Cascades Inc. · TSX:CAS
Cascades — Q1 2023 Earnings Presentation
45 slides from Cascades's earnings presentation, May 11, 2023
Slide 1: Q1 2023 Financial Results
Q1 2023 FINANCIAL RESULTS May 11, 2023 & Highlights of the 2022 - 2024 Strategic Plan Update
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: Disclaimer - 2022-2024 Strategic Plan Update
DISCLAIMER - 2022 - 2024 STRATEGIC PLAN UPDATE When taking into consideration all of the contributing factors discussed below, management expects sales, operating income and EBITDA (A) to increase from the year 2022 levels: • Annualization of selling price changes in 2022 and in the first quarter of
Slide 4: Overview of Consolidated Profitability Drivers
OVERVIEW OF CONSOLIDATED PROFITABILITY DRIVERS Consolidated EBITDA (A)1 Variation Quarter-over-Quarter Year-over-Year (in millions of Canadian dollars) Q1 2023 vs Q4 2022 Q1 2023 vs Q1 2022 Pricing $(8) million $79 million Freight & Production Costs $1 million $(25) million Volume & Mix, FX & Others
Slide 5: Summary of Quarterly Financial Results & KPIs
SUMMARY OF QUARTERLY FINANCIAL RESULTS & KPIs 2021 2022 2023 (In millions of CAN$, except per common share amounts, where noted) Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Financial Results Sales 942 956 1,030 1,028 3,956 1,038 1,119 1,174 1,135 4,466 1,134 Operating income (loss) 44 23 73 (90) 50 (4) 32
Slide 6: Recycled Fibre Costs - Index List Prices
RECYCLED FIBRE COSTS - INDEX LIST PRICES ($ US/s.t.) Current OCC: 300 (May-23) • Relatively balanced market, with limited export activity 275 counterbalancing lower seasonal generation 250 • Solid inventories at our mills 225 200 194 • Lower pricing YoY and sequentially following marginal 175 correc
Slide 7: Virgin Fibre Costs - Index List Prices
VIRGIN FIBRE COSTS - INDEX LIST PRICES ($ US/s.t.) VIRGIN PULP: Current (Apr-23) • Improvement in market dynamics sequentially, but 1,800 prices remain elevated YoY 1,600 1,600 • Lower demand from Asia, normalized logistics, more steady domestic production levels, new capacity and 1,400 1,390 import
Slide 8: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Comments on sequential performance Results Change vs. Q1 2023 Q4 2022 Q1 2022 è Total shipments increased by 5% sequentially. Shipments of parent rolls increased by 16% and those of converted products decreased by 4% compared to the fourth quarter. The sequential
Slide 9: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Quarterly EBITDA (A)1 (M CAN$) è Sequential Q1 shipments of converted products: Canada -3.0% (vs. market +0.5%); US -8.4% (vs. market -1.0%) 15% 17% 17% 21% 22% 119 126 99 103 è Year-over-year Q1 shipments of converted products: 80 Canada -5.1% (vs. market -5.3%);
Slide 10: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q1 2023 Q4 2022 Q1 2022 Sales (M$) è Sales remained stable sequentially. The slightly higher volume in our Cardboard 161 —% 3% and Moulded pulp sub-segments, and higher average selling price in our Plastics
Slide 11: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Quarterly EBITDA (A)1 (M CAN$) 1 è Q1 2023 EBITDA (A) of $27 M, or 17% on a margin basis, was 12% 14% 14% 15% 15% 12% 17% higher sequentially and year-over-year. 25 25 27 21 22 20 è Cardboard: results increased sequentially reflecting higher 17 volumes and low
Slide 12: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q1 2023 Q4 2022 Q1 2022 è Shipments increased by 1% on a sequential basis. This reflects the combined impact Shipments ('000 s.t.) of a 3% decrease in shipments of converted products and higher external shipments 124 1% (5)% of pare
