REVIEW OF Q FINANCIAL RESULTS. August 9, 2018

Transcription

1 REVIEW OF Q FINANCIAL RESULTS August 9, 2018

2 DISCLAIMER FORWARD-LOOKING STATEMENT Certain statements in this presentation, including statements regarding future results and performance, are forward-looking statements within the meaning of securities legislation based on current expectations. The accuracy of such statements is subject to a 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 Cascades Inc. s ( Cascades, CAS, the Company, the Corporation, us or we ) 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 Corporation. SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES SPECIFIC ITEMS The Corporation incurs some specific items that adversely or positively affected its operating results. We believe it is useful for readers to be aware of these items, as they provide additional information to measure the performance, compare the Corporation's results between periods and to assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not necessarily reflective of the Corporation underlying business operations in measuring and comparing its performance and analyzing future trends. Our definition of specific items may differ from those of other corporations and some of them may arise in the future and may reduce the cash available to us. They include, but are not limited to, charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing and repurchase of long-term debt, some deferred tax assets provisions or reversals, premiums paid on long-term debt refinancing, gains or losses on the acquisition or sale of a business unit, gains or losses on the share of results of associates and joint ventures, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rate swaps, foreign exchange gains or losses on long-term debt, specific items of discontinued operations and other significant items of an unusual, non-cash or non-recurring nature. RECONCILIATION OF NON-IFRS MEASURES To provide more information for evaluating the Corporation's performance, the financial information included in this analysis contains certain data that are not performance measures under IFRS ( non-ifrs measures ) which are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance measures and non-ifrs measures is useful to both management and investors as they provide additional information to measure the performance and financial position of the Corporation. It also increases the transparency and clarity of the financial information. The following non-ifrs measures are used in our financial disclosures: income before depreciation and amortization (): Used to assess operating performance and contribution of each segment when excluding depreciation & amortization. is widely used by investors as a measure of a corporation ability to incur and service debt and as an evaluation metric. : Used to assess operating performance and contribution of each segment on a comparable basis. operating income: Used to assess operating performance of each segment on a comparable basis. net earnings: Used to assess the Corporation s consolidated financial performance on a comparable basis. free cash flow: Used to assess the Corporation s capacity to generate cash flows to meet financial obligation and/or discretionary items such as share repurchase, dividend increase and strategic investments. Net debt to adjusted ratio: Used to measure the Corporation's credit performance and evaluate the financial leverage. Net debt to adjusted ratio on a pro forma basis: Used to measure the Corporation's credit performance and evaluate the financial leverage on a comparable basis including significant business acquisitions and excluding significant business disposals, if any. Non-IFRS measures are mainly derived from the consolidated financial statements but do not have meanings prescribed by IFRS. These measures have limitations as an analytical tool, and should not be considered on their own or as a substitute for an analysis of our results as reported under IFRS. In addition, our definitions of non-ifrs measures may differ from those of other corporations. Any such modification or reformulation may be significant. All amounts in this presentation are in Canadian dollars unless otherwise indicated. Please click here for supplemental information on non-ifrs measures. 2

3 SUMMARY OF QUARTERLY FINANCIAL RESULTS Q Q Q Q Q Q Q Q Q Q Figures above in millions of CAN$ 1 Net Earnings Figures above in millions of CAN$ 1 Net Earnings (In millions of CAN$, except amount per share) Year Q1 Q2 Q3 Q4 Year Q1 Q2 LTM Financial results Sales 4,001 1,006 1,130 1,103 1,082 4,321 1,098 1,179 4,462 income Net earnings net earnings Net earnings per share $1.42 $1.70 $2.70 $0.35 $0.60 $5.35 $0.65 $0.28 $1.88 net earnings per share 1 $1.21 $0.13 $0.25 $0.20 $0.14 $0.72 $0.13 $0.30 $0.77 Sales, adjusted and adjusted net earnings improved sequentially and year-over-year in Q (1) Please click here for supplemental information on non-ifrs measures. 3

