Cascades Inc. · TSX:CAS
Cascades — Investor Presentation (March 2023)
37 slides from Cascades's investor presentation, March 2023
Slide 1: Investor Presentation March 2023
Investor Presentation March 2023 1
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: Who We Are
WHO WE ARE Eco-Friendly Packaging, Hygiene & Recovery Solutions OUR MISSION To improve the well-being of people, communities and the planet by providing sustainable and innovative solutions that create value. OUR VISION To be a key contributor to our customers’ success by leading the way for sustain
Slide 4: Investment Thesis
INVESTMENT THESIS ✓ 2022-2024 Strategic Plan Focused on margin expansion, cash flow generation and leverage improvement while limiting CAPEX to 4% of revenue in 2023 and 20241 ✓ Modernized, well-financed asset base Positioned to capitalize on growth trends in key markets ✓ Strong sustainability trac
Slide 5: Sustainability Track Record: Driving Positive Change
Sustainability Track Record: Driving Positive Change Where We Are Where We’re Going ESG strategy aligned with UN’s 50% greenhouse gas (GHG) intensity Sustainable Development Goals, Member emissions reduction (scope 1) since 1990 of the UN Global Compact 45% fewer GHG emissions Aggressive GHG reducti
Slide 6: Sustainability Action Plan 2021-2025
Sustainability Action Plan 2021-2025 Ambitious targets, a robust action plan, GHG reduction targets have been approved by the Science Based Targets initiative (SBTi). Climate Change 38.7% IN 2030 VS 2019 27.5% IN 2030 VS 2019 22% IN 2030 VS 2019 Respectful scopes 1 + 2, mills (kg of CO2 scopes 1 + 2
Slide 7: Returning Value to Shareholders
Returning Value to Shareholders (in millions of CAD$, except dividend yield amounts in %) 6.0% 5.7% $60 5.0% $26 $9 4.0% $40 $8 2.9% 3.0% $9 $20 2.2% 2.1% $48 2.0% $20 $41 1.6% 1.2% $31 $23 1.0% $15 $15 $- 0.0% 2017 2018 2019 2020 2021 2022 Dividends Share Repurchases Dividend Yield 7
Slide 8: Q4 2022 Results
Q4 2022 Results (in millions of CAD$, except per share amounts) Q4 2022 Q4 2021 Q3 2022 Sales 1,135 1,028 1,174 Operating Income (loss) (20) (90) 25 EBITDA (A)1 116 62 111 Margin (EBITDA (A)1/Sales) 10.2% 6.0% 9.5% Net earnings (loss) (27) 105 (2) Adjusted net earnings (loss) 22 (9) 20 Net earnings
Slide 9: Overview of Consolidated Profitability Drivers
Overview of Consolidated Profitability Drivers (in millions of CAD$) Consolidated EBITDA (A)1 Quarter-over-Quarter Year-over-Year 2022 vs 2021 Variation Drivers Q4 2022 vs Q3 2022 Q4 2022 vs Q4 2021 Pricing $1 million $117 million $467 million Freight & Production Costs ($6) million ($37) million ($
Slide 10: Recycled Fibre Costs – Index Prices
Recycled Fibre Costs – Index Prices OCC: ($ US/s.t.) Current • High seasonal material generation combined with low (Mar-23) export activities and extended downtime taken in the 2102 containerboard industry meant supply outpaced demand • Solid inventories at our mills • Lower pricing YoY and sequenti
Slide 11: Virgin Fibre Costs – Index List Prices
Virgin Fibre Costs – Index List Prices ($ US/s.t.) VIRGIN PULP : Current (Feb-23) • Slight improvement in market dynamics sequentially, but prices significantly higher YoY 1,675 • Improving transportation conditions, more steady 1,530 domestic production levels, new capacity coming in to the market
Slide 12: Capital Investments
Capital Investments (in property, plant & equipment, in millions of Canadian dollars, excluding new leases, disposal of assets and accounts payable variation) 2023F CAPEX: ~$325 M1 Includes ~CAD$175 M for Bear Island (1) Amount is subject to change depending on business and/or economic conditions. 1
Slide 13: Financial Ratios & Debt Maturities
