Slide 1: Investor Presentation, Toronto
INVESTOR PRESENTATION, TORONTO April 9, 2018
Slide 2: Disclaimer
DISCLAIMER FORWARD-LOOKING STATEMENT 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 numb
Slide 3: Investment Thesis
INVESTMENT THESIS • Founded in 1964 by the Lemaire brothers in Kingsey Falls, Quebec, Canada 50+ Years of • 92 facilities1, 11,000 employees, operations in Canada, US and Production & Europe2 Focus on • 80% of Cascades’ products are made with recycled fibres Sustainable • Long-term circular economy
Slide 4: Investment Thesis
INVESTMENT THESIS Leading market positions in growing North American packaging and Diversified tissue business segments, well-positioned in Europe Player, Strong # 6 containerboard producer in North America Competitive # 5 tissue producer in North America 1 Positioning # 2 coated recycled boxboard p
Slide 5: Investment Thesis
INVESTMENT THESIS Financial Metrics 2017 Sales by Geography ✓ Revenues: $4.3 B (+6.6% 5-yr CAGR) 2017 SALES FROM 2017 SALES TO (SOURCE) (DESTINATION) ✓ Adj. EBITDA: $393 M (+6.6% 5-yr CAGR) 21% Europe1 21% ✓ Adj. CF Ops.: $277 M (+11.7% 5-yr CAGR) 30% U.S. 40% ✓ Net debt stable at $1.5 B ✓ Net debt/
Slide 6: Near-Term Business Drivers
INVESTMENT THESIS Near-Term Business Drivers Tailwinds ✓ Containerboard: implementation of linerboard/ medium price increases; lower OCC costs ✓ Benefits from business process modernization and implementation of ERP platform ✓ Sales volume increases at new tissue converting facility in Oregon ✓ Q2/1
Slide 7: Strong Financial Profile
OPERATING PERFORMANCE AND FINANCIAL SITUATION Strong Financial Profile Sales (CAN$ M) Operating Income & Margin (CAN$ M and %) CAGR: + 6.6% CAGR: + 19.4% 4,321 250 221 8.0% 4500 4,001 200 176 175 4000 3,861 153 6.0% 3,561 150 137 3,370 5.2% 5.5% 4.0% 3500 3,141 100 72 4.0% 4.0% 3.8% 3000 50 2.0% 2.3
Slide 8: Consolidated Financial Ratios & Debt Maturities
OPERATING PERFORMANCE AND FINANCIAL SITUATION Consolidated Financial Ratios & Debt Maturities Net Debt / LTM Adjusted OIBD1 Interest Coverage Ratio2 5.0x 4.6x 4.7x 4.7x 4.6x 4.0x 3.8x 3 4.2x 3.6x 3.4x 3.4x 3.0x 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Net Debt1 / Net Debt + Total
Slide 9: Leverage Ratio Target of 2.5x
OPERATING PERFORMANCE AND FINANCIAL SITUATION Leverage Ratio Target of 2.5x 6.0x 5.8x 5.0x 5.0x 4.6x 4.7x 4.0x 3.8x 4.0x 3.6x 1 3.0x 2.8x 2 2.4x 2 2.2x 2 2.0x 1.0x 0.0x 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E $288 M of proceeds from the sale of equity stake in Boralex brought us closer
Slide 10: Raw Material Costs – Index List Prices
RAW MATERIAL COSTS – INDEX LIST PRICES (US$/ton) Recycled Fibre Prices Current (US$/ton) Virgin Pulp Prices Current (Avr.) (Mar.) 200 1,300 175 193 1,200 1,260 150 1,100 1,085 125 1,000 100 900 75 78 800 50 700 Oct 15 Oct 16 Oct 17 Apr 15 Apr 16 Apr 17 Apr 18 July 15 July 16 July 17 Jan 15 Jan 16 Ja
Slide 11: Containerboard Packaging: A Leading Canadian and Major North American Player
CONTAINERBOARD PACKAGING A Leading Canadian and Major North American Player ▪ Largest corrugated box producer in Canada with 10% ~31% market share 15% Manufacturing - CAN ▪ 64%1 integration rate, targeting 85%1 in the mid-term 2017 20% Manufacturing - US ▪ Strong platform in Canada and growing prese
Slide 12: Containerboard Packaging: Thriving on Market Trends & Technologies
CONTAINERBOARD PACKAGING Thriving on Market Trends & Technologies New Conversion Plant in The E-Commerce Piscataway, NJ opportunity • New state of the art conversion facility housing 1st quartile equipment • US$80 M project largely funded by sale of the • Growth in e-commerce is shifting the balance
