REVIEW OF FINANCIAL RESULTS Q3 2009

Transcription

1 REVIEW OF FINANCIAL RESULTS November 6, 2009 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 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 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 most directly 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 Highest EBITDA excluding specific items ($127 M) in Company's history Net earnings excluding specific items of $0.36 per share ($35 million) Free cash flow of $65 million ($142 million YTD) Net debt down $88 million compared to June 30 th 2009; Decrease of $216 million y o y Acquisition of Atlantic Packaging s tissue paper assets Two strategic acquisitions in the paper recovery sector 4

5 SUMMARY OF FINANCIAL RESULTS (In million of CAN$, except amount per share) Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 LTM Financial results Sales ,039 1,020 4, ,945 Excluding specific items EBITDA Net earnings (loss) (9) (11) Net earnings (loss) per share (0.09) (0.11) Cash flows (adjusted) from operations (M CAN$) Q Q EBITDA Q Q (% of sales) Cash flows (adjusted) from operations 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% (M CAN$) Q Q Q Q (% of sales) 11.0% 9.0% 7.0% 5.0% 3.0% 1.0% The trend in improved results continues 5

6 SEGMENTED EBITDA (M CAN$) Q (M CAN$) Q Q Q Q Q Q Boxboard 3 Q Q Q (% of sales) Containerboard (M CAN$) % % % % % % 20 Specialty products (% of sales) % % % 9 6.0% Q Q Q Q Q Q % 2.0% Q (M CAN$) 19 Q Q Q Q Q Q Q Q Q Q Tissue papers 12 Q Q Q Q Q (% of sales) 18.0% 15.0% 12.0% 9.0% (% of sales) % 19.0% Improved results in containerboard for a third consecutive quarter 16.0% 13.0% 10.0% 7.0% 4.0% EBITDA excluding specific items. 6

7 PRICING AND COST ENVIRONMENT Natural gas ($US/mmBtu) (M $CAN) $ 11 $ 10 $ 9 $ 8 $ 7 $ 6 $ 5 $ 4 $ 3 $ 2 $ Q Q Q Q Q Q Q Q EBITDA Consolidated Est. Spread avrg. price cost fibre Cascades ($CAN/s.t.) EBITDA boxboard Total shipments ('000 s.t.) 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 The higher volumes did not fully offset the decrease in the selling price/fibre cost spread and the appreciation of the CAN$ Natural gas Hhub ($US/mmBtu) $US/$CAN EBITDA excluding specific items. 7

8 PRICING AND COST ENVIRONMENT Selling prices 1,600 1,550 1,500 1,450 1,400 1,350 1,300 1,250 1,200 1,150 Cascades North American price and cost indices Raw material costs , Q Q Q Q Q Q Q Q Q Q Q Q Selling prices index1 (US$) Raw materials index2 (US$); The selling price index/raw material cost index spread tighten compared c to as recycled fibre and pulp prices continued to increase See notes p

9 FINANCIAL REVIEW 9

10 EBITDA VARIANCE ANALYSIS (M CAN$) (26) (6) (5) (1) In M CAN$ 80 Energy price & cons. Other variable costs Volume (shipments) Fixed costs & others Selling price & mix Var. of the $CAN Raw materials costs & mix Other sectors Business acquisitions and disposals Containerboard (10) (3) (1) 41 Boxboard 32 1 (3) 5 (5) (1) (2) (1) 26 Specialty prod (1) (1) 22 Tissue papers (10) (1) (3) 1 38 Corporate (11) Total (26) (6) (5) (1) 127 Lower fixed and other variable costs combined with higher volumes more than offset a tighter spread and stronger CAN$ EBITDA excluding specific items.. 10

