Cascades Inc. · TSX:CAS
Cascades — Q2 2016 Earnings Presentation
36 slides from Cascades's earnings presentation, Aug 5, 2016
Slide 1: Review of Q2 2016 Financial Results
CASCADES INC. Review of Q2 2016 Financial Results August 5, 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: Opening Remarks
OPENING REMARKS ( 10 8Mee
Slide 4: Summary of Financial Results
SUMMARY OF FINANCIAL RESULTS (M CAN$) EBITDA 1 (CAN$) EPS 1 (% of sales) 150 16% $0.60 134 $0.52 125 14% $0.50 103 104 106 112 93 $0.38 100 12% $0.40 82 85 $0.35 $0.25 75 10% $0.30 $0.23 $0.18 50 8% $0.20 $0.08 25 6% $0.10 $0.04 0 4% $0.00 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2014 20
Slide 5: Historical Segmented Shipments
HISTORICAL SEGMENTED SHIPMENTS Containerboard Boxboard Europe ('000 s.t.) ('000 s.t.) 300 296 300 296 287 284 286 277 282 277 278 280 280 268 268 263 266 263 267 260 260 257 240 240 220 220 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2014 2015 2015 2015 2015 2016 2016 2014 2014 2015 2015 20
Slide 6: Historical Segmented EBITDA
HISTORICAL SEGMENTED EBITDA1 Containerboard Boxboard Europe (M CAN$) (% of sales) (M CAN$) (% of sales) 75 24% 25 20% 68 56 55 60 19 60 55 20% 20 16% 46 52 17 17 44 16 45 16% 15 14 14 14 12% 13 30 12% 10 8% 15 8% 5 4% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2014 2015 2015 2015 2015 2016
Slide 7: Segmented EBITDA Waterfalls
SEGMENTED EBITDA WATERFALLS1 Containerboard Boxboard Europe Selling Acqu. Acqu. Selling EBITDA Reco. & Other Raw EBITDA EBITDA Other Raw Reco. & EBITDA (M CAN$) Prices & Volume Energy & CAN$ (M CAN$) Energy & CAN$ Volume Prices & Q1-2016 Recyc. Costs Materials Q2-2016 Q1-2016 Costs Materials Recyc.
Slide 8: Key Performance Indicators (KPIs)
KEY PERFORMANCE INDICATORS (KPIs) Sequentially: Containerboard: stable @ 93% Tissue Papers: 87% to 89% Boxboard Europe: 97% to 92% ('000 s.t.) 2 Total Shipments Capacity Utilization Rate (Manufacturing only) 800 100% 766 769 743 757 738 741 93% 93% 93% 93% 93% 750 95% 721 717 91% 90% 89% 700 90% 650
Slide 9: Raw Material Costs – Index List Prices
RAW MATERIAL COSTS – INDEX LIST PRICES Recycled Fibre Prices Current Virgin Pulp Prices Current (US$/ton) (US$/ton) 200 (July) 1,100 (July) 157 1,000 1,000 150 900 100 100 850 800 50 700 Apr 13 Apr 15 Apr 13 Apr 14 Apr 15 Apr 16 Apr 14 Apr 16 Jan 14 Jan 15 Jan 16 Jan 14 Jan 15 Jan 16 July 13 July 14
Slide 10: Financial Review
FINANCIAL REVIEW ( 10 8Mee
Slide 11: Q2 2015 – Q2 2016 Sales Reconciliation
Q2 2015 – Q2 2016 SALES RECONCILIATION (M CAN$) 1,025 +5% 4 1,000 10 5 998 (1) (4) 34 975 950 950 0 Selling Recovery Sales Acqu. & Corp. Sales CAN$ Prices & Volume Q2-2015 Disposals Elim. Q2-2016 & Mix Recycling (M CAN$) Containerboard 322 6 11 4 (1) 342 Boxboard Europe 202 13 (5) (14) 1 197 Special
Slide 12: Q1 2016 – Q2 2016 Sales Reconciliation
Q1 2016 – Q2 2016 SALES RECONCILIATION (M CAN$) 0% 1,050 4 5 35 (1) (10) 1,025 1,003 1,000 998 (38) 0 Recovery Selling Sales Acqu. & Corp. Sales Volume & Prices CAN$ Q1-2016 Disposals Elim. Q2-2016 Recycling & Mix (M CAN$) Containerboard 336 4 4 5 (7) 342 Boxboard Europe 219 (12) 1 (3) (8) 197 Speci
Slide 13: Q2 2015 – Q2 2016 EBITDA Variance Analysis
