Cascades Inc. · TSX:CAS
Cascades — RBC Conference 2021
41 slides from Cascades's conference presentation, Dec 2, 2021
Slide 1: Investor Presentation – RBC Conference
Investor Presentation RBC Conference December 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 and 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: Our Business - Products, Brands, Markets
OUR BUSINESS - PRODUCTS, BRANDS, MARKETS PACKAGING PRODUCTS BRANDS END MARKETS SOLUTIONS ROLLS 66% of LTM Q3/21 Sales • LINER (APPROX. % OF PACKAGING SALES) • MEDIUM • URB Converters 41% CONVERTED PRODUCTS Food & Beverage 33% • CORRUGATED BOXES Industrial 9% • CONSUMER PRODUCTS PACKAGING • INDUSTRIA
Slide 6: Sustainability Action Plan: 2021-2025
SUSTAINABILITY ACTION PLAN: 2021- 2025 → GHG reduction targets approved by the Science Based Targets initiative (SBTi) 6
Slide 7: 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 8: Financial Results
FINANCIAL RESULTS 8
Slide 9: 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 M. The transaction closed October 26th, 2021, generating proceeds of $450 M net of transaction fees. 2
Slide 10: LTM Q3 2021 Results
(LTM Q3 2021, except where specified) SALES1 Sales $3,958 M Adj. OIBD3 & Margin $466 M / 11.8% 34% LTM 13% Adj. CF from operations $358 M 11% Adj. Free CF $103 M 75% 52% Q3 2021 Adj. Free CF per share $1.02 ADJ. OIBD1,3 Net debt (at 9/30/21) $1.76 B Net debt/Adj. OIBD3 (at 9/30/21) 3.8x Results2 14%
Slide 11: Raw Material — Index Prices
Raw material — Index prices Recycled Fibre Prices ($US/s.t.) Current2 Recovered Paper Prices Q3 Q3 vs Q3 vs (Nov-21) 2021 Q3/20 Q2/21 250 225 █ WHITE GRADES - Basket of products 200 163 37% 30% 184 (Northeast avg)1 175 150 █ BROWN GRADES - OCC No. 11 125 170 162 179% 59% 100 (Northeast average) 75 5
Slide 12: Quarterly Financial Results
In millions of CAN$ In millions of CAN$ Quarterly 133 139 73 122 104 107 98 49 48 73 42 Financial 54 29 32 44 22 23 8 3 (1) Results Q3 2020 Q4 2020 Operating Income Q1 2021 Q2 2021 Adjusted OIBD Q3 2021 Q3 2020 Net Earnings Q4 2020 Q1 2021 Q2 2021 Adjusted Net Earnings (Loss) Q3 2021 (In millions of
Slide 13: Quarterly Segmented Operating Income
QUARTERLY Containerboard (millions of CAN$/%) SEGMENTED 22.0% 21.5% 19.8% 20.1% 122 18.5% 110 108 OPERATING INCOME 100 100 94 71 65 64 58 (LOSS), ADJUSTED OIBD1 & MARGIN Q3 2020 Q4 2020 Operating Income Q1 2021 Adj. OIBD Q2 2021 Q3 2021 Adj. OIBD Margin Specialty Products (millions of CAN$/%) Tissue
Slide 14: Quarterly Cash Flows
131137 Quarterly 84 87 82 86 87 89 78 70 35 Cash 58 23 (4) Flows (12) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 CF from operations Adj. CF from operations Adj. Free Cash Flow Generated (Used) In millions of CAN$ In millions of CAN$ 20195 20205 2021 (In millions
Slide 15: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / Adjusted OIBD1,3,4 Interest Coverage Ratio2,3,4 5.0x 4.6x 4.7x 6.7x 4.0x 3.8x 3.8x 5.8x 6.0x 3.6x 3.5x 4.7x 4.6x 5.2x 3.25x 4.3x 2.5x 3.0x 3.4x 3.4x 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q3 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 16: Capital Investments
CAPITAL INVESTMENTS1 2021F: $275 M - $300 M1 • Includes ~ CAN$155 M for Bear Island • Replaced older assets with MODERN equipment 2022F: ~ $400 M1 • Includes ~ CAN$260 M for Bear Island • Invested in ORGANIC growth • OPTIMIZED geographic footprint 312 27 • Increased INTEGRATION rate 81 227 • Discipl
Slide 17: Near Term Factors
• North American operations: continued benefits • Containerboard: QoQ performance to reflect Near from margin improvement initiatives YoY and QoQ return to normalized production levels at partially offsetting costs inflation. Niagara Falls complex, good demand and • Raw material, logistics and produ
Slide 18: Business Segments & Activities
BUSINESS SEGMENTS & ACTIVITIES 18
