Cascades Inc. · TSX:CAS
Cascades — Non-Deal Roadshow (May 2017)
41 slides from Cascades's roadshow presentation, May 23, 2017
Slide 1: Institutional Investor Roadshow – Vancouver
INSTITUTIONAL INVESTOR ROADSHOW – VANCOUVER May 23-24, 2017
Slide 2: Disclaimer: Forward-Looking Statement
DISCLAIMER FORWARD-LOOKING STATEMENT Certain statements in this presentation, including statements regarding future results and performance, are forward-looking statements within the meaning of securities legislation based on current expectations. The accuracy of such statements is subject to a numb
Slide 3: Disclaimer: Reconciliation of Non-IFRS Measures
DISCLAIMER RECONCILIATION OF NON-IFRS MEASURES To provide more information for evaluating the Corporation's performance, the financial information included in this analysis contains certain data that are not performance measures under IFRS (“non-IFRS measures”) which are also calculated on an adjust
Slide 4: Company Overview
COMPANY OVERVIEW LTM Q1-17 Net Sales $4,004 M (segment breakdown) • Founded in 1964 by the Lemaire family; headquartered in Kingsey Falls, QC 31% 34% Containerboard • Produces, converts and markets packaging & tissue products composed principally of Boxboard Europe3 recycled fibres Specialty Product
Slide 5: Business Segments
BUSINESS SEGMENTS Containerboard Boxboard Europe1 Specialty Products Tissue Papers A Canadian leader #2 producer of coated Largest paper collector A Canadian leader #6 in North America recycled boxboard in Europe in Canada #5 in North America Charles Malo Michele Bianchi Luc Langevin Jean Jobin Pres
Slide 6: Raw Material Costs – Index List Prices
RAW MATERIAL COSTS – INDEX LIST PRICES Recycled Fibre Prices Current Virgin Pulp Prices Current (US$/ton) (US$/ton) (May) (April) 200 1,100 179 1,080 175 1,000 150 140 125 900 910 100 800 75 50 700 Feb 14 May 14 Feb 15 May 15 Feb 16 May 16 Feb 17 May 17 Nov 14 Nov 15 Nov 16 Aug 14 Aug 15 Aug 16 Oct
Slide 7: Operating Performance and Financial Situation
OPERATING PERFORMANCE AND FINANCIAL SITUATION Good Financial Momentum Sales (CAN$ M) Operating Income & Margin (CAN$ M and %) CAGR: + 5.9% CAGR: + 23.9% 250 221 8,0% 4500 4 001 4 004 200 176 179 4000 3 861 153 6,0% 3 561 150 137 3 370 5,2% 5,5% 4,0% 3500 3 141 100 72 4,5% 3,8% 4,0% 3000 50 2,0% 2,3%
Slide 8: Business Segments: Historical Segmented Operating Income and Margin
BUSINESS SEGMENTS Historical Segmented Operating Income and Margin Containerboard (CAN$ M and %) Boxboard Europe2 (CAN$ M and %) 170 158 151 14% 40 29 5% 150 104 108 12% 30 19 13% 10% 20 11 16 3% 100 12% 11% 8% 10 3% 9% 3 2% 1% 50 9% 6% 0 2% 4% 0% 1% -1% 0 2% -10 (3%) -50 (13) 0% -20 -3% (1%) -2% -3
Slide 9: Business Segments: Historical Segmented Adjusted OIBD and Margin
BUSINESS SEGMENTS Historical Segmented Adjusted OIBD3 and Margin Containerboard (CAN$ M and %) Boxboard Europe2 (CAN$ M and %) 250 231 216 19% 80 72 9% 206 63 200 17% 70 57 8% 150 164 18% 15% 60 9% 53 51 43 7% 150 16% 15% 13% 50 7% 8% 90 14% 14% 40 7% 6% 100 11% 30 6% 9% 20 6% 5% 50 10% 7% 10 4% 0 5
Slide 10: Consolidated Financial Ratios & Debt Maturities
OPERATING PERFORMANCE AND FINANCIAL SITUATION Consolidated Financial Ratios & Debt Maturities Net Debt / LTM Adjusted OIBD1 Interest Coverage Ratio2 4,7x 4,6x 5,0x 4,7x 4,3x 4,6x 4,3x 4,0x 3,8x 3,4x 3,4x 3,0x 2012 2013 2014 2015 2016 Q1 2012 2013 2014 2015 2016 Q1 2017 2017 Net Debt1 / Net Debt + To
Slide 11: Leverage Target of 3.0x – 3.5x Achievable Without Asset Disposals
OPERATING PERFORMANCE AND FINANCIAL SITUATION Leverage Target of 3.0x – 3.5x Achievable Without Asset Disposals 6,0x 5,8x 5,0x 5,0x 4,6x 4,7x 4,0x 3,8x 4,0x 3,4x 1 3,0x 2,8x 1 2,6x 1 2,0x 1,0x 0,0x 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E Q1/17 leverage ratio of 4.3x. Removing current market
Slide 12: Q1 2017 Performance – Financial Results
Q1 2017 PERFORMANCE – FINANCIAL RESULTS 112 161 106 103 73 82 75 65 75 50 33 31 34 36 35 20 30 4 15 12 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2016 2016 2016 2016 2017 2016 2016 2016 2016 2017 1 Operating Income Adjusted OIBD Net Earnings Adjusted Net Earnings 1 Figures above in millions of CAN$ Figures above
