dopaco canada

CASCADES
Review of financial
results Q1 2011
May 12, 2011
DISCLAIMER
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 number of risks, uncertainties and assumptions that may cause
actual results to differ materially from those projected, including, but not limited to, the effect of general economic
conditions, decreases in demand for the Company’s products, the prices and availability of raw materials,
changes in the relative values of certain currencies, fluctuations in selling prices and adverse changes in general
market and industry conditions. This presentation also includes price indices as well as variance and sensitivity
analyses that are intended to provide the reader with a better understanding of the trends related to our business
activities. These items are based on the best estimates available to the Company.
The financial information included in this presentation also contains certain data that are not measures of
performance under IFRS (“non-IFRS measures”). For example, the Company uses earnings before interest,
taxes, depreciation and amortization (EBITDA) because it is the measure used by management to assess the
operating and financial performance of the Company’s operating segments. Such information is reconciled to the
most directly comparable financial measures, as set forth in the “Supplemental Information on Non-IFRS
Measures” section of our most recent quarterly report or annual report.
Specific items are defined as items such as charges for impairment of assets, for facility or machine closures,
debt restructuring charges, gains or losses on sales of business units, unrealized gains or losses on derivative
financial instruments that do not qualify for hedge accounting, foreign exchange gains or losses on long-term
debt and other significant items of an unusual or non-recurring nature.
All amounts in this presentation are in Canadian dollars unless otherwise indicated.
2
OPENING REMARKS
3
QUARTERLY HIGHLIGHTS
• Financial results reflect the adoption of IFRS and divestiture of Dopaco (reclassified as
discontinued operations).
• As expected, results reflect the unfavorable seasonality as well as the significant and
rapid inflation of input costs and the Canadian dollar over the past 6 months.
• Divestiture of Dopaco, Cascades’ paper cup and carton converting business for the
quick-service restaurant and foodservice industries, for US$400 million on May 2, 2011.
• Increased ownership of Reno De Medici to 41%.
• Start-up of a completely rebuilt tissue machine to produce Premium and Ultra quality
tissue papers with a lower environmental footprint.
• Divestiture of the Avot-Vallée, France, white-top linerboard mill.
• Announcement of the consolidation of corrugated box operations in New England.
4
SUMMARY OF FINANCIAL RESULTS
(In millions of CAN$, except amount per share)
Financial results
Sales
Excluding specific items
EBITDA
Net earnings (loss)
Net earnings (loss) per share
Cash flow from operations (adjusted)
EBITDA
(M CAN$)
2009
(Canadian
GAAP)
Year
Q1
Q2
Q3
Q4
Year
Q1
3,359
759
808
832
783
3,182
774
408
110
1.13
281
59
4
0.04
43
85
26
0.27
41
94
33
0.35
72
72
17
0.17
41
310
80
0.83
197
37
1
0.01
15
(% of sales)
100
80
10.0%
80
9.0%
60
7.0%
40
5.0%
20
3.0%
0
1.0%
6.0%
4.0%
Q2 2010
Q3 2010
Q4 2010
Q1 2011
(% of sales)
11.0%
40
Q1 2010
Cash flow from operations (adjusted)
100
8.0%
0
(M CAN$)
2011 (IFRS)
12.0%
60
20
2010 (IFRS)
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
As anticipated, profitability came down in Q1 due challenging business conditions
and operational difficulties in a few units.
EBITDA, net earnings and cash flow from operations (adjusted) excluding specific items.
5
BUSINESS CONDITIONS
Selling
prices
Cascades North American manufacturing selling price
and raw material cost indices (US$)
Raw material
costs
750
1 200
650
550
1 100
450
350
1 000
250
Selling prices index (US$)
US$/CAN$
Natural Gas Henry Hub - US$/mmBtu
Capacity utilization rate (Manufacturing)
Total shipments ('000 s.t.)
Q1
$0.96
$5.30
92%
683
Q1 2011
Q4 2010
Q3 2010
Q2 2010
Raw materials index (US$);
2009
(CAD GAAP)
Year
$0.88
$3.99
86%
2,903
Q1 2010
Q4 2009
Q3 2009
Q2 2009
Q1 2009
Q4 2008
Q3 2008
Q2 2008
150
Q1 2008
900
Q2
$0.97
$4.09
94%
688
2010
(IFRS)
Q3
$0.96
$4.38
91%
693
Q4
$0.99
$3.80
87%
659
Year
$0.97
$4.39
91%
2,723
2011
(IFRS)
Q1
$1.01
$4.10
90%
657
As expected, business conditions were less favourable in Q1.
