KP Tissue (KPT) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue grew 10.1% year-over-year to $521.1 million, driven by higher sales volume and favorable pricing, especially in the U.S. market.

• Adjusted EBITDA was $65.7 million, down 9.3% from Q3 2023, mainly due to higher pulp prices, increased manufacturing and SG&A costs, and outsourcing.

• Net income rose to $18.0 million, up $5.1 million from Q3 2023, aided by FX gains and lower tax expense, with net income margin improving to 3.5%.

• Completed construction and successful startup of the Sherbrooke LDC paper machine, adding 60,000 metric tons of capacity and exceeding ramp-up expectations.

• Declared a quarterly dividend of $0.18 per share, payable January 15, 2025.

Financial highlights

• Q3 2024 revenue reached $521.1 million, up $47.7 million or 10.1% year-over-year.

• Adjusted EBITDA was $65.7 million, with a margin of 12.6%, down from 15.3% in Q3 2023.

• Net income increased to $18.0 million, compared to $12.9 million in Q3 2023.

• Cost of sales rose 13.2% to $437.3 million, with cost of sales as a percentage of revenue at 83.9%.

• SG&A expenses increased 16.3% to $46.5 million, mainly due to higher advertising, promotion, and IT costs.

Outlook and guidance

• Q4 2024 Adjusted EBITDA expected to be in line with Q3, supported by higher selling prices and slightly lower input costs.

• 2024 CapEx guidance lowered to $190–$210 million; 2025 CapEx expected at $40–$60 million, excluding any remaining Sherbrooke spend.

• Leverage ratio anticipated to improve in 2025 as Sherbrooke ramps up.

• Pricing actions are expected to continue offsetting higher pulp costs.

• Pulp prices expected to remain volatile in 2025.