Cascades Inc. · TSX:CAS
Cascades — NBF Québec Conference 2012
35 slides from Cascades's conference presentation, Jun 5, 2012
Slide 1: Cascades NBF Québec Conference
CASCADES NBF Québec Conférence June 5, 2012
Slide 2: Disclaimer
DISCLAIMER Certain statements in this presentation, including statements regarding future results and performance, are forward-lookingg statements within the meaningg of securities legislation g based on current expectations. p The accuracy of such statements is subject to a number of risks, uncerta
Slide 3: Overview – Packaging and Tissue Products
OVERVIEW – PACKAGING AND TISSUE PRODUCTS Boxboard Containerboard Specialty products Tissue papers Leading NA packaging and tissue manufacturer with substantial recycling capabilities 3
Slide 4: Overview – Balanced Play
OVERVIEW – BALANCED PLAY ($ in millions) Cascades Q1-2012 LTM Sales1: $3,780 Q1-2012 Q1 2012 LTM EBITDA1,, 2: $274 P k i Packaging Ti Tissue P Papers 77% of Sales 23% of Sales 66% of EBITDA 34% of EBITDA Boxboard Europe Containerboard Specialty Products 24% of Sales 31% of Sales 22% of Sales 21% off
Slide 5: Overview – Closed-Loop Business Model
OVERVIEW – CLOSED-LOOP BUSINESS MODEL 100+ business units 76% recycled fibre (2.9M tons) NA integration rate (2011): 23 units 33% (580K tons) May be sent to 30 units recycling centers NA integration rate (2011): 62 units 47% Upstream and downstream integration Including the 6 manufacturing/convertin
Slide 6: Overview – Recycled Fibre Supply
OVERVIEW – RECYCLED FIBRE SUPPLY Recycled Fibre Supply Sources – North America 2008 2011 Spot Spot Cascades Purchases Cascades Purchases Recovery 20% Recovery 19% andd Internal I t l and Internal 32% 35% Contractual Contractual agreements agreements 48% 46% Control over 80% of our fibre supply despi
Slide 7: Market Dynamics – Demand
MARKET DYNAMICS – DEMAND Packaging Tissue (billions North American Box Shipments U.S. Total Tissue Consumption ('000 s.t.) ft2) 460 8,400 8,319 428 8,219 424 421 421 8 201 8,201 420 412 411 413 8,200 405 386 387 8,028 8,053 380 374 8,000 7 896 7,896 7,844 340 7,800 300 7,600 2001 2002 2003 2004 2005
Slide 8: Market Dynamics – Supply
MARKET DYNAMICS – SUPPLY Top 5 producers' share of capacity 100% 85% 86% 77% 76% 80% 66% 60% 40% 20% 0% North American European coated North American Canadian North American coated boxboard boxboard containerboard containerboard tissue Cascades’s C Market Share 3% 17% 3% 26% 7% (estimate) Increased
Slide 9: Market Dynamics – Market Balance
MARKET DYNAMICS – MARKET BALANCE Annual Average Capacity Utilization Rates 100% 96% 92% 88% 84% 80% 76% 2007 2008 2009 2010 2011 U.S. Containerboard Industry U.S. Coated Recycled Boxboard Industry U.S. Tissue Industry Balanced supply/demand equation with utilization rates at approximately 95% Source
Slide 10: Market Dynamics – Pricing
MARKET DYNAMICS – PRICING Packaging Tissue Packaging Annual Average Selling Prices Cascades Tissue Papers Index (January 1999 = 1,000) 1,200 1,700 1,669 991 1,153 , 1 600 1,600 1,000 909 1,500 800 710 1,400 597 600 1,300 640 560 420 1,200 400 1,148 2004 2005 2006 2007 2008 2009 2010 2011 1 100 1,100
Slide 11: Market Dynamics – Raw Material Costs
MARKET DYNAMICS – RAW MATERIAL COSTS (US$/ton) Main Recycled Fiber North Amercian OBM List Prices 300 290 250 200 150 Current 150 165 135 140 100 Whit grades White d (SOP) 50 Brown grades (OCC) 0 y 08 y 09 y 10 y 11 Marr 08 July 08 Nov 08 Marr 09 July 09 Nov 09 Marr 10 July 10 Nov 10 Marr 11 July 11
Slide 12: Market Dynamics – FX and Other Input Costs
