Cascades Inc. · TSX:CAS
Cascades — Q2 2014 Earnings Presentation
33 slides from Cascades's earnings presentation, Aug 12, 2014
Slide 1: Review of Q2 2014 financial results
CASCADES INC. Review of Q2 2014 financial results August 12, 2014
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 ww! Cascades ‘GREEN BY NATURE™
Slide 4: Summary of Financial Results
SUMMARY OF FINANCIAL RESULTS (M CAN$) EBITDA 1 (M CAN$) EPS 1 (% of sales) 125 14.0% $0.24 102 $0.19 94 91 100 12.0% $0.16 81 73 81 77 $0.09 $0.08 69 $0.05 $0.05 $0.07 75 65 10.0% $0.08 $0.01 50 8.0% $0.00 $(0.04) 25 6.0% $(0.08) $(0.06) 0 4.0% $(0.16) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Slide 5: Specific Items During Q2-2014
SPECIFIC ITEMS DURING Q2-‐2014 Strategic initiatives Closure of the Djupafors boxboard mill Exit from the fine papers market Exit from the kraft paper market Refinancing of 2016 and 2017 senior notes at better terms 5.5% coupon Maturities pushed forward to 2021 and 2022 Other elem
Slide 6: Historical Segmented EBITDA
HISTORICAL SEGMENTED EBITDA1 Containerboard Boxboard Europe (M CAN$) (% of sales) (M CAN$) (% of sales) 48 46 16% 28 16% 42 43 23 24 33 33 20 36 12% 21 12% 26 25 25 23 12 12 11 12 11 24 8% 14 8% 6 12 4% 7 4% 0 0% 0 0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2012 2012 2013 2013 201
Slide 7: Segmented EBITDA Waterfalls
SEGMENTED EBITDA WATERFALLS Containerboard Boxboard Europe Selling Acqu. Acqu. Selling EBITDA Other Raw EBITDA EBITDA Other Raw EBITDA (M CAN$) Volume Prices & Energy & CAN$ (M CAN$) CAN$ & Volume Energy Prices & Q1-2014 Costs Materials Q2-2014 Q1-2014 Costs Materials Q2-2014 Mix Divest. Divest. Mix
Slide 8: Raw Material Costs
RAW MATERIAL COSTS Recycled Fiber North American Current (US$/ton) Virgin Pulp Prices Current (US$/ton) List Prices (August) 1,100 (July) 300 250 1,000 1,030 200 900 855 150 160 800 100 100 700 50 600 Oct 11 Apr 11 Jan 12 Apr 12 Oct 12 Jan 13 Apr 13 Oct 13 Jan 14 Apr 14 July 11 July 12 July 13 July
Slide 9: Key Performance Indicators (KPIs)
KEY PERFORMANCE INDICATORS (KPIs) 4% increase in Containerboard: 91% Boxboard Europe: 97% manufacturing Spec. Prod.: 73% shipments Tissue Papers: 95% ('000 s.t.) Total Shipments 1 Capacity Utilization Rate (Manufacturing only) 2 900 95% 828 826 93% 785 790 805 779 795 91% 91% 800 92% 762 766 90% 90%
Slide 10: Financial Review
FINANCIAL REVIEW ww! Cascades ‘GREEN BY NATURE™
Slide 11: Discontinued Operations Summary
DISCONTINUED OPERATIONS SUMMARY December 31, 2013 Quarter - March 31, 2014 Quarter -June 30, 2014 Previously Discontinued operations As Previously Discontinued operations As Including Discontinued operations As Reported Europe Fine Papers Reported Reported Europe Fine Papers Reported Disc. Op. Europ
Slide 12: Q2 2013 – Q2 2014 Sales Reconciliation
Q2 2013 – Q2 2014 SALES RECONCILIATION (M CAN$) 1,020 +5% 5 4 1,000 55 985 (5) 980 (8) 960 940 934 0 Selling Sales Corp. Acqu. & Sales CAN$ Prices Volume Q2-2013 Elim. Disposals Q2-2014 & Mix (M CAN$) Containerboard 335 10 9 2 (5) 12 363 Boxboard Europe 203 24 (1) (1) (5) 220 Specialty Products 158
