Cascades Inc. · TSX:CAS
Cascades — Q3 2019 Earnings Presentation
37 slides from Cascades's earnings presentation, Nov 8, 2019
Slide 1: Review of Q3 2019 Financial Results
REVIEW OF Q3 2019 FINANCIAL RESULTS November 8, 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: Summary of Quarterly Financial Results
SUMMARY OF QUARTERLY FINANCIAL RESULTS 137 156 161 70 113 135 135 38 82 36 24 31 26 28 78 72 — 13 (37) (68) Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 1 Operating Income (loss) Adjusted OIBD Net Earnings (loss) Adjusted Net Earnings 1 Figures above in millions of
Slide 4: Historical Segmented Quarterly Operating Income & Adjusted OIBD
HISTORICAL SEGMENTED QUARTERLY OPERATING INCOME (LOSS) & ADJUSTED OIBD1 Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 117 118 29 30 111 113 25 104 19 20 18 19 94 91 14 84 84 84 10 9 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Operating Incom
Slide 5: Historical Segmented Quarterly Shipments
HISTORICAL SEGMENTED QUARTERLY SHIPMENTS Containerboard ('000 s.t. and % capacity utilization1) Boxboard Europe ('000 s.t. and % capacity utilization1) 96% 377 95% 370 368 363 93% 342 90% 90% 94% 333 331 321 92% 93% 91% 292 88% 259 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2
Slide 6: Raw Material Costs - Index List Prices
RAW MATERIAL COSTS - INDEX LIST PRICES ($ US/t.c.) Recycled Fibre Prices Current ($ US/t.m.) Virgin Pulp Prices Current (Nov-19) (Oct-19 250 1,500 225 ) 1,400 200 1,300 175 150 1,200 125 1,100 1,115 103 100 1,000 75 900 900 50 25 28 800 0 700 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 A
Slide 7: Segmented Review
SEGMENTED REVIEW = 9 O18Me- 8
Slide 8: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Comments on sequential performance Q3 2019 Q2 2019 Q3 2018 è Shipments increased sequentially. This reflected a 5% increase in manufacturing shipments Shipments ('000 s.t.) that was driven by usual seasonal variations and a 2% increase in capaci
Slide 9: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q3 2019 Q2 2019 Q3 2018 è Shipments increased 3% sequentially, excluding the Orchids acquisition, driven by Shipments ('000 s.t.) increases in all Away-from-Home converted product segments that reflect the usual 161 4% (2)% favourab
Slide 10: Packaging Products / Boxboard Europe
PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Q3 2019 Q2 2019 Q3 2018 Shipments ('000 s.t.) è Shipments of virgin boxboard decreased by 13% sequentially, reflecting the usual seasonality 321 (3)% 24% in the period. Shipments of recycled boxboard decreased
Slide 11: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q3 2019 Q2 2019 Q3 2018 è The lower quarter-over-quarter sales is primarily explained by seasonality in moulded pulp Sales (M$) activities, and the impact of lower recycled fibre pricing on results from Rec
Slide 12: Segmented YoY Operating Income (Loss) Waterfalls
SEGMENTED YoY OPERATING INCOME (LOSS) WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 160 22 6 45 22 117 118 (29) 120 94 (11) 91 5 (16) 30 6 25 80 1 2 9 19 40 (5) 14 15 10 0 (11) Q3 2018 Depr. & Q3 2018 Raw Other Price Other prod.Q3 2019 Depr. & Q3 2019 Operating Amor
Slide 13: Segmented Sequential Operating Income Waterfalls
SEGMENTED SEQUENTIAL OPERATING INCOME WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 160 (29) 40 5 30 113 8 1 118 11 30 120 91 30 25 84 (4) 19 (4) 80 (1) 2 20 (6) 14 40 10 (11) 0 Q2 2019 Depr. & Q2 2019 Volume Other Price Q3 2019 Depr. & Q3 2019 0 Operating Amort. /
Slide 14: Financial Review
FINANCIAL REVIEW eo ke SE fe te Oe 7 ba
Slide 15: Key Performance Indicators (KPIs)
KEY PERFORMANCE INDICATORS (KPIs) Total Shipments1 ('000 s.t.) Capacity Utilization Rate1-2 (manufacturing only) 859 93% 93% 849 821 809 91% 91% 793 90% Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 LTM Return on Assets LTM Working Capital (% of LTM Sales) 10.7% 11.
