Cascades Announces a Continuation of Solid Results for the First Quarter of 2020

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Navigating the Covid-19 pandemic by providing our customers essential products while ensuring the health and safety of our employees

KINGSEY FALLS, QC, May 7, 2020 - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended March 31, 2020.

Q1 2020 Highlights

  • Sales of $1,313 million
    (compared with $1,227 million in Q4 2019 (+7%) and $1,230 million in Q1 2019 (+7%))
  • As reported (including specific items)
    • Operating income of $90 million
      (compared with an operating loss of $1 million in Q4 2019 and an operating income of $72 million in Q1 2019 (+25%))
    • Operating income before depreciation and amortization (OIBD)1 of $161 million
      (compared with $76 million in Q4 2019 (+112%) and $139 million in Q1 2019 (+16%))
    • Net earnings per share of $0.24
      (compared with net loss per share of $0.27 in Q4 2019 and net earnings per share of $0.26 in Q1 2019)
  • Adjusted (excluding specific items)1
    • Operating income of $90 million
      (compared with $75 million in Q4 2019 (+20%) and $68 million in Q1 2019 (+32%))
    • OIBD of $161 million
      (compared with $152 million in Q4 2019 (+6%) and $135 million in Q1 2019 (+19%))
    • Net earnings per share of $0.42
      (compared with $0.30 in Q4 2019 and $0.14 in Q1 2019)
  • Exercised option to acquire the Caisse de dépôt et placement du Québec's ("CDPQ") 20.2% interest in the Greenpac Mill, increasing the Corporation's ownership to 86.3%; Transaction was settled January 3, 2020 for a total purchase price of $121 million.
  • Net debt1 of $2,212 million as at March 31, 2020 (compared with $1,963 million as at December 31, 2019) reflecting FX impact ($140 million) and the acquisition of CDPQ's interest in Greenpac Mill ($121 million); Net debt to adjusted OIBD ratio1 at 3.5x.

1 For further details, please refer to the "Supplemental Information on non-IFRS Measures" section.

Mr. Mario Plourde, President and Chief Executive Officer, commented: "Our first quarter results are a testament to the dedication and hard work of every one of our employees during these challenging times. We are very proud of their commitment to support our customers and communities by ensuring that our facilities meet the heightened demand for the essential tissue and packaging products we produce. Within this difficult context, first quarter sales increased 7% from the prior quarter. This reflected improvements in all business segments, most notably in Tissue, European Boxboard and specific Specialty Packaging products as a result of consumer buying patterns related to Covid-19 and strategic actions taken in recent quarters. Sales growth of 7% year-over-year was largely driven by increases in Tissue, which benefited from higher volumes and favourable average selling price, sales mix and exchange rate. Containerboard sales also increased year-over-year, as higher volumes and a beneficial exchange rate offset the impacts from a less favourable sales mix and lower average selling price. Sales in European Boxboard decreased slightly year-over-year largely due to lower average selling prices, while lower sales in Specialty Products reflect a business divestiture and mill closure in 2019.  

First quarter adjusted OIBD of $161 million, which is net of a $10 million expected credit loss provision taken against accounts receivable amounts across our business segments, increased 6% sequentially and 19% compared to the prior year period. The sequential performance was driven by improved results in Tissue that reflected volume growth combined with a higher average selling price. Stronger sequential performances from the European Boxboard and Specialty Packaging segments also benefited from volume growth. European Boxboard results also reflected lower raw material pricing and lower average selling prices, while the reverse was true for Specialty Packaging. The year-over-year growth was entirely attributable to the improved performance in the Tissue segment.

Discussing near-term outlook, Mr. Plourde commented, "At this time we expect second quarter performance to be the result of a combination of tailwinds and headwinds in our different business segments. Specifically, Tissue results will reflect elevated raw material prices due to higher white recycled grade fibre costs and a greater use of virgin pulp due to lower levels of available recycled material. Containerboard margins are also expected to be impacted by higher OCC prices. Volumes in both Tissue and Containerboard are also forecasted to slow sequentially following an easing of the Covid-19 related pantry stocking trends seen in the first quarter and lower demand levels following business closures. Near-term Specialty Product performance is expected to reflect stronger consumer packaging trends, the effects of which should offset softness in industrial packaging. Boxboard Europe results are expected to increase slightly, supported by steady demand and announced industry price increases.

Our priority is the health and safety of our employees, ensuring the continuity of our production to meet the needs of our customers, supporting community initiatives and working in partnership with customers impacted by the current business environment. We will remain vigilant in our cash flow management, and expect our projected available liquidity levels to meet future requirements. We will adjust investment plans further should they be required while continuing to manage our debt level. Given the uncertainty regarding the potential impact from the Covid-19 pandemic over the coming months, we are focused on prudent cash flow management, and have therefore reduced planned capital expenditures to a range of $175 to $200 million for the year, down from $250 million previously, but are maintaining our current dividend policy. Analysis of our Bear Island conversion project has continued at a slower pace given current circumstances, and as such we will not be providing any updated specifics or schedule at this time."

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Source: Cascades

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