Slide 13: Consolidated North American Competitive Landscape
CONTAINERBOARD PACKAGING Consolidated North American Competitive Landscape 2007 2013 2017 Smurfit Stone 20% IP 35% IP 33% ❖ Weyerhaeuser 16% ❖ Rock Tenn 20% ❖ WestRock2 20% IP 11% Koch/GP 11% Koch/GP 10% GP 11% PCA 7% PCA 10% Temple Inland 9% Cascades1 4% Kapstone2 4% PCA 6
Slide 14: Containerboard Packaging: Sound Environment
CONTAINERBOARD PACKAGING Sound Environment Fundamentals Sound Despite Added Capacity • Capacity growth of ±1.8% annually Industry Operating Rates1 over 2015 - 2020 period 100% 90% • Strong industry fundamentals (Dec/17): 80% Cascades adjusted OIBD increases ~$3.75M 70% with every 1% increase in our
Slide 15: Containerboard Packaging: Business Drivers
CONTAINERBOARD PACKAGING Business Drivers Containerboard Benchmark Market Prices Brown Grades Recycled Fibre Prices (US$/s.t.) (US$/s.t.) 800 200 750 180 700 160 140 650 120 600 100 550 80 500 60 450 40 Linerboard 42-lb. unbleached kraft, Eastern U.S. Old corrugated containers no. 11 (Northeast) 400
Slide 16: Containerboard Industry Statistics
CONTAINERBOARD INDUSTRY STATISTICS U.S. Corrugated Boxes Shipments (BSF) RISI Forecast 2017 – 2022 CAGR: + 1.9% 395 405 411 420 425 360 360 364 369 376 386 345 357 359 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F 2022F U.S Containerboard Production & Utilization Capacity Rate
Slide 17: Boxboard Europe: Second Largest Coated Recycled Boxboard Producer
BOXBOARD EUROPE Second Largest Coated Recycled Boxboard Producer in Europe ▪ 57.8% equity ownership of Reno de Medici, a public Italian company; 5 recycled (885K m.t.) & 1 Coated virgin boxboard (165K m.t.) mills 20% recycled ▪ Simplified structure with focus on spreading one- 2017 boxboard company
Slide 18: Leading European Producer of Coated Board
BOXBOARD EUROPE Leading European Producer of Coated Board 1 Top Cartonboard Producers Top FBB Producers1 Top WLC Producers1 (Total Market) (Virgin) (Recycled) Mayr-Melnhof Metsä Board Mayr-Melnhof Metsä Board Stora Enso Reno De Medici Stora Enso Kotkamills Weig Karton Reno De Medici Mayr-Melnhof Smu
Slide 19: Boxboard Europe: Business Drivers
BOXBOARD EUROPE Business Drivers Boxboard Benchmark Market Prices1 Recycled Fibre Prices2 (Euro€/m.t.) (Euro€/m.t.) 1,200 200 1,150 180 1,100 160 1,050 1,000 140 950 Virgin folding boxboard (FBB) average price 120 900 100 750 80 700 60 650 Groundwood grade average price 600 40 White grade average pr
Slide 20: Specialty Products: A Diversified Packaging Player
SPECIALTY PRODUCTS A Diversified Packaging Player ▪ Largest paper collector in Canada with 19 facilities2 Recovery and 1.4 million s.t. of material processed in 2017 20% ▪ A leading position in industrial packaging with Cascades Sonoco JV 2017 Industrial Sales packaging ▪ Strong growth potential in
Slide 21: Cascades Recovery+ Sub-Segment
SPECIALTY PRODUCTS Cascades Recovery+ Sub-Segment 1 NA Recycled Fibre (2.9M st) • Business unit created via the merger of recovery operations & recycled fibre Brown recycled purchased & used buying group White recycled • Manages procurement of all raw material 34% 34% purchased & used (1.0M st) (1.0
Slide 22: Tissue Papers: A Canadian Leader and Important North American Player
TISSUE PAPERS A Canadian Leader and Important North American Player ▪ 5th largest tissue producer in NA based on capacity (650K s.t.) 14% Retail ▪ Growing footprint in Western U.S. 2017 ▪ 67% integration rate, targeting 85% in the mid-term Sales 45% Away-from- ▪ Repositioned and rebranded AfH produc
Slide 23: Strong Position Across the North American Tissue Market
