Welcome to the KP Tissue second quarter 2020 results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. Before turning the meeting over to management, I would like to remind everyone that this conference call is being recorded on Thursday, August 6th, 2020. I will now turn the conference over to Mike Baldesarra, Director, Investor Relations. Please go ahead.
Thank you, Operator, and good morning, ladies and gentlemen. My name is Mike Baldesarra. I'm the Director of Investor Relations at KP Tissue. The purpose of this conference call is to review the financial results for the second quarter of 2020 for Kruger Products LP, which I'll refer to as KP LP going forward. With me this morning is Dino Bianco, the Chief Executive Officer of KP Tissue and Kruger Products LP, and Mark Holbrook, the Chief Financial Officer of KP Tissue and Kruger Products LP. 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 is 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 all figures expressed in today's call will be in Canadian dollars unless otherwise stated. The press release reporting our Q2 2020 results was published this morning and will be available from our website at kptissue.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 during the call to refer to the presentation we prepared to accompany these discussions, which is also available on our website. We'd also appreciate that during the Q&A period, for you to limit your questions to two.
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 on today's call. Let's start with a brief review of our financial performance for the second quarter of 2020. Our Q2 results were very strong on several fronts, and we are extremely proud of what we achieved. These results were driven by the strong demand created by COVID-19, our strong operational position as we entered COVID-19, and the exceptional work done by our employees during this pandemic. In early March, as we prepared for COVID-19, our focus was on three things. First and foremost was the safety and well-being of our employees. Second was on ensuring the continuity of our business. And third was to be the best at meeting the needs of our customers and consumers during the pandemic. As we finish Q2, I'm proud to say that our safety performance has been exceptional.
We have had no major disruption to our business. Although not perfect, we have been a top supplier to our customers and have been able to grow our share during this time, all while giving back to our communities and those in need. Before I get into the results, I want to personally thank all 2,600 of our employees across North America for their exceptional leadership, especially during the last four months. Onto the numbers. Excluding the divested Mexico business, revenue increased by 13.7% to CAD 386.8 million over the same quarter last year. Adjusted EBITDA was a very strong CAD 64.4 million, up over 100% from last year. By geography, you'll see Canadian sales increased by just under 5%, and U.S. sales grew by 27.5%. As we look at market pulp prices, NBSK and eucalyptus prices in Canadian and U.S. dollars were down year-over-year.
This decline was 7% in Canadian dollars. However, in Q2, NBSK pulp prices increased sequentially by 6%. This trend was similar for BEK, or eucalyptus, which was down 16% in Canadian dollars versus last year, but up almost 4% sequentially in Q2. For the remainder of 2020, and based on industry forecasts, NBSK and BEK prices in U.S. dollars are expected to remain stable to slightly upward. Let me discuss the impact of COVID-19 on our business during the second quarter, particularly from a business continuity perspective. As mentioned, our first priority was on creating a safe work environment for our employees, which we implemented early and continued to modify as we adopted best practices. Our assets performed very strong, driven by our OpEx program, and we secured additional raw materials, which ensured we delivered as much capacity as possible during this period of high demand.
With regions across North America at different stages, we continue to adopt and adapt best practices to keep our facilities and our people safe. Our decision to focus on running the top-selling SKUs allowed us to improve productivity and better meet demand. Our SKU count was reduced by almost 50% compared to our pre-COVID levels. As indicated before, the past few months have allowed us to relook at our SKU portfolio, and although we will slowly add back SKUs, we will not get back to the complexity of before. We see this as a win-win situation for the retailers and for Kruger Products, as we both get faster turns on key products. We entered the pandemic with a healthy inventory level, and that certainly helped meet the unprecedented demand. The plan is now to rebuild our inventory when we can, so we are ready for any future demand spikes.
