REVIEW OF FINANCIAL RESULTS Q4 AND FISCAL YEAR 2009

Transcription

1 REVIEW OF FINANCIAL RESULTS Q4 AND FISCAL YEAR 2009 February 26, 2010 Une version française de cette présentation est disponible sur demande.

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 subjectto 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 Canadian GAAP ( non-gaap 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 mostdirectly comparable financial measures, as set forth in the Supplemental Information on Non-GAAP Measures section of our 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 nonrecurring nature. 2

3 OPENING REMARKS 3

4 QUARTERLY HIGHLIGHTS Net earnings excluding specific items of $1.13 per share ($110 million) Highest EBITDA (excluding specific items) in the Company s history (465M$) Cash flow from operations (adjusted) of $305 million ($3.12 per share). Positive free cash flow of $149 million (negative FCF of $79 million in 2008) Net debt down $268 million compared to December 31,

5 SUMMARY OF FINANCIAL RESULTS (In million of CAN$, except amount per share) Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Financial results Sales ,039 1,020 4, ,877 Excluding specific items EBITDA Net earnings (loss) (9) (11) Net earnings (loss) per share (0.09) (0.11) Cash flows (adjusted) from operations (M CAN$) Q Q Q Q EBITDA Q Q Q (% of sales) Cash flows (adjusted) from operations Q % 12.0% 10.0% 8.0% 6.0% 4.0% (M CAN$) Q Q Q Q Q Q Q (% of sales) 11.0% Q % 7.0% 5.0% 3.0% 1.0% Growth of 15% in EBITDA vs. Q4-2008; Highest annual EBITDA in Cascades history 5

6 SEGMENTED EBITDA (M CAN$) Q (M CAN$) Q Q Q Q Q Boxboard 24 Q Q Specialty products Q Q Q Q Q Q (% of sales) (M CAN$) Containerboard (% of sales) % % 10.0% % % % % % 2.0% 25 Q % (% of sales) 12.0% % Q % 6.0% 4.0% 2.0% Q (M CAN$) 12 Q Q Q Q Q Q Q Q Q Tissue papers Q Q Q Q Q Q % (% of sales) 22.0% 19.0% 16.0% 13.0% 10.0% 7.0% 4.0% Boxboard group continues to improve EBITDA excluding specific items. 6

7 PRICING AND COST ENVIRONMENT (M $CAN) Natural gas ($US/mmBtu) Q Q Q Q Q Q Q Q Q Q Q Q EBITDA Consolidated EBITDA boxboard Est. Spread avrg. price - cost fibre Cascades ($CAN/s.t.) Total shipments ('000 s.t.) 12 $ 11 $ 10 $ 9 $ 8 $ 7 $ 6 $ 5 $ 4 $ 3 $ 2 $ Q Q Q Q Q Q Q Q Q Q Q Q ,08 $ 1,03 $ 0,98 $ 0,93 $ 0,88 $ 0,83 $ 0,78 $ ('000 s.t. or $CAN/s.t.) $US/$CAN Except for the better results in boxboard and the increased shipments, all the main factors (spread, energy, F/X) had a negative impact on Cascades results. Natural gas Hhub ($US/mmBtu) $US/$CAN EBITDA excluding specific items. 7

8 PRICING AND COST ENVIRONMENT Prix de vente T12007 Indices Cascades des prix de vente et des matières premières Prix des matières nord-américains ($US) premières T22007 T32007 T42007 T12008 T22008 The selling price index/raw material cost index spread tighten compared c to Q as recycled fibre and pulp prices continued to increase T32008 T42008 EBITDA $107 M EBITDA $121 M T12009 T22009 Indice des prix de vente1 ($US) Indice des prix des matières premières2 ($US) EBITDA $127 M T32009 EBITDA $110 M T See notes p

9 FINANCIAL REVIEW 9

10 Q EBITDA VARIANCE ANALYSIS (M$) (1) (6) (7) (11) Q OIBD excluding spec. Other cost optimization Variation of the CAN$ Selling prices & mix Shipments Energy costs Raw material costs Q OIBD excluding spec. Norampac (4) (5) (3) 1 30 Carton plat (3) 33 GPS 22 (2) 1 1 (1) (1) (1) 19 Tissu 38 5 (1) 2 0 (1) (8) 35 Corpo 0 (6) (2) 0 (7) Total (1) (6) (7) (11) 110 Despite improved cost optimization, EBITDA decreased as a result of lower seasonal volumes as well as higher energy and raw material costs. EBITDA excluding specific items.. 10