See notes page 35. Source: Bloomberg.
6
RESULTS TO IMPROVE
• Demand and backlogs remain healthy.
• Selling price increases being implemented or announced in
boxboard, specialty products and tissue paper segments.
• Operational action plans underway aimed at:
• reducing fixed and SG&A costs;
• optimizing production and efficiencies
• proactively managing cash flow.
Recent initiatives
Closure of
Leominster box plant
• At strategic level, question, analyze and make the difficult
decisions to:
• adjust our portfolio of assets;
• improve our competitiveness.
Sale of Dopaco and
Avot-Vallée
Cascades will be able to rebound in the coming quarters,
as we have historically done so in the past.
7
DOPACO TRANSACTION HIGHLIGHTS
1. Cash consideration of US$400 million
• Purchase price of 7.0 times 2010 adjusted EBITDA (in US$) and 7.7 times
2008-2010 EBITDA (in US$) average
• Estimated proceeds of US$337 million net of cash tax payment and
transaction fees
• Net proceeds to be used to pay down debt
• Subject to customary working capital and net debt adjustments
2. Cascades to continue to provide boxboard to Dopaco through a five year
supply agreement
3. Conclusion of the transaction on May 2, 2011
EBITDA excluding specific items.
8
DOPACO TRANSACTION RATIONALE
1. Strengthened financial position and improved financial flexibility
• Estimated net debt reduction of US$337 million
• Net debt/EBITDA ratio down from 4.2x to 3.9x
• Debt/capitalization ratio down from 58.4% to 49.6%
• Future Capex needs significantly reduced
2. Unlocked value for shareholders
• Attractive EBITDA multiples
• Improving Cascades’ financial risk profile
3. Strategic decision
• Focus going forward on core tissue, packaging, and recycling activities
4. Limited integration with our boxboard manufacturing operations
• 46,000 tons shipped to Dopaco in 2010 on total shipments of 365,000 tons
• Stand-alone management team, very limited synergies with Cascades
Assumes US$337 million and CAN$ 321 million of net proceeds used to pay down debt (exchange rate of 1.0491 US$/CAN$). EBITDA excluding specific items.
9
FINANCIAL REVIEW
10
Q1 2011 IFRS AND PREVIOUS CAN GAAP
RECONCILIATION
(in millions of Canadian dollars)
As reported in 2010 (previous Can GAAP)
Less: IFRS adjustments:
Joint ventures
Depreciation and amortization
Others
Including IFRS adjustment
Less: discontinued operations
As reported (IFRS)
(in millions of Canadian dollars)
Sales
Q1 2010
Q4 2010
Operating income
Q1 2010
Q4 2010
EBITDA
Q1 2010
Q4 2010
942
991
23
45
78
98
(82)
(98)
(10)
893
(110)
783
(6)
4
1
44
(10)
34
(8)
860
(101)
759
(4)
5
2
26
(7)
19
2
72
(13)
59
88
(16)
72
Sales
Q1 2011
EBITDA
Q1 2011
As reported (IFRS)
Add back:
Discontinued operations
Joint ventures
774
37
95
99
11
9
Including discontinued operations and joint ventures
968
57
In Q1 2011, Cascades still had $20 M in EBITDA contribution from JVs and discontinued operations.
Sales of discontinued operations and joint ventures are net of intercompany. Operating income and EBITDA excluding specific items.
11
Q1 2010- Q1 2011 EBITDA VARIANCE ANALYSIS
(M CAN$)
120
43
100
80
60
1
78
(17)
40
2
3
3
16
59
9
(10)
37
57
11
42
20
0
Q1 2010
Discontin.
Joint
(previous
operations
ventures
Canadian
(Dopaco)
GAAP)
(M CAN$)
Containerboard
28
Boxboard
23
(13)
(5)
Specialty products
18
(3)
Tissue papers
19
Corporate
(10)
Total
78
(13)
(8)
Others
1
2
1
(2)
2
Q1 2010
(IFRS)
29
7
16
19
(12)
59
Selling
prices & Shipments
mix
(2)
Energy
costs
18
14
6
5
(1)
2
(1)
(2)
(1)
1
43
(1)
(3)
Variation
of the
CAN$
Other
costs
(3)
(1)
(2)
(2)
5
(3)
(6)
(5)
(4)
(4)
3
(16)
Raw
material
costs &
mix
(16)
(8)
(7)
(11)
(42)
Discontin.
