CASCADES INC. Review of Q Financial Results. November 6, 2014

Transcription

1 CASCADES INC. Review of Financial Results November 6,

2 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 Corporation 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 may also include 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 management of the Corporation. 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 Corporation 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 Corporation 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 or reversal of impairment of assets, for facility or machine closures, accelerated depreciation of assets due to restructuring measures, debt restructuring charges, gains or losses on disposal or acquisition 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

3 OPENING REMARKS

4 SUMMARY OF FINANCIAL RESULTS EBITDA (% of sales) EPS % 12.0% 10.0% 8.0% 6.0% 4.0% $0.24 $0.16 $0.08 $0.00 $(0.08) $(0.16) $0.09 $0.07 $0.05 $(0.04) $(0.06) $0.19 $0.01 $0.08 $0.04 (In millions of CAN$, except amount per share) Year YTD Financial results 1 Sales , ,851 Excluding specific items EBITDA Net earnings (loss) (4) Net earnings (loss) per share $(0.04) $0.09 $0.07 $0.19 $0.31 $0.01 $0.08 $0.04 $0.13 Cash flow from operations (adjusted) EBITDA up 7% sequentially; East Angus kraft paper mill reclassified as discontinued operations Note 1 EBITDA and net earnings excluding specific items. Adjusted to exclude discontinued operations of the Fine Papers division, the Djupafors and East Angus mills. Note 2 Excluding premium paid on the refinancing of senior notes totaling $20M in and $11M in. 4

5 HISTORICAL SEGMENTED EBITDA 1 Containerboard Boxboard Europe (% of sales) (% of sales) % 15% 10% 5% % 12% 8% 4% 0 0% 0 0% Specialty Products Tissue Papers (% of sales) (% of sales) % 9% 6% % 15% 10% 4 3% 11 5% 0 0% 0 0% Note 1: EBITDA excluding specific items. Adjusted to exclude discontinued operations of the Fine Papers division, the Djupafors and East Angus mills. 5

6 SEGMENTED EBITDA WATERFALLS Containerboard Boxboard Europe EBITDA - Selling Prices & Mix Energy CAN$ Acqu. & Divest. Other Costs Raw Materials Volume EBITDA - EBITDA - Energy Selling Prices & Mix CAN$ Acqu. & Divest. Raw Materials Other Costs Volume EBITDA (1) (3) (5) Increase in sales of high value-added products Fire incidents resulted in an estimate of $2M in margin loss Impact of white energy certificate Seasonality in Europe and Santa Giustina rebuild Specialty Products Tissue Papers EBITDA - CAN$ Volume Selling Prices & Mix Acqu. & Divest. Other Costs Energy Raw Materials EBITDA - EBITDA - Volume Other Costs Energy CAN$ Acqu. & Divest. Selling Prices & Mix Raw Materials EBITDA (5) Volume increase in the Increase of external purchases Favorable FX rate Canadian retail market of rolls and virgin pulp 6 EBITDA excluding specific items. Adjusted to exclude discontinued operations of the Fine Papers division, the Djupafors and East Angus mills. 16

7 July 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13 Apr 13 July 13 Oct 13 Jan 14 Apr 14 July 14 Oct 14 July 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13 Apr 13 July 13 Oct 13 Jan 14 Apr 14 July 14 Oct 14 RAW MATERIAL COSTS (US$/ton) Recycled Fiber North American List Prices Current (October) (US$/ton) 1,100 1,000 Virgin Pulp Prices Current (October) 1, White grades (SOP) Brown grades (OCC) NBSK NBHK OBM Average Quarterly List Prices / / Brown grades - OCC No. 11 (Northeast) % -8% White grades - SOP No. 37 (Northeast) % +0% Virgin Pulp Prices NBSK (Canadian sources delivered to US East) % +0% NBHK (Canada/US sources delivered to US East) % -3% Source: RISI. Increased OCC supply as mill closures have led to lower prices 7