Slide 13: Containerboard Packaging Group
CONTAINERBOARD PACKAGING GROUP A Leading Canadian and Major North American Player ▪ Largest corrugated boxes producer in Canada with 8% ~32% market share 16% 15% Manufacturing - CAN ▪ 67%1 integration rate, targeting 85%1 in the mid-term 2016 Manufacturing - US ▪ Strong platform in Canada and growin
Slide 14: Containerboard: Greenpac Mill
CONTAINERBOARD PACKAGING GROUP Greenpac Mill • Largest recycled linerboard mill in NA: 1,4251 st/day of recycled linerboard (26 pounds) • State-of-the-art equipment • Product differentiation: Greenpac XP grades represented 89% of total production in Q1/17 • Take-or-pay agreement for 81% • As of Q2/1
Slide 15: Greenpac Mill Financial Information
CONTAINERBOARD PACKAGING GROUP Greenpac Mill Financial Information Last Twelve Months as of March 31, 2017 (in millions, unless otherwise noted) USD CAD Sales1 269 353 COGS & SG&A 211 277 Amortization 21 28 Operating Income 37 48 Financing Expense 10 13 Refinancing Costs 8 11 Greenpac's net earnings
Slide 16: Containerboard: Environment Still Sound
CONTAINERBOARD PACKAGING GROUP Environment Still Sound North American Containerboard Producers Fundamentals Sound Despite Added Capacity 2016 Industry Participants Industry Operating Rates and Expected Capacity2 % of total capacity (Operating rate) 100% IP 33% 90% ❖ WestRock 19% 80% Cascades adjus
Slide 17: Containerboard: Business Drivers
CONTAINERBOARD PACKAGING GROUP Business Drivers Containerboard Benchmark Market Prices Brown Grades Recycled Fibre Prices (US$/s.t.) (US$/s.t.) 750 200 700 180 650 160 140 600 120 550 100 500 80 450 60 400 40 Linerboard 42-lb. unbleached kraft, Eastern U.S. Old corrugated containers no. 11 (Northeas
Slide 18: Flow-Through of a Price Increase
CONTAINERBOARD PACKAGING GROUP Flow-Through of a Price Increase Price increase RISI reflects announced increase MONTHS 0 1 2 3 4 5 6 Gradual MILLS implementation 70% 100% implemented BOXES Gradual implementation 80% 100% implemented The “% implemented” above refers to the percentage of Cascades’ sal
Slide 19: Boxboard Europe Group
BOXBOARD EUROPE GROUP Second Largest Coated Recycled Boxboard Producer in Europe ▪ 57.7% equity ownership of Reno de Medici, a public Coated Italian company; 5 recycled (885K m.t.) & 1 virgin 22% recycled boxboard (165K m.t.) mills 2016 boxboard ▪ Operations in Italy, France and Germany Sales ▪ Simp
Slide 20: Specialty Products Group
SPECIALTY PRODUCTS GROUP A Diversified Packaging Player ▪ A leading position in industrial packaging with Recovery Cascades Sonoco JV 24% ▪ Largest paper collector in Canada with 19 facilities and 1.4 million s.t. of material processed in 2016 2016 Industrial Sales 46% packaging ▪ Strong growth pote
Slide 21: Cascades Recovery+ Sub-Segment
SPECIALTY PRODUCTS GROUP Cascades Recovery+ Sub-Segment 1 Recycled Fibre (2.6M st) • Business unit created via the merger of recovery operations & recycled fibre Brown recycled buying group purchased • Manages procurement of all raw material 31% (0.8M st) White recycled fibre for Cascades’ North Ame
Slide 22: Tissue Papers Group
TISSUE PAPERS GROUP A Canadian Leader and Important North American Player ▪ 5th largest tissue producer in NA based on capacity (650K s.t.) 17% Retail ▪ Growing footprint in Western U.S. 2016 ▪ 68% integration rate, targeting 85% in the mid-term Sales 46% Away-from- ▪ Repositioned and rebranded AfH
Slide 23: Tissue Papers: Strong Position Across the North American Market
TISSUE PAPERS GROUP Strong Position Across the North American Tissue Market CAS Sales by Country (2016) Tissue Market Demand1 Canada (25%) US (75%) 160 Indexed U.S. Tissue Branded Away-from- Branded Away-from- 140 43% Home 27% Home Demand 42% 47% 120 Private Private Label 100 At-Home At-Home Label
Slide 24: Newest Investment: Converting Facility in Oregon
TISSUE PAPERS GROUP Newest investment: Converting Facility in Oregon • Expands tissue footprint on US West Coast • $68M out of planned $84M invested to date • 40% integration with St. Helens, OR tissue paper plant, located ~12 km away, resulting in a ~9% increase in overall integration rate to 78% •
Slide 25: Diversified Capacity and Positioning