Joint
Q1 2011
operations
ventures
(IFRS)
(Dopaco)
19
5
7
10
(4)
37
11
7
2
11
9
Q1 2011
including
Dopaco
and JVs
19
23
9
10
(4)
57
Price improvement in packaging offset raw material cost increase.
EBITDA excluding specific items.
12
Q4 2010- Q1 2011 EBITDA VARIANCE ANALYSIS
(M CAN$)
100
80
98
(17)
60
72
(10)
2
3
57
9
5
11
7
40
37
8
10
20
0
Q4 2010
Discontin.
(previous
Joint
operations
Canadian
ventures
(Dopaco)
GAAP)
(M CAN$)
Containerboard
37
Boxboard
24
(16)
(7)
Specialty products
16
(3)
Tissue papers
23
Corporate
(2)
Total
98
(16)
(10)
Others
3
(1)
(2)
Selling
Q4 2010
Shipments prices &
(IFRS)
mix
40
1
12
23
(4)
72
Variation
of the
CAN$
(1)
Energy
costs
Other
costs
(5)
2
1
(6)
(8)
3
(2)
(3)
(5)
2
(1)
1
(2)
(2)
(1)
(3)
(1)
(2)
(2)
(3)
(5)
(7)
Raw
material
costs &
mix
(9)
(1)
(10)
Discontin.
Q1 2011
Joint
operations
(IFRS)
ventures
(Dopaco)
19
5
7
10
(4)
37
11
7
2
11
9
Q1 2011
including
Dopaco
and JVs
19
23
9
10
(4)
57
Also include the indirect impact of F/X (Canadian sales
in CAN$ but based on US$ reference price)
The significant increase of input costs (with some lag from Q4 2010) and the CAN$ led to weaker results in Q1.
Also, Q4 2010 EBITDA was positively impacted by 6M$ in “one-time” items.
EBITDA excluding specific items.
13
SEGMENTED EBITDA (IFRS)
(M CAN$)
(% of sales)
Boxboard (excluding Reno de Medici)
15
10.0%
60
8.0%
50
11
7
10
6.0%
5
4
4.0%
5
2.0%
0.0%
0
Q2 2010
(M CAN$)
20
Q3 2010
Q4 2010
Q1 2011
17
10.0%
18
15
8.0%
12
10
7
4.0%
0
2.0%
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
15.0%
13.0%
29
11.0%
19
9.0%
10
7.0%
0
5.0%
Q2 2010
(M CAN$)
30
Q3 2010
Q4 2010
Q1 2011
(% of sales)
Tissue papers
24
24
12.0%
23
19
9.0%
20
6.0%
5
17.0%
40
37
Q1 2010
(% of sales)
Specialty products
16
19.0%
50
40
30
(% of sales)
Containerboard
20
1
Q1 2010
(M CAN$)
10
10
6.0%
0
3.0%
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
North American boxboard benefited from improved volumes and pricing while tissue and containerboard were hit hard
by the cost inflation and CAN$. Also, these 2 segments benefited from “one-time” items in Q4 2010 (for 6 M$).
EBITDA excluding specific items.
14
KEY PERFORMANCE INDICATORS (KPIs)
Total Shipments
('000 s.t.)
Capacity utilization rate
725
96%
700
683
94%
693
688
92%
675
659
657
650
94%
92%
91%
90%
90%
87%
88%
86%
625
84%
600
82%
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q1 2010
11.5%
11.2%
11.0%
Q3 2010
Q4 2010
Q1 2011
Working capital (% of sales)
Return on assets
12.0%
Q2 2010
18.0%
11.0%
16.3%
10.6%
9.9%
10.0%
16.1%
16.0%
14.7%
14.6%
15.0%
14.0%
9.0%
8.0%
12.0%
7.0%
10.0%
6.0%
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Excluding the sale of the Avot-Vallée mill, shipments would have been up 2% (15k s.t.), mostly due to boxboard.
