Cascades Inc. · TSX:CAS
Cascades — Q1 2020 Earnings Presentation
35 slides from Cascades's earnings presentation, May 7, 2020
Slide 1: Q1 2020 Financial Results
Q1 2020 FINANCIAL RESULTS May 7, 2020
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 Response - COVID-19
OUR RESPONSE - COVID-19 Employees & Operations Customers & Suppliers Community All Cascades operations considered Ongoing communication with customers Working closely with partner companies essential to ensure product fulfillment, continuity in the production of over 1 million of delivery and early
Slide 4: Summary of Quarterly Financial Results
SUMMARY OF QUARTERLY FINANCIAL RESULTS2 156 161 152 161 135 31 43 29 39 108 90 24 13 26 28 22 72 82 (26) (1) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 1 Operating Income (loss) Adjusted OIBD Net Earnings (loss) Adjusted Net Earnings 1 Figures above in millions o
Slide 5: Historical Segmented Quarterly Operating Income (Loss) & Adjusted OIBD
HISTORICAL SEGMENTED QUARTERLY OPERATING INCOME (LOSS) & ADJUSTED OIBD1,2 Containerboard (millions of CAN$) Boxboard Europe2 (millions of CAN$) 113 118 29 30 30 25 24 104 106 18 19 20 99 14 91 84 84 69 74 (6) Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Operating I
Slide 6: Historical Segmented Quarterly Shipments
HISTORICAL SEGMENTED QUARTERLY SHIPMENTS Containerboard ('000 s.t. and % capacity utilization1) Boxboard Europe ('000 s.t. and % capacity utilization1) 351 377 374 363 365 333 331 101% 342 98% 321 96% 95% 94% 91% 92% 93% 305 88% 88% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q1 2019 Q2 2019 Q3 2019 Q4
Slide 7: Raw Material Costs - Index List Prices
RAW MATERIAL COSTS - INDEX LIST PRICES ($ US/t.c.) Recycled Fibre Prices Current ($ US/t.m.) Virgin Pulp Prices Current (May-20) (Apr-20) 250 1,500 225 1,400 200 194 1,300 175 150 1,200 1,150 125 1,100 115 100 1,000 75 900 890 50 25 800 0 700 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 F
Slide 8: Segmented Review
SEGMENTED REVIEW = 9 O18Me- 8
Slide 9: Packaging Products / Containerboard
PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Comments on sequential performance Q1 2020 Q4 2019 Q1 2019 è Shipments increased by 2% sequentially. This was driven by a 7% increase in manufacturing Shipments ('000 s.t.) shipments that reflect higher demand and production levels. The integrat
Slide 10: Tissue Papers
TISSUE PAPERS Results Change vs. Comments on sequential performance Q1 2020 Q4 2019 Q1 2019 è The 8% sequential increase in shipments was driven in large part by Covid-19 related Shipments ('000 s.t.) demand. Specifically, shipments of converted products increased 7%, while shipments 181 8% 24% of p
Slide 11: Packaging Products / Boxboard Europe
PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Q1 2020 Q4 2019 Q1 2019 Shipments ('000 s.t.) è Shipments of virgin boxboard increased by 9,000 s.t., or 26%, in the first quarter of 2020 compared to the prior quarter, while shipments of recycled boxboard in
Slide 12: Packaging Products / Specialty Products
PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Q1 2020 Q4 2019 Q1 2019 è The sequential sales increase reflects increases in most business sub-segments. This was Sales (M$) most notable in Industrial Products following a slight slowdown in this sub-segm
Slide 13: Segmented YoY Operating Income (Loss) Waterfalls
SEGMENTED YoY OPERATING INCOME (LOSS) WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 160 16 4 60 4 19 17 120 27 104 99 (28) 84 (17) 40 11 29 (4) 30 (11) 74 80 (27) 18 20 (7) 3 (16) 20 1 40 0 0 Q1 2019 Depr. & Q1 2019 Volume Raw Energy Other prod. Price Q1 2020 Depr.
