Cascades Inc. · TSX:CAS
Cascades — Q3 2020 Earnings Presentation
33 slides from Cascades's earnings presentation, Nov 12, 2020
Slide 1: Q3 2020 Financial Results
Q3 2020 FINANCIAL RESULTS November 12, 2020
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 RESULTS2 186 43 39 54 58 49 48 161 152 161 162 28 29 22 108 90 94 73 (26) (1) 2 Q3 2019 2 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 1 Operating Income (loss) Adjusted OIBD Net Earnings (loss) Adjusted Net Earnings 1 Figures above in millio
Slide 4: Historical Segmented Quarterly Operating Income (Loss) & Adjusted OIBD
HISTORICAL SEGMENTED QUARTERLY OPERATING INCOME (LOSS) & ADJUSTED OIBD1,2 Containerboard (millions of CAN$) Boxboard Europe2 (millions of CAN$) 118 106 43 99 94 100 30 30 29 91 25 24 14 20 19 69 74 71 54 (6) Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Operating In
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) 411 351 377 374 101% 365 360 326 98% 98% 321 94% 316 92% 92% 93% 94% 305 91% 88% Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q3 2019 Q4 2019 Q1 2020 Q2
Slide 6: Raw Material Costs - Index List Prices
RAW MATERIAL COSTS - INDEX LIST PRICES ($ US/t.c.) Recycled Fibre Prices Current ($ US/t.m.) Virgin Pulp Prices Current (Nov-20) (Oct-20) 250 1,500 225 1,400 200 1,300 175 150 1,200 125 1,100 1,130 100 78 1,000 75 900 50 58 860 25 800 0 700 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Aug
Slide 7: Segmented Review
SEGMENTED REVIEW = 9 O18Me- 8
Slide 8: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Comments on sequential performance Q3 2020 Q2 2020 Q3 2019 è Shipments increased by 14% sequentially. This was driven by an 18% increase in Shipments ('000 s.t.) manufacturing shipments that reflects higher demand and the 16.5 days of planned 41
Slide 9: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q3 2020 Q2 2020 Q3 2019 è Shipments decreased 14% on a sequential basis in the third quarter. This reflects an Shipments ('000 s.t.) 11% decrease in shipments of converted products, driven by the Covid-19 related 144 (14)% (11)% dem
Slide 10: Packaging Products / Boxboard Europe
PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Q3 2020 Q2 2020 Q3 2019 Shipments ('000 s.t.) è Shipments of virgin boxboard decreased by 6,000 s.t., or 14%, in the third quarter of 2020 compared to the prior quarter, while shipments of recycled boxboard de
Slide 11: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q3 2020 Q2 2020 Q3 2019 è Sales decreased by 3% sequentially. Sales in the Industrial packaging sub-sector increased Sales (M$) 8%, while those of flexible and plastic food packaging increased 9% from the p
Slide 12: Financial Review
FINANCIAL REVIEW eo ke SE fe te Oe 7 ba
Slide 13: Key Performance Indicators (KPIs)
KEY PERFORMANCE INDICATORS (KPIs) Total Shipments1 ('000 s.t.) Capacity Utilization Rate1-2 (manufacturing only) 906 97% 871 859 93% 853 92% 91% 837 90% Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 LTM Return on Assets LTM Working Capital (% of LTM Sales) 12.7% 12.
Slide 14: Year over Year Sales Reconciliation
YEAR OVER YEAR SALES RECONCILIATION (M CAN$) +1% 1,350 21 1 1,300 27 (16) 1,275 1,264 (22) 1,250 1,200 Business Sales Other closure and Sales (M CAN$) Q3-2019 Volume F/X CAN$ variances disposal Price & Mix Q3-2020 Containerboard 473 42 2 — — (11) 506 Boxboard Europe 256 (5) 15 — — (5) 261 Specialty
Slide 15: Sequential Sales Reconciliation
SEQUENTIAL SALES RECONCILIATION (M CAN$) -1% 1,400 1,350 1,285 5 4 3 1,300 1,275 1,250 (22) 1,200 1,150 1,100 Sales Sales (M CAN$) Q2-2020 Other variances Volume Price & Mix F/X CAN$ Q3-2020 Containerboard 458 — 64 — (12) 454 Boxboard Europe 272 — (9) — 5 265 Specialty Products 113 — 7 (7) (3) 120 T
Slide 16: Year-over-Year Operating Income Reconciliation
YEAR-OVER-YEAR OPERATING INCOME RECONCILIATION + Lower production, logistics and SG&A costs + Lower energy costs + Higher volumes + R&D tax credits + R&D tax credits + Contribution from Orchids business acquisition - Lower average selling price - Lower volumes - Higher costs of brown recycled fibre
Slide 17: Sequential Operating Income Reconciliation
SEQUENTIAL OPERATING INCOME RECONCILIATION + Higher volumes + Lower raw material costs + Higher average selling prices - Appreciation of the CAN$ Higher raw material, maintenance and - Higher production, logistics - and SG&A costs energy costs - Appreciation of the CAN$ - Lower volumes Review of rem
Slide 18: Q3-20 Adjusted OIBD to Operating Income Reconciliation
Q3-20 ADJUSTED OIBD TO OPERATING INCOME RECONCILIATION (M CAN$) 200 162 150 100 81 7 1 73 50 (81) (13) (3) 0 Adjusted Depr. & Adjusted Gain on acq. Impairment Restructuring Unrealized gain Operating 1 OIBD Amort. Operating and others charges costs on financial Income Income 1 instruments Container-
Slide 19: Net Earnings - IFRS vs Adjusted
NET EARNINGS - IFRS VS ADJUSTED NET EARNINGS NET EARNINGS (LOSS) PER SHARE1 (in millions of Canadian dollars, except amount per share) Q3-2020 Q3-2020 As per IFRS 49 $ 0.51 Specific items: Gain on acquisitions, disposals and others (7) $ (0.05) Impairment charges 13 $ 0.10 Restructuring costs 3 $ 0.
