Cascades Inc. · TSX:CAS
Cascades — CIBC 19th Annual Eastern Institutional Investor Conference 2020
33 slides from Cascades's conference presentation, Sep 17, 2020
Slide 1: Investor Presentation
1 Investor Presentation September 17, 2020 CIBC 19th Annual Eastern Institutional Investor Conference
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: Business Overview
BUSINESS OVERVIEW • Diversified producer with leading market positions • Business founded on sustainability 55+ years ago CONTAINERBOARD EUROPEAN SPECIALTY PRODUCTS TISSUE PACKAGING BOXBOARD1 PACKAGING PAPERS Comprehensive packaging Leading containerboard # 2 recycled boxboard Leading tissue paper s
Slide 4: LTM Q2 2020 Results
LTM Q2 2020 RESULTS 2% SALES Sales $5,089 M -14% Adj. OIBD3 $660 M 33% 63% 36% 24% Adj. OIBD3 Margin 13% ADJ. OIBD3 Adj. CF from operations: $530 M 8% Adj. Free CF $210 M 19% Net debt (at June 30/20): $2.08 B 9% 20% Net debt/Adj. OIBD3: 3.1x WC (% of LTM sales): 9.7% Containerboard Packaging Boxboar
Slide 5: Quarterly Results
QUARTERLY RESULTS2 (In millions of CAN$, except amount 2018 20192 2020 per share) Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 2 Q4 Year Q1 Q2 Financial results Sales 1,098 1,180 1,175 1,196 4,649 1,230 1,275 1,264 1,227 4,996 1,313 1,285 Operating income (loss) 112 73 78 (35) 228 72 82 108 (1) 261 90 94 Adjusted OIBD
Slide 6: Key Near-Term Market Considerations – Covid-19
KEY NEAR-TERM MARKET CONSIDERATIONS – COVID-19 APPROXIMATE % OF LTM Q2 2020 N.A. PACKAGING SALES BY END CUSTOMER INDUSTRY NEAR-TERM INDUSTRY POTENTIAL IMPACT RATIONALE AND ASSUMPTIONS Stable demand for Cascades' non-integrated liner & Paper medium tonnage that is sold to external third party 49% Con
Slide 7: Near-Term Outlook
NEAR-TERM OUTLOOK - • Containerboard: expect slight volume increase, lower • Containerboard: expect lower average selling price sequential raw material costs to negatively impact results YoY + • Boxboard Europe: sequential gradual benefit from • Tissue: softer QoQ and YoY AfH volume expected previou
Slide 8: Raw Material – Index Prices
RAW MATERIAL – INDEX PRICES Current Q2 Q2 vs Q2 vs Recycled Fibre Prices (Aug-20) RECOVERED PAPER PRICES 2020 Q2/19 Q1/20 ($ US/s.t.) 110 █ WHITE GRADES - Basket of products (Northeast avg)1 170 9% 67% █ BROWN GRADES - OCC No. 11 58 (Northeast average) 94 135% 161% Virgin Pulp Prices Current Q2 Q2 v
Slide 9: Containerboard – Our Business
CONTAINERBOARD – OUR BUSINESS 6th largest containerboard producer in N.A. ANNUAL CAPACITY: 1,568 K S.T. (CAN $ M) 2,000 600 16% 1,840 1,827 1,836 1,652 47% 500 22.7% 53% 22.3% 24.1% 1,500 441 417 84% 410 400 15.0% 381 Recycled Virgin Linerboard Medium 328 1,000 288 300 247 200 MANUFACTURING CONVERTI
Slide 10: Containerboard – Market
CONTAINERBOARD – MARKET • Positive trends in the containerboard market contributing to segment strength and solid profit spreads North American Containerboard North American Capacity Linerboard, OCC Price, and Demand Growth and Market Share 1 and Operating Rate 1 Gross Profit Spread 1,2 Others, 18%
Slide 11: Boxboard Europe – Our Business
BOXBOARD EUROPE1 – OUR BUSINESS • 2nd largest coated recycled boxboard producer in Europe 6 recycled mills (1,095K m.t.) & 1 virgin boxboard mill (165K m.t.) (CAN $ M) 1,200 1,048 1,036 11.8% 10.3% 122 COATED RECYCLED COATED VIRGIN 933 10.4% CONVERTING 1,000 BOXBOARD BOXBOARD 108 838 8.1% 97 800 81%
