Cascades Inc. · TSX:CAS
Cascades — Investor Presentation (April 2022)
48 slides from Cascades's investor presentation, Apr 20, 2022
Slide 1: Investor Presentation
Investor Presentation Investor Marketing April 20, 2022 1
Slide 2: Disclaimer
DISCLAIMER FORWARD-LOOKING STATEM ENT 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 num
Slide 3: Same Roots Different Company
~9,950 employees, 78 facilities Same Roots Different Company OUR MISSION To improve the well-being of people, communities and the planet by providing sustainable and innovative solutions that create value. OUR VISION To be a key contributor to our customers’ success by leading the way for sustainabl
Slide 4: Our Sustainable Products
OUR SUSTAINABLE PRODUCTS We have been making products from recycled materials for almost 60 years. Our Our markets We are aligned Our supply Our products operations are are growing with industry chain is are eco- sustainable trends responsible designed 4
Slide 5: Strategically Repositioned
STRATEGICALLY REPOSITIONED Over the last 10 years, Cascades has repositioned our operations with 17 closures, 11 divestitures, 15 strategic transactions and 4 new projects, to meet evolving market dynamics and customer needs. 2012 2014 2016 2018 • Consolidated 3 box • Exited Kraft paper • Acquired 1
Slide 6: A Modernized Asset Base
A MODERNIZED ASSET BASE Investments and modernization initiatives have improved the competitiveness* of our assets. CONTAINERBOARD CONTAINERBOARD CONTAINERBOARD Manufacturing (with Bear Island) Converting Sheeting 16% 20% 31% 36% Total 15% Total # of Capacity Capacity Machines 63% 6% 69% 44% Tier 1
Slide 7: Annual Historical Performance
ANNUAL HISTORICAL PERFORMANCE Our modernization initiatives, investments and strategy have delivered results, leading to significant and steady growth. SALES (in 000’s CAN$) ADJUSTED OIBD1 & OIBD MARGIN LEVERAGE RATIO (M CAN$, % of sales) 12.0% 12.6% 13.3% 11.0% 10.9% 10.5% 10.1% 9.9% 9.3% 9.8% 1,05
Slide 8: Segmented Annual Sales, Adjusted OIBD & Margin
Containerboard (millions of CAN$/%) Segmented Annual 1,652 1,840 1,827 1,918 2,009 Sales, Adjusted OIBD1 15.0% 22.3% 24.1% 21.0% 18.5% & Margin 410 441 403 372 247 2017 2018 2019 2020 2021 Sales Adj. OIBD Adj. OIBD Margin Specialty Products (millions of CAN$/%) Tissue Papers (millions of CAN$/%) 1,5
Slide 9: Capital Allocation
CAPITAL ALLOCATION In the last 5 years $2.1 billion of adjusted OIBD was generatedincludes ~ CAN$275 M for Bear Island conversion Source of Funds 2017 -2021 Use of Funds 2017 - 2021 $143 $188 Share Issuance $747 $592 Dividends & Share Repurchases Business Disposals Debt Repayment $1,417 $1,527 Capit
Slide 10: Financial Results
FINANCIAL RESULTS The Covid-19 pandemic led to important fluctuations in demand, added significant inflationary pressure on costs and curtailed labour availability… Our 2022-2024 Strategic Plan outlines our detailed actionable objectives – Our Path Forward 10
Slide 11: Results 2021
(Full Year 2021, except where specified) Sales $3,956 M SALES1 Containerboard Adj. OIBD3 & Margin $389 M / 9.8% Packaging 33% 15% 6% Adj. CF from operations $296 M 2021 79% 52% Specialty Products Adj. Free CF (used) Adj. Free CF (used) per share ($54M) ($0.53) Results 2 14% ADJ. OIBD1,3 Tissue Net d
Slide 12: Fibre Costs
FIBRE COSTS FIBER COSTS (US$/s.t.) Current VIRGIN PULP PRICES (US$/tonne) Current 250 (Apr-22) (Apr-22) 1,800 225 200 1,600 235 175 1,665 1,400 150 140 125 1,200 1,450 100 75 1,000 50 800 25 0 600 Sept 17 Sept 18 Sept 19 Sept 20 Sept 21 May 17 May 18 May 19 May 20 May 21 Mar 17 Mar 18 Mar 19 Mar 20
