Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the KP Tissue Second Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. To join the question queue, you may press Star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing Star, then 0. Before turning the meeting over to management, I would like to remind everyone that this conference call is being recorded today, Thursday, August tenth, 2023. I would now like to turn the call over to Mike Baldassarra, Director, Investor Relations. Please go ahead. Thank you, operator, and good morning, ladies and gentlemen. My name is Mike Baldassarra. I'm the Director of Investor Relations at KP Tissue Inc. The purpose of the conference call is to review the financial results of the 2nd quarter of 2023 for Kruger Products Inc, which I'll refer to as Kruger Products going forward. With me this morning is Dino Bianco, the Chief Executive Officer of KP Tissue and Kruger Products, and Mark Holbrook, the Chief Financial Officer of KP Tissue and Kruger Products. The following discussions and responses to questions contain forward-looking statements concerning the company's activities. Forward-looking statements involve known and unknown risks and uncertainties, which could cause the company's actual results to differ materially from those in the forward-looking statements. Investors are cautioned not to rely on these forward-looking statements. The company does not undertake to update these forward-looking statements, except if required by applicable laws. There's a page at the beginning of the written presentation, which contains the usual legal cautions, including as to forward-looking information, which you should be aware of. I'd like to point out that the figures expressed in today's call are in Canadian dollars, unless otherwise stated. The press release reporting the Q2 2023 results were published this morning and will be accessible from our website at kptissueinc.com. Please be aware that our MD&A will be posted on our website and will also be available on SEDAR. Finally, I would ask that you, during the call, to refer to the presentation we prepared to accompany these discussions, which is also available on the website. We'd also appreciate that during the Q&A period for you to limit your questions to 2. Thank you for your collaboration, ladies and gentlemen. I'll now turn the call over to Dino Bianco, our CEO. Dino? Thank you, Mike. Good morning, everyone, and thank you for joining us for our second quarter earnings call. We are pleased that margin recovery, along with improved sales volume and a better mix in our consumer business, generated strong Adjusted EBITDA in the second quarter of 2023. Ongoing cost management initiatives, including productivity gains and cost controls, also contributed to increasing profitability. In addition, our away from home segment delivered a fourth consecutive quarter of positive Adjusted EBITDA to maintain its growth momentum. As a result, our financial performance in the second quarter normalized versus a more challenging market and operating environment in the same period last year. On a sequential basis, revenue and Adjusted EBITDA continued to improve with solid incremental growth. Looking ahead to the second half of 2023, we anticipate an increasingly favorable landscape as input costs trend downwards. TAD Sherbrooke and the Sherbrooke expansion project continue to ramp up production capacity to meet customer demand. Margins are restored to their pre-pandemic levels. Now, let's take a look at our quarterly numbers on slide 6. Revenue increased 17.3% to CAD 466.3 million in the second quarter of 2023 on the strength of selling price increases across all segments and regions in 2022. A favorable sales mix and higher sales volume in our consumer segment, as well as positive foreign exchange impact on US dollar sales. Revenue in Canada rose 10.8% year-over-year in the second quarter, while in the US, it grew 27.1% as the market benefited from strong volume in both our consumer and AFH segments. Adjusted EBITDA was up 365.8% year-over-year to CAD 55 million in the second quarter, off a low 2022 base due to several factors, including selling price increases, favorable sales mix, and higher sales volume, Memphis plant operations improvement, and lower freight rates. These factors were partially offset by inflation on manufacturing costs, higher warehousing and SG&A expense, and an unfavorable foreign exchange impact. On slide 7, pulp average prices in Canadian dollars decreased double digits in the second quarter of 2023 from the previous quarter, while year-over-year prices declined to a lesser extent. NBSK and BEK average prices fell 8.9% and 11.4% year-over-year in Q2 2023. Based on industry analysis, pulp prices are near or at the bottom of the price cycle. Let's move on to our Sherbrooke operations and expansion on slide 8. TAD Sherbrooke continues to perform well, surpassing production expectations on the paper machine and converting. Both our facial line, scheduled to launch late in the 4th quarter, and our paper machine, slated for the end of 2024, are still tracking to plan. We are keeping a close eye on supply chain and inflationary pressures. I'm also pleased to report that the startup of our most recent converting line, which was started up in Q1 2023, was the fastest of all