Slide 19: Well Positioned Asset Base
WELL POSITIONED ASSET BASE Québec Ontario Northeastern U.S. 19
Slide 20: Recovery Activities
Groundwood Recovery Pulp recycled fibre (0.1 M st) Brown Activities recycled fibre (0.2 M st) White A leading paper collector recycled fibre in Canada (0.4 M st) (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 21: 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 21
Slide 22: Containerboard
Containerboard 6th largest containerboard producer in N.A. (CAN $ M) 600 15% 2,007 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% 20.5% 85% 410 412 1,500 403 400 Recycled Virgin Linerboard Medium 381 328 321 15.0% 309 300 1,000 247 200 164 Manufacturing
Slide 23: Containerboard — Bear Island
Containerboard — Bear Island TOTAL COST: US $400 M ≤ 2020 2021 2022 2023 2024 2025 START DATE: 12/2022 PROJECT COSTS (US$M) $601 $115 $200 $25 - - PRODUCTION RAMP UP - - - 75% 80% 90% ANNUAL PRODUCTION (‘000 s.t.) - - - ~ 280,000 ~ 375,000 ~ 420,000 OIBD (US$M) ~ $15 - $30 ~$35 - $50 ~ $55 - $65 202
Slide 24: 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% 51.3 50.5 49.5 Visy Pulp & 47.9 Paper Capacity 44.9 46.1 4% Market 43.2 94.4% 94.4% 93.1% Cascades 4
Slide 25: Containerboard — Industry
Containerboard — Industry • Gross profit expected to average US$705/s.t. for kraft liner and US$628/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 26: Specialty Products
Specialty Comprehensive Packaging Solutions Provider Focused on Strategic Scalable Markets Products3 (CAN $ M) 600 520 100 90 492 500 473 80 13.1% 12.7% 68 70 400 358 11.2% 339 60 60 55 54 Consumer Products Industrial 300 50 Packaging2 Packaging 10.0% 9.2% 42 40 200 34 36 33 30 59% 41% 24 24 20 of 2
Slide 27: 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 1,314 1,268 150 1,200 7.4% 5.7% 5.6% 100 94 86 72 73 1.3% 50 800 28 17 17 6 0 Retail Away-from- Parent -50 Ti
Slide 28: 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 29: Tissue Papers – Market
TISSUE PAPERS – MARKET • Covid-19 pandemic has resulted in important fluctuations in demand, which has led to producers temporarily adjusting production levels Average US Monthly Parent Roll Capacity & Production1 US Tissue Converted Product Shipments1 (‘000 s.t.) (‘000 s.t.) 880 1,000 860 840 800 8
Slide 30: You see Cascades, We see a refocused company
You see Cascades We see a refocused company 30
Slide 31: 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 32: 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 33: 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 33
Slide 34: 2011-2020 Refocused & Optimized
2011-2020 REFOCUSED & OPTIMIZED2 SALES (in 000’s CAN$) LEVERAGE RATIO 7.0x $5,000 5,116 5.8x 4,996 6.0x 5.0x 5.0x 4.6x 4.7x $4,500 4,649 4.0x 3.8x 4.0x 3.6x 3.5x 4,321 3.3x $4,000 3.0x 2.5x 3,953 4,001 3,849 3,885 3,760 2.0x $3,500 3,645 REFOCUSED OPTIMIZED 1.0x REFOCUSED OPTIMIZED $3,000 0.0x 2011
Slide 35: Annual Historical Performance
ANNUAL HISTORICAL PERFORMANCE2 SALES (M CAN$) SHIPMENTS (‘000 s.t.) 593 625 629 645 561 1,268 1,352 1,509 1,615 1,314 703 659 520 492 473 1,401 1,475 1,477 1,544 1,552 1,652 1,840 1,827 1,918 2,007 2017 2018 2019 2020 LTM Q3 2021 2017 2018 2019 2020 LTM Q3 2021 Containerboard Specialty Products Tiss
Slide 36: Appendices
APPENDICES 36
Slide 37: 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 38: 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 39: Select Reference Prices & Fibre Costs
SELECT REFERENCE PRICES & FIBRE COSTS Q3 2021 vs Q3 2021 vs These indexes should only be used as an indicator of trends and they 2019 2020 2021 Q3 2020 Q2 2021 may be different than our actual selling prices or purchasing costs. Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 (units) (%) (units) (%) Sell
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