TISSUE PAPERS GROUP Diversified Capacity and Positioning 2016 NORTH AMERICAN TISSUE MANUFACTURERS Capacity Market Capacity Capacity ('000 s.t.) Share Retail AfH 1 Georgia-Pacific 2,849 29% 67% 33% 2 Procter & Gamble 1,494 15% 100% 0% 3 Kimberly-Clark 1,466 15% 67% 33% 4 SCA Tissue NA 784 8% 0% 100%
Slide 26: Tissue Papers: Business Drivers
TISSUE PAPERS GROUP Business Drivers Tissue Papers Benchmark Market Prices White Grades Recycled Fibre Prices (US$/s.t.) (US$/s.t.) 1,500 350 1,400 300 1,300 250 1,200 200 1,100 150 1,000 100 900 Virgin parent rolls 50 Sorted office papers no. 37 (Northeast) Recycled parent rolls Sorted office paper
Slide 27: Strategic Plan 2017-2022
2017-2022 STRATEGIC PLAN ete as
Slide 28: Positioning for Growth 2011-2016
POSITIONING FOR GROWTH Building on the Past, Positioning for the Future 2011 - 2016 Acquisition of Consolidation WE MODERNIZED New tissue paper Papersource machine in Oregon of Recovery • Invested more than $500M in ownership modern equipment Acquisition of Start-up of the a corrugated Greenpac Mill
Slide 29: Positioning for Growth 2017-2022
POSITIONING FOR GROWTH Building on the Past, Positioning for the Future 2017 - 2022 Start-up of new state-of-the-art tissue WE ARE FOCUSED ON converting plant in Scappoose, OR (will increase Tissue integration rate to ~ 78%) • Modernizing & growing our asset base • Increasing our converting capacity
Slide 30: Upgrade Our Platforms: Accelerate Modernization
1 UPGRADE OUR PLATFORMS Accelerate the modernization of our assets • Replace older equipment • Invest in organic growth Scappoose, OR Newtown, CT Drummondville, QC 30
Slide 31: Upgrade Our Platforms: Increase Integration Rate
1 UPGRADE OUR PLATFORMS Increase the integration rate by investing in converting capacity 2016 Integration Rate Our Objective 1 1 67% 85% 68% 85% 1 67% including associates and joint ventures, excluding Greenpac; 85% including associates, joint ventures & Greenpac 31
Slide 32: Upgrade Our Platforms: Improve Geographic Footprint
1 UPGRADE OUR PLATFORMS Improve our geographic footprint to better serve our customers Grow our platform & geographic footprint in the US 32
Slide 33: Create Value: Increase Profitability Margin
2 CREATE VALUE Increase our profitability margin 10% 15% • Consolidate Greenpac • Transformation program • Monetize the benefits of benefits, reduction of • Growth associated with results (Q2/17) our optimization, potential strategic costs associated with its • New tissue conversion modernization an
Slide 34: Create Value: Disciplined Capital Allocation
2 CREATE VALUE Disciplined capital allocation Cash Flow from Operations Invest in our Asset Base • Continue to modernize our Dividends and Share Debt Reduction equipment & infrastructure Repurchases • Objective to allocate at least • Opportunistic M&A in line • Maintain current strategy $100M of FCF
Slide 35: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION STRAWBERRY BASKET OUR OBJECTIVE: 20% of sales from innovative products in 2020 35
Slide 36: Near Term Outlook
NEAR TERM OUTLOOK • Full impact in Q2 2017 of the Fall 2016 US$40/s.t. containerboard price increase • US$50/s.t. containerboard price increase + reflected in RISI in April 2017 • Recovered paper prices in North America I • Full impact of URB price increase announced and Europe remain high in Q1 201
Slide 37: Appendix
APPENDIX ete as
Slide 38: 5-Year Shareholder Return
5-YEAR SHAREHOLDER RETURN CAS vs. TSX Small Cap Index CAS TSX SCI 400% 1 Year 173% 110% Cascades 350% 3 Year 253% 97% 335% 5 Year 335% 115% 300% 250% 200% TSX Small 150% Cap Index 115% 100% 50% 2012-05 2012-08 2012-11 2013-02 2013-05 2013-08 2013-11 2014-02 2014-05 2014-08 2014-11 2015-02 2015-05 20
Slide 39: Historical Results
HISTORICAL RESULTS (In million of Canadian dollars) Q1-17 2016 Q4-16 Q3-16 Q2-16 Q1-16 2015 2014 Sales Containerboard 346 1,370 336 356 342 336 1,301 1,181 Boxboard Europe 211 796 191 189 197 219 825 841 Specialty Products 173 620 156 158 157 149 579 568 Tissue Papers 306 1,305 319 342 324 320 1,236
Slide 40: Geographically Diversified
GEOGRAPHICALLY DIVERSIFIED 40
Slide 41: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or [email protected] 41