Cascades Inc. · TSX:CAS
Cascades — Q3 2012 Earnings Presentation
33 slides from Cascades's earnings presentation, 2012
Slide 1: Review of Q3 2012 financial results
CASCADES INC. Review of Q3 2012 financial results
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
Slide 4: Summary of Financial Results
SUMMARY OF FINANCIAL RESULTS EBITDA Cash flow from operations (adjusted) (M CAN$) (% of sales) (M CAN$) (% of sales) 100 10.0% 80 10.0% 84 79 78 61 80 72 8.0% 60 8.0% 48 60 51 40 40 44 6.0% 40 40 4.0% 6.0% 20 20 2.0% 0 4.0% 0 0.0% Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q3 2011 Q4 2011 Q1 2012 Q2 20
Slide 5: Historical Segmented EBITDA
HISTORICAL SEGMENTED EBITDA Boxboard Europe Containerboard Boxboard Europe Containerboard (M CAN$) (% of sales) (M CAN$) (% of sales) 20 12.0% 60 15.0% 17 55 15 45 12.0% 13 7.0% 36 10 11 10 7 27 26 10 30 9.0% 20 21 23 19 19 5 2.0% 5 4 15 6.0% 0 0 -3.0% 0 3.0% Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 Q4 Q1 Q2 Q
Slide 6: Segmented EBITDA Waterfalls
SEGMENTED EBITDA WATERFALLS Boxboard Europe Containerboard Acqu. Volume Prices Acqu. Volume Prices Other Raw Other Raw (M CAN$) Q2-2012 and Energy & & $ CAN Q3-2012 (M CAN$) Q2-2012 and Energy & & $ CAN Q3-2012 Costs Material Costs Material Divest. Mix Mix Divest. Mix Mix 17 29 2 5 0 28 15 4 27 (1)
Slide 7: Market Dynamics
MARKET DYNAMICS
Slide 8: Raw Material Costs
RAW MATERIAL COSTS (US$/ton) Main Recycled Fiber North Amercian OBM List Prices 300 290 250 Current 200 175 175 150 165 100 100 90 50 White grades (SOP) Brown grades (OCC) 0 July 09 Nov 09 July 10 Nov 10 July 11 Nov 11 July 12 Nov 12 Sept 09 Sept 10 Sept 11 Sept 12 Mar 09 Mar 10 Mar 11 Mar 12 Jan 09
Slide 9: Product Prices
1 000 1 100 1 200 500 600 700 800 900 (Euro/m.t.) 1,000 1,100 1,200 500 600 700 800 900 ($US/s.t.) Jan-09 09 Jan-09 Mar-09 09 Mar-09 May-09 09 May-09 Jul-09 09 Jul-09 Sep-09 09 Sep-09 Grocery bag 30-lb Uncoated f reesheet Nov-09 09 Nov-09 Jan-10 10 Jan-10 20-pt bending chip f ood ( URB) Mar-10 10 Ma
Slide 10: Financial Review
FINANCIAL REVIEW
Slide 11: Q3-2011 – Q3-2012 Sales Reconciliation
Q3-2011 – Q3-2012 SALES RECONCILIATION (M CAN$) 1 050 -4% 1 000 28 947 950 (10) (10) (13) 906 (16) 900 (20) 850 800 Sales Acquistions Divest. Corporate $CAN Volumes Selling Sales Q3-2011 & Elimin. Prices Q3-2012 Closures & Mix Decrease in sales resulting from lower volume, FX and product mix 11
Slide 12: Q3-2011 – Q3-2012 EBITDA Variance Analysis
Q3-2011 – Q3-2012 EBITDA VARIANCE ANALYSIS (M CAN$) -1% 5 3 125 35 (1) (1) 100 79 (19) 78 75 (23) 50 25 0 Business Selling Raw Other Q3-2011 Acqu. & Energy Volume Prices FX Q3-2012 Materials1 Costs Disposals & Mix (M CAN$) Containerboard 27 2 2 1 1 (6) 1 (2) 26 Boxboard Europe 10 14 (1) (3) (1) (11)
Slide 13: Q2-2012 – Q3-2012 EBITDA Variance Analysis
Q2-2012 – Q3-2012 EBITDA VARIANCE ANALYSIS -7% (M CAN$) 120 100 7 0 0 84 78 80 (1) (5) (2) (5) 60 40 20 0 Selling Other Raw Acqu. and Q2-2012 1 Energy Volumes Prices & $ CAN Q3-2012 Costs Materials Divest. (M CAN$) Mix Containerboard 23 4 (2) 1 2 (1) (1) 26 Boxboard Europe 11 (1) 5 (1) (5) (1) (1) 7