Finally, the consumer trust and dedication to our brands continues to be the foundation of our success. In times of uncertainty, we believe this is an important differentiator. We are enormously proud that Kruger Products is Canada's leading tissue company and continues to grow share. Let me provide an update on TAD Sherbrooke. Despite the temporary halt to construction driven by the required implementation of COVID-19 procedures, we are extremely pleased to report that the project remains on time and on budget, and also that all major equipment has been received with no major disruption. I'm also pleased to say, as per our schedule, our first converting line started up a few weeks ago and is ramping up and progressing as expected. This line will initially be converting paper received from the Memphis facility.
Our second converting line is scheduled to start up in a few weeks, with the third line startup in Q4. As we enter the final phases of the TAD Sherbrooke project, we are thrilled with what this asset represents for our future. The full plant startup is expected to begin early next year, with anticipated ramp-up supported by solid traction with new and existing customers across North America. The COVID-19 impact on demand has created elevated interest in the output of this new facility, and we expect demand to exceed supply during the ramp-up period. Let me turn to our OpEx program. It is tracking effectively at all our sites, and all our plants are operating very well in Q2. We continue to achieve month-to-month performance gains. As I indicated before, SKU consolidation helped us run more efficiently as well and increased both output and productivity.
The program has also contributed to overall lower manufacturing costs, and we are tracking very well to achieve our projected savings of CAD 15 million-CAD 20 million on a run-rate basis by the end of this year. In summary, the OpEx program is driving more capacity, improving asset reliability, delivering cost savings, and spearheading a cultural shift throughout our manufacturing organization to run our assets and our plants at optimal levels. Moving on to our trademarks, we are very pleased with the performance of our brands this year. We were building momentum pre-COVID, and we have amplified this performance over the past 20 weeks. The strong performance has been driven by several factors, including increased marketing investment, a stronger in-stock position, improved product quality, a made-in-Canada focus, and strong support from our existing and new customers.
In times of crisis, consumers turn to brands they trust, and our brands have continued to build strong connections with our consumers over the past few years. Our marketing investment will be up significantly as we continue to build our brands. Some of our marketing tactics have changed due to COVID, but we remain true to offering tissue products our consumers want and desire. We are ramping up quality, developing new innovations, increasing our presence in e-commerce, and modifying our consumer message to more closely align with where consumers are emotionally right now. Our bold new campaign will launch in Q3 of this year. I'm also proud to say that we have been building distribution and sales of our White Cloud brand in the U.S. As we get new distribution, we are investing to support the brand to build consumer affinity.
Our White Cloud marketing investment is expected to be up significantly this year over prior years. On the share performance front, we had good momentum, which began at the end of 2019 and was further accelerated with COVID-19. The data presented on the next two slides for market share is based on the latest 52-week period and therefore doesn't fully reflect the strong share gains made in the past few months. In the bathroom tissue category, our Cashmere and Purex brands are unquestionably the recognized Canadian market leaders, with a combined share of 35.5%. With a market-leading share of 30.9%, our Scotties brand is the market leader and the one consumers turn to when they need a facial tissue.
We believe our Sponge Towels paper towels represents our greatest opportunity for share growth, as we have a strong number two position at 21.5%, and we have been able to grow share during COVID, even prior to launching our full marketing, innovation, and quality initiatives, which will hit the marketplace over the next 12 months. Let me turn to away-from-home. As expected, away-from-home had a more challenging market condition in Q2, driven by the severe impact of COVID-19 on end-user markets. I remind you that AFH had a fairly good first quarter, supported by solid orders and crossover opportunities within the consumer segment. At this time, overall market indicators point to AFH industry declines of 40%-50% in Q2. The good news is that we expect this to be the bottom and that there will be a slow recovery over the coming months.
On the positive side, we also observed that increased sensitivity to hand hygiene has driven end-user transition to paper towels versus hand dryers. This is initially an investment, but will have a substantial benefit in the business in the future. The scarcity of sorted office waste paper, mainly driven by shutdown of offices, and this is a paper that we use in our recycled paper products, has increased significantly versus the pre-COVID cost. As a result of these cost increases, we have taken pricing effective September 1st in AFH, both in Canada and the U.S. AFH has also taken an aggressive approach at implementing OpEx in their facilities, and the impact has been very strong from a cost and capacity perspective, which creates a strong foundation for the future. At this stage, however, future results in AFH will be primarily driven by market demand.