Slide 20: Quarterly Year-over-Year Adjusted EPS Variance
QUARTERLY YEAR-OVER-YEAR ADJUSTED EPS VARIANCE1,2 0.80 Impact of R&D tax credits non-taxable in the USA in 2020. Valuation of prior years losses carried forward in 2020 0.60 0.15 0.50 0.01 0.51 0.45 $ cents 0.40 0.11 0.30 0.01 (0.01) (0.15) 0.20 (0.06) Fair value of CDPQ option related to Greenpac (
Slide 21: Quarterly Sequential Adjusted EPS Variance
QUARTERLY SEQUENTIAL ADJUSTED EPS VARIANCE1,2 0.80 Valuation of prior years losses carried forward in Q3 0.04 0.61 0.60 0.57 0.07 0.50 0.01 0.51 0.04 0.02 $ cents 0.40 (0.19) (0.05) 0.20 0.00 2 2 EPS reported Specific Adjusted EPS OIBD Depreciation Financing Non- Income Adjusted EPS Specific EPS rep
Slide 22: Cash Flow Overview
CASH FLOW OVERVIEW 153 153 162 162 97 38 59 44 16 104 108 107 106 115 91 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 3 3 CF from oper. Adj. CF from oper. Adjusted Free Cash Flow Figures above in millions of CAN$ Figures above in millions of CAN$ 2018 2019 2020 LTM
Slide 23: Net Debt Reconciliation - Q3 2020
NET DEBT1 RECONCILIATION - Q3 2020 (M CAN$) 2,100 2,077 2,050 2,000 45 1,982 1,950 (106) 23 (30) 11 1,900 (32) (6) 1,850 Net debt as at Cash flow Changes in F/X CAN$ Investments Dividends paid & Right-of-use assets Payments for Net debt as at June 30, 2020 from oper. non-cash and others change in ca
Slide 24: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD1,3 Interest Coverage Ratio2,3 5.0x 4.6x 4.7x 6.0x 6.2x 5.8x 4.0x 3.8x 3.6x 4.7x 4.6x 3.5x 4.3x 3.25x 3.0x 3.4x 3.4x 3.0x 2012 2013 2014 2015 2016 2017 2018 2019Q3 2020 2012 2013 2014 2015 2016 2017 2018 2019 Q3 2020 Net Deb
Slide 25: Capital Investments
CAPITAL INVESTMENTS (in millions of Canadian dollars, including capitalization of IT projects, excluding value of leases) INCLUDING ±$40 M of 360 investments at Bear Island 40 81 274 2020 CAPEX: 47 ± $240 M1 218 20 46 35 104 30 61 18 80 22 184 27 39 20 66 25 62 30 2017 2018 2019 2020 Containerboard
Slide 26: Concluding Remarks
CONCLUDING REMARKS 26
Slide 27: Near Term Factors
NEAR TERM FACTORS • Containerboard: favourable impact on selling price • For each of our business segments, we are QoQ and YoY as Nov. 1st price increase begins to be remaining cautious for our Q4 outlook given lack of implemented certainty about the potential impact that Covid may • Raw materials:
Slide 28: Appendix
APPENDIX —s Ne | a
Slide 29: Segmented YoY Operating Income Waterfalls
SEGMENTED YoY OPERATING INCOME WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 160 20 5 45 29 118 3 2 (30) 4 29 (12) 120 91 100 11 25 (11) 30 71 (5) 19 80 (2) (32) 14 1 2 15 40 0 0 Q3 2019 Depr. & Q3 2019 Volume Other Price Raw Q3 2020 Depr. & Q3 2020 Q3 2019 Depr. &
Slide 30: Segmented Sequential Operating Income Waterfalls
SEGMENTED SEQUENTIAL OPERATING INCOME WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 160 50 12 43 26 40 120 94 100 (30) 30 29 (12) 29 (2) (3) 30 (6) (4) (6) 71 1 19 80 54 (7) 20 (6) 1 2 40 11 10 0 0 Q2 2020 Depr. & Q2 2020 Other Other Energy Q3 2020 Depr. & Q3 2020 Q
Slide 31: Selected Reference Prices
SELECTED REFERENCE PRICES Current (US$/s.t.) Containerboard - Selected Products Current (Euro€/s.t.) Boxboard Europe - Selected Products (Sep-20) 800 (Oct-20) 1,200 1,100 1,095 700 715 1,000 615 900 600 800 500 700 600 659 400 500 Aug 17 Nov 17 Feb 18 May 18 Aug 18 Nov 18 Feb 19 May 19 Aug-19 Nov-19
Slide 32: Selected Reference Prices and Fibre Costs
SELECTED REFERENCE PRICES AND FIBRE COSTS Q3 2020 vs Q3 2020 vs 2018 2019 2020 Q3 2019 Q2 2020 These indexes should only be used as an indicator of trends and they may be different than our actual selling prices or purchasing costs. Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 (units) (%) (units) (%)
Slide 33: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 / investor@cascades.com 33