Cascades Inc. · TSX:CAS
Cascades — Non-Deal Roadshow (March 2016)
41 slides from Cascades's roadshow presentation, Mar 14, 2016
Slide 1: Institutional Investors Roadshow Montréal - Toronto
CASCADES INC. Institutional Investors Roadshow Montréal - Toronto March 14-15, 2016
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: Leading Packaging Products and Tissue Paper Manufacturer
LEADING PACKAGING PRODUCTS AND TISSUE PAPER MANUFACTURER Packaging Products Tissue Papers Containerboard Boxboard Europe Specialty Products • One of the Canadian • # 1 in Canada Position • # 2 in coated recycled • Largest paper collector in Market leaders boxboard in Europe Canada • # 5 in North Ame
Slide 4: Balanced Play in Two Healthy Sectors
BALANCED PLAY IN TWO HEALTHY SECTORS Segmented EBITDA1 (M$) 250 231 200 164 138 150 150 133 119 90 96 100 72 57 41 63 58 50 43 37 40 0 2012 2013 2014 2015 Containerboard Boxboard Europe Specialty Products Tissue Papers 1 Excluding specific items and before corporate activities 4
Slide 5: Strong Financial Momentum
STRONG FINANCIAL MOMENTUM EBITDA & EBITDA Margin (excluding specifics) (M$) 450 16% 426 400 14% 342 340 350 12% 300 285 10% 250 8% 200 6% 2012 2013 2014 2015 5
Slide 6: Strong Free Cash Flow Generation
STRONG FREE CASH FLOW GENERATION Free Cash Flow per Share1,2 $2.00 $1.58 $1.50 $0.86 $1.00 $0.78 $0.50 $0.00 $(0.21) $(0.50) 2012 2013 2014 2015 • High free cash flow yield • Improving cash flows driven by Strategic Action Plan and positive drivers 1 Excluding specific items 2 Excluding increase in
Slide 7: Exchange Rate & Sales Distribution
EXCHANGE RATE & SALES DISTRIBUTION US$/CAN$ Exchange Rate Destination of 2015 Sales of $3.9 billion $1.05 $0.95 23% Canada $0.85 37% U.S. $0.75 $0.65 Europe & Others Q2-15 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q3-15 Q4-15 40% • $3 million EBITDA sensitivity to 14% from Canada every C
Slide 8: FX Impact on Debt Has Slowed Us Down
FX IMPACT ON DEBT HAS SLOWED US DOWN (M$) 1,900 359 1,721 1,700 1,535 1,500 611 1,362 1,300 1,100 900 85 700 (797) (72) 500 Net debt Cash flow Disc. Dividends, Capital Net debt FX Net debt 12/31/2012 from operations share investments 12/31/2015 12/31/2015 operations buyback & & other non- issuance a
Slide 9: Leverage Target Achievable Without Asset Disposals
LEVERAGE TARGET ACHIEVABLE WITHOUT ASSET DISPOSALS 6.0x 5.8x 5.0x 5.0x 4.6x 4.7x 4.0x 4.0x 3.6x 3.6x 3.4x 3.0x 2.0x 1.0x 0.0x 2016E 2011 2012 2013 2014 2015 2017E 2018E Based on Street’s EBITDA estimates $438 million for 2016 and $408 million for 2017. Assuming stable EBITDA for 2018 ($408 million),
Slide 10: Proportionate Consolidation
PROPORTIONATE CONSOLIDATION Selected Financial Data As Reported Proportionate 2015 (IFRS) Consolidation1 Sales (M$) 3,861 3,747 Adjusted EBITDA (M$) 426 463 Adjusted EBITDA Margin 11.0% 12.4% Net Debt to Adjusted EBITDA Ratio2 4.0x 4.0x 1 Selected financial data adjusted to proportionally reflect th
Slide 11: Our Four Strategic Priorities
OUR FOUR STRATEGIC PRIORITIES 1 MODERNIZE 2 OPTIMIZE core operations through capital allocation and focused investments reduce working capital Status: Ongoing Status: Ongoing 3 RESTRUCTURE 4 INNOVATE to improve and develop underperforming units processes and products Status: Well-advanced Status: Co
