Cascades Inc. · TSX:CAS
Cascades — Q3 2018 Earnings Presentation
34 slides from Cascades's earnings presentation, Nov 8, 2018
Slide 1: Review of Q3 2018 Financial Results
REVIEW OF Q3 2018 FINANCIAL RESULTS November 8, 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: Summary of Quarterly Financial Results
SUMMARY OF QUARTERLY FINANCIAL RESULTS 134 137 57 61 106 105 112 105 33 36 38 73 78 27 29 51 19 45 13 12 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 1 1 Operating Income Adjusted OIBD Net Earnings Adjusted Net Earnings Figures above in millions of CAN$ Figures abo
Slide 4: Historical Segmented Quarterly Operating Income & Adjusted OIBD
HISTORICAL SEGMENTED QUARTERLY OPERATING INCOME (LOSS) & ADJUSTED OIBD1 Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 121 117 28 30 105 22 94 19 19 19 77 82 14 72 74 11 10 50 51 5 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Operating Income
Slide 5: Historical Segmented Quarterly Shipments
HISTORICAL SEGMENTED QUARTERLY SHIPMENTS Containerboard ('000 s.t. and % capacity utilization1) Boxboard Europe ('000 s.t. and % capacity utilization1) 298 385 369 372 370 103% 276 271 270 352 100% 259 91% 92% 92% 94% 96% 89% 93% 90% Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017 Q1 2018 Q2
Slide 6: Key Performance Indicators (KPIs)
KEY PERFORMANCE INDICATORS (KPIs) Total Shipments1 ('000 s.t.) Capacity Utilization rate1-2 (manufacturing only)) 824 97% 94% 797 799 92% 788 793 91% 91% Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 LTM Return on Assets LTM Working Capital (% of LTM Sales) 10.2% 10
Slide 7: Raw Material Costs - Index List Prices
RAW MATERIAL COSTS - INDEX LIST PRICES (US$/ton) Recycled Fibre Prices Current (US$/ton) Virgin Pulp Prices Current (Oct) (Oct) 250 1,500 225 225 1,400 1,420 200 1,300 175 1,200 1,210 150 1,100 125 1,000 100 900 75 68 800 50 700 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 N
Slide 8: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD1 Interest Coverage Ratio2 5.0x 3 4.7x 5.4x 4.6x 4.7x 4.6x 3 4.0x 3.8x 3 4.3x 3.6x 3 3.2x 3.4x 3.4x 3.0x 2012 2013 2014 2015 2016 2017 Q3 2018 2012 2013 2014 2015 2016 2017 Q3 2018 Net Debt / Net Debt + Total Equity Long-Ter
Slide 9: Financial Review
FINANCIAL REVIEW Bo o1smeck
Slide 10: Year Over Year Sales Reconciliation
YEAR OVER YEAR SALES RECONCILIATION (M CAN$) +6% 1,200 7 10 1,180 20 1,172 1,160 21 (21) 1,140 32 1,120 1,103 1,100 1,080 Sales Acqu. & Other Recovery & Sales (M CAN$) Q3-2017 F/X CAN$ Disposals Price Volume variances Recycling Q3-2018 Containerboard 438 11 16 15 (8) — — 472 Boxboard Europe 202 8 5
Slide 11: Sequential Sales Reconciliation
SEQUENTIAL SALES RECONCILIATION (M CAN$) -1% 1,205 6 1,195 14 (1) (2) 1,185 1,179 1,175 1,172 1,165 (24) 1,155 1,145 Sales Other Recovery & Sales (M CAN$) Q2-2018 Price F/X CAN$ variances Recycling Volume Q3-2018 Containerboard 475 12 3 — — (18) 472 Boxboard Europe 232 (5) (2) — — (15) 210 Specialty
Slide 12: Year-over-Year Consolidated Operating Income Reconciliation
YEAR-OVER-YEAR CONSOLIDATED OPERATING INCOME RECONCILIATION + Lower ERP and business process optimization costs + Higher volume (M CAN$) + Lower recycled fibres prices (OCC) - Higher stock-based compensation expense + More favourable product mix and + Higher average selling price average selling pri