Working capital continues to improve.
See notes page 35.
15
Q1 2011 EBITDA TO OP. INCOME RECONCILIATION
(M CAN$)
40
37
30
20
10
1
0
(36)
(2)
(3)
(1)
-10
EBITDA excl.
spec. items
Depreciation &
amortization
(M CAN$)
Operating income
Specific items:
Loss (gain) on disposal and others
Impairment loss
Closure and restructuring costs
Unrealized loss on financial instruments
Total specific items
EBIT excluding specific items
Depreciation
EBITDA excluding specific items
(1)
(6)
EBIT excl. spec. Unrealized loss
Closure and
Loss on disposal Impairment loss Operating income
items
on financial instr. restructuring costs
and others
Boxboard
5
Containerboard
(2)
Specialty
Products
1
Tissue
Papers
-
Corporate
Activities
(6)
Discontinued
Operations
(4)
3
1
4
9
7
16
1
1
3
1
6
4
15
19
1
6
7
10
10
(6)
2
(4)
(3)
(3)
(7)
(4)
(11)
Total
(6)
1
1
3
2
7
1
36
37
16
Q1 2011 NET EARNINGS RECONCILIATION
(M CAN$)
2
1
0
-2
-4
(5)
-6
1
(3)
-8
2
(8)
(2)
-10
(1)
-12
(1)
Net earnings
excluding
spec. Items
F/X loss on
Closure and
long-term debt restructuring
costs
Unreal. Loss
on fin.
Instruments
Impairment
loss
Loss on
disposal and
others
Tax effect on
specific items
Included in
disc.oper.
Net earnings
17
CASH FLOW OVERVIEW
(in millions of CAN$)
Q1
Q2
2010
Q3
Q4
Year
2011
Q1
Cash flow from operations (including discontinued operations)
Working capital variation
Cash flow provided by operations
51
(18)
33
54
(40)
14
84
(11)
73
54
44
98
243
(25)
218
22
(20)
2
(33)
(6)
(6)
(0.06)$
(23)
(6)
(15)
(0.16)$
(24)
(4)
45
0.47 $
(50)
(4)
44
0.45 $
(130)
(20)
68
0.70 $
(37)
(5)
(40)
(0.41)$
Capital expenditures & other assets1
Dividend & Share Buyback
Free cash flow
Free cash flow per share
(M CAN$)
100
75
50
Free cash flow
16%
25
-50
-75
16%
44
12%
11%
0
-25
45
20%
(6)
(15)
9%
10%
8%
(40)5%
-100
Q1 2010 Q2 2009 Q3 2010 Q4 2010 Q1 2011
Free cash flow
Free cash flow yield
Cash flow provided by operations
(M CAN$)
150
120
98
90
60
30
73
33
14
2
0
4%
(30)
0%
(60)
Q1 2010
Q2 2009
Q3 2010
Q4 2010
Q1 2011
Free cash flow pressured by lower profitability and seasonal negative W/C variation.
Rebound expected in coming quarters.
Free cash flow yield is defined as LTM FCF per share / share price end of period. 1 Excluding increase in investments.
18
NET DEBT RECONCILIATION
(M CAN$)
1,600
1,500
1,397
35
1,400
10
27
5
(1)
1,445
(28)
1,300
1,200
1,124
1,100
321
1,000
Net debt
Dec. 31,
2010
CAPEX
Other
Dividend,
F/X
Var. of Cash flow Net debt Sale of Net debt
assets & bbacks change & working from oper. March 31, Dopaco March 31,
investments
others
capital & disc. Op. 2011
2011,
adjusted for
the sale
Despite weaker quarter and usual seasonal increase in working capital, net debt relatively stable.
However, with the sale of Dopaco, net debt down 40% or almost $700 M in 2 years.
For Dopaco, net debt reduction using estimated net proceeds of US$337 M and an 1.0491 US$/CAN$ exchange rate.