4 HISTORICAL SEGMENTED QUARTERLY OPERATING INCOME (LOSS) & ADJUSTED 1 Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) Q Q Q Q Q Q Q Q Q Q Specialty Products (millions of CAN$) Q Q Q Q Q Tissue Papers (millions of CAN$) (6) (2) (9) Q Q Q Q Q (Loss) (1) Please click here for supplemental information on non-ifrs measures. 4

5 HISTORICAL SEGMENTED QUARTERLY SHIPMENTS Containerboard ('000 s.t. and % capacity utilization 1 ) Boxboard Europe ('000 s.t. and % capacity utilization 1 ) 100% 103% % % % 92% 91% 94% 93% 89% Q Q Q Q Q Q Q Q Q Q Tissue Papers ('000 s.t. and % capacity utilization 1 ) % % % % 84% Q Q Q Q Q (1) Utilization rate defined as total manufacturing shipments divided by practical capacity. 5

6 KEY PERFORMANCE INDICATORS (KPIs) Total Shipments 1 ('000 s.t.) Capacity Utilization rate 1-2 (manufacturing only)) % 94% 97% 92% 91% Q Q Q Q Q Q Q Q Q Q LTM Return on Assets LTM Working Capital (% of LTM Sales) 10.2% 10.8% 9.1% 8.9% 9.2% 9.5% 9.9% 9.9% 10.1% 10.5% Q Q Q Q Q Q Q Q Q Q (1) Not including the Specialty Products segment. (2) Utilization rate defined as total manufacturing shipments divided by practical capacity. Please refer to the 2018 Second Quarter Report for the definition of the KPIs. 6

7 RAW MATERIAL COSTS - INDEX LIST PRICES (US$/ton) Recycled Fibre Prices Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Jul 18 Current (July) (US$/ton) 1,400 1,300 1,200 1,100 1, Virgin Pulp Prices Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Jul 18 Current (July) 1,355 1,180 White grades (Basket of products) Brown grades (OCC) NBSK NBHK Recovered Paper Prices Q Q Q Q2/Q2 Q2/Q1 White grades - Basket of products (Northeast average) % 16% Brown grades - OCC No. 11 (Northeast average) (52)% (23)% Virgin Pulp Prices NBSK (Canadian sources delivered to Eastern US) 1,093 1,233 1,310 20% 6% NBHK (Canada/US sources delivered to Eastern US) 942 1,077 1,125 19% 4% OCC prices continued downward trend in Q2 due to China's restriction on recovered paper import permits; Strong demand for pulp pushed NBSH & NBHK prices higher Source: RISI. (1) Basket of white recycled paper, including grades such as SOP, Hard White Envelope and Coated Book Stock; Northeast average. Weighted average based on Cascades' consumption of each grade. 7

8 CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES Net Debt / LTM 1 Interest Coverage Ratio 2 5.0x 4.6x 4.7x 4.0x 3.8x x 3.5x 3.0x 3.4x 3.4x 4.7x 4.6x 3 4.3x 3 5.0x Q Net Debt / Net Debt + Total Equity 64% 62% 58% 59% 57% 49% 48% Q Long-Term Debt Maturities (as at June 30, 2018) year > 1 year Q Senior notes Debts without recourse Revolver Subsidiaries debts Q LTM leverage ratio of 3.5x 3 ; Targeting leverage ratio of 2.5x Bank debt financial covenant ratios: Net funded debt to capitalization 65% (currently at 44.62%), interest coverage ratio 2.25x (currently at 4.32x). (1) Please click here for supplemental information on non-ifrs measures. (2) Last twelve months adjusted to financing expense. (3) Pro-forma for the 2017 and 2018 business acquisitions on a LTM basis. 8

