KP Tissue Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to KP Tissue second 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. Instructions will be provided at that time for you to queue up for questions. If at any time you have difficulties hearing the conference, please press star followed by zero for operator assistance. Before turning the meeting over to management, I would like to remind everyone that this conference call is being recorded on Tuesday, August 13, 2024. I would now like to turn the conference over to Mike Baldessera, Director, Investor Relations. Please go ahead, sir.

Thank you, operator, and good morning, ladies and gentlemen. My name is Mike Baldessera. I'm the Director, Investor Relations at KP Tissue, Inc. The purpose of this conference call is to review the financial results of the second quarter of 2024 at Kruger Products, Inc., which I'll refer to as Kruger Products going forward. With me this morning is Dino Bianco, our Chief Executive Officer of KP Tissue and Kruger Products, and Michael Keyes, the Chief Financial Officer of KP Tissue and Kruger Products. 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 company's actual 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 all in Canadian dollars unless otherwise stated. The press release reporting our Q2 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 you, during the call, to refer to the presentation to be prepared to accompany these discussions, which is also available on our website. We'd also appreciate 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?

Thank you, Mike. Good morning, everyone, and thank you for joining us for our second quarter earnings call for fiscal 2024. We delivered against expectations in the second quarter of 2024 with revenue-driven profitability generating more than $65 million in adjusted EBITDA. In the consumer segment, We brought added innovation and capacity to the Canadian facial tissue market to build our leadership status with a 42.8% share, while maintaining our number one and two positions in the bathroom tissue and paper towel categories, respectively. We also continued growing our away-from-home business on the strength of increased sales and adjusted EBITDA year over year and sequentially. We are pleased with the strong momentum across all our business units, both in Canada and the U.S., And despite a labor disruption at our Crabtree Quebec facility that has since been resolved with a five-year collective bargaining agreement, we are very pleased with our results. From a margin management standpoint, we recently announced a price increase in our consumer segment to mitigate escalating pulp prices that are approaching peak levels. This pricing adjustment, along with other productivity initiatives, will ensure we continue to drive profitable growth. Now let's take a look at our quarterly numbers on slide six. Revenue growth of 9.3% in the second quarter of 2024 can mainly be attributed to higher sales volume, favorable sales mix in the consumer segment, and improved pricing year over year. Revenue is also positively impacted by foreign exchange fluctuations on U.S. dollar sales. Canadian revenues increased 5.2% in the second quarter, while the U.S. improved 14.8%. Robust revenue in the U.S. continued to be fueled by new business growth. Adjusted EBITDA was up 18.6% year-over-year to $65.3 million in the second quarter, mainly driven by enhanced sales volume, improved sales mix, improved prices, and lower pulp costs. These factors were partially offset by several items. Michael will provide you with the details in his financial review. On slide seven, pulp average prices in Canadian dollars increased as high as 21.6% in the second quarter of 2024 from the previous quarter, while year-over-year average prices for NBSK and BEK were up 14.5% and 18.4% versus Q2 2023. In fact, NBSK prices in Canadian dollars reached a record level during the second quarter of 2024. Based on industry forecasts, pulp prices are expected to remain elevated over the course of the year, and as a result, we announced a price increase for our consumer segment that will be effective in early September. Let's move on to our operations on slide 8. Production rates have progressed according to plan at our facilities, while the North American market continues to remain highly utilized in tissue. Our upcoming paper machine in Sherbrooke is on schedule with the start up on track for Q4 2024. Our new facial tissue assets in Gatineau and Sherbrooke are continuing to see expectations and produce high quality products and an expanded portfolio. Network CAD paper and converting output is ahead of last year, which is allowing us to meet the increased demand of premium products from our customers. And finally, we ratified a five-year collective bargaining agreement at our Crabtree facility that should provide us with production stability going forward. Turning to our facial market update on slide nine, as mentioned in recent calls, the facial tissue category in Canada underwent a significant reset following the Kleenex exit from retail almost a year ago. Scotty's continued to build on its leadership position in the second quarter with a 52-week market share rising to nearly 43%. As mentioned earlier, both our legacy and new facial lines at Sherbrooke and Gatineau are operating above plan. We also increased innovation with the launch of Scotty's Pocket Packs for consumers on the go and introduced new Ultra Soft and Ultra Soft with Lotion SKUs to meet the consumer's needs for premium facial tissue. In addition, we strategically added marketing support behind Scotty's house and home design series, as well as sponsorship of the Canada's Got Talent television show. All of this has resulted in increased investments in the Scotty's brand. Now let's move on to brand support on slide 10. We maintained ongoing support for our multiple brands to drive awareness and continue to drive share growth. For example, we offered consumers the chance to win one of three VIP experiences, each worth approximately $10,000 at an NHL playoff game. We also introduced Only in Canada promotions to highlight the leadership position of our brands in Canada. On Bonterra, in Q2 2024, we also increased distribution and support with targeted media to expand the awareness and trials of the sustainable brand for environmentally conscious consumers. In addition, we released a unique cashmere ultralux bathroom guide setting the standard for restaurant bathroom excellence by recognizing some of the most beautiful restaurant bathrooms in Toronto. This guide, which uses an exclusive three-flower rating system, evaluates restaurant bathrooms on a set list of criteria such as lighting, amenities, and comfort. We look forward to expanding this concept in the coming months. Turning to slide 11, the data presented is taken from Nielsen. It shows branded market share performance over a 52-week period ending June 15, 2024. I am pleased to report that our bathroom tissue is recovering after a high inflationary period during the last couple of years. Facial tissue and paper towel, meanwhile, continue to grow share based on investments in our brands, strong go-to-market and retail activation. Let's look at the away-from-home segment on slide 12. We generated robust adjusted EBITDA that improved double digits over Q2 2023 and Q1 2024. Sales volume improvements both year-over-year and sequentially drove strong profitability in the second quarter with seasonality a contributing factor on a sequential basis. Looking ahead, away-from-home converting asset performance continues to support higher volume while the startup of our Sherbrooke paper machine in the latter part of the year will provide internal paper for our AFH business, thus reducing our external requirements. Finally, on AFH, sales volume continues to track well, despite an uncertain economic environment. I will now turn the call over to Michael.