Cascades Inc. · TSX:CAS
Cascades — Non-Deal Roadshow (May 2016)
35 slides from Cascades's roadshow presentation, May 17, 2016
Slide 1: Institutional Investors Roadshow – Toronto
CASCADES INC. Institutional Investors Roadshow – Toronto May 17, 2016
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: Company Overview
COMPANY OVERVIEW LTM 3/31/16 Net Sales $3,954 million Segment Sales Breakdown1 • Founded in 1964 by the Lemaire family; headquartered in Kingsey Falls, QC 15% Containerboard • Produces, converts and markets packaging & tissue 33% Tissue Papers products composed principally of recycled fibre 20% Boxb
Slide 4: Leading Packaging and Tissue Paper Manufacturer
COMPANY OVERVIEW Leading Packaging and Tissue Paper Manufacturer Packaging Products Tissue Papers Containerboard Boxboard Europe Specialty Products • One of the Canadian • # 1 in Canada Position • # 2 in coated recycled • Largest paper collector in Market leaders boxboard in Europe Canada • # 5 in N
Slide 5: Sales and Operations Across North America and Europe
COMPANY OVERVIEW Sales and Operations Across North America and Europe Sales from (in %) Sales to (in %) Europe Europe 23% 23% 37% Canada 50% Canada 27% 40% US US Operating Facilities (in %) PP&E by Geographic Segment (in %) Europe 9% Europe 19% US 31% 52% Canada 60% Canada 29% US Note: Figures as of
Slide 6: Strong Financial Momentum
OPERATING PERFORMANCE AND FINANCIAL SITUATION Strong Financial Momentum Sales EBITDA (excl. specific items) (M CAN$) (M CAN$) 4,250 500 18.0% 3,954 447 4,000 450 16.0% 3,861 426 3,750 400 14.0% 3,561 342 340 3,500 350 12.0% 3,370 285 3,250 300 10.0% 3,141 3,000 250 8.0% 2,750 200 6.0% 2012 2013 2014
Slide 7: Historical Segmented EBITDA
OPERATING PERFORMANCE AND FINANCIAL SITUATION Historical Segmented EBITDA Containerboard Boxboard Europe (M CAN$) (M CAN$) 300 2012 – LTM3/31/16 CAGR: 34% 100% 100 2012 – LTM3/31/16 CAGR: 12% 100% 231 234 250 80% 80 80% 72 57 63 62 200 60% 60 60% 150 164 43 150 40% 40 40% 100 90 20% 20 20% 50 0% 0 0
Slide 8: Cash Flow and Free Cash Flow per Share
OPERATING PERFORMANCE AND FINANCIAL SITUATION Cash Flow and Free Cash Flow per Share Cash Flow From Operating Activities1 Free Cash Flow per Share1,2 (M CAN$) (CAN$) 400 2.00 337 358 1.60 1.58 277 1.50 300 233 0.86 1.00 0.78 200 155 0.50 100 0.00 (0.28) 0 (0.50) 2012 2013 2014 2015 LTM 3/31/16 2012
Slide 9: Debt Maturities and Repayment
OPERATING PERFORMANCE AND FINANCIAL SITUATION Debt Maturities Debt Repayment as at March 31, 2016 • Over last 24 months, $1 billion+ of 1,000 senior notes refinanced • Extended maturities to 2021, 750 714 2022 and 2023 • $750 million revolving facility 500 extended to 2019 325 282 250 250 • Average
Slide 10: Leverage Target of 3.0x – 3.5x
LEVERAGE TARGET OF 3.0x – 3.5x Achievable Without Asset Disposals 6.0x 5.8x 5.0x 5.0x 4.6x 4.7x 4.0x 3.8x 4.0x 3.6x 1 3.6x 1 3.3x 1 3.0x 2.0x 1.0x 0.0x 2013 Q1-16 2011 2012 2014 2015 2016E 2017E 2018E 1 Based on Street’s EBITDA estimates $435 million for 2016 and $416 million for 2017. Assuming stab
Slide 11: Containerboard Packaging Group: Environment Still Sound
CONTAINERBOARD PACKAGING GROUP Environment Still Sound North American Containerboard Producers Fundamentals Sound Despite Added Capacity 2015 Industry Participants Industry Operating Rates and Expected Capacity2 % of total capacity (Operating rate) 100% IP 33% 90% WestRock 19% 80% Cascades EBITD
Slide 12: Greenpac Mill
