2015 was $5.9-million, compared with net income of $16.1-million in the third quarter of 2014. The decrease was primarily due to an increase in interest expense of $12.7-million resulting mainly from additional charges related to the redemption of the $175-million senior notes, lower EBITDA of $3.2-million, higher depreciation expense of $2.2-million, a change in the tax expense of $1.6-million and an increase in the unrealized foreign exchange loss of $1.2-million.
The cash balance as of Sept. 27, 2015, was $38.5-million, compared with $35.3-million as of June 28, 2015. Cash generated from operating activities resulting from EBITDA in the third quarter of 2015 and lower working capital was partially offset by capital spending and interest payments in the quarter.
KPT third quarter 2015 financial results
KPT incurred a net loss of $2-million in the third quarter of 2015. Included in the net loss was $1-million representing KPT's share of KPLP's loss. The loss was reduced by the net of depreciation expense of $1.4-million related to adjustments to carrying amounts on acquisition, partially offset by an income tax recovery of $400,000.
Dividends on common shares
The board of directors of KPT declared a quarterly dividend of 18 cents per share to be paid on Jan. 15, 2016, to shareholders of record at the close of business on Dec. 31, 2015.
Additional information
For additional information, please refer to the management's discussion and analysis (MD&A) of KPT and KPLP for the third quarter ended Sept. 27, 2015, available on SEDAR and KPT's website.
Third quarter conference call information
KPT will hold its third quarter conference call on Thursday, Nov. 12, 2015, at 8:30 a.m. ET.
Via telephone: 1-877-223-4471 or 647-788-4922
Via the Internet: KPT website
Presentation material referenced during the conference call will be available at the KPT website.
A rebroadcast of the conference call will be available until midnight on Dec. 11, 2015, by dialling 800-585-8367 or 416-621-4642 and entering passcode 56759656. The replay of the webcast will remain available on the website until midnight on Dec. 11, 2015.
KRUGER PRODUCTS LP --
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(in thousands of dollars)
13-week 13-week 39-week 39-week
period period period period
ended ended ended ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2015 2014 2015 2014
Revenue $ 293,574 $ 267,629 $ 838,287 $ 767,521
Expenses
Cost of sales 247,964 219,914 710,917 645,137
Selling, general and
administrative expenses 21,630 17,717 64,526 58,125
Recovery of non-financial
assets (1,131) - (1,131) -
Restructuring costs 781 - 1,835 2,835
Operating income 24,330 29,998 62,140 61,424
Interest expense 25,254 12,622 48,069 34,923
Other expense 4,821 2,752 10,770 7,622
Income (loss) before income
taxes (5,745) 14,624 3,301 18,879
Income taxes 121 (1,477) 1,282 (2,118)
Net income (loss) for the
period (5,866) 16,101 2,019 20,997
Other comprehensive income
(loss)
Items that will not be
reclassified to net
income
Remeasurements of pensions 1,915 (1,999) (4,123) (31,511)
Remeasurements of
postretirement benefits 1,447 (18) (702) (3,511)
Items that may be
subsequently reclassified
to net income
Available-for-sale
investment (277) (183) (306) (321)
Cumulative translation
adjustment 26,229 12,260 42,893 13,039
Total other comprehensive
income (loss) for the
period 29,314 10,060 37,762 (22,304)
Comprehensive income (loss)
for the period 23,448 26,161 39,781 (1,307)
KP TISSUE INC. --
UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(in thousands of dollars, except per-share amounts)
13-week 13-week 39-week 39-week
period period period period
ended ended ended ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2015 2014 2015 2014
$ $ $ $
Equity income (loss) $ (2,397) $ 1,235 $ (3,964) $ (944)
Dilution gain 7 37 129 95
Income (loss) before income
taxes (2,390) 1,272 (3,835) (849)
Income taxes (409) 585 (270) 418
Net income (loss) for the
period (1,981) 687 (3,565) (1,267)
Other comprehensive income
(loss)
net of tax expense
(recovery)
Items that will not be
reclassified to net income
(loss)
Remeasurements of pensions 274 (284) (590) (4,564)
Remeasurements of
postretirement benefits 145 (1) (71) (356)
Items that may be
subsequently reclassified
to net income (loss)
Available-for-sale
investment (39) (26) (43) (47)
Cumulative translation
adjustment 4,732 2,309 7,847 2,461
Total other comprehensive
income (loss) for the
period 5,112 1,998 7,143 (2,506)
Comprehensive income (loss)
for the period 3,131 2,685 3,578 (3,773)
Basic earnings (loss) per
share (0.22) 0.08 (0.40) (0.14)
We seek Safe Harbor.
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