MARKET DYNAMICS – FX AND OTHER INPUT COSTS Oil & chemicals Currency Since Since Dec. 2011 Jan. 2010 performance against Oil +9% +46% Latex Pigments +10% +1% +43% +37% € Plastics +12% +29% Q1-2012 vs Starch +3% +28% Q4-2011 +2% +5% CAN$ strength and input costs sky- sky-rocketing since 2010
Slide 13: Strategic Action Plan – Priority #1
STRATEGIC ACTION PLAN – PRIORITY #1 1 Focused investing for modernization of core operations and IT ATMOS (Voith) ERP • Full machine rebuilt • $80M iinvestment t t program • Swing machine with “TAD • Blueprint and programming: equivalent” technology 2011-2012 • $30M investment i t t • Implementation
Slide 14: Strategic Action Plan – Priority #1 (cont'd)
STRATEGIC ACTION PLAN – PRIORITY #1 (cont’d) • Competitive advantage – Recycled liner • Financial flexibility not affected • Largest in NA • $99M total investment • 540,000 short tons capacity • $84M in equity • Most technologically advanced equipment • $15M in bridge loan • Debt non-recourse to Cas
Slide 15: Strategic Action Plan – Priority #2
STRATEGIC ACTION PLAN – PRIORITY #2 2 Optimizing capital allocation between sectors and investments; reducing working capital Papersource Acquisition W/C Reduction Working capital (% of sales) • Acquired one of the most modern 20.0% converting plants in NA 18.0% 16.3% 16.1% • Integration level incre
Slide 16: Strategic Action Plan – Priority #3
STRATEGIC ACTION PLAN – PRIORITY #3 3 Restructuring of under-performing units Periods 2004-2006 2006-2008 2008-2010 2011 Packaging P k i Packaging P k i Packaging P k i Packaging P k i 5 acquisitions 2 mergers 2 closures 4 sales 7 closures 4 closures 2 acquisitions 1 investment Strategic 2 sales 4 s
Slide 17: Strategic Action Plan – Priority #4
STRATEGIC ACTION PLAN – PRIORITY #4 4 Improvement and development of processes and products through innovation ROCE ≥ WACC MID-TERM OBJECTIVE Net debt/EBITDA at 3x Challenging Ch ll i M Market k tEEvolution l ti Proactive P ti measures Improve I profitability fit bilit 17
Slide 18: Strategic Action Plan – Q1-2012 Initiatives
STRATEGIC ACTION PLAN – Q1-2012 INITIATIVES Focused investing for Optimizing capital allocation Restructuring of modernization of between under-performing units core operations (and IT) sectors and investments ● Announced consolidation of Ontario containerboard ● $30 million investment ● Acquisition
Slide 19: Financial Review – Historical Performance
FINANCIAL REVIEW – HISTORICAL PERFORMANCE (M CAN$) SALES (M CAN$) EBITDA 4,500 500 465 4,033 4,025 400 4,000 3,862 , 3,877 340 3,692 314 305 310 3,625 3,481 300 250 259 262 3,449 229 3,500 3,182 200 3 000 3,000 100 2,500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2003 2004 2005 2006 2007 2008 20
Slide 20: Financial Review – Segmented EBITDA
FINANCIAL REVIEW – SEGMENTED EBITDA (M CAN$) Boxboard Europe (% of sales) (M CAN$) (% off sales)) Containerboard 20 12,0% 60 55 15,0% 17 46 15 13 45 36 12,0% 7,0% 10 10 33 10 30 27 9,0% 5 19 20 19 21 4 2,0% 5 15 6,0% 2 2 0 0 -3,0% 0 3,0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 201
Slide 21: Financial Review – Key Indicators (KPIs)
FINANCIAL REVIEW – KEY INDICATORS (KPIs) Total Shipments Capacity Utilization Rate ( 000 s.t.) ('000 1000 96% 94% 902 900 91% 821 92% 796 90% 90% 775 89% 800 88% 87% 87% 692 695 86% 700 663 661 84% 600 500 80% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 2010 2010 2011 2011 2011 2011 2012 20
Slide 22: Financial Review – Equity Investments
FINANCIAL REVIEW – EQUITY INVESTMENTS • 35% equity investment • 45% equity investment • Market Value: +/- $110M • Market value: +/- $25M Boralex’s forecast installed production capacity Reno De Medici’s EBITDA (MW) (euro) 1 000 875 50 818 40 800 40 32 30 600 472 30 400 20 2011 2013 2015 2009 2010 20
Slide 23: Financial Review – Debt Profile
