Cascades Inc. · TSX:CAS
Cascades — Investor Presentation (June 2019)
36 slides from Cascades's investor presentation, Jun 19, 2019
Slide 1: Marketing Presentation Vancouver
MARKETING PRESENTATION Vancouver June 19, 2019
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: Focused on Reducing the Valuation Gap
FOCUSED ON REDUCING THE VALUATION GAP LEVERAGE OUR POSITION AS DIVERSIFIED PLAYER ✓ # 5 containerboard producer in N.A.1 ✓ # 2 coated recycled boxboard producer in Europe2 ✓ # 5 tissue producer in N.A.1 ✓ # 1 paper collector in Canada BUILD VALUE WITH STRATEGIC GROWTH ✓ Organic growth, increase inte
Slide 4: 2018 Summary – What Moved the Dial
2018 SUMMARY – WHAT MOVED THE DIAL CONTAINERBOARD TISSUE Strong market fundamentals Difficult market dynamics Solid operational performance Operational/logistics challenges Low raw material prices Very high raw material prices Favourable end market pricing Little movement in end pric
Slide 5: Financial Metrics, Sales by Geography and KPIs
Financial Metrics 2018 Sales by Geography (2018) ✓ Revenues: $4.6 B (+6.9% 5-yr CAGR3) 2018 SALES FROM 2018 SALES TO (SOURCE) (DESTINATION) ✓ Adj. EBITDA2: $489 M (+9.5% 5-yr CAGR3) 21% Europe1 22% ✓ Adj. CF Ops.: $361 M (+6.8% 5-yr CAGR3) 34% U.S. 41% ✓ Net debt at $1.77 B ✓ Net debt/Adjusted EBITD
Slide 6: Annual Results
ANNUAL RESULTS Sales (CAN$ M) Operating Income & Margin (CAN$ M and %) CAGR: + 6.1% CAGR: + 6.3% 250 221 230 8.0% 000 4,649 4,781 200 175 186 500 4,321 153 6.0% 3,861 4,001 137 000 150 5.5% 3,561 5.1% 4.0% 500 100 4.0% 4.0% 3.9% 3.8% 000 50 2.0% 500 0 0.0% 2014 2015 2016 2017 2018 LTM Q1-19 2014 201
Slide 7: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD1 Interest Coverage Ratio2 3 3 3 3 Net Debt / Net Debt + Total Equity Long-Term Debt Maturities (as at March 31, 2019) Senior notes Revolver Term loan Leases - no recourse Debts without Subsidiaries Leases - recourse debts S
Slide 8: Summary of Quarterly Financial Results
SUMMARY OF QUARTERLY FINANCIAL RESULTS 1 1 Figures above in millions of CAN$ Figures above in millions of CAN$ 2017 2018 2019 (In millions of CAN$, except amount per share) Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q42 Year2 Q1 Financial results Sales 1,006 1,130 1,103 1,082 4,321 1,098 1,180 1,175 1,196 4,649 1,23
Slide 9: Cash Flow Overview
CASH FLOW OVERVIEW 3 3 Figures above in millions of CAN$ Figures above in millions of CAN$ 2017 2018 2019 (In millions of CAN$, except amount per share) Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Cash flow from operations 33 89 61 77 260 69 111 92 89 361 82 Specific items1 1 2 2 12 17 — — — — — 3 Adjusted
Slide 10: Historical Segmented Quarterly Operating Income & Adjusted OIBD
HISTORICAL SEGMENTED QUARTERLY OPERATING INCOME (LOSS) & ADJUSTED OIBD1 Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 1 1 Specialty Products2 (millions of CAN$) Tissue Papers (millions of CAN$) 1 1 (1) Please click here for supplemental information on non-IFRS measures. (2) 20
Slide 11: Historical Segmented Quarterly Shipments
HISTORICAL SEGMENTED QUARTERLY SHIPMENTS Containerboard ('000 s.t. and % capacity utilization1) Boxboard Europe ('000 s.t. and % capacity utilization1) Tissue Papers ('000 s.t. and % capacity utilization1) (1) Utilization rate defined as total manufacturing shipments divided by practical capacity. 1
Slide 12: Raw Material Costs - Index List Prices
RAW MATERIAL COSTS - INDEX LIST PRICES ($ US/t.c.) Recycled Fibre Prices Current Virgin Pulp Prices Current ($ US/t.m.) (June-19) (May-19) 1,295 137 1,100 33 White grades (Basket of products) Brown grades (OCC) NBSK NBHK Recovered Paper Prices Q2-2018 Q1-2019 Q2-2019 Q2/Q2 Q2/Q1 White grades - Baske
