Cascades Inc. · TSX:CAS
Cascades — Investor Presentation (September 2021)
41 slides from Cascades's investor presentation, Sep 2, 2021
Slide 1: Investor Presentation Scotiabank Marketing September 2, 2021
Investor Presentation Scotiabank Marketing September 2, 2021 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: Our Mission, Our Vision
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 sustainable packaging, hygiene and recovery solutions. ~9,950 employees
Slide 4: Investment Thesis
INVESTMENT THESIS Manufacturing ✓ Well-capitalized and modernized business Recovery & recycling Converting platforms competitively positioned in growing markets We recover residual materials to ✓ Solid balance sheet and strong create forecasted cash flow support responsible & operational flexibility
Slide 5: Well Positioned Asset Base
WELL POSITIONED ASSET BASE Québec Ontario Northeastern U.S. 5
Slide 6: Our Business - Products, Brands, Markets
OUR BUSINESS - PRODUCTS, BRANDS, MARKETS PACKAGING PRODUCTS BRANDS END MARKETS SOLUTIONS ROLLS 60% of LTM Q2/21 Sales • LINER (APPROX. % OF PACKAGING SALES) • MEDIUM • URB Converters 41% CONVERTED PRODUCTS Food & Beverage 33% • CORRUGATED BOXES Industrial 9% • CONSUMER PRODUCTS PACKAGING • INDUSTRIA
Slide 7: Packaging Solutions
INDUSTRY TRENDS Packaging Solutions A MUST ✓ Broad selection of innovative & sustainable packaging solutions aligned with industry trends to meet the needs Sustainable of our strategic markets. packaging OUR MATERIALS OUR MARKETS Differentiation by design New technologies E-commerce & E-food 7
Slide 8: Sustainability Action Plan: 2021-2025
SUSTAINABILITY ACTION PLAN: 2021- 2025 3rd party frameworks, 100 Most standards & guidelines Sustainable provide comprehensive Corporations Only 1 out of & transparent in the World Containers only 12 Ranked & Canadian information for our (Corporate Knights) 17th Packaging company companies to make c
Slide 9: Sustainability Action Plan: 2021-2025
SUSTAINABILITY ACTION PLAN: 2021- 2025 Collaborate with our Work in partnership to employees, customers and develop methods that are supply chain partners to regenerative and respectful develop environmentally of the environment, friendly and sustainable allowing us to continue to solutions that cre
Slide 10: Sustainability Action Plan: 2021-2025
SUSTAINABILITY ACTION PLAN: 2021- 2025 10
Slide 11: You see Cascades, We see a refocused company
You see Cascades We see a refocused company 11
Slide 12: We've Been Busy: 2011-2020 Refocused & Optimized
WE’VE BEEN BUSY: 2011-2020 REFOCUSED & OPTIMIZED 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 MODERNIZATION OF ERP & BUSINESS PROCESS PLATFORMS S 3 tissue facilities S NA boxboard S Sheet plant (ON) activities C NA recovery A Orchids Paper assets activities A CDPQ 20.2% interest in Greenpac Mil
Slide 13: Our Asset Base
Investments & OUR ASSET BASE modernization initiatives have CONTAINERBOARD CONTAINERBOARD CONTAINERBOARD Manufacturing (with Bear Island) Converting Sheeting improved 13% competitiveness* 33% 10% 31% 26% Total Total # of of our assets. Capacity 62% Capacity Machines 5% 77% 43% * Competitiveness (Tie
Slide 14: 2011-2020 Refocused & Optimized
2011-2020 REFOCUSED & OPTIMIZED SALES (in 000’s CAN$) LEVERAGE RATIO 7.0x $5,000 5.8x 6.0x 5.0x $4,500 5.0x 4.6x 4.7x 4.0x 3.8x 4.0x 3.6x 3.5x 3.3x $4,000 3.0x 2.5x 2.0x $3,500 REFOCUSED OPTIMIZED 1.0x REFOCUSED OPTIMIZED $3,000 0.0x 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011 2012 2013 2
Slide 15: Driving Value
Capture Benefits from Modernization Initiatives DRIVING • • Drive continuous value from stronger operational and financial capacity & platform Fund value-creating growth – Bear Island project VALUE • Ramp up new Tissue converting assets, optimize newly repositioned platform Disciplined Capital Alloc
