Cascades Inc. · TSX:CAS
Cascades — Investor Presentation (September 2019)
32 slides from Cascades's investor presentation, Sep 12, 2019
Slide 1: Marketing Presentation
MARKETING PRESENTATION New York – September 12, 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: We Care, We Innovate, We Create Value
WE CARE, WE INNOVATE, WE CREATE VALUE Focused investments and Raising profile of our Leveraging our diversification acquisitions generating sustainability leadership to to innovate, cross-sell, support sustainable growth & returns generate opportunities customer growth Balanced capital allocation: L
Slide 4: 2018 Financial Performance
2018 FINANCIAL PERFORMANCE ADJ. EBITDA2 $489M 28% Containerboard Packaging (10.5% margin) 22% 38% Boxboard 38% Europe 1 Adj. CF from operations: $361 million Specialty WC (% of LTM sales): 10.6% 40% Products ROCE: 4.6% Net debt: $1.77 billion 14% Net debt/Adj. EBITDA2: 3.5x Tissue 20% Annual shipmen
Slide 5: 2018 - What Moved the Dial
2018 - 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 pricing EURO
Slide 6: LTM Q2 2019 Financial Performance
LTM Q2 2019 FINANCIAL PERFORMANCE 4% 8% 29% Adj. CF from operations: $391 M 37% ADJ. Net debt: $1.86 B 16% SALES: EBITDA3: Net debt/Adj. EBITDA2: 3.3x $4.9 B $541 M (11.1% margin) WC (% of LTM sales): 10.3% 14% 72% Capacity utilization rate: 91% 20% Containerboard Packaging Boxboard Europe1 Specialt
Slide 7: Near-Term Outlook
NEAR-TERM OUTLOOK • Raw materials: lower OCC price, positive trends in virgin pulp - • Tissue: ongoing market-related challenges and SOP white recycled fibre grade + • Containerboard: potential for pricing & volume • Tissue: price increases announced in various products and headwinds sub-segments •
Slide 8: Investment Thesis
INVESTMENT THESIS STRATEGIC M&A: Orchids Paper assets, U.S. moulded pulp assets, Barcelona Cartonboard FOCUSED INVESTMENTS: State-of-the-art equipment & facilities; Capex targeting cost reduction, optimization and productivity gains MARKETS: Stable fundamental demand growth in our tissue & pac
Slide 9: Containerboard - Our Business
CONTAINERBOARD - OUR BUSINESS 5th largest containerboard ANNUAL CAPACITY: 1,559 K S.T. 500 producer in NA 600 16% 47% 53% 000 1,847 24.1% 500 1,840 22.3% 1,652 445 84% (CAN $ M) 410 400 500 1,301 1,370 15.0% 381 346 Recycled Virgin Linerboard Medium 300 17.8% 15.8% 000 231 247 MANUFACTURING CONVERTI
Slide 10: Containerboard - Market
CONTAINERBOARD - MARKET • NA demand CAGR 2016 – 2023e: ~ 2% • 2016 – 2023e CAGR capacity growth: ~ 3% annually North American Production1 North American Capacity Additions1 (M s.t.) +3.1% +2.6% 49.66 48.2 1.5 50 +4.0% 47.0 1.2 +3.6% 1.8 +3.1% 1.6 45.2 +2.4% +2.2% 1.3 43.6 45 42.3 1.0 41.4 0.9 40.4 4
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.) 200 120 (CAN $ M) 10.4% 1,004 9.8% 933 97 98 100 000 8.1% COATED RECYCLED COATED VIRGIN 825 7.6% 796 838 80 CONVERTING 6.7% BOXBOARD BOXBOARD 8
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 SBS FBB CUK WLC Barcelona Car
Slide 13: Tissue Papers - Our Business
TISSUE PAPERS - OUR BUSINESS 4th largest tissue producer in NA • Acquired Orchids Paper for US$207 million, expect US$45 million EBITDA run-rate beginning 2021 (CAN $ M) 2018 ANNUAL SALES: 28% 72% 1,600 300 1,429 RETAIL TISSUE AWAY-FROM-HOME PARENT ROLLS 1,305 1,352 250 1,236 1,268 1,200 11.5% 200 9
Slide 14: Tissue Papers - Market
TISSUE PAPERS - MARKET • Market fundamentals reflect capacity additions, higher raw material & transport costs • Cascades capital investments focused on reducing fixed cost base, modernizing equipment, aligning product offering and geographic footprint with customer requirements Tissue Market Demand
Slide 15: Specialty Products
SPECIALTY PRODUCTS 800 (CAN $ M) 703 725 100 Diversified Packaging Player – Focused on Growth Sectors 700 620 659 90 579 10.5% 9.5% 80 600 10.0% 70 500 65 67 CONSUMER PRODUCTS INDUSTRIAL RECOVERY & 58 6.8% 60 6.1% 400 51 46 49 50 PACKAGING PACKAGING RECYCLING 300 40 40 31 30 200 23 20 20 22% 32% 46%
Slide 16: Largest Paper Collector in Canada
SPECIALTY PRODUCTS RECOVERY FIBRE1 USED IN 2018: 2.3 M S.T. 5% 9% (0.1 M st) (0.2 M st) Largest paper collector in Canada 18% In 2018, we collected & purchased 3.2 MILLION S.T. of fibre (0.4 M st) 68% • 71% (2.3 million s.t.) used internally (1.6 M st) • 29% (0.9 million s.t.) sold to external custo
