Cascades is in for the long-term

Jaclin Ouellet

Cascades is in for the LONG-TERM and will invest in its assets to raise its share value. Markets will have to show more patience, especially the Toronto Stock Exchange, which Cascades has been a part of for 40 years.

On May 10, 2018, during the shareholder's general meeting in Montreal, the Kingsey Falls, QC, pulp and paper company showed its frustration with a few shareholders who were questioning investments reaching up to $385M for 2018 in order to refresh its production platform and replace obsolete equipment. Of that amount, $125M will go towards tissue paper production.

Alain Lemaire

Alain Lemaire, President of the Board of administrators, was the first to demonstrate his impatience during the question period when Cascades' share value was discussed. A legitimate subject if ever there was one, since the company's share value tumbled from 18$ in July 2017 to 12$ this month.

"Stakeholders are simply too short-sighted and in a hurry to make money," Lemaire lamented. "Expectations were high and we disappointed most analysts. The market is especially irritated over the fact that we are investing in paper tissue, as the market fundamentals in that segment are perceived as weak at best. At Cascades, we have been making tissue paper for 40 years and that segment always performed well for us. Our performances were enhanced by that paper grade and we will remain faithful to its production. It's a long-term commitment," Lemaire said with confidence.

Mario Plourde

Later questioned by the media, Mario Plourde, CEO of Cascades, took the refrain further. "Cascades' share is undervalued, that's for sure, and the price does not reflect the value of the company. Let's not forget that we are an important producer in the North American markets (6th in boxboard and 5th in hygienic paper). Those who are divided or afraid of the 2018 investment level, look solely at the short-term. Funny enough, our long-term investors have no problem whatsoever with these investments. Cascades always concentrated its efforts in wrapping and hygienic products. We modernized the boxboard segment last year and we're in a position to reap the benefits of booming e-commerce and innovative wrapping products. Our strategy is now shifting to tissue paper, which needs a little TLC."

Cascades has no plans to retreat from this path. And why should they? The company is on solid financial footing, with rising global sales and a controlled debt. True to its core values, the company's mission, 'to be the maker of durable solutions in hygiene paper, boxboard and recovery papers,' is reflected in the decision to sell its shares of Boralex in 2017, a company that specializes in energy production using biomass. "Boralex had no direct synergy with us, it was pure investment. We waited until the share climbed higher in order to reflect the company value. We sold at the perfect time and directed the profits to used the money to buy Cascades' obligations for a $200 million value," Lemaire explained.


Salaries: A representative of the MEDAC, a movement dedicated to the education on and defence of stakeholder rights, took the stand during the question period at Cascades Annual Meeting of shareholders to congratulate the company on its salary policy.

Willie Gagnon noted the company's salary ratio of 33 (between the CEO's wage and employee average salary) was exemplary. An acceptable ratio for the MEDAC is between 20 and 30.

All smiles, Mario Plourde, CEO of Cascades, joked about it, suggesting he was perhaps underpaid.

NAFTA: the difficult issue of trade tariffs and anti-dumping costs on certain grades of paper has practically no effect on Cascades, suggested Plourde. Those tariffs are aimed at newsprint and wood lumber. Cascades requires 20% of wood pulp for its production and the company does not produce any newsprint paper. Thus, the NAFTA dispute has currently no direct impact on Cascades' mills.

The crisis of recycled fibre in Quebec: Cascades is a decidedly special 'creature' of sorts in the Canadian and North American paper industry. The company is promoting the internal use of electric cars with its employees, and on May 10, every activity related to the stakeholders' meeting met the test of a 'low environmental imprint' (reusable dishes, 100% fibre recycled content napkins, etc.)

Today Cascades uses up to 80% recycled fibre in its products. This fibre is costly, but the company is taking advantage of the fact that it produces in both Canada and the United States. Furthermore, the quality of recycled papers is better on the American side of the border.

When questioned about the problem of low quality old papers in Quebec, Plourde noted there is no short-term solution. "Some sorting plants in Quebec opted for exporting low grade papers to Asia. These plants today have to live with their decision. What the Quebec recycled paper industry needs now is to educate people (on what to put into their recycle bins) and to modernize sorting plants. We are not into sorting ourselves, but we try very hard to use local recycled content and encourage the circular economy. Within this perspective, we deal with sorting centers who offer quality content. Its in our social DNA to pledge for the environment. It's our promise for the future."

No doubt about it, Cascades is positively in it for the long-term!!

Jaclin Ouellet
Journalist, Paper Advance