KP Tissue (KPT) has reported a decreased revenue in its Kruger Products’ business Q2 results as compared to Q2 2020 but added that the company’s TAD Sherbrooke facility remains ahead of its start-up schedule.
Revenue at the Kruger Products decreased 12.3% in the quarter to $339.3m, compared with $386.8m the same time a year ago.
This was primarily due to a significant sales volume decrease in the Consumer Segment which the business said resulted primarily from the comparison to high Covid-19 buying activity in the year ago quarter, while sales volume in the AfH segment was slightly lower compared to Q2 2020 as Covid-19 impacted both quarters.
Adjusted EBITDA was $37.3m compared to $64.4m in Q2 2020, a decrease of 42.1%, and similar sequentially to the $37.5m reported in the first quarter of 2021.
The decrease was primarily due to the impact of lower sales volumes, along with an “unfavourable impact of higher pulp prices and higher freight rates and warehousing costs”.
Net income was $2.2m in Q2 2021 compared to $28.9m in Q2 2020, a decrease of $26.7 million.
This was mainly due to lower Adjusted EBITDA, higher depreciation and interest expense and a decrease in other income, partially offset by lower income taxes.
KPT had a net loss of $1.2m in Q2 2021.
KPT Chief Executive Officer, Dino Bianco, said: “Given continued soft demand resulting from Covid-19 related de-stocking by retailers and consumers, headwinds from high pulp prices and a gradual market recovery in the AfH segment, results for the quarter were largely in line with our expectations.
“Consequently, revenues were under pressure and Adjusted EBITDA for the quarter was down significantly compared to last year’s record level, but was stable when compared to the first quarter of this year.”
He added that the company’s share position “remains strong” in all tissue product categories and the launch of Kruger Products’ SpongeTowels UltraProTM “continues to exceed expectations, and led to important share gains in the category”.
Bianco said: “TAD Sherbrooke’s start-up curve remains ahead of schedule and provides the paper tissue capacity required to meet our long-term growth plans.
“After several quarters of depressed end-user demand in AfH, volume has gradually picked-up with the easing of Covid-19 restrictions, particularly in the USA.
“This combined with the benefits of production efficiencies and less paper outsourcing has resulted in an improved AfH Adjusted EBITDA position for the quarter, providing a near-term path to a turnaround.”
He said that with the situation gradually improving month-after-month in Consumer Tissue, the business anticipates a return to more normal buying patterns and demand from retailers and consumers in the second half of the year.
“We have also worked hard to position AfH for a market recovery and expect improving sales as end-markets recover.
“High pulp prices and cost inflation will remain prevalent for the remainder of the year. We expect that, despite these factors, the pricing actions announced and a more favourable sales market should translate into a stronger performance in the second half of 2021.
“We are beginning to see the risks and uncertainties associated with Covid-19 subside and expect to see activities and behaviour start to return to more pre-Covid levels in the second half of 2021, in both the Consumer and AfH segments.
“Despite higher pulp prices, we expect Q3 2021 Adjusted EBITDA to be in a range which is higher than Q2 2021 and lower than Q3 2020.”