KP Tissue TSE: KPT reported higher first-quarter profitability despite essentially flat revenue, as lower pulp prices and reduced warehousing costs helped offset foreign exchange pressure and other cost headwinds, executives said on the company’s first quarter 2026 earnings call.
Dino Bianco, CEO of KP Tissue and Kruger Products, said the company generated adjusted EBITDA of CAD 86.9 million in the quarter, with an adjusted EBITDA margin of 16%. That represented a 14.6% increase from the prior-year period on revenue of CAD 544.6 million, which was down 0.3% year-over-year.
“Overall, we are pleased with our financial performance in the opening quarter,” Bianco said, citing lower year-over-year pulp prices and warehousing costs as the main drivers of the profit improvement.
Profitability Improves as Revenue Holds Steady
Michael Keays, CFO of KP Tissue and Kruger Products, said net income totaled CAD 19.8 million in the first quarter, compared with CAD 15.4 million in the first quarter of 2025. The increase was driven by higher adjusted EBITDA, lower depreciation expense and reduced interest and other finance costs, partially offset by an unfavorable foreign exchange difference and higher income tax expense.
Revenue in Canada increased 0.8% year-over-year, while U.S. revenue declined 1.5%. Bianco noted that the U.S. business was lapping a strong comparison from the first quarter of 2025, when sales grew more than 21%.
On a sequential basis, revenue decreased CAD 15.5 million, or 2.8%, from the fourth quarter of 2025, primarily because of lower Canadian sales volume and unfavorable foreign exchange impact, partly offset by higher selling prices. Adjusted EBITDA increased sequentially by CAD 2.7 million, or 3.2%, to CAD 86.9 million.
Keays said the year-over-year adjusted EBITDA gain was supported by lower pulp prices and reduced warehousing costs, partially offset by higher manufacturing overhead costs. Sequentially, the improvement was attributed mainly to lower manufacturing overhead, reduced SG&A expenses and slightly higher selling prices, partly offset by lower Canadian volume, elevated freight and warehousing expenses, higher pulp prices and foreign exchange pressure.
Consumer Segment Margins Rise, Away-From-Home Improves
In the Consumer business, revenue declined 0.8% year-over-year to CAD 461.7 million. Keays said the slight decrease was primarily due to unfavorable foreign exchange impact from U.S. dollar sales, while higher U.S. sales volume was essentially offset by a decrease in Canada.
Consumer adjusted EBITDA totaled CAD 83.9 million, compared with CAD 76.1 million in the prior-year quarter. The segment’s adjusted EBITDA margin was 18.2%, up two percentage points from a year earlier.
The Away-From-Home segment posted revenue of CAD 82.9 million, up 2.5% year-over-year, driven primarily by higher U.S. volume. Adjusted EBITDA in the segment was CAD 6.3 million, compared with CAD 2.8 million a year earlier. Keays said the margin more than doubled to 7.6%, partially driven by benefits from insourcing paper supply. Sequentially, Away-From-Home adjusted EBITDA declined from the fourth quarter due to seasonal volume patterns.
Bianco said Away-From-Home revenue, volume and profitability grew year-over-year but declined sequentially due to seasonality. He said growth in the first quarter was mainly driven by the U.S. market, which performed more strongly than Canada.
Company Monitors Costs and Potential Pricing
Executives said KP Tissue is watching input costs closely, particularly fuel, freight and pulp. Bianco said NBSK average prices in Canadian dollars declined sequentially and year-over-year in the first quarter, while BEK prices increased over the same periods. He said industry analysts expect both NBSK and BEK prices to move higher in 2026, with BEK rising faster and to a higher level.
Asked about cost mitigation and pricing in light of recent geopolitical developments in the Middle East, Bianco said the situation had not significantly affected the first quarter, but could have a greater impact in the second half of the year if prices remain elevated. He said the company had not made “dramatic changes” but had rejected some supplier cost increases it viewed as aggressive or premature.
“At the end of the day, we’re gonna deliver our margin and we’ll do it through cost initiatives, as well as pricing if we have to,” Bianco said.
Bianco and Keays both said no new price increases had been announced in the market. Keays added that even if pricing announcements are made, they can take up to two months to take effect.
Bianco said Canadian consumer tissue categories showed some softness in the quarter, with Nielsen data indicating units were down about 1%. He pointed to factors including lower population growth, less discretionary spending on paper towels, pantry de-loading and possible shifts to non-measured retail channels.
Memphis Ramp-Up and Western U.S. TAD Project Remain in Focus
Bianco said manufacturing assets exceeded expectations across the company’s network in the first quarter, and KP Tissue maintained a strong safety record. He said a new state-of-the-art converting line at the Memphis facility began ramping up in early April and is expected to add capacity to the company’s U.S. network, with a focus on premium bathroom tissue and paper towel products.
The company is also advancing plans for a proposed Through-Air Drying tissue facility in the western United States. Bianco said KP Tissue is finalizing incentives, permitting and financing with its preferred location and expects to make an official announcement before the end of the first half of 2026.
The project would include a new tissue plant with a TAD paper machine and related converting lines. Bianco said the machine is expected to have annual production capacity of about 75,000 metric tons, with startup expected in late 2028.
During the question-and-answer session, Bianco said the company’s planning still supports the need for announced industry capacity additions, including its own project. He said KP Tissue expects longer-term industry utilization rates to remain in the “mid-low 90s,” while acknowledging there could be short-term volatility as new sites start up.
Balance Sheet Strengthens; Q2 EBITDA Expected Near Q1 Level
KP Tissue ended the quarter with CAD 205.9 million in cash, up from CAD 196.1 million at the end of the fourth quarter of 2025. Long-term debt was CAD 1.058 billion, down CAD 16.1 million sequentially, while net debt declined CAD 14.4 million. Keays said the leverage ratio fell to 2.9 times from 3.1 times in the prior quarter.
Capital expenditures totaled CAD 16 million in the first quarter. Keays said the company expects full-year 2026 CapEx to be in the range of CAD 100 million to CAD 120 million, including spending related to previously discussed strategic projects.
Looking ahead, Bianco said market demand for the company’s leading tissue products remains healthy, and production rates across paper machines and converting lines are exceeding targets. He said KP Tissue expects second-quarter 2026 adjusted EBITDA to be “in the range” of first-quarter results.
Bianco also said the company will continue investing in brands, including Cashmere, SpongeTowels, Scotties and Bonterra, while building on its Away-From-Home growth model and preparing for the planned western U.S. tissue facility.
About KP Tissue TSE: KPT
KP Tissue Inc operates as a holding company. The firm produces, distributes, markets, and sells a range of disposable tissue products in North America. It offers bathroom and facial tissues, paper towels, paper towels, and napkins, as well as disposable wiping products and washroom dispensing systems.
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