KP Tissue 4Q 2013 results: Revenue unchanged at $242.9 million; operating income improves to $16.3 million

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KP Tissue 4Q 2013 results: Revenue unchanged at $242.9 million; operating income improves to $16.3 million

April 02, 2014 - 06:53
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MISSISSAUGA, ON , March 19, 2014 (Press Release) - KP Tissue Inc. ("KPT") (TSX:KPT), which holds a limited partnership interest in Kruger Products L.P. ("KPLP"), releases the financial results for KPT and KPLP for the fourth quarter of 2013 and full year 2013. KPLP is Canada's leading manufacturer of quality tissue products for household and commercial use.

KP Tissue Inc. and Kruger Products L.P. KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP. As of December 31, 2013, KPT held a 16.7% interest in KPLP, accounted for as an investment on the equity basis. The financial results presented for KPT represent its holding in KPLP during the fourth quarter of 2013 and during full year 2013. The following discussion and analysis, unless identified specifically as representing the financial results of only KPT, relates entirely to the financial results of KPLP. Accordingly, the results of KPLP apply to KPT only to the extent of its holding in KPLP. On January 15, 2014, KPLP paid a distribution to its partners. Following the reinvestment by the partners of KPLP of a portion of such distribution pursuant to KPLP's distribution reinvestment plan, KPT held a 16.7% interest in KPLP.

KPLP Highlights

Q4 2013 Highlights

  • Continued to expand overall market share in Canada and maintained number one position

  • Revenue of $242.9 million in Q4 2013, the same as in Q4 2012

  • EBITDA of $28.3 million in Q4 2013 compared to $23.0 million in Q4 2012, an increase of 22.5 percent

  • TAD Project progressing well, EBITDA contribution of $4.1 million in Q4 2013

Full Year Highlights

  • Revenue of $955.3 million in fiscal 2013, compared to $922.9 million in fiscal 2012, an increase of 3.5 percent

  • EBITDA of $116.2 million in fiscal 2013, compared to $110.9 million in fiscal 2012, an increase of 4.8 percent

  • Net income of $48.9 million in fiscal 2013 compared to $41.4 million in fiscal 2012, an increase of 18.2 percent

"In 2013, we realized a number of achievements. First, we completed the extensive construction phase of our TAD Project in the U.S. on-time and on-budget, and then successfully began the ramp up of the manufacturing and sales of our TAD products. In addition, I'm pleased to report that we again strengthened our market share position and continued to be the leader in the Canadian tissue market. Finally, our EBITDA for the year reached $116.2 million, despite significantly higher commodity costs," said Mario Gosselin, CEO of KP Tissue and KPLP.

"Late in 2013, our business was impacted by extreme weather conditions. We also began to implement programs designed to offset the impact of higher pulp and energy costs, and considering the continued rise in pulp prices in year-to-date 2014, we will need to consider additional programs to offset the negative impact. In the current fiscal year, in addition to the TAD Project ramp-up, we will also turn our attention to other high return CAPEX projects.

"We are pleased to report that the TAD Project contributed positive EBITDA of $4.1 million in the fourth quarter. We continue to expect to achieve our TAD EBITDA target of $60 million by 2017, and in 2014 we anticipate TAD EBITDA in the $20 to $25 million range.

"We estimate that Q1 2014 EBITDA will be similar to slightly above Q1 2013 due to current market conditions, including higher input costs. Similar to 2013, we expect a sequential improvement in Q2 2014 results reflecting higher promotional activities during the second quarter," concluded Mr. Gosselin.

KPLP Q4 2013 Financial Results

Revenue in Q4 2013 was $242.9 million, the same as in Q4 2012, including the impact of 6 fewer days of sales in Q4 2013 compared to Q4 2012. An increase in Consumer segment revenue resulting from new business related to the TAD Project and the favourable impact of foreign exchange on U.S. based sales was offset by a decrease in AFH segment revenue.

Cost of sales in Q4 2013 were $173.1 million, compared to $172.4 million in Q4 2012. The impact of increases in commodity prices, particularly pulp fibre and natural gas, and the unfavourable impact of foreign exchange was partially offset by the impact of 6 fewer days of sales in Q4 2013 compared to Q4 2012. As a percentage of revenue, cost of sales increased to 71.2 percent in Q4 2013 from 71.0 percent in Q4 2012.

Operating expenses in Q4 2013 were $52.2 million, compared to $59.7 million in Q4 2012. Operating expenses decreased due to: the impact of 6 fewer days in Q4 2013 compared to Q4 2012; lower freight and selling expenses as a result of changes in sales mix; lower advertising and promotion expenses; a lower management fee in Q4 2013; and direct and incremental costs related to the TAD Project and reorganization expenses incurred in Q4 2012.

EBITDA in Q4 2013 was $28.3 million, compared to $23.0 million in Q4 2012 primarily due to the decrease in operating expenses.

TAD Project EBITDA was $4.1 million in Q4 2013. EBITDA in Q4 2012 included $1.8 million of direct and incremental expenses without any corresponding revenue for the TAD Project.

Net income in Q4 2013 was $7.6 million, compared to $5.4 million in Q4 2012. Net income increased primarily due to higher EBITDA, partially offset by higher interest expense and a lower income tax credit in Q4 2013.

The cash balance as of December 31, 2013 was $87.7 million, compared to $87.8 million as of September 29, 2013. Cash from operating activities improved while additional cash was used in investing and financing activities.

KPLP Full Year Financial Results

Revenue was $955.3 million in fiscal 2013 compared to $922.9 million in fiscal 2012. The increase in revenue was primarily due to higher sales volumes in Canada and new business related to the TAD Project.

EBITDA was $116.2 million in fiscal 2013 compared to $110.9 million in fiscal 2012. The increase in EBITDA was primarily driven by the increase in revenue, offset somewhat by lower operating margins due to higher commodity costs and operating expenses.

Net income was $48.9 million in fiscal 2013 compared to $41.4 million in fiscal 2012. The increase in net income was primarily due to higher EBITDA, the income tax recovery and a net recovery related to restructuring activities, partially offset by increased interest and depreciation expenses.

KPT Highlights

Q4 2013 Highlights

  • Net loss of $0.8 million in Q4 2013

  • Loss per share of $0.08 in Q4 2013

  • Declared quarterly dividend of $0.18 per share, payable April 15, 2014

Full Year Highlights

  • Net loss of $0.3 million in Fiscal 2013

  • Loss per share of $0.03 in Fiscal 2013

KPT Q4 2013 Financial Results

Included in the net loss of $0.8 million in Q4 2013 was $1.3 million representing KPT's share of KPLP's profit. The profit was offset by depreciation expense of $1.7 million related to adjustments to carrying amounts on acquisition, and income tax expense of $0.4 million.

KPT Full Year Financial Results

Included in the net loss of $0.3 million in Fiscal 2013 was $8.2 million representing KPT's share of KPLP's profit. The profit was offset primarily by depreciation expense of $7.1 million related to adjustments to carrying amounts on acquisition, and income tax expense of $2.0 million.

KPLP Distribution

KPLP will pay a distribution of $0.18 per KPLP unit to its partners on or prior to April 15, 2014.

Dividends on Common Shares

The Board of Directors of KP Tissue Inc. declared a quarterly dividend of $0.18 per share to be paid on April 15, 2014 to shareholders of record at the close of business on March 31, 2014.