CASCADES INC. 2016 Industrial & Construction Conference May 11, 2016
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 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 Company. The financial information included in this presentation also contains certain data that are not measures of performance under IFRS ( non-ifrs measures ). For example, the Company uses operating income before depreciation and amortization ( OIBD which, for purposes of this presentation, we call EBITDA ) and operating income before depreciation and amortization (excluding specific items) ( OIBD (excluding specific items) which, for purposes of this presentation, we call EBITDA (excluding specific items) ) because such measures are used by management to assess the operating and financial performance of the Company s operating segments. Such information is reconciled to the most directly comparable financial measures, as set forth in the Supplemental Information on Non-IFRS Measures section of our most recent quarterly report or annual report. Specific items are defined as items such as charges for or reversal of impairment of assets, for facility or machine closures, accelerated depreciation of assets due to restructuring measures, premiums paid on long-term debt refinancing, loss on refinancing of long-term debt, gains or losses on sales of business units, 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, other significant items of an unusual or non-recurring nature, and all such items included in discontinued operations or in the share of results of our associates and joint ventures. All amounts in this presentation are in Canadian dollars unless otherwise indicated. 2
COMPANY OVERVIEW Founded in 1964 by the Lemaire family and headquartered in Kingsey Falls, QC Produces, converts and markets packaging and tissue products principally composed of recycled fibre Balanced play in less cyclical sectors Heavy exposure to two of the strongest paper segments: Tissue and Containerboard Market leader across many of its primary product offerings Unique culture green visionaries, turnarounds, entrepreneurial philosophy ~11,000 employees worldwide 1 Before inter-segment sales and corporate activities 2 EBITDA excluding specific items LTM 3/31/16 Net Sales $3,954 million Segment Sales Breakdown 1 15% Containerboard 33% Tissue Papers 20% Boxboard Europe Specialty Products 32% LTM 3/31/16 EBITDA $447 million Segment EBITDA Breakdown 1, 2 13% Containerboard 13% Tissue Papers 47% Boxboard Europe Specialty Products 27% 3
LTM 3/31/16 Financials Market Position COMPANY OVERVIEW Leading Packaging and Tissue Paper Manufacturer Containerboard Packaging Products Boxboard Europe Specialty Products Tissue Papers One of the Canadian leaders # 6 in North America 3 # 2 in coated recycled boxboard in Europe Largest paper collector in Canada # 1 in Canada # 5 in North America 33% of Sales 1 20% of Sales 1 15% of Sales 1 32% of Sales 1 47% of EBITDA 1,2 13% of EBITDA 1,2 13% of EBITDA 1,2 27% of EBITDA 1,2 EBITDA Margin 2 : 18% EBITDA Margin 2 : 7% EBITDA Margin 2 : 10% EBITDA Margin 2 : 11% 1 Before inter-segment sales and corporate activities 2 Excluding specific items 3 Including 100% of Greenpac s capacity 4
COMPANY OVERVIEW Sales and Operations Across North America and Europe Sales from (in %) Sales to (in %) Europe 23% Europe 23% 37% Canada 50% Canada US 27% US 40% Operating Units (in %) PP&E by Geographic Segment (in %) Europe 9% Europe 19% US 31% 60% Canada US 29% 52% Canada Note: Figures as of December 31, 2015 5
GEOGRAPHICALLY DIVERSIFIED 6
COMPANY OVERVIEW Closed-loop Business Model Recovery Manufacturing 2 CLIENTS 19 units 80% recycled fibre (2.6M tons) NA integration rate (2015): 28% (0.44M tons) NA integration rate (2015) Containerboard 1 64% Tissue Papers 67% Containerboard Boxboard Europe: Specialty Products: Tissue Papers: 6 units 6 units 3 units 11 units 26 units Finished Products Trims and rejects sent to recycling centers Converting 2 Containerboard: Specialty Products: Tissue Papers: 18 units 17 units 13 units 48 units Upstream and downstream integration in North America 1 Integration rate for our containerboard activities in North America (considering 100% of Greenpac s production as internal capacity) 2 Including Reno De Medici s units and Greenpac. Also including four manufacturing/converting tissue papers units which are counted in both Converting and Manufacturing. 7