Slide 16: Year Over Year Sales Reconciliation
YEAR OVER YEAR SALES RECONCILIATION (M CAN$) +8% 1,350 1,300 12 8 1 91 1,264 (2) 1,250 (21) 1,200 1,175 1,150 1,100 Sales Business Other Recovery & Sales (M CAN$) Q3-2018 acquisitions Price & Mix Variances Volume F/X CAN$ Recycling Q3-2019 Containerboard 472 — (11) — 9 3 — 473 Boxboard Europe 210 51
Slide 17: Sequential Sales Reconciliation
SEQUENTIAL SALES RECONCILIATION (M CAN$) -1% 1,300 9 1,275 1,275 (1) 1,264 (3) (4) 1,250 (15) 1,225 1,200 Sales Other Recovery & Sales (M CAN$) Q1-2019 Volume variances Price & Mix Recycling F/X CAN$ Q2-2019 Containerboard 462 18 — (4) — (3) 473 Boxboard Europe 270 (7) — (1) — (6) 256 Specialty Prod
Slide 18: Year-Over-Year Operating Income Reconciliation
YEAR-OVER-YEAR OPERATING INCOME RECONCILIATION + Lower recycled fibres and virgin pulp prices + Favourable mix of products sold + Lower OCC costs (Raw materials) + Lower resin and OCC costs + Higher average selling price - Lower parent rolls selling prices + Business acquisition Q4-2018 + Production
Slide 19: Sequential Operating Income Reconciliation
SEQUENTIAL OPERATING INCOME RECONCILIATION + Lower raw materials costs + Lower recycled fibres and virgin pulp prices Seasonally lower volume and (M CAN$) Other production costs (mix of products sold - higher maintenance costs - and subcontracting) related to production downtime 250 225 47 200 175 6
Slide 20: Quarterly Year-Over-Year EPS Variance
QUARTERLY YEAR-OVER-YEAR EPS VARIANCE Q3-2018 Q3-2019 Adjusted1 Specifics1 As reported Adjusted1 Specifics1 As reported OIBD1 137 2 139 161 47 208 Depreciation (61) — (61) (73) — (73) Operating income 76 2 78 88 47 135 Financing expenses & interest expense on employee future benefits and other liabi
Slide 21: Quarterly Sequential EPS Variance
QUARTERLY SEQUENTIAL EPS VARIANCE Q2-2019 Q3-2019 Adjusted1 Specifics1 As reported Adjusted1 Specifics1 As reported OIBD1 156 (2) 154 161 47 208 Depreciation (72) — (72) (73) — (73) Operating income (loss) 84 (2) 82 88 47 135 Financing expenses & interest expense on employee future benefits and othe
Slide 22: Q3-19 Adjusted OIBD to Operating Income Reconciliation
Q3-19 ADJUSTED OIBD TO OPERATING INCOME RECONCILIATION (M CAN$) 161 150 49 135 88 (1) (1) 100 (73) 50 0 Adjusted Depr. & Adjusted Gain on acquisition Impairment Unrealized gain Operating 1 OIBD Amort. Operating and others charges on financial Income 1 Income instruments Container- Boxboard Specialty
Slide 23: Net Earnings - IFRS vs Adjusted
NET EARNINGS - IFRS VS ADJUSTED NET EARNINGS NET EARNINGS PER SHARE1 (in millions of Canadian dollars, except amount per share) Q3-2019 Q3-2019 As per IFRS 70 $ 0.74 Specific items: Gain on acquisitions, disposals and others (49) $ (0.53) Impairment charges 1 $ 0.01 Unrealized loss on financial inst
Slide 24: Cash Flow Overview
CASH FLOW OVERVIEW 124 125 52 38 104 108 15 1 92 92 89 89 82 85 (42) Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 CF from oper. Adj. CF from oper. 3 Adjusted Free Cash Flow 3 Figures above in millions of CAN$ Figures above in millions of CAN$ 2017 2018 2019 (In mil
Slide 25: Net Debt Reconciliation - Q3 2019
NET DEBT1 RECONCILIATION - Q3 2019 (M CAN$) 2,100 278 2,077 2,050 2,000 1,950 1,900 1,861 1,850 61 1,799 1,800 12 13 1,750 9 1,700 (104) 1,650 (53) 1,600 1,550 1,500 Net debt as at Cash flow Changes in Capital leases Dividends paid & F/X CAN$ Payments for Net debt as at Business Net debt as at June