Slide 13: Sequential Consolidated Operating Income Reconciliation
SEQUENTIAL CONSOLIDATED OPERATING INCOME RECONCILIATION (M CAN$) + Higher selling prices + Higher contribution from the Recovery business 200 + Lower repair and maintenance expense + Lower raw material costs - Lower volume 160 12 5 3 134 137 2 58 (1) (2) 120 (11) + More favourable product mix and av
Slide 14: Quarterly Year-over-Year EPS Variance
QUARTERLY YEAR-OVER-YEAR EPS VARIANCE Q3-2017 Q3-2018 Adjusted1 Specifics1 As reported Adjusted1 Specifics1 As reported OIBD1 106 (2) 104 137 2 139 Depreciation (53) — (53) (61) — (61) Operating income 53 (2) 51 76 2 78 Financing expenses & interest expense on employee future benefits (26) — (26) (2
Slide 15: Quarterly Sequential EPS Variance
QUARTERLY SEQUENTIAL EPS VARIANCE Q2-2018 Q3-2018 Adjusted1 Specifics1 As reported Adjusted1 Specifics1 As reported OIBD1 134 (3) 131 137 2 139 Depreciation (58) — (58) (61) — (61) Operating income 76 (3) 73 76 2 78 Financing expenses & interest expense on employee future benefits (24) 1 (23) (24) —
Slide 16: Q3-18 Adjusted OIBD to Operating Income Reconciliation
Q3-18 ADJUSTED OIBD TO OPERATING INCOME RECONCILIATION (M CAN$) 160 137 120 76 2 78 80 (61) 40 0 Adjusted Depr. & Adjusted Unrealized gain Operating 1 OIBD Amort. Operating on financial Income Income 1 instruments Container- Boxboard Specialty Tissue Corporate (M CAN$) board Europe Products Papers A
Slide 17: Net Earnings - IFRS vs Adjusted
NET EARNINGS - IFRS VS ADJUSTED NET EARNINGS PER NET EARNINGS COMMON SHARE1 (in millions of Canadian dollars, except amount per common share) Q3-2018 Q3-2018 As per IFRS 36 $ 0.38 Specific items: Unrealized gain on financial instruments (2) $ (0.02) Foreign exchange gain on long-term debt & financia
Slide 18: Cash Flow Overview
CASH FLOW OVERVIEW 111 111 89 92 92 54 12 22 27 77 63 69 69 61 (42) Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 CF from oper. Adj. CF from oper. 3 Adjusted Free Cash Flow 3 Figures above in millions of CAN$ Figures above in millions of CAN$ 2016 2017 2018 (In mill
Slide 19: Net Debt Reconciliation - Q3 2018
NET DEBT1 RECONCILIATION - Q3 2018 (M CAN$) 1,600 1,586 124 1,573 1,550 1,500 (92) 12 1,450 2 7 (42) 1,400 (24) 1,350 Net debt as at Cash flow from Var in non-cash FX rate Capital lease Others Dividends paid Capital Net debt as at June 30, 2018 operations work. cap. acquisitions & share buyback, inv
Slide 20: Segmented Review
SEGMENTED REVIEW Bo o0o mek
Slide 21: Segmented YoY Operating Income (Loss) Waterfalls
SEGMENTED YoY OPERATING INCOME (LOSS) WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 160 15 (22) 30 12 45 117 120 94 19 19 72 (15) 9 14 80 50 (1) 15 (7) 10 40 3 5 (9) 0 Q3 2017 Depr. & Q3 2017 Raw Price Other Q3 2018 Depr. & Q3 2018 0 Operating Amort. / Adjusted Q3 2
Slide 22: Segmented Sequential Operating Income (Loss) Waterfalls
SEGMENTED SEQUENTIAL OPERATING INCOME (LOSS) WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 8 30 160 30 12 6 117 (22) 22 120 20 105 94 19 82 (2) (6) (4) 80 3 (1) 15 (5) 10 40 (9) 0 0 Q2 2018 Depr. & Q2 2018 Other Volume Price Q3 2018 Depr. & Q3 2018 Q2 2018 Depr. & Q