Given the evolving and unpredictable market environment, the pace and timing of this expected recovery remains difficult to predict. With that, I will now turn the call over to Mark, who will review our quarterly results.
Thank you, Dino, and good morning, ladies and gentlemen. I'll now ask you to turn to slide 14, which reviews our financial performance for the second quarter. Revenues, excluding Mexico, were up 13.7% to CAD 386.8 million in the second quarter, compared to CAD 340.2 million for the same period last year. Adjusted EBITDA increased by CAD 32.9 million to CAD 64.4 million from CAD 31.5 million in Q2 of last year, and increased sequentially by CAD 13.4 million from CAD 51 million in Q1 of 2020. From a margin perspective, Adjusted EBITDA increased to 16.7% from 8.6% last year and 13.6% in Q1 2020. In the second quarter of 2020, we recorded a net income of CAD 28.9 million compared to a net income of CAD 0.9 million last year. The increase was primarily due to higher Adjusted EBITDA, partially offset by higher income tax expense and depreciation expense.
In the quarterly segmented view on slide 15, consumer revenue, excluding Mexico, increased by 23.3% year-over-year to reach CAD 338.2 million. In the away from home segment, revenue declined by 26.5% to CAD 48.5 million. Consumer segment Adjusted EBITDA increased by CAD 34.2 million to CAD 69.6 million, and Adjusted EBITDA margin increased from 11.8% to 20.6%. For the away from home segment, Adjusted EBITDA increased by CAD 0.9 million to a loss of CAD 2.1 million, and Adjusted EBITDA margin stood at -4.4% versus -4.6% for the previous year. On slide 16, we reviewed Q2 2020 revenue over Q2 2019, which was up by CAD 46.6 million, or 13.7% excluding Mexico.
The increase was primarily attributable to volume increases in Canada and the U.S., primarily related to COVID-19 demand and a favorable FX impact. This was partially offset by lower AFH revenue and consumer selling prices moderating in response to lower input costs.
By geography, Canadian sales increased by CAD 10.3 million, or 4.9%, and in the U.S., sales increased by CAD 36.3 million, or 27.5%. For your information, the revenue of the Mexican operations that were divested in Q3 last year was CAD 25.4 million for the second quarter of 2019. On slide 17, we provide further insight into our Q2 2020 Adjusted EBITDA, which increased year-over-year by CAD 32.9 million, or 104.6% to CAD 64.4 million. Gross margin for the quarter also increased from 9.9% to 18%. The increase in Adjusted EBITDA was driven by a combination of factors, including significantly higher sales volume, lower input costs and freight costs, and the benefits of the OpEx program, resulting in less outsourcing and lower manufacturing costs. These elements were partially offset by higher costs related to COVID-19, higher warehousing costs, and increased SG&A costs.
For a sequential perspective, let's turn to slide 18, where we compare Q2 2020 to Q1 2020 revenue. Quarter-over-quarter revenues increased by CAD 11.7 million, or 3.1%. The consumer segment revenue increased by 8%, whereas away from home decreased by 21.6%, reflecting sharp declines in end-user markets. By region, revenue in Canada decreased by CAD 11.6 million, or 5.1%, after a very strong Q1 and due to the AFH decline, while U.S. revenue increased by CAD 23.3 million, or 16%, including favorable FX impact. On slide 19, Q2 Adjusted EBITDA increased sequentially by CAD 13.4 million, or 26.4% compared to Q1, and gross margin improved from 16.2% to 19.8%. The increase in Adjusted EBITDA was driven by the increased sales volume in the consumer segment, favorable sales mix, higher manufacturing efficiency, slightly lower freight and warehousing costs, and the leveraging of fixed overhead costs.
