KP Tissue (KPT) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue rose 9.3% year-over-year to CAD 509.8 million, driven by higher sales volume, favorable mix, and improved pricing in both Consumer and AFH segments.

• Adjusted EBITDA increased 18.6% year-over-year to CAD 65.3 million, with margin improving to 12.8% from 11.8% last year.

• Net income declined to CAD 10.6 million from CAD 14.5 million in Q2 2023, mainly due to higher FX loss and depreciation.

• Maintained leadership in Canadian facial tissue (42.8% share), bathroom tissue, and paper towels; Scotties brand gained share post-Kleenex exit.

• Resolved labor disruption at Crabtree, Quebec, with a new five-year agreement, ensuring production stability.

Financial highlights

• Q2 2024 revenue grew 9.3% year-over-year to CAD 509.8 million, with Canada up 5.2% and U.S. up 14.8%.

• Adjusted EBITDA margin improved to 12.8% from 11.8% in Q2 2023.

• Net income margin was 2.1% in Q2 2024, down from 3.1% in Q2 2023.

• Total liquidity at quarter-end was CAD 428.7 million.

• Q2 CapEx was CAD 50.4 million, with CAD 46.2 million for Sherbrooke; full-year CapEx expected between CAD 200–220 million.

Outlook and guidance

• Adjusted EBITDA for Q3 2024 expected to be in line with Q2, despite higher pulp prices and labor settlement impacts.

• Pulp prices anticipated to remain elevated through year-end; price increases effective September to mitigate cost pressures.

• Sherbrooke paper machine startup on track for Q4 2024, expected to enhance internal supply and margins over the next 18–24 months.

• 2024 CAPEX anticipated at CAD 200–220 million, with significant investment in Sherbrooke Expansion.