Slide 12: Improving Asset Base
IMPROVING ASSET BASE St. Helens Vaughan ±$300 million St. Marys invested in modern equipment Candiac Wagram Drummondville Santa Giustina Granby Kingsey Falls 12
Slide 13: Capex During Modernization Phase
CAPEX DURING MODERNIZATION PHASE Capital Expenditures (M$) $184M $161M $184M $165M $185M 200 • 2016 level of ~$185M 150 • Impacted by strong US$ • 2012-2013: investment in 100 containerboard – now bearing fruit 50 • 2013-2015: investment in 0 tissue papers – not yet 2012 2013 2014 2015 2016B reflect
Slide 14: Streamlining the Portfolio
STREAMLINING THE PORTFOLIO Data on Excluding Sales and Closures Dopaco • Employees: ‒ 2,300 • From 2011 to 2015 • Sales: ‒ $986M • 15 closures • EBITDA: ‒ $29M • 6 asset sales • EBITDA Margin: 3% • Dopaco division also divested in 2011 to finance Greenpac, Reno and Papersource investments 14
Slide 15: Containerboard - Drivers
CONTAINERBOARD - DRIVERS • Canada’s competitive positioning following the reversal of the $CAD • Spread − Price − Raw materials • Supply/demand equation − Economic environment and market segments − New capacity and machine conversions − Our approach: state-of-the-art mill Greenpac • Products − Light
Slide 16: Containerboard – Strategic Focus
CONTAINERBOARD – STRATEGIC FOCUS • Improve processes ‒ Produce to capacity • Leverage our modernized asset base in Canada ‒ Maintain our leadership position Growth ‒ Converting platforms in Ontario and Québec areas and ‒ Greenpac capacity and product lines productivity initiatives • Increase our U.S
Slide 17: Containerboard - Produce to Capacity
CONTAINERBOARD - PRODUCE TO CAPACITY Illustrative EBITDA and Manufacturing Utilization Rate Illustrative (excluding Greenpac) EBITDA (M$) 215 • 2015 mill utilization rate at ~92% 210 • Importance of ONE Certification 205 program 200 • EBITDA increases ~$2.5M for 195 every additional percentage of ut
Slide 18: Containerboard - Our Cornerstone: Greenpac
CONTAINERBOARD - OUR CORNERSTONE: GREENPAC • Largest recycled linerboard mill in NA: 1,500 s.t./day of lightweight recycled linerboard (26 pounds) • Product differentiation • State-of-the-art equipment • Take-or-pay agreement for 81% of the mill’s output • 59.7% ownership: • Partners include a pensi
Slide 19: Improving Greenpac Performance
IMPROVING GREENPAC PERFORMANCE • Greenpac XP grades represented 72% of the total production in Q4-2015 due to good market receptivity (s.t./day) 1,500 1,000 1,300 1,283 1,288 1,147 1,125 1,211 1,260 500 944 764 524 0 1 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 1
Slide 20: Greenpac Impact on EPS
GREENPAC IMPACT ON EPS • Assuming a conservative multiple, Greenpac adds significant value to the Cascades story Greenpac Impact on Illustrative Value Illustrative EBITDA Cascades’ EPS per Share 1 (US$M) (CAN$) (CAN$) 60 $0.08 $1.70 80 $0.17 $2.80 100 $0.27 $3.90 EBITDA Sensitivity ±10 ±$0.55 1 For
Slide 21: Containerboard - Our Objective
CONTAINERBOARD - OUR OBJECTIVE EBITDA Margin1 (%) 2014 2015 IP (NA Industrial Packaging) 24% 24% Packaging Corp. (Packaging) 22% 23% WestRock2 (NA Corrugated Packaging) 18% 19% KapStone (Consolidated, with kraft paper) 20% 15% Average 21% 20% Containerboard Group – excluding Greenpac 14% 18% Contain