9 FINANCIAL REVIEW 9

10 YEAR OVER YEAR SALES RECONCILIATION (M CAN$) +4% 1,250 1,200 1,150 1, (15) (21) 1,179 1,100 (M CAN$) Sales Q Selling prices & Mix Acqu. & Disposals Volume Other Variances F/X CAN$ Recovery & Recycling Sales Q Containerboard (11) 475 Boxboard Europe (4) Specialty Products (6) (1) (21) 164 Tissue Papers 338 (6) 21 (11) 342 Corporate & Elim. (37) (2) 5 (34) Total 1, (15) (21) 1,179 Higher selling price, improved mix and business acquisitions drove YoY sales increases in Containerboard and European Boxboard business segments. Specialty Product results below last year due to the decrease in OCC price. 10

11 SEQUENTIAL SALES RECONCILIATION (M CAN$) +7% 1, ,150 (2) 1,179 1,100 1,098 (M CAN$) 1,050 Sales Q Volume Selling Prices & Mix F/X CAN$ Recovery & Recycling Other Variances Sales Q Containerboard Boxboard Europe 246 (18) 7 (3) 232 Specialty Products Tissue Papers (3) Corporate & Elim. (33) 1 (2) (34) Total 1, (2) 1,179 Stronger Containerboard and Tissue Papers volumes and improved sales price & mix in all segments drove sequential sales increase, offsetting lower volumes from Boxboard Europe 11

12 YEAR-OVER-YEAR CONSOLIDATED OPERATING INCOME RECONCILIATION (M CAN$) Higher average selling price + Lower recycled fibres prices (OCC) - Higher labour and freight costs Lower ERP and business process optimization costs + Lower stock-based compensation expense 9 + Lower recycled fibres prices + Higher average selling price - Higher gas prices - 8 (11) (28) Lower contibution from the Recovery business Higher volume - Less favourable product mix and average selling prices - Higher freight costs - Higher raw material costs (3) (58) 73 0 Q Amort. Specific Items Q Containerboard Boxboard Europe Corporate Activities Specialty Products Tissue Papers Q Specific Items Amort. Q Strong Containerboard results, driven by higher prices & lower raw material costs, offset weakness in Tissue Papers reflecting higher raw material costs (1) Please click here for supplemental information on non-ifrs measures. 12

13 SEQUENTIAL CONSOLIDATED OPERATING INCOME RECONCILIATION (M CAN$) + Sale of NY plant (62) Higher volume + Lower raw material costs + Higher average selling price - Higher Repairs and maintenance costs (6) (3) - Higher raw material costs + Higher seasonal volume (58) 73 0 Q Amort. Specific Items Q Containerboard Corporate Activities Specialty Products Boxboard Europe Tissue Papers Q Specific Items Amort. Q Stronger Containerboard results reflect better volume, implementation of the US$50/st price increase, and lower raw material costs, which more than offset Tissue weakness (1) Please click here for supplemental information on non-ifrs measures. 13

14 QUARTERLY YEAR-OVER-YEAR EPS VARIANCE Q Q Specifics 1 As reported 1 Specifics 1 As reported (3) (3) 131 Depreciation (56) (56) (58) (58) income 51 (3) (3) 73 Financing expenses & interest expense on employee future benefits (25) (25) (24) 1 (23) FX gain on LT debt and financial instruments Fair value revaluation gain on investments Share of results of associates and JVs Profit before tax (2) 53 Recovery of (provision for) income taxes (16) (16) Non-controlling interests (5) (5) (10) (10) Net earnings (2) 27 per share $ 0.25 $ 2.45 $ 2.70 $ 0.30 $ (0.02) $ 0.28 Change in after-tax results normalized at 26% $ 0.20 Better results in Containerboard and Europe partially offset by lower results from Specialty Products and Tissue papers segments Change in income taxes provision vs normalized tax rate at 26% Change in share of results of Associates and JVs - net of taxes and non-controlling interests (1) Please click here for supplemental information on non-ifrs measures. $ (0.10) Utilization of unrecognized tax assets on operating loss in 2017 and higher contribution from RdM in 2018 (higher tax rate) $ (0.05) Higher minority interest from RdM and Greenpac $