11 KEY PERFORMANCE INDICATORS (KPIs) (In million of CAN$, unless other wise noted) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Q3 vs. Q2 change Operational Total shipments (in '000 of s.t.) Packaging 3, , % Tissue papers % Total 3, , % Capacity utilization rate 3 % 94% 91% 87% 90% 82% 88% 79% 84% 88% 4% Integration rate (North America) % 46% 45% 47% 46% 45% 46% 49% 49% 48% (1%) Financial LTM Return on assets (%) 4 8.9% 8.3% 7.7% 7.6% 8.0% 8.0% 8.9% 10.4% 11.4% 1.0% Working capital 5 In millions of $ (6%) % LTM of sales 16.5% 16.7% 16.6% 16.3% 16.6% 16.6% 16.8% 17.0% 17.0% Shipments continued to rebound after a trough in Q1 ('000 s.t.) Q Total shipments & Capacity utilization rate Q Q Q % 95% 90% 85% 80% 75% 70% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 8.3% Q LTM Return on assets (%) 8.9% 8.0% 7.7% 7.6% Q Q Q % 11.4% Fourth consecutive quarter of improving ROA Total shipments Capacity utilization rate See notes p

12 EBITDA TO OP. INCOME RECONCILIATION (M CAN$) (53) (1) (5) EBITDA excl. spec. items Depreciation & amortization EBIT excl. spec. Items Impairment loss Unreal. gain on finan. inst. Closure and restruct. costs Operating income Container Specialty Tissue Corporate (in million of Canadian dollars) Boxboard board Products Papers Activities Total Operating income Specific items: Impairment loss 1 1 Closure and restructuring costs Unrealized gain on financial instruments (2) (6) (8) Total specific items 4 (1) 1 (6) (2) EBIT excluding specific items (1) 74 Depreciation Operating income before depreciation and amortization (EBITDA) excluding specific items

13 NET EARNINGS RECONCILIATION (M CAN$) (8) Net earnings Impairment loss Closure and restruct. costs F/X Loss on long term debt Unrealized gain on finan. instr. Net earnings excluding spec. items 13

14 CASH FLOW OVERVIEW (in millions of CAN$) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 YTD Cash flow from operations Non cash working capital variation (89) (48) 12 (21) 26 (31) (1) Cash flow provided by operations 89 (31) Capital expenditures (167) (41) (42) (45) (63) (191) (40) (32) (52) (124) TOTAL (78) (72) 6 (23) 22 (67) Cash flow provided by operations Capital expenditures (M CAN$) (M CAN$) (30) (60) (31) Q Q Q Q Q Q Q Q Improved free cash flow to pay down debt despite higher CAPEX 14

15 BALANCE SHEET & KEY FINANCIAL RATIOS Year Q1 Q2 Q3 Q4 Q1 Q2 Q3 Total assets 3,769 3,960 3,897 3,917 4,030 4,041 3,886 3,877 Total debt 1,621 1,767 1,741 1,795 1,812 1,818 1,670 1,590 Net debt* 1,596 1,749 1,720 1,786 1,801 1,805 1,658 1,570 Shareholders' equity 1,199 1,246 1,211 1,201 1,256 1,289 1,309 1,335 Book value per share $12.09 $12.60 $12.25 $12.16 $12.79 $13.23 $13.43 $13.70 LTM EBITDA LTM Interest % 59.0% 58.0% 57.0% 56.0% 55.0% 54.0% 53.0% 57.5% Q Debt / Debt + Equity 59.9% 58.6% 59.1% 59.0% Q Q Q % Q % 54.4% Q Net debt / LTM EBITDA Q Q Q Q An. Q Q LTM EBITDA / LTM interest Q Q Q Q An. Q3 09 Significant improvement in all debt ratios * Includes $108 M of net debt from unrestricted subsidiaries and JVs. The debt/debt+ equity ratio does not take into account the effect of our hedging instruments on our US$ denominated debt. Debt covenants are calculated on a restricted group basis, which excludes our JVs and participations. 15

16 NET DEBT RECONCILIATION (M CAN$) 1,700 1,658 1,650 1, Down $88 M 61 (8) 13 1,570* 1,550 1,500 1,551 (117) (94) 5 1,450 1,400 Net debt June 30, 2009 (1,042 M in senior notes, 474 M in revolver and term loan, 35 M in others) Operating cash flows CAPEX Var. of F/X Dividends and share buyback (961 M in senior notes, 479 M in revolver and term loan, 22 M in others) Business acquisitions Variation of cash & cash equivalents Others 1,462 Net debt September 30, 2009 Current availability*** of approximately $375 $360 M on credit facilities ies * Includes $108 M of net debt from unrestricted subsidiaries and joint ventures. ** As of September 30th 2009, availability was $344 M as we had $371 M undrawn from the credit facility but $27 M in letters of credit. ***Credit Agreement Borrowing Base amounts to $825M on a authorized amount of $850M. 16