8 KEY PERFORMANCE INDICATORS (KPIs) 7% decrease in manufacturing shipments partially due to Santa Giustina rebuild Containerboard: 94% Boxboard Europe: 90% Spec. Prod.: 78% Tissue Papers: 100% ('000 s.t.) Total Shipments 1 Capacity Utilization Rate (Manufacturing only) % 92% 89% 87% 88% 91% 93% 88% 87% 90% 91% 91% % % 11.0% LTM Return on Assets 16.0% LTM Working Capital (% of LTM Sales) % 9.0% 8.0% 7.5% 8.1% 8.0% 8.0% 8.5% 9.3% 9.5% 9.6% 9.9% 14.0% 12.0% 10.0% 14.8% 14.4% 14.0% 13.5% 13.1% 12.9% 12.9% 12.7% 12.6% 7.0% 8.0% Decrease in shipments due to seasonality and machine rebuild in Europe Note 1 Excluding discontinued operations. Note 2 Including discontinued operations. Excluding the Fine Papers division starting from. Please refer to the Annual Report and quarterly report for the definition of the KPIs. 8

9 FINANCIAL REVIEW

10 SALES RECONCILIATION 1,020 1, % - (5) (5) Sales - CAN$ Volume Corp. Elim. Selling Prices & Mix Acqu. & Disposals Sales - Containerboard (5) 366 Boxboard Europe (6) 193 Specialty Products (3) (2) 145 Tissue Papers (1) (7) 282 Corporate (25) 1 2 (22) Total (5) (5) 964 Improvement due to favourable FX and higher shipments of packaging products Adjusted to exclude discontinued operations of the Fine Papers division, the Djupafors and East Angus mills. 10

11 EBITDA VARIANCE ANALYSIS % 2 - (5) (12) 97 0 EBITDA - CAN$ Other Costs Volume Energy Acqu. & Disposals Selling Prices & Mix Raw Materials EBITDA - Containerboard 42 2 (3) 10 (1) 50 Boxboard Europe (6) 2 14 Specialty Products (2) (5) 12 Tissue Papers (1) (7) (8) 32 Corporate (9) (2) (11) Total (5) (12) 97 1 FX, volume and energy mostly offset by higher raw material costs EBITDA excluding specific items. Adjusted to exclude discontinued operations of the Fine Papers division, the Djupafors and East Angus mills. 1 Raw materials include fibre, parent rolls used by converting operations as well as transportation costs. 11

12 EBITDA VARIANCE ANALYSIS % 2 - (3) (5) 97 0 EBITDA - Selling Prices & Mix Energy Volume CAN$ Acqu. & Disposals Other Costs Raw Materials EBITDA - Containerboard (1) 1 50 Boxboard Europe 20 2 (5) (3) 14 Specialty Products Tissue Papers (5) 32 Corporate (5) (1) (2) (3) (11) Total (3) (5) 97 1 Gains on selling price, energy and volume more than offset higher production and raw material costs EBITDA excluding specific items. 1 Raw materials include fibre, parent rolls used by converting operations as well as transportation costs. 12

13 QUARTERLY EPS VARIANCE - - Excluding specifics Specifics As reported Excluding specifics Specifics As reported EBITDA 91 (43) Depreciation (46) (46) (45) (45) EBIT and others 45 (43) Financing expenses (27) (44) (71) (23) (23) Interest expense on employee future benefits (1) (1) (2) (2) FX gain (loss) on LT debt and fin. Inst (24) (24) Share of results of associates and JVs 0 (2) (2) (1) 2 1 Profit (loss) before tax and others 17 (76) (59) 26 (21) 5 Provision for income taxes and others (8) (23) 2 (21) Non-controlling interests (3) (3) (1) (1) Discountinued operations (37) (37) 2 (1) 1 Net earnings (loss) 6 (89) (83) 4 (20) (16) per share 0.07 $ (0.95) $ (0.88) $ 0.04 $ (0.21) $ (0.17) $ Interest savings following refinancing Include withholding tax of $14M ($0.15 per share) Change in Operating results after-tax (normalized 30%) 0.07 $ Change in income taxes provision (vs normalized 30%) (0.13) $ One-time withholding tax and Europe valuation allowance reversal Change in discontinued operations, net of taxes 0.02 $ Operating results of closed discontinued operations Change in share of results of Associates and JVs - net 0.01 $ Lower EBITDA from Reno De Medici and lower contribution from investments of taxes and non-controlling interests (0.03) $ 13

