Cascades Inc. · TSX:CAS
Cascades — Investor Presentation (September 2022)
48 slides from Cascades's investor presentation, September 2022
Slide 1: Investor Presentation September 2022
Investor Presentation September 2022 1
Slide 2: Disclaimer
DISCLAIMER FORWARD-LOOKING STATEM ENT 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 num
Slide 3: Who We Are
~9,950 employees, 78 facilities WHO WE ARE Eco-Friendly Packaging, Hygiene & Recovery Solutions OUR MISSION To improve the well-being of people, communities and the planet by providing sustainable and innovative solutions that create value. OUR VISION To be a key contributor to our customers’ succes
Slide 4: Sustainability Track Record: Driving Positive Change
Sustainability Track Record: Driving Positive Change Where We Are Where We’re Going 50% greenhouse gas (GHG) intensity ESG strategy aligned with UN’s emissions reduction (scope 1) since 1990 Sustainable Development Goals 45% fewer GHG emissions Aggressive GHG reduction targets (scopes 1 and 2) than
Slide 5: Investment Thesis
INVESTMENT THESIS ✓ 2022-2024 Strategic Plan Focused on margin expansion, cash flow generation and leverage improvement while limiting CAPEX to 4% of revenue in 2023 and 20241 ✓ Modernized, well-financed asset base Positioned to capitalize on growth trends in key markets ✓ Strong sustainability trac
Slide 6: Q2 2022 Results
Q2 2022 Results (in millions of CAD$, except per share amounts) Q2 2022 Q1 2022 Q2 2021 Sales 1,119 1,038 956 Operating Income 32 (4) 23 Adjusted OIBD1 91 58 98 Net earnings (loss) 10 (15) 3 Adjusted net earnings (loss) 10 (15) 8 Net earnings (loss) per common share $0.10 ($0.15) $0.02 Adjusted net
Slide 7: Q2 2022 – Consolidated Profitability Drivers
Q2 2022 – Consolidated Profitability Drivers (in millions of CAD$) Consolidated Adjusted OIBD1 Quarter-over-Quarter Year-over-Year Year-to-Date Variation Drivers Q2 2022 vs Q1 2022 Q2 2022 vs Q2 2021 2022 vs 2021 Pricing & Mix $51 million $147 million $233 million Freight & Production Costs ($25) mi
Slide 8: Selling Prices - Index Reference Prices
Selling Prices - Index Reference Prices Containerboard - Selected Products Current Specialty Products - Selected Products Current (US$/s.t.) (Aug-22) (Aug-22) (US$/s.t.) 935 1,100 865 Tissue Papers - Selected Products Current (US$/s.t.) (July-22) 1,640 1,285 Source: RISI 8
Slide 9: Recycled Fibre Costs – Index Prices
Recycled Fibre Costs – Index Prices OCC (Outlook September 2022): ($ US/s.t.) Current 300 (Sep-22) • Favourable market, with good generation of material and 250 2552 lower domestic and export demand • Solid inventories at our mills 200 • Higher pricing YoY, but lower sequentially with favourable pri
Slide 10: Virgin Fibre Costs – Index List Prices
Virgin Fibre Costs – Index List Prices ($ US/s.t.) Current VIRGIN PULP (Outlook September 2022): 2,000 (Aug-22) • Recent improvements in pulp mill uptime has not yet 1,805 resulted in a significant improvement in market dynamics 1,600 1,620 • Transportation constraints persist, with rail car availab
Slide 11: Capital Investments
Capital Investments (in property, plant & equipment, in millions of Canadian dollars, excluding new leases, disposal of assets and accounts payable variation) 2022F CAPEX: $450 M - $470 M1 Includes ~CAD$310 M - $330 M for Bear Island conversion (1) Amount is subject to change depending on business a
Slide 12: Financial Ratios & Debt Maturities
Financial Ratios & Debt Maturities Net Debt / Adjusted OIBD1,3 Interest Coverage Ratio2,3 5.4x 5.0x 6.7x 4.6x 4.7x 5.8x 6.0x 4.0x 3.8x 4.0x 3.6x 3.5x 3.5x 4.7x 4.6x 4.6x 4.3x 4.3x 2.5x 3.0x 3.4x 3.4x 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q2 2012 2013 2014 2015 2016 2017 2018 2019 2020 20
