KP Tissue, Canada's leading manufacturer of tissue products, released its Q3 financial results last week. The company manufactures branded products like Cashmere, Purex, SpongeTowels, Scotties, and White Swan along with private label tissue products.
Revenue was $391.4 million in Q3 2021 compared to $369.1 million in Q3 2020, an increase of $22.3 million or 6.0%. KP says the increase in revenue was due to a selling price increase in Consumer Canada, slightly higher sales volume in the Consumer segment compared to the year ago quarter, and an increase in sales volume in the AFH segment resulting from the beginning of COVID-19 related demand recovery.
“Our solid revenue growth of 6% for the third quarter reflects pricing actions in our Canadian Consumer segment, combined with slightly higher volume and gradually improving commercial end-markets, along with the execution of our recovery plan in the Away-From-Home business,” said KP Tissue’s CEO Dino Bianco. “High inflationary costs and near-record pulp prices negatively impacted our Adjusted EBITDA compared to the same quarter last year, but the benefits of recent price increases resulted in a sequential improvement to $40.3 million for the quarter.”
Cost of sales was $345.6 million in Q3 2021 compared to $307.7 million in Q3 2020, an increase of $37.9 million or 12.3%. Manufacturing costs increased primarily due to higher sales volumes net of overhead absorption, increased pulp costs, labour shortages in manufacturing, higher depreciation expense and inflation.
“Inflationary pressure and labour shortages are among the key challenges we will be facing in upcoming quarters,” said Bianco. “We are executing pricing actions across the business along with a more focused labour approach to manage our margins, while continuing to invest to grow the top-line in both Consumer and AFH. TAD Sherbrooke performance continues to be well ahead of our growth curve and a key enabler for future growth.”
Selling, general and administrative (SG&A) expenses were $29.0 million in Q3 2021 compared to $31.2 million in Q3 2020, a decrease of $2.2 million or 7.1%. KP Tissue says the decrease was primarily due to a reduction in compensation related costs, the release of a COVID-19 related AFH accounts receivable provision recorded during 2020 and foreign exchange gains, partially offset by higher marketing expenses.
Net loss was $9.3 million in Q3 2021 compared to net income of $18.5 million in Q3 2020, a decrease of $27.8 million. The decrease was primarily due to lower Adjusted EBITDA of $5.9 million, and higher other, interest and depreciation expenses, partially offset by a higher income tax recovery.