Slide 13: Financial Ratios & Debt Maturities
FINANCIAL RATIOS & DEBT MATURITIES Net Debt / Adjusted OIBD1,3 Interest Coverage Ratio2,3 5.0x 6.7x 4.6x 4.7x 6.0x 5.8x 4.0x 3.8x 4.0x 3.6x 3.5x 3.5x 4.7x 4.6x 4.6x 4.3x 2.5x 3.0x 3.4x 3.4x 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Net Debt /
Slide 14: Capital Investments
CAPITAL INVESTMENTS (in property, plant & equipment, in millions of Canadian dollars, excluding new leases, disposal of assets and accounts payable variation) 2022F CAPEX: $415 M1 Includes ~CAD$275 M for Bear Island conversion $15 $35 $330 $312 $40 $26 $27 $50 $81 $227 $213 $37 $39 $22 $169 $20 $24
Slide 15: Near-Term Factors
NEAR-TERM FACTORS Headwinds Tailwinds • Transportation – cost & availability • Favourable raw material markets for • Inflationary pressures on operational Containerboard business costs • Improved sales volumes in packaging • Availability of labour businesses - Containerboard & • Uncertainty related
Slide 16: Sustainability Is in Our DNA
SUSTAINABILITY IS IN OUR DNA Nearly 60 years ago, long before businesses began incorporating environmental principles into their practices, our company became a pioneer of the circular economy by making products from recycled materials. True to our values and dedicated to helping our customers reduc
Slide 17: Sustainability – Driving Positive Change
SUSTAINABILITY – Driving Positive Change Our track record and our sustainability action plan both show we are solutions driven, and we can enable our customers to reduce their footprint through our value-added eco-friendly products and services. Where We Are Where We’re Going 50% greenhouse gas (GHG
Slide 18: Sustainability Action Plan: 2021-2025
SUSTAINABILITY ACTION PLAN: 2021- 2025 → GHG reduction targets approved by the Science Based Targets initiative (SBTi) 18
Slide 19: Recovery Operations
Recovery Operations A natural extension of our operations, delivering financial and strategic value. Largest source of Among Cascades’ lowest Excellent source of market recovered fiber landed cost sources with intelligence, active in all fiber contributing about 25% of ability to raise value through
Slide 20: Recovery Operations
Recovery Operations Cascades recovery and recycling services & solutions provide our operations with the raw material they need, but also help our partners and customers to divert close to 40% of their waste from landfills. 4% 8% 24% 13% ~ 3.0 M s.t. ~ 2.3 M s.t. of fibre consumed, of fibre used by
Slide 21: Where We Are Going
WHERE WE ARE GOING 21
Slide 22: Where We Are Going: Our Top Priorities
Where We Are Going An integrated company with strong assets to drive value for shareholders 1 Deliver on the profitability plan in Tissue 2 Complete the Bear Island start up Our Top Continue to grow our sustainable packaging 3 Priorities business with U.S. capacity expansion 4 Deliver on our Sustain
Slide 23: 2022–2024 Strategic Objectives
Where We Are Going 2022 – 2024 Strategic Objectives CONTAINERBOARD SPECIALTY PRODUCTS TISSUE PAPERS ✓ Be the go-to solution for ✓ Be the leader in ✓ The path forward to businesses sustainable packaging improved profitability Increase pace of new sustainable Leverage well invested asset base and 1 Co
Slide 24: 2022–2024 Financial Targets
Where We Are Going 2022 – 2024 Strategic Objectives: Focused on free cash flow generation + maintaining financial flexibility 1 Revenue: ~$5.0 B+ in 2024 OIBD4 ~11% - 13% in 2022 2 Margin: ~13% - 15% in 2024 Financial Targets CAPEX: ~ $415 M in 2022 (incl. $275M for Bear Island) 3 ~ 4% of revenue in