Slide 13: Q2 2013 – Q2 2014 EBITDA Variance Analysis
Q2 2013 – Q2 2014 EBITDA VARIANCE ANALYSIS (M CAN$) +12% 110 5 1 - 6 100 (3) 13 91 90 (12) 81 80 0 Selling EBITDA Other Acqu. & Raw EBITDA CAN$ Prices & Energy Volume Q2-2013 Costs Disposals Materials Q2-2014 1 Mix (M CAN$) Containerboard 33 4 9 4 (7) 43 Boxboard Europe 12 3 2 (1) 2 (1) 3 20 Special
Slide 14: Q1 2014 – Q2 2014 EBITDA Variance Analysis
Q1 2014 – Q2 2014 EBITDA VARIANCE ANALYSIS (M CAN$) 130 120 +18% 8 110 9 - - 100 17 (5) 91 90 (15) 80 77 0 Selling EBITDA Other Acqu. & Raw EBITDA Volume Energy Prices & CAN$ Q1-2014 Costs Disposals Materials Q2-2014 1 Mix (M CAN$) Containerboard 33 10 4 5 (1) (8) 43 Boxboard Europe 24 (2) (2) 2 (3)
Slide 15: Q2 2014 EBITDA to Operating Income Reconciliation
Q2 2014 EBITDA TO OPERATING INCOME RECONCILIATION (M CAN$) 100 91 90 80 70 60 50 45 40 - (46) (2) 30 20 5 10 0 (38) -10 EBITDA Depr. & Op. income Gain on acqui., Unrealized loss Impairment Operating excluding amort. excluding disposals on fin. instr. charges and income spec. items spec. items and ot
Slide 16: Specific Items During Q2-2014
SPECIFIC ITEMS DURING Q2-‐2014 Strategic initiatives Gross Net Impact on Closure of the Djupafors boxboard mill $11M $11M EPS Sale of fine papers activities $38M $27M EPS Announced closure of kraft paper mill ($3M) ($2M) EBITDA and EPS Refinancing of 2016 and 2017 senior notes $44M $33M
Slide 17: Cash Flow Overview
CASH FLOW OVERVIEW 1 Cash flow from continuing operations adjusted Free cash flow (M CAN$) (M CAN$) 90 60 80 53 75 50 58 58 52 60 40 45 39 30 30 20 15 12 11 15 10 3 0 0 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2014 2013 2014 (in millions of CAN$) Q1 Q2 Q3 Q4 Year Q1
Slide 18: Net Debt Reconciliation
NET DEBT RECONCILIATION (M CAN$) 1,720 -4% 1,708 1,700 EBITDA excl. specific $91M Tax paid ($2M) 1,680 Financial fees ($35M) Dividends & pension $2M Restructuration East Angus ($4M) 1,660 Subtotal $52M (47) Financial fee premium ($20M) 33 1,645 1,640 Cash flow from operations $32M 1,620 (38) 16 1,60
Slide 19: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net debt / LTM EBITDA Interest Coverage Ratio 7.0x 5.0x 4.6x 5.8x 6.0x 4.0x 3.4x 3.5x 5.0x 2.9x 3.0x 5.0x 3.0x 4.5x 4.6x 4.5x 2.5x 4.0x 2.0x 3.3x 3.0x 1.0x 2009 2010 2011 2012 2013 LTM 2009 2010 2011 2012 2013 LTM 06/30/2014 06/30/2014 Net Debt / Net D
Slide 20: Segmented Review
SEGMENTED REVIEW ww! Cascades ‘GREEN BY NATURE™
Slide 21: Packaging / Containerboard
PACKAGING / CONTAINERBOARD Results Change vs. Comments on sequential performance Q2 2014 Q1 2014 Q2 2013 Total shipments increased by 9%, (+14% for the mills and +6% for converted products – Shipments ('000 s.t.) same plants basis), mainly reflecting the seasonal pickup and better operating rates
Slide 22: Packaging / Boxboard Europe
PACKAGING / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Q2 2014 Q1 2014 Q2 2013 Shipments ('000 s.t.) Lower shipments in all of our markets during the quarter due to a general domestic 283 -2% -1% market slowdown in June; however, year-to-date volumes are stable Average