Slide 16: Driving Value
DRIVING 5 PILLARS OBJECTIVES & RESULTS VALUE REVENUE MANAGEMENT OBJECTIVES → Targeting improvements in net → Increase adjusted OIBD margin1 selling price, volumes, cost to by 1% in 2020, 2021 and 2022 from serve and customer & product mix our 2019 reference base year PRODUCTION EFFICIENCY → Targetin
Slide 17: Financial Results
FINANCIAL RESULTS 17
Slide 18: Discontinued Operations
DISCONTINUED OPERATIONS On July 5, 2021, the Corporation announced the monetization of its 57.6% controlling equity interest in Reno de Medici S.p.A. (RDM) for an amount per share of €1.45, or $461 million. The transaction is expected to close in the third quarter of 2021. 20192 20202 20212 (In mill
Slide 19: LTM Q2 2021 Results
(LTM Q2 2021, except where specified) Sales $3,942 M SALES1 Adj. OIBD3 $492 M LTM 35% 17% Adj. OIBD3 Margin 12.5% Adj. CF from operations $399 M 11% ADJ. 72% 52% Q2 2021 OIBD1,3 Adj. Free CF $91 M Adj. Free CF per share $0.92 Net debt (at 6/30/21) $1.71 B Results2 13% Net debt/Adj. OIBD3 (at 6/30/21
Slide 20: Raw Material — Index Prices
Raw material — Index prices Recycled Fibre Prices ($ US/s.t.) Current2 Q2 Q2 vs Q2 vs 250 (June-21) Recovered Paper Prices 2021 Q2/20 Q1/21 225 200 175 █ WHITE GRADES - Basket of products 125 (26%) 23% 150 134 (Northeast avg)1 125 100 95 █ BROWN GRADES - OCC No. 11 87 (7%) 23% 75 (Northeast average)
Slide 21: Quarterly Segmented Operating Income, Adjusted OIBD & Margin
QUARTERLY Containerboard (millions of CAN$/%) SEGMENTED 22.0% 21.5% 20.7% 19.8% 20.1% 122 110 108 OPERATING INCOME 94 100 100 71 65 64 54 (LOSS), ADJUSTED OIBD1 & MARGIN Q2 2020 Q3 2020 Operating Income Q4 2020 Adj. OIBD Q1 2021 Q2 2021 Adj. OIBD Margin Specialty Products (millions of CAN$/%) Tissue
Slide 22: Quarterly Financial Results
In millions of CAN$ In millions of CAN$ Quarterly 73 143 139 58 133 54 122 49 48 104 98 42 Financial 64 54 44 23 22 29 3 8 Results Q2 2020 Q3 2020 Operating Income (loss) Q4 2020 Q1 2021 Adjusted OIBD Q2 2021 Q2 2020 Q3 2020 Net Earnings Q4 2020 Q1 2021 Adjusted Net Earnings Q2 2021 (In millions of
Slide 23: Quarterly Cash Flows
131137 Quarterly 125125 84 66 87 82 86 87 89 78 Cash 23 (4) Flows (12) Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 CF from operations Adj. CF from operations Adj. Free Cash Flow Generated (Used) In millions of CAN$ In millions of CAN$ 20195 20205 20215 (In million
Slide 24: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / Adjusted OIBD1,3,4 Interest Coverage Ratio2,3,4 Net Debt4 / Net Debt4 + Total Equity Long-Term Debt Maturities (as at June 30, 2021) Avg. interest cost: 4.71% Senior notes Revolver Term loan Leases - Subsidiaries Debts without Subsidiaries W
Slide 25: Capital Investments
CAPITAL INVESTMENTS1 2021F: $400 M - $425 M2 Includes ~ $250 M for Bear Island conversion • Replaced older assets with MODERN equipment 312 27 • Invested in ORGANIC growth 81 227 213 • OPTIMIZED geographic footprint 20 39 22 169 24 133 • Increased INTEGRATION rate 104 85 7 61 21 • Disciplined, balan
Slide 26: Near Term Factors
Near • North American operations: positive impact from margin improvement initiatives YoY and QoQ. • Containerboard: expect continued strong demand • Raw materials: expect higher raw material prices both year-over-year and sequentially in Q3 for all businesses. term levels in addition to favourable
Slide 27: 2020 Results
2020 Sales $4,105 M SALES1 Adj. OIBD3 $546 M Adj. OIBD3 Margin 13.3% 40% 23% 2020 ADJ. 52% Adj. CF from operations $473 M 48% OIBD1,3 Adj. Free CF $214 M 8% Adj. Free CF per share $2.23 Results 2 12% Net debt (at June 30/21) Net debt/Adj. OIBD3 WC (% of 2020 sales) $1.71 B 2.5x 10.3% Containerboard
