Cascades Inc. · TSX:CAS
Cascades — Imperial Capital Global Opportunities Conference 2012
30 slides from Cascades's conference presentation, Sep 20, 2012
Slide 1: Cascades Inc. – Imperial Capital Global Opportunities Conference
CASCADES INC. Imperial Capital Global Opportunities Conference September 20, 2012
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: Overview – Packaging and Tissue Products
OVERVIEW – PACKAGING AND TISSUE PRODUCTS Containerboard Specialty Products Tissue Papers Leading packaging and tissue manufacturer with substantial recycling capabilities 3
Slide 4: Overview – Worldwide Asset Base
OVERVIEW – WORLDWIDE ASSET BASE Asset Base Distribution (PP&E per region) Canada 64% USA 21% Europe 15% 4
Slide 5: Overview – Other Assets & Investments
OVERVIEW – OTHER ASSETS & INVESTMENTS Assets Consideration Accounting • 46% ownership RENO DE MEDICI • Public co: bloc worth ± $30M • Fully consolidated RECOVERY OPERATIONS • 73% ownership • 59.7% ownership GREENPAC PROJECT • $99M investment to date JV IN INDUSTRIAL PACKAGING • 50% ownership • Equit
Slide 6: Overview – Balanced Play
OVERVIEW – BALANCED PLAY Cascades Q2-2012 LTM Sales1: $3,734M Q2-2012 LTM EBITDA1, 2: $293M Sales to: Canada US Elsewhere 40% 37% 23% Packaging Tissue Papers 75% of Sales 25% of Sales 58% of EBITDA 42% of EBITDA Boxboard Europe Containerboard Specialty Products 22% of Sales 31% of Sales 22% of Sales
Slide 7: Overview – Healthy P&FP Sectors and Access to Fiber
OVERVIEW – HEALTHY P&FP SECTORS AND ACCES TO FIBER Recycled Fiber Sources - 2011 Top 5 producers' share of capacity 100% 85% 86% Spot 80% 77% 76% Internal and Purchases 66% CAS Recovery 20% 60% 32% 40% Contractual agreements 20% 48% 0% North American European North American Canadian North American c
Slide 8: Overview – Green Leadership Play
OVERVIEW – GREEN LEADERSHIP PLAY RECOVERED PAPER DOWNSTREAM • #1 Canadian collector Recycled fiber usage (2011): 76% (2.9M tons) NA integration rate (2011): 33% (580K tons) PACKAGING • #1 Canadian containerboard producer RECOVERY • #6 North American containerboard producer 23 units • #2 European in
Slide 9: Overview – Recession Proof Play
OVERVIEW – RECESSION PROOF PLAY 2011 U.S. Containerboard End-Users EBITDA (excluding specific items) (M $) Non- 140 127 durables; 121 120 107 110 28% 96 Durables; 100 94 88 85 84 9% 79 80 72 72 Others 62 Food; 53% 59 10% 60 51 37 40 20 2011 U.S. Tissue Paper End-Users 0 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q
Slide 10: Market Dynamics – Demand
MARKET DYNAMICS – DEMAND Packaging Tissue (billions North American Box Shipments U.S. Total Tissue Consumption ('000 s.t.) ft2) 460 8,400 8,319 424 421 428 421 8,201 8,219 420 412 411 413 8,200 405 386 387 8,053 8,028 380 374 8,000 7,896 7,844 340 7,800 300 7,600 2001 2002 2003 2004 2005 2006 2007 2
Slide 11: Market Dynamics – Market Balance
MARKET DYNAMICS – MARKET BALANCE Annual Average Capacity Utilization Rates 100% 96% 92% 88% 84% 80% 76% 2007 2008 2009 2010 2011 U.S. Containerboard Industry U.S. Coated Recycled Boxboard Industry U.S. Tissue Industry Sources: RISI, CEPI Cartonboard, Paper Packaging Canada , Fiber Box Association. B