Slide 23: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Comments on sequential performance Q3 2018 Q2 2018 Q3 2017 Shipments ('000 t.c.) è Shipments decreased by 4% sequentially, mainly as a result of planned maintenance downtime. This reflects a 7% decrease in Containerboard shipments, following a 8
Slide 24: Packaging Products / Boxboard Europe
PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Q3 2018 Q2 2018 Q3 2017 Shipments ('000 t.c.) è Shipment levels decreased sequentially as a result of the usual seasonal summer slowdown. 259 (6)% (4)% Compared to the previous period, shipments of recycled gr
Slide 25: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q3 2018 Q2 2018 Q3 2017 Sales ($M) è Sales remained stable sequentially as the benefits of higher shipments in the Industrial Packaging sub-segment were offset by lower shipments in the Consumer Products 16
Slide 26: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q3 2018 Q2 2018 Q3 2017 Shipments ('000 t.c.) è Shipments increased by 4% sequentially in all converted product markets, reflecting the 164 1% 4% usual seasonality and newly secured volumes in both the away-from-home and the consume
Slide 27: Concluding Remarks and Q&A
CONCLUDING REMARKS AND Q&A 27
Slide 28: Near Term Outlook
NEAR TERM OUTLOOK • Seasonal improvement in volume in Europe • Continuing beneficial impact of more stable and • Ongoing market-related challenges facing the lower OCC prices, currently at ~US$70/st Tissue segment à • Selective price increases announced in various Tissue sub-segments • • Rising pulp
Slide 29: Appendix
APPENDIX = § O18 Me.
Slide 30: Foreign Exchange
FOREIGN EXCHANGE Hedging Program – US$ Cash flows US$/CAN$ EXCHANGE RATES Euro€/CAN$ 2018 0.90 0.90 • 34% to 57% of exposure (net of interest) hedged at an average rate of 1.33 CAN$/US$ to 1.34 CAN$/US$ 0.85 0.85 0.80 0.80 2019 • 35% to 47% of exposure (net of interest) hedged at an 0.75 0.75 averag
Slide 31: Energy Prices
ENERGY PRICES Natural gas Crude oil (US$) ENERGY PRICES (US$) 8.00 80.00 Hedging Program – Natural gas • Canada: 6.00 60.00 • 2018: 22% at 3.89 CAN$/GJ • 2019: 8% at 3.60 CAN$/GJ 4.00 40.00 • U.S.: • 2018: 41% at 3.14 US$/mmBtu 2.00 20.00 • 2019: 38% at 2.89 US$/mmBtu 0.00 0.00 Q2-15 Q3-15 Q4-15 Q1-
Slide 32: Selected Reference Prices
SELECTED REFERENCE PRICES (US$/s.t.) Containerboard - Selected Products Current (Euro€/s.t.) Boxboard Europe - Selected Products Current 800 (Oct) 1,200 (Oct) 1,100 700 755 1,000 1,072 670 900 600 800 500 700 673 600 400 500 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 1
Slide 33: Selected Reference Prices and Fibre Costs
SELECTED REFERENCE PRICES AND FIBRE COSTS Q3 2018 vs Q3 2018 vs 2016 2017 2018 Q3 2017 Q2 2018 These indexes should only be used as an indicator of trends and they may be different than our actual selling prices or purchasing costs. Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 (units) (%) (units) (%) Selling pric
Slide 34: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or jennifer_aitken@cascades.com 34