Slide 14: Segmented Sequential Operating Income (Loss) Waterfalls
SEGMENTED SEQUENTIAL OPERATING INCOME (LOSS) WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) 5 3 160 45 9 30 (11) 106 4 30 24 20 120 29 99 (28) 74 14 (11) 1 69 15 80 (4) (7) 8 3 0 40 16 -15 (6) 0 -30 Q4 2019 Depr. & Q4 2019 Volume Other Price Q1 2020 Depr. & Q1 2020 Q
Slide 15: Financial Review
FINANCIAL REVIEW eo ke SE fe te Oe 7 ba
Slide 16: Key Performance Indicators (KPIs)
KEY PERFORMANCE INDICATORS (KPIs) Total Shipments1 ('000 s.t.) Capacity Utilization Rate1-2 (manufacturing only) 906 97% 859 849 93% 93% 837 91% 821 90% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 LTM Return on Assets LTM Working Capital (% of LTM Sales) 12.3% 10.
Slide 17: Year Over Year Sales Reconciliation
YEAR OVER YEAR SALES RECONCILIATION (M CAN$) +7% 1,450 1,400 146 9 1,350 (14) (19) 1,313 1,300 (39) 1,250 1,230 1,200 Business Sales Other Recovery & closure and Sales (M CAN$) Q1-2019 Volume Variances Recycling disposal Price & Mix Q1-2020 Containerboard 441 41 3 — — (27) 458 Boxboard Europe 279 15
Slide 18: Sequential Sales Reconciliation
SEQUENTIAL SALES RECONCILIATION (M CAN$) +7% 1,400 1,350 18 83 1,313 1,300 (7) (8) 1,250 1,227 1,200 1,150 1,100 Sales Other Sales (M CAN$) Q4-2019 Volume F/X CAN $ Price & Mix variances Q1-2020 Containerboard 451 10 4 (7) — 458 Boxboard Europe 243 36 4 (11) — 272 Specialty Products 105 4 2 3 (1) 11
Slide 19: Year-Over-Year Operating Income Reconciliation
YEAR-OVER-YEAR OPERATING INCOME RECONCILIATION + Lower recycled fibres and virgin pulp prices + Higher volume - Covid-19 demand + Lower costs of brown fibre grades + Higher average selling price / mix of products sold + Higher volume + Lower energy costs - Lower selling prices - Production costs (mi
Slide 20: Sequential Operating Income (Loss) Reconciliation
SEQUENTIAL OPERATING INCOME (LOSS) RECONCILIATION + Higher volume - Covid-19 demand + Higher volume + Higher average selling prices and mix - Higher raw material and production costs - Mix of raw material (+ external rolls) - Lower average selling prices Includes $10 million (M CAN$) expected credit
Slide 21: Quarterly Year-Over-Year Adjusted EPS Variance
QUARTERLY YEAR-OVER-YEAR ADJUSTED EPS VARIANCE1,2 0.60 0.10 0.01 0.01 0.42 0.40 0.21 (0.02) $ cents 0.26 (0.03) 0.24 0.20 (0.18) 0.14 (0.12) 0.00 EPS reported Specific 2 Adjusted EPS OIBD Depreciation Financing Share of Non- Income 2 Adjusted EPS Specific EPS reported Q1-2019 items Q1-2019 & expense
Slide 22: Quarterly Sequential Adjusted EPS Variance
QUARTERLY SEQUENTIAL ADJUSTED EPS VARIANCE1,2 0.50 0.05 0.06 0.42 0.40 0.07 0.57 0.30 (0.04) (0.02) 0.30 0.24 0.20 (0.18) 0.10 $ cents 0.00 -0.10 -0.20 -0.30 (0.27) -0.40 EPS reported Specific 2 Adjusted EPS OIBD Depreciation Financing Non- Income 2 Adjusted EPS Specific EPS reported Q4-2019 items Q
Slide 23: Q1-20 Adjusted OIBD to Operating Income Reconciliation
Q1-20 ADJUSTED OIBD TO OPERATING INCOME RECONCILIATION (M CAN$) 200 161 150 90 1 90 100 50 (71) (1) 0 Adjusted Depr. & Adjusted Loss on acq. Unrealized loss Operating 1 1 OIBD Amort. Operating and others on financial Income Income instruments Container- Boxboard Specialty Tissue Corporate (M CAN$) b
Slide 24: Net Earnings - IFRS vs Adjusted