Slide 22: Extensive European Platform
EXTENSIVE EUROPEAN PLATFORM • ~58% ownership of RdM, a public Italian company, and 100% of a virgin board mill in France • Rationalization of production capacity, consolidation of sales forces, structure simplification and modernization investments have resulted in improved performance #2 Producer o
Slide 23: Boxboard Europe – Strategic Focus
BOXBOARD EUROPE – STRATEGIC FOCUS • Strengthen presence in growing markets Growth (i.e. Eastern Europe) areas • Continue to reduce leverage to provide flexibility • Strategic investment to reduce costs and improve quality and margins (energy, automation and capacity creep) Productivity • Increase sy
Slide 24: Boxboard Europe - Reduce Leverage to Maintain Flexibility
BOXBOARD EUROPE - REDUCE LEVERAGE TO MAINTAIN FLEXIBILITY (M€) Net Financial Debt Reno De Medici 150 5.0x 120 4.0x 90 3.0x 60 2.0x 30 1.0x 0 0.0x 2008 2009 2010 2011 2012 2013 2014 2015 Net financial debt Net debt/EBITDA multiple 1 2008-2010: as reported. 2011-2015: excluding specific items and disc
Slide 25: Specialty Products – Operating Snapshot
SPECIALTY PRODUCTS – OPERATING SNAPSHOT INDUSTRIAL OPERATING CONSUMER RECOVERY PACKAGING AND PLATFORMS PACKAGING OTHERS Units 19 14 6 Employees (2015) 1,075 600 420 Collection Key Technologies Board machine Extrusion vehicule fleet Extrusion/ Bailing Thermo forming Coating Slitting/ Sorting die-cutt
Slide 26: Specialty Products – Current Sales Distribution
SPECIALTY PRODUCTS – CURRENT SALES DISTRIBUTION 2015 2015 Sales Distribution Sales Distribution (IFRS) (JV at 100%; non-IFRS) $579M $792M Others Others 9% 6% Consumer Consumer Packaging Recovery Packaging Recovery 18% 33% 24% 42% Industrial Industrial Packaging Packaging 25% 43% 26
Slide 27: Specialty Products – Recent Performance & Initiatives
SPECIALTY PRODUCTS – RECENT PERFORMANCE & INITIATIVES 2014 Events EBITDA & EBITDA Margin (excluding specifics) Closure: (M$) • East Angus Kraft 60 58 12% paper mill 50 10% Asset Sale: 41 40 40 37 8% • Fine Papers division 30 6% 2015 Events 20 4% Restructuring/ 10 2% Acquisition: 0 0% • Norcan 2012 2
Slide 28: Specialty Products – Stability and Growth
SPECIALTY PRODUCTS – STABILITY AND GROWTH INDUSTRIAL CONSUMER RECOVERY PACKAGING PACKAGING • Continue to secure • Stable contributor and • Growth vector strategic source of leading market supply position Objective to increase top line by +10% over the next three years while improving margins in all
Slide 29: Tissue – Diversified Capacity
TISSUE – DIVERSIFIED CAPACITY 2015 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 SCA Tissue NA 772 8% 0% 100% 5 Cascades Tissue 657 7% 62
Slide 30: Tissue – Geographic Distribution
TISSUE – GEOGRAPHIC DISTRIBUTION 2015 Sales Distribution $1,236 million Parent U.S. Rolls 75% 17% Retail Canada 44% 25% Away- from- Home 39% AFH Retail AFH Retail 49% 51% 42% 58% 30
Slide 31: Tissue – Strategic Focus
TISSUE – STRATEGIC FOCUS • Grow U.S. Away-from-Home segment more aggressively • Increase our footprint in the West and the South Growth areas • Increase integration rate – targeting 85% • Increase market presence in value-added product segment (“Better” and “Best”) • Reduce costs to improve competit
