Cascades Inc. · TSX:CAS
Cascades — Q4 2013 Earnings Presentation
34 slides from Cascades's earnings presentation, Mar 13, 2014
Slide 1: Review of Q4 2013 financial results
CASCADES INC. Review of Q4 2013 financial results March 13, 2014
Slide 2: Disclaimer
DISCLAIMER 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 number of risks, uncertainties
Slide 3: Opening Remarks
OPENING REMARKS
Slide 4: Summary of Financial Results
SUMMARY OF FINANCIAL RESULTS 2 2 EBITDA EPS (M CAN$) (% of sales) (CAN$) 125 12.0% $0.25 105 $0.19 96 $0.20 100 84 78 83 10.0% $0.15 70 68 $0.09 75 $0.10 8.0% $0.05 $0.05 $0.07 50 $0.05 6.0% $0.00 25 $(0.05) $(0.06) $(0.04) 0 4.0% $(0.10) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 2012 2012 2013
Slide 5: Historical Segmented EBITDA
HISTORICAL SEGMENTED EBITDA Containerboard Boxboard Europe (M CAN$) (% of sales) (M CAN$) (% of sales) 50 46 16% 25 12% 42 21 40 20 33 12% 9% 26 25 25 13 30 15 21 23 8% 11 11 11 10 9 6% 19 10 20 10 7 4% 3% 10 5 0 0% 0 0% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2012 2012 2012 2012
Slide 6: Segmented EBITDA Waterfalls
SEGMENTED EBITDA WATERFALLS Containerboard Boxboard Europe Acqu. Selling Selling Acqu. EBITDA Other Raw EBITDA EBITDA Other Raw EBITDA (M CAN$) $ CAN & Energy Volume Prices & (M CAN$) Energy Volume $ CAN Prices & & Q3-2013 Costs Materials Q4-2013 Q3-2013 Costs Materials Q4-2013 Divest. Mix Mix Dives
Slide 7: Key Performance Indicators (KPIs)
KEY PERFORMANCE INDICATORS (KPIs) Containerboard: 84% Slightly lower shipments Boxboard Europe: 91% due to seasonality Spec. Prod.: 72% Tissue Papers: 93% ('000 s.t.) Total Shipments Capacity Utilization Rate (Manufacturing only) 900 95% 825 868 93% 805 832 840 819 774 807 806 91% 800 92% 89% 90% 88
Slide 8: Raw Material Costs
RAW MATERIAL COSTS Recycled Fiber North American Current (US$/ton) Virgin Pulp Prices Current (US$/ton) List Prices (March) (February) 200 1 100 175 165 1 000 1,010 150 900 125 125 870 800 100 75 700 50 600 July 12 July 13 Jan 12 Jan 13 Jan 14 Apr 12 Oct 12 Apr 13 Oct 13 Jan 12 July 12 Jan 13 July 1
Slide 9: Financial Review
FINANCIAL REVIEW
Slide 10: Q4 2012 – Q4 2013 Sales Reconciliation
Q4 2012 – Q4 2013 SALES RECONCILIATION (M CAN$) +6% 980 16 5 - 958 960 48 (15) 940 920 904 0 Selling Sales Acqu. & Corp. Sales $ CAN Volume Prices Q4-2012 Disposals Elim. Q4-2013 & Mix (M CAN$) Containerboard 306 7 23 4 (12) 328 Boxboard Europe 198 21 (2) (1) 216 Specialty Products 183 7 1 2 (1) 192
Slide 11: Q4 2012 – Q4 2013 EBITDA Variance Analysis
Q4 2012 – Q4 2013 EBITDA VARIANCE ANALYSIS (M CAN$) 140 +50% 5 4 120 5 10 105 13 100 17 (19) 80 70 0 Selling EBITDA Other Acqu. & Raw EBITDA Energy $ CAN Volume Prices & 1 Q4-2012 Costs Disposals Materials Q4-2013 Mix (M CAN$) Containerboard 25 4 4 15 8 4 2 (16) 46 Boxboard Europe 11 9 2 (2) (1) (1)
Slide 12: Q3 2013 – Q4 2013 EBITDA Variance Analysis
Q3 2013 – Q4 2013 EBITDA VARIANCE ANALYSIS +9% (M CAN$) 130 2 5 3 - 120 22 (8) 110 105 100 96 (15) 0 Selling EBITDA Other Raw Acqu. & EBITDA $ CAN Energy Prices & Volume Q3-2013 Costs Materials1 Disposals Q4-2013 Mix (M CAN$) Containerboard 42 10 1 (2) 8 (7) (6) 46 Boxboard Europe 9 4 1 4 (1) 1 3 21
Slide 13: Q4 2013 EBITDA to Operating Income Reconciliation
