Cascades Inc. · TSX:CAS
Cascades — Desjardins Conference Montreal 2019
34 slides from Cascades's conference presentation, Mar 19, 2019
Slide 1: Investor Presentation – Desjardins Conference Montreal
INVESTOR PRESENTATION Desjardins Conference Montreal March 19, 2019
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: Financial Review
FINANCIAL REVIEW Bio ovsme ts
Slide 4: Quarterly Financial Results
QUARTERLY FINANCIAL RESULTS 1 1 Figures above in millions of CAN$ Figures above in millions of CAN$ 2016 2017 2018 (In millions of CAN$, except amount per share) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Financial results Sales 4,001 1,006 1,130 1,103 1,082 4,321 1,098 1,180 1,175 1,196 4,649 Operating
Slide 5: Quarterly Results – Business Segments
QUARTERLY RESULTS – BUSINESS SEGMENTS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 1 1 Specialty Products (millions of CAN$) Tissue Papers (millions of CAN$) 1 1 (1) Please click here for supplemental information on non-IFRS measures. 5
Slide 6: Quarterly Results – Business Segment Shipments
QUARTERLY RESULTS – BUSINESS SEGMENT SHIPMENTS Containerboard ('000 s.t. and % capacity utilization1) Boxboard Europe ('000 s.t. and % capacity utilization1) Tissue Papers ('000 s.t. and % capacity utilization1) (1) Utilization rate defined as total manufacturing shipments divided by practical capac
Slide 7: Raw Material Costs - Index List Prices
RAW MATERIAL COSTS - INDEX LIST PRICES Current (US$/ton) Recycled Fibre Prices Current Virgin Pulp Prices (US$/ton) (Feb-19) (Feb-19) 1,380 201 1,180 58 White grades (Basket of products) Brown grades (OCC) NBSK NBHK Recovered Paper Prices Q4-2017 Q3-2018 Q4-2018 Q4/Q4 Q4/Q3 White grades - Basket of
Slide 8: Product Reference Selling Prices
PRODUCT REFERENCE SELLING PRICES (US$/s.t.) Containerboard - Selected Products Boxboard Europe - Selected Products Current (Euro€/s.t.) Current (Feb) (Dec) 755 1,072 650 673 (US$/s.t.) Specialty Products - Selected Products Current Tissue Papers - Selected Products Current (US$/s.t.) (Feb) (Dec) 1,4
Slide 9: Near Term Factors – Q1 2019
NEAR TERM FACTORS – Q1 2019 • Raw materials: lower OCC price, positive trends in virgin pulp and SOP white recycled fiber grade • Tissue Papers: market-related challenges and • Tissue Papers: price increases announced in various operational issues at the St. Helens, Oregon products and sub-segments
Slide 10: Financial Metrics, Sales by Geography, KPIs
Financial Metrics 2018 Sales by Geography (2018) ✓ Revenues: $4.6 B (+6.9% 5-yr CAGR3) 2018 SALES FROM 2018 SALES TO (SOURCE) (DESTINATION) ✓ Adj. EBITDA2: $489 M (+9.5% 5-yr CAGR3) 21% Europe1 22% ✓ Adj. CF Ops.: $361 M (+6.8% 5-yr CAGR3) 34% U.S. 41% ✓ Net debt at $1.77 B ✓ Net debt/Adjusted EBITD
Slide 11: Annual Results
ANNUAL RESULTS Sales (CAN$ M) Operating Income & Margin (CAN$ M and %) CAGR: + 6.9% CAGR: + 13.8% 5000 250 221 230 8.0% 4,649 4500 4,321 200 175 4,001 153 6.0% 4000 3,861 137 3,561 150 5.5% 3500 5.1% 4.0% 100 4.0% 4.0% 3.8% 3000 2.0% 50 2500 2014 2015 2016 2017 2018 0 0.0% 2014 2015 2016 2017 2018 A
Slide 12: Annual Financial Ratios & Debt Maturities