19
BALANCE SHEET & KEY FINANCIAL RATIOS
2010
Q1
Q2
Q3
Q4
Q1
Total assets
Total debt
Net debt*
3,452
1,469
1,454
3,497
1,522
1,508
3,544
1,477
1,462
3,437
1,403
1,397
3,452
1,455
1,445
3,172
1,134
1,124
Shareholders' equity
Book value per share
1,067
$11.01
1,081
$11.18
1,101
$11.40
1,049
$10.86
1,038
$10.77
1,138
$11.80
436
102
422
104
410
106
369
109
345
109
288
109
LTM EBITDA
LTM Interest
Net debt / LTM EBITDA
Debt / Debt + Equity
60.0%
2011
Q1 djusted for
sale of Dopaco
57.2%
5.0
58.4%
4.5
55.0%
49.6%
50.0%
4.0
45.0%
3.5
40.0%
3.0
Q4 2010
Q1 2011
Q1 2011
adjusted for
sale of Dopaco
4.2
3.9
3.8
Q4 2010
Q1 2011
Q1 2011 adjusted
for sale of
Dopaco
With the sale of Dopaco, significant improvement in debt ratios.
For Dopaco, net debt reduction using estimated net proceeds of US$337 M and an 1.0491 $US/$CAN exchange rate. EBITDA excluding specific items.
20
RENO DE MEDICI: FULL CONSOLIDATION IN Q2
Reno de Medici (RdM)
1. Cascades currently owns 40.99% of outstanding shares
2. Cascades can acquire up to 5% per year on the open market
3. Cascades has the option to acquire 9.07% from one shareholder « Industria Innovatione»
• Cascades has a call option to buy for €0.43 per share until Dec. 31, 2012
• Industria has a put option to sell for €0.41 per share from Jan 2013 to March 31, 2014
• Total potential investment of €14-15 M
4. Put / Call option for Cascades virgin assets in effect
• 2011 is reference year
• Paid in cash or in additional shares of RdM
• May represent 10%-20% of outstanding shares of RdM (depending on acquisition structure)
Due to the option in place (9.07%) and to its current position (41%), Cascades will begin to fully consolidate
RdM’s results in its financial statements in Q2 2011
21
RENO DE MEDICI: RECENT FINANCIAL RESULTS
2010
Q1
Q2
Q3
Q4
Year
Q1
115
7
106
235
127
11
118
239
125
10
110
227
137
12
107
245
504
40
107
946
138
11
99
241
(In millions of euro, except shipments)
Financial results
Sales
EBITDA
Net debt
Shipments ('000 m.t.)
EBITDA
(M euro)
(M euro)
14
120
12
115
10
110
8
105
6
100
4
95
2
90
0
85
Q1 2010
Q2 2010
Q3 2010
Q4 2010
2011
Q1 2011
Net debt
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Steady improvement in results and financial position in recent years.
22
RENO DE MEDICI: Q1 RECONCILIATION
(in millions of Canadian dollars)
As reported (IFRS)
Sales
EBITDA
Net debt
Net debt/LTM
EBITDA
Q1 2011
Q1 2011
Q1 2011
Q1 2011
774
37
1 445
4.2
3.9
Less: Dopaco sale proceeds
Add back: Reno de Medici (100%)
186
15
(321)
134
Including Reno de Medici, adjusted for sale of Dopaco
960
52
1 258
3.6
22
3
982
55
1 258
3.5
Add back:
Other joint ventures
Including Reno de Medici, other JVs & adjusted for sale of Dopaco
Cascades’ reported EBITDA and debt ratio should significantly improve in Q2
given the full consolidation of Reno de Medici.
EBITDA excluding specific items.
23
SEGMENTED REVIEW
24
TISSUE PAPERS
Sales
Manufacturing and converting
EBITDA
EBITDA margins
Shipments
Avg. Selling price
Avg. Selling price
(in millions $)
(in millions $)
(% of sales)
(in thousands s.t.)
($CAN/s.t.)
Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011
199
212
10
23
5%
11%
124
130
1,599
1,630
1,622
($US/s.t.)
Q4 2010
1,609
• Sales fell mainly due to lower volumes and a stronger Canadian dollar.
• Both shipments of external parent rolls and converted products declined from the previous quarter. This decrease was primarily due to higher
rates of integration, a exceptionally strong demand from our away-from-home customers in Q4 2010, and the usual seasonal downturn that we
always experience in the U.S. retail market.
• Overall, selling prices of manufacturing and converting products have remained relatively stable. In fact, the average selling price in U.S. dollars
increased 1% due to a slightly positive “sales mix" and the price increase of U.S. $ 50 / tc the parent rolls of brown paper that was realized in the
second half of the quarter.