Q2 2015 – Q2 2016 EBITDA VARIANCE ANALYSIS (M CAN$) 130 +9% 2 1 4 - - 120 5 10 112 110 (13) 103 0 Selling Recovery EBITDA Raw Acqu. & Other EBITDA Prices & Energy CAN$ & 1 Volume Q2-2015 Materials Disposals Costs Q2-2016 Mix Recycling (M CAN$) Containerboard 55 11 1 (4) (3) 60 Boxboard Europe 19 (5)
Slide 14: Q1 2016 – Q2 2016 EBITDA Variance Analysis
Q1 2016 – Q2 2016 EBITDA VARIANCE ANALYSIS (M CAN$) +6% 130 2 1 7 - (3) 120 13 (4) 112 110 (10) 106 0 Recovery Selling EBITDA Other Acqu. & Raw EBITDA Volume Energy & CAN$ Prices & Q1-2016 Costs Disposals Materials 1 Q2-2016 Recycling Mix (M CAN$) Containerboard 55 2 1 (1) (2) 5 60 Boxboard Europe 1
Slide 15: Quarterly EPS Variance – Q2 vs Q2
QUARTERLY EPS VARIANCE – Q2 VS Q2 Q2-2015 Q2-2016 Excluding Excluding specifics Specifics As reported specifics Specifics As reported EBITDA 103 2 105 112 112 Depreciation (44) (44) (47) (47) EBIT 59 2 61 65 65 Financing expenses & interest expense on employee future benefits (24) (19) (43) (22) (22
Slide 16: Quarterly EPS Variance – Q2 vs Q1
QUARTERLY EPS VARIANCE – Q2 VS Q1 Q1-2016 Q2-2016 Excluding Excluding specifics Specifics As reported specifics Specifics As reported EBITDA 106 14 120 112 112 Depreciation (47) (47) (47) (47) EBIT 59 14 73 65 65 Financing expenses & interest expense on employee future benefits (25) (25) (22) (22) F
Slide 17: Q2 2016 EBITDA to Operating Income Reconciliation
Q2 2016 EBITDA TO OPERATING INCOME RECONCILIATION (M CAN$) 120 112 100 80 4 5 65 65 (3) 60 (47) (6) 40 20 0 EBITDA Dep. & Op. income Unrealized gain Gain on acq., Impairment Restructuring Operating excluding amort. excluding on financial disposals charges costs income spec. items spec. items instrum
Slide 18: Net Earnings – IFRS vs Excluding Specific Items
NET EARNINGS – IFRS VS EXCLUDING SPECIFIC ITEMS NET EARNINGS NET EARNINGS 1 PER COMMON SHARE (in millions of Canadian dollars, except amount per common share) Q2-2016 Q2-2016 As per IFRS 36 $0.38 Specific items: Gain on acquisitions, disposals and others (4) ($0.03) Impairment charges 3 $0.02 Restru
Slide 19: Cash Flow Overview
CASH FLOW OVERVIEW Cash flows from operations, adjusted 2 Free cash flows, adjusted 2, 3 (M CAN$) (M CAN$) 125 116 80 75 110 106 59 100 60 86 49 75 40 32 56 50 20 25 0 (5) 0 (20) Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 2014 2015 2016 (in millions of CAN$) Year
Slide 20: Net Debt Reconciliation – Q2-2016
NET DEBT RECONCILIATION – Q2-2016 (M CAN$) -1% 1,700 1,684 51 1,664 1,650 26 1,600 14 8 (116) (3) 1,550 1,500 Net Debt Cash flow from FX Rate Dividends paid Investments Var. in non- Capital Net Debt 03/31/2016 operations & share and others cash work. cap. investments, net 06/30/2016 buyback, net of
Slide 21: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM EBITDA Interest Coverage Ratio 7.0x 6.0x 5.2x 5.8x 6.0x 5.0x 4.7x 5.0x 4.7x 5.0x 4.0x 4.6x 3.4x 3.4x 4.0x 3.0x 4.0x 3.0x 3.6x 2.5x 3.0x 2.0x 2011 2012 2013 2014 2015 Q2 2011 2012 2013 2014 2015 Q2 2016 2016 Net Debt / Net Debt + Total Eq
Slide 22: Proportionate Consolidation – Cascades
PROPORTIONATE CONSOLIDATION – CASCADES Note 1 – Selected financial data adjusted to proportionally reflect the impact of certain associates and joint ventures namely Greenpac at 59.7%, Sonoco JVs at 50%, Reno de Medici at 57.6% and Recovery at 73% until November 30, 2015. Not adjusted for Boralex. N
Slide 23: Financial Information on Greenpac