Slide 32: Tissue – Optimize Logistics and Increase Integration
TISSUE – OPTIMIZE LOGISTICS AND INCREASE INTEGRATION Retail Away-from-Home C Converting Now take steps to M Manufacturing integrate volume from our mill in Oregon M C CM CM C CM CM M M M C C M C C C C Wagram was a M M C significant step to C get closer to growth regions 32
Slide 33: Tissue – Improving Our Performance
TISSUE – IMPROVING OUR PERFORMANCE EBITDA & EBITDA Margin (excluding specifics) 160 138 132 15% Objective: 13% margin 119 120 12% • Expected margin expansion with 96 90 announced price increases 72 80 9% • Improved Canadian producer competitiveness 40 6% • Complete start-ups • Growth in private labe
Slide 34: Q1-2016 Near Term Outlook
Q1-2016 NEAR TERM OUTLOOK • Higher prices for recovered white • Favourable FX environment papers + • Continued implementation of • Potential decrease in prices in FX-related price increases for I Europe for recycled boxboard corrugated boxes (WLC) • Higher volume in Q1 • Decrease in index price for
Slide 35: Positive Drivers for 2016
POSITIVE DRIVERS FOR 2016 • Continue to improve EBITDA, EBITDA margin and EPS • Greenpac impact on EPS • Potential operational improvements • Produce to capacity • Process improvements • Ramp-up of recent CAPEX projects • Beneficial drivers • FX • Price increase implementation and full year impact •
Slide 36: Appendix
APPENDIX ete as
Slide 37: Business Drivers – Price Dynamics
BUSINESS DRIVERS – PRICE DYNAMICS Containerboard - Selected Benchmarks Tissue Papers - Selected Benchmarks (US$/s.t.) (US$/s.t.) 750 1,600 700 1,500 650 1,400 600 1,300 550 1,200 500 1,100 450 1,000 Linerboard 42-lb. unbleached kraft, Eastern U.S. Virgin parent rolls 400 900 Corrugating medium 26-lb
Slide 38: Business Drivers – Shipments
BUSINESS DRIVERS – SHIPMENTS • Shipments were 2% higher in Q4-2015 compared to the same period last year • Manufacturing utilization rates2 hovering around 89% in Q4-2015 • Containerboard – 90% • Boxboard Europe – 89% • Tissue Papers – 89% Total Shipments (‘000 s.t.) Total Manufacturing Utilization
Slide 39: Business Drivers – COGS
10% 6% 8% BUSINESS DRIVERS – COGS 36% 2015 9% 10% 6% 20% 11% 8% 37% Raw materials 8% Chemicals and production supplies Wages and employee benefits expenses Energy 20% Freight 11% Depreciation and amortization Others Raw materials Chemicals and production supplies • Raw materials (including chemicals
Slide 40: Raw Materials – Fibre Costs
RAW MATERIALS – FIBRE COSTS Recycled Fibre North American Current Virgin Pulp prices Current (US$/ton) (US$/ton) 200 List Prices (March) 1,100 (February) 1,000 150 153 940 900 875 100 85 800 50 700 Nov 12 Nov 14 Nov 13 Nov 15 Dec 12 Mar 13 Sept 13 Sept 14 June 13 Dec 13 Mar 14 June 14 Dec 14 Mar 15
Slide 41: Raw Materials – Sourcing Strategy
RAW MATERIALS – SOURCING STRATEGY Cascades’ NA Recycled Fibre Supply World Top Recovered Paper Suppliers 20151 Recovery & (M Tonnes) 6 Internal 5 Most of the fibre 25% 4 supply coming Regular & 3 from internal Steady Volume Spot 2 sources, (Noncontractual) 25% 1 contracts and 27% 0 Contractual regul