Cascades Inc. · TSX:CAS
Cascades — Q2 2017 Earnings Presentation
37 slides from Cascades's earnings presentation, Aug 10, 2017
Slide 1: Review of Q2 2017 Financial Results
REVIEW OF Q2 2017 FINANCIAL RESULTS August 10, 2017
Slide 2: Disclaimer
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: Opening Remarks
OPENING REMARKS ( 10 8Mee
Slide 4: Financial Results
FINANCIAL RESULTS ( 10 8Mee
Slide 5: Summary of Quarterly Financial Results
SUMMARY OF QUARTERLY FINANCIAL RESULTS 112 107 103 323 82 75 65 50 48 161 33 31 36 35 20 30 24 4 15 12 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2016 2016 2016 2017 2017 2016 2016 2016 2017 2017 Operating Income Adjusted OIBD 1 Net Earnings Adjusted Net Earnings 1 Figures above in millions of CAN$ Figures above
Slide 6: Historical Segmented Quarterly Operating Income & Adjusted OIBD
HISTORICAL SEGMENTED QUARTERLY OPERATING INCOME & ADJUSTED OIBD1 Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 21 60 58 56 17 46 44 43 45 14 13 33 30 11 28 9 7 5 3 1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2016 2016 2016 2017 2017 2016 2016 2016 2017 2017 Operating Income Adjusted OIBD
Slide 7: Historical Segmented Quarterly Shipments
HISTORICAL SEGMENTED QUARTERLY SHIPMENTS Containerboard (‘000 s.t. and % capacity utilization) Boxboard Europe (‘000 s.t. and % capacity utilization) 400 375 1 300 296 1.05 350 294 0.98 283 284 283 285 1 300 0.96 280 267 102% 250 263 0.95 96% 96% 0.94 258 98% 200 260 150 94% 0.92 0.9 93% 92% 100 0.9
Slide 8: Key Performance Indicators (KPIs)
KEY PERFORMANCE INDICATORS (KPIs) Total Shipments (‘000 s.t.) Capacity Utilization Rate1 (manufacturing only) 856 96% 95% 93% 757 763 769 91% 736 89% Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2016 2016 2016 2017 2017 2016 2016 2016 2017 2017 LTM Return on Assets LTM Working Capital (% of LTM Sales) 11.9% 11.4%
Slide 9: Raw Material Costs – Index List Prices
RAW MATERIAL COSTS – INDEX LIST PRICES (US$/ton) Recycled Fibre Prices Current (US$/ton) Virgin Pulp Prices Current (August) (July) 200 1,200 175 179 165 1,100 1,100 150 1,000 975 125 900 100 75 800 50 700 May 14 May 15 May 16 May 17 Feb 15 Feb 16 Feb 17 Nov 14 Nov 15 Nov 16 Aug 14 Aug 15 Aug 16 Aug
Slide 10: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD1 Interest Coverage Ratio2 5.0x 4.6x 4.7x 4.7x 4.6x 4.0x 4.2x 3 4.7x 3 3.8x 3.4x 3.4x 3.0x 2012 2013 2014 2015 2016 Q2 2012 2013 2014 2015 2016 Q2 2017 2017 Net Debt / Net Debt + Total Equity Long-Term Debt Maturities 64% 71
Slide 11: Financial Review
FINANCIAL REVIEW ( 10 8Mee
Slide 12: Year Over Year Sales Reconciliation
YEAR OVER YEAR SALES RECONCILIATION (M CAN$) 1,200 +13% 1,150 23 25 1,130 33 (6) (8) 1,100 65 1,050 998 1,000 0 Recovery Selling Sales Acqu. & Corp. Sales & Prices CAN$ Volume Q2-2016 Disposals Elim. Q2-2017 Recycling & Mix (M CAN$) Containerboard 342 73 9 6 (2) 428 Boxboard Europe 197 (1) 4 13 213
Slide 13: Sequential Sales Reconciliation
SEQUENTIAL SALES RECONCILIATION +12% (M CAN$) 1,140 15 7 1,130 1,120 18 (3) 1,100 19 1,080 68 1,060 1,040 1,020 1,006 0 Selling Recovery Sales Acqu. & Corp. Sales CAN$ Volume Prices & Q1-2017 Disposals Elim. Q2-2017 & Mix Recycling (M CAN$) Containerboard 346 68 2 1 11 428 Boxboard Europe 211 11 (9)
Slide 14: Year-over-Year Consolidated Operating Income Reconciliation