Slide 25: Business Segments
BUSINESS SEGMENTS 25
Slide 26: Containerboard
Containerboard 6th largest containerboard producer in N.A. (CAN $ M) 600 14% 2,009 Annual capacity: 44% 2,000 1,918 1,840 1,827 1,575 k s.t. 54% 1,652 22.3% 24.1% 21.0% 500 86% 441 20.5% 1,500 410 403 400 Recycled Virgin Linerboard Medium 372 381 15.0% 328 321 300 1,000 247 230 200 Manufacturing Con
Slide 27: Containerboard: North American Market
Containerboard The North American market offers good returns and attractive growth potential Market share: top 4 players = 75%1 North American Capacity and Operating Rate2 • Forecasted 2021 - 2026 CAGR capacity growth of ~ 2.7% • Operating rate average ~93.5% over 2021 - 2026 51.3 Pratt +2.7% 50.5 5
Slide 28: Containerboard: Key Market Growth Drivers
Containerboard North American Containerboard Key Market Growth Drivers Expected Production Net Exports (M Tons) Containerboard consumption (M Tons) e-Commerce adoption • COVID-19 accelerated adoption amongst all + 2.4% population segments 6.3 5.9 5.4 6.0 5.1 5.1 • Consumer behavior changes, increase
Slide 29: Containerboard: Box Demand Growth
Containerboard Box Shipment Growth Box Demand Growth Segmentation 3.7% 3% 25% Agriculture, Food & Beverage 2.6% 2020-2025 Manufacturing demand growth 2.1% 2.1% 2.0% + 46.7 B ft2 E-Commerce 1.8% 57% 15% Retail, Wholesale & 1.1% Other 0.3% • Box demand forecasted growth: +2.1% (CAGR) 2020-2025 • E-com
Slide 30: Containerboard: Platform Positioned for Market Growth
Containerboard Our platform is well positioned to capitalize on market growth Distribution/E-com Produce Food Processing Consumer (CPG) Industrial (In MSF) Food processing Others 37% 2% Others 6% Produce Food 4% processing* CPG 48% Produce 7% 7% Cascades Industry Industrial CPG 8% Distribution/ 16%
Slide 31: Containerboard: Bear Island Investment
Containerboard With our investment in Bear Island, we have significant growth opportunity to meet market demand. Full START DATE: 12/2022 ≤ 2021 2022 2023 2024 2025 potential REVISED PROJECT COST: $175 $210 $50 - - US $425 M - $450 M PRODUCTION RAMP UP ~ 70% ~ 94% ~ 97% 100% ANNUAL PRODUCTION (‘000
Slide 32: Specialty Products
Specialty Products 3 Comprehensive Packaging Solutions Provider Focused on Strategic Scalable Markets 2021 sales of $548 M increased 16% from 2020 (CAN $ M) 600 100 548 90 492 500 473 13.1% 80 74 12.7% 70 34% 400 358 11.2% 37% 339 2021 2021 60 59 60 sales 55 sales 300 50 63% 66% 10.0% 9.2% 42 40 200
Slide 33: Specialty Products: Market Growth Drivers
Specialty Products With 50% of our 2021 sales coming from the fresh produce, egg packaging, food services & isothermal distribution markets, our eco-friendly packaging solutions are well positioned to capitalize on market trends. North American Fresh Produce and Key Market Growth Drivers Foodservice
Slide 34: Specialty Products: Sustainable Packaging Solutions
Specialty Products Our sustainable packaging solutions are aligned with growing market segments. (1) Sources: Freedonia "Molded Pulp Packaging" USA, April 2020; Freedonia "Egg Cartons" USA, Retail, July 2020; Freedonia "Fresh Produce" USA, Retail, March 2021; Freedonia "Case Ready Fresh Protein Pack
Slide 35: Tissue Papers
Tissue Papers 4th largest tissue producer in N.A. (CAN $ M) 25% 2,000 300 32% USA 2021 2021 Recycled Annual Annual 250 Canada Sales Sales Virgin 1,615 68% 1,600 1,509 200 75% 10.8% 1,352 175 1,268 1,272 150 1,200 7.4% 5.7% 94 100 86 72 2.1% 1.3% 50 800 28 27 17 6 0 Retail Away-from- Parent -37 -50 T
Slide 36: Tissue Papers – What Happened in 2021?