CONTAINERBOARD PACKAGING GROUP Greenpac Mill • Largest recycled linerboard mill in NA: 1,500 st/day of recycled linerboard (26 pounds) • State-of-the-art equipment • Product differentiation: Greenpac XP grades represent 75% of total production in Q1/16 (s.t./day) Greenpac Production • Take-or-pay ag
Slide 13: Tissue Papers Group: Strong Position Across North American Market
TISSUE PAPERS GROUP Strong Position Across the North American Tissue Market CAS Sales by Geography (2015) Tissue Market Demand1 160 Canada (25%) US (75%) Indexed U.S. Tissue 140 Away-from- Away-from- Demand Home Home 42% 49% 120 100 At-Home At-Home 58% 51% 80 1996 2000 2004 2008 2012 2016E CAS Sales
Slide 14: Tissue Papers Group: Diversified Capacity
TISSUE PAPERS GROUP Diversified Capacity 2015 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 SCA Tissue NA 772 8% 0% 100% 5 Cascades Tissu
Slide 15: Specialty Products Group
SPECIALTY PRODUCTS GROUP Stable Source of Revenue and Unique Platform for Innovation • Diversified product offerings and stable revenue stream with leading market positions • Recent initiatives have included Cascades Recovery minority (27%) acquisition completed in December 2015, and restructuring a
Slide 16: Boxboard Europe Group
BOXBOARD EUROPE GROUP Extensive European Platform • ~58% ownership of RdM, a public Italian company; 5 recycled mills & 1 virgin boxboard mill • Rationalization of production capacity, consolidation of sales forces, structure simplification and modernization investments have resulted in improved per
Slide 17: Our Four Strategic Priorities
OUR FOUR STRATEGIC PRIORITIES 1 MODERNIZE 2 OPTIMIZE core operations through capital allocation and focused investments reduce working capital Status: Ongoing Status: Ongoing 3 RESTRUCTURE 4 INNOVATE to improve and develop underperforming units processes and products Status: Well-advanced Status: Co
Slide 18: Strategic Priority: Modernize
STRATEGIC PRIORITY: MODERNIZE 1 ± $300M Invested in Modern Equipment Capital Expenditures (M$) • Divestitures and free cash $184M $161M $184M $173M $185M flow have funded Capex 200 • 2016 Capex ~ $185M 150 • Mainly growth Capex 100 • Mostly in the US • Impacted by strong US$ 50 • 2012-2013: investme
Slide 19: Strategic Priority: Optimize
STRATEGIC PRIORITY: OPTIMIZE 2 Strategic Initiatives Generating Results Working Capital % of sales 16% ONE Cascades, delivering results 14.8% 14.0% 14% Capturing savings through: 13.1% 12.9% 12.6% • Shared Services 11.9% 12% 11.3% 11.3% • Supply Chain • Logistics 10% Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 • Operat
Slide 20: Strategic Priority: Restructure
STRATEGIC PRIORITY: RESTRUCTURE 3 Streamlining the Portfolio Data on Asset Sales and Closures1 • Workforce reduction: ‒ 2,300 From 2011 to 2015: • Sales: ‒ $986M • 15 closures • EBITDA: ‒ $29M • 6 asset sales • EBITDA Margin: 3% • Dopaco division also divested in 2011 to finance Greenpac, Reno and P
Slide 21: Strategic Priority: Innovate
STRATEGIC PRIORITY: INNOVATE 4 Objective: 20% of Sales from Innovative Products 21
Slide 22: Focused on Growth and Productivity
FOCUSED ON GROWTH AND PRODUCTIVITY Containerboard Tissue Papers Specialty Boxboard Europe Packaging Group Group Products Group Group • Increase US Away- • Improve processes • Consumer • Strengthen presence from-Home segment • Grow US converting packaging provides in growing markets • Expand footprin
Slide 23: Near Term Outlook