• EBITDA margins declined as the positive effect of improved average selling price in U.S. dollars was offset by a stronger Canadian dollar, the
rising cost of raw materials and energy, lower volumes and the effect of a tax credit of $4 million recorded in the last quarter of 2010. Moreover,
the normal ramp-up related to the start-up of the new machine in Candiac, a major maintenance downtime and some operational challenges had
a negative impact on our Q1 2010 EBITDA.
• Recently, we began implementing a price increase of U.S. $ 50 / tc the parent rolls of white paper. In addition, we announced price increases
following:
• Away-from-home market U.S.: up to 9% for June 1;
• Away-from-home Canada: up to 6% for May 1;
• Retail Canada, branded : 7.5% for July;
• Retail Canada, private label: 7.5% for August.
1 2002
= 1,000 combined tissue paper index in US$, with a constant sales mix (that of year 2006). EBITDA excluding specific items.
25
PACKAGING - BOXBOARD
Manufacturing - N. America
Manufacturing - Europe1
Converting1
Discontinued operations1
Others and eliminations
Sales
EBITDA
EBITDA margins
Shipments
Avg. Selling price
Avg. Selling price
(in millions $)
(in millions $)
(% of sales)
(in thousands s.t.)
($CAN/s.t.)
($US or euro/s.t.)
Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010
64
59
(1)
(2%)
-%
91
83
707
707
717
698
62
56
4
4
6%
7%
57
52
1 080
1 057
€ 801
€ 768
144
156
12
15
8%
10%
70
66
1 802
1 882
1 828
1 858
(106)
(120)
(11)
(16)
10%
13%
(48)
(47)
n/a
n/a
n/a
n/a
(11)
(9)
1
(2)
(20)
(17)
142
5
1
3%
1%
150
137
153
North America / Manufacturing
• Despite the rise of the CAN$, sales rose 10% thanks to increased demand and the gradual implementation of a price hike of US$40/s.t. on
recycled board. During the quarter, backlogs have increased significantly and remained at high levels at the end of the period. The increase in
volumes is mainly due to the favorable seasonality and more export sales.
• Operating income before amortization (EBITDA) declined slightly, as growth in selling prices and shipments did not fully offset the stronger
Canadian dollar, the cost of raw materials, energy and freight.
• However, in April, in order to restore margins, we began to realize a second price increase of US$40/s.t. on recycled board.
North America / Converting (excluding the discontinued operations, Dopaco)
• Converting operations have also benefited from a major increase in demand. This mainly explains the improvement in EBITDA (excluding the
discontinued operations). Moreover, along with the rising cost of paper, price hikes should be implemented over the next 2 quarters.
Europe / manufacturing (figures of our 40.99% participation in Reno De Medici not shown in the table)
• In Europe, operations of both virgin and recycled board (Reno de Medici) took advantage of volume and pricing growth. The rising cost of energy
and raw materials had however a negative impact on profitability. In April, Reno de Medici began implementing a price increase of €50/m.t. on
recycled board grades.
1Manufacturing
– Europe numbers do not reflect our share of Reno de Medici S.p.A. (40.99%). Converting figures include discontinued operations (Dopaco) that are eliminated on another line.
26
EBITDA excluding specific items.
PACKAGING - CONTAINERBOARD
Manufacturing
Converting
Others and eliminations
Sales
EBITDA
EBITDA margins
Shipments
Avg. Selling price
Avg. Selling price
(in millions $)
(in millions $)
(% of sales)
(in thousands s.t.)
($CAN/s.t. or msf)
($US/s.t. or msf)
Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010
139
147
7
16
5%
11%
279
284
498
515
505
508
1
1
1
1
1
161
165
73
75
74
741
195
201
13
18
7%
9%
(80)
(80)
(1)
6
(153)
(150)
268
19
40
7%
15%
287
299
254
Manufacturing
• Sales declined due to the disposal of the Avot-Vallée mill and the strength of CAN$. Actually, during the quarter, prices in U.S. dollars remained
stable.
• Excluding the impact of the divestiture of Avot-Vallée, domestic demand has remained relatively stable but export shipments increased. In total,
shipments rose 2% compared to the previous quarter. The average operating rate averaged 92% in Q1 2011.