TISSUE PAPERS Strong Position Across the North American Tissue Market CAS Sales by Country (2017) Tissue Market Demand1 Canada (26%) US (74%) 160 1.8% growth represents ~175K s.t. / year Branded Away-from- Branded Away-from- Indexed U.S. Tissue 25% 140 41% Home Home Demand 43% 50% 120 Private Priva
Slide 24: Diversified Capacity and Positioning
TISSUE PAPERS Diversified Capacity and Positioning 2017 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 Essity (ex-SCA) 721 7% 0% 100% 5 Ca
Slide 25: Tissue Papers: Business Drivers
TISSUE PAPERS Business Drivers U.S. Parent Roll Production & Capacity U.S. Converted Products Price Variation YoY ('000 s.t.) 825 10.0% Parent roll capacity 800 Parent roll production 5.0% 775 0.0% 750 725 -5.0% 700 -10.0% 675 Paper Towels - Industrial -15.0% Paper Towels - Retail 650 Toilet Tissue
Slide 26: Tissue Papers: Business Drivers
TISSUE PAPERS Business Drivers Virgin Fibre Prices White Grades Recycled Fibre Prices (US$/s.t.) (US$/s.t.) 1,300 350 1,200 300 1,100 250 1,000 200 900 150 800 100 700 NBSK Sorted office papers no. 37 (Northeast) 600 50 NBHK Sorted office papers no. 37 (Midwest) 500 0 Apr 08 Apr 09 Apr 10 Apr 11 Apr
Slide 27: Strategic Plan 2017-2022
2017-2022 STRATEGIC PLAN ete as
Slide 28: Positioning for Growth
POSITIONING FOR GROWTH Building on the Past, Positioning for the Future Significant Repositioning and Investments Completed from 2011 – 2016 (CAN M$) CAPEX WE MODERNIZED (excludes M&A) 250 Invested more than $400M in modern equipment $221M $206M 200 $184M $184M $173M WE OPTIMIZED $161M 150 Decreased
Slide 29: Positioning for Growth: Strategy Focus Areas
POSITIONING FOR GROWTH Building on the Past, Positioning for the Future UPGRADE OUR VALUE 1 PLATFORMS 2 CREATION - Invest in organic growth - Increase profitability margin from 10% to 15% - Increase integration rate to 85% in - Disciplined capital allocation Containerboard & Tissue Papers - Sustaina
Slide 30: Upgrade Our Platforms
1 UPGRADE OUR PLATFORMS Accelerate Modernization + Increase Integration + Optimize Footprint • Replace older equipment • Increase our integration rate • Improve geographic footprint • Invest in organic growth by investing in conversion to better serve our customers, capacity increase penetration of
Slide 31: 2018 Capex – Important Investments to Consolidate Position
UPGRADE OUR PLATFORMS 1 2018 CAPEX – Important Investments to Consolidate Position 5% STRATEGIC RATIONALE: • Investing in businesses with solid fundamental long-term growth profiles 2018 CAPEX 39% 35% $335 - $385M 1 • Supports growth in our core markets ($250 - $300M net of • Aligned with 2017-2022
Slide 32: 2018 Capex – Important Investments to Consolidate Position
1 UPGRADE OUR PLATFORMS 2018 CAPEX – Important Investments to Consolidate Position SEGMENT MAJOR PROJECTS INVESTMENT IMPACT BUSINESS CASE ($M CAN) Piscataway, NJ ✓ Integration ±5% Containerboard conversion plant $80 - $85 H2 2018 ✓ Improve footprint and asset quality Europe Paper machine upgrade ±$1
Slide 33: Capital Allocation Aligned with Long-term Value Creation
CREATE VALUE 2 Capital Allocation Aligned with Long-term Value Creation Strategic & Targeted Use of Cash Flow from Operations INVEST IN OUR ASSET BASE • Modernize equipment • Opportunistic M&A • Increase integration, optimize footprint • IRR target of 15%1 DEBT REDUCTION • Objective = allocate at le
Slide 34: Multi-Pronged Approach to Increase Profitability Margin to 15%
CREATE VALUE 2 Multi-Pronged Approach to Increase Profitability Margin to 15% In Progress 3 • Growth from targeted investments and potential strategic M&A • Continued ramp-up of new Oregon tissue conversion facility • Transformation program benefits & reduction of implementation costs ±$50 M ANNUALL
