KP Tissue Reports Strong Q1 2025 Earnings Growth

KP Tissue ((TSE:KPT)) has held its Q1 earnings call. Read on for the main highlights of the call.

KP Tissue’s recent earnings call painted a picture of robust growth and strategic advancements, despite some challenges. The company showcased a strong performance in revenue growth and adjusted EBITDA, largely driven by increased sales and successful operational expansions. However, there were notable hurdles in the Away-From-Home segment’s profitability and the impact of tariffs and higher pulp prices on costs. Overall, the positive aspects of growth and successful project implementation outweighed the negative implications of cost challenges and trade disruptions.

Strong Revenue Growth

KP Tissue reported a remarkable revenue increase of nearly 14% in Q1 2025 year-over-year. This growth was fueled by pre-shipped volume ahead of tariffs, favorable selling prices, and a positive foreign exchange impact, highlighting the company’s strategic foresight in navigating market conditions.

Increase in Adjusted EBITDA

The company’s adjusted EBITDA saw a significant rise of nearly 13% year-over-year, reaching $75.8 million. This increase was attributed to higher sales volume, increased selling prices, and lower manufacturing overhead costs, underscoring KP Tissue’s operational efficiency.

U.S. Sales Performance

U.S. sales performance was a standout, with a robust growth of 21.7% year-over-year. This strong upward trend indicates KP Tissue’s successful penetration and expansion in the U.S. market, contributing significantly to overall revenue growth.

Sherbrooke Expansion Project Success

The Sherbrooke Expansion Project, particularly the new LDC paper machine, exceeded start-up expectations. It is anticipated to meet all in-house paper requirements in Q2 2025, marking a significant milestone in KP Tissue’s production capabilities.

Sustainability Achievements

KP Tissue reported impressive sustainability achievements, including a 26% reduction in GHG emissions, a 35% decrease in water consumption, and 100% use of certified fibers. These accomplishments reflect the company’s commitment to environmental responsibility.

Away-From-Home Segment Profitability Decrease

The Away-From-Home segment faced profitability challenges, with adjusted EBITDA decreasing by $5 million year-over-year. This decline was impacted by external purchased paper, higher fiber prices, and one-time warehousing expenses.

Impact of Tariffs and Trade Disruptions

Trade disruptions had an estimated impact of approximately $3 million on KP Tissue’s business in Q1 2025. This highlights the ongoing challenges posed by global trade dynamics.

Higher Pulp Prices

The cost structure was affected by a significant increase in pulp prices, with NBSK and BEK pulp prices rising 29.5% and 10.5% respectively, compared to Q1 2024. This increase in raw material costs poses a challenge to maintaining profitability.

Forward-Looking Guidance

Looking ahead, KP Tissue provided optimistic guidance for the remainder of fiscal year 2025. The company anticipates continued revenue growth, supported by a 15.1% rise in the Consumer segment and strategic investments in the Sherbrooke Expansion Project. Despite challenges from higher pulp prices and tariffs, KP Tissue expects to enhance its profitability and invest between $80 million and $100 million in capital expenditures to bolster production capabilities and sustain growth.

In conclusion, KP Tissue’s earnings call highlighted a strong performance in revenue and operational expansions, despite facing challenges from tariffs and higher pulp prices. The company’s strategic initiatives, particularly in the U.S. market and sustainability efforts, position it well for future growth. Investors and stakeholders can remain optimistic about KP Tissue’s trajectory, given its robust financial results and forward-looking strategies.