RAW MATERIALS Reliable Sourcing Strategy Cascades North American Recycled Fibre Supply 2015 1 Most of the fibre supply coming from internal sources, contracts and regular streams Regular and Steady Volume (Noncontractual) 27% Recovery & Internal 25% Constant review of our inventory strategy Contractual Agreements 23% Ensure control over fibre supply with potential to increase tons under control Develop substitute grades 1 Including volume treated for Greenpac Spot 25% (M Tonnes) 6 5 4 3 2 1 0 Our Strategy Top Recovered Paper Suppliers in the World Source: RISI Continue to increase integration rate with CAS other segments Potential to increase virgin content in certain circumstances Continue to close the loop with customers & retailers 8
OPERATING PERFORMANCE AND FINANCIAL SITUATION Strong Financial Momentum Sales EBITDA (excl. specific items) (M CAN$) (M CAN$) 4,250 500 18.0% 4,000 3,861 3,954 450 426 447 16.0% 3,750 3,500 3,250 3,141 3,370 3,561 400 350 300 285 342 340 14.0% 12.0% 10.0% 3,000 250 8.0% 2,750 2012 2013 2014 2015 LTM 3/31/16 200 2012 2013 2014 2015 LTM 3/31/16 6.0% Improved results reflect improved productivity, FX and stable raw material & energy costs 9
OPERATING PERFORMANCE AND FINANCIAL SITUATION Historical Segmented EBITDA Containerboard Boxboard Europe (M CAN$) (M CAN$) 300 100% 231 234 250 80% 80 200 60% 60 150 164 150 40% 40 100 43 57 72 63 62 100% 80% 60% 40% 100 90 20% 20 20% 50 0% 0 2012 2013 2014 2015 LTM 3/31/16 100 Specialty Products (M CAN$) (M CAN$) 100% 80 80% 125 58 62 60 60% 100 37 41 40 40 40% 75 150 2012 2013 2014 2015 LTM 3/31/16 Tissue Papers 138 133 138 119 96 0% 100% 80% 60% 40% 20 20% 50 20% 0 0% 25 2012 2013 2014 2015 LTM 3/31/16 2012 2013 2014 2015 LTM 3/31/16 Green line represents segment EBITDA as percent of total Company EBITDA; EBITDA excluding specific items 0% 10
OPERATING PERFORMANCE AND FINANCIAL SITUATION Cash Flow and Free Cash Flow per Share Cash Flow From Operating Activities 1 Free Cash Flow per Share 1,2 (M CAN$) (CAN$) 400 300 200 155 233 277 337 358 2.00 1.50 1.00 0.50 0.78 0.86 1.58 1.60 100 0.00 0 2012 2013 2014 2015 LTM 3/31/16 (0.50) (0.28) 2012 2013 2014 2015 LTM 3/31/16 Cash flows have grown at a 29% CAGR since 2012 Improving cash flows driven by Strategic Action Plan Objective of ~$100M of free cash flow annually directed toward debt reduction 1 Excluding specific items 2 Excluding increase in investments 11
OPERATING PERFORMANCE AND FINANCIAL SITUATION Capital Expenditures 2016 level to be slightly higher at ~$185M, including IT Mainly growth Capex Mostly towards US (M CAN$) 200 184 Capital Expenditures 184 173 161 185 Capex Distribution for FY2015 $173M 150 Boxboard Europe Specialty Products 13% 8% Corporate 9% Containerboard 37% 100 2012 2013 2014 2015 2016B Divestitures and free cash flow have funded capital expenditures Tissue Papers 33% 12
OPERATING PERFORMANCE AND FINANCIAL SITUATION Debt Maturities Debt Repayment as at March 31, 2016 Over last 24 months, $1 billion+ of senior notes refinanced Extended maturities to 2021, 2022 and 2023 $750 million revolving facility extended to 2019 Average interest rate down 112 bps to 4.93% in 2015 from 6.05% in 2013 Resulted in interest savings of ~$23 million annually 1,000 750 714 500 325 250 282 250 33 132 0 1 year > 1 year 2019 2021 2022 2023 Debts without recourse Subsidiaries debts Revolver Senior notes Refinancings in 2014 and 2015 resulting in +US$20 million interest savings 13
BUSINESS SEGMENT HIGHLIGHTS Attractive Containerboard Market Conditions with Greenpac Investment Delivering Results Specialty Products Group Provides a Stable Source of Revenue, Unique Platform for Innovation and Hedge for Recovered Paper Price Volatility Strong Position Across the North American Tissue Market Boxboard Europe Continues to Strengthen with Recent Rationalizations and Asset Improvements 14
CONTAINERBOARD Environment Still Sound North American Containerboard Producers % of total capacity 2015 Industry Participants IP 33% WestRock 19% GP 10% PCA 10% Kapstone 4% Cascades 1 4% Pratt 4% Others 16% Top-5 Producers 76% Source: RISI, Deutsche Bank, Company reports and estimates 1 Including 59.7% of Greenpac s total capacity Fundamentals Sound Despite Added Capacity (Operating rate) 100% 90% 80% 70% 60% Q1 2009 (Million s.t.) 44.0 42.0 40.0 38.0 36.0 Operating Rates and Expected Capacity 39.9 2014 Q1 2010 1.0 2 SP Fiber PCA D3 Yr 2 Pratt Yr 1 Greif Yr 1 IP Valliant Yr 1 Corr. Supplies Productivity 1% Q1 2011 40.9 Q1 2012 0.6 Pratt Yr 2 Greif Yr 2 IP Valliant Yr 2 SP Fiber Yr 2 Corr. Supplies Productivity 1% Q1 2013 41.5 0.7 Q1 2014 Kruger Yr 1 Corr. Sup. Yr 1 Productivity 1% 42.2 Q1 2015 0.9 Kruger Yr 1 Corr. Sup. Yr 1 Productivity 1% Q1 2016 43.1 New 2015e New 2016e New 2017e New 2018e capacity capacity capacity capacity (+2.5%) (+1.5%) (+1.7%) (+2.1%) 15