FINANCIAL INFORMATION ON GREENPAC 1 Greenpac - Selected financial data (in millions of US dollars) 2014 2015 LTM Q2-2016 Sales 210-230 235-250 240-255 Adjusted EBITDA excluding specific items 38-45 65-72 63-70 Adjusted EBITDA excluding specific items - margin 16%-20% 26%-30% 25%-28% Net debt 2,3 270
Slide 24: Segmented Review
SEGMENTED REVIEW ( 10 8Mee
Slide 25: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Comments on sequential performance Q2 2016 Q1 2016 Q2 2015 Shipments ('000 s.t.) Higher global external shipments (-3% for mills and +7% for corrugated box 284 3% 1% activities). Higher corrugated box shipments resulted in higher internal sale
Slide 26: Packaging Products / Boxboard Europe
PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Q2 2016 Q1 2016 Q2 2015 Lower shipments for recycled grades due to weaker European demand and lower Shipments ('000 s.t.) tons produced and sold by the Arnsberg mill due to a temporary downtime taken to 267
Slide 27: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q2 2016 Q1 2016 Q2 2015 Shipments ('000 s.t.) Sequential increase in Industrial Packaging shipments for a second consecutive 48 7% 9% quarter. Consumer Products Packaging and Recovery segments also experi
Slide 28: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q2 2016 Q1 2016 Q2 2015 Converted products increased by 6% due to the usual seasonality in the Away-from- Shipments ('000 s.t.) Home segment and additional volume for a major customer in the Canadian retail 158 10% 3% market. Ex
Slide 29: Q&A and Concluding Remarks
Q&A AND CONCLUDING REMARKS
Slide 30: Near Term Outlook
NEAR TERM OUTLOOK • Raw material cost and volume headwinds + • Higher volume in Q3 in Europe I • FX rate still favourable • Higher prices for recovered papers in • Energy costs still favourable North America Boxboard EBITDA EBITDA EBITDA EBITDA Containerboard Specialty Products Tissue Papers Europe
Slide 31: Appendix
APPENDIX
Slide 32: Foreign Exchange
FOREIGN EXCHANGE US$/CAN$ Exchange rates Euro€/CAN$ Hedging Program – US$ Cash flows 1.10 1.10 2016 1.00 1.00 • 23% to 58% of exposure (net of interest) hedged at an average rate of 1.18 CAN$/US$ to 1.21 CAN$/US$ 0.90 0.90 2017 0.80 0.80 • 28% to 51% of exposure (net of interest) hedged at an 0.70 0
Slide 33: Energy Prices
ENERGY PRICES Natural gas Energy prices Crude oil Hedging Program – Natural gas (US$) (US$) 12.00 120 • Canada: 10.00 100 • 2016: 68% at 3.90 CAN$/GJ 8.00 80 • 2017: 57% at 3.94 CAN$/GJ 6.00 60 4.00 40 • U.S.: 2.00 20 • 2016: 40% at 4.47 US$/mmBtu 0.00 0 • 2017: 39% at 3.91 US$/mmBtu Q1-14 Q1-15 Q2-
Slide 34: Selected Reference Prices
SELECTED REFERENCE PRICES Containerboard - Selected Products Current Boxboard Europe - Selected Products Current (US$/s.t.) 650 (July) (Euro€/m.t.) 1,200 (June) 615 1,100 600 1,043 1,000 550 900 515 800 500 700 450 657 Linerboard 42-lb. unbleached kraft, Eastern U.S. 600 Coated duplex - virgin board
Slide 35: 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 different Q2 2016 Q2 2016 than our actual selling prices or purchasing costs 2014 2015 2016 vs. Q2 2015 vs. Q1 2016 Year Q1 Q2 Q3 Q4 Year Q1 Q2 (units) (%) (units) (%) Selling prices
Slide 36: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or [email protected] 36