Slide 13: Tissue Papers
TISSUE PAPERS Quarterly EBITDA (A)1 (M CAN$) è Good demand for Retail tissue products (shipments +9% YoY, +3% QoQ), but slower demand levels for Away-from-Home tissue 4% products (shipments -6% YoY, -10% QoQ). (2)% 1% 2% (5)% 16 è Prices of raw material costs have begun to ease; recent price 8 decre
Slide 14: Q1 2023 EBITDA (A) to Operating Loss Reconciliation
Q1 2023 EBITDA (A)1 TO OPERATING LOSS RECONCILIATION (M CAN$) 160 134 120 2 80 40 (62) (1) (1) 0 -40 -80 -120 (152) (80) 1 EBITDA (A) Depr. & Gain on acq., Restructuring Unrealized loss Impairment Operating loss Amort. disp. and others costs on financial charges instruments Container- Specialty Tiss
Slide 15: Net Earnings (Loss) - As Reported vs Adjusted
NET EARNINGS (LOSS) - As reported VS ADJUSTED2 NET EARNINGS NET EARNINGS (NET LOSS) (NET LOSS) PER COMMON SHARE1 (In millions of Canadian dollars, except per common share amounts) Q1 2023 Q1 2023 As reported (75) ($0.75) Specific items: Impairment charges 152 $1.14 Gain on acquisitions, disposals an
Slide 16: Quarterly Year-over-Year Adjusted EPS Variance
QUARTERLY YEAR-OVER-YEAR ADJUSTED EPS VARIANCE1,2 1.00 0.50 0.56 0.03 0.32 (0.01) (0.02) (0.04) (0.05) $ cents 0.00 — (0.15) (0.15) -0.50 (1.07) (0.75) 2 EPS reported Specific Adjusted EPS EBITDA (A) Income tax Share of Depreciation Non- Financing Adjusted EPS Specific EPS reported 2 2 Q1 2022 items
Slide 17: Quarterly Sequential Adjusted EPS Variance
QUARTERLY SEQUENTIAL ADJUSTED EPS VARIANCE1,2 0.50 0.14 0.32 0.49 0.22 (0.01) (0.01) (0.01) (0.01) 0.25 0.00 $ cents -0.25 (0.27) -0.50 -0.75 (1.07) (0.75) 2 EPS reported Specific Adjusted EPS EBITDA (A) Share of Financing Non- Income Adjusted EPS 2 Specific EPS reported 2 Q4 2022 items Q4 2022 resu
Slide 18: Cash Flow Overview
CASH FLOW OVERVIEW 2021 2022 2023 (In millions of CAN$, except per common share amounts) Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Cash flow from operations 82 87 58 20 247 19 81 60 100 260 89 Specific items1 4 2 12 31 49 7 — 2 3 12 1 Adjusted cash flow from operations2 86 89 70 51 296 26 81 62 103 272 9
Slide 19: New Capital Investments
NEW CAPITAL INVESTMENTS (in millions of Canadian dollars, excluding new leases, disposal of assets and accounts payable variation) 532 2023F CAPEX: 36 ~ 41 $325 M1 29 incl.~ CAN$175M for Bear Island 312 330 325 26 27 50 81 227 213 37 39 22 426 169 20 24 85 104 97 61 217 184 22 22 18 62 66 84 83 2017
Slide 20: Net Debt Reconciliation - Q1 2023
NET DEBT1 RECONCILIATION - Q1 2023 (M CAN$) 2,100 140 2,070 2,000 1,966 46 1,900 15 8 (89) (9) (4) (3) 1 1 Net debt as of Cash flow Investments F/X CAN$ Proceeds from Right-of-use Dividends paid Changes in non- Payments for Net debt as of December 31, from oper. and others disposals of assets cash p
Slide 21: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / EBITDA (A)1,3 Interest Coverage Ratio2,3 6.7x 5.8x 6.0x 5.4x 5.2x 4.7x 4.0x 3.8x 3.6x 3.5x 4.6x 4.7x 4.6x 4.3x 4.6x 4.9x 3.25x 3.5x 3.4x 2.5x 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q1 2014 2015 2016 2017 2018 2019 2020 2021 2022 Q1 202
Slide 22: Near Term Factors
NEAR TERM FACTORS • Containerboard: Net of $7 million partial insurance settlement in Q1 2023, sequential performance forecast to reflect the start-up of vs Q1 2023 vs Q2 2022 Bear Island, slightly higher average raw material prices, lower Q2 20231 selling prices and softer volume; Expect relatively