• The decline in profitability was primarily due to increased raw material costs. In fact, part of the rise in pricing of old corrugated containers
(OCC), which began in September 2010, had not yet affected the mills in the last quarter (lag impact). However, it was felt in Q1 2011.
Converting
• The decline in sales and EBITDA are mainly explained by the slight volume decline (-1% in msf vs. Q4 2010). This small drop, comparable to
the average of the Canadian industry, primarily reflects a longer than usual recovery of demand from the produce market producers.
• It is also worth noting that the profitability of converting operations had benefited from a favorable adjustment of $ 2 million in the previous
quarter as a result of a change to post-retirement benefits of one of our units.
1 Equals
to 2,667 million square feet (msf), $1,212 CAN/s.t. and $1,230US/s.t. respectively in Q1 2011, and 2,696 million square feet (msf), $1,223 CAN/s.t. and $1,207 US/s.t.
respectively in Q4 2010. EBITDA excluding specific items.
27
PACKAGING – SPECIALTY PRODUCTS
Industrial Packaging
Consumer Product Packaging
Specialty Papers
Recovery and Recycling
Others and eliminations
Sales
EBITDA
EBITDA margins
Shipments
Avg. Selling price
Avg. Selling price
(in millions $)
(in millions $)
(% of sales)
(in thousands s.t.)
($CAN/s.t.)
($US/s.t.)
Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010 Q1 2011 Q4 2010
30
29
2
2
7%
7%
42
40
18
18
2
-%
11%
73
71
2
-%
3%
60
58
83
86
4
7
5%
8%
(2)
(3)
1
(1)
(5)
( 5)
202
201
7
12
3%
6%
97
93
923
938
936
926
Industrial Packaging
• The stability in results can be explained mainly by improved volumes and a favorable “sales mix”, which offset the negative effect of exchange
rate and the rising cost of raw materials.
Packaging Consumer Products
• The decline in EBITDA was primarily due to lower shipments combined with cost inflation in our plastic operations. However, price increases were
announced for the second quarter to offset cost inflation.
Specialty Papers
• The EBITDA slightly decreased as the Canadian dollar and freight costs improved while the selling prices/raw material costs spread tightened.
• Some production outages in our paper mills have also adversely impacted the production efficiency and results during the quarter.
• In May, our kraft paper mill should benefit from higher selling prices (+ US$40-50/s.t.) on its specialty grades.
Recovery and recycling
• Despite a favorable pricing environment for our recovery operations, the usual seasonal weakness in generation and the adverse weather
conditions had a significant negative incidence on volumes (down 8%), on operating and freight costs, and consequently profitability.
EBITDA excluding specific items.
28
Q&A
29
CONCLUDING REMARKS
30
NEAR TERM OUTLOOK
In Q2 2011
(+) Demand to continue to improve
(+) Reno De Medici’s results to be fully consolidated
(-) Elevated input costs
(-) Strong Canadian dollar
In H2 2011
(+) Improved selling prices
(+) Restructuring measures, improved operating rates and efficiency
Cautious optimism for Q2 but Cascades to rebound later in the year.
31
APPENDICES
32
MARKET PRICES AND COSTS SUMMARY
Change
These indexes should only be used as indicator of trends and they
be different than our actual selling prices or purchasing costs.
Selling prices
Cascades North American US$ index (index 2005 = 1,000)1
PACKAGING
Boxboard
North America (US$/ton)
Recycled boxboard - 20pt. Clay coated news (transaction)
Europe (Euro/tonne)
Recycled white-lined chipboard (GD2) index2
Virgin coated duplex boxboard (GC2) index3
Containerboard (US$/ton)
Linerboard 42-lb. unbleached kraft, East US (transaction)
Corrugating medium 26-lb. Semichemical, East U.S. (transaction)
Specialty products
(US$/ton, tonne for deinked pulp)
Recycled boxboard - 20pt. Bending chip (transaction)
Deinked pulp (f.o.b; U.S. air-dried & wet-lap, post-consumer)
Unbleached kraft paper, Grocery bag 30-lb.
Uncoated white 50-lb. offset, rolls
TISSUE PAPERS
Cascades Tissue papers (index 1999 = 1,000)4
Raw materials
Cascades North American US$ index (index 2005 = 300)5
RECYCLED PAPER
North America (US$/ton)
Corrugated containers, no. 11 (New England)
Special news, no. 8 (ONP - Chicago & NY average)
Sorted office papers, no. 37 (SOP - Chicago & NY average)
Europe (Euro/tonne)
6
Recovered paper index
VIRGIN PULP (US$/tonne)
Bleached softwood kraft Northern, East U.S.