17 SEGMENTED REVIEW 17

18 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.) Manufacturing N. America % 13% Manufacturing Europe % 5% Converting % 9% ,551 2,670 2,325 2,288 n/a n/a Others and eliminations (19) (23) 2 (27) (26) % 10% North America / manufacturing Sales decreased by 13% during the third quarter mainly as a result of the 7% decrease in volumes and the appreciation of the Canadian dollar. Those factors, combined with higher recycled fiber prices partially offset by lower fixed costs, also explain the slight decline in EBITDA to 8 million$. EBITDA margins improved to 14% The capacity utilization rate was 82% in compared to 84% in. North America / converting The slight seasonal decrease in volumes (in cartons) in the quick service restaurant converting operations combined with the appreciation of the CAN$ explain the lower sales and EBITDA. Selling prices as well as paper input costs remained relatively stable compared to. Europe / manufacturing Selling prices continued to be slightly under pressure while recycled fiber costs continued to increase. Shipments were affected by the usual seasonal slowdown of August. 1 Numbers reflect the proportionate consolidation (34.8% in and 33.2% in ) of the activities of Reno de Medici S.p.A.. EBITDA excluding specific items. 18

19 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.) Manufacturing % 17% Converting % 6% n/a n/a Others and eliminations (90) (85) 2 (158) (144) % 14% Manufacturing Sales remained relatively stable as the appreciation of the Canadian dollar and the decrease in selling prices were offset by the 11% growth in shipments (29,000 s.t.). Capacity utilization rate increased from 82% in Q2 to 91% in. Downtime reduced quarterly production by approximately 23,000 short tons (38,000 s.t. in Q2) EBITDA mainly decreased as a result of higher recycled fiber costs and the appreciation of the $CAN. Theses hikes, combined with the slight decrease in selling prices, more than offset the growth in volumes and lower energy costs. Converting Sales stayed relatively stable as a 3% increase in shipments (in msf) offset the decrease of the average selling price in CAN$. Shipments rose mostly due to the seasonal pickup in demand. The average converting selling price in CAN$ was lower, in line with market price indicators. The average price in US$ increased due to the appreciating Canadian dollar. With regards to EBITDA, the decrease in the cost of linerboard and corrugated medium, coupled with a rise in volumes and the reduction in SG&A costs, had a substantial positive effect. These factors more than offset the downward pressure on selling prices. After a trough of 4% in Q1 2009, EBITDA margins continued to rebound to reach 10%. 1 Equals 3,065 million square feet (msf), $1,178 CAN/s.t. and $1,073 US/s.t. respectively in, and at 2,963 million square feet (msf), $1,298 CAN/s.t. and $1,112 US/s.t. respectively in. EBITDA excluding specific items. 19

20 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.) Manufacturing % 11% Converting % 10% Recovery, deinked pulp % 9% n/a n/a Others and eliminations (18) (22) (1) (5) (5) % 11% Manufacturing (fine p., kraft p., vinyl flooring backing and uncoated board) Overall, the relatively stable sales are mainly explained by a growth in our fine paper, uncoated board and flooring backing shipments which offset the appreciation of the Canadian dollar. With a 6% increase in volume, the manufacturing operations capacity utilization rate increased to 86% in Q3 relative to 82% in Q2. The EBITDA slightly decreased due to the negative effects of fiber costs and price mix. This was partly offset by increased volumes and the accounting of an exceptional charge in the previous quarter. Converting (fine p., laminated, papermill packaging, honeycomb, plastic products, moulded pulp) The slight improvement of the EBITDA of our converting operations is mainly attributable to the performance of the papermill packaging segment which was favorably affected by higher volumes and a better control of their fixed costs. Recovery and Deinked Pulp Sales and profitability of our recovery operations continued to increase mainly due to higher selling prices of recycled fibre and the ramp up of our Calgary sorting facility. Our two deinked pulp units posted relatively stable results as the hike in the price of raw materials was offset by improved volumes and lower energy and fixed costs. EBITDA excluding specific items. 20