our Sherbrooke converting lines due to OpEx learnings, staff maturity, and artificial intelligence implementation. As we look to the new facial line and paper machine, the hiring process is progressing well, and we are continuing to onboard employees to manage those lines. Turning to our Memphis operations on Slide 9, we have maintained our focus on TAD manufacturing for both converting and paper machine assets after the shutdown of our LDC assets earlier in the year. The new facial tissue line, which was recently strengthened with digital twin AI tools to optimize productivity, continues to exceed its ramp-up curve. Sales volume and the cost structure have also improved at Memphis during the last 2 quarters, while employee turnover has stabilized following the shutdown of the legacy operations. Let's pivot to brand support on Slide 10. As indicated last quarter, we plan on reinvesting in our brands to recover share in 2023. Q2 2023 marketing was focused on multi-brand activities, highlighted by the NHL Bring Home the Stanley Cup promotion, that offered 3 pairs of VIP experiences to winning participants for the Stanley Cup finals. Other key marketing activities during the quarter included our Made in Canada drive to support the positioning of our Canadian brands, the successful launch of the second chapter of our Unapologetically Human campaign, entitled Life Love Is Messy, the release of new Scotties House and Home designs and facial tissue. Finally, we continue to make strategic shopper investments behind White Cloud at key accounts in the U.S. Moving to Slide 11. The data presented is taken from Nielsen. It shows market share performance over a 52-week period, ended June 17, 2023. The data reflects that Kruger Products share has incrementally improved from the previous quarter, particularly for bathroom tissue and paper towels. We're seeing improvement in our branded products, driven by pricing stability in the marketplace and a return to a more normalized promotion agenda at retail. Looking at away from home on Slide 12, volume strength reflects market recovery and accelerated growth at some key customers. As mentioned earlier, this business delivered a 4th consecutive quarter of positive Adjusted EBITDA in Q2 2023, as we are seeing structural signs that this profitability is sustainable. However, we will keep monitoring the potential and impact of any economic slowdown on this business. I will now turn the call over to Mark. Mark? Thank you, Dino, and good morning, everyone. Please turn to Slide 13 for a summary of our financial performance in Q2 2023. As Dino mentioned earlier, margin recovery and strong top-line growth generated Adjusted EBITDA of CAD 55 million in the second quarter. Net income totaled CAD 14.5 million in the quarter, compared to a loss of CAD 35.5 million in Q2 2022. The increase was primarily due to higher Adjusted EBITDA and a foreign exchange gain. These factors were partially offset by greater income tax and depreciation expense, higher interest expense and other finance costs, and a loss on the sale of fixed assets. In the quarterly segmented view on Slide 14, consumer revenue increased 17.5% year-over-year to CAD 383.5 million in the second quarter, and 1.8% sequentially compared to Q1 2023. Consumer segment revenue rose both in Canada and the U.S. In the away from home segment, revenue grew 16.4% year-over-year to CAD 82.8 million, and 11.2% sequentially from the previous quarter. Consumer Adjusted EBITDA totaled CAD 53.3 million in the second quarter, compared to CAD 14.3 million in Q2 of 2022, with an Adjusted EBITDA margin of 13.9% versus 4.4% for the same respective period. Sequentially, consumer Adjusted EBITDA was up CAD 2 million or 3.8% from Q1 of 2023. For our AFH business, Adjusted EBITDA managed at CAD 5.8 million in the second quarter, compared to negative CAD 0.5 million in Q2, 2022, with a positive margin of 7%. Sequentially, Adjusted EBITDA for away from home was up CAD 4.9 million from Q1 of 2023, as Q2 is seasonally a stronger quarter. On Slide 15, we review year-over-year revenue growth for Q2, which improved by CAD 68.8 million or 17.3%. This growth is attributable to the carry forward of selling price increases from 2022 across all segments and regions, favorable sales mix and higher sales volume from our consumer segment, as well as a positive foreign exchange impact on U.S. dollar sales. On a geographical basis, revenues in Canada rose CAD 25.9 million or 10.8% year-over-year, while U.S. revenues grew CAD 42.9 million or 27.1%. On Slide 16, we provide additional insight into profitability in the second quarter. Adjusted EBITDA increased by CAD 43.2 million to CAD 55 million, representing a margin of 11.8%. That's from a trough of CAD 11.8 million in Q2 last year, or a margin of 3%. The increase in Adjusted EBITDA was primarily due to higher selling prices relative to the second quarter last year, favorable sales mix and higher sales volume, improvement in our Memphis plant operations, and lower freight rates. These factors were partially offset by inflation on manufacturing costs, higher warehousing and SG&A expenses, and the unfavorable impact of foreign exchange fluctuations. Let's turn to slide 17, where we compare Q2 revenue sequentially to Q1 2023. Revenue improved by CAD 15.3 million, or 3.4%, mainly due