Cascades Inc. · TSX:CAS
Cascades — Q3 2016 Earnings Presentation
38 slides from Cascades's earnings presentation, Nov 11, 2016
Slide 1: Review of Q3 2016 Financial Results
CASCADES INC. Review of Q3 2016 Financial Results November 11, 2016
Slide 2: Disclaimer
DISCLAIMER 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 number of risks, uncertainties
Slide 3: Opening Remarks
OPENING REMARKS ( 10 8Mee
Slide 4: Summary of Quarterly Financial Results
SUMMARY OF QUARTERLY FINANCIAL RESULTS (M CAN$) Adjusted EBITDA (% of sales) (CAN$) Adjusted EPS 150 16% $0.60 134 $0.52 125 14% $0.50 106 112 103 104 103 100 12% $0.40 $0.38 82 85 $0.35 $0.32 75 10% $0.30 $0.25 $0.23 50 8% $0.18 $0.20 25 6% $0.08 $0.10 0 4% $0.00 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 5: Historical Segmented Quarterly Shipments
HISTORICAL SEGMENTED QUARTERLY SHIPMENTS Containerboard Boxboard Europe (% capacity (% capacity ('000 s.t.) utilization) ('000 s.t.) utilization) 296 294 296 300 100% 300 105% 282 284 286 277 277 278 280 95% 280 100% 268 268 266 263 267 263 258 260 90% 260 95% 240 85% 240 90% 220 80% 220 85% Q4 Q1 Q
Slide 6: Key Performance Indicators (KPIs)
Sequentially: KEY PERFORMANCE INDICATORS (KPIs) Containerboard: 93% to 96% Boxboard Europe: 92% to 89% Tissue Papers: 89% to 93% ('000 s.t.) Total Shipments Capacity Utilization Rate (Manufacturing only) 2 800 100% 766 769 763 743 757 93% 741 93% 93% 93% 93% 750 95% 721 717 91% 90% 89% 700 90% 650 8
Slide 7: Raw Material Costs – Index List Prices
RAW MATERIAL COSTS – INDEX LIST PRICES Recycled Fibre Prices Current Virgin Pulp Prices Current (US$/ton) (US$/ton) (Nov.) (Oct.) 200 1,100 179 1,000 995 150 900 100 105 830 800 50 700 May 14 May 15 May 16 Feb 14 Feb 15 Feb 16 Nov 13 Nov 14 Nov 15 Nov 16 Aug 13 Aug 14 Aug 15 Aug 16 Oct 13 Oct 14 Oct
Slide 8: Historical Segmented Quarterly Adjusted EBITDA
HISTORICAL SEGMENTED QUARTERLY ADJUSTED EBITDA Containerboard Boxboard Europe (M CAN$) (% of sales) (M CAN$) (% of sales) 75 24% 25 20% 68 60 58 19 60 56 20% 20 16% 52 55 55 17 16 17 44 14 14 45 16% 15 12% 13 10 9 8% 30 12% 15 8% 5 4% Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2015 20
Slide 9: Segmented Sequential Adjusted EBITDA Waterfalls
SEGMENTED SEQUENTIAL ADJUSTED EBITDA WATERFALLS Containerboard Boxboard Europe Adjusted Selling Acqu. Adjusted Adjusted Acqu. Selling Adjusted Reco. & Other Raw Reco. & Raw Other (M CAN$) EBITDA Volume Prices & CAN$ & Energy EBITDA (M CAN$) EBITDA Energy CAN$ & Volume Prices & EBITDA Recyc. Costs Ma
Slide 10: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted EBITDA Interest Coverage Ratio 7.0x 6.0x 5.8x 4.8x 6.0x 5.0x 4.7x 5.0x 4.7x 5.0x 4.0x 4.6x 3.4x 3.4x 4.0x 3.0x 3.8x 4.0x 3.0x 2.5x 3.0x 2.0x 2011 2012 2013 2014 2015 Q3 2011 2012 2013 2014 2015 Q3 2016 2016 Net Debt / Net Debt +
Slide 11: Financial Review
FINANCIAL REVIEW ( 10 8Mee
Slide 12: Q3 2015 – Q3 2016 YoY Sales Reconciliation
Q3 2015 – Q3 2016 YoY SALES RECONCILIATION (M CAN$) 0% 1,040 1 2 9 1,035 (2) 1,030 (4) 1,026 1,025 1,021 (11) 0 Recovery Selling Sales Acqu. & Corp. Sales & Prices CAN$ Volume Q3-2015 Disposals Elim. Q3-2016 Recycling & Mix (M CAN$) Containerboard 353 5 8 1 (11) 356 Boxboard Europe 205 (9) (7) 189 S
Slide 13: Q2 2016 – Q3 2016 QoQ Sales Reconciliation
Q2 2016 – Q3 2016 QoQ SALES RECONCILIATION (M CAN$) +2% 3 1,025 6 1,021 1,020 (2) 8 (2) 1,015 1,010 10 1,005 1,000 998 0 Recovery Selling Sales Acqu. & Corp. Sales Volume & CAN$ Prices Q2-2016 Disposals Elim. Q3-2016 Recycling & Mix (M CAN$) Containerboard 342 7 2 1 4 356 Boxboard Europe 197 (6) (1)