15 QUARTERLY SEQUENTIAL EPS VARIANCE Q Q Specifics 1 As reported 1 Specifics 1 As reported (3) 131 Depreciation (55) (55) (58) (58) income (3) 73 Financing expenses & interest expense on employee future benefits (23) (23) (24) 1 (23) FX gain on LT debt and financial instruments 1 1 Fair value revaluation gain on investments 5 5 Share of results of associates and JVs Profit before tax (2) 53 Provision for income taxes (5) (19) (24) (16) (16) Non-controlling interests (11) (11) (10) (10) Net earnings (2) 27 per share $ 0.13 $ 0.52 $ 0.65 $ 0.30 $ (0.02) $ 0.28 Change in after-tax results normalized at 26% $ 0.19 Higher contribution from Containerboard and Europe partially offset by lower results from Tissue & Specialty Products segments. Change in income taxes provision vs normalized tax rate at 26% $ (0.04) Difference in statutory income tax rate of foreign operations Change in share of results of Associates and JVs - $ 0.02 net of taxes and non-controlling interests $ 0.17 (1) Please click here for supplemental information on non-ifrs measures. 15

16 Q2-18 ADJUSTED TO OPERATING INCOME RECONCILIATION (M CAN$) (58) 76 (3) Amort. 1 Unrealized loss on financial instruments (M CAN$) Containerboard Boxboard Europe Specialty Products Tissue Papers Corporate Activities Total income (loss) (9) (26) 73 Specific items: Unrealized loss on financial instruments 3 3 Total Specific items 3 3 operating income (loss) (9) (26) 76 Depreciation and amortization (17) 134 (1) Please click here for supplemental information on non-ifrs measures. 16

17 NET EARNINGS - IFRS VS ADJUSTED NET EARNINGS NET EARNINGS PER COMMON SHARE 1 (in millions of Canadian dollars, except amount per common share) Q Q As per IFRS 27 $ 0.28 Specific items: Unrealized loss on financial instruments 3 $ 0.03 Unrealized gain on interest rate swaps (1) $ (0.01) 2 $ $ 0.30 (1) Specific amounts per common share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interest. (2) Please click here for supplemental information on non-ifrs measures. 17

18 CASH FLOW OVERVIEW Q Q Q Q Q Q Q Q Q Q CF from oper. Adj. CF from oper. 3 Free Cash Flow 3 Figures above in millions of CAN$ Figures above in millions of CAN$ (In millions of CAN$, except amount per share) Year Q1 Q2 Q3 Q4 Year Q1 Q2 LTM Cash flow from operations Specific items cash flow from operations Including: Net financing expense paid (89) (38) (10) (40) (11) (99) (37) (18) (106) Capital expenditures & other assets 2, 5 capital lease payments, net of disposals (196) (64) (32) (46) (63) (205) (9) (72) (190) Dividends 4 (16) (4) (7) (5) (4) (20) (6) (12) (27) free cash flow (34) free cash flow per share 3 $1.18 $(0.36) $0.55 $0.13 $0.24 $0.56 $0.56 $0.29 $1.22 Lower year-over-year adjusted Free Cash Flow in Q2 reflects expected higher capital payments offsetting a strong progression of Cash Flow from Operations (1) Specific items: premiums paid on the repurchase of long-term debt and restructuring costs. (2) Excluding increase in investments. (3) Please click here for supplemental information on non-ifrs measures. (4) Paid to our shareholders and to non-controlling interests. (5) Net of disposals of $81 million. 18

19 NET DEBT 1 RECONCILIATION - Q (M CAN$) 1, ,586 1,550 1, ,500 1, ,400 (111) (5) 1,350 Net debt as at Mar 31, 2018 Cash flow from operations Var in non-cash work. cap. components Others Dividends paid & share buyback, net of share issuance (options) FX rate Capital lease acquisitions and others Capital investments, net Net debt as at June 30, 2018 Q Q $430 million LTM adjusted 1 2 $455 million 3.6x Net debt/ltm adjusted 1 3.5x Strong Cash Flow from Operations more than offset by higher capital expenditure and capital lease (mainly related to the building of our new containerboard converting plant in New Jersey) (1) Please click here for supplemental information on non-ifrs measures. (2) Pro-forma for the 2017 and 2018 business acquisitions on a LTM basis. 19