Slide 13: Selected Reference Prices
SELECTED REFERENCE PRICES Current (US$/s.t.) Containerboard - Selected Products Current (Euro€/s.t.) Boxboard Europe - Selected Products (May) (May) 1,117 735 640 672 Current (US$/s.t.) Current Specialty Products - Selected Products (US$/s.t.) Tissue Papers - Selected Products (Apr) (May) 1,444 730
Slide 14: Near Term Factors
NEAR TERM FACTORS • Raw materials: lower OCC price, positive trends in virgin pulp and SOP white recycled fiber grade • Tissue: ongoing market-related challenges • Tissue: price increases announced in various • Containerboard: potential for pricing & volume • products and sub-segments Boxboard Eur
Slide 15: Containerboard Packaging
CONTAINERBOARD PACKAGING ▪ Largest Canadian corrugated box producer (~32% market share) 14% 12% ▪ #51 NA containerboard producer (based on capacity) ▪ 2018 integration rate2: 76%, targeting 85% 2018 20% ▪ Annual capacity of 1,559K s.t.: Sales ✓ 84% recycled vs. 16% virgin $1,840M ✓ 53% linerboard vs
Slide 16: Containerboard Packaging
CONTAINERBOARD PACKAGING Industry Operating Rates1 • Average capacity growth of ± 3% annually over 2016 - 2021 period ✓ NA demand CAGR 2016 - 2021: ± 2.4% • April industry fundamentals: Cascades adjusted OIBD increases ~$4M – $5M with every 1% increase in our utilization rate ✓ Capacity util.: 91.5%
Slide 17: Boxboard Europe
BOXBOARD EUROPE ▪ 57.95% equity ownership of Reno de Medici, a public 4% Italian company; 6 recycled mill (1,085K m.t.)2 & 1 virgin boxboard mill (165K m.t.) 19% ▪ 2nd largest coated recycled boxboard producer in Europe 2018 ▪ Well positioned PanEuropean asset base and sales Sales network: Italy, Fr
Slide 18: Boxboard Europe
BOXBOARD EUROPE Leading European Producer of Coated Board 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 2
Slide 19: Specialty Products
SPECIALTY PRODUCTS ▪ Diversified industrial & consumer products packaging player ▪ Largest paper collector in Canada with 19 facilities2 and 1.45 million s.t. of material processed in 2018 22% ▪ A leading position in industrial packaging with 2018 Cascades Sonoco JV 46% Sales ▪ 2018 sales (IFRS) of
Slide 20: Specialty Products - Cascades Recovery+
SPECIALTY PRODUCTS CASCADES RECOVERY+ SUB-SEGMENT Recovery & Recycling is our “forest” and 5% manages procurement of all raw material (0.1 M st) 9% fibre for our North American operations. (0.2 M st) CIRCULAR ECONOMY APPROACH Spot 18% FIBER1 USED 25% (0.4 M st) IN 2018: 2.3 million s.t. 68% (1.6 M s
Slide 21: Tissue Papers
TISSUE PAPERS ▪ 5th largest tissue producer in NA based on capacity (650K s.t.), growing Western US footprint ▪ Results reflect higher raw material prices & increased transportation costs, elevated industry capacity ▪ February 2019: Announced closure of 2 paper machines in Ontario (annual production
Slide 22: Tissue Papers
TISSUE PAPERS Established Positioning in North American Tissue Market CAS Sales by Country (2018) Tissue Market Demand1 Canada (31%) US (69%) 1.8% growth represents ~190K s.t. / year AWAY-FROM- BRANDED AWAY-FROM- BRANDED HOME 25% HOME 41% 41% 51% PRIVATE PRIVATE LABEL AT-HOME LABEL 75% AT-HOME 59% 5
Slide 23: Tissue Papers - Diversified Capacity and Positioning
TISSUE PAPERS Diversified Capacity and Positioning 2019 NORTH AMERICAN TISSUE MANUFACTURERS Capacity Market Capacity Capacity 1 1 ('000 s.t.) Share Retail AfH 1 Georgia-Pacific 2,570 29% 67% 33% 2 Procter & Gamble 1,355 15% 100% 0% 3 Kimberly-Clark 1,330 15% 67% 33% 4 Essity (ex-SCA) 654 8% 0% 100%