The increase was partially offset by lower AFH volume and higher SG&A costs. I'll now turn to our balance sheet and financial position on slide 20. Our cash position was CAD 144.2 million at the end of Q2 2020, or relatively stable, with CAD 144.6 million at the end of Q1. The cash position includes CAD 37.8 million in the TAD Sherbrooke entity at the end of Q2. Overall, net debt at quarter-end stood at CAD 561.1 million, down CAD 17.7 million from CAD 578.8 million at the end of Q1 2020.
Our net debt to trailing 12-month Adjusted EBITDA ratio has declined to just 2.7x, driven by a significant increase in the latest 12-month Adjusted EBITDA and lower working capital, which has resulted in a reduction in the overall net debt, despite the higher borrowing for the TAD Sherbrooke project. I'll conclude my section by reviewing the CapEx on slide 21.
Q2 2020 CapEx totaled CAD 73.4 million, including CAD 69.4 million for the TAD Sherbrooke facility. Looking at the full year 2020, we expect regular CapEx to be in the CAD 25 million-CAD 35 million range, while the TAD Sherbrooke CapEx is now expected to be between CAD 330 million-CAD 350 million, slightly lower than our previous outlook due to the timing of project payments. The total CapEx range for fiscal 2020 is expected to be from CAD 355 million-CAD 385 million. Thank you for your attention, and I'll now turn the call back over to Dino.
Thank you, Mark. Turning to slide 22, we have a clearly defined roadmap for continued growth. We will continue to invest in our strong brands for the long term to build our market share position in North America, which has been accelerated by this pandemic. Our new state-of-the-art TAD Sherbrooke facility will soon become another important vector of growth in the ultra-premium segment. The additional tissue capacity is fully committed and supported by a sales pipeline of new and existing customers and products. The OpEx program is creating a more efficient supply chain network, and its benefits were most evident in the height of the COVID-19 crisis. Given the current headwinds impacting AFH's end-user markets, we are executing a plan to improve performance in this segment. At the foundation of our strategy is developing a strong, passionate, results-driven, and inclusive culture.
For our shareholders, we are also reinvesting the business to not only drive today but the future. As a final word, I wish to again reiterate how proud I am of our highly dedicated team who worked passionately to meet consumer and retailer needs across North America during COVID while continuing to progress our key strategic initiatives. To all of them, a big thank you. We will now be happy to take your questions.
At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Hamir Patel from CIBC Capital Markets. Your line is open.
Hi, good morning.
Good morning, Hamir.
Dino, looks like you guys are seeing some pretty nice market share gains in bath tissue and towels. Sounds like there's a lot more to come maybe on the towel side. Could you speak to some of the innovation that you have planned and what's sort of the market share that you'd be targeting in towels over the medium term?
Well, that's a great question, Hamir. I mean, when I talk about our share, that is obviously the category where we're the most underdeveloped relative to facial and bath, so we think we've got some room to gain there. I think the startup of TAD II, which will be able to provide us better quality products and more flexibility and innovation in pack sizes and design, will be a big enabler to that. I think focusing our marketing investment, Sponge Towels has been the lead brand as part of our NHL program and will continue to be, so it'll continue to benefit from that. So I think there's a lot going on, quality improvement-wise, innovation-wise, marketing-wise, and then the flexibility and the additional capacity that gets provided when TAD Sherbrooke comes on board will all be factors in us continuing to build our Sponge Towels brand.
Great. Thanks, Dino. That's helpful. I saw some headlines recently of Walmart Canada charging suppliers' fees for some of the sort of new initiatives that they're rolling out, and it looks like some other suppliers are demanding similar discounts. Are you expecting that to be a headwind in the tissue category as well?