Slide 17: Strategic Plan
STRATEGIC PLAN MODERNIZE our platforms Generate SUSTAINABLE Value INNOVATION and CUSTOMER focus 17
Slide 18: Modernize
MODERNIZE Capital Investments1 YTD Q2 2019: $141 M $429M • Replace older assets with $330 M - $400 M 2 ± $300 M 3 MODERN equipment 243 110 - 125 • Invest in ORGANIC growth $223 M 35 - 45 65 35 - 45 • OPTIMIZE geographic footprint 27 35 34 32 110 - 135 • Increase INTEGRATION rate to 85% 64 88 42 29 4
Slide 19: Sustainable Value
SUSTAINABLE VALUE SHAREHOLDERS INVESTMENT BALANCE SHEET • Opportunistic share buy- • Fund CAPEX with cash flow • Leverage target: 2.5 x back (NCIB at 2%) • Modernize, reduce fixed • Disciplined capital • Increased quarterly cost base, optimize allocation dividend from $0.04 to geographic footprint •
Slide 20: Innovation & Customer Focus
INNOVATION & CUSTOMER FOCUS 275 employees provide engineering & consulting services internally, 37 employees to major customers & external clients dedicated to developing innovative ✓ Major Projects solutions for our customers ✓ Technical Services ✓ Food & Beverage ✓ Operational Efficiency ✓ Hygiene
Slide 21: Our Innovations
OUR INNOVATIONS • Made of 60% recycled content • Maintains temperature at 4°C (39°F) • Extends and optimizes the shelf life of fresh proteins • Fully recyclable and made from FSC® certified recycled materials • Barrier tray and customizable absorbent pad ensure • Customizable according to transport
Slide 22: Sustainability is in Our DNA
Sustainability is in our DNA 6.5 x 4.0 x less water less water 2.7 x 1.3 x less electricity less electricity Our plants recover 76% of their manufacturing waste every year, and the recycled fibre that we collect & recycle annually could fill saves 45 million trees…the equivalent to 180x the trees fo
Slide 23: Appendix
APPENDIX ie oveme- ms
Slide 24: Cascades – Market Position
CASCADES – MARKET POSITION North American Tissue Manufacturers North American Containerboard Producers CAPACITY MARKET RETAIL AFH MARKET SHARE (‘000 S.T.) SHARE CAPACITY2 CAPACITY2 International Paper 31% Georgia Pacific 2,570 29% 67% 33% WestRock 23% Proctor & Gamble 1,335 15% 100% - PCA
Slide 25: Raw Material - Index Prices
RAW MATERIAL - INDEX PRICES ($ US/s.t.) Recycled Fibre Prices Current Q2 Q2 vs Q2 vs (Sep-19) RECOVERED PAPER PRICES 2019 Q2 2018 Q1 2019 █ WHITE GRADES - Basket of products (Northeast avg)1 156 (24)% (22)% 109 33 █ BROWN GRADES - OCC No. 11 (Northeast average) 40 (44)% (34)% ($ US/s.t.) Virgin Pulp
Slide 26: Selling Prices - Index Prices
SELLING PRICES - INDEX PRICES Current Current ($ US/s.t.) CONTAINERBOARD (Aug) (Euro€/s.t.) BOXBOARD EUROPE (June) 725 1,117 630 672 Current SPECIALTY PRODUCTS (Aug) TISSUE PAPERS Current ($ US/s.t.) ($ US/s.t.) (July) 1,423 730 1,147 Sources: RISI, CEPI 26
Slide 27: Reference Prices and Fiber Costs
REFERENCE PRICES AND FIBER 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 a
Slide 28: Historical Financial Performance
HISTORICAL FINANCIAL PERFORMANCE (In millions of Canadian dollars, except per share data) Q2-19 Q1-19 2018 Q4-18 Q3-18 Q2-18 Q1-18 2017 Q4-17 Q3-17 Q2-17 Q1-17 Sales Containerboard 462 441 1,840 472 472 475 421 1,652 440 438 428 346 Boxboard Europe2 270 279 933 245 210 232 246 838 212 202 213 211 Sp
Slide 29: Financial Ratios & Debt Maturities
FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD1 Interest Coverage Ratio2 Net Debt / Net Debt + Total Equity Long-Term Debt Maturities (AS AT JUNE 30, 2019) Senior notes Revolver Term loan Leases - Non recourse Debts without recourse Subsidiaries debts Leases - Subsidiaries Bank debt
Slide 30: Sensitivities – Selling Price, Raw Material Costs, FX
SENSITIVITIES – SELLING PRICE, RAW MATERIAL COSTS, FX SHIPMENTS/CONSUMPTION INCREASE OIBD IMPACT (‘000 s.t, ‘000 mmBtu for Natural Gas) (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 Conve
Slide 31: Cascades Worldwide
1 CASCADES WORLDWIDE QUÉBEC EUROPE 2 NORTH AMERICA ONTARIO NORTHEASTERN U.S. 1 Including main associates and joint ventures. 2 Via our equity ownership in Reno de Medici, a public Italian company 31
Slide 32: Cascades – Investor Contact
CASCADES RECOVERY + PAPER + PACKAGING ~ investors@cascades.com Cascades