Slide 14: Q3 2015 – Q3 2016 YoY Adjusted EBITDA Reconciliation
Q3 2015 – Q3 2016 YoY ADJUSTED EBITDA RECONCILIATION - Weaker volume - Mississauga fire - Longer than usual seasonal downtime - Acceleration of ERP implementation and - Depreciation of the British Pound business process re-engineering - Higher recycled fibre costs - FX losses on hedging (M CAN$) - Q
Slide 15: Q2 2016 – Q3 2016 QoQ Adjusted EBITDA Reconciliation
Q2 2016 – Q3 2016 QoQ ADJUSTED EBITDA RECONCILIATION - Weaker volume - Mississauga fire - Longer than usual seasonal downtime - Acceleration of ERP implementation - Depreciation of the British Pound and business process re-engineering - Higher recycled fibre costs - Lower R&D tax credits (M CAN$) 12
Slide 16: Quarterly YoY EPS Variance – Q3 vs Q3
QUARTERLY YOY EPS VARIANCE – Q3 VS Q3 Q3-2015 Q3-2016 Adjusted Specifics As reported Adjusted Specifics As reported EBITDA 134 (12) 122 103 (5) 98 Depreciation (45) (45) (48) (48) EBIT 89 (12) 77 55 (5) 50 Financing expenses & interest expense on employee future benefits (23) (1) (24) (24) (24) FX g
Slide 17: Quarterly QoQ EPS Variance – Q2 vs Q3
QUARTERLY QoQ EPS VARIANCE – Q2 VS Q3 Q2-2016 Q3-2016 Adjusted Specifics As reported Adjusted Specifics As reported EBITDA 112 112 103 (5) 98 Depreciation (47) (47) (48) (48) EBIT 65 65 55 (5) 50 Financing expenses & interest expense on employee future benefits (22) (22) (24) (24) FX gain (loss) on
Slide 18: Q3-16 Adjusted EBITDA to Operating Income Reconciliation
Q3-16 ADJUSTED EBITDA TO OPERATING INCOME RECONCILIATION (M CAN$) 120 103 100 80 55 60 50 (48) (2) (3) 40 20 0 Adjusted Dep. & Adjusted Impairment Restructuring Operating EBITDA amort. operating charges costs income income Container- Boxboard Specialty Tissue Corporate Total (M CAN$) board Europe Pr
Slide 19: Net Earnings – IFRS vs Adjusted
NET EARNINGS – IFRS VS ADJUSTED NET EARNINGS NET EARNINGS PER COMMON SHARE 1 (in millions of Canadian dollars, except amount per common share) Q3-2016 Q3-2016 As per IFRS 20 $0.21 Specific items: Impairment charges 2 $0.02 Restructuring costs 3 $0.02 Foreign exchange loss on long-term debt and finan
Slide 20: Cash Flow Overview
CASH FLOW OVERVIEW Adjusted cash flow from operations Adjusted free cash flow 2 (M CAN$) (M CAN$) 116 75 125 80 110 106 59 100 60 49 68 37 75 40 56 50 20 25 0 (5) 0 (20) Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016 2014 2015 2016 (in millions of CAN$) Year Q1 Q2 Q3
Slide 21: Net Debt Reconciliation – Q3-2016
NET DEBT RECONCILIATION – Q3-2016 (M CAN$) 1,700 -2% 1,664 1,650 25 1,625 23 1,600 (68) 4 (22) (1) 1,550 1,500 Net Debt Cash flow from Var. in non- Investments Dividends paid FX Rate Capital Net Debt 06/30/2016 operations cash work. cap. and others & share investments, net 09/30/2016 components buyb
Slide 22: Proportionate Consolidation – Cascades
PROPORTIONATE CONSOLIDATION – CASCADES As reported Proportionate 1 (in millions of Canadian dollars) (IFRS) consolidation Selected financial data Q3-2016 Q3-2016 Q2-2016 Q3-2015 Sales 1,021 1,007 992 999 Adjusted EBITDA 103 114 121 144 Adjusted EBITDA - margin 10.1% 11.3% 12.2% 14.4% Total assets 3,
Slide 23: Financial Information on Greenpac
FINANCIAL INFORMATION ON GREENPAC Greenpac - Selected financial data1 (in millions of US dollars) 2014 2015 LTM Q3-2016 Sales 210-230 235-250 240-255 Adjusted EBITDA 38-45 65-72 58-65 Adjusted EBITDA - margin 16%-20% 26%-30% 23%-27% Net debt2,3 270 185 177 Net debt/Adjusted EBITDA ratio 6.0x-7.1x 2.