14 EBITDA TO OPERATING INCOME RECONCILIATION EBITDA excluding spec. Items (46) Depr. & amort (1) Op. income excluding spec. Items Unrealized gain on fin. instr. Loss on acqui., disposals and others Operating Income Container- Boxboard Specialty Tissue Corporate Discontinued board Europe Products Papers Activities Operations Total Operating income (loss) (15) (2) 53 Specific items: Loss on acquisitions, disposals and others (2) 1 Unrealized gain on financial instruments (2) (2) Total specific items (1) (2) (1) Operating income (loss) excluding specific items (15) (4) 52 Depreciation and amortization EBITDA excluding specific items (11) (4) 97 14

15 CASH FLOW OVERVIEW 1 Cash flow from continuing operations adjusted , Free cash flow (in millions of CAN$) Year YTD 3 Cash flow from operations adjusted, excl. disc. operations Capital expenditures & other assets, net of disposals (46) (33) (26) (45) (150) (44) (34) (44) (122) Dividend & share buyback (4) (4) (4) (3) (15) (4) (4) (4) (12) Free cash flow (5) Free cash flow per share $(0.05) $0.03 $0.54 $0.10 $0.62 $0.12 $0.19 $0.53 $ Strong cash flow from operations for - including tax refund Note 1 Excluding discontinued operations. Note 2 Excluding increase in investments. Note 3 Excluding premiums paid on the refinancing of senior notes totaling $20M in and $11M in. 15

16 NET DEBT RECONCILIATION 1,675 1,650 1,625 1,600 1,645 0% EBITDA excl. specific $97M Net income tax refund $21M Net financial expenses paid ($17M) Dividends received and others ($3M) Subtotal $98M Premium paid on LTD refinancing ($11M) Cash flow from operations $87M ,640 1,575 1,550 (87) (9) 3 8 1,525 Net Debt 06/30/ Cash flow from op. Var. in noncash work. cap. components Dividends paid & shares buyback Capital lease & others F/X Rate Capital investments, net Net Debt 09/30/ LTM 06/30/ LTM 09/30/ 363 EBITDA excluding specific items x Net debt/ebitda excluding specific items 4.5x Strong free cash flows and working capital management allowed for debt reduction despite FX net debt includes $96M of non-recourse net debt of Reno De Medici and other unrestricted subsidiaries. 16

17 CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net debt / LTM EBITDA 1 Interest Coverage Ratio 7.0x 5.0x 6.0x 5.0x 5.8x 5.0x 4.6x 4.5x 4.0x 3.0x 2.5x 3.0x 3.4x 3.5x 4.0x 2.0x 3.0x 2011 LTM 09/30/ 1.0x 2011 LTM 09/30/ Net Debt / Net Debt + Total Equity Long-Term Debt Maturities 65% 60% 55% 56% 58% 57% 60% % 45% 2011 LTM 09/30/ year >1 year Senior notes Revolver Debts without recourse Subsidiaries debts Continuous improvement on the leverage front despite the weakness of the CAN$ Cascades bank debt financial covenant ratios: Net funded debt to capitalization < 65% (currently at 58%),interest coverage ratio > 2.25x (currently at 3.24x). 1 Excluding discontinued operations 17

18 SEGMENTED REVIEW

19 PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Shipments ('000 s.t.) 337 0% 1% Comments on sequential performance Despite the fire incident at the Niagara Falls mill, shipments were relatively stable (-6% for the mills and +5% for the converted products) Strong increase in shipments of corrugated products (+6%) led to higher internal sales for our containerboard mills which contributed to limit external tonnage Average selling price (CAN$/unit) 1,088 (US$/unit) 999 1% 3% 2% -2% Higher average selling price mainly due to a better product mix as more converted products were sold Positive impact of a price increase in the boxboard sector Sales ($M) 366 EBITDA ($M) 50 % of sales 14% EBITDA excluding specific items 1% 4% 16% 19% Slight increase in sales as favourable product mix (+$7M) was partially offset by a decrease in selling prices primarily due to the strengthening of the Canadian dollar EBITDA increased by $7M compared to due to a favourable product mix which increased the average selling price (+$6M), a decrease in energy costs (+$2M) and a favourable foreign exchange rate (+$1M) These factors compensated for slightly higher production costs (-$1M) and raw material costs (-$1M) related to the change in the product mix which were partly offset by lower recycled fiber prices 19