Slide 12: Market Dynamics – Product Prices
MARKET DYNAMICS – PRODUCT PRICES Containerboard - Selected Products ($US/t.c.) 1,000 900 800 After approx. 30 months of flat pricing, 700 $50/s.t. price increase announced 600 (applicable in September) 500 along with following box price increases 400 Jun-12 Jul-11 Oct-09 Oct-10 Apr-11 Oct-11 Jan-09
Slide 13: Market Dynamics – Raw Material Costs
MARKET DYNAMICS – RAW MATERIAL COSTS (US$/ton) Main Recycled Fiber North Amercian OBM List Prices 300 290 Current 250 List Prices 200 185 175 150 165 100 110 90 50 White grades (SOP) Brown grades (OCC) 0 May 09 May 10 May 11 May 12 Jan 09 Jan 10 Jan 11 Jan 12 Mar 09 Mar 10 Mar 11 Mar 12 Sept 09 Sept
Slide 14: Market Dynamics – Input Cost Inflation
MARKET DYNAMICS – INPUT COST INFLATION Natural gas Energy prices Crude oil Chemical Products Index Variation (US$) (US$) 7.00 110 40% 6.00 100 5.00 90 30% 4.00 80 70 20% 3.00 60 2.00 50 10% 1.00 40 0.00 30 0% Jan-11 Jul-11 Jan-12 Jul-12 May-11 May-12 Sep-11 Nov-11 Mar-11 Mar-12 July 09 July 10 Jan 1
Slide 15: Market Dynamics – Foreign Exchange
MARKET DYNAMICS – FOREIGN EXCHANGE Exchange rates US$/CAN$ EURO/CAN$ 1.10 1.00 1.05 0.95 1.00 +49% 0.90 0.95 0.90 0.85 0.85 0.80 0.80 0.75 +25% 0.75 0.70 0.70 0.65 0.65 0.60 0.60 Q1 03 Q3 03 Q1 04 Q3 04 Q1 05 Q3 05 Q1 06 Q3 06 Q1 07 Q3 07 Q1 08 Q3 08 Q1 09 Q3 09 Q1 10 Q3 10 Q1 11 Q3 11 Q1 12 US$/CAN
Slide 16: Financial Review – Historical Performance
FINANCIAL REVIEW – HISTORICAL PERFORMANCE (M CAN$) SALES (M CAN$) EBITDA 4,500 500 465 4,033 4,025 400 4,000 3,862 3,877 340 3,692 314 305 310 3,625 3,481 300 250 259 262 3,449 229 3,500 3,182 200 3,000 100 2,500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2003 2004 2005 2006 2007 2008 2009 2010
Slide 17: Financial Review – Segmented EBITDA
FINANCIAL REVIEW – SEGMENTED EBITDA Boxboard Europe Containerboard (M CAN$) (% of sales) (M CAN$) Boxboard Europe Containerboard (% of sales) 20 12.0% 60 55 15.0% 17 46 15 13 45 12.0% 10 7.0% 36 10 11 27 10 30 19 21 23 9.0% 5 20 19 4 2.0% 5 15 6.0% 2 0 0 -3.0% 0 3.0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3
Slide 18: Financial Review – Key Indicators (KPIs)
FINANCIAL REVIEW – KEY INDICATORS (KPIs) ('000 s.t.) Total Shipments Capacity Utilization Rate 1000 96% 94% 902 900 822 829 92% 91% 90% 90% 89% 90% 800 776 796 88% 87% 87% 692 695 86% 700 663 661 84% 600 500 80% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 2011Q2 2011Q3 2011Q4 2011 Q1 Q2 2010 2010 2010 20
Slide 19: Financial Review – Debt Profile
FINANCIAL REVIEW – DEBT PROFILE Net Debt Long-term Debt Maturities Distribution (M CAN$) 2,000 1,805 2020 1,800 2017 16% 1,658 33% 1,5701,533 1,585 1,600 1,508 1,4851,524 1,454 1,462 1,445 1,397 1,370 1,400 1,298 Before 2016 10% 1,200 2016 1,000 41% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 200
Slide 20: Financial Review – Leverage Ratios & Covenants
FINANCIAL REVIEW – LEVERAGE RATIOS & COVENANTS Debt / Debt + Equity Net debt / LTM EBITDA1 65% 7.0x 61% 59% 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 06/2012 06/2012 • Cascades’ financial bank coven
Slide 21: Financial Review – Capex Program