Slide 26: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD1,3 Interest Coverage Ratio2 5.0x 4.6x 4.7x 5.8x 5.8x 4.0x 3.8x 3.6x 3.7x 4.7x 4.6x 3.5x 4.3x 3.4x 3.4x 3.0x 2012 2013 2014 2015 2016 2017 2018 Q3 2019 2012 2013 2014 2015 2016 2017 2018 Q3 2019 Net Debt / Net Debt + Total E
Slide 27: Capital Investments
CAPITAL INVESTMENTS (in millions of Canadian dollars, including capitalization of IT projects, excluding1 value of leases) 73 Revised 2019 capital expenditures 11 62 Containerboard $60M to $70M 9 Boxboard Europe $35M to $40M 46 27 7 Specialty Products $35M to $40M 27 15 Tissue Papers $110M to $115M
Slide 28: Concluding Remarks
CONCLUDING REMARKS 28
Slide 29: Orchids Paper - Acquisition Update
ORCHIDS PAPER - ACQUISITION UPDATE • Acquisition closed September 13, 2019 • US$237 million cost financed via current cash, existing lines of credit • Includes US$30 million of assumed liabilities, per the purchase agreement • Assumption of US$5 million of debt at closing • Sale of certain assets ac
Slide 30: Orchids Paper - Integration Update
ORCHIDS PAPER - INTEGRATION UPDATE • Low risk strategy to modernize asset portfolio • US$240 million invested in Orchids assets over the last 5 years • Optimizes logistics, lowers inter-facility transportation within US network • Improves equipment configuration - paper machines with 100” trims • In
Slide 31: Orchids Paper - Integration Update
ORCHIDS PAPER - INTEGRATION UPDATE • Elimination of Cascades’ current outsourcing requirements • Transfer of currently outsourced tonnage to Orchids’ assets will use open capacity at Barnwell and Pryor • 75% of this tonnage will be transferred internally by the end of 2019, 100% by the end of Q2 202
Slide 32: Near Term Factors
NEAR TERM FACTORS • Raw materials: favourable OCC, virgin pulp and • Tissue: ongoing market dynamics, lower Q4 SOP white recycled fiber grade pricing seasonal volumes • Tissue: contribution from Orchids, roll-out of price • Containerboard: potential for pricing & volume à • increases, positive trend
Slide 33: Appendix
APPENDIX —s Ne | a
Slide 34: Impact of New IFRS 16 - Accounting for Leases
IMPACT OF NEW IFRS 16 - ACCOUNTING FOR LEASES Impact on the Statements of Earnings* 2019 annualized (in millions of Canadian dollars) Q3-2019 YTD 2019 impact OIBD Containerboard 2 8 12 Europe 1 3 4 Specialty Products 2 5 7 Tissue Papers 1 3 4 Corporate 1 3 3 Increase in OIBD (total) 7 22 30 Increase
Slide 35: Selected Reference Prices
SELECTED REFERENCE PRICES Current (US$/s.t.) Containerboard - Selected Products Current (Euro€/s.t.) Boxboard Europe - Selected Products (Oct-19) 800 (Oct-19) 1,200 1,100 1,115 700 725 1,000 630 900 600 800 500 700 669 600 400 500 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Aug 18 Nov 18
Slide 36: Selected Reference Prices and Fibre Costs
SELECTED REFERENCE PRICES AND FIBRE COSTS Q3 2019 vs Q3 2019 vs 2017 2018 2019 Q3 2018 Q2 2019 These indexes should only be used as an indicator of trends and they may be different than our actual selling prices or purchasing costs. Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 (units) (%) (units) (%)
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