YEAR-OVER-YEAR CONSOLIDATED OPERATING INCOME RECONCILIATION - Greenpac consolidation - ERP implementation costs - Better pricing environment - Business processes optimization costs - Higher manufacturing & converting shipments (M CAN$) - Higher production costs & unusual expenses 140 4 120 47 112 4
Slide 15: Sequential Consolidated Operating Income Reconciliation
SEQUENTIAL CONSOLIDATED OPERATING INCOME RECONCILIATION - Greenpac consolidation - Higher shipments - Better pricing environment - Higher selling prices - Higher manufacturing & converting shipments - Higher raw materials costs - Higher production costs and unusual expenses (M CAN$) 120 7 2 107 100
Slide 16: Quarterly Year-over-Year EPS Variance
QUARTERLY YEAR-OVER-YEAR EPS VARIANCE Q2-2016 Q2-2017 1 1 1 Adjusted Specifics As reported Adjusted Specifics1 As reported OIBD1 112 112 107 (3) 104 Depreciation (47) (47) (56) (56) Operating income 65 65 51 (3) 48 Financing expenses & interest expense on employee future benefits (22) (22) (25) (25)
Slide 17: Quarterly Sequential EPS Variance
QUARTERLY SEQUENTIAL EPS VARIANCE Q1-2017 Q2-2017 Adjusted1 Specifics1 As reported Adjusted1 Specifics1 As reported OIBD1 75 3 78 107 (3) 104 Depreciation (47) (47) (56) (56) Operating income 28 3 31 51 (3) 48 Financing expenses & interest expense on employee future benefits (22) (22) (25) (25) FX g
Slide 18: Q2-17 Adjusted OIBD to Operating Income Reconciliation
Q2-17 ADJUSTED OIBD TO OPERATING INCOME RECONCILIATION (M CAN$) 120 107 100 80 8 4 60 51 48 (2) (2) 40 (56) (11) 20 0 Adjusted Depr. & Adjusted Gain on Unrealized Inventory Restructuring Impairment Operating OIBD1 Amort. Operating Acquisitions, Gain on Adjustment Costs Charges Income Income1 Disposa
Slide 19: Net Earnings – IFRS vs Adjusted
NET EARNINGS – IFRS VS ADJUSTED NET EARNINGS NET EARNINGS 1 PER COMMON SHARE (in millions of Canadian dollars, except amount per common share) Q2-2017 Q2-2017 As per IFRS 323 $3.41 Specific items: Gain on acquisitions, disposals and others (8) ($0.06) Inventory adjustment resulting from business acq
Slide 20: Greenpac Acquisition – Accounting Factsheet
GREENPAC ACQUISITION – ACCOUNTING FACTSHEET Factsheet • Interest of one partner classified in other liabilities due to put option • Cascades share of profit before tax 78.3% • Minority interest 21.7% • Client list and amortizable fixed assets increase $53 million • Goodwill addition $256 mil
Slide 21: Cash Flow Overview
CASH FLOW OVERVIEW 59 55 107116 37 85 84 89 91 22 68 68 33 34 (34) Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2016 2016 2016 2017 2017 2016 2016 2016 2017 2017 CF from operations Adjusted CF from operations 3 Adjusted Free Cash Flow 3 Figures above in millions of CAN$ Figures above in millions of CAN$ 2016 2017
Slide 22: Net Debt Reconciliation – Q2-2017
NET DEBT1 RECONCILIATION – Q2-2017 +$85M -$288M (M CAN$) +10% -16% 1,800 219 1,780 1,750 1,700 1,650 1,617 1,600 32 1,550 23 4 8 1,492 1,500 (89) (34) (288) 1,450 Net Debt 1 Cash flow FX Rate Dividends Others Var. in non- Capital Greenpac’s Net Debt 1 Sale of Net Debt 1 03/31/2017 from paid & cash w
Slide 23: Segmented Review
SEGMENTED REVIEW ( 10 8Mee
Slide 24: Segmented YoY Operating Income Waterfalls
SEGMENTED YoY OPERATING INCOME WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 90 9 30 3 80 14 6 (1) 70 21 (8) 14 60 (13) 60 56 (21) 20 8 17 (6) 50 46 (14) 13 40 30 30 10 (5) 7 20 2 10 0 0 Q2-2016 Depr. & Q2-2016 Other Selling Other Raw Q2-2017 Depr. & Q2-2017 Q2-2016