ANNUAL FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD1 Interest Coverage Ratio2 3 3 3 3 Net Debt / Net Debt + Total Equity Long-Term Debt Maturities (as at December 31, 2018) Weighted Average Interest Rate of 5.20% Senior notes Revolver Term loan Debts without recourse Subsidiaries
Slide 13: Containerboard Packaging
CONTAINERBOARD PACKAGING ▪ Largest Canadian corrugated box producer (~32% market share) 14% 12% ▪ #51 NA containerboard producer (based on capacity) ▪ 2018 integration rate2: 76%, targeting 85% 2018 20% ▪ Annual capacity of 1,559K s.t.: Sales ✓ 84% recycled vs. 16% virgin $1,840M ✓ 53% linerboard vs
Slide 14: Containerboard Packaging
CONTAINERBOARD PACKAGING Industry Operating Rates1 • Average capacity growth of ± 3% annually over 2016 - 2021 period ✓ NA demand CAGR 2016 - 2021: ± 2.4% • February industry fundamentals: Cascades adjusted OIBD increases ~$4M – $5M with every 1% increase in our utilization rate ✓ Capacity util.: 89
Slide 15: Boxboard Europe
BOXBOARD EUROPE ▪ 57.95% equity ownership of Reno de Medici, a public 4% Italian company; 6 recycled mill (1,085K m.t.)2 & 1 virgin boxboard mill (165K m.t.) 19% ▪ 2nd largest coated recycled boxboard producer in Europe 2018 ▪ Well positioned PanEuropean asset base and sales Sales network: Italy, Fr
Slide 16: Boxboard Europe
BOXBOARD EUROPE Leading European Producer of Coated Board Top Cartonboard Producers1 Top FBB Producers1 Top WLC Producers1 (Total Market) (Virgin) (Recycled) Metsä Board Stora Enso Kotkamills Mayr-Melnhof International Paper Holmen Iggesund Reno De Medici Pankaboard Buchmann BillerudKorsnäs 0 1000 2
Slide 17: Specialty Products
SPECIALTY PRODUCTS ▪ Diversified industrial & consumer products packaging player ▪ Encompasses Recovery operations, where results reflect variations in raw material pricing 22% ▪ Largest paper collector in Canada with 19 facilities2 and 1.45 million s.t. of material processed in 2018 2018 46% ▪ A le
Slide 18: Specialty Products
SPECIALTY PRODUCTS CASCADES RECOVERY+ SUB-SEGMENT Recovery & Recycling is our “forest” and 5% manages procurement of all raw material (0.1 M st) 9% fibre for our North American operations. (0.2 M st) CIRCULAR ECONOMY APPROACH Spot 18% FIBER1 USED 25% (0.4 M st) IN 2018: 2.3 million s.t. 68% (1.6 M s
Slide 19: Tissue Papers
TISSUE PAPERS ▪ 5th largest tissue producer in NA based on capacity (650K s.t.), growing Western US footprint ▪ Recent results reflect higher raw material prices & increased transportation costs, as well as elevated capacity additions in the industry 36% 33% ▪ 2018 integration rate: 70%, targeting 8
Slide 20: Tissue Papers
TISSUE PAPERS Established Positioning in North American Tissue Market CAS Sales by Country (2018) Tissue Market Demand1 Canada (31%) US (69%) 1.8% growth represents ~190K s.t. / year AWAY-FROM- BRANDED AWAY-FROM- BRANDED HOME 25% HOME 41% 41% 51% PRIVATE PRIVATE LABEL AT-HOME LABEL 75% AT-HOME 59% 5
Slide 21: Tissue Papers
TISSUE PAPERS Diversified Capacity and Positioning 2018 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 Essity (ex-SCA) 721 7% 0% 100% 5 Ca
Slide 22: Strategic Plan
1 2 3 MODERNIZE CREATE INNOVATION OUR SUSTAINABLE & CUSTOMER PLATFORMS VALUE FOCUS STRATEGIC PLAN BUILDING ON OUR PAST, POSITIONING FOR THE FUTURE 22
Slide 23: Modernize Our Platforms