to higher sales volume in both our consumer and AFH segments, partially offset by a slightly negative foreign exchange impact on US dollar sales. Geographically, revenue in Canada rose by CAD 4.4 million, or 1.7% sequentially, while revenue in the US grew by CAD 10.9 million, or 5.7%. On slide 18, Adjusted EBITDA in the second quarter increased sequentially by CAD 5 million or 10.2% on higher sales volume and lower freight costs. These factors were partially offset by higher warehousing costs, greater plant overhead and absorption from inventory reduction, and higher SG&A expenses, particularly marketing spending. Turning to our balance sheet and financial position on slide 19, our cash position stood at CAD 88.2 million at the end of the second quarter, an increase of CAD 42.9 million from Q1 2023. Long-term debt at quarter end totaled CAD 1.0777 billion, down CAD 18.4 million from the end of the previous quarter. Net debt decreased by $61.6 million sequentially to $1.0236 billion, as we remained disciplined with capital spending and generated cash from reduced working capital. Consequently, our net debt to last 12 months Adjusted EBITDA ratio decreased to 5.7 times in the second quarter from 7.9 times in Q1 of 2023, and 8.1 times in Q2 of 2022. Leverage improved on the strength of lower net debt and higher Adjusted EBITDA in the last 12 months. We expect deleveraging to continue in 2023, despite ongoing investments in our Sherbrooke expansion project, as Adjusted EBITDA keeps growing on a last 12 months basis. At quarter end, total liquidity, representing cash and cash equivalents and availability from revolving credit agreements, stood at $181.6 million. In addition, CAD 13.8 million of cash was held for the Sherbrooke expansion project. I'll conclude my section by reviewing capital expenditures on slide 20. Total CapEx in Q2 2023 was CAD 42.8 million, including CAD 36.9 million for the Sherbrooke expansion project. At the end of the second quarter, CapEx stood at CAD 77.4 million. We are maintaining our CapEx forecast between CAD 200 million-CAD 230 million for 2023, as spending related to the Sherbrooke expansion project and regular CapEx is expected to pick up significantly in the second half of the year. Thank you for joining us this morning, and I'll now turn the call back over to Dino. Thank you, Mark. Please turn to slide 22 for my closing comments. We are steadily progressing along a recovery curve, highlighted by strong revenue and margin improvement in the second quarter to drive Adjusted EBITDA growth. We are managing pricing margins given changing input costs. We are increasing our marketing investment to support brand equity and grow share for the long term. Our Sherbrooke expansion project is moving forward, with the startup of the facial line scheduled for the end of this year and the paper machine for the end of next year, while the Memphis turnaround is progressing according to plan. Our away from home segment is delivering against sustainable profit model on the strength of our 4 consecutive quarters of positive Adjusted EBITDA. As Mark mentioned, our leverage ratio is progressively coming down as Adjusted EBITDA improves. Finally, we'll keep investing in our organization and culture to drive future growth. Now, let's turn our attention to the outlook for the third quarter of 2023. As commodity and other input costs decline, we will focus on maintaining margins while continuing to reinvest in the business to drive long-term value. Accordingly, Adjusted EBITDA for Q3 2023 is expected to be in the range of Q2 2023. We will now be happy to take your questions. Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star, then one on your telephone keypad. You'll hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. Our first question comes from Hamir Patel of CIBC Capital Markets. Please go ahead. Hi, good morning. Good morning. Dino, when, when do you expect to fully realize the benefit from the year-to-date decrease that we've seen in benchmark pulp prices? Well, we're starting to see some of it already. Even though I, I think, Mark may have alluded to this, year-to-date, pulp is still up versus, prior year. We're starting to see it moving through our PNL. There's usually a lag. It could be two to three months, just based on, inventory moving through, the system. We should start seeing more of that in the second half, of the year, Amir. Great. Thanks, Dino. Dino, could you speak more to your White Cloud investments that you mentioned, and how you see your market share in the U.S. evolving across your private label and White Cloud offerings? Yeah, on the White Cloud basis, I think I mentioned this before. We're. You know, our approach there is to strategically have that product at customers where it makes sense and it fits. We don't want to go wide across the whole retail landscape. We want to pick up key customers and focus on growing with them where there's an opportunity, and that's what we've been doing. Our investments, particularly after a difficult year last year, and starting this year, our investments have been more tactical in terms of driving awareness and growth, as it relates to the marketing side and continuing to build share at key accounts. I'm very pleased with the direction we have moved in this in this narrow but deep approach