Slide 13: Packaging Businesses
PACKAGING BUSINESSES fresh: ries oe res . fres 18
Slide 14: Containerboard
Containerboard 6th largest containerboard producer in N.A. 2,112 600 (CAN $ M) 14% 2,009 2,000 1,918 Annual capacity: 44% 1,840 1,827 500 1,575 k s.t. 54% 1,652 22.3% 24.1% 441 21.0% 86% 410 403 20.5% 1,500 400 372 16.3% Recycled Virgin Linerboard Medium 381 343 328 321 15.0% 300 1,000 247 230 214 2
Slide 15: Containerboard – Quarterly Performance
Containerboard – Quarterly Performance Quarterly Operating Income & Adjusted OIBD1 (M CAN$) ➢ Stronger second quarter 2022 shipments reflect usual upward seasonal trends, partially offset by some softness in demand levels as a result of inventory rebalancing at certain customers. ➢ Impact of sequent
Slide 16: Containerboard – Well-Positioned for Growth
Containerboard – Well-Positioned for Growth ✓ Consumer demand driving shift to responsible packaging ✓ Brand owners seeking solutions with greater recycled content ✓ Greater usage of Lightweight containerboard Distribution/E-com Produce Food Processing Consumer (CPG) Industrial (In MSF) Others Food
Slide 17: Containerboard - Market
Containerboard - Market The North American market offers good returns and attractive growth potential North American Containerboard Expected Production1 North American Capacity and Operating Rate1 5-Yr CAGR : + 1.6% 5-Yr CAGR: +1.9% 49.1 49.4 48.3 6.0 6.3 6.5 6.5 46.9 5.7 5.0 5.6 44.9 45.7 43.2 2021
Slide 18: Containerboard - Bear Island Project
Containerboard - Bear Island Project Full START DATE: 12/2022 ≤ 2021 2022 2023 2024 2025 potential PROJECT COST: $175 ~$250 $45 - $60 - - US $470 M - $485 M PRODUCTION RAMP UP ~ 70% ~ 94% ~ 97% 100% ANNUAL PRODUCTION (‘000 s.t.) ~ 330,000 ~ 435,000 ~ 450,000 ~ 465,000 OIBD1 (US$M) ~$40-$55 ~$70-$85
Slide 19: Containerboard - Bear Island Project
Containerboard - Bear Island Project PROJECT COST US $470 - $485 M • Persistent inflationary pressure on costs has increased total project costs. INVESTMENT US $252 M ($322 M) (2018 – Q2 2022) • Delivery delays of certain construction material due to continued constraints in transportation START-UP
Slide 20: Specialty Products
Specialty Products3 Comprehensive Packaging Solutions Provider Focused on Strategic Scalable Markets 2021 sales of $548 M increased 16% from 2020 (CAN $ M) 700 100 620 13.7% 90 600 13.5% 85 548 80 492 74 74 500 473 12.7% 70 34% 11.2% 60 60 37% 400 358 59 2021 2021 339 55 sales 50 sales 63% 66% 300 1
Slide 21: Specialty Products – Quarterly Performance
Specialty Products – Quarterly Performance Quarterly Operating Income & Adjusted OIBD1 (M CAN$) ➢ Q2 2022 adjusted OIBD1 of $25 M was the third consecutive record quarterly level and increased 14% sequentially and 39% versus prior year. ➢ Industrial packaging: stronger sequential results reflect hig
Slide 22: Specialty Products
Specialty Products With 50% of our 2021 sales coming from the fresh produce, egg packaging, food services & isothermal distribution markets, our eco-friendly packaging solutions are well positioned to capitalize on market trends. North American Fresh Produce and Key Market Growth Drivers Foodservice
Slide 23: Tissue Papers Business
TISSUE PAPERS BUSINESS 23 23
Slide 24: Tissue Papers
Tissue Papers 4th largest tissue producer in N.A. (CAN $ M) 25% 2,000 300 32% USA 2021 2021 Recycled Annual 250 Annual Canada Sales Sales Virgin 1,615 68% 1,600 1,509 10.8% 200 75% 1,352 175 1,339 1,272 150 1,268 5.7% 7.4% 1,200 94 100 86 1.3% 72 2.1% 50 28 17 27 -1.4% 800 6 0 -19 -37 -50 Retail Awa
Slide 25: Tissue Papers – Quarterly Performance