Slide 14: Q3-2012 EBITDA to Operating Income Reconciliation
Q3-2012 EBITDA TO OPERATING INCOME RECONCILIATION (M CAN$) 90 80 78 70 60 50 40 6 36 33 30 (45) (1) (2) 20 10 0 EBITDA Depr. & EBIT Impairment Acc. depr. Unrealized Operating excluding amort., excluding charges due to gain on income spec. items excl. spec. items spec. items restr. measures fin. inst
Slide 15: Cash Flow Overview
CASH FLOW OVERVIEW Cash flow from operations, (M CAN$) Free cash flow (M CAN$) including specific items 80 30 21 60 20 60 13 48 42 10 40 35 37 0 20 (5) (3) (10) (7) 0 (20) Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 2011 2012 (in millions of CAN$) Q1 Q2 Q3 Q4 Year
Slide 16: Key Performance Indicators (KPIs)
KEY PERFORMANCE INDICATORS (KPIs) ('000 s.t.) Total Shipments Manufacturing Capacity Utilization Rate 1000 92% Containerboard 85% 902 Boxboard Europe 95% 900 90% Spec. Products 78% 822 829 807 90% 89% Tissue 98% 800 774 796 Containerboard 86% 695 88% Boxboard Europe 86% 700 663 661 87% 87% Spec. Pro
Slide 17: Net Debt Reconciliation
NET DEBT RECONCILIATION (M CAN$) 1,700 12 4 3 23 1,600 1,585 (12) (31) 1,542 (42) 1,500 1,400 1,300 Net Debt Capex, Capital Dividends Other Var. of Variation CF from Net Debt Q2-2012 net of Leases & Assets Working of CAN$ Operations Q3-2012 disposals & Others Buy-backs & Capital Investments Net debt
Slide 18: Balance Sheet & Key Financial Ratios
BALANCE SHEET & KEY FINANCIAL RATIOS Debt / Debt + Equity Net debt / LTM EBITDA 65% 7.0x 59% 61% 59% 60% 5.9x 57% 57% 6.0x 5.8x 5.4x 55% 54% 5.0x 4.6x 50% 4.0x 3.8x 45% 3.3x 40% 3.0x 2007 2008 2009 2010 2011 LTM 2007 2008 2009 2010 2011 LTM 09/2012 09/2012 ¹EBITDA excluding specific items. Starting
Slide 19: Segmented Review
SEGMENTED REVIEW
Slide 20: Tissue Papers
TISSUE PAPERS Results Change vs. Q3 2012 Q2 2012 Q3 2011 Comments on sequential performance Slight increase in the shipments of our US operation (retail and away-from-home) Shipments ('000 s.t.) +1% +13% that surpassed a decrease in Canada 147 Shipments of parent rolls remained stable Average Sellin
Slide 21: Packaging / Containerboard
PACKAGING / CONTAINERBOARD Results Change vs. Q3 2012 Q2 2012 Q3 2011 Comments on sequential performance 1.4% external shipment increase by our manufacturing mills Shipments ('000 s.t.) +1% -8% 1.3% increase in shipments of converted products; a 3% decrease in shipments of 301 boxboard was more than
Slide 22: Packaging / Boxboard Europe
PACKAGING / BOXBOARD EUROPE Results Change vs. Q3 2012 Q2 2012 Q3 2011 Comments on sequential performance Sequentially, shipments lower due to unfavorable economic environment in Europe Shipments ('000 s.t.) and normal downtimes at this period of the year -9% -3% 260 Important investments at the La
Slide 23: Packaging / Specialty Products