to building the brand on the customer front. We will continue to invest as we are able to build a brand. We think it has a lot of equity. We know the quality is top level, and there's a lot of affinity for that brand based on the longevity of that brand, so we'll continue to invest. Great. Thanks, Dino. Just the last question I had for Mark: Any preliminary CapEx estimate you can provide for 2024? Well, we have provided our 2023 forecast, and then we would provide 2024 when we go to our third quarter call, Amir. That would be more appropriate at that point, I think. Okay, fair enough. Thanks. That's all I had. I'll, I'll turn it over. Our next question comes from Kasia Kopytek of TD Securities. Please go ahead. Hi, good morning, everyone. It's Kasia on the line. I wanted to ask about EBITDA margins. Last quarter, you talked about targeting mid to high single digits for the away-from-home segment. What about the company as a whole? Once you've rolled out and implemented all these initiatives that you talked about, where do you see aggregate margins for the company settling at? Yeah, well, you know, good question, Kasia. We have 3 different types of businesses. I think actually, we have 4 different types of businesses. We have a branded business in Canada that has a certain margin structure. We have a private label business in Canada that has a certain margin structure. We have an away-from-home business that has a different margin structure, and we have a US primarily private label business that has a different margin structure. Depending on the relative growth of each of those segments, that'll change the weighted average of our margin structure. We have targets within each of those segments that I won't disclose with you, but I think you could probably figure out how they rank based on the business models that exist there. I think we should... This company, on a weighted average business, should be low teens, just on a weighted average business. Obviously, there'll be segments that are much higher than that and segments that will be lower than that, but we should be in the, in the low teens, and we're starting to progress towards that. Gotcha. Okay, when I look at historically, I mean, the best you've ever done was during the pandemic. That was 17%, and pre-pandemic, it was 15%. Do you think you can, you can get there, 15%? I think, that would, that, that to me, would be in the low teens, yes. Okay. Do you know just how much is private label of your business right now? Can you disclose that? No, I can't. Obviously, in the US, it's most of the business. Let me be very clear, other than, other than White Cloud, on the consumer side, mostly private label. I'm not talking to AFH. Let's just say it's north of 90%. In Canada, it's a smaller role and a smaller business. In Canada, we work strategically with customers where we support the brand, our brands, and the category through private label supply. It is a strategic approach, and we use it accordingly, with a few key customers here where it makes sense. Right. Understood. When you say 90% for the U.S., is that on a volume basis or just generally speaking, maybe on a dollar sales basis? I, I think, I, I think either volume or revenue would be the same- Okay. given the dominant portion of private label down there. Got it. Fair enough. Last one for me, just sticking with this theme. I mean, when I look at your, your brand and competitors, their EBITDA margins are, are, are quite a bit north of your mid-teen target. Anything structural that you would say is, is at play here of why you can't bridge towards perhaps even higher margins relative to your- Well, as I said, we have different businesses that make different margin levels. The number I gave you is weighted average. We have a branded business. You said our branded competitors, we have a branded business that makes, you know, a higher margin, and we have, away from home, which we talked, you know, 5%-10%, which makes a lower mid business. We feel segment by segment, we are equal or better than our competitors, if you look segment by segment. Gotcha. Okay. Thank you. I appreciate that context. I'll turn it over. Our next question comes from Paul Quinn of RBC Capital Markets. Please go ahead. Yeah, thanks. Morning. Just wondering why the outlook on Q3 is so conservative in light of, you know, you'll have declining pulp prices, freight, and probably a couple other cost inputs. Why go so conservative, Dino? Well, great. Hey, Paul. Good, good question. I mean, it's, it's a, it's a volatile period. There's a lot of moving pieces. you know, this business can be made or lost on the cycles, this downcycle and the upcycle with pulp prices changing, capacity changes in the marketplace, customer demands changing, I think we're, we're being, we're being reasonable in our approach. Obviously, our, our goal would be to, to beat that. just given... It isn't just a pulp coming down story, right? There's, there's capacity plays, there's pricing movement in the marketplace, and I think we're taking a reasonable approach with that. If it moves in our favor, and if the, if the category in the market, moves in our favor, certainly we would be able to beat that, and, and if it doesn't, then hopefully we've protected against that with our call. Okay. Just on customers, any pushback yet? I