Cascades Inc. · TSX:CAS
Cascades — Non-Deal Roadshow (April 2019)
36 slides from Cascades's roadshow presentation, Apr 9, 2019
Slide 1: Marketing Presentation Toronto
MARKETING PRESENTATION Toronto April 9, 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: 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 pr
Slide 4: 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 5: Financial Review
FINANCIAL REVIEW Bio ovsme ts
Slide 6: Quarterly Financial Results
QUARTERLY FINANCIAL RESULTS 1 1 Figures above in millions of CAN$ Figures above in millions of CAN$ 2016 2017 2018 (In millions of CAN$, except amount per share) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Financial results Sales 4,001 1,006 1,130 1,103 1,082 4,321 1,098 1,180 1,175 1,196 4,649 Operating
Slide 7: Quarterly Results – Business Segments
QUARTERLY RESULTS – BUSINESS SEGMENTS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 1 1 Specialty Products (millions of CAN$) Tissue Papers (millions of CAN$) 1 1 (1) Please click here for supplemental information on non-IFRS measures. 7
Slide 8: Quarterly Results – Business Segment Shipments
QUARTERLY RESULTS – BUSINESS SEGMENT SHIPMENTS Containerboard ('000 s.t. and % capacity utilization1) Boxboard Europe ('000 s.t. and % capacity utilization1) Tissue Papers ('000 s.t. and % capacity utilization1) (1) Utilization rate defined as total manufacturing shipments divided by practical capac
Slide 9: Raw Material Costs - Index List Prices
RAW MATERIAL COSTS - INDEX LIST PRICES (US$/ton) Recycled Fibre Prices Current Virgin Pulp Prices (US$/ton) Current (Apr-19) (Mar-19) 1,355 176 1,160 48 White grades (Basket of products) Brown grades (OCC) NBSK NBHK Recovered Paper Prices Q1-2018 Q4-2018 Q1-2019 Q1/Q1 Q1/Q4 White grades - Basket of
Slide 10: Selected Reference Prices
SELECTED REFERENCE PRICES Current (US$/s.t.) Containerboard - Selected Products Current (€ /s.t.) Boxboard Europe - Selected Products (Mar) (Mar) 1,117 745 650 672 Current (US$/s.t.) Current Specialty Products - Selected Products (US$/s.t.) Tissue Papers - Selected Products (Feb) (Mar) 1,446 730 1,1
Slide 11: Near Term Factors – Q1 2019
NEAR TERM FACTORS – Q1 2019 • Raw materials: lower OCC price, positive trends in virgin pulp and SOP white recycled fiber grade • Tissue Papers: market-related challenges and • Tissue Papers: price increases announced in various operational issues at the St. Helens, Oregon • products and sub-segme
Slide 12: Financial Metrics, Sales by Geography, 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 $1.77 B ✓ Net debt/Adjusted EBITD
Slide 13: Annual Results
ANNUAL RESULTS Sales (CAN$ M) Operating Income & Margin (CAN$ M and %) CAGR: + 6.9% CAGR: + 13.8% 5000 250 221 230 8.0% 4,649 4500 4,321 200 175 4,001 153 6.0% 4000 3,861 137 3,561 150 5.5% 3500 5.1% 4.0% 100 4.0% 4.0% 3.8% 3000 2.0% 50 2500 2014 2015 2016 2017 2018 0 0.0% 2014 2015 2016 2017 2018 A
Slide 14: Annual Financial Ratios & Debt Maturities
ANNUAL 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 December 31, 2018) Weighted Average Interest Rate of 5.20% Senior notes Revolver Term loan Debts without recourse Subsidiaries
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% • February industry fundamentals: Cascades adjusted OIBD increases ~$4M – $5M with every 1% increase in our utilization rate ✓ Capacity util.: 89
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 1 Top Cartonboard Producers 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
Slide 19: Specialty Products
SPECIALTY PRODUCTS ▪ Diversified industrial & consumer products packaging player ▪ Encompasses Recovery operations, where results reflect variations in raw material pricing 22% ▪ Largest paper collector in Canada with 19 facilities2 and 1.45 million s.t. of material processed in 2018 2018 46% ▪ A le
Slide 20: Specialty Products
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
TISSUE PAPERS Diversified Capacity and Positioning 2018 NORTH AMERICAN TISSUE MANUFACTURERS Capacity Market Capacity Capacity ('000 s.t.) Share Retail AfH 1 Georgia-Pacific 2,849 29% 67% 33% 2 Procter & Gamble 1,494 15% 100% 0% 3 Kimberly-Clark 1,466 15% 67% 33% 4 Essity (ex-SCA) 721 7% 0% 100% 5 Ca
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 $429M Planned CAPEX 2018 HIGHLIGHTS $330 M - $400 M 20192 MAJOR PROJECTS Construction of Piscataway Tissue modernization containerboard corrugated plant ✓ $135 M, incl. $56 M of lease ✓ ± $80 M - $100 M va
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 $400M funded by CF • Targete
Slide 28: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION CUSTOMERS INNOVATION 275 employees provide Containerboard engineering & consulting services internally, to major customers & external clients 37 people Specialty Products Tissue Papers dedicated to Supported by: innovation CAS Innovation Centre CAS R&D Centre MAJO
Slide 29: Focus on Customers and Innovation
3 FOCUS ON CUSTOMERS AND INNOVATION Hand towel dispenser that is 99.9% jam free, patented dispenser Produces innovative, lightweight technology Low-density PETE recycled linerboard – XP grades containing 80% post- consumer material OBJECTIVES: • 20% of sales from innovative products in 2020 • Levera
Slide 30: Appendix
APPENDIX ete as
Slide 31: Historical Results
HISTORICAL RESULTS (In million of Canadian dollars) 2018 Q4-18 Q3-18 Q2-18 Q1-18 2017 Q4-17 Q3-17 Q2-17 Q1-17 2016 2015 2014 Sales Containerboard 1,840 472 472 475 421 1,652 440 438 428 346 1,370 1,301 1,181 Boxboard Europe 933 245 210 232 246 838 212 202 213 211 796 825 841 Specialty Products 659 1
Slide 32: Sensitivity Table
SHIPMENTS/CONSUMPTION OIBD IMPACT SENSITIVITY TABLE 1 (‘000 s.t, ‘000 mmBtu for Natural Gas) INCREASE (in CAN$ 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 * Subject to change based on final review 33
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 15.0 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 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 36