11 2009 EBITDA VARIANCE ANALYSIS (M$) (16) (78) OIBD Raw material costs Other cost optimization Energy costs Variation of the CAN$ Selling prices & mix Shipments 2009 OIBD Norampac (21) (47) 145 Carton plat (6) 115 GPS (1) 2 0 (13) (13) 74 Tissu (12) (12) 154 Corpo (14) 0 (8) 1 (2) 0 0 (23) Total (16) (78) 465 Improved cost control efficiency, lower variable costs and the CAN$ C more than offset selling price erosion and softer demand. EBITDA excluding specific items.. 11

12 KEY PERFORMANCE INDICATORS (KPIs) Year (In million of CAN$, unless other wise noted) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Operational Total shipments (in'000 of s.t.) Packaging 3, , ,683 Tissue papers Total 3, , ,142 Capacity utilization rate 3 -% 94% 91% 87% 90% 82% 88% 79% 84% 88% 87% 85% Integration rate (North America) -% 45% 45% 47% 46% 45% 46% 49% 49% 48% 49% 49% Financial LTM Return on assets (%) 4 9.1% 8.4% 7.7% 7.5% 7.8% 7.8% 8.9% 10.4% 11.4% 11.9% 11.9% Working capital 5 In millions of $ % LTM of sales 15.4% 16.4% 16.6% 16.9% 16.5% 16.5% 16.4% 16.1% 15.0% 14.2% 14.2% Higher shipments due to better demand in Europe and acquisition of Atlantic Packaging tissue assets. ('000 s.t.) Total shipments & Capacity utilization rate 91% 90% 87% 88% % 82% 84% % Q Q Q Q Q Q Q Q Total shipments Capacity utilization rate 95% 13.0% 90% 12.0% 85% 11.0% 80% 10.0% 75% 9.0% 70% 8.0% 65% 7.0% 8.4% Q % Q LTM Return on assets (%) 10.4% 8.9% 7.8% 7.5% Q Q Q Q % Q % Q Fifth consecutive quarter of improving ROA See notes p

13 Q EBITDA TO OP. INCOME RECONCILIATION (M$) (56) $37M related to our Fjordcell pulp mill (2) (42) EBITDA excl. spec. items Depreciation & amortization EBIT excl. spec. Items Unreal. gain on finan. inst. Closure and restruct. costs Impairment loss Operating income Q Container- Specialty Tissue Corporate (in million of Canadian dollars) Boxboard board Products Papers Activities Total Operating income (24) (9) 14 Specific items: Impairment loss Closure and restructuring costs 2 2 Unrealized gain on financial instruments (2) (2) (4) Total specific items (2) 40 EBIT excluding specific items (11) 54 Depreciation Operating income before depreciation and amortization (EBITDA) excluding specific items (7)

14 Q NET EARNINGS RECONCILIATION $37M related to our indefinitely shut Fjordcell pulp mill $33M related to long-term debt refinancing (M$) (2) (3) (4) (22) (41) Net earnings Impairment loss F/X Loss on longterm debt Loss on long-term debt refinancing Closure and restruct. costs Adjustment of statutory tax rate Share of results of significantly influenced companies Unrealized gain on finan. instr. Tax effect on specific items Net earnings excluding spec. items 14

15 CASH FLOW OVERVIEW (in millions of CAN$) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Cash flow from operations Working capital variation (89) (48) 12 (21) 26 (31) (1) Cash flow provided by operations 89 (31) Capital expenditures & other assets (163) (42) (34) (45) (62) (183) (43) (35) (53) (57) (188) Dividend & Share Buyback (21) (6) (4) (5) (5) (20) (6) (4) (5) (5) (20) Free cash flow (95) (79) 10 (28) 18 (79) Free cash flow per share $ $ 0.10 $ $ 0.18 $ $ 0.18 $ 0.44 $ 0.61 $ 0.30 $ 1.53 $ (M CAN$) (30) (60) (31) 48 Cash flow provided by operations ($) ,10-0,80-0,28.. Free cash flow per share... 0,18 0,18 8% -10% -8% -13% -23%. 0,44 11%. 0,61 18%. 0,30 17% 100% 80% 60% 40% 20% 0% -20% -40% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Free cash flow per share LTM FCF per Share/Share price Strong free cash flow generation to pay down debt ¹LTM FCF per share / share price end of period 15

