Cascades Inc. · TSX:CAS
Cascades — Q1 2017 Earnings Presentation
39 slides from Cascades's earnings presentation, May 10, 2017
Slide 1: Review of Q1 2017 Financial Results
REVIEW OF Q1 2017 FINANCIAL RESULTS May 10, 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: Opening Remarks
OPENING REMARKS ( 10 8Mee
Slide 5: Financial Results
FINANCIAL RESULTS ( 10 8Mee
Slide 6: Summary of Quarterly Financial Results
SUMMARY OF QUARTERLY FINANCIAL RESULTS 106 112 103 161 82 75 73 65 50 75 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 Operating Income Adjusted OIBD 1 Net Earnings Adjusted Net Earnings 1 Figures above in millions of CAN$ Figures above
Slide 7: Historical Segmented Quarterly Operating Income & Adjusted OIBD
HISTORICAL SEGMENTED QUARTERLY OPERATING INCOME & ADJUSTED OIBD1 Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 16 17 55 60 58 14 46 44 43 45 11 40 9 28 33 8 7 5 3 1 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2016 2016 2016 2016 2017 2016 2016 2016 2016 2017 Operating Income Adjusted OIBD 1
Slide 8: Historical Segmented Quarterly Shipments
HISTORICAL SEGMENTED QUARTERLY SHIPMENTS Containerboard (‘000 s.t. and % capacity utilization) Boxboard Europe (‘000 s.t. and % capacity utilization) 350 1 300 296 294 1.05 277 284 283 285 300 0.98 278 1 250 0.96 280 267 102% 263 0.95 200 96% 96% 0.94 97% 258 260 150 0.92 0.9 93% 93% 92% 100 0.9 240
Slide 9: Key Performance Indicators (KPIs)
Sequentially: KEY PERFORMANCE INDICATORS (KPIs) Containerboard: 91% to 96% Boxboard Europe: 91% to 102% Tissue Papers: 83% to 86% Total Shipments (‘000 s.t.) Capacity Utilization Rate1 (manufacturing only) 769 96% 763 757 93% 93% 743 91% 736 89% Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2016 2016 2016 2016 2017
Slide 10: Raw Material Costs – Index List Prices
RAW MATERIAL COSTS – INDEX LIST PRICES Recycled Fibre Prices Current Virgin Pulp Prices Current (US$/ton) (US$/ton) (April) (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 Oc
Slide 11: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD2 Interest Coverage Ratio1 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 Debt / Net Debt + Total Equity Long-Term Debt Maturities 64% 732 62
Slide 12: Financial Review
FINANCIAL REVIEW ( 10 8Mee
Slide 13: Year Over Year Sales Reconciliation
YEAR OVER YEAR SALES RECONCILIATION (M CAN$) 0% 4 1,050 12 1,040 (4) 31 (8) 1,030 1,020 1,010 1,003 1,006 (32) 0 Recovery Selling Sales Acqu. & Corp. Sales & Volume Prices CAN$ Q1-2016 Disposals Elim. Q1-2017 Recycling & Mix (M CAN$) Containerboard 336 3 6 5 (4) 346 Boxboard Europe 219 12 (5) (15) 2
Slide 14: Sequential Sales Reconciliation
SEQUENTIAL SALES RECONCILIATION (M CAN$) 1,030 +3% 12 1,020 - 13 1,010 (7) 1,006 1,000 17 (8) 990 979 980 0 Recovery Selling Sales Acqu. & Corp. Sales Volume & Prices CAN$ Q4-2016 Disposals Elim. Q1-2017 Recycling & Mix (M CAN$) Containerboard 336 3 9 (2) 346 Boxboard Europe 191 22 2 (4) 211 Special
Slide 15: Year-over-Year Consolidated Operating Income Reconciliation
