KP Tissue Q2 2025 presentation: Revenue up 5.2%, EBITDA grows 11% year-over-year

Introduction & Market Context

KP Tissue Inc. (TSX:KPT) released its Q2 2025 financial results on August 13, 2025, showcasing year-over-year growth across key metrics despite a sequential slowdown from the previous quarter. The company, which maintains leading positions in several tissue product categories across North America, reported continued strength in its Canadian operations while announcing new investments in its US facilities.

The results come amid a volatile economic environment with fluctuating pulp prices, where NBSK prices increased 8.5% year-over-year while BEK prices dropped 10.0%. KP Tissue’s market position remains strong, holding the #1 position in bathroom tissue with 32.0% market share and facial tissue with 45.1% market share, while maintaining the #2 position in paper towels with 24.4% market share.

Quarterly Performance Highlights

KP Tissue reported Q2 2025 revenue of $536.1 million, representing a 5.2% increase compared to Q2 2024, though showing a 1.8% sequential decline from Q1 2025. Adjusted EBITDA reached $72.5 million, up 11.0% year-over-year but down 4.3% quarter-over-quarter. Net income saw significant improvement at $22.1 million, an $11.5 million increase over the same period last year.

As shown in the following financial highlights:

The company’s performance showed geographic divergence, with Canadian revenue increasing by 7.4% ($20.7 million) year-over-year, while US revenue grew at a more modest 2.4% ($5.6 million). This aligns with the company’s continued emphasis on its "Made in Canada" positioning, which has been reinforced through new Cashmere and Purex campaigns.

The quarterly financial summary provides a comprehensive view of the company’s performance metrics:

Detailed Financial Analysis

KP Tissue’s revenue growth of $26.3 million compared to Q2 2024 was primarily driven by higher consumer volume, favorable selling prices across segments, and positive foreign exchange impact on US dollar sales. This was partially offset by lower volume in the Away From Home (AFH) segment.

The adjusted EBITDA improvement of $7.2 million year-over-year was attributed to higher sales volume, increased selling prices, and lower manufacturing overhead costs. These positive factors were partially offset by higher pulp prices, unfavorable mill performance at the Memphis site, greater freight costs, and increased SG&A expenses. The adjusted EBITDA margin improved to 13.5% in Q2 2025 from 12.8% in Q2 2024.

The following chart illustrates the factors contributing to the adjusted EBITDA growth:

When comparing to Q1 2025, the $10.0 million sequential revenue decrease was primarily due to lower US sales volume and unfavorable foreign exchange impact on US sales, partially offset by increased selling prices. Geographically, Canadian revenue increased by $13.2 million (4.6%) while US revenue decreased by $23.2 million (8.9%).

The company’s balance sheet shows cash of $85.3 million and total debt of $1,205.5 million, resulting in net debt of $1,120.2 million. With last twelve months adjusted EBITDA of $280.8 million, the net debt to adjusted EBITDA ratio stands at 4.0x, remaining stable compared to previous quarters.

Strategic Initiatives

KP Tissue announced a US$35 million investment in its Memphis facility to drive efficiency, including shutting down older assets, focusing on premium products, and implementing modern equipment and on-site warehousing. The new multi-purpose, state-of-the-art converting line is scheduled to start up in Q2 2026.

The company’s Sherbrooke Expansion assets continue to perform above start-up expectations, contributing to overall network production rates exceeding Q2 2025 targets. Capital expenditures for Q2 2025 totaled $10.8 million, including $2.0 million related to the Sherbrooke Expansion Project, with anticipated CAPEX of $70-90 million for the full year 2025.

In the AFH segment, KP Tissue launched Cashmere and Scotties brands for the commercial market in June, reporting strong response from end-users and distribution partners. The segment’s profitability improved sequentially due to in-sourcing of paper from the new paper machine in Sherbrooke, though volume decreased year-over-year.

The company also highlighted its sustainability initiatives, with key targets to achieve by 2030:

Forward-Looking Statements

Looking ahead, KP Tissue aims to expand business across its customer base in 2025 while managing margins in a volatile economic environment. The company will continue investing in US operations to drive efficiency and capacity, leveraging its strong brand positions and "Made in Canada" positioning.

Management is closely monitoring the AFH market due to economic uncertainty, though they note that profitability in this segment is benefiting from internal paper supply. The company is also focused on developing organizational capability to strengthen adaptability and resilience in a changing market environment.

As summarized in the company’s growth strategy:

KP Tissue’s Q2 2025 results demonstrate the company’s ability to generate year-over-year growth despite sequential challenges and a complex economic backdrop. With strategic investments in manufacturing capabilities and continued brand leadership, the company appears positioned to maintain its strong market presence while addressing efficiency and sustainability objectives.

Full presentation:

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