Yeah, it's a good question, Hamir. Obviously, we are very disappointed in the approach Walmart has taken, particularly at a time like this where we're scrambling to try to work with all our customers to meet the increased demand and to make a request like they are making, I think, is very unfortunate and certainly has got the attention of the industry, both other customers and all suppliers, as this is across the board. At this point, we are evaluating our response, so I have no formal comment on it other than to say, again, that we are frustrated and disappointed by their action, and once we evaluate our options here, we will respond accordingly.
Fair enough. Just the last one for me, Dino. You touched on the away-from-home segment, maybe a sign of conversions from hand dryers to paper towels. Is that anecdotal, or is there any sort of data that you have that you could share on that?
Well, I think it's more than anecdotal, but I don't have the data specifically. I mean, I know just based on the work we're doing and the demands we're getting from our end users that this is a definite change that is going on in the industry. Unfortunately, it's not easy data to kind of say, "Hey, the industry's converted from X to Y," but I would say it's more than anecdotal. The only thing I just want to caution you on this is that the initial conversion is an investment because you have to put in new dispensers and so forth. The benefit comes over a year or two years.
So there's a bit of an initial investment to put in the dispensers, and then you recover that through your paper sales over time. But we're seeing quite a transition, not just in Canada but clearly in the U.S. and across most segments. I mean, obviously, food service and restaurants, but you're seeing it in commercial, you're seeing it in healthcare, travel, those places that are still open, etc. So I think it's here to stay.
Okay, great. Thanks. That's all I had. I'll turn it over.
Your next question comes from the line of Paul Quinn from RBC Capital Markets. Your line is open.
Hey, thanks very much. Good morning.
Morning.
Just morning. How sustainable that SKU rationalization is in a post-COVID environment?
That's a great question. I mean, we've always, and I think most companies that you'll talk to, particularly fast-moving consumer goods, have always talked about reducing SKUs but never really wanted to do it because they were worried they would lose sales. Here we have a perfect test case where we had to do it. Clearly, we saw the benefits on the operational front: the ability to run longer runs, the ability to reduce the amount of changeovers, the ability, the other thing I want to say is not every SKU is the same. I mean, some SKUs are more complicated to run, some are easy. SKU is not a SKU, but the fact that we were able to also diminish the more complicated SKUs really helped us on the ops side, operational side.
At the end of the day, the benefit was that we were able to produce more product for customers and for consumers. I think this is here to stay. Paul, I said we had about a 50% reduction, which is true. We'll probably go back somewhere in the middle, so we might have a 25% reduction as we look at our SKU portfolio and what we think will be permanent reductions versus just temporary. Somewhere between the 100 and 50 now, we'll probably net out at about 75% of pre-COVID levels.
Okay, great. That's helpful. What's your mix-out look for TAD Sherbrooke?
Well, I don't know. I'll answer that in a broad way. Right now, we think that the bulk of that machine will be paper towel and will also be bath, but we think paper towel will probably be 60% of what that machine will make at maturity. It'll depend on where the market goes, obviously, but right now we're projecting a 60/40 kind of split. And then we're projecting similar about 60/40 for Canada, 40 for the U.S. at this point of the split of that asset. The other thing I want to say about that asset, which you've given me the opportunity to talk about it, is the fact that we have that asset coming on board will make all our other assets more productive and drive more capacity.
So as we ramp up Sherbrooke, we'll have more capacity across our other paper machines that'll also allow us to grow other businesses that maybe we're capacity constrained on today. So it isn't just all about Sherbrooke. It's also the benefit across the whole network and driving capacity.
Then just maybe you can help me understand the rationalization for the away-from-home price hike in September?
Yeah. I mean, sorted office waste at one point was double what it was pre-COVID. It softened a little bit but still significantly above where it was. You can imagine the sorted office waste comes from office towers and work environments, and that has essentially shut down, so it's been very difficult to get sorted office waste, and we're needing to go further. So this is a market. It's not just for us. It's a market trend. It is a high input cost for AFH in particular that uses a lot of recycled fiber. So they have a, unlike virgin pulp, which has essentially stayed fairly flat, this has created a cost headwind for AFH. And because of that, we're passing that cost on to the market. So that's basically. Well, it's pretty straightforward.