Tissue Papers – Quarterly Performance ➢ Positive demand level momentum for Away-from- Quarterly Operating Income & Adjusted OIBD1 (M CAN$) Home products (shipments +14% YoY, +14% QoQ), and Retail products (shipments +9% YoY, +3% QoQ). ➢ Significant increases in input/logistics costs continued to imp
Slide 26: Tissue Papers – Covid Impact on Market
Tissue Papers – Covid Impact on Market Avg US Monthly Parent Roll Capacity & Production1 (‘000 s.t.) US Tissue Converted Products Shipments1 (‘000 s.t.) 880 900 +34% 860 -26% 840 700 820 +48% 800 500 -34% 780 -11% +11% 760 300 740 720 100 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 Dec 19
Slide 27: Tissue Papers – Covid Impact on Performance
Tissue Papers – Covid Impact on Performance Covid led to important swings in demand levels for Cascades’ converted tissue products Annual Capacity: 2021 Volume Shipped: LOGISTICS & 80 M CASES 57 M CASES PANDEMIC BUYING INVENTORY REBALANCING LABOUR CONSTRAINTS 25% 26% 86% 85% 79% 75% 75% 73% 73% 17.3
Slide 28: Tissue Papers – Modernized Asset Base
Tissue Papers – Modernized Asset Base More than $700 M invested between 2017 – 2021 to strengthen and modernize our platform. 2022 2019 ACTION EQUIPMENT CAPACITY 17% 9% 9% 26% 4 paper machines 104 K s.t. Closed 22% 48% 10% 7 facilities 28 converting lines 16 M cases 82% 18% 62% 64% Added 13 converti
Slide 29: Tissue Papers – Strategically Positioned
Tissue Papers – Strategically Positioned The majority of our RETAIL TISSUE business is in growing segments. Cascades’ (5-year CAGR) Total Paper Private Label Retail Tissue Others 5% 3% 4% 1% • ~60% of Private Label volume is sold in Club 4% 4% 1% Drug: (0.5%) 5% and Mass Merchandiser customer segmen
Slide 30: Tissue Papers – Strategic Plan Update
Tissue Papers – Strategic Plan Update ➢ Our plan is tracking well, but benefits realized to date are ➢ Significant cost headwinds and slight delay in price increase being offset by persistent cost headwinds since its launch in implementation timeline results in revised 2022 adjusted OIBD1 February 2
Slide 31: Tissue Papers – Market
Tissue Papers – Market Effective Tissue Capacity – North America1 Top 10 N.A. Tissue Producers (2021)3 (‘000 tonnes) All others 12% 10,500 + 0.7% + 1.6% Sofidel America Georgia Pacific + 1.1% 3% 27% 10,000 Irving Tissue 4% Clearwater Paper 9,500 4% Kruger Tissue 4% 9,000 First Quality 5% Essity P&G
Slide 32: Where We Are Going
WHERE WE ARE GOING 2022-2024 Strategic Plan Detailed actionable objectives – Our Path Forward …BUILDING ON OUR MODERNIZED ASSET BASE Same Roots. Different Company. 32
Slide 33: Near-Term Factors
NEAR-TERM FACTORS • Logistics and production costs: expect continued pressure on Q3 2022 vs Q2 2022 vs Q3 2021 costs YoY and QoQ in Q3 for all business segments. OIBD1 Trend • Containerboard: QoQ performance to reflect stable demand, lower average raw material prices and incremental benefits from pr
Slide 34: 2022 Outlook
2022 OUTLOOK Good demand dynamics for Price of natural gas Packaging products Announced selling price increases Availability and cost of logistics in all business segments + easing OCC prices Return to normalized demand levels in the tissue Raw material costs, particularly as the reopening of the ec
Slide 35: 2022 – 2024 Strategic Plan: Top Priorities
2022 – 2024 Strategic Plan: Top Priorities An integrated company with strong assets to drive value for shareholders 1 Deliver on the profitability plan in Tissue 2 Complete the Bear Island start up Our Top Continue to grow our sustainable packaging Priorities 3 business with U.S. capacity expansion
Slide 36: 2022 – 2024 Strategic Plan: Business Objectives
