Key points
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KP Tissue’s profitability improved in the first quarter despite revenue remaining basically flat at CAD 544.6 million. Adjusted EBITDA increased 14.6% year over year to CAD 86.9 million, helped by lower pulp prices and lower storage costs.
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Segment performance was mixed but overall stronger: Consumer revenue fell slightly, while out-of-home services revenue rose 2.5% and adjusted EBITDA more than doubled to C$6.3 million. Management said U.S. performance was the main driver of out-of-home service growth.
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The company focuses on costs, capacity expansion and balance sheet strength.. KP Tissue ended the quarter with more cash, lower debt and a leverage ratio of 2.9 times, and expects second-quarter adjusted EBITDA to be roughly in line with the first quarter as it continues to work on ramping up Memphis and a planned tissue plant in the western US.
KP Tissue (TSE:KPT) reported higher profitability in the first quarter despite essentially flat revenue, as lower pulp prices and reduced storage costs helped offset currency pressure and other cost headwinds, executives said on the company’s first-quarter 2026 earnings conference 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%. This represented a 14.6% increase from the prior-year period on revenue of C$544.6 million, which decreased 0.3% year over year.
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“Overall, we are satisfied with our financial performance in the first quarter,” Bianco said, citing lower year-over-year pulp prices and storage costs as the main drivers of the profit improvement.
Profitability improves as revenue remains stable
Michael Keays, chief financial officer of KP Tissue and Kruger Products, said net income totaled CAD 19.8 million in the first quarter, compared to CAD 15.4 million in the first quarter of 2025. The increase was driven by higher adjusted EBITDA, lower depreciation expense and lower interest and other financing costs, partially offset by an unfavorable exchange rate difference and higher income tax expense.
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Revenue in Canada increased 0.8% year over year, while revenue in the United States decreased 1.5%. Bianco noted that the US business was seeing a strong comparison to the first quarter of 2025, when sales grew more than 21%.
Sequentially, revenue decreased CAD 15.5 million, or 2.8%, from the fourth quarter of 2025, primarily due to lower sales volume in Canada and unfavorable foreign exchange impact, partially offset by higher sales prices. Adjusted EBITDA increased sequentially by C$2.7 million, or 3.2%, to C$86.9 million.
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Keays said the year-over-year adjusted EBITDA increase was supported by lower pulp prices and lower storage costs, partially offset by higher overall manufacturing costs. Sequentially, the improvement was primarily attributed to lower manufacturing overhead expenses, lower SG&A expenses and slightly higher selling prices, partially offset by lower Canadian volume, elevated transportation and storage expenses, higher pulp prices and currency pressure.
Consumer segment margins increase, out-of-home service improves
In the Consumer business, revenue decreased 0.8% year over year to CAD 461.7 million. Keays said the slight decline was primarily due to the unfavorable exchange rate impact on U.S. dollar sales, while higher sales volume in the United States was essentially offset by a decline in Canada.
Consumer-adjusted EBITDA amounted to CAD 83.9 million, compared to CAD 76.1 million in the prior-year quarter. The segment’s adjusted EBITDA margin was 18.2%, two percentage points higher than the previous year.
The Far From Home segment reported revenue of CAD 82.9 million, a 2.5% year-over-year increase, primarily driven by higher volume in the U.S. Adjusted EBITDA in the segment was CAD 6.3 million, compared to CAD 2.8 million a year earlier. Keays said the margin more than doubled to 7.6%, driven in part by benefits from insourcing paper supply. Sequentially, Far From Home’s adjusted EBITDA decreased from the fourth quarter due to seasonal volume patterns.
Bianco said far-from-home service revenue, volume and profitability grew year-over-year, but declined sequentially due to seasonality. He said growth in the first quarter was driven primarily by the U.S. market, which performed stronger than Canada.
The company monitors costs and potential prices
Executives said KP Tissue is closely watching input costs, particularly fuel, transportation and pulp. Bianco said average NSK prices in Canadian dollars decreased sequentially and year-over-year in the first quarter, while BEK prices increased during the same periods. He said industry analysts expect NBSK and BEK prices to rise in 2026, with BEK rising faster and to a higher level.
When 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 larger 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 that it considered aggressive or premature.
“At the end of the day, we are going to achieve our margin and we will do it through cost initiatives as well as pricing if necessary,” Bianco said.
Bianco and Keays said no new price increases had been announced in the market. Keays added that even if price announcements are made, they can take up to two months to take effect.
Bianco said Canadian consumer tissue categories showed some weakness in the quarter, with Nielsen data indicating units were down about 1%. He pointed to factors including slower population growth, less discretionary spending on paper towels, pantry unloading and potential shifts to unmetered retail channels.
Memphis acceleration and TAD project in the western US remain in focus
Bianco said manufacturing assets exceeded expectations across the company’s network in the first quarter and that KP Tissue maintained a strong safety record. He said a new state-of-the-art converting line at the Memphis facility began operating in early April and is expected to add capacity to the company’s U.S. network, with a focus on premium toilet paper and paper towel products.
The company is also moving forward with plans for a proposed air-drying tissue facility in the western United States. Bianco said KP Tissue is finalizing incentives, permits and financing with its preferred location and hopes 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 an annual production capacity of around 75,000 metric tons, and is expected to be commissioned by the end of 2028.
During the question and answer session, Bianco said the company’s planning still supports the need for the announced industrial capacity additions, including its own project. He said KP Tissue expects long-term industry utilization rates to remain in the “high 90s,” although it acknowledges there could be short-term volatility as new sites come online.
The balance sheet is strengthened; Q2 EBITDA expected near Q1 level
KP Tissue ended the quarter with CAD 205.9 million in cash, down from CAD 196.1 million at the end of Q4 2025. Long-term debt was CAD 1,058 million, down CAD 16.1 million sequentially, while net debt decreased CAD 14.4 million. Keays said the leverage ratio fell to 2.9 times from 3.1 times in the previous quarter.
Capital expenditures amounted to 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 strategic projects discussed above.
Looking ahead, Bianco said market demand for the company’s core tissue products remains healthy and production rates on 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 to invest in brands, including Cashmere, SpongeTowels, Scotties and Bonterra, as it builds its away-from-home growth model and prepares for a planned tissue facility in the western U.S.
About KP fabric (TSE:KPT)
KP Tissue Inc operates as a holding company. The company produces, distributes, markets and sells a range of tissue products in North America. Offers facial and bath tissues, paper towels, paper towels and napkins, as well as disposable cleaning products and bathroom dispensing systems.
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The article “Highlights from KP Tissue’s Q1 Earnings Calls” was originally published by MarketBeat.
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