Okay. And then just lastly, just looking beyond TAD Sherbrooke, what are the main growth opportunities ahead for KP Tissue?
Yeah. I think we're looking at both organic and acquired opportunities. And I do think we have a great opportunity to grow on paper towels, as I said. I think we have an opportunity to grow our brands in the U.S. I think we have an opportunity to continue to look at when do we put more capacity on stream and where and what type. We're obviously very pleased with the TAD technology and the fact that that's where the growth is, particularly in the U.S. So we'll be looking at where do we add more capacity. And we continue to look at M&A. I mean, it is, as you can imagine, multiples for tissue companies are very high these days given COVID. But we continue to look at not just M&A, but joint partnerships and licensing deals and so forth.
So I think there's lots of vectors of growth that we continue to look at in tissue, let alone adjacencies such as wipes and other things. So we're really still focused on tissue. We think there's lots of room to grow in North America.
That's all I had. Best of luck.
Thank you, Paul.
Once again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Zachary Evershed from National Bank Financial. Your line is open.
Thank you. Good morning, everyone. Congrats on the quarter.
Good morning, Zach. Thank you.
I was hoping you could give us a little more color on the geographic split as the sales growth in the U.S. was much stronger than in Canada. What were the main drivers there, and what do you foresee going forward?
Yeah, it's a great question. Obviously, it stands out. I think there's three drivers. I would say the first one is the COVID demand spike in the U.S. was a couple of weeks behind Canada. So Canada started seeing that benefit in Q1, March, end of March. The U.S. really started picking it up in April. So there was a little bit of timing difference between Q1 and Q2 from a marketplace point of view. I think the second piece is that our away from home business deteriorated higher in Canada than the U.S., and that's in those numbers. So in Canada, we're a mature player represented across multiple segments that have declined. In the U.S., we were opportunistically able to take advantage of some opportunities in the consumer space. So it didn't feel the impact as much on the AFH side in the U.S. as it did in Canada.
And then I think the third one is we're able to yield more capacity out of our U.S. assets. We started OpEx a year ago in Memphis, and the ability to—the change of asset or capacity availability in the U.S. was much greater than it was in Canada. So that allows us to take advantage of that capacity in the U.S. I will say, and I'm sure other tissue companies will say the same thing, that our revenue growth, even though it was strong, we still were capacity constrained. We couldn't keep up to the demand of consumers and customers. It varies by segment and by geography.
And so that's why it's so important for us to get our assets running as well as they can, and in some cases, delaying maintenance, and in some cases, running an asset that maybe we don't want to run because it's not cost-effective of bringing that asset back online. So those are really the three drivers: the higher capacity availability because of OpEx that started a year ago, AFH not as bad in the U.S. as it was in Canada, and the fact that COVID was a couple of weeks delayed, COVID demand a couple of weeks delayed.
That's really clear. Thanks. Pardon me. Another one with the comment about away from home being primarily driven by market demand now and not so much OpEx. Does that translate to consumer as well, or is there still more juice to squeeze on the CAD 15 million-CAD 20 million in target savings?
I guess what I will say is, so on the AFH comment, the comment for AFH really is in the context of they're doing the right things. They're pricing the business. They are doing OpEx. They are focusing on the right customers and products within the portfolio. So my comment there is they're doing the right thing. Demand is the big unknown. And I've said to my AFH team, "You can't control the direction of the wind, but you can control your direction of your sales." And I think they're doing a great job of doing the right things for that business to keep moving that business forward because there will be a recovery, and we want to be ready for that recovery. On the OpEx in general, I'm very pleased with where we are.
In fact, we are ahead of our own internal schedule as it relates to OpEx, both in capacity and in cost savings. So I don't have any concern with us being able to deliver that CAD 15 million-CAD20 million on a run rate basis.
Thank you for that. One last one from me. With the expectation that demand will exceed supply during the ramp-up of TAD 2, should we consider that the overload has completely filled?