16 BALANCE SHEET & KEY FINANCIAL RATIOS Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q4 Year Total assets 3,769 3,935 3,898 3,917 4,031 4,031 4,041 3,886 3,877 3,792 3,792 Total debt 1,621 1,767 1,741 1,795 1,812 1,812 1,818 1,670 1,590 1,552 1,552 Net debt* 1,596 1,739 1,721 1,785 1,800 1,800 1,805 1,658 1,569 1,533 1,533 Shareholders' equity 1,199 1,246 1,211 1,201 1,256 1,256 1,289 1,309 1,335 1,304 1,304 Book value per share $12.09 $12.60 $12.25 $12.16 $12.79 $12.79 $13.23 $13.43 $13.70 $13.41 $13.41 LTM EBITDA LTM Interest % 59.0% 58.0% 57.0% 56.0% 55.0% 54.0% 53.0% 57.5% Q % Q Debt / Debt + Equity 59.9% 59.1% 59.0% 58.5% Q Q Q Q % Q % Q % Q Q Q Net debt / LTM EBITDA Q Q Q Q Q Q Q Q LTM EBITDA / LTM interest Q Q Q Q Q Q Q Q Improvement in all debt ratios * Includes $104M of net debt from unrestricted subsidiaries and JVs.The debt/debt+ equity ratio does not take into account the effect of our hedging instruments on our US$ denominated debt. Debt covenants are calculated on a restricted group basis, which excludes our JVs and participations. 16

17 NET DEBT RECONCILIATION (M$) 3,000 2, (25) (91) (956) 2,000 1,500 1, * * 1,000,500,0 Net debt September 30, 2009 Senior note offerings (net of fees) CAPEX Others Var. of F/X Operating cash flows Debt buy-back & revolver reimbursment Net debt December 31, 2009 Current availability** of approximately $375 $360 M on credit facilities ies * Includes $104 M of net debt from unrestricted subsidiaries and joint ventures. ** As of December 31th 2009, availability was $521 M as we had $259 M drawn from the credit facility but $26 M in letters of credit. Credit Agreement Borrowing Base amounts to $806M on a authorized amount of $850M. 17

18 RECENT NOTES REFINANCING (M CAN$) Long-term debt repayment schedule as of Sep. 30, 2009* (M CAN$) Long-term debt repayment schedule as of Feb. 19, 2010* Improving debt profile by extending debt maturities *Including revolver, term credits and unsecured senior notes. Using a F/X rate of Cdn$ for Sept. 30, 2009 and a F/X rate of Cdn$ / US$ for Feb. 19,

19 SEGMENTED REVIEW 19

20 PACKAGING - BOXBOARD Sales EBITDA EBITDA margins Shipments Avg. Selling price Avg. Selling price Reference price (in millions $) (in millions $) (% of sales) (in thousands s.t.) ($CAN/s.t.) ($US or Euro/s.t.) ($US or Euro/s.t.) Q Q Q Q Q Q Q Q Q Q Q Q Q Q Manufacturing - N. America % 12% Manufacturing - Europe % 4% Converting % 9% ,525 2,551 2,391 2,325 n/a n/a Others and eliminations (18) (19) (23) (27) % 8% North America / manufacturing Sales were stable in the fourth quarter as the 6% increase in volumes was offset by the appreciation of the Canadian dollar. Increased volumes and gains on F/X contracts positively affected EBITDA of manufacturing operations. However, the higher cost of energy and raw materials combined with an unfavorable sales mix had an negative impact on EBITDA. The EBITDA margins stayed relatively stable at 11%. Capacity utilization rate was 87% in Q compared to 82% in Q In 2009, EBITDA for the mills reached $29 M compared to an operating loss before depreciation of $21 M in North America / converting Despite the seasonally lower volumes (in cartons) in our converting operations, EBITDA increased thanks to a better control of costs and an increased operational efficiency. Europe / manufacturing In Europe, the strong improvement in results is explained by significantly higher demand and a slight increase in average selling price. 1 Numbers reflect the proportionate consolidation (36.15% in Q and 34.8% in Q3 2009) of the activities of Reno de Medici S.p.A.. EBITDA excluding specific items. 20

21 PACKAGING - CONTAINERBOARD Sales EBITDA EBITDA margins Shipments Avg. Selling price Avg. Selling price Reference price (in millions $) (in millions $) (% of sales) (in thousands s.t.) ($CAN/s.t. or msf) ($US/s.t. or msf) ($US/s.t.) Q Q Q Q Q Q Q Q Q Q Q Q Q Q Manufacturing % 14% Converting % 10% n/a n/a Others and eliminations (82) (90) (162) (163) % 15% Manufacturing Sales and operating income before depreciation (EBITDA) declinedmainly due to the appreciation of the CAN$, lower seasonal shipments (2% or 5,000 s.t.) and selling price erosion. Capacity utilization rate went from 91% in the third quarter to 89% in the fourth quarter of EBITDA was also negatively affected by higher energy costs and lower credits for research & development. Converting Sales dropped due to the appreciation of the CAN$ and lower seasonal shipments (4% in msf). EBITDA also declined in line with lower volumes and higher maintenance and other fixed costs. However, linerboard and medium costs as well as the appreciation of the CAN$ had a positive effect. Overall, EBITDA margins stayed relatively stable at 9%. 1 Equals 2,942 million square feet (msf), $1,135 CAN/s.t. and $1,075 US/s.t. respectively in Q4 2009, and at 3,065 million square feet (msf), $1,167 CAN/s.t. and $1,064 US/s.t. respectively in Q EBITDA excluding specific items. 21