Q4 2013 EBITDA TO OPERATING INCOME RECONCILIATION (M CAN$) 110 105 100 90 80 70 60 57 1 (48) (7) 50 45 (6) 40 EBITDA Depr. & Op. income Unrealized Closure and Impairment Operating excluding amort. excluding gain restructuring charges income spec. items spec. items on fin. Instr. costs Container- Box
Slide 14: Cash Flow Overview
CASH FLOW OVERVIEW (M CAN$) Cash flow from continuing operations (M CAN$) Free cash flow 90 55 78 48 75 45 61 60 35 46 45 41 25 15 12 30 4 5 15 (5) 0 (4) Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2013 Q2-2013 Q3-2013 Q4-2013 2012 2013 (in millions of CAN$) Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Cash flow from o
Slide 15: Quarterly Variance of EPS
QUARTERLY VARIANCE OF EPS Including (6) for Greenpac Q3-2013 Q4-2013 Share of Share of Operating Ass/JV & Excluding As Operating Ass/JV & Excluding As segments Non-Cont. Int. specifics Specifics reported segments Non-Cont. Int. specifics Specifics reported EBITDA 96 96 (13) 83 105 105 (12) 93 Deprec
Slide 16: Status of Employee Future Benefits
STATUS OF EMPLOYEE FUTURE BENEFITS 2012 2013 2014E Balance sheet obligations for Present value of obligations 736 668 Fair value of assets 598 624 Defined pension benefits 138 44 Other post-employment benefits 120 114 Income statement charge Defined pension benefits 19 20 15 Defined contribution ben
Slide 17: Net Debt Reconciliation
NET DEBT RECONCILIATION (M CAN$) +1% 1,620 3 3 1,612 1,601 6 41 1,600 1,580 44 1,560 1,540 (61) 1,520 (25) 1,500 1,480 1,460 1,440 1,420 1,400 Net Debt Cash flow Var. of Capex, Variation Investment Dividends Other Net Debt 09/30/2013 from op. working net of of Greenpac and items 12/31/2013 cap. disp
Slide 18: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net debt / LTM EBITDA Interest Coverage Ratio 7.0x 5.0x 4.6x 5.9x 5.8x 6.0x 4.0x 3.4x 5.0x 3.0x 2.9x 3.0x 5.0x 4.6x 3.0x 4.5x 2.5x 4.0x 2.0x 3.3x 3.0x 1.0x 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Debt / Debt + Equity Long-term Debt
Slide 19: Segmented Review
SEGMENTED REVIEW
Slide 20: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q4 2013 Q3 2013 Q4 2012 Decreased shipments mostly related to lower sales in the US, both in the away-from- Shipments ('000 s.t.) home and retail markets Volume of converted products decreased by 12% due to seasonality in the AFH 13
Slide 21: Packaging / Containerboard
PACKAGING / CONTAINERBOARD Results Change vs. Q4 2013 Q3 2013 Q4 2012 Comments on sequential performance 4% decrease in external shipments of our manufacturing activities following anticipated Shipments ('000 s.t.) decrease in boxboard demand as major clients reduced their year-end inventory; 314 -6
Slide 22: Packaging / Boxboard Europe
PACKAGING / BOXBOARD EUROPE Results Change vs. Q4 2013 Q3 2013 Q4 2012 Comments on sequential performance Shipments ('000 s.t.) Sequentially, higher shipments in all of our markets due to downtimes taken during the previous quarter 277 7% -1% Increase in shipments overseas for recycled grades Averag
Slide 23: Packaging / Specialty Products
PACKAGING / SPECIALTY PRODUCTS Results Change vs. Q4 2013 Q3 2013 Q4 2012 Comments on sequential performance Sequentially, Specialty Papers shipments remained fairly stable Shipments ('000 s.t.) Reduced volumes in Industrial Packaging but in line with Q4 2012 90 -3% -1% Lower volumes in Consumer Pro