FINANCIAL REVIEW – DEBT PROFILE (M CAN$) Net Debt Long-term Debt Maturities Distribution 2,000 1,805 1,800 2017 1,658 34% 2020 1,570 , 1 533 1,533 17% % 1,600 1,454 1 08 1,508 1,462 1,445 1,4851,524 1 524 1,397 1,370 1,400 1,298 Before 2015 1,200 10% 1,000 2016 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 24: Financial Review – Leverage Ratios
FINANCIAL REVIEW – LEVERAGE RATIOS Debt / Debt + Equity q y Net debt / LTM EBITDA 65% 7.0 60% 59% 6.5 60% 58% 5.8 x 56% 6.0 56x 5.6 54% 5.5 55% 4.9 x 5.0 50% 4.2 x 4.2 x 4.5 4.0 45% 3.5 40% 3.0 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Slight increase in debt du
Slide 25: Financial Review – Capex Program
FINANCIAL REVIEW – CAPEX PROGRAM • Projects in the works could be approved if business conditions are favourable – Potential for $225M to $250M in 2012 • Capex requests for 2012 initially approved at approximately $150M – Amount subject to change depending on operating results and economic condition
Slide 26: Concluding Remarks
CONCLUDING REMARKS • Short term • Prioritize organic growth and productivity improvement • Proactively address operational issues and realize our strategic plan • Focused investing for modernization of core operations • Optimize capital allocation • Restructure under-performing units p • Improve and
Slide 27: Near Term Outlook: Cautious Optimism
NEAR TERM OUTLOOK: Cautious optimism • Lower raw material costs • Consolidation of Papersource • Higher demand volatility + • Impacts of restructuring and • Europe p uncertaintyy I optimization measures • Continuous strength of CAN$ • Produce according to historical • High energy and chemical costs
Slide 28: Appendix
APPENDIX 28
Slide 29: Energy Prices
ENERGY PRICES Natural gas Energy prices Crude oil Hedging Program - Natural gas (US$) (US$) 7.00 110 • Canada: 6 00 6.00 5.00 90 • 2012: 65% at 5.97 CAN$/GJ 4.00 • 2013: 70% at 5.48 CAN$/GJ 70 3.00 2.00 50 • U.S.: U S: 1.00 0.00 30 • 2012: 58% at 6.30 US$/mmBtu • 2013: 52% at 5.84 US$/mmBtu Apr 09 J
Slide 30: Foreign Exchange
FOREIGN EXCHANGE US$/CAN$ Exchange rates EURO/CAN$ Hedging Program - Cash flow USD: 1.10 1.00 • 2012 US$/CAN$ Euro/CAN$ 1.05 0.95 31 to 52% (with options) of exposure 0.90 1.00 hedged at an average rate of 0.85 1.032CAN$/US$ to 1.067CAN$/US$ 0.95 0.80 0.90 0.75 • 2013 0.70 0.85 23 to 39% (with optio
Slide 31: North American Manufacturing Spread
NORTH AMERICAN MANUFACTURING SPREAD 1,300 1,267 1,271 850 1,234 750 1 200 1,200 1,106 650 1,166 550 1 100 1,100 1 070 1,070 512 450 452 428 410 387 350 1 000 1,000 206 324 250 900 150 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 Manufacturin
Slide 32: Market Prices and Costs Summary
MARKET PRICES AND COSTS SUMMARY 2010 2011 2012 Change Change These indexes should only be used as indicator of trends Average Average Average Average Average Average Average Q1 2012 Q1 2012 and they be different than our actual selling prices or purchasing Q1 Q2 Q3 Q4 Q1 Q1 2011 Q4 2011 costs. (unit
Slide 33: Sensitivity Table 2011
SENSITIVITY TABLE 2011 CAPACITY / CHANGE EBITDA IMPACT CONSUMPTION (In million of CAN$) (‘000 s.t. and ‘000 mmBtu for natural gas) SELLING PRICES (MANUFACTURING) Boxboard 1,425 25 US$ or € / ton 45 Containerboard 920 25 US$ / ton 23 Specialty Products (paper only) 375 25 US$ / ton 9 Tissue 525 25 US
Slide 34: Notes
NOTES 1. The Cascades Noth American selling prices index represents an approximation of the Company'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 operations o
Slide 35: For more information
For more information: www.cascades.com/investors Riko Gaudreault Di t IInvestor Director, t R Relations l ti riko_gaudreault@cascades.com 514--282 514 282--2697 35 35