Slide 23: Packaging / Specialty Products
PACKAGING / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q2 2014 Q1 2014 Q2 2013 Results and the prior year comparison for the Specialty Products Group exclude Shipments ('000 s.t.) financial information of the Fine Papers segment which was sold on June 30, 2014 and re
Slide 24: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q2 2014 Q1 2014 Q2 2013 Higher shipments in all our segments except in the US retail market Shipments ('000 s.t.) Most important increase was in the away-from-home segment 140 8% -6% Shipments of parent rolls also increased
Slide 25: Q&A and Concluding Remarks
Q&A AND CONCLUDING REMARKS ww! Cascades ‘GREEN BY NATURE™
Slide 26: Near Term Outlook
NEAR TERM OUTLOOK • Impact of additional capacity in tissue industry • Q3 seasonality impact on volumes • Short term decrease of recovered paper costs • Aggressive competitive stance by national + brands and supply management by major I • Price increases for boxboard in North America retails • Stabl
Slide 27: Appendix
APPENDIX ww! Cascades ‘GREEN BY NATURE™
Slide 28: Quarterly Variance of EPS
QUARTERLY VARIANCE OF EPS Q1-2014 Q2-2014 Share of Share of Operating Ass/JV & Excluding Operating Ass/JV & Excluding segments Non-Cont. Int. specifics Specifics As reported segments Non-Cont. Int. specifics Specifics As reported EBITDA 77 77 4 81 91 91 (40) 51 Depreciation (44) (44) (44) (46) (46)
Slide 29: Foreign Exchange
FOREIGN EXCHANGE Exchange rates Hedging Program – USD Cash flows US$/CAN$ Euro€/CAN$ 1.10 0.95 • 2014 1.05 0.90 1.00 0.85 34% to 62% of exposure hedged at an average 0.95 0.80 rate of 1.045 CAN$/US$ to 1.080 CAN$/US$ 0.90 0.75 • 2015 0.85 0.70 0.80 0.65 21% to 41% of exposure hedged at an average 0.
Slide 30: Energy Prices
ENERGY PRICES Natural gas Energy prices Crude oil Hedging Program – Natural gas (US$) (US$) • Canada: 8.00 110 7.00 • 2014 : 69% at 5.43 CAN$/GJ 100 6.00 90 • 2015 : 64% at 4.79 CAN$/GJ 5.00 80 4.00 3.00 70 • U.S.: 2.00 60 • 2014 : 57% at 5.13 US$/mmBtu 1.00 50 • 2015 : 47% at 5.07 US$/mmBtu Q2-11 Q
Slide 31: Selected Industry Reference Prices
SELECTED INDUSTRY REFERENCE PRICES Containerboard - Selected Products Boxboard Europe - Selected Products (US$/s.t.) (Euro€/m.t.) 1,100 Current 1,200 (July) 1,000 1,100 955 900 1,000 800 900 740 700 700 800 600 700 10$ decrease 20-pt clay coated news (CRB) 500 July 2014 Linerboard 42-lb 600 Coated d
Slide 32: Market Prices and Costs Summary
MARKET PRICES AND COSTS SUMMARY Q2 2014 Q2 2014 These indexes should only be used as indicator of trends and they be different 2011 2012 2013 2014 over Q2 2013 over Q1 2014 than our actual selling prices or purchasing costs. Year Year Q1 Q2 Q3 Q4 Year Q1 Q2 (units) (%) (units) (%) Selling prices (av
Slide 33: Notes
NOTES 1. The Cascades recycled white-lined chipboard selling prices index represents an approximation of Cascades’ recycled grades selling prices in Europe. It is weighted by country. 2. The Cascades virgin coated duplex boxboard selling prices index represents an approximation of Cascades’ virgin g