Tissue Papers – What happened in 2021? Volume + raw material headwinds accounted for 80% of the reduction in adjusted OIBD1 (CAN$ Millions) Covid-19 had a significant disruptive and unpredictable impact on demand & production Average US Monthly Parent Roll Capacity & Production2 (‘000 s.t.) US Tissu
Slide 37: Tissue Papers: Platform Modernization
Tissue Papers More than $400 M invested between 2017 – 2021 to strengthen and modernize our platform. 2022 2019 ACTION EQUIPMENT CAPACITY 17% 9% 9% 26% 4 paper machines 104 K s.t. Closed 22% 48% 7 facilities 10% 28 converting lines 16 M cases 82% 18% 13 converting lines (6 Added sites) 15 M cases 62
Slide 38: Tissue Papers: Growing Retail Segments
Tissue Papers The majority of our retail tissue business is in growing retail segments. (5-year CAGR) Total Paper Private Label Cascades Others 5% 3% 4% 1% Drug: (0.5%) 4% 4% 1% • ~60% of Private Label volume is sold in Club 5% 5% Online: 22.6% 4% 11% and Mass Merchandiser customer segments 5% Dolla
Slide 39: Tissue Papers: Capacity and Growth Drivers
Tissue Papers Tissue Capacity1 Key Market Growth Drivers3 (‘000 tonnes) Retail 10,000 • Premiumization; demand for Ultra and + 1.1% + 0.3% Premium product segments + 2% 9,600 72% • Consumers increasingly brand agnostic, 9,200 willing to purchase private label 8,800 Away-from-Home 8,400 (AFH) 2017 20
Slide 40: Tissue Papers: Interconnected US and Canadian Businesses
Tissue Papers Our US and Canadian businesses are interconnected 52% of our annual capacity is in the US… …while 64% of our 2021 volume was sold in the U.S. …. in 2021 only 47% came from there Annual Capacity: Volume Shipped: 2021 Production 80M cases 57 M cases 64% 25% 31% 36% 23% 21 22% 15 37% 33%
Slide 41: Appendices
APPENDICES 41
Slide 42: Quarterly Segmented Operating Income, Adjusted OIBD & Margin
Containerboard (millions of CAN$/%) Quarterly Segmented 22.0% 21.5% Operating Income 20.1% 122 18.5% 110 108 100 94 13.9% (Loss), Adjusted OIBD1 65 64 70 58 43 & Margin Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Operating Income Adj. OIBD Adj. OIBD Margin Specialty Products (millions of CAN$/%) Tissue
Slide 43: Quarterly Financial Results
In millions of CAN$ In millions of CAN$ Quarterly 105 139 122 73 104 98 107 73 62 42 44 32 Financial 23 22 29 3 8 (1) (9) Results Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 (90) Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Operating Income Adjusted OIBD Net Earnings Adjusted Net Earnings (Loss) (In millions
Slide 44: Quarterly Cash Flows
131137 Quarterly 84 82 86 87 89 35 70 Cash 58 51 20 (4) (12) (54) Flows Q4 2020 Q1 2021 CF from operations In millions of CAN$ Q2 2021 Q3 2021 Adj. CF from operations Q4 2021 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Adj. Free Cash Flow Generated (Used) Q4 2021 In millions of CAN$ 20194 20204 2021 (In million
Slide 45: Reference Prices and Fibre Costs
Reference Prices and Fibre Costs Q4 2021 vs Q4 2021 vs 2019 2020 2021 Q4 2020 Q3 2021 These indexes should only be used as an indicator of trends and they may be different than our actual selling prices or purchasing costs. Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year (units) (%) (units) (%) Selling price
Slide 46: Sustainability Action Plan: 2021-2025
SUSTAINABILITY ACTION PLAN: 2021- 2025 3rd party frameworks, standards & guidelines provide comprehensive & transparent information for our customers, investors & stakeholders RANKING AGENCIES WHERE DATA IS FRAMEWORKS/STANDARDS BEING FOLLOWED/VERIFIED/SUBMITTED FOLLOWED AND/OR EVALUATED 46
Slide 47: Sensitivities
SENSITIVITIES1 SHIPMENTS /CONSUMPTION (‘000 s.t, ‘000 mm Btu for Natural Gas) INCREASE OIBD IMPACT (in CAN$ M) 2 SELLING PRICE (Manufacturing & Converting) Linerboard, Eastern US 400 US$25/s.t. 13 North Corrugated medium, Eastern US 330 US$25/s.t. 10 America Converted products 840 US$25/s.t. 26 Tiss
Slide 48: investor@cascades.com
Ce Cascades investor@cascades.com