Cost of sales in 1Q 2014 was $198.9 million , compared to $183.2 million in 1Q 2013 due to the impact of increases in commodity prices, particularly pulp fibre and natural gas, the unfavourable impact of foreign exchange, and an increase in freight and warehousing expenses related primarily to higher sales volume. As a percentage of revenue, cost of sales increased to 84.8% in 1Q 2014 from 82.6% in 1Q 2013.
Selling, general and administrative expenses in Q1 2014 were $20.5 million , compared to $20.8 million in Q1 2013 due to a slight decrease in advertising and promotion expenses.
EBITDA in Q1 2014 was $24.2 million (included TAD Project EBITDA of $3.5 million ), compared to $25.1 million in 1Q 2013 (included TAD Project EBITDA loss of $2.9 million ). EBITDA was impacted by lower margins as a result of higher cost of sales.
There was a net loss in 1Q 2014 of $3.2 million , compared to net income of $11.7 million in 1Q 2013. The net loss was driven by a number of non-operational charges in 1Q 2014 including charges related to restructuring of $2.8 million , the change in the amortized cost of the partnership unit liability of $3.3 million and a decrease in the deferred tax recovery of $4.6 million.
"EBITDA of $24.2 million for the 1Q 2014 continued to reflect high input costs and extreme weather conditions, which impacted margins. Despite a challenging market environment, we maintained our number one overall market share in Canada. The TAD Project was in line with expectations and contributed $3.5 million to EBITDA," said Mario Gosselin, CEO of KP Tissue and KPLP.
"During the quarter, we completed the consolidation of our Eastern distribution activities with expected annual savings of approximately $1.6 million. We also undertook an optimization program at the corporate level which should represent annual savings of approximately $2.4 million , once finalized.
"Going forward, we continue to see headwinds related to pulp and energy costs for the second quarter, and then a gradual decrease in pulp prices in the back half of 2014. This should alleviate some of the pressure on our margins. EBITDA for the 2Q 2014 is expected to be higher compared to the first quarter of 2014 and moderately lower compared to the 2Q 2013. For the TAD Project, some significant promotional activities are planned in the second quarter which should contribute to a higher EBITDA contribution when compared to the 1Q 2014," concluded Mr. Gosselin.
KPT holds a 16.6% interest in Kruger Products L.P. ("KPLP"), Canada's leading manufacturer of quality tissue products for household and commercial use.