21 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.) Manufacturing and converting % 20% ,715 1,870 1,563 1,602 1,605 1,628 The slight increase in sales is explained by a strong growth of shipments that was almost completely offset by a lower average selling price in US$ and the appreciation of the Canadian dollar. Our total external shipments grew by 11% mainly due to the seasonal pickup in demand for parent rolls, market share gains, the need of some of our customers to come back to more sustainable inventory levels and the acquisition of the tissue assets of Atlantic Packaging Products Ltd. which translate, on its own, by a 3% increase of shipments. Selling prices of our converted products remained relatively stable in Canada as well as in the United States in local currency. Selling prices of parent rolls continued to decrease in both countries compared to. Moreover, the average US$ selling price was negatively affected by a mix effect. The EBITDA reached $38 million as lower selling prices and higher fiber costs more than offset the positive impact of increased shipments. The integration of the tissue assets of Atlantic Packaging Products Ltd. is evolving as expected and we will begin to focus on achieving the potential synergies during the following quarters in order to improve EBITDA = 1000, combined tissue paper index in US$, with a constant sales mix (that of year 2006). EBITDA excluding specific items. 21

22 Q & A 22

23 CONCLUDING REMARKS 23

24 SUMMARY & OUTLOOK Q2 Summary Highest EBITDA in Cascades History ($127 M) Net earnings excluding specific items of $0.36 per share ($35 million) Free cash flow of $65 million ($142 million YTD) Net debt down $88 million compared to June 30 th 2009 Acquisition of Atlantic Packaging s tissue paper assets Two strategic acquisitions in the paper recovery sector Short Term Outlook Relative stability of selling prices Lower volumes due to normal seasonality and planned maintenance downtime Potentially higher fibre and energy costs 24

25 APPENDICES 25

26 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 Average Average Average Average Average Average Average Average Average Average Q1 Q2 Q3 Q4 Q1 Q2 Q3 (unit) (%) (unit) (%) Selling prices Cascades North American US$ index (index 2003 = 1,000) 1 1,386 1,442 1,460 1,552 1,547 1,500 1,487 1,427 1,412 1, % -15-1% PACKAGING Boxboard North America (US$/ton) Recycled boxboard - 20pt. Clay coated news (transaction) % -2 0% Europe (Euro/tonne) Recycled white-lined chipboard (GD2) index % -13-2% Virgin coated duplex boxboard (GC2) index 7 1, % -13-1% Containerboard (US$/ton) Linerboard 42-lb. unbleached kraft, East US (transaction) % -6-1% Corrugating medium 26-lb. Semichemical, East U.S. (transaction) % -6-1% Specialty products (US$/ton, tonne for deinked pulp) Recycled boxboard - 20pt. Bending chip (transaction) % -7-1% Deinked pulp (f.o.b; U.S. air-dried & wet-lap, post-consumer) % 25 4% Unbleached kraft paper, Grocery bag 30-lb % 0 0% Uncoated white 50-lb. offset, rolls % -23-3% TISSUE PAPERS Cascades Tissue papers (index 1999 = 1,000) 8 1,493 1,560 1,602 1,618 1,606 1,597 1,615 1,628 1,605 1, % -23-1% Raw materials Cascades North American US$ index (index 2003 = 300) % 78 27% RECYCLED PAPER (US$/short ton) North America (US$/ton) Corrugated containers, no. 11 (OCC - Chicago & NY average) % 32 71% Special news, no. 6 (ONP - Chicago & NY average) % % Sorted office papers, no. 37 (SOP - Chicago & NY average) % 35 39% Europe (Euro/tonne) Recovered mixed paper & board sorted index % 14 67% VIRGIN PULP (US$/tonne) Bleached softwood kraft Northern, East U.S % 90 14% Bleached hardwood kraft Northern mixed, East U.S % 71 13% WOODCHIPS Conifer eastern Canada (US$/odmt) % 6 5% Change Change Source: RISI, Random Lengths and Cascades. See notes p

27 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 products for 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 Tissue paper 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 closure and 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 differ from our actual purchasing costs and our purchase mix. 27

28 For more information: Didier Filion Director, Investor Relations