Slide 24: Q&A and Concluding Remarks
Q&A AND CONCLUDING REMARKS
Slide 25: Near Term Outlook
NEAR TERM OUTLOOK • Favorable FX • Short term increase of recovered paper • Price increases for boxboard and UFS costs products in North America • Shutdown of our Trenton mill for 14 days + • Benefits of restructuring and optimization • Impacts of weather conditions I measures • Challenges in our No
Slide 26: Appendix
APPENDIX
Slide 27: Yearly Variance of EPS
YEARLY VARIANCE OF EPS Including (9) for Greenpac YTD-2012 YTD-2013 Share of Share of Operating Ass/JV & Excluding As Operating Ass/JV & Excluding As segments Non-Cont. Int. specifics Specifics reported segments Non-Cont. Int. specifics Specifics reported EBITDA 304 304 (30) 274 352 352 (30) 322 Dep
Slide 28: 2013 Sensitivity Table
2013 SENSITIVITY TABLE1 CAPACITY / EBITDA CONSUMPTION IMPACT INCREASE (‘000 s.t., except (In million of where indicated) CAN$) SELLING PRICES (MANUFACTURING)2 Containerboard 1,268 US$25/s.t. 33 Specialty Products (Industrial Packaging 371 US$25/s.t. 10 and Specialty Papers sectors only) Tissue 583 U
Slide 29: Foreign Exchange
FOREIGN EXCHANGE US$/CAN$ Exchange rates EURO/CAN$ Hedging Program – USD Cash flows 1.10 0.95 • 2014 1.05 0.90 24 to 41% of exposure hedged at an 1.00 0.85 average rate of 1.0477 CAN$/US$ to 0.95 0.80 0.90 0.75 1.0788 CAN$/US$ 0.85 0.70 • 2015 0.80 0.65 15 to 30% of exposure hedged at an Q1-11 Q2-11
Slide 30: Energy Prices
ENERGY PRICES Energy prices Hedging Program – Natural gas Natural gas Crude oil (US$) (US$) • Canada: 7.00 110 • 2014 : 66% at 5.31 CAN$/GJ 6.00 100 • 2015 : 59% at 4.72 CAN$/GJ 5.00 90 4.00 80 3.00 • U.S.: 2.00 70 1.00 60 • 2014 : 55% at 5.12 US$/mmBtu 0.00 50 • 2015 : 44% at 5.09 US$/mmBtu Q1-11 Q
Slide 31: Selected Industry Reference Prices
SELECTED INDUSTRY REFERENCE PRICES Containerboard - Selected Products Boxboard Europe - Selected Products (US$/s.t.) (€/m.t.) 1 100 Current 1 200 (February) 1 100 1 000 955 900 1 000 800 900 740 700 710 800 600 700 20-pt clay coated news (CRB) 500 600 Coated duplex - virgin board (GC2) Linerboard 42
Slide 32: Market Prices and Costs Summary
MARKET PRICES AND COSTS SUMMARY Q4 2013 Q4 2013 Year 2013 over These indexes should only be used as indicator of trends and they be different 2011 2012 2013 over Q4 2012 over Q3 2013 Year 2012 than our actual selling prices or purchasing costs. Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year (units) (%) (uni
Slide 33: North American Manufacturing Spread
NORTH AMERICAN MANUFACTURING SPREAD 1,400 850 750 1,313 1,300 1,272 1,271 1,262 650 1,238 550 1,200 471 450 409 387 350 1,100 353 360 250 1,000 150 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2011 2011 2011 2011 2012 2012 2012 2012 2013 2013 2013 2013 Selling prices index ($US/s.t.)1 Raw materials index ($U
Slide 34: Notes
NOTES 1. The Cascades North American selling prices index represents an approximation of the Corporation's manufacturing selling prices in North America (excluding converting). It is weighted according to shipments and is based on the average selling price of our North American manufacturing operati