20 PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Comments on sequential performance Shipments ('000 s.t.) 257-9% 3% Lower shipments in our two markets during the quarter due to seasonal downtime, maintenance, and the installation of a new machine at Santa Giustina At the end of October, the backlog was healthier than at the same date last year Average selling price (CAN$/unit) 751 (Euros/unit) 521-4% 3% 0% -2% Prices stable in Euro Sequential strengthening of the Canadian dollar against the Euro resulted in lower average selling prices in Canadian dollar terms Sales ($M) 193 EBITDA ($M) 14 % of sales 7% EBITDA excluding specific items -12% 5% -30% 27% Sales decreased essentially due to above-mentioned decrease in shipments and the unfavorable exchange rate In addition to lower sales, higher raw material costs caused by a higher usage of white grades and CTMP pulp negatively affected the EBITDA $2M positive impact from white certificates Maintenance costs related to production downtime also negatively impacted the results Data adjusted to exclude the Djupafors mill 20

21 PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Comments on sequential performance Shipments ('000 s.t.) 41 0% -9% Sequentially, higher shipments in our deinked pulp and vinyl backing activities were offset by lower shipments in the Recovery segment Shipments in the Industrial Packaging and the Consumer Product Packaging segments were stable Sales ($M) 145-1% 2% Slight decrease in sales caused by lower shipments in Recovery activities and an unfavourable average foreign exchange rate EBITDA ($M) 12 % of sales 8% EBITDA excluding specific items 20% 0% Significant sequential EBITDA increase mainly due to a favourable exchange rate at the end of the quarter, an increase in selling prices in the Consumer Product Packaging segment and lower fixed costs in the Recovery segment Compared to, positive impact of lower raw material costs in the Industrial Packaging segment Industrial Packaging, deinked pulp and vinyl backing shipments only Data restated to exclude the Fine Papers Division and the East Angus kraft paper mill 21

22 TISSUE PAPERS Results Change vs. Shipments ('000 s.t.) 153 9% 0% Comments on sequential performance Higher shipments in all our segments Sales of converted products increased by 11% due to higher volume in the Canadian retail market and favourable seasonality in the away-from-home market Shipments of parent rolls also increased by 8% Average selling price (CAN$/unit) 1,836 (US$/unit) 1,686 0% 1% 0% -3% Stable average selling prices Higher proportion of retail products sold in Canada at slightly lower prices and a higher share of away-from-home products in the product mix Sales ($M) 282 EBITDA ($M) 32 % of sales 11% EBITDA excluding specific items 10% 1% 39% -18% Increase in sales essentially linked to the above-mentioned increase in shipments In addition to the positive impact of higher shipments (+$8M), lower energy costs (+$2M), lower subcontracting (+$2M) and favourable foreign exchange rate (+$1M) contributed positively to the EBITDA More than offset the negative impact of higher raw material costs linked to higher purchases of rolls and virgin pulp and increased administration expenses 22

23 Q&A AND CONCLUDING REMARKS

24 NEAR TERM OUTLOOK seasonality in North America + seasonality in Europe Potential decrease of OCC costs Price increases for boxboard in North America Stable to favourable FX environment Positive impact from recent strategic initiatives I Competitive tissue market Start-up costs related to the new tissue paper machine in Oregon Reorganization of production logistics in relation to the new converting plant in North Carolina. Potential pricing pressure in Europe Boxboard Europe Containerboard Specialty Products Tissue Papers Volume Slight increase Slight decrease Slight decrease Slight decrease Average Selling prices Slight decrease Stable Stable Stable Raw material costs Slight decrease Slight decrease Slight decrease Stable CDN $ vs other currency Slight decrease Slight decrease Energy costs Slight increase Slight increase Slight increase Slight increase 24

25 APPENDIX

26 FOREIGN EXCHANGE US$/CAN$ US$/CAN$ Exchange rates Euro /CAN$ Euro /CAN$ Hedging Program USD Cash flows 30% to 45% of exposure hedged at an average rate of CAN$/US$ to CAN$/US$ % to 40% of exposure hedged at an average rate of CAN$/US$ to CAN$/US$ % to 16% of exposure hedged at an average rate of CAN$/US$ to CAN$/US$ Source: Bloomberg Averages Year Foreign exchange rates Change US$/CAN$ % 0% Euro /CAN$ % 4% 26