Slide 12: Boxboard Europe – Market
BOXBOARD EUROPE1 – MARKET Top Cartonboard Producers1 Top FBB Producers1 Top WLC Producers1 (Total Market) (Virgin) (Recycled) Metsä Board Stora Enso Kotkamills Mayr-Melnhof International Paper Holmen Iggesund Reno De Medici Pankaboard Buchmann BillerudKorsnäs 0 1000 2000 Barcelona Cartonboard, acqui
Slide 13: Tissue Papers – Our Business
TISSUE PAPERS – OUR BUSINESS 4th largest tissue producer in N.A. • Acquired Orchids Paper for US$235 million, expect US$45 million EBITDA run-rate beginning 2021 (CAN $ M) 2,000 300 2019 ANNUAL SALES: 29% 71% 1,654 250 ~ 75% RECYCLED / 25% VIRGIN 1,600 1,509 9.5%200 1,352 RETAIL TISSUE AWAY-FROM-HOM
Slide 14: Tissue Papers – Market
TISSUE PAPERS – MARKET • Capital investments focused on: ✓ reducing fixed cost base, modernizing equipment ✓ aligning product offering & geographic footprint with customer requirements • Orchids acquisition: ✓ optimization of asset base, distribution network & supply chain North American Tissue Mark
Slide 15: Specialty Products – Our Business
3 SPECIALTY PRODUCTS – OUR BUSINESS (CAN $ M) 600 Comprehensive Packaging Solutions Provider 492 500 461 Focused on Strategic Scalable Markets 400 358 CONSUMER PRODUCTS INDUSTRIAL 339 11.2% 11.7% 55 PACKAGING2 PACKAGING 54 300 9.2% 10.0% 65% 35% 200 34 36 34 33 of 2019 sales of 2019 sales 24 24 100
Slide 16: Recovery Activities
RECOVERY ACTIVITIES A leading paper collector in Canada Fibre1 used in 2019: 2.3 M s.t. 6% ✓ 18 facilities in Canada & the U.S.2 8% (0.1 M st) (0.2 M st) ✓ In 2019, we collected & purchased 3.1 MILLION S.T. of fibre 17% • 75% (2.3 million s.t.) (0.4 M st) used internally 69% (1.6 M st) • 25% (0.8 mi
Slide 17: Our Framework for Success
OUR FRAMEWORK FOR SUCCESS
Slide 18: Recent Strategic Actions
RECENT STRATEGIC ACTIONS CONTAINERBOARD • Built state-of-the-art corrugated packaging facility in Piscataway, NJ • Closed 4 converting plants • Acquired 20% interest in Greenpac Mill (Niagara Falls, NY), ownership at 86.4% BOXBOARD EUROPE • Acquired Barcelona Cartonboard in Spain (Reno De Medici) SP
Slide 19: Recent Strategic Actions
RECENT STRATEGIC ACTIONS CORPORATE • ERP system (SAP) rolled-out across of our North American operations ✓ Modernization of IT platform and data interpretation ✓ Optimization of supply chain processes • Business processes: ✓ Transformed our support platform with optimization of finance, HR, logistic
Slide 20: Operational Transformation
OPERATIONAL TRANSFORMATION Strategic Focuses3 Capital Investments1 • Replacing older assets with $360 M Excludes potential Bear Island investment MODERN equipment & CDPQ stake in Greenpac Mill • Investing in ORGANIC growth $274 M 184 $218 M 90 • OPTIMIZING geographic footprint $175 - $200 M 2 62 55
Slide 21: Sustainability in Focus
SUSTAINABILITY IN FOCUS 100 Most Sustainable Corporations in the World (Corporate Knights) - Ranked 49th - Only Containers & Packaging company named - 1 out of only 12 Canadian companies to make the list 3rd party frameworks, standards & guidelines provide comprehensive & transparent information for
Slide 22: Sustainability Is in Our DNA
SUSTAINABILITY IS IN OUR DNA 50% 7.3x 2.8x reduction in the intensity of our GHG less water used to manufacture our less energy used to manufacture our emissions since 1990 products than the average in the products than the average in the Canadian paper industry* Canadian paper industry* * Forest Pr