Slide 35: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION Cascades’ new Innovation Centre Containerboard is focused on: Specialty Products • Coordinating multigroup programs 37 people Tissue Papers • Developing new expertise (ex. A.I.) dedicated to Supported by: • Gathering market intelligence innovation Cascades’ Innova
Slide 36: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION Hand towel dispenser with new, patented dispenser technology Produces innovative, lightweight recycled linerboard – XP grades Low-density PETE containing 80% post- consumer material OBJECTIVE: 20% of sales from innovative products in 2020 Recyclable insulated cont
Slide 37: Appendix
APPENDIX ete as
Slide 38: Q4 2017 Performance – Financial Results
Q4 2017 PERFORMANCE – FINANCIAL RESULTS 107 106 105 256 82 75 161 48 51 45 33 31 57 24 33 19 4 15 12 13 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 2016 2017 2017 2017 2017 2016 2017 2017 2017 2017 Operating Income Adjusted OIBD 1 Net Earnings Adjusted Net Earnings 1 Figures above in millions of CAN$ Figures abov
Slide 39: Historical Segmented Operating Income and Margin
BUSINESS SEGMENTS Historical Segmented Operating Income and Margin Containerboard (CAN$ M and %) Boxboard Europe2 (CAN$ M and %) 170 158 164 34 14% 40 29 5% 150 104 108 12% 30 19 13% 10% 20 11 4% 3% 100 12% 8% 10 3% 9% 10% 3 2% 1% 50 9% 6% 0 4% 0% 1% -1% 0 2% -10 (3%) -50 (13) 0% -20 -3% (1%) -2% -3
Slide 40: Historical Segmented Adjusted OIBD and Margin
BUSINESS SEGMENTS Historical Segmented Adjusted OIBD3 and Margin Containerboard (CAN$ M and %) Boxboard Europe2 (CAN$ M and %) 300 22% 80 72 68 9% 231 247 20% 70 63 250 216 57 9% 53 8% 18% 60 8% 200 150 164 16% 50 43 8% 7% 18% 7% 150 16% 14% 40 7% 6% 90 15% 12% 30 100 14% 14% 6% 5% 10% 20 50 8% 10 4
Slide 41: Historical Results
HISTORICAL RESULTS (In million of Canadian dollars) 2017 Q4-17 Q3-17 Q2-17 Q1-17 2016 Q4-16 Q3-16 Q2-16 Q1-16 2015 2014 Sales Containerboard 1,652 440 438 428 346 1,370 336 356 342 336 1,301 1,181 Boxboard Europe 838 212 202 213 211 796 191 189 197 219 825 841 Specialty Products 703 161 181 188 173
Slide 42: Sensitivity Table
SENSITIVITY TABLE 1 SHIPMENTS/CONSUMPTION INCREASE OIBD IMPACT (‘000 s.t, ‘000 mmBtu for Natural Gas) (in CAN$ M) SELLING PRICE2 (Manufacturing & Converting) Containerboard 1,490 US$25/s.t. 47 North America Tissue Papers 590 US$25/s.t. 19 Europe Boxboard 1,120 €25/s.t. 42 MATERIALS2 (Recycled papers
Slide 43: Near Term Outlook – Q1 2018
NEAR TERM OUTLOOK – Q1 2018 • Announced US$50/s.t. linerboard, US$60/s.t. medium and box price increases scheduled for March 5, 2018 • Challenging market conditions for our Tissue + • Good economic environment in Europe Papers segment, especially in the hand towel I • Price increase announced for so
Slide 44: 5-Year Shareholder Return
5-YEAR SHAREHOLDER RETURN CAS vs. Indices TSX TSX Container- Tissue CAS Composite Small Cap board Index Index 550% 1 Year 87% 97% 90% 126% 63% 3 Year 183% 100% 102% 117% 64% 450% 5 Year 303% 123% 106% 184% 70% 350% 250% 150% 50% 2013-04 2013-07 2013-10 2014-01 2014-04 2014-07 2014-10 2015-01 2015-04
Slide 45: Shareholders & Analyst Coverage
SHAREHOLDERS & ANALYST COVERAGE Major Shareholders % Analyst City Bank Lemaire Brothers, BoD & employees 32.5% Letko Brosseau 14.1% Leon Aghazarian Montréal National Bank Caisse de Dépôt et Placement du QC 5.0% Keith Howlett Toronto Desjardins Dimensional Fund Advisors 4.0% Benoît Laprade Montréal S
Slide 46: Geographically Diversified
GEOGRAPHICALLY DIVERSIFIED 46
Slide 47: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or jennifer_aitken@cascades.com 47