Bleached hardwood kraft Northern mixed, East U.S.
WOODCHIPS – Conifer eastern Canada (US$/odmt)
Sources: RISI, Dow Jones, Random Lengths and Cascades. See notes p. 35.
2009
Average Average Average
Q1
Q2
Average Average
Q3
Q4
Change
Q12011 Q12011 Q12011 Q12011
2010
2011 Q12010 Q12010 Q42010 Q42010
Average Average
Q1
(unit)
(%)
(unit)
(%)
1,109
1,106
1,180
1,223
1,234
1,186
1,238
132
12%
4
0%
754
790
825
843
855
828
880
90
11%
25
3%
592
985
580
976
631
1,025
656
1,063
690
1,155
639
1,055
690
1,155
110
179
19%
18%
0
0
0%
0%
547
517
580
550
640
610
640
610
640
610
625
595
640
610
60
60
10%
11%
0
0
0%
0%
565
601
926
855
575
708
960
868
625
752
1,020
917
625
755
1,047
938
650
755
1,060
933
619
743
1,022
914
667
748
1,025
930
92
40
65
62
16%
6%
7%
7%
17
-7
-35
-3
3%
-1%
-3%
0%
1,617
1,617
1,623
1,615
1,620
1,619
1,631
14
1%
11
1%
258
426
409
397
452
421
470
44
10%
18
4%
68
56
120
149
90
225
146
92
198
131
78
218
170
95
216
149
88
214
182
128
223
33
38
-2
22%
42%
-1%
12
33
7
7%
35%
3%
53
100
120
126
132
120
146
46
46%
14
11%
718
609
121
880
776
125
993
908
121
1000
900
120
967
840
124
960
856
123
970
820
123
90
44
-2
10%
6%
-2%
3
-20
-1
0%
-2%
-1%
33
HEDGING PORTFOLIO 2011
1. Cash flow USD, net exposure including interest ($170 M$):
• US$ 52.5 M at $1.14 (31% of exposure)
2. Natural gas:
• Canada:
• 2011: 75% at around 6.30 CAN$/GJ
•
U.S.:
• 2011: 75% at around 6.50 US$/mmBtu
34
NOTES
1.
2.
3.
4.
5.
6.
7.
8.
9.
The Cascades North American selling prices index represents an approximation of the Company’s manufacturing selling prices in North America (excluding
Converting products). It is weighted according to shipments and is based on the average selling price of our North American manufacturing operations of
boxboard, containerboard, specialty products and tissue paper. It considers the change in the mix of products sold. This index should only be used as a trend
indicator.
The Cascades North American raw materials index represents the average weighted cost paid for some of our manufacturing raw materials namely, recycled fiber,
virgin pulp and woodchips in North America. It is weighted according to the volume of purchase. This index should only be used as an a trend indicator and it may
differ from our actual manufacturing purchasing costs and our purchase mix.
The capacity utilization rate is defined as: Shipments/Practical capacity. Paper manufacturing only.
Return on assets is a non-GAAP measure and is defined as: LTM EBITDA excluding specific items/ LTM Average of total quarterly assets. It includes discontinued
operations.
Working capital includes accounts receivable plus inventories less accounts payable. It excludes an unpaid provision for closure and restructuring costs. It also
excludes the current portion of derivatives financial instruments and the current portion of future taxes liability.
The Cascades recycled white-lined chipboard selling prices index represents an approximation of Cascades’ recycled grades selling prices in Europe. It is
weighted by country.
The Cascades virgin coated duplex boxboard selling prices index represents an approximation of Cascades’ virgin grades selling prices in Europe. It is weighted
by country.
The Cascades Tissue paper selling prices index represents a mix of primary and converted products, and is based on the product mix at the end of 2006.
The Cascades recovered paper index represents an approximation of Cascades’ recovered paper purchase prices in Europe. It is weighted by country based on
the recycled fibre supply mix of 2009.
35
For more information:
www.cascades.com/investors
Didier Filion
Director, Investor Relations
didier_filion@cascades.com
514-282-2697
36
CREDIT: IMAGE ECOterre