20 SEGMENTED REVIEW 20

21 SEGMENTED YoY OPERATING INCOME (LOSS) WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) Q Amort. / Specific items (10) Q Selling Raw Other Q Price & Material Variances 1 1 Mix (20) (3) Amort. / Specific items 82 Q Q Amort. Q Raw Material 6 Selling Price & Mix (4) Other Variances 30 Q (9) Amort. 21 Q Higher containerboard and corrugated box prices Lower recycled fibres prices Higher labour, repairs and transportation costs Lower recycled fibres prices Better pricing environment Higher energy prices Specialty Products (millions of CAN$) Tissue Papers (millions of CAN$) Q Amort. Q Selling Price & Mix (7) (8) Other Recovery Variances & Recyc. 9 Q (5) Amort. 4 Q Q Amort. / Specific items 35 Q Volume (6) Selling Price & Mix (13) (16) 7 Raw Other Q Material Variances (16) Amort. (9) Q Loss Higher URB prices as well as favourable product mix Lower contribution from Recovery activities due to lower recycled paper prices (1) Please click here for supplemental information on non-ifrs measures. Higher seasonal volume Less favourable product mix and market pricing dynamics Increase in virgin fibre and recycled white fibre costs Higher freight and repairs costs 21

22 SEGMENTED SEQUENTIAL OPERATING INCOME (LOSS) WATERFALLS Containerboard (millions of CAN$) Boxboard Europe (millions of CAN$) Q (64) Amort. / Specific items Q Volume Raw Other Q Material Variances 1 1 (20) (3) Amort. / Specific items 82 Q Q Amort. Q Selling Price & Mix (5) 30 Volume Q (8) Amort. 22 Q Mostly higher manufacturing shipments Lower recycled fibres prices Better pricing environment Lower shipments in Western Europe Specialty Products (millions of CAN$) Tissue Papers (millions of CAN$) Q Amort. Q Recovery & Recyc. 1 Selling Price & Mix (1) Other Variances 9 Q (5) Amort. 4 Q (2) Q Loss Amort. Q Volume (7) Raw Material (8) Other Variances 7 Q (16) Amort. (9) Q Loss Better diversification of Recovery & Recycling shipments (1) Please click here for supplemental information on non-ifrs measures. Seasonality and higher demand Increase in virgin fibre and recycled white papers costs 22

23 PACKAGING PRODUCTS / CONTAINERBOARD Results Change vs. Q Q Q Shipments ('000 t.c.) 385 9% 3% Average selling price (CAN$/unit) 1,234 3% 8% Sales ($M) % 11% income ($M) 82 (32)% 173% 1 ($M) % 88% Comments on sequential performance è Shipments increased by 9% sequentially. This reflects a 13% increase in Containerboard shipments, following operational issues recorded in the previous quarter, and a 5% increase in corrugated box shipments. è Average selling prices in Canadian dollars increased 3% sequentially in the second quarter, reflecting the roll out of the US$50/st price increase. Selling prices increased in both the containerboard and corrugated box sectors. è Sales increased by 13% sequentially, mainly due to higher volumes, the higher average selling price, and the 2% average depreciation of the Canadian dollar compared to the U.S. dollar. è increased by 36% compared to the prior quarter. This was driven by higher volumes, lower average recycled fibre prices, and the higher average realized selling price. % of sales 22.1% 23