Financial Ratios & Debt Maturities Net Debt / Adjusted OIBD1,3 Interest Coverage Ratio2,3 Net Debt / Net Debt + Total Equity1 Long-Term Debt Maturities (as of December 31, 2022) Unsecured Senior Revolver Term loan Leases – notes Subsidiaries Subsidiaries Without recourse – Leases – Debts without deb
Slide 14: Packaging Businesses
PACKAGING BUSINESSES Tier 1 Tier 2 Tier 3 Investments and modernization Specialty Packaging 45% 43% 12% initiatives have improved the Containerboard - Sheeting 20% 44% 36% competitiveness* of Containerboard - Converting 69% 15% 16% our assets. Conainerboard - Manufacturing 63% 6% 31% (including Bear
Slide 15: Containerboard
Containerboard 6th largest containerboard producer in N.A. (CAN $ M) 2,500 800 14% 2,265 Annual capacity: 42% 2,009 700 1,918 1,575 k s.t. 58% 2,000 1,840 1,827 600 86% 1,652 24.1% 500 Recycled Virgin Linerboard Medium 1,500 22.3% 21.0% 17.7% 410 441 18.5% 403 401 400 372 1,000 15.0% 381 328 321 300
Slide 16: Containerboard – Quarterly Performance
Containerboard – Quarterly Performance Quarterly EBITDA (A)1 (M CAN$) • Sequential Q4 shipments of converted products: Canada -1.0% (vs. market -2.7%); US +4.0% (vs. market -4.5%) • Year-over-year Q4 shipments of converted products: Canada -2.8% (vs. market -4.7%); US +6.0% (vs. market -8.4%) • Infl
Slide 17: Containerboard - Market
Containerboard - Market North American Containerboard Expected Production1 North American Capacity and Operating Rate1 5-Yr CAGR : + 1.2% 5-Yr CAGR: +1.3% 6.2 47.6 48.0 5.0 5.5 5.6 5.9 6.2 46.9 5.7 44.9 45.5 45.8 43.2 2021-26 42.9 94.7% average: 34.7 37.3 36.4 36.6 37.7 38.3 39.1 94.0% 93.0% 93.6% 9
Slide 18: Containerboard - Bear Island Project
Containerboard - Bear Island Project SITE WHEN ACQUIRED PROJECT COST • US $515 - $525 M (CAN $675 - $690 M) INVESTMENT TO • US $396 M (CAN $512 M) Lightweight DATE (2018–2022) START-UP • End of March 2023 BUILDING EXTENSION - JUNE 2022 Recyclability/ • Production: ~235,000 s.t. Sustainability 2023 F
Slide 19: Specialty Products
Specialty Products Comprehensive Packaging Solutions Provider Focused on Strategic Scalable Markets 2022 sales of $654 M increased 19% from 2021 (CAN $ M) 700 654 120 600 14.1% 548 100 492 92 500 473 13.5% 86 80 36% 34% 12.7% 74 400 358 2022 2022 339 11.2% sales 60 59 60 sales 55 64% 66% 300 10.0% 9
Slide 20: Specialty Products – Quarterly Performance
Specialty Products – Quarterly Performance Quarterly EBITDA (A)1 (M CAN$) • Q4 2022 EBITDA (A)1 of $20 M, or 12% on a margin basis, was lower sequentially and fairly stable versus the prior-year. • Industrial packaging: results decreased sequentially reflecting softer market demand, and higher opera
Slide 21: Tissue Papers Business
TISSUE PAPERS BUSINESS Tier 1 Tier 2 Tier 3 Converting Lines 62% 22% 17% Investments and modernization initiatives have improved the Converted Cases Capacity 82% 9% 9% competitiveness* of our assets. Manufacturing Capacity 43% 28% 29% * Competitiveness (Tier 1, 2 or 3) of manufacturing and convertin
Slide 22: Tissue Papers
Tissue Papers 4th largest tissue producer in N.A. (CAN $ M) 2,000 400 32% USA 37% 2022 2022 Recycled Canada Sales Sales 1,615 300 Virgin 68% 63% 1,600 1,509 10.8% 1,422 1,352 200 1,268 5.7% 175 1,272 7.4% 1,200 94 1.3% 86 100 72 2.1% 28 17 27 -0.9% 6 800 (13) 0 Retail Away-from- Parent (108) (100) T
Slide 23: Tissue Papers – Quarterly Performance
Tissue Papers – Quarterly Performance Quarterly EBITDA (A) 1 (M CAN$) • Slower demand levels for Away-from-Home tissue products (shipments -6% YoY, -9% QoQ), and Retail tissue products (shipments -1% YoY, -3% QoQ). • Significant cost inflation in raw materials, chemicals, energy and production suppl
Slide 24: Tissue Papers – Annual 2022 EBITDA (A) Waterfall