2022 – 2024 Strategic Plan: Business Objectives CONTAINERBOARD SPECIALTY PRODUCTS TISSUE PAPERS Be the go-to solution Be the leader in The path forward to for businesses sustainable packaging improved profitability • Increase pace of new sustainable • Leverage well invested asset base • Complete Bea
Slide 37: 2022 – 2024 Strategic Plan: Financial Targets
2022 – 2024 Strategic Plan: Financial Targets Focused on free cash flow generation + maintaining financial flexibility 1 Revenue: ~$5.0 B+ in 2024 OIBD4 ~11% - 13% in 2022 2 Margin: ~13% - 15% in 2024 Financial Targets CAPEX5: ~ $415 M in 2022 (incl. $275M for Bear Island) 3 ~ 4% of revenue in 2023
Slide 38: Appendices
APPENDICES 38
Slide 39: Recovery Operations
Recovery Operations A natural extension of our operations, delivering financial and strategic value. Largest source of Among Cascades’ lowest Excellent source of market recovered fiber landed cost sources with intelligence, active in all fiber contributing about 25% of ability to raise value through
Slide 40: Recovery Operations
Recovery Operations Cascades recovery and recycling services & solutions provide our operations with the raw material they need, but also help our partners and customers to divert close to 40% of their waste from landfills. 4% 8% 24% 13% ~ 3.0 M s.t. ~ 2.3 M s.t. of fibre consumed, of fibre used by
Slide 41: Sustainability Action Plan 2021-2025
Sustainability Action Plan 2021-2025 Ambitious targets, a robust action plan, GHG reduction targets have been approved by the Science Based Targets initiative (SBTi). Climate Change 38.7% IN 2030 VS 2019 27.5% IN 2030 VS 2019 22% IN 2030 VS 2019 Respectful scopes 1 + 2, mills (kg of CO2 scopes 1 + 2
Slide 42: Strong Foundation: A Modernized Asset Base
Strong Foundation: A Modernized Asset Base Investments and modernization initiatives have improved the competitiveness* of our assets. CONTAINERBOARD CONTAINERBOARD CONTAINERBOARD Manufacturing (with Bear Island) Converting Sheeting 16% 20% 31% 36% Total 15% Total # of Capacity Capacity Machines 63%
Slide 43: Annual Historical Performance
Annual Historical Performance Our modernization initiatives, investments and strategy delivered results. SALES (in 000’s CAN$) ADJUSTED OIBD1 & OIBD MARGIN LEVERAGE RATIO (M CAN$, % of sales) 12.0% 12.6% 13.3% 11.0% 10.9% 10.5% 10.1% 9.9% 9.3% 9.8% 1,052 129 1,048 108 5.8x 933 5.0x 97 4.6x 4.7x 838
Slide 44: Quarterly Financial Results & KPIs
Quarterly Financial Results & KPIs 20202 2021 2022 (In millions of CAN$, except per common share amounts, where noted) Year Q12 Q2 Q3 Q4 Year Q1 Q2 YTD5 LTM6 Financial Results Sales 4,105 942 956 1,030 1,028 3,956 1,038 1,119 2,157 4,215 Operating income (loss) 292 44 23 73 (90) 50 (4) 32 28 11 Adju
Slide 45: Cash Flow Overview
Cash Flow Overview 20204 2021 2022 (In millions of CAN$, except per common share amounts) Year Q14 Q2 Q3 Q4 Year Q1 Q2 YTD5 LTM6 Cash flow from operations 458 82 87 58 20 247 19 81 100 178 Specific items1 15 4 2 12 31 49 7 — 7 50 Adjusted cash flow from operations2 473 86 89 70 51 296 26 81 107 228
Slide 46: Historical Reference Prices and Fibre Costs
Historical Reference Prices and Fibre Costs Source: RISI 46
Slide 47: Sensitivities
SENSITIVITIES1 SHIPMENTS / CONSUMPTION (‘000 s.t, ‘000 mm Btu for Natural Gas) INCREASE OIBD IMPACT (Annually, CAN$ M) SELLING PRICE2 (Manufacturing & Converting) Linerboard, Eastern US 400 US$25/s.t. 13 Corrugated Medium, Eastern US 330 US$25/s.t. 10 Converted Products 840 US$25/s.t. 26 Tissue Pape
Slide 48: www.cascades.com/investors
www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 / investisseur@cascades.com