Slide 25: Segmented Sequential Operating Income Waterfalls
SEGMENTED SEQUENTIAL OPERATING INCOME WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 80 11 25 70 3 21 (8) 18 (8) 20 4 60 56 (21) 50 12 45 (10) 8 14 15 13 40 33 30 10 30 (5) 20 5 5 10 1 0 0 Q1-2017 Depr. & Q1-2017 Other Selling Raw Other Q2-2017 Depr. & Q2-2017 Q1-201
Slide 26: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Comments on sequential performance Q2 2017 Q1 2017 Q2 2016 Shipments ('000 s.t.) Sequential shipments increased by 32%. Containerboard shipments were 70% 375 higher following the consolidation of Greenpac during the quarter, but were slightly
Slide 27: Packaging Products / Boxboard Europe
PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Q2 2017 Q1 2017 Q2 2016 Shipments ('000 s.t.) Following a record quarter in terms of shipments, slight decrease in shipments of 283 -4% 6% both recycled and virgin grades due to the beginning of the holiday
Slide 28: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q2 2017 Q1 2017 Q2 2016 During the second quarter, shipments in all sub-segments rose with the exception Shipments ('000 s.t.) of Industrial Packaging. The decrease is essentially due to lower productivit
Slide 29: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q2 2017 Q1 2017 Q2 2016 Converted product shipments in all markets increased by 9% sequentially, reflecting Shipments ('000 s.t.) higher demand due to usual seasonality. 151 9% -4% External parent roll shipments increased by 5%
Slide 30: Concluding Remarks and Q&A
CONCLUDING REMARKS AND Q&A — i? oh f. | @e passes
Slide 31: Near Term Outlook
NEAR TERM OUTLOOK • Gradual price increase in corrugated boxes following the US$50/s.t. containerboard price • Higher OCC costs in North America and increase reflected in RISI in April 2017 Europe + • US$20/s.t. corrugating medium price increase • Other recovered paper prices in North I reflected in
Slide 32: Appendix
APPENDIX
Slide 33: Foreign Exchange
FOREIGN EXCHANGE Exchange rates Hedging Program – US$ Cash flows US$/CAN$ Euro€/CAN$ 2017 1.00 1.00 • 36% to 63% of exposure (net of interest) hedged at an 0.90 0.90 average rate of 1.27 CAN$/US$ to 1.31 CAN$/US$ 0.80 0.80 2018 • 36% to 51% of exposure (net of interest) hedged at an 0.70 0.70 averag
Slide 34: Energy Prices
ENERGY PRICES Natural gas Energy prices Crude oil (US$) Hedging Program – Natural gas (US$) 12.00 120 • Canada: 10.00 100 • 2017: 51% at 3.96 CAN$/GJ 8.00 80 • 2018: 40% at 3.91 CAN$/GJ 6.00 60 4.00 40 • U.S.: 2.00 20 • 2017: 49% at 3.76 US$/mmBtu 0.00 0 • 2018: 41% at 3.51 US$/mmBtu Q3-14 Q4-14 Q1-
Slide 35: Selected Reference Prices
SELECTED REFERENCE PRICES (US$/s.t.) Containerboard - Selected Products Current Boxboard Europe - Selected Products Current (Euro€/m.t.) 750 (July) 1,200 (June) 700 705 1,100 650 1,000 1,031 600 610 900 550 800 500 700 680 450 Linerboard 42-lb. unbleached kraft, Eastern U.S. 600 Coated duplex - virg
Slide 36: 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 Q2 2017 Q2 2017 different than our actual selling prices or purchasing costs. 2016 2017 vs. Q2 2016 vs. Q1 2017 Q1 Q2 Q3 Q4 Year Q1 Q2 (units) (%) (units) (%) Selling prices (average
Slide 37: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or [email protected] 37