KP Tissue (TSE:KPT) reported higher third-quarter revenue and earnings at Kruger Products, but executives said a decision on a new tissue facility would be delayed as they assess trade uncertainty and rising costs.
Kruger Products generated revenue of CAD 589.7 million in the third quarter of 2026, up 5.1% from a year earlier, while adjusted EBITDA rose 9.1% to CAD 93.5 million. Net income increased to CAD 27.7 million from CAD 14.6 million, primarily reflecting higher adjusted EBITDA and a favorable foreign exchange difference, Chief Financial Officer Michael Keays said.
Chief Executive Officer Dino Bianco said sales grew in both Canada and the United States, with U.S. growth supported by demand for premium private-label products. He also warned that escalating input costs and inflationary pressure could require action to protect margins.
New facility pushed beyond 2028
Kruger Products is continuing work on its planned new TAD facility, but Bianco said a final investment decision will be deferred until there is greater certainty around the economy and trade. The facility is no longer expected to begin operating in 2028.
The western United States remains the preferred location, although the company is considering backup sites, Bianco said. He cited uncertainty over tariffs and rising costs for steel, labor, transportation and equipment as factors affecting the project’s economics.
“We have not stopped the project,” Bianco said, adding that engineering work continues alongside discussions with the lead community about incentives and with banks about potential financing.
In the meantime, the company is investing to expand output at its existing TAD assets in Sherbrooke and Memphis. Bianco said a new converting line in Memphis was ramping up ahead of plan and would support further growth.
Sales rise as margins face pressure
Canadian revenue rose 3.2% year over year, while U.S. revenue increased 7.3%. Consumer segment revenue climbed 5.2% to CAD 492.8 million, driven primarily by higher volumes in both countries, increased U.S. selling prices and a favorable foreign exchange impact on U.S. dollar sales, Keays said.
Consumer adjusted EBITDA increased to CAD 88 million from CAD 78.2 million, with the margin reaching 17.9%. In the Away From Home business, known as Kruger PRO, revenue grew 4.4% to CAD 96.9 million, while adjusted EBITDA fell to CAD 8.9 million from CAD 10.4 million. Bianco said profitability in the segment was affected by higher logistics costs.
Consolidated adjusted EBITDA margin improved to 15.9% from 15.3% a year earlier. Keays attributed the increase in adjusted EBITDA primarily to lower pulp prices and higher sales volumes, partly offset by manufacturing overhead and logistics costs. Sequentially, the margin declined from 16.4% in the second quarter.
Bianco said average Canadian-dollar pulp prices rose slightly from the second quarter. Compared with a year earlier, average NBSK prices fell 6.2%, while BEK prices rose more than 30%. He said the company expects transportation and other costs to remain elevated and sees NBSK pulp prices rising in 2027.
Pricing and brand recovery in focus
Bianco said Kruger Products is considering productivity measures and pricing adjustments to address cost pressures. A price increase in the Away From Home business took effect Sept. 1, primarily to offset higher fuel and transportation costs.
For the Canadian consumer business, Bianco said the company had modeled potential pricing action but had not made an official announcement. The last consumer price increase was in 2024, he said.
In Canada, Kruger Products faced market-share pressure in bathroom tissue and paper towels, while facial tissue performed well, Bianco said. The company is investing in its brands and using targeted pricing, promotions, innovation and retail execution to rebuild share. He said early results were encouraging, with SpongeTowels beginning to respond positively.
Outlook and balance sheet
Assuming a similar tariff environment, management expects fourth-quarter adjusted EBITDA to be slightly below the third-quarter level but above the same period a year earlier. Bianco said the outlook leaves room for potential pricing, tariff or execution-related uncertainty.
Kruger Products ended the quarter with CAD 176.4 million in cash and CAD 1.14 billion in total debt. Its leverage ratio declined to 2.7 times from 2.9 times at the end of the second quarter.
The company lowered its 2026 capital expenditure outlook to CAD 80 million to CAD 100 million, including pre-engineering work for the TAD expansion and other strategic projects. For 2027, it expects capital spending of CAD 60 million to CAD 80 million, excluding any spending related to the TAD expansion.
About KP Tissue (TSE:KPT)
KPT was created to acquire, and its business is limited to holding, a limited equity interest in Kruger Products, which is accounted for as an investment on the equity basis. KPT currently holds a 12% interest in Kruger Products.