PACKAGING / SPECIALTY PRODUCTS Results Change vs. Q3 2012 Q2 2012 Q3 2011 Comments on sequential performance Higher shipments due to higher volumes of Specialty Papers Shipments1 ('000 s.t.) +1% +4% Stable volumes in the Industrial Packaging segment 99 Decrease in shipments in the Recovery segment A
Slide 24: Q&A and Concluding Remarks
Q&A AND CONCLUDING REMARKS
Slide 25: Near Term Outlook: Confidence
NEAR TERM OUTLOOK: Confidence • Lower to stable raw material costs • Increased export prices for recycled • Price increase in containerboard fibre sector • Economic uncertainty, particularly in • Impacts of restructuring and Europe + I optimization measures • Higher demand volatility • Potential to
Slide 26: Strategic Action Plan
STRATEGIC ACTION PLAN 1 2 3 4 Focused investing Optimizing capital ACTION PLAN Restructuring of for modernization of allocation & under-performing Innovation PRIORITIES core operations reducing working units (and IT) capital TOOL OR ERP Working Capital PROCESS Initiative MEDIUM TERM Improve our ROCE
Slide 27: Appendix
APPENDIX
Slide 28: Debt Profile
DEBT PROFILE Net Debt and Leverage Ratio Long-term Debt Maturities (Debt to Distribution LTM EBITDA) (M CAN$) 7.0x 1,805 2,000 2017 2020 6.5x 1,658 1,800 33% 16% 1,570 1,533 1,508 1,5851,542 6.0x 1,454 1,462 1,397 1,445 1,4851,524 1,600 1,298 1,370 1,400 5.5x 1,200 5.0x 1,000 4.5x Before 800 4.0x 20
Slide 29: Energy Prices
ENERGY PRICES Natural gas Energy prices Crude oil Hedging Program – Natural gas (US$) (US$) 7.00 110 • Canada: 6.00 100 • 2012: 71% at 5.48 CAN$/GJ 5.00 90 80 • 2013: 70% at 5.48 CAN$/GJ 4.00 70 3.00 60 2.00 50 • U.S.: 1.00 40 • 2012: 55% at 5.89 US$/mmBtu 0.00 30 • 2013: 53% at 5.79 US$/mmBtu Q1-11
Slide 30: Foreign Exchange
FOREIGN EXCHANGE Exchange rates Hedging Program – USD Cash flows US$/CAN$ EURO/CAN$ • 2012 1.10 1.00 1.05 0.95 26 to 43% of exposure hedged at an 0.90 average rate of 1.033CAN$/US$ to 1.00 0.85 1.068CAN$/US$ 0.95 0.80 0.75 • 2013 0.90 0.70 15 to 40% of exposure hedged at an 0.85 0.65 average rate of
Slide 31: North American Manufacturing Spread
NORTH AMERICAN MANUFACTURING SPREAD 1,300 1,267 1,271 850 1,234 1,234 1,223 750 1,200 650 1,070 550 1,100 512 450 452 397 368 350 1,000 324 250 900 150 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 Manufacturing spread in CAN$ in Q3/12: Q3/12: +1% vs
Slide 32: Market Prices and Costs Summary
MARKET PRICES AND COSTS SUMMARY These indexes should only be used as indicator of trends and they be different 2010 2011 2012 Q3 2012 over Q3 2011 Q3 2012 over Q2 2012 than our actual selling prices or purchasing costs. Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 (units) (%) (units) (%) Selling prices (average)
Slide 33: Notes
NOTES 1. The Cascades North American selling prices index represents an approximation of the Corporation's manufacturing selling prices in North America (excluding converting). It is weighted according to shipments and is based on the average selling price of our North American manufacturing operati