Cascades Inc. · TSX:CAS
Cascades — Investor Presentation (September 2023)
42 slides from Cascades's investor presentation, September 2023
Slide 1: Investor Presentation September 2023
1 Investor Presentation September 2023
Slide 2: Disclaimer: Forward-Looking Statement
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: Disclaimer: 2022-2024 Financial Information
DISCLAIMER: 2022-2024 Financial Information When taking into consideration all of the contributing factors discussed below, management expects sales, operating income and EBITDA (A) to increase from the year 2022 levels: • Annualization of selling price changes in 2022 and in the first quarter of 20
Slide 4: We care. We innovate. We create value.
We care. We innovate. We create value. Mission Vision To improve the well-being of To be a key contributor to people, communities and the our customers’ success by planet by providing sustainable leading the way for sustainable and innovative solutions that packaging, hygiene and create value. recov
Slide 5: Investment Thesis
INVESTMENT THESIS • 2022-2024 Strategic Plan1 • Modernized and well- positioned asset base • Strong sustainability track record • Bear Island 100% recycled lightweight containerboard mill (Virginia, US) • Agile & aligned go-to market approach (1) Please refer to “Disclaimer: 2022 – 2024 Financial In
Slide 6: Cascades: 10,000 employees, 500 products, 75 facilities
Cascades: 10,000 employees, 500 products, 75 facilities Québec Northeastern U.S. Ontario 6
Slide 7: Our Environmental Performance 2022
Our Environmental Performance 2022 80% of the fibres bought to manufacture our products are recycled 2.4X less energy consumed than industry average* 4.3X less water consumed than the industry average* 42% fewer GHG emissions (scope 1 & 2) than the industry average* 59% of the electricity we use is
Slide 8: Awards & Distinctions
Awards & Distinctions 20th most sustainable CDP Supplier Engagement company in the world Rating Leaderboard Recognized as Giga-Guru by Canada’s top 100 employers Walmart for GHG reduction 18th best corporate 12th year as the most sustainable citizen in Canada company according to Quebecers 8
Slide 9: 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 10: Q2 2023 Results
Q2 2023 Results (in millions of CAN$, except per share amounts) Q2 2023 Q2 2022 Q1 2023 Sales 1,168 1,119 1,134 Operating Income (loss) 64 32 (80) EBITDA (A)1 141 91 134 Margin (EBITDA (A)1/Sales) 12.1% 8.1% 11.8% Net earnings (loss) 22 10 (75) Adjusted net earnings 26 10 33 Net earnings (loss) per
Slide 11: Overview of Consolidated Profitability Drivers
Overview of Consolidated Profitability Drivers (in millions of CAN$) Consolidated EBITDA (A)1 Quarter-over-Quarter Year-over-Year Year-to-Date Variation Drivers Q2 2023 vs Q1 2023 Q2 2023 vs Q2 2022 6 months 2023 vs 2022 Pricing ($24) million $18 million $93 million Freight & Production Costs $1 mil
Slide 12: Recycled Fibre Costs – Index Prices
Recycled Fibre Costs – Index Prices ($ US/s.t.) Current OCC: (Sep-23) • Stable market with ongoing softer export activity and favourable seasonal generation • Good inventories at our mills, logistics continued to ease • Marginal upward index price adjustment in the quarter 1451 will support more s
Slide 13: Virgin Fibre Costs – Index List Prices
Virgin Fibre Costs – Index List Prices ($ US/tonne) VIRGIN PULP : Current • Sequential improvement with rapid price decreases, (Sep-23) and index prices also lower YoY • Continued lower demand from Asia, normalized logistics, weak European market, new production 1,270 NBSK capacity and highest inve