Slide 28: Annual Historical Performance
ANNUAL HISTORICAL PERFORMANCE2 SALES (M CAN$) SHIPMENTS (‘000 s.t.) 593 625 629 645 558 1,268 1,352 1,509 1,615 1,334 659 492 493 1,120 1,125 1,305 1,307 703 473 1,290 933 1,048 1,052 1,054 838 1,652 1,840 1,827 1,918 2,006 1,401 1,475 1,477 1,544 1,586 2017 2018 2019 2020 LTM Q2 2021 2017 2018 2019
Slide 29: Business Segments & Activities
BUSINESS SEGMENTS & ACTIVITIES 29
Slide 30: Recovery Activities
Groundwood Recovery Pulp recycled fibre (0.1 M st) Brown Activities recycled fibre (0.2 M st) White recycled fibre A leading paper collector (0.4 M st) in Canada (1.6 M st) 18 facilities in Canada & the U.S. In 2020, we collected & purchased 3 million s.t. of fibre • 77% (2.4 million s.t.) used inte
Slide 31: Containerboard
Containerboard 6th largest containerboard producer in N.A. (CAN $ M) 600 15% 2,006 Annual capacity: 44% 2,000 1,918 1,840 1,827 500 1,565 k s.t. 56% 1,652 22.3% 24.1% 441 21.0% 21.0% 85% 410 418 1,500 403 400 Recycled Virgin Linerboard Medium 381 328 321 322 15.0% 300 1,000 247 200 164 Manufacturing
Slide 32: Containerboard — Industry
Containerboard — Industry North American Containerboard North American Capacity Demand Growth and Market Share1 and Operating Rate1 Others International Paper Capacity (M s.t.) Operating Rate 21% 30% 50.2 49.0 47.7 Visy Pulp & 46.2 Paper 44.8 4% Capacity 43.2 95.0% Market 42.9 Cascades 93.5% 4% Shar
Slide 33: Containerboard — Industry
Containerboard — Industry • Gross profit expected to average US$714/s.t. for kraft liner and US$634/s.t. for recycled liner over 2021 – 2025 • Demand for containerboard supported by solid forecasted N.A. GDP growth through 2025 Kraft Liner & Recycled Liner Gross Profit Spread 1,2 Canada : Real GDP G
Slide 34: Specialty Products
Specialty Comprehensive Packaging Solutions Provider Focused on Strategic Scalable Markets Products3 (CAN $ M) 600 100 90 492 493 500 473 80 13.6% 12.7% 70 400 358 67 11.2% 339 60 60 55 Consumer Products Industrial 300 52 50 Packaging2 Packaging 10.0% 9.2% 42 40 200 34 36 33 30 59% 41% 24 24 20 of 2
Slide 35: Tissue Papers
Tissue Papers 4th largest tissue producer in N.A. (CAN $ M) 2,000 300 28% 27% 2020 250 USA 2020 Recycled 1,615 Annual Annual Canada Sales Virgin 1,600 1,509 200 Sales 10.8% 72% 73% 1,352 175 1,334 1,268 150 7.3% 1,200 7.4% 5.7% 94 97 100 86 72 1.3% 50 800 28 17 6 0 -9 Retail Away-from- Parent -50 Ti
Slide 36: Tissue Papers
Tissue Papers Significantly modernized & strengthened our converting platform EARLY 2019 2022 17% 33% 94 lines 48% 72 lines 22% 62% 18% 9% 26% 9% Capacity: Capacity: 83 M cases 80 M cases 64% 10% 82% Tier 1 Tier 2 Tier 3 36
Slide 37: Tissue Papers – Market
TISSUE PAPERS – MARKET North American Tissue Capacity1 Market Share 2020 North American Tissue Capacity1 Forecasted avg annual capacity growth of ~ 1.1% % Total 2020 production % Total Production Capacity – over 2021-2023 capacity of ~10.0 M s.t. Retail / Away-from-Home TOP 5 = 72% (‘000 s.t.) 10,00
Slide 38: Appendices
APPENDICES 38
Slide 39: Select Reference Prices & Fibre Costs
SELECT REFERENCE PRICES & FIBRE COSTS Q2 2021 vs Q2 2021 vs These indexes should only be used as an indicator of trends and they may 2019 2020 2021 Q2 2020 Q1 2021 be different than our actual selling prices or purchasing costs. Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 (units) (%) (units) (%) Selling
Slide 40: Sensitivities
SENSITIVITIES1 SHIPMENTS /CONSUMPTION (‘000 s.t, ‘000 mm Btu for Natural Gas) INCREASE OIBD IMPACT (in CAN$ M) 2 SELLING PRICE (Manufacturing & Converting) Linerboard, Eastern US 430 US$25/s.t. 14 North Corrugated medium, Eastern US 330 US$25/s.t. 11 America Converted products 780 US$25/s.t. 25 Tiss
Slide 41: investor@cascades.com
Ce Cascades investor@cascades.com