KP Tissue Q2 Earnings Call Highlights

KP Tissue (TSE:KPT) reported higher second-quarter revenue and adjusted EBITDA, supported by stronger U.S. sales volumes, improved performance at its Memphis facility and lower pulp prices. Management said it expects third-quarter adjusted EBITDA to remain in line with the CAD 90.6 million generated in the second quarter.

Revenue rose 2.8% year over year to CAD 550.9 million in the quarter, while adjusted EBITDA increased 25% to CAD 90.6 million. The company’s adjusted EBITDA margin improved to 16.4% from 13.5% a year earlier. Net income was CAD 22.1 million, comparable with the second quarter of 2025, as higher adjusted EBITDA was offset by an unfavorable foreign-exchange difference.

“We maintained strong momentum in the second quarter of 2026,” CEO Dino Bianco said, citing double-digit adjusted EBITDA growth despite what he described as an uncertain economic environment.

U.S. Growth Offsets Canadian Consumer Softness

Revenue in the United States increased CAD 22.5 million, or 9.5%, from a year earlier, while Canadian revenue declined CAD 7.7 million, or 2.6%. Bianco said the Canadian consumer market remained soft as inflationary pressures prompted some shoppers to move toward private-label tissue products.

The consumer segment generated revenue of CAD 457.6 million, up 1.9% year over year, driven by higher U.S. sales volumes. Consumer adjusted EBITDA rose to CAD 85.3 million from CAD 69.2 million a year earlier, with the segment’s margin improving to 18.6% from 15.6%.

The Away-From-Home business, operating under the Kruger PRO brand, reported revenue growth of 7.4% to CAD 93.3 million, primarily because of higher U.S. sales volume. Segment adjusted EBITDA declined slightly to CAD 8.5 million from CAD 9 million, as higher transportation costs reduced profitability. On a sequential basis, however, the segment delivered higher revenue, volume and profitability.

Kruger PRO announced a 3% to 5% price increase effective Sept. 1, according to Bianco. The increase is intended to address transportation, packaging and oil-based input costs and affects about two-thirds of the business, with the remainder generally covered by contracts that reset when they renew.

Canadian Market-Share Recovery Plan Underway

Management said it experienced market-share losses in Canadian bathroom tissue and paper towel categories during the spring, though it began to see improvement in June. NielsenIQ data for the 52-week period ended June 13 showed a soft Canadian market, according to the company, while its facial-tissue share increased to 47%.

Bianco said the company’s recovery plan includes adjusting pricing in certain accounts, working with retailers on category management, securing additional promotional activity and refining product communication. He said the measures are not expected to require material incremental spending.

“We’re starting to see benefits already,” Bianco said, adding that management expects continued progress through the second half of the year.

The company also plans to promote more value-oriented offerings as consumers seek lower price points. Bianco said KP Tissue continues to evaluate product formats, innovation and “de-sheeting,” while maintaining competitive pricing gaps versus lower-priced products.

Memphis Operations Advance; TAD Project Still Under Review

KP Tissue said its new converting line in Memphis, which began operating early in the second quarter, is progressing ahead of plan. The line is intended to expand U.S. capacity and produce a range of tissue products for customers. Management said the Memphis facility has also been meeting safety, productivity and sustainability targets.

Bianco said the Memphis turnaround is progressing and that the site may require about another year to reach maturity. The company expects that bringing assets into base operating condition could reduce maintenance costs over time. It is also evaluating additional, smaller investments to expand capacity for ultra-premium tissue products at the site.

The company continues to assess a planned new through-air-dried, or TAD, tissue facility in the western United States. Bianco said a greenfield development requires work related to infrastructure, water, permitting, roads, rail and wastewater. The company is also conducting engineering work and seeking financing.

Management said economic uncertainty, including potential tariffs, the status of the Canada-United States-Mexico Agreement and broader geopolitical conditions, has contributed to a longer evaluation process. Bianco said the company remains committed to the project and hopes to provide clarity before the end of 2026, but did not provide a final investment decision date.

Pulp, Tariffs and Capital Spending

On pulp costs, the company said northern bleached softwood kraft average prices declined 13.4% year over year, while bleached eucalyptus kraft prices increased 15.2%. Industry analysts expect both grades to rise later in 2026 and into 2027, with eucalyptus kraft expected to increase faster and reach a higher level, Bianco said.

KP Tissue uses a mix of hardwood and softwood pulp and has flexibility in some brands to shift its furnish depending on relative pricing, according to Bianco. He said the company generally operates near a 60/40 mix between the two pulp types.

Management said it does not expect recent North American tariff announcements to have a significant impact on its business. Bianco said less than 1% of Canadian sales would be affected by the tariff discussed on the call, and the company is considering limited mitigation measures such as pre-shifting supply and alternative sourcing.

Cash declined to CAD 165.2 million at the end of the second quarter from CAD 205.9 million at the end of the first quarter, primarily because of working-capital changes. Total debt was stable sequentially, and the company’s leverage ratio remained at 2.9 times. Second-quarter capital expenditures totaled CAD 15.5 million, and KP Tissue maintained its full-year capital spending forecast of CAD 90 million to CAD 110 million, including pre-engineering work for the U.S. TAD extension.

About KP Tissue (TSE:KPT)

KPT was created to acquire, and its business is limited to holding, a limited equity interest in Kruger Products, which is accounted for as an investment on the equity basis. KPT currently holds a 12% interest in Kruger Products.

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