Slide 1: Investor Presentation, Montréal
INVESTOR PRESENTATION, MONTRÉAL March 14, 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 $1.5 B ✓ Net debt/
Slide 6: Near-Term Business Drivers
INVESTMENT THESIS Near-Term Business Drivers Tailwinds ✓ Implementation of linerboard/ medium price increases in containerboard; lower OCC costs ✓ Benefits from business process modernization and implementation of ERP platform ✓ Increasing sale volume at new tissue converting facility in Oregon ✓ Ne
Slide 7: Strong Financial Profile
OPERATING PERFORMANCE AND FINANCIAL SITUATION Strong Financial Profile Sales (CAN$ 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: Now Targeting Leverage Ratio of 2.5x
OPERATING PERFORMANCE AND FINANCIAL SITUATION Now Targeting Leverage Ratio 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 $288 M of proceeds from the sale of equity stake in Boralex brought us
Slide 10: Raw Material Costs – Index List Prices
RAW MATERIAL COSTS – INDEX LIST PRICES (US$/ton) Recycled Fibre Prices Current (US$/ton) Virgin Pulp Prices Current (Mar.) (Feb.) 200 1,300 175 184 1,200 1,230 150 1,100 1,075 125 1,000 100 900 75 83 800 50 700 Sept 15 Sept 16 Sept 17 Mar 15 Mar 16 Mar 17 Mar 18 June 15 June 16 June 17 Dec 14 Dec 15
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% ❖ WestRock 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.) 750 200 700 180 650 160 140 600 120 550 100 500 80 450 60 400 40 Linerboard 42-lb. unbleached kraft, Eastern U.S. Old corrugated containers no. 11 (Northeast) 350
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 Mayr-Melnhof Metsä Board Mayr-Melnhof Metsä Board Stora Enso Reno De Medici Stora Enso Kotkamills Weig Karton Reno De Medici Mayr-Melnhof Smurfit Kappa Holmen Iggesund Internat
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 Group: A Diversified Packaging Player
SPECIALTY PRODUCTS GROUP 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 potenti
Slide 21: Cascades Recovery+ Sub-Segment
SPECIALTY PRODUCTS GROUP 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 buying group White recycled • Manages procurement of all raw material 34% 34% purchased (1.0M st) (1.0M st) fi
Slide 22: Tissue Papers Group: A Canadian Leader and Important North American Player
TISSUE PAPERS GROUP 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
Slide 23: Strong Position Across the North American Tissue Market
TISSUE PAPERS GROUP Strong Position Across the North American Tissue Market CAS Sales by Country (2017) Tissue Market Demand1 Canada (26%) US (74%) 160 1.8% 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 Privat
Slide 24: Diversified Capacity and Positioning
TISSUE PAPERS GROUP 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
Slide 25: Tissue Papers: Business Drivers
TISSUE PAPERS GROUP Business Drivers Tissue Papers Benchmark Market Prices Virgin & Recycled Fibre Prices (US$/m.t.) (US$/s.t.) 1,300 1,500 1,100 1,400 900 1,300 700 NBSK NBHK 1,200 500 Feb 08 Feb 09 Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 Feb 15 Feb 16 Feb 17 Feb 18 Aug 09 Aug 10 Aug 11 Aug 12 Aug 15 Au
Slide 26: Strategic Plan 2017-2022
2017-2022 STRATEGIC PLAN ete as
Slide 27: Building on the Past, Positioning for the Future
POSITIONING FOR GROWTH Building on the Past, Positioning for the Future 2011 - 2016 Acquisition of Consolidation WE MODERNIZED New tissue paper Papersource machine in Oregon of Recovery • Invested more than $400M in ownership modern equipment Acquisition of Start-up of the a corrugated Greenpac Mill
Slide 28: Capital Expenditures
POSITIONING FOR GROWTH Building on the Past, Positioning for the Future Capital Expenditures (CAN M$) ✓ Strong free cash flow has 250 $221M funded Capex $206M 200 $184M $184M $173M ✓ Impacted by strong US$ $161M 150 ✓ Approximately $400M invested in strategic projects 100 since 2012 ✓ Since 2012, an
Slide 29: Strategy Focus Areas 2017-2022
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% - Disciplined capital allocation - Grow US platform - Sustainable free cash f
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: Disciplined Capital Allocation
UPGRADE OUR PLATFORMS 1 Disciplined Capital Allocation 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 least $100M of FCF toward debt reduction annual
Slide 32: 2018 Capex – Important Investments to Consolidate Position
UPGRADE OUR PLATFORMS 1 2018 CAPEX – Important Investments to Consolidate Position (in CAN$) Containerboard $135M - $145M ✓ Strong fundamentals in Boxboard Europe $30M - $35M Containerboard and in Europe Specialty Products $40M - $50M ✓ Solid cash flow from operations will fund 2018 CAPEX program Ti
Slide 33: 2018 Capex – Major Projects
1 UPGRADE OUR PLATFORMS 2018 CAPEX – Important Investments to Consolidate Position SEGMENT MAJOR PROJECTS INVESTMENT IMPACT BUSINESS CASE ($M CAN) Piscataway, NJ ✓ Integration ±5% Containerboard conversion plant $80 - $85 H2 2018 ✓ Improve footprint and asset quality Europe Paper machine upgrade ±$1
Slide 34: Increase Profitability Margin to 15%
CREATE VALUE 2 Increase Profitability Margin to 15% • Growth associated with targeted investments and potential strategic In Progress 4 acquisitions • Transformation program benefits & reduction of implementation costs In Progress 3 ±$50 M ANNUALLY • Monetize the benefits of our optimization, modern
Slide 35: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION Cascades’ new Innovation Centre Containerboard is focused on: Specialty Products • Coordinating multigroup programs 37 people Tissue Papers • Developing new expertise (ex. A.I.) dedicated to Supported by: • Gathering market intelligence innovation Cascades’ Innova
Slide 36: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION Hand towel dispenser with new, patented dispenser technology Produces innovative, lightweight recycled linerboard – XP grades Low-density PETE containing 80% post- consumer material OBJECTIVE: 20% of sales from innovative products in 2020 Recyclable insulated cont
Slide 37: Appendix
APPENDIX ete as
Slide 38: Q4 2017 Performance – Financial Results
Q4 2017 PERFORMANCE – FINANCIAL RESULTS 107 106 105 256 82 75 161 48 51 45 33 31 57 24 33 19 4 15 12 13 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 2016 2017 2017 2017 2017 2016 2017 2017 2017 2017 Operating Income Adjusted OIBD 1 Net Earnings Adjusted Net Earnings 1 Figures above in millions of CAN$ 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: 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 43: 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 113% 100% 94% 131% 68% 3 Year 209% 106% 109% 120% 68% 450% 5 Year 354% 122% 106% 193% 77% 350% 250% 150% 50% 2013-03 2013-06 2013-09 2013-12 2014-03 2014-06 2014-09 2014-12 2015-
Slide 44: Shareholders & Analyst Coverage
SHAREHOLDERS & ANALYST COVERAGE Major Shareholders % Analyst City Bank Lemaire Brothers, BoD & employees 32.3% 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 45: Geographically Diversified
GEOGRAPHICALLY DIVERSIFIED 45
Slide 46: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or jennifer_aitken@cascades.com 46