FINANCIAL REVIEW – CAPEX PROGRAM Capex requests for 2012 initially approved at approximately $150M Amount subject to change depending on operating results and economic conditions. Capital Expenditures Distribution in 2011 - $141M By segment By project category Corporate 6% Others Boxboard 15% 23
Slide 22: 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 Cap PROCESS Initiative MEDIUM TERM Improve our ROCE to
Slide 23: Strategic Action Plan – Priority #1
STRATEGIC ACTION PLAN – PRIORITY #1 1 Focused investing for modernization of core operations and IT CONSOLIDATION OF OUR PACKAGING OPERATIONS ERP IMPLEMENTATION WITH CONCURRENT INVESTMENTS • Recent investment announcements: • $80M investment program • $30M in our containerboard sector • Blueprint an
Slide 24: Strategic Action Plan – Priority #1 (cont'd)
STRATEGIC ACTION PLAN – PRIORITY #1 (cont’d) OUR GREENPAC PROJECT 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 • $15M in bridge loan • Deb
Slide 25: Strategic Action Plan – Priority #2
STRATEGIC ACTION PLAN – PRIORITY #2 2 Optimizing capital allocation between sectors and investments Tuck-in acquisitions W/C Reduction Initiative • Papersource Working Capital (% of Sales) 16.0% • Modern converting plant 15.1% 15.1% 14.5% 14.4% 14.5% 14.7% • Integration increased to 70% + 13.9% 14.2
Slide 26: Strategic Action Plan – Priority #3
STRATEGIC ACTION PLAN – PRIORITY #3 3 Restructuring of under-performing units Periods 2004-2006 2006-2008 2008-2010 2011 2012 Packaging Packaging Packaging Packaging Packaging 5 acquisitions 2 mergers 2 closures 4 sales 1 investment 7 closures 4 closures 2 acquisitions 1 investment 4 closures Strate
Slide 27: Investment Considerations – Recommendations
INVESTMENT CONSIDERATIONS – RECOMMANDATIONS EBITDA (M$) EPS Brokerage Firm Rating Target 2012 2012 BMO CAPITAL MARKETS Outperform $5.75 326 $0.31 DESJARDINS SECURITIES Buy $6.50 341 $0.43 NATIONAL BANK FINANCIAL Outperform $6.00 331 $0.32 SCOTIA BANK Sector outperform $5.50 370 $0.42 TD Hold $5.00 3
Slide 28: Investment Considerations – Valuation Metrics
INVESTMENT CONSIDERATIONS – VALUATION METRICS Comparable Entreprise Price / BV EV / EBITDA P/E Dividend Sector companies Value (M$) (next) (next) yield (%) Graphic Packaging US$4,328 1.8x 6.4x 17.0x 0.0% Kapstone US$1,254 1.7x 5.9x 12.5x 0.0% Meadwestvaco US$6,509 1.6x 6.6x 20.6x 3.4% Packaging PCA
Slide 29: Investment Considerations – Potential Improvements
INVESTMENT CONSIDERATIONS – POTENTIAL IMPROVEMENTS • Modernization initiatives (±$150M capex program) • Papersource integration • Bird Packaging integration Improvement • Containerboard productivity rate reverting to historical levels in the • Streamlining of converting operations in New England, On
Slide 30: Near Term Outlook: Confidence
NEAR TERM OUTLOOK: Confidence • Lower to stable raw material costs • Economic uncertainty, particularly • Announced price increase in in Europe containerboard sector • Higher demand volatility + • Impacts of restructuring and optimization measures • Recent recycled white paper price I increase • Pot
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