Slide 14: Capital Investments
Capital Investments (in property, plant & equipment, in millions of CAN dollars, excluding new leases, disposal of assets and accounts payable variation) Strategic investments have transformed our operational platform. 532 36 41 29 330 ~325 312 26 27 50 81 227 213 37 169 20 39 22 426 ~175 24 85 104
Slide 15: 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 June 30, 2023) Unsecured Senior Revolver Term loan Leases – notes Subsidiaries Subsidiaries Without recourse – Leases – Debts without debts G
Slide 16: Containerboard Packaging
Containerboard Packaging 2022 sales2: 2024 TARGETS4: 7 mills • Revenue: ~$2.6 B 19 converting sites $2.2 B • EBITDA (A)1 margin: 18% - 20% 14% 8% 19% 42% 22% 2022 2022 2022 sales sales sales 58% 86% 51% Recycled Linerboard Manufacturing - Canada Manufacturing - US Virgin Medium Converting - Canada C
Slide 17: Containerboard Packaging
Containerboard Packaging Customer-centric Modernized group operational firmly platform rooted incustomers providing its key markets, with a wide placing innovation and eco- range of innovative, high-performance responsibility packaging at the heart of its solutions business strategy Our Sustainable
Slide 18: Containerboard – Quarterly Performance
Containerboard – Quarterly Performance Quarterly EBITDA (A)1 (M CAN$) • Sequential Q2 shipments of converted products: Canada +5.5% (vs. market +2.7%); US +13.8% (vs. market +1.2%) • Year-over-year Q2 shipments of converted products: Canada -0.6% (vs. market -2.8%); US +9.6% (vs. market -7.9%) • Con
Slide 19: Containerboard - Market Landscape
Containerboard - Market Landscape N.A. Containerboard Expected Production1 N.A. Containerboard Market Share3 CAGR 2023 – 2027 +0.5% TOP 4 PLAYERS = 67% 4.9 5.1 5.4 5.5 5.7 5.3 4.6 37.4 37.6 38.1 Other 34.7 34.7 36.3 37.0 24% IP 30% 2021 2022 2023E 2024E 2025E 2026E 2027E Containerboard consumption (
Slide 20: Corrugated Boxes - Market Landscape
Corrugated Boxes - Market Landscape Agriculture, food & beverage and e-commerce sectors to Forecasted Box Shipment Growth1 account for 79% of market growth from now to 20272. 100% 3.3% 2.1% 1.4% 16.9 25% 54% 1.2% 9% 12% 9.2 -3.6% -4.1% 4.2 2.0 1.6 Total Agriculture, food Manufacturing E-Commerce Ret
Slide 21: Specialty Products
Specialty Products 21 2024 TARGETS4 19 operating 2022 Sales2: • Revenue: ~ $735 M facilities1 $654 M • EBITDA (A)3 margin: 17% - 19% 4% 15% 36% 34% 35% 2022 2022 2022 sales sales sales 34% 64% 66% 6% 6% Fresh proteins Industrial & flexible packaging Consumer packaging USA Canada Fruits & vegetables
Slide 22: Specialty Products
Specialty Products Customer-centric group firmly rooted in its key markets, placing innovation and eco-responsibility at the heart of its business strategy • Fresh proteins • Fruits & vegetables • Isothermal distribution • Egg packaging • Food services 22
Slide 23: Specialty Products – Quarterly Performance
Specialty Products – Quarterly Performance Quarterly EBITDA (A)1 (M CAN$) • Q2 2023 EBITDA (A)1 of $24 M, or 15% on a margin basis, was lower sequentially and stable year-over-year. • Cardboard: results decreased sequentially reflecting lower selling prices, higher raw material costs, and a less fav
Slide 24: Tissue Papers
Tissue Papers 2024 TARGETS4 2022 sales2: • Revenue: ~ $1.5 B 10 plants $1.4 B • EBITDA (A)3: $120 M - $140 M • Converted products sold: 59 M - 63 M cases Converting 40% Manufacturing Converting 48% capacity 51% capacity 49% capacity 52% by country1 by market1 by country1 60% USA Canada USA Canada Aw
Slide 25: Tissue Papers – More resilient. More agile. Less volatile.