24 PACKAGING PRODUCTS / BOXBOARD EUROPE Results Change vs. Q Q Q Shipments ('000 t.c.) 276 (7)% (2)% Average selling price (CAN$/unit) 840 2% 12% (Euro /unit) 546 3% 8% Sales ($M) 232 (6)% 9% income ($M) 22 16% 69% 1 ($M) 30 7% 43% Comments on sequential performance è Shipment levels decreased sequentially following lower production in some plants and fewer shipments in Western Europe. Compared to the previous period, shipments of recycled grades decreased by 18,000 s.t., or 7%, and shipments of virgin grades decreased by 4,000 s.t., or 9%. Shipments of specialty products remained stable at 6,000 s.t. è The higher average selling price is largely explained by price increases that were implemented for the virgin market and a favourable geographical mix. This was partially offset by the 1% appreciation of the Canadian dollar compared to the euro. è The sequentially lower sales are explained by the lower volume in the current period, in addition to the 1% appreciation of the Canadian dollar compared to the euro. These effects were partially offset by the higher average selling price. è In addition to the elements mentioned above, lower raw material prices also contributed to the sequential improvement in results. Higher energy prices and transactions fees related to the Barcelona Cartonboard acquisition partly offset the increase. % of sales 12.9% 24

25 PACKAGING PRODUCTS / SPECIALTY PRODUCTS Results Change vs. Q Q Q Sales ($M) 164 3% (13)% income ($M) 4 100% (71)% 1 ($M) 9 29% (55)% % of sales 5.5% Comments on sequential performance è The 3% sequential increase in sales is largely attributable to higher shipments in the Consumer Product Packaging sub-segment. Shipment levels similarly increased in the Recovery and Recycling sub-segment, despite the ongoing Chinese restrictions on recycled paper import permits. è Selling price increases were implemented to counter the higher costs of raw material in the Consumer Packaging sub-segment and for our European paper mill packaging facility. è The sequential increase in operating income was mainly due to improved profitability in the Recovery and Recycling sub-segment as a result of more stable market conditions and improved operational efficiencies. The operating income contribution was lower from packaging activities as a result of additional maintenance work and lower volume in the Industrial Packaging sub-segment. 25

26 TISSUE PAPERS Results Change vs. Q Q Q Shipments ('000 t.c.) 163 9% 8% Average selling price (CAN$/unit) 2,093 2% (7)% Sales ($M) % 1% loss ($M) (9) 350% (153)% 1 ($M) 7 (46)% (80)% Comments on sequential performance è Shipments increased by 13% sequentially in all converted product markets, reflecting and the usual seasonality and new volumes secured in the away from home market. Shipments of jumbo rolls increased by 4% sequentially, driven by higher demand and favorable market seasonality. è The average Canadian dollar selling price increased slightly compared to the first quarter. This was driven by the appreciation of the Canadian dollar, the selling price increase announced in the Canadian market last quarter, and the higher proportion of converted products sold during the current period. These positive elements were partly offset by a less favorable mix of customers and products sold. è The positive factors detailed above benefited sales levels by 12% sequentially. è Despite the higher sales levels recorded in the current period, operating income decreased compared to the prior quarter as a result of the significant increase in prices for both virgin fibres and recycled white grades, in addition to higher freight costs. % of sales 2.0% 26

27 CONCLUDING REMARKS AND Q&A 27

28 NEAR TERM OUTLOOK Ã Ongoing implementation of US$50/st price increase in Containerboard Continuing beneficial impact of more stable and lower OCC prices, currently at ~US$70/st Price increase announced in URB Favourable seasonal volumes in Tissue Ongoing market-related challenges facing the Tissue division Rising pulp prices (NBSK and NBHK) Higher white recycled paper pricing (SOP) Seasonally softer third quarter demand in Europe N.A. transportation costs and availability Impact of less robust OCC pricing on Recovery & Recycling sub-segment performance Q Forecast REFLECTING: Containerboard Packaging YoY ì QoQ ì YoY ì Boxboard Europe QoQ î YoY Specialty Products QoQ ì YoY î Tissue Papers VOLUME æ æ ä ä SELLING PRICE ä ä ä ä ä ä RAW MATERIAL COST æ æ ä æ ä ä EXCHANGE RATE æ æ æ ENERGY COST ä ä ä ä QoQ 28