Slide 23: Delivering Value-Added Innovation
DELIVERING VALUE-ADDED INNOVATION 275 employees provide 37 employees engineering, R&D and dedicated to developing consulting services to innovative solutions for our customers & external clients customers EXAMPLES OF OUR INNOVATIONS • Made of 60% recycled • Maintains temperature at content 4°C (39°F
Slide 24: Investment Highlights
INVESTMENT HIGHLIGHTS 55+ year track-record of sustainably focused production Well positioned in key markets with attractive underlying growth profiles Integrated provider offering customers value-added, sustainable solutions and products Solid Balance Sheet, with investments focused on cost
Slide 25: Appendix
APPENDIX
Slide 26: Our Response – Covid-19
OUR RESPONSE – COVID-19 Employees & Operations Customers & Suppliers Community All Cascades operations considered Ongoing communication with Working closely with partner essential customers to ensure product companies in the production of over fulfillment, continuity of delivery and 1 million medica
Slide 27: Cascades – Market Position
CASCADES – MARKET POSITION North American Tissue Manufacturers N.A. Containerboard Producers CAPACITY MARKET RETAIL AFH MARKET SHARE (‘000 S.T.) SHARE CAPACITY2 CAPACITY2 International Paper 31% Georgia Pacific 2,563 28% 67% 33% WestRock 22% Proctor & Gamble 1,355 15% 100% - PCA 11% Kimb
Slide 28: Selected Reference Prices
SELECTED REFERENCE PRICES Current (US$/s.t.) Containerboard – Selected Products Current (Euro€/s.t.) Boxboard Europe – Selected Products (Jun-20) (Jun-20) 1,096 715 615 661 Current (US$/s.t.) Specialty Products – Selected Products Current Tissue Papers – Selected Products (US$/s.t.) (Jun-20) (Jun-20
Slide 29: Reference Prices & Fibre Costs
REFERENCE PRICES & FIBRE COSTS Sources: RISI, Cascades and Reno de Medici. (1) The index is based on publication prices and represents an approximation of Cascades’ recycled grades selling prices in Europe. It is weighted by country. (2) The index is based on publication prices and represents an app
Slide 30: Consolidated Financial Ratios & Debt Maturities
CONSOLIDTED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD1,3 Interest Coverage Ratio2,3 Net Debt / Net Debt + Total Equity Long-Term Debt Maturities (as at June 30, 2020) Leases - Non Senior notes Revolver Term loan recourse Debts without Subsidiaries Without recourse - Leases - re
Slide 31: Segmented Quarterly Operating Income & Adjusted OIBD
SEGMENTED QUARTERLY OPERATING INCOME (LOSS) & ADJUSTED OIBD1,2 Containerboard (millions of CAN$) Boxboard Europe2 (millions of CAN$) Specialty Products2 (millions of CAN$) Tissue Papers (millions of CAN$) (1) Please click here for supplemental information on non-IFRS measures. (2) 2019 third quarter
Slide 32: Sensitivities
SENSITIVITIES1 SHIPMENTS /CONSUMPTION (‘000 s.t, ‘000 mmBtu for Natural Gas) INCREASE OIBD IMPACT (in CAN$ M) SELLING PRICE2 (Manufacturing & Converting) Linerboard, Eastern US 350 US$25/s.t. 11 North Corrugated medium, Eastern US 350 US$25/s.t. 11 America Converted products 740 US$25/s.t. 24 Tissue
Slide 33: investor@cascades.com
Ce Cascades nvestor@cascades.com
Cascades — CIBC 19th Annual Eastern Institutional Investor Conference 2020 on 6ix