27 ENERGY PRICES Natural gas (US$) Energy prices Crude oil (US$) Hedging Program Natural gas Canada: : 64% at 4.79 CAN$/GJ 2015 : 63% at 4.70 CAN$/GJ U.S.: : 57% at 4.88 US$/mmBtu 2015 : 54% at 4.88 US$/mmBtu Natural gas (US$/mmBtu) Crude oil (US$/barrel) Averages Year Energy prices Change Natural gas Henry Hub (US$/mmBtu) % -13% Crude oil WTI (US$/barrel) % 1% 0% Source: Bloomberg 27

28 July 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13 Apr 13 July 13 Oct 13 Jan 14 Apr 14 July 14 Oct 14 July 11 Sept 11 Nov 11 Jan 12 Mar 12 May 12 July 12 Sept 12 Nov 12 Jan 13 Mar 13 May 13 July 13 Sept 13 Nov 13 Jan 14 Mar 14 May 14 July 14 Sept 14 July 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13 Apr 13 July 13 Oct 13 Jan 14 Apr 14 July 14 Oct 14 July 11 Sept 11 Nov 11 Jan 12 Mar 12 May 12 July 12 Sept 12 Nov 12 Jan 13 Mar 13 May 13 July 13 Sept 13 Nov 13 Jan 14 Mar 14 May 14 July 14 Sept 14 SELECTED REFERENCE PRICES (US$/s.t.) 1,100 1, Containerboard - Selected Products 20-pt clay coated news (CRB) Linerboard 42-lb Corrugating medium 26-lb Current (October) $ decrease July (Euro /m.t.) 1,200 1,100 1, Boxboard Europe - Selected Products Coated duplex - virgin board (GC2) White-lined chipboard - recycled board (GD2) 9$ decrease Sept. Specialty Products - Selected Products (US$/s.t.) pt bending chip food 600 Current (October) 700 (US$/s.t.) 1,600 1,500 1,400 1,300 1,200 1,100 1, Tissue Papers - Selected Products Virgin parent rolls Recycled parent rolls Current (September) 1,269 1,035 28

29 SELECTED REFERENCE PRICES AND FIBRE COSTS These indexes should only be used as indicator of trends and they be different than our actual selling prices or purchasing costs Year Year Year Sources RISI, Cascades and Reno de Medici 1 The index represents an approximation of Cascades recycled grades selling prices in Europe. It is based on RISI data and weighted by country. 2 The index represents an approximation of Cascades virgin grades selling prices in Europe. It is based on RISI data and weighted by country. 3 The recovered paper index represents an approximation of Cascades recovered paper purchase prices in Europe. It is based on RISI data and weighted by country. over over (units) (%) (units) (%) Selling prices (average) PACKAGING PRODUCTS Boxboard North America (US$/ton) Recycled boxboard - 20pt. clay coated news (transaction) % 0 0% Europe (Euro/tonne) Recycled white-lined chipboard (GD2) index % 0 0% Virgin coated duplex boxboard (GC2) index 2 1,153 1,121 1,086 1,086 1,086 1,086 1,086 1,097 1,098 1, % -3 0% Containerboard (US$/ton) Linerboard 42-lb. unbleached kraft, East U.S. (transaction) % 0 0% Corrugating medium 26-lb. semichemical, East U.S. (transaction) % -10-1% Specialty Products (US$/ton, tonne for deinked pulp) Recycled boxboard - 20pt. bending chip (transaction) % 0 0% Deinked pulp (f.o.b; U.S. air-dried & wet-lap, post-consumer) % 0 0% TISSUE PAPERS (US$/ton) Parent rolls, recycled fibres (transaction) 1,286 1,238 1,199 1,200 1,135 1,106 1,160 1,068 1,038 1, % 3 0% Parent rolls, virgin fibres (transaction) 1,433 1,366 1,338 1,372 1,387 1,367 1,366 1,289 1,259 1, % 12 1% Raw materials (average) RECYCLED PAPER North America (US$/ton) Corrugated containers, no. 11 (OCC - Midwest & Northeast average) % -7-8% Special news, no. 8 (ONP - Midwest & Northeast average) % 0 0% Sorted office papers, no. 37 (SOP - Midwest & Northeast average) % 3 2% Europe (Euro/tonne) Recovered paper index % 0 0% VIRGIN PULP (US$/tonne) Bleached softwood kraft Northern, Eastern U.S ,017 1,030 1, % 0 0% Bleached hardwood kraft Northern mixed, Eastern U.S % -30-3% 29

30 For more information: Riko Gaudreault Director, Investor Relations or