NET EARNINGS - IFRS VS ADJUSTED NET EARNINGS NET EARNINGS (LOSS) PER SHARE1 (in millions of Canadian dollars, except amount per share) Q1-2020 Q1-2020 As per IFRS 22 $ 0.24 Specific items: Loss on acquisitions, disposals and others 1 $ 0.01 Unrealized gain on financial instruments (1) $ (0.01) Forei
Slide 25: Cash Flow Overview
CASH FLOW OVERVIEW 153 153 52 38 59 124 125 1 16 104 108 107 82 85 91 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 CF from oper. Adj. CF from oper. 3 Adjusted Free Cash Flow 3 Figures above in millions of CAN$ Figures above in millions of CAN$ 2018 2019 2020 (In mi
Slide 26: Net Debt Reconciliation - Q1 2020
NET DEBT1 RECONCILIATION - Q1 2020 (M CAN$) 2,250 140 2,212 2,200 2,150 2,100 121 2,050 2,000 1,963 73 1,950 1,900 34 12 13 1,850 9 1,800 1,750 (153) 1,700 Net debt as at Cash flow Right-of-use assets Dividends paid & Investments Changes in Payments for Payment of F/X CAN$ Net debt as at December 31
Slide 27: Consolidated Financial Ratios & Debt Maturities
CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM Adjusted OIBD1,3 Interest Coverage Ratio2,3 5.0x 4.6x 4.7x 6.0x 6.1x 5.8x 4.0x 3.8x 3.6x 4.7x 4.6x 3.5x 3.5x 4.3x 3.25x 3.4x 3.4x 3.0x 2012 2013 2014 2015 2016 2017 2018 2019Q1 2020 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020 Net Deb
Slide 28: Capital Investments
CAPITAL INVESTMENTS (in millions of Canadian dollars, including capitalization of IT projects, excluding value of leases) Excludes potential Bear 360 Island investments 40 81 274 Revised 2020 CAPEX: 47 ± $175-$200 M1 218 20 46 35 104 30 61 18 80 22 184 27 39 20 66 25 62 30 2017 2018 2019 2020 Contai
Slide 29: Concluding Remarks
CONCLUDING REMARKS 29
Slide 30: Key Near-Term Market Considerations - COVID-19
KEY NEAR-TERM MARKET CONSIDERATIONS - COVID-19 APPROXIMATE % OF LTM Q1 2020 PACKAGING SALES BY NEAR-TERM END CUSTOMER INDUSTRY INDUSTRY POTENTIAL RATIONALE AND ASSUMPTIONS IMPACT Stable demand for Cascades' non-integrated liner & medium tonnage that Paper is sold to external third party converters,
Slide 31: Near Term Factors
NEAR TERM FACTORS • Tissue: higher volume and average selling price • Raw material: higher sequential prices expected to expected to help support YoY results negatively impact all segments • Containerboard: expect slight volume increase YoY Ã • Boxboard Europe: volume & raw material favorable YoY; P
Slide 32: Appendix
APPENDIX —s Ne | a
Slide 33: Selected Reference Prices
SELECTED REFERENCE PRICES Current (US$/s.t.) Containerboard - Selected Products Current (Euro€/s.t.) Boxboard Europe - Selected Products (Apr-20) 800 (Apr-20) 1,200 1,100 1,096 700 715 1,000 615 900 600 800 500 700 653 600 400 500 Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Aug 18 Nov 18 Feb 19 May 19
Slide 34: Selected Reference Prices and Fibre Costs
SELECTED REFERENCE PRICES AND FIBRE COSTS Q1 2020 vs Q1 2020 vs 2018 2019 2020 Q1 2019 Q4 2019 These indexes should only be used as an indicator of trends and they may be different than our actual selling prices or purchasing costs. Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 (units) (%) (units) (%) Sellin
Slide 35: For More Information
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 / investor@cascades.com 35