Slide 23: Highlights of the 2022-2024 Strategic Plan Update
HIGHLIGHTS OF THE 2022 - 2024 STRATEGIC PLAN UPDATE 23
Slide 24: Highlights - 2022-2024 Strategic Plan Update
HIGHLIGHTS - 2022 - 2024 Strategic Plan Update OUR OBJECTIVES ARE UNCHANGED ◦ Drive revenues in targeted strategic markets ◦ Increase profitability across business segments ◦ Maintain a disciplined approach to capital allocation, deliver on leverage reduction objective WHAT WE HAVE UPDATED ◦ Growth
Slide 25: Containerboard - Bear Island - 1st Paper Roll May 2, 2023
CONTAINERBOARD - Bear Island - 1st Paper Roll May 2, 2023 25
Slide 26: Containerboard - Bear Island
CONTAINERBOARD - Bear Island • Higher cost of the project reflects inflation-driven cost escalation, supply chain challenges, and slight modifications to original design plan of this brownfield project ≤ 2022 2023 2024 2025 Full Potential ~ US $396 M US $130 M PROJECT COST (Cash) - - - (~ CAN $512 M
Slide 27: Containerboard - Strategic Market Volume Growth Targets
CONTAINERBOARD - Strategic Market Volume Growth Targets • Updated volume growth targets reflect realignment of the Company's go-to market approach to adapt to changes in the market since February 2022. 2021 - 2024 Updated 2021 - 2024 OUR STRATEGIC MARKETS1 Volume Growth Target 2022 vs. 2021 Volume G
Slide 28: Containerboard - Action Plan
CONTAINERBOARD - Action Plan Objective as at Updated Objective February 2022 1 Complete Bear Island start-up End of 2022 Production started May 2, 2023 Increase integration with new • Opportunities to increase converting capacity will be explored over the 2 converting capacity in the U.S. longer-ter
Slide 29: Specialty Products - Sales Growth Targets
SPECIALTY PRODUCTS - Sales Growth Targets Sales Growth Target Updated Sales Growth OUR STRATEGIC MARKETS 2021 - 2024 2022 vs. 2021 Target 2021 - 2024 (as at February 2022) Egg Packaging 10% - 15% 18% 30% - 35% 2021 sales $190 M Fruits & Vegetables 120% - 135% 20% 25% - 30% 2021 sales $30 M Proteins
Slide 30: Specialty Products - Action Plan
SPECIALTY PRODUCTS - Action Plan Objective as at Updated Objective February 2022 Increase pace of new sustainable product • 2 new sustainable products introduced 1 development and commercial launch • 6 additional ones planned for 2023 Continue to develop and grow our share • Annual sales growth real
Slide 31: Tissue Papers - Business Overview
TISSUE PAPERS - Business Overview • The Company announced a repositioning of its Tissue operational platform in April 2023 • Reduces annual paper production capacity by 92,000 s.t. and annual converting capacity by 10 million cases • 2024 target of selling 75-80 million cases of converted products t
Slide 32: Tissue Papers - Action Plan
TISSUE PAPERS - Action Plan Objective as at Updated Objective February 2022 Leverage well invested asset base and limit •• Target of $35 M unchanged 1 Capex to $35 M annually through 2024 Focused on core assets following announced repositioning of operational platform Focus on production execution a
Slide 33: Tissue Papers - 2024 EBITDA Forecast Drivers
TISSUE PAPERS - 2024 EBITDA (A)1 FORECAST DRIVERS 1 Bridge to 2024F EBITDA (A) ($M) KEY DRIVERS ~ 130 • Benefits from implemented selling price increases and other profitability initiatives initiated over the past 12 months • Optimization of operational platform and profitability initiatives are imp
Slide 34: Cascades - 2024 Financial Targets