1 MODERNIZE OUR PLATFORMS Modernize + Integrate + Optimize • Replace older equipment • Increase our integration rate • Improve geographic footprint • Invest in organic growth to 85% by investing in to better serve our customers, conversion capacity increase penetration of Scappoose, OR Containerboar
Slide 24: Modernize Our Platforms
MODERNIZE OUR PLATFORMS Strategic Capital Investments1 to Strengthen & Consolidate Positioning $429M Planned CAPEX 2018 HIGHLIGHTS $330 M - $400 M 20192 MAJOR PROJECTS Construction of Piscataway Tissue modernization containerboard corrugated plant ✓ $135 M, incl. $56 M of lease ✓ ± $80 M - $100 M va
Slide 25: Create Value: Focused on Long-Term Value Creation
CREATE VALUE 2 Focused on Long-Term Value Creation INVESTMENT BALANCE SHEET SHAREHOLDERS • Modernize equipment, • Allocate $100M of FCF • Maintain current reduce fixed cost base toward debt reduction dividend strategy annually • 2019 Capex: $330M - • Opportunistic market $400M funded by CF • Targete
Slide 26: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION CUSTOMERS INNOVATION 275 employees provide Containerboard engineering & consulting services internally, to major customers & external clients 37 people Specialty Products Tissue Papers dedicated to Supported by: innovation CAS Innovation Centre CAS R&D Centre MAJO
Slide 27: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION Hand towel dispenser that is 99.9% jam free, patented dispenser Produces innovative, lightweight technology recycled linerboard – XP grades Low-density PETE containing 80% post- consumer material OBJECTIVES: • 20% of sales from innovative products in 2020 • Levera
Slide 28: Appendix
APPENDIX ete as
Slide 29: Historical Results
HISTORICAL RESULTS (In million of Canadian dollars) 2018 Q4-18 Q3-18 Q2-18 Q1-18 2017 Q4-17 Q3-17 Q2-17 Q1-17 2016 2015 2014 Sales Containerboard 1,840 472 472 475 421 1,652 440 438 428 346 1,370 1,301 1,181 Boxboard Europe 933 245 210 232 246 838 212 202 213 211 796 825 841 Specialty Products 659 1
Slide 30: Sensitivity Table
SHIPMENTS/CONSUMPTION OIBD IMPACT SENSITIVITY TABLE 1 (‘000 s.t, ‘000 mmBtu for Natural Gas) INCREASE (in CAN$ M) SELLING PRICE2 (Manufacturing & Converting) Linerboard 42-lb unbleached kraft, Eastern US 370 US$25/s.t. 13 Corrugated medium 26-lb, semichem., Eastern US 370 US$25/s.t. 13 North America
Slide 31: Impact of New IFRS 16 - Accounting for Leases
IMPACT OF NEW IFRS 16 - ACCOUNTING FOR LEASES Statements of Based on 2018 By Segment * (CAN$ million) Earnings Impact * (CAN$ million) Increase in OIBD 23 Containerboard 5 Increase in depreciation 20 Europe 4 Increase in financial expenses 4 Specialty Products 7 Tissue 3 Balance Sheet Impact * Based
Slide 32: Operationally Diversified
OPERATIONALLY DIVERSIFIED BUSINESS SEGMENT OPERATIONS LOCATION CAPACITY CONTAINERBOARD 6 Manufacturing 4 Canada / 2 US 1.56 M s.t. PACKAGING1,4 21 Converting 16 Canada / 5 US 15.0 B ft → 27 facilities 7 Manufacturing 2 Canada / 5 US 380,000 s.t. TISSUE1 10 Converting 2 Canada / 8 US - → 21 facilitie
Slide 33: Geographically Diversified
GEOGRAPHICALLY DIVERSIFIED QUÉBEC EUROPE ONTARIO NORTHEASTERN U.S. 33
Slide 34: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or [email protected] 34