KP Tissue Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to KPTSU first quarter 2024 results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session, and instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press the star followed by zero for operator assistance at any time. Before turning the meeting over to management, I would like to remind everyone that this conference call is being recorded on Tuesday, May 14, 2024. I will now turn the conference over to Mike Baldessara, Director of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, ladies and gentlemen. My name is Mike Baldessara. I'm the Director of Investor Relations at KP Tissue, Inc. The purpose of the conference call is to review the financial results of the first quarter of 2024 for Kruger Products, Inc. which I'll refer to as Kruger Products going forward. With me this morning is Dino Bianco, the Chief Executive Officer of KP Tissue and Kruger Products, and Michael Keyes, the Chief Financial Officer of KP Tissue and Kruger Products. Before I turn the call over to my colleagues, I'd like to highlight that the following discussions and responses to questions contain forward-looking statements concerning the company's activities. Forward-looking statements involve known and unknown risks and uncertainties, which could cause the actual company's results to differ materially from those in the forward-looking statements. Investors are cautioned not to rely on these forward-looking statements. The company does not undertake to update these forward-looking statements, except if required by applicable laws. There's a page at the beginning of the written presentation which contains the usual legal cautions, including as to forward-looking information, which you should be aware of. I'd like to point out that all figures expressed in today's call are in Canadian dollars unless otherwise stated. The press release reporting our Q1 2024 results were published this morning and will be accessible from our website at kptissueinc.com. Please be aware that our MD&A will be posted on our website and will also be available on CDAR. Finally, I would ask that during the call to refer to the presentation, we have prepared to accompany discussions, which is also available on our website. We'd also appreciate that during the Q&A period for you to limit your questions to two. Thank you for your collaboration, ladies and gentlemen. I'll now turn the call over to Dino Bianco, our CEO.

Dino? Good morning. Thank you, Mike. I'd also like to take the opportunity to welcome Michael Keyes to his first official analyst call as our new CFO. So please go easy on him for this call. Why don't we get started? Good morning. As I said, thank you for joining us. This is our first quarter earnings call for fiscal 2024. We delivered very strong results in the first quarter, highlighted by increased sales volume and improved adjusted EBITDA. In our consumer segment, we continue to build on our leadership position in facial tissue following the grocery exit of Kleenex in Canada through incremental marketing, added manufacturing capacity, and product innovation. We also invested in brand support to drive awareness and share gains in our bathroom tissue and paper towel categories. Our away-from-home business continued its strong performance in the first quarter with robust growth and profitability both year-over-year and sequentially combined with solid sales growth. Looking ahead to the remainder of 2024, we will continue to take a multifaceted approach to drive profitable growth. Given anticipated headwinds in commodity markets, we are preparing an action plan to mitigate escalating pulp prices. Now let's take a look at our quarterly numbers on slide 6. Revenue growth of 6.3% in the first quarter of 2024 can mainly be attributed to higher sales volume and favorable sales mix, partially offset by lower selling prices year over year. Canadian revenues increased 2.1% in the first quarter, while the U.S. improved 12.1%, The growth in the U.S. is mainly driven by new business growth. Adjusted EBITDA was up 34.3% year-over-year to $67.1 million in the first quarter. It's mainly driven by higher sales volume, improved sales mix, and lower pulp prices, along with improved freight costs. These factors were partially offset by several items, including reduced selling prices. Michael will provide you with more details on these drivers in the financial review. On slide 7, pulp average prices in Canadian dollars climbed as high as 12.5% in the first quarter of 2024 from the previous quarter, while year-over-year average prices for both NBSK and BK were down 14.2% and 19.2% versus Q1 of last year. Due to various global factors, we witnessed significant increases in pulp prices on a sequential basis in Q1 2024. And based on industry forecasts, pulp prices are expected to escalate over the course of the year. Let's move on to our operations on slide 8, which combines both our Sherbrooke and Memphis manufacturing facilities. Our new facial tissue line in Sherbrooke, which launched in early February of this year, is meeting startup expectations and already producing high-quality, saleable products. Construction of our paper machine is progressing well with the start-up scheduled for Q4 of 2024, and this extra capacity from these assets will help us meet heightened demand for our products in North America. At Memphis, our TAD paper machine production continues to improve on a year-over-year basis, and we are encouraged by the progress at that site. Converting production in Memphis is also recovering with investments in operations, along with hirings in maintenance and technical leadership, which are delivering better results. All our other facilities are generally operating at plan. Turn to our facial market update on slide nine. Following the grocery exit of the Kleenex brand in Canada, we have observed a large-scale reset of retail shelves across grocery stores in Canada. As the leader in the facial tissue category in the country, Scotty has continued to gain its fair share of the market with a 52-week share reaching 40.3% at the end of the first quarter. As mentioned in last quarter's conference call, we added a new converting line at our Gatineau facility in February to help meet growing customer demand. The new line in Gatineau is now running at full capacity to supplement the output from the recently deployed facial line in Sherbrooke. Finally, our innovation pipeline for Scotty's is strong, driven by the introduction of different sizes, formats, and quality types, and is also helping us to grow share in this product category for today and for the future. We have also increased our investments to support our market-leading Scotty's brand. Now let's move on to brand support on slide 10. We continue to reinforce our brands in the first quarter to drive awareness and share gains in a highly competitive environment. One area where we made additional investments involved our Bonterra brand, which is our sustainable brand for environmentally conscious consumers. We introduced this product family in 2022 to offer consumers a viable option at the shelf for building a better planet. In Q1 2024, we made a concerted effort and push the targeted media to support this brand with incremental customer listings. Turning to slide 11. The data presented is taken from Nielsen. It shows market share performance over a 52-week period ending March 23, 2024. After some share lost a private label in the recent period of high inflation, we are recovering on share across all three categories. Not surprisingly, facial tissue delivered the highest share gains of 4.7 percentage points from the previous period, followed by paper towels at 0.7% and bathroom tissue at 0.6%. Market share at 40.3% for facial tissue and 24.6% for paper towels reached the highest level in the last four years for Kruger products. And on back tissue share, we continue to move in the right direction in this very competitive category. Looking at the away from home segment on slide 12, its sustained recovery continued in the first quarter with robust adjusted EBITDA results above Q1 2023 and Q4 2023. Sales volume in the first quarter increased year over year, but was down sequentially due to seasonality. Of note, our enhanced portfolio management delivered a higher mix of premium versus value products, which enhanced our profitability. Going forward, asset performance in AFH continues to progress and meet the growth in demand. The sales outlook for this segment remains strong despite ongoing concerns of an economic slowdown. I will now turn the call over to Michael.