Zach, you cut out a little bit there. I didn't hear the full question. Can you repeat it, please?
Yeah. Sorry about that. With the expectation that demand will exceed supply during the ramp-up of TAD 2, should we consider that the order book is completely filled for the new machine?
Yeah. I mean, you don't get an order book as you would a normal business. You don't get a PO from a customer. You get commitments. You get a relationship that says, "Yes, we're interested. Here's the product specs," and you start building towards it. So I'm very confident in all the pre-work that we've done, obviously, with existing customers, and then we've added some new customers that we will be oversold. Now, having said that, our focus will be to ramp up. Now the problem becomes on the ops side, which is how do we get that asset up faster, get more production out of it? How do we beat our ramp-up curve now that we've got the demand there? So we've got a great team running that new site. They're all in place. They're working already. As I said, converter line one is up.
I know they'll take the challenge of beating our ramp-up curve on the capacity side so that we can continue to satisfy the demand that we are going to get.
That's really helpful. Thanks. I'll turn it over.
Thank you.
Once again, if you would like to ask a question, please press star, then the number one on your telephone keypad. Your next question comes from the line of Kasia Kopytek from TD Securities. Your line is open.
Hi. Good morning, everyone. It's Kasia on the line.
Good morning.
Good morning. Just wondering, from strong consumer segment results, are you able to parse out some of the details that drove that difference between sustained volume strength versus mixed versus how much maybe cost control contributed to that during Q2?
Well, I mean, Mark presented a waterfall chart that kind of talked about where our growth drivers were for the business. I think certainly demand is our big lead because when you've got the demand, you not only get the margin from those extra sales, you get more productivity and throughput. You're able to leverage your fixed cost structure better, etc. So clearly, demand is the beginning of all that, and it flows its way through the P&L and many different lines. I've talked about pulp being really benign and not being a headwind as it was for many years. So that helped us stabilize there. And then the work that we're doing on OpEx was really helpful. The CAD 15 million-CAD 20 million that I just talked about is weaving its way into the numbers as well.
It's a combination of many, but certainly the big surprise or news for any of us in tissue is the strength of the demand curve. I think a lot of those other factors we had already planned and were working on as we built our plans for this year.
Okay. Thanks for that, Dino. So it doesn't sound like mixed was a huge factor sequentially. Do I have that about right?
Well, yeah. I mean, that's a good - sorry, I didn't answer that part of it. Certainly, we had more consumer sales than AFH sales. So that helps us when we hate to lose it on AFH, but at the end of the day, consumers are still using the same amount of tissue, whether it's in an office or at home now. But when they use it at home and they use our product, it's a better margin for us. And then within that, we make better margin on our branded product. So we had the benefit of consumer products versus AFH and branded products within consumer that helped our margin structure and our mix.
Okay. Just on the price hike for AFH, I appreciate the rationale there with the sorted office paper price increases. Just given how competitive the environment is for away from home, what's your confidence in being able to secure those hikes in September?
Well, obviously, our ears are to the ground, and we're working closely with a lot of our partners. It is not a significant price increase. Somewhere in the range of 3%-5% is probably where it'll come in. We're working with customers as we speak. As I said, this is a cost-to-market price increase. It's not unique to Kruger. My expectation is that other competitors are feeling similar pressure on the cost side in their away-from-home business. So what's my confidence on it? I've never done a price increase during a pandemic, so it's news for all of us. I think we're going about it the right way. We know the market's competitive, and we'll just make sure that we continue to secure our business through the price increase.
Fair enough. Thanks for that. Okay. That's it from me. Thanks, everyone. Stay safe.
Thank you. You too.
There are no further questions. I turn the call to Mike Dino Bianco for closing comments.
Great. Thank you. I want to thank everybody for joining us on this conference call this morning. We look forward to speaking with you again in November following the release of our third quarter results. Thank you to each of you. Stay safe and have a great day.