KP Tissue Inc.

Good morning and welcome to KP Teacher's first quarter 2025 results conference call. Today's call is being recorded for replay. All participants are currently in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at the time for you to queue up for questions. If at any time during the call you experience any difficulties please press star followed by zero for operator assistance. I will now turn the call over to Doris Kermick, Director of Investor Relations. You may begin your conference.

Thank you, Operator. Good morning, everyone, and thank you for joining us to review Kruger Products' first quarter 2025 financial results. With me this morning is Dino Bianco, the CEO of KP Tissue and Kruger Products. and Michael Keyes, the CFO of KP Tissue and Cougar Products. Today's discussion will include certain forward-looking statements. Actual results could differ materially from these forward-looking statements due to known and unknown risks and uncertainties. A list of risk factors can be found in our public filings. In addition, today's discussion will include certain non-GAAP financial measures. The reconciliation of these non-GAAP financial measures to the most comparable GAAP measure can be found in our MD&A. The press release reporting our Q1 2025 results is published this morning and will be available on our website at kptissuing.com. The financial statements and MD&As will also be posted on our website and on CDAR Plus. The investor presentation to accompany today's discussion can be found in the investor relations section of our website. I will now turn the call over to our CEO, Dino Bianco. Dino?

Thank you, Doris. Good morning, everyone, and thank you for joining us for our first quarter earnings call for fiscal 2025. We are pleased with our strong first quarter results, especially considering the uncertain and volatile economic environment. Adjusted EBITDA reached $75.8 million in the quarter on revenue that increased double digits year over year. Revenue for the consumer segment was mainly driven by higher sales volume in Canada and the U.S. and improved pricing. Our away-from-home business, which has been rebranded Kruger Pro, also generated higher sales volume in the same period last year, although profitability was unfavorably impacted by the purchase of external paper. We expect that our newly deployed LDC paper machine in Sherbrooke will essentially meet all in-house paper requirements beginning in the second quarter of 2025. In fact, the new LDC paper machine and facial tissue converting line which are all part of the Sherbrooke expansion project, have exceeded startup expectations. And given the changing tariff announcements affecting North America and the world, the impact to our business in the first quarter was not significant. We will continue to closely monitor the impact of potential tariffs and have developed contingency plans to mitigate any potential financial risk. Now let's take a look at our quarterly numbers on slide six. Revenue growth of nearly 14% in the first quarter of 2025, was spurred by pre-shipped volume into the U.S. ahead of tariffs, favorable selling prices across both consumer and AFH segments, and a positive foreign exchange impact on U.S. dollar sales. Revenue in Canada increased 7.6% in the first quarter, while U.S. sales continued a strong upward trend with growth of 21.7% year over year. In terms of profitability, Adjusted EBITDA grew nearly 13% year-over-year to $75.8 million in the first quarter. The year-over-year improvement can be attributed to higher sales volume, increased selling price, and lower manufacturing overhead costs. These factors were partially offset by a number of items, including higher pulp prices and greater freight costs, including the impact of tariffs. Michael will provide you with more details in his financial review. On slide seven, pulp average prices in Canadian dollars increased single digits in the first quarter of 2025 from the previous quarter, while year-over-year average prices for NBSK and BEK were up 29.5% and 10.5% respectively versus Q1 2024. To summarize this chart, market pulp prices increased significantly in the first quarter and industry analysts expect volatility in 2025 due to the uncertain trade environment. Let's move on to our operations on slide eight. Production rates exceeded our forecast in Q1 2025, which has been critical as North American demand for tissue continues to be very strong. As previously mentioned, our new LDC paper machine in Sherbrooke and facial tissue line are surpassing startup expectations, while TAD paper machine and converting output remains ahead of last year. For the rest of 2025, anticipate production to further increase as new assets reach their maturity curve. Let's turn to brand support on slide 9. We continued our Made in Canada positioning across all trademark brands in the first quarter of 2025. This has become even more important for consumers during these times. Our Made in Canada positioning has always been at the core of our Canadian brands, as all our brands sold in Canada are Made in Canada. During the first quarter, we also made investments behind brand-specific campaigns for Bonterra, Scotties, and sponge towels, both on TV and digital platforms to drive top-of-mind awareness. In addition, we joined forces with Volkswagen to celebrate Earth Month in April by launching our Bonterra Driving Good Together contest. Canadian shoppers had an opportunity to win the all-electric ID Buzz microbus through the purchase of Bonterra products, our sustainability-focused line. The campaign demonstrated that making environmentally conscious decisions to protect the planet can be simple and rewarding. Shifting to hockey-related campaigns, I would like to highlight that we recently completed the fifth year of our Kruger Big Assist program by committing $200,000 to five minor hockey associations across Canada. And I want to congratulate the Ontario-based North Halton Girls Hockey Association with a grand prize winner in 2025. The Cougar Big Assist program helps provide financial assistance to Canadian hockey families, removing barriers to Canada's national game and giving more kids a chance to participate. Over the past five years, we have donated $1 million to over 50 hockey communities across Canada. And finally, we implemented our in-market activations with our partners, the Toronto Maple Leafs, Montreal Canadiens, and the NHL during the ongoing playoffs. Let's turn to slide 10. The data presented is taken from Nielsen. It shows branded market share performance over a 52-week period ending March 22nd for 2025 numbers, while the data from 2021 to 24 is based on 52-week periods for those years. The numbers reflect relatively stable share both in the bathroom tissue and paper towel categories, and this was reflected as the pricing that we took in Q4 of last year. We're also seeing some share improvements in the first quarter of this year, which will benefit our future 52-week share going forward. In facial tissue, we consolidated our leadership position in the Canadian market with a 45% share on the strength of the Scotties brand and our innovations. Looking at the away from home segment on slide 11, sales volume increased year over year in Q1 2025, but was down sequentially due to typical seasonality. Although orders remained strong during the quarter, much of the customer discussions were based on tariffs, supply, sourcing, and cost. We do believe, though, that our strong business fundamentals and our customer relationships allowed us to deliver strong growth in the quarter. Profitability decreased year over year, driven primarily by continued external purchase sales. We expect that our new LDC paper machine in Sherbrooke will meet internal requirements for paper and improve margins beginning in Q2 2025. And finally, we intend to launch our Cashmere and Scotties brands in the away-from-home market in June, which should become visible in key commercial settings for our common consumer. I will now turn the call over to Michael.