CONTAINERBOARD Our Strategic Move: Greenpac Largest recycled linerboard mill in NA: 1,500 s.t./day of lightweight recycled linerboard (26 pounds) State-of-the-art equipment Product differentiation: Greenpac XP grades represent 75% of total production in Q1-2016 Take-or-pay agreement for 81% of the mill s output 59.7% ownership: Partners include a pension fund and two independent converters Note: Greenpac is not consolidated in the results and balance sheet since Cascades does not have effective control under IFRS 16
BOXBOARD EUROPE Stronger and Leaner Production Platform ~58% ownership of RdM, a public Italian company, and 100% of a virgin board mill in France Rationalization of production capacity, consolidation of sales forces, structure simplification and modernization investments have resulted in improved performance #2 Producer of Coated Recycled Boxboard in Europe M M M M M M (M ) 50 40 30 20 10 0 EBITDA & EBITDA Margin 48 45 40 43 33 6% 7% 9% 8% 7% 2012 2013 2014 2015 LTM Q1-2016 M M Manufacturing Recycled grades Manufacturing Virgin grades Energy credits totaling 4M in 2013, 6M in 2014 17
SPECIALTY PRODUCTS GROUP Stable Source of Revenue and Unique Platform for Innovation Diversified product offerings and stable revenue stream with leading market positions Recent initiatives have included Cascades Recovery minority (27%) acquisition completed in December 2015 Restructuring and minority acquisition of Norcan Industrial Packaging Products (~45% of sales 1 ) Leading producer of papermill packaging 12 units JV Share of EBITDA $10-$15M Recycling and Recovery (~30% of sales 1 ) Largest recycled paper collector in Canada 19 units Consumer Packaging Products (~20% of sales 1 ) Largest producer of honeycomb in Canada 6 units 2 units Vinyl backing Deinked pulp Other Products (~5% of sales 1 ) 1 Including 100% of joint ventures 18
Indexed U.S. Tissue Demand TISSUE PAPERS Stong Position Across the North American Tissue Market Sales by Geography (2015) Canada (25%) US (75%) Away-from- Home 42% Away-from- Home 49% 160 140 120 Tissue Market Demand At-Home 58% At-Home 51% 100 80 1996 2000 2004 2008 2012 2016E Sales by End Markets (2015) North American Tissue Capacity Additions Private Label 44% Branded 56% Source: RISI Parent Rolls 17% Away-from- Home 39% At-Home 44% Branded 11% Private Label 89% (M s.t.) 12,500 10,000 7,500 5,000 2,500 0 9,230 160 9,390 180 9,570 248 9,818 564 2009 New 2011 New 2013 New 2015 New capacity capacity capacity capacity (+1.7%) (+1.9%) (+2.6%) (+5.7%) 10,382 2017e 19
TISSUE PAPERS Extended Geographical Reach 2015 NORTH AMERICAN TISSUE MANUFACTURERS Capacity ('000 s.t.) Market Share Capacity Retail Capacity AfH 1 Georgia-Pacific 2,849 29% 67% 33% 2 Procter & Gamble 1,494 15% 100% 0% 3 Kimberly-Clark 1,466 15% 67% 33% 4 SCA Tissue NA 772 8% 0% 100% 5 Cascades Tissue 657 7% 62% 38% 6 Clearwater Paper 435 4% 90% 10% 7 KP Tissue 399 4% 77% 23% 8 First Quality Tissue 290 3% 100% 0% 9 Irving Tissue 282 3% 100% 0% 10 Soundview Paper 161 2% 67% 33% Others 1,012 10% TOTAL 9,818 100% Source: RISI, Company reports and estimates 20
POTENTIAL BENEFITS STEMMING FROM OUR INITIATIVES Modernizing our operating platform to increase profitability $185M capex program in 2016 Divestitures and closures of under-performing units Containerboard: sound fundamentals and improved platform Modernized converting platform and manufacturing productivity improvement Greenpac to positively contribute to EPS for a second full year in 2016 Tissue Papers: strong and growing position in North America Increasing presence in the US with recent expansion initiatives Other sources of growth and incremental value Culture of innovation Good performance from European platform and hidden value of Boralex investment On-going initiatives to improve our business processes Potential tailwinds CAD$ weakness More stable economic reality in Canada, the US and Europe China s economic weakness and favourable impact on recovered paper prices Lower oil and gas costs Taking the right steps to position Cascades for the future 21
For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or investor@cascades.com 22