YEAR-OVER-YEAR CONSOLIDATED OPERATING INCOME RECONCILIATION - ERP implementation costs - Higher OCC costs - Business processes optimization costs (M CAN$) - Higher share-based compensation 47 120 4 106 100 (14) (2) (10) (11) 75 3 80 73 (12) 60 40 - Lower parent roll shipments - Ongoing start up cost
Slide 16: Sequential Consolidated Operating Income Reconciliation
SEQUENTIAL CONSOLIDATED OPERATING INCOME RECONCILIATION - Q1 inherent seasonality affected shipments - Ongoing start up costs related to new Scappoose facility - Rebranding costs (M CAN$) 100 3 2 1 50 82 80 75 3 (1) (6) (7) 60 - ERP implementation costs 40 33 - Business processes optimization costs
Slide 17: Quarterly Year-over-Year EPS Variance
QUARTERLY YEAR-OVER-YEAR EPS VARIANCE Q1-2016 Q1-2017 Adjusted Specific items As reported Adjusted Specific items As reported OIBD1 106 14 120 75 3 78 Depreciation (47) (47) (47) (47) Operating income 59 14 73 28 3 31 Financing expenses & interest expense on employee future benefits (25) (25) (22) (
Slide 18: Quarterly Sequential EPS Variance
QUARTERLY SEQUENTIAL EPS VARIANCE Q4-2016 Q1-2017 Adjusted Specific items As reported Adjusted Specific items As reported OIBD1 82 1 83 75 3 78 Depreciation (50) (50) (47) (47) Operating income 32 1 33 28 3 31 Financing expenses & interest expense on employee future benefits (23) 1 (22) (22) (22) FX
Slide 19: Q1-17 Adjusted OIBD to Operating Income Reconciliation
Q1-17 ADJUSTED OIBD TO OPERATING INCOME RECONCILIATION (M CAN$) 80 75 60 40 4 31 28 (47) (1) 20 0 Adjusted Depr. & Adjusted Unrealized Restructuring Operating OIBD1 Amort. Operating Gain on Costs Income Income1 Financial Instruments Container- Boxboard Specialty Tissue Corporate Total (M CAN$) board
Slide 20: Net Earnings – IFRS vs Adjusted
NET EARNINGS – IFRS VS ADJUSTED NET EARNINGS NET EARNINGS PER COMMON SHARE1 (in millions of Canadian dollars, except amount per common share) Q1-2017 Q1-2017 As per IFRS 161 $1.70 Specific items: Restructuring costs 1 $0.01 Unrealized gain on financial instruments (4) ($0.03) Foreign exchange gain o
Slide 21: Cash Flow Overview
CASH FLOW OVERVIEW 59 107116 37 85 84 22 68 68 56 56 33 34 (5) (34) Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2016 2016 2016 2016 2017 2016 2016 2016 2016 2017 CF from operations Adjusted CF from operations 3 Adjusted Free Cash Flow 3 Figures above in millions of CAN$ Figures above in millions of CAN$ 2016 2017
Slide 22: Net Debt Reconciliation – Q1-2017
NET DEBT1 RECONCILIATION – Q1-2017 (M CAN$) +$85M 1,650 +6% 58 1,617 1,600 39 1,550 1,532 16 14 1,500 3 (33) (12) 1,450 Net Debt 1 Cash flow from FX Rate Dividends paid Others Investments Var. in non- Capital Net Debt 1 12/31/2016 operations & issuance of in associates cash work. cap. investments, n
Slide 23: Proportionate Consolidation – Cascades
PROPORTIONATE CONSOLIDATION – CASCADES As reported 1 Proportionate consolidation (in millions of Canadian dollars) (IFRS) Selected financial data Q1-2017 Q1-2017 Q4-2016 Q1-2016 Sales 1,006 989 961 994 Operating income 31 39 41 81 Adjusted OIBD3 75 83 93 116 Adjusted OIBD - margin 7.5% 8.4% 9.7% 11.