Tissue Papers – More resilient. More agile. Less volatile. Equipped to be the conventional towel and tissue papers Private Label PARTNER OF CHOICE for distributors and retailers 25
Slide 26: Operating Platform Aligned with Major Population Areas
Operating Platform Aligned with Major Population Areas 26 2017 - 2021 • Significant investments in converting assets • Closure of underperforming plants • Well-located and larger plants • Acquisition of Orchids assets • Production efficiency initiatives 2022 – 2023 Population Density (People / km2)
Slide 27: Tissue Papers – Quarterly Performance
Tissue Papers – Quarterly Performance Quarterly EBITDA (A)1 (M CAN$) • Good demand for Retail tissue products (shipments +8% YoY, +2% QoQ), while demand levels for Away-from-Home tissue products improved sequentially but were below last year (shipments -6% YoY, +15% QoQ). • Prices of raw material co
Slide 28: Tissue Papers Industry
Tissue Papers Industry US Tissue Parent Roll Production & Capacity Utilization1 US Parent Roll Prices1 1,593 1,530 97% 1,514 92% 93% 1,428 9,891 1,266 1,251 9,485 1,120 1,156 9,402 2020 2021 2022 Recycled parent roll, average (US$/s.t.) Virgin parent roll, average (US$/s.t.) Total parent roll produc
Slide 29: North American Tissue Retailer Share by Country
North American Tissue Retailer Share by Country Top 5 CAN retailers make up 94% Top 10 U.S. retailers make up 84% of market tissue EQ1 sales of market tissue EQ1 sales Top Retailers (Bath & Towels) EQ Share Top Retailers (Bath & Towels) EQ Share Share Change (YoY) Share Change (YoY) 43.8 +1.4% 23.3
Slide 30: Where We Are Going
WHERE WE ARE GOING 30
Slide 31: Near-Term Factors
NEAR-TERM FACTORS vs Q2 2023 vs Q3 2022 • Containerboard: Sequential performance forecast to be stable, reflecting ramp-up of Bear Island, slightly higher average raw Q3 2023 material prices, lower selling prices and softer volume; Expect slightly softer YoY results with benefits of lower raw materi
Slide 32: 2024 Financial Targets
2024 Financial Targets2 Sales (M CAN$) Free Cash Flow3 ~9% - 10% ~5,000 8.5% 7.4% 7.2% 4,611 4,466 5.1% 4.7% 4,105 ~450 3,948 3,956 348 290 333 - 204 210 500 2019 2020 2021 2022 LTM Q2 2023 2024 Target 2019 2020 2021 2022 LTM Q2 2023 2024 Target Free Cash Flow (M CAD$) Free Cash Flow/Sales (%) EBITD
Slide 33: 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 Tissue Papers business profitability plan Ramp up the strategic Bear Island 100% recycled 2 and lightweight containerboard facility Our Top Explore opportunities to gr
Slide 34: Appendices
APPENDICES 34
Slide 35: Recovery & Recycling
Recovery & Recycling A natural extension of our operations, delivering financial and strategic value. MT/YR of secondary fibre & virgin of Cascades’ fibre requirements via 2.6 M pulp supply chain provided 25% our collection & processing facilities We create value by North American operations facilit
Slide 36: Recovery & Recycling: Protecting our Forests
Recovery & Recycling: Protecting our “Forests” Materials that are • Domestic competition is rising… OCC consumed from NA containerboard and recycled pulp mills integral to our products to grow by 3.7 M MT from 2020-2025 Mixed & • OCC represents 74% (60% in 2010) of recycled Newsprint, 7% fibre consu
Slide 37: Quarterly Financial Results & KPIs
Quarterly Financial Results & KPIs 2021 2022 2023 (In millions of CAN$, except per common share amounts, where noted) Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 YTD4 LTM5 Financial Results Sales 942 956 1,030 1,028 3,956 1,038 1,119 1,174 1,135 4,466 1,134 1,168 2,302 4,611 Operating income (loss) 44 2
Slide 38: Cash Flow Overview
Cash Flow Overview 2021 2022 2023 (In millions of CAN$, except per common share amounts) Q1 Q2 Q3 Q4 YEAR Q1 Q2 Q3 Q4 YEAR Q1 Q2 YTD4 LTM5 Cash flow from operations 82 87 58 20 247 19 81 60 100 260 89 117 206 366 Specific items1 4 2 12 31 49 7 — 2 3 12 1 5 6 11 Adjusted cash flow from operations2 86
Slide 39: Historical COGS and SG&A Overview
Historical COGS and SG&A Overview 2021 2022 2023 COST OF SALES (In millions of CAN$) Q1 Q2 Q3 Q4 YEAR Q1 Q2 Q3 Q4 YEAR Q1 Q2 Raw materials 265 312 379 382 1,338 359 393 440 395 1,587 365 396 Wages & benefits 167 162 161 172 662 171 176 171 180 698 193 194 Energy 47 44 49 51 191 59 59 65 60 243 63 58
Slide 40: Historical Reference Prices and Fibre Costs
Historical Reference Prices and Fibre Costs Q2 2023 Q2 2023 2021 2022 2023 vs. Q2 2022 vs. Q1 2023 These indexes should only be used as an indicator of trends, and they may be different than our actual selling prices or purchasing costs. Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Q1 Q2 (units) (%) (units) (%
Slide 41: Sensitivities
SHIPMENTS / OPERATING SENSITIVITIES1 CONSUMPTION (‘000 s.t, ‘000 mm Btu for Natural Gas) INCREASE INCOME IMPACT (Annually, CAN$ 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 42: Investor Relations Contact
www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514.282.2697 / investor@cascades.com