Tissue Papers – Annual 2022 EBITDA (A)1 Waterfall ➔ $137 million of benefits successfully realized within the 2022 calendar year from pricing, volume and sales mix initiatives. While significant, these did not fully offset the $177 million of cost and FX headwinds that impacted results in the 12 mon
Slide 25: Tissue Papers Industry
Tissue Papers Industry US Tissue Parent Roll Production & Capacity Utilization1 US Parent Roll Prices1 1,594 97% 1,515 92% 93% 1,428 9,890 1,266 9,484 1,120 1,156 9,401 2020 2021 2022 Recycled parent roll, average (US$/s.t.) Virgin parent roll, average (US$/s.t.) Total parent roll production ('000 s
Slide 26: Where We Are Going
WHERE WE ARE GOING 26
Slide 27: Near-Term Factors
NEAR-TERM FACTORS • Containerboard: Net of $5 million partial insurance Q1 2023 vs Q4 2022 vs Q1 2022 settlement in Q4 2022, sequential performance forecast to EBITDA (A)1 benefit from low average raw material prices, offset by slightly softer volume, lower selling price and elevated Trend operation
Slide 28: 2022 – 2024 Strategic Plan: Top Priorities
2022 – 2024 Strategic Plan: Top Priorities An integrated company with strong assets to drive value for shareholders 1 Deliver on the profitability plan in Tissue 2 Complete the Bear Island start up Our Top Continue to grow our sustainable packaging Priorities 3 business with U.S. capacity expansion
Slide 29: 2022 – 2024 Strategic Plan: Financial Targets
2022 – 2024 Strategic Plan: Financial Targets Focused on free cash flow generation + maintaining financial flexibility 1 Revenue: ~$5.0 B+ in 2024 EBITDA (A)4 ~13% - 15% in 2024 2 Margin: Financial Targets CAPEX5: ~ $325 M in 2023 (incl. $175M for Bear Island) 3 ~ 4% of revenue in 2024 Free cash ~9%
Slide 30: Appendices
APPENDICES 30
Slide 31: Recovery Operations
Recovery Operations A natural extension of our operations, delivering financial and strategic value. Largest source of Among Cascades’ lowest Excellent source of market recovered fiber landed cost sources with intelligence, active in all fiber contributing about 25% of ability to raise value through
Slide 32: Quarterly Financial Results & KPIs
Quarterly Financial Results & KPIs 2020 2021 2022 (In millions of CAN$, except per common share amounts, where noted) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Financial Results Sales 4,105 942 956 1,030 1,028 3,956 1,038 1,119 1,174 1,135 4,466 Operating income (loss) 292 44 23 73 (90) 50 (4) 32 25 (2
Slide 33: Cash Flow Overview
Cash Flow Overview 2020 2021 2022 (In millions of CAN$, except per common share amounts) YEAR Q1 Q2 Q3 Q4 YEAR Q1 Q2 Q3 Q4 YEAR Cash flow from operations 458 82 87 58 20 247 19 81 60 100 260 Specific items1 15 4 2 12 31 49 7 — 2 3 12 Adjusted cash flow from operations2 473 86 89 70 51 296 26 81 62 1
Slide 34: Historical COGS and SG&A Overview
Historical COGS and SG&A Overview COST OF SALES 2021 2022 (In millions of CAN$) Q1 Q2 Q3 Q4 YEAR Q1 Q2 Q3 Q4 YEAR Raw materials 265 312 379 382 1,338 359 393 440 395 1,587 Wages & benefits 175 171 169 181 696 183 190 185 194 752 Energy 47 44 49 51 191 59 59 65 60 243 Delivery 115 107 115 125 462 142
Slide 35: Historical Reference Prices and Fibre Costs
Historical Reference Prices and Fibre Costs 2022 Q4 2022 2020 2021 2022 vs. 2021 vs. Q3 2022 These indexes should only be used as an indicator of trends, and they may be different than our actual selling prices or purchasing costs. Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year (units) (%) (units) (%) Selli
Slide 36: Sensitivities
SHIPMENTS / OPERATING SENSITIVITIES1 CONSUMPTION (‘000 s.t, ‘000 mm Btu for Natural Gas) INCREASE INCOME IMPACT (Annually, CAN$ M) SELLING PRICE2 (Manufacturing & Converting) PACKAGING Linerboard, 42-lbs unbleached kraft, Eastern US 390 US$25/s.t. 13 Corrugated Medium, 26-lbs semichemical, Eastern U
Slide 37: Investor Relations Contact
www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 / investor@cascades.com