NEAR TERM OUTLOOK • Pricing and raw material cost • Higher volume in Q2 headwinds in Europe + • Price increases for specific Tissue • Higher prices for recovered white products I papers in North America • Lower energy cost • Decrease in index price for • OCC prices still low and stable linerboard an
Slide 24: Potential Benefits Stemming From Our Initiatives
POTENTIAL BENEFITS STEMMING FROM OUR INITIATIVES Modernizing our operating platform to increase profitability • $185M Capex program in 2016 • Divestitures and closures of under-performing units • Containerboard: sound fundamentals and improved platform • Modernized converting platform and improved
Slide 25: Appendix
APPENDIX ete as
Slide 26: Business Drivers – Price Dynamics
BUSINESS DRIVERS – PRICE DYNAMICS Containerboard - Selected Benchmarks Tissue Papers - Selected Benchmarks (US$/s.t.) (US$/s.t.) 650 1,600 600 1,500 550 1,400 500 1,300 450 1,200 400 1,100 350 1,000 Linerboard 42-lb. unbleached kraft, Eastern U.S. Virgin parent rolls 300 900 Corrugating medium 26-lb
Slide 27: Business Drivers – Shipments
BUSINESS DRIVERS – SHIPMENTS • Shipments were 1% higher in Q1-2016 compared to the same period last year • Manufacturing utilization rates2 hovering around 93% in Q1-2016 • Containerboard – 94% • Boxboard Europe – 97% • Tissue Papers – 87% CAS Total Shipments (‘000 s.t.) CAS Manufacturing Utilizatio
Slide 28: Business Drivers – COGS
10% 6% 8% BUSINESS DRIVERS – COGS 36% LTM Q1-2016 9% 10% 6% 20% 11% 8% 37% Raw materials 8% Chemicals and production supplies Wages and employee benefits expenses Energy 20% Freight 11% Depreciation and amortization Others Raw materials Chemicals and production supplies • Raw materials (including ch
Slide 29: Raw Materials – Fibre Costs
RAW MATERIALS – FIBRE COSTS Recycled Fibre North American Current Virgin Pulp prices Current (US$/ton) (US$/ton) 200 List Prices (May) 1,100 (April) 1,000 150 153 960 900 100 850 90 800 50 700 Feb 13 Feb 14 Feb 15 Feb 16 Aug 13 Aug 14 Aug 15 July 13 July 14 July 15 May 13 Nov 15 Nov 13 May 14 Nov 14
Slide 30: Raw Materials – Sourcing Strategy
RAW MATERIALS – SOURCING STRATEGY Cascades’ NA Recycled Fibre Supply World Top Recovered Paper Suppliers (M Tonnes) 6 20151 Recovery & 5 Internal 4 Most of the fibre 25% supply coming Regular & 3 from internal Steady Volume Spot 2 sources, (Noncontractual) 25% 1 contracts and 27% 0 Contractual regul
Slide 31: Proportionate Consolidation
PROPORTIONATE CONSOLIDATION Selected Financial Data As Reported Proportionate Q1-2016 (IFRS) Consolidation1 Sales (M$) 1,003 994 Adjusted EBITDA (M$) 106 116 Adjusted EBITDA Margin 10.6% 11.7% Net Debt to Adjusted EBITDA Ratio2 3.8x 3.7x 1 Selected financial data adjusted to proportionally reflect t
Slide 32: Greenpac Impact on EPS
CONTAINERBOARD PACKAGING GROUP Greenpac Impact on EPS • Assuming a conservative multiple, Greenpac adds significant value to the Cascades story Greenpac Impact on Illustrative Value Illustrative EBITDA Cascades’ EPS per Share 1 (US$M) (CAN$) (CAN$) 60 $0.08 $1.70 80 $0.17 $2.80 100 $0.27 $3.90 EBITD
Slide 33: Tissue Papers Group: Optimize Logistics and Increase Integration
TISSUE PAPERS GROUP Optimize Logistics and Increase Integration Retail Away-from-Home C Converting Now taking steps to M Manufacturing integrate volume from our mill in Oregon M C CM CM C CM CM M M M C C M C C C C Wagram was a M M C significant step to C bring us closer to growth regions 33
Slide 34: Geographically Diversified
GEOGRAPHICALLY DIVERSIFIED 34
Slide 35: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or [email protected] 35