Slide 24: Strategic Plan
1 2 3 MODERNIZE CREATE INNOVATION OUR SUSTAINABLE & CUSTOMER PLATFORMS VALUE FOCUS STRATEGIC PLAN BUILDING ON OUR PAST, POSITIONING FOR THE FUTURE 24
Slide 25: Modernize Our Platforms
1 MODERNIZE OUR PLATFORMS Modernize + Integrate + Optimize • Replace older equipment • Increase our integration rate • Improve geographic footprint • Invest in organic growth to 85% by investing in to better serve our customers, conversion capacity increase penetration of Scappoose, OR Containerboar
Slide 26: Modernize Our Platforms
MODERNIZE OUR PLATFORMS Strategic Capital Investments1 to Strengthen & Consolidate Positioning 2019 $429M MAJOR PROJECTS2 $330M - $400M Tissue modernization 110 - ✓ ± $80 M - $100 M 125 243 Begin Bear Island conversion to containerboard 35 - 45 $223M $230M ✓ ± $60 M 35 - 45 51 65 Warehouse & rolling
Slide 27: Create Value - Focused on Long-Term Value Creation
CREATE VALUE 2 Focused on Long-Term Value Creation INVESTMENT BALANCE SHEET SHAREHOLDERS • Modernize equipment, • Allocate $100M of FCF • Maintain current reduce fixed cost base toward debt reduction dividend strategy annually • 2019 Capex: $330M - • Opportunistic market $400M funded by CF • Targete
Slide 28: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION CUSTOMERS INNOVATION 275 employees provide Containerboard engineering & consulting services internally, to major customers & external clients 37 people Specialty Products Tissue Papers dedicated to Supported by: innovation CAS Innovation Centre CAS R&D Centre MAJO
Slide 29: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION Hand towel dispenser that is 99.9% jam free, patented dispenser Produces innovative, lightweight technology Low-density PETE recycled linerboard – XP grades containing 80% post- consumer material OBJECTIVES: • 20% of sales from innovative products in 2020 • Levera
Slide 30: Appendix
APPENDIX ete as
Slide 31: Historical Results
HISTORICAL RESULTS (In million of Canadian dollars) Q1-19 2018 Q4-18 Q3-18 Q2-18 Q1-18 2017 Q4-17 Q3-17 Q2-17 Q1-17 2016 2015 Sales Containerboard 441 1,840 472 472 475 421 1,652 440 438 428 346 1,370 1,301 Boxboard Europe 279 933 245 210 232 246 838 212 202 213 211 796 825 Specialty Products 196 65
Slide 32: Sensitivity Table
SHIPMENTS/CONSUMPTION OIBD IMPACT SENSITIVITY TABLE 1 (‘000 s.t, ‘000 mmBtu for Natural Gas) INCREASE (in CAN$ M) SELLING PRICE2 (Manufacturing & Converting) Linerboard, Eastern US 370 US$25/s.t. 13 Corrugated medium, Eastern US 370 US$25/s.t. 13 North America Converted products 740 US$25/s.t. 25 Ti
Slide 33: Impact of New IFRS 16 - Accounting for Leases
IMPACT OF NEW IFRS 16 - ACCOUNTING FOR LEASES Impact on the Statements of Earnings* (in millions of Canadian dollars) Q1-2019 2019 annualized impact OIBD Containerboard 3 12 Europe 1 4 Specialty Products 2 7 Tissue Papers 1 4 Corporate 1 3 Increase in OIBD (total) 8 30 Increase in depreciation 7 27
Slide 34: Operationally Diversified
OPERATIONALLY DIVERSIFIED BUSINESS SEGMENT OPERATIONS LOCATION CAPACITY CONTAINERBOARD 6 Manufacturing 4 Canada / 2 US 1.56 M s.t. PACKAGING1,4 20 Converting 16 Canada / 4 US 13.8 B ft → 26 facilities 7 Manufacturing 2 Canada / 5 US 380,000 s.t. TISSUE1 10 Converting 2 Canada / 8 US - → 21 facilitie
Slide 35: Geographically Diversified
GEOGRAPHICALLY DIVERSIFIED QUÉBEC NORTH AMERICA EUROPE ONTARIO NORTHEASTERN U.S. 35
Slide 36: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or jennifer_aitken@cascades.com