mean, your customers are seeing lower pulp prices, and, you know, you guys have successfully implemented a number of price increases on the tissue side. Any pushback on customers in terms of pricing, that would, you know, stall out your margin growth? Yeah, sure. You know, as I said earlier, this business, you know, competitively only allows you to work within a certain margin structure. The key is how we manage the upswings and the downswings. Obviously, last year, us and a lot of tissue manufacturers lost on that because of the speed of the inflation that happened and the breadth of it and the lag that happens before you get pricing. This year, we're seeing the other side of that. I think customers understand there's a lag involved, customers understand there's volatility. You know, clearly, as we look at pricing for the future, let's say for the whole second half, we take a couple of different approaches. In Canada, we are the market leader, and I've always believed that the role of the market leader is to establish a healthy margin structure for the category. A reasonable but healthy margin structure, we will try to do that, and we'll see how that plays out, which may mean, and will mean, you know, price declines if these commodity costs continue to fall. In the U.S., we're more of a follower, so it depends what others are doing and how we have to play, 'cause we're a smaller player there, and we'll have to be competitive. You are definitely gonna start to see deflation in this category. Some are contractually based, like a lot of the AFH business, some of our private label contracts that will naturally have a deflation factor within that. The, the, the magic will be in. You know, I'm not worried about our behavior, or certainly we know how we want to approach this, but at the same time, we wanna make sure we're competitive. We wanna make sure that our business is strong, our relationships with our customers remain strong, and our brands remain strong. That's where the, that's where the black box is, Paul, and we'll just have to manage with this as, as it continues to change. That ties back a little bit to the, to the Q3 call that we made. All right. Thanks very much, Dino. Once again, if you have a question, please press Star, then 1. Our next question comes from Zachary Evershed of National Bank Financial. Please go ahead. Morning, everyone. This is actually Nathan calling in for Zach this morning. My first question is, with respect to your cost efficiency initiatives, how far along your process are you, and how much further do you think you can extract from that? Well, I, I guess what I would say, Nathan, is we have every year, we undertake productivity initiatives or cost efficiency initiatives, so whatever you wanna call them. I think every company does that as they try to offset costs through efficiencies and effectiveness in the network. Most of it is in the production area, but there are other areas like supply chain that we do that as well. Every year we do that. It's baked into our DNA as a company. We accelerated that coming out of last year and into this year, just given the magnitude of the cost increases. I'm very proud of how our organization has responded. It is a muscle that's well developed. We had to, we had to do more of it, but we knew what to do and how to do it, and at the same time, do it without jeopardizing, you know, product quality or integrity of our, of our business. I would say we're very far along. I'm very pleased with the progress, and we will hit our internal number, which of course, we, we don't share, but we will hit our internal number as it relates to productivity this year. Great to hear. Given the trade downs typical in the face of inflation, how are you evaluating the effectiveness of your marketing spend? Well, I, I would say the trade down, trade downs, have stabilized. In fact, they're probably returning more to, to a normal mix. We start to see in the... I mentioned in the, the last few quarters, as pricing has stabilized, customers are returning to you know, regular promotion activity. We believe our brands will, will continue to, to grow. I think the marketing piece of it is even more important when you have high inflation, to make sure your brands stay on the radar. We did move more of our marketing to transactional-type marketing, versus, you know, last year, versus doing big advertising. This year, we're adding more equity, what I call equity advertising, which is long-term building of the brand, while still continuing to do tactical in-store activity. It's a mix. You know, marketing is a mix. It's not just a TV advertising. It's, it's social, it's digital, it's in store, it's PR, it's promotions, it's, it's ad, you know, it's, it's video. We, we use that mix accordingly, and last year we spent more of that mix to drive sales short term. This year, we're maybe balancing it more to drive still sales, but longer term equity. Thanks. I'll turn it over. This concludes the question and answer session. I would like to turn the conference back over to Dino Bianco for any closing remarks. Great. Thank you all for joining us on the call today. We look forward to speaking with you again following the release of our third quarter results. Thank you, and have a great day. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.