22 PACKAGING SPECIALTY PRODUCTS Sales EBITDA EBITDA margins Shipments Avg. Selling price Avg. Selling price Reference price (in millions $) (in millions $) (% of sales) (in thousands s.t.) ($CAN/s.t.) ($US/s.t.) ($US/s.t.) Q Q Q Q Q Q Q Q Q Q Q Q Q Q Manufacturing % 10% Converting % 12% Recovery, deinked pulp % 10% n/a n/a Others and eliminations (16) (18) (5) (5) % 11% Manufacturing (fine p., kraft p., vinyl flooring backing and uncoated board) Overall, the decrease in sales is mainly explained by lower seasonal shipments and the appreciation of the CAN$, partly offset by a lower average selling price. The capacity utilization rate in manufacturing activities came down from 86% in Q to 81% during the fourth quarter. In 2009, the average capacity utilization rate was 82%. EBITDA stayed stable as the lower shipments and higher raw material and energy costs were offset by a more favorable sales mix and a reduction of fixed costs. Converting -(fine p., laminated, papermill packaging, honeycomb, plastic products, moulded pulp) The stable EBITDA in converting is mainly explained by the performance of our papermill packaging sector which was positively affected by higher volumes and a more favorable sales mix. Our consumer product packaging sector was negatively affected by the opposite scenario, a higher cost of raw materials and a seasonal decrease of shipments. Recovery and Deinked Pulp Although we experienced higher selling prices and volumes (due to recent acquisitions), profitability of our recovery operations was lower as a result of increased provisions and overall competition. Our both de-inked pulp units reported lower results as result of a tighter selling prices-raw material costs spread and lower shipments. EBITDA excluding specific items. 22

23 TISSUE PAPERS Sales EBITDA EBITDA margins Shipments Avg. Selling price Avg. Selling price Reference price 1 (in millions $) (in millions $) (% of sales) (in thousands s.t.) ($CAN/s.t.) ($US/s.t.) ($US/s.t.) Q Q Q Q Q Q Q Q Q Q Q Q Q Q Manufacturing and converting % 18% ,644 1,715 1,556 1,563 1,628 1,605 The slight increase in sales is explained by the acquisition of the tissue assets of Atlantic Packaging which was almost completely offset by the appreciation of the CAN$. Our total external shipments grew by 7% mainly due to the acquisition of the tissue assets of Atlantic Packaging. This increase in shipments has been felt at both the parent roll and converted product levels. Excluding the impact of the acquisition, our volumes in the away-from-home market decreased due to seasonality. However, our shipments increased in the retail market. Selling prices of our converted products remained relatively stable in both markets (away-from-home and retail) and countries (Canada and United States). Selling prices of parent rolls stabilized during the quarter. However, the average US$ selling price was slightly lower compared to Q The EBITDA decreased to $35 million as the negative impact of higher costs of fiber (-$8 M) and energy (-$1 M) as well as the appreciation of the CAN$ were partly offset by lower variable and other costs = 1,000 combined tissue paper index in US$, with a constantsales mix (that of year 2006). EBITDA excluding specific items. 23

24 Q & A 24

25 CONCLUDING REMARKS 25

26 FOCUS ON FIRST QUARTILE ROA * Return on assets % of assets (average assets 2009) Boxboard 4% 3% 11% 30% Containerboard 12% 9% 10% 39% Specialty products 10% 11% 13% 16% Tissue papers 12% 18% 27% 15% Total Cascades 9.1% 7.8% 11.9% 100% Improvement in all sectors; Significant turnaround in Boxboard, Tissue ROA more than doubled since 2007 See notes p.31 26