Slide 24: Financial Information on Greenpac
FINANCIAL INFORMATION ON GREENPAC Last Twelve Month as of March 31, 2017 (in millions, unless otherwise noted) USD CAD Sales1 269 353 COGS & SG&A 211 277 Amortization 21 28 Operating Income 37 48 Financing Expense 10 13 Refinancing Costs 8 11 Greenpac's net earnings 19 24 Cascades ownership 59.7% 59
Slide 25: Segmented Review
SEGMENTED REVIEW ( 10 8Mee
Slide 26: Segmented YoY Operating Income Waterfalls
SEGMENTED YoY OPERATING INCOME WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 70 30 6 5 60 15 55 (6) 5 50 45 20 (5) 40 40 (10) 8 16 33 14 (8) 30 (12) (7) 10 8 20 5 10 (1) 0 0 Q1-2016 Depr. & Q1-2016 Selling Other Raw Q1-2017 Depr. & Q1-2017 Q1-2016 Depr. & Q1-2016 En
Slide 27: Segmented Sequential Operating Income Waterfalls
SEGMENTED SEQUENTIAL OPERATING INCOME WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 70 25 60 9 20 3 50 45 5 1 43 15 (2) 14 (8) 40 (7) 33 (3) 8 11 30 28 (12) 10 14 20 5 5 3 10 (1) 0 0 Q4-2016 Specific Q4-2016 Selling Raw Q1-2017 Depr. & Q1-2017 Q4-2016 Depr. & Q4-201
Slide 28: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Comments on sequential performance Q1 2017 Q4 2016 Q1 2016 Shipments ('000 s.t.) Sequential shipments increased by 1%. Containerboard shipments were 7% higher 285 following a 5% increase in the capacity utilization rate during the quarter, and
Slide 29: Packaging Products / Boxboard Europe
PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Q1 2017 Q4 2016 Q1 2016 Shipments ('000 s.t.) Significant increase in shipments of both recycled and virgin grades due to a strong 296 13% 6% demand in Europe. Average selling price Pressure remained on se
Slide 30: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q1 2017 Q4 2016 Q1 2016 Shipments for Industrial Packaging increased 7% sequentially. Shipments in the Shipments ('000 s.t.) Recovery and Consumer Packaging segments were down slightly sequentially, 49 7%
Slide 31: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q1 2017 Q4 2016 Q1 2016 Converted product shipments in all markets decreased by 5% sequentially, Shipments ('000 s.t.) reflecting usual seasonality. 139 -3% -3% Despite inherent market seasonality, external parent roll shipments
Slide 32: Concluding Remarks and Q&A
CONCLUDING REMARKS AND Q&A — i? oh f. | @e passes
Slide 33: Near Term Outlook
NEAR TERM OUTLOOK • Full impact in Q2 2017 of the Fall 2016 US$40/s.t. containerboard price increase • US$50/s.t. containerboard price increase + reflected in RISI in April 2017 • Recovered paper prices in North America I • Full impact of URB price increase announced and Europe remain high in Q1 201
Slide 34: Appendix
APPENDIX
Slide 35: Foreign Exchange
FOREIGN EXCHANGE US$/CAN$ Exchange rates Euro€/CAN$ Hedging Program – US$ Cash flows 2017 1.00 1.00 • 38% to 64% of exposure (net of interest) hedged at an 0.90 0.90 average rate of 1.26 CAN$/US$ to 1.31 CAN$/US$ 0.80 0.80 2018 • 27% to 47% of exposure (net of interest) hedged at an 0.70 0.70 averag
Slide 36: Energy Prices
ENERGY PRICES Natural gas Energy prices Crude oil (US$) Hedging Program – Natural gas (US$) 12.00 120 • Canada: 10.00 100 • 2017: 56% at 3.94 CAN$/GJ 8.00 80 • 2018: 41% at 3.99 CAN$/GJ 6.00 60 4.00 40 • U.S.: 2.00 20 • 2017: 40% at 3.90 US$/mmBtu 0.00 0 • 2018: 36% at 3.58 US$/mmBtu Q2-14 Q3-14 Q4-
Slide 37: Selected Reference Prices
SELECTED REFERENCE PRICES (US$/s.t.) Containerboard - Selected Products Current Boxboard Europe - Selected Products Current (Euro€/m.t.) 750 (April) 1,200 (March) 700 705 1,100 650 1,000 1,031 600 900 590 550 800 500 700 649 450 Linerboard 42-lb. unbleached kraft, Eastern U.S. 600 Coated duplex - vi
Slide 38: Selected Reference Prices and Fibre Costs
SELECTED REFERENCE PRICES AND FIBRE COSTS These indexes should only be used as an indicator of trends and they may be Q1 2017 Q1 2017 different than our actual selling prices or purchasing costs. 2016 2017 vs. Q1 2016 vs. Q4 2016 Q1 Q2 Q3 Q4 Year Q1 (units) (%) (units) (%) Selling prices (average) P
Slide 39: For More Information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or [email protected] 39