CASCADES - 2024 Financial Targets Financial Targets 2024 Objective Updated 2024 Objective as at February 2022 1 Revenues ~ $5.0 B ~ $5.0 B 2 EBITDA (A) Margin1 ~ 13% - 15% ~ 12% - 14% 3 CAPEX4 ~ 4% of sales in 2023 & 2024 ~ $175 M in 2024 (~3.5% of sales) 4 Free Cash Flow1,2,3 ~ 9% - 11% of sales ~
Slide 35: Cascades - Net Debt Evolution 2023-2024
CASCADES - Net Debt1 Evolution 2023 - 2024 1 Forecasted Evolution of Net Debt 2022-2025 ($M) 1,966 ~ 1,750 ~ 1,800 1 1 Net Debt Cash Flow from CAPEX Bear Island Dividends paid to Leases, FX & Net Debt Target (Dec. 31/22) Operations project shareholders & Other (Dec. 31/24) minority interests (1) Ple
Slide 36: Cascades - Our Top Priorities
CASCADES - Our Top Priorities An integrated Company with strong assets to drive value for shareholders 1 Deliver on the Tissue Papers business profitability plan 2 Ramp-up the strategic Bear Island 100% recycled and lightweight containerboard facility 3 Explore opportunities to grow our sustainable
Slide 37: Appendix
APPENDIX 37
Slide 38: Year-over-Year Sales Reconciliation
YEAR-OVER-YEAR SALES RECONCILIATION (M CAN$) +9% 1,200 47 1,134 79 (3) (8) 1,100 (19) 1,038 1,000 Recovery & Sales Recycling & Sales (M CAN$) Q1 2022 Price F/X CAN$ Mix Other items Volume Q1 2023 Containerboard 534 3 23 (15) — 16 561 Specialty Products 157 16 7 — — (19) 161 Tissue Papers 314 60 17 1
Slide 39: Year-over-Year EBITDA Reconciliation
YEAR-OVER-YEAR EBITDA (A)1 RECONCILIATION + Higher realized spreads, favourable FX + Higher selling prices and lower logistics costs - Higher production, energy, and logistics costs + Lower raw material costs - Less favourable volume/mix - Lower volumes + Higher selling prices, more favourable FX -
Slide 40: Sequential Sales Reconciliation
SEQUENTIAL SALES RECONCILIATION (M CAN$) -0% 1,200 1,135 38 1,134 2 1,100 (30) (8) (3) 1,000 Recovery & Sales Recycling & Sales (M CAN$) Q4 2022 Mix Price F/X CAN$ Other items Volume Q1 2023 Containerboard 567 (22) (13) (2) — 31 561 Specialty Products 161 — (4) — — 4 161 Tissue Papers 384 (8) 9 (1)
Slide 41: Sequential EBITDA Reconciliation
SEQUENTIAL EBITDA (A)1 RECONCILIATION + Lower raw material costs + Lower operating costs + Better realized spreads + Net impact of higher volume and less favourable sales mix + Higher volume - Lower selling price - Higher operational costs - Lower results from Recovery operations 7 7 134 (M CAN$) 74
Slide 42: Cost of Sales and Selling Expenses
COST OF SALES SELLING AND ADMINISTRATIVE EXPENSES (In millions of Canadian dollars) Q1 2023 Q4 2022 Q1 2022 Cost of sales Raw materials 365 395 359 Wages and benefits 206 194 183 Energy 63 60 59 Delivery 135 137 142 Other 142 142 149 Depreciation and amortization 63 62 60 974 990 952 Selling and adm
Slide 43: Selected Reference Prices
SELECTED REFERENCE PRICES Current Current Containerboard - Selected Products (US$/s.t.) Specialty Products - Selected Products (Apr-23) (US$/s.t.) (Apr-23) 1,000 1,200 1,100 900 865 1,000 1,040 800 900 755 800 700 700 600 600 May 19 Feb-21 Nov-22 Nov-19 Aug-21 Aug 18 May-20 Feb-22 Feb 19 Nov-20 Aug-
Slide 44: Selected Reference Prices and Fibre Costs
SELECTED REFERENCE PRICES AND FIBRE COSTS Q1 2023 vs. Q1 2023 vs. 2021 2022 2023 Q12022 Q4 2022 These indexes should only be used as an indicator of trends and they may be different than our actual selling prices or purchasing costs. Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 (units) (%) (units) (%) Selli
Slide 45: For More Information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 / investor@cascades.com