29 APPENDIX 29

30 FOREIGN EXCHANGE US$/CAN$ 0.90 EXCHANGE RATES Euro /CAN$ 0.90 Hedging Program US$ Cash flows % to 52% of exposure (net of interest) hedged at an average rate of 1.33 CAN$/US$ to 1.34 CAN$/US$ % to 49% of exposure (net of interest) hedged at an average rate of 1.33 CAN$/US$ 0.60 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 US$/CAN$ EURO /CAN$ % to 26% of exposure (net of interest) hedged at an average rate of 1.32 CAN$/US$ As a percentage of 2017 EBITDA Between 10% to 20% hedged for next 12 to 36 months income sensitivity estimated to be $3M for every US$0.01 variation versus the CAN$ Source : Bloomberg. 30

31 ENERGY PRICES Natural gas (US$) 8.00 ENERGY PRICES Crude oil (US$) Hedging Program Natural gas Canada: 2018: 32% at 3.97 CAN$/GJ 2019: 8% at 3.60 CAN$/GJ U.S.: 2018: 44% at 3.32 US$/mmBtu 2019: 38% at 2.89 US$/mmBtu 0.00 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q Natural gas (US$/mmBtu) Crude oil (US$/barrel) Source : Bloomberg. 31

32 SELECTED REFERENCE PRICES (US$/s.t.) Containerboard - Selected Products Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Jul 18 Current (July) (Euro /s.t.) 1,200 1,100 1, Boxboard Europe - Selected Products Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Jul 18 Current (July) 1, (US$/s.t.) Specialty Products - Selected Products Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Jul 18 Current (July) 730 (US$/s.t.) 1,500 1,400 1,300 1,200 1,100 1, Tissue Papers - Selected Products Feb 15 May 15 Aug 15 Nov 15 Feb 16 May 16 Aug 16 Nov 16 Feb 17 May 17 Aug 17 Nov 17 Feb 18 May 18 Current (June) 1,393 1,090 32

33 SELECTED REFERENCE PRICES AND FIBRE COSTS Q vs Q Q vs Q These indexes should only be used as an indicator of trends and they may be different than our actual selling prices or purchasing costs. Year Q1 Q2 Q3 Q4 Year Q1 Q2 (units) (%) (units) (%) Selling prices (average) PACKAGING PRODUCTS Containerboard (US$/short ton) Linerboard 42-lb. unbleached kraft, Eastern US (open market) % 33 5 % Corrugating medium 26-lb. semichemical, Eastern US (open market) % 33 5 % Boxboard Europe (euro/metric ton) Recycled white-lined chipboard (WLC) index (2) % % Virgin coated duplex boxboard (FBB) index 2 1,045 1,031 1,031 1,031 1,031 1,031 1,072 1, % % Specialty Products (US$/short ton) Uncoated recycled boxboard - 20-pt. bending chip (series B) % 37 6 % TISSUE PAPERS (US$/short ton) Parent rolls, recycled fibres (transaction) 1,013 1,023 1,040 1,053 1,057 1,043 1,072 1, % 15 1 % Parent rolls, virgin fibres (transaction) 1,280 1,297 1,320 1,334 1,339 1,323 1,366 1, % 22 2 % Raw material (average) RECYCLED PAPER North America (US$/short ton) Sorted residential papers, No. 56 (SRP - Northeast average) (45) (59) % (28) (47) % Old corrugated containers, No. 11 (OCC - Northeast average) (77) (52) % (21) (23) % Sorted office papers, No. 37 (SOP - Northeast average) % % Europe (euro/metric ton) Recovered paper index (39) (28) % (12) (11) % VIRGIN PULP (US$/metric ton) Northern bleached softwood kraft, Canada 978 1,033 1,093 1,110 1,183 1,105 1,233 1, % 77 6 % Bleached hardwood kraft, mixed, Canada/US , ,077 1, % 48 4 % Sources: RISI, Cascades and Reno de Medici. (1) The index is based on publication prices and represents an approximation of Cascades recycled grades selling prices in Europe. It is weighted by country. (2) The index is based on publication prices and represents an approximation of Cascades virgin grades selling prices in Europe. It is weighted by country. (3) The recovered paper index is based on publication prices and represents an approximation of Cascades recovered paper purchase prices in Europe. It is weighted by country. 33

34 For more information: Jennifer Aitken, MBA Director, Investor Relations or 34