Slide 24: Segmented Review
SEGMENTED REVIEW ( 10 8Mee
Slide 25: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Comments on sequential performance Q3 2016 Q2 2016 Q3 2015 Shipments ('000 s.t.) Sequential 4% increase reflects higher shipments in both containerboard (+3%) and 294 4% -1% corrugated box (+4%) activities. Average selling price On a consoli
Slide 26: Packaging Products / Boxboard Europe
PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Q3 2016 Q2 2016 Q3 2015 Shipments ('000 s.t.) Decrease in shipments of both recycled and virgin grades linked to longer than 258 -3% -3% usual seasonal downtime and to weak demand in Europe. Average selling
Slide 27: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q3 2016 Q2 2016 Q3 2015 Shipments ('000 s.t.) Shipments for Industrial Packaging remained stable sequentially, but increased by 48 7% year-over-year due to good productivity at our URB mill. Shipments in
Slide 28: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q3 2016 Q2 2016 Q3 2015 Converted products increased by 3% due to the usual seasonality in the Away-from- Shipments ('000 s.t.) Home segment and additional volume from major customers in the Canadian and 163 U.S. retail market. 3%
Slide 29: Concluding Remarks and Q&A
CONCLUDING REMARKS AND Q&A — i? oh f. | @e passes
Slide 30: Near Term Outlook
NEAR TERM OUTLOOK • $50/s.t. containerboard price increase for • Continuing challenging market conditions in Linerboard and Medium on October 1, 2016 in Europe + North America • Seasonality-related decrease in Q4 volume I • Gradual flow-through on contractual and non- in North America contractual bo
Slide 31: Appendix
APPENDIX
Slide 32: Q3 2015 – Q3 2016 YoY Adjusted EBITDA Reconciliation
Q3 2015 – Q3 2016 YoY ADJUSTED EBITDA RECONCILIATION (M CAN$) -23% 140 2 1 134 2 (2) 130 (4) (4) 120 110 103 (26) 0 Adjusted Selling Recovery Adjusted Acqu. & Raw Other EBITDA Prices & Energy & CAN$ Volume EBITDA Disposals Materials 1 Costs Q3-2015 Mix Recycling Q3-2016 (M CAN$) Containerboard 68 5
Slide 33: Q2 2016 – Q3 2016 QoQ Adjusted EBITDA Reconciliation
Q2 2016 – Q3 2016 QoQ ADJUSTED EBITDA RECONCILIATION (M CAN$) 130 -8% 3 1 3 120 5 (6) 112 110 103 (15) 0 Adjusted Recovery Selling Adjusted Acqu. & Raw Other EBITDA Volume & Prices & CAN$ Energy EBITDA Disposals Materials 1 Costs Q2-2016 Recycling Mix Q3-2016 (M CAN$) Containerboard 60 3 1 (1) (4) (
Slide 34: Foreign Exchange
FOREIGN EXCHANGE US$/CAN$ Exchange rates Euro€/CAN$ Hedging Program – US$ Cash flows 1.00 1.00 2016 0.90 0.90 • 23% to 58% of exposure (net of interest) hedged at an average rate of 1.18 CAN$/US$ to 1.21 CAN$/US$ 0.80 0.80 2017 0.70 0.70 • 28% to 51% of exposure (net of interest) hedged at an averag
Slide 35: Energy Prices
ENERGY PRICES Natural gas Energy prices Crude oil (US$) Hedging Program – Natural gas (US$) 12.00 120 • Canada: 10.00 100 • 2016: 59% at 3.92 CAN$/GJ 8.00 80 • 2017: 57% at 3.94 CAN$/GJ 6.00 60 4.00 40 • U.S.: 2.00 20 • 2016: 41% at 3.96 US$/mmBtu 0.00 0 • 2017: 45% at 3.91 US$/mmBtu Q3-13 Q4-13 Q1-
Slide 36: Selected Reference Prices
SELECTED REFERENCE PRICES (US$/s.t.) Containerboard - Selected Products Current Boxboard Europe - Selected Products Current (Euro€/m.t.) 700 (Oct) 1,200 (Sept) 650 655 1,100 1,043 1,000 600 900 550 540 800 500 700 652 450 Linerboard 42-lb. unbleached kraft, Eastern U.S. 600 Coated duplex - virgin bo
Slide 37: Selected Reference Prices and Fibre Costs
SELECTED REFERENCE PRICES AND FIBRE COSTS These indexes should only be used as an indicator of trends and they may be Q3 2016 Q3 2016 different than our actual selling prices or purchasing costs 2014 2015 2016 vs. Q3 2015 vs. Q2 2016 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 (units) (%) (units) (%) Selling pri
Slide 38: For more information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or jennifer_aitken@cascades.com 38