27 UPWARD SELLING PRICES (US$/ton) Monthly Refence Prices ( /tonne) Jan 06July 06Jan 07July 07Jan 08July 08Jan 09July 09Jan 10 Liner Medium CRB GC II GDII Cascades capacity ( 000 s.t.) CRB (North American boxboard) 390 Liner + Medium (Containerboard) 1,115 GC II (European boxboad) 244 GD II 1 (Europeanboxboard) 359 Tissue paper Recent developments CRB implemented 30 US$/ton Liner + Medium implemented US$/ton GC II announced /tonne GD II announced /tonne Tissue paper announced Rolls & U.S. AfH Price increases have been announced across all sectors for Q1 2010; additional price increase announced for April in containerboard. ¹Cascades capacity through the proportionate consolidation of Reno de Medici (992,000 s.t.). ²Practical capacity which represents 85% of theoretical capacityof 644,000 s.t.. Source: RISI and EUWID 27

28 SUMMARY & OUTLOOK Q4 Summary Net earnings excluding specific items of $1.13 per share ($110 million) compared to net earnings of $0.04 per share ($4 million) in 2008 Operating income before depreciation and amortization (EBITDA) excluding specific items up 152% to $465 million, the highest annual EBITDA in the Company s history Cash flow from operations (adjusted) of $305 million ($3.12 pershare) and free cash flow of $149 million Net debt down $268 million compared to December 31, Short-Term Outlook Improvement of demand Current implementation of selling price increases Significant rise of recycled fibre costs 28

29 APPENDICES 29

30 MARKET PRICE AND COST SUMMARY 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 Average Average Average Average Average Average Average Average Average Average Average Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q (unit) (%) (index 2003 = 1,000) 1 1,386 1,442 1,460 1,552 1,547 1,500 1,487 1,427 1,412 1,417 1, % PACKAGING Boxboard North America (US$/ton) Recycled boxboard - 20pt. Clay coated news (transaction) % Europe (Euro/tonne) Recycled white-lined chipboard (GD2) index % Virgin coated duplex boxboard (GC2) index 7 1, % Containerboard (US$/ton) Linerboard 42-lb. unbleached kraft, East US (transaction) % Corrugating medium 26-lb. Semichemical, East U.S. (transaction) % Specialty products (US$/ton, tonne for deinked pulp) Recycled boxboard - 20pt. Bending chip (transaction) % Deinked pulp (f.o.b; U.S. air-dried & wet-lap, post-consumer) % Unbleached kraft paper, Grocery bag 30-lb % Uncoated white 50-lb. offset, rolls % TISSUE PAPERS Cascades Tissue papers (index 1999 = 1,000) 8 1,490 1,560 1,602 1,618 1,606 1,581 1,615 1,628 1,605 1,628 1, % Raw materials Cascades North American US$ index (index 2003 = 300) % RECYCLED PAPER North America (US$/ton) Corrugated containers, no. 11 (OCC - Chicago & NY average) % Special news, no. 8 (ONP - Chicago & NY average) % Sorted office papers, no. 37 (SOP - Chicago & NY average) % Europe (Euro/tonne) Recovered mixed paper & board sorted index % VIRGIN PULP (US$/tonne) Bleached softwood kraft Northern, East U.S % Bleached hardwood kraft Northern mixed, East U.S % WOODCHIPS Conifer eastern Canada (US$/odmt) % Change Source: RISI, Random Lengths and Cascades. See notes p

31 NOTES 1. The Cascades North American selling prices index represents an approximation of Cascades manufacturing (excluding converted products) selling prices in North America. It is weighted according to shipments. It takes into account some of the main Cascades productsfor which prices are available in Pulp & Paper Week magazine and the Cascades Tissue Index. This index should only be used as a trend indicator as it may differ from our actual selling prices and our product mix. The only non-manufacturing prices taken into account in the index are the tissue prices. In fact, the tissue pricing indicator, which is blended in the Cascades North American selling prices index, is the Cascades Tissuepaper selling prices index which represents a mix of primary and converted products. 2. 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 (in tons). 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. 3. Defined as: Shipments/Practical capacity. Paper manufacturing only. 4. 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. 5. Working capital includes accounts receivable plus inventories less accounts payable. It excludes an unpaid provision for closureand restructuring costs. It also excludes the current portion of derivatives financial instruments and the current portion of future taxes liability. 6. 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. For each country we use an average of PPI and EUWID prices for white-lined chipboard. Historical prices were revised by EUWID in August 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. For each country we use an average of PPI and EUWID prices for the coated duplex boxboard. Historical prices were revised by EUWID in August 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 The Cascades recovered mixed paper & board sorted prices index represents an approximation of Cascades recovered paper purchase prices in Europe. It is weighted by country. For each country we use an average of PPI and EUWID prices for the recovered mixed paper & board. This index should only be used as a trend indicator and it may differfrom our actual purchasing costs and our purchase mix. 31

32 For more information: Didier Filion Director, Investor Relations