CAS Cascades Inc

KINGSEY FALLS, QC, Nov. 6, 2024 /PRNewswire/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended September 30, 2024.

Q3 2024 Highlights

• Sales of $1,201 million (compared with $1,180 million in Q2 2024 and $1,198 million in Q3 2023);
• Operating income of $36 million (compared with $34 million in Q2 2024 and $80 million in Q3 2023);
• Net earnings per common share of $0.01 (compared with $0.01 in Q2 2024 and $0.34 in Q3 2023);
• Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA (A)¹) of $140 million (compared with $112 million in Q2 2024 and $161 million in Q3 2023);
• Adjusted net earnings per common share¹ of $0.27 (compared with $0.08 in Q2 2024 and $0.44 in Q3 2023);
• Net debt¹ of $2,039 million as of September 30, 2024 (compared with $2,093 million as of June 30, 2024). Net debt to EBITDA (A) ratio¹ of 4.3x, versus from 4.2x as of June 30, 2024;
• Total capital expenditures, net of disposals, totaled $34 million in Q3 2024, compared to $23 million in Q2 2024 and $56 million in Q3 2023. The Corporation's 2024 capital expenditures will be approximately $160 million.

Hugues Simon, President and CEO, commented: "We are pleased with our third quarter 2024 performance. Sequentially stronger results were driven by our Containerboard business, where higher average selling prices and lower production expenses offset the impact of higher raw material costs. Specialty Products results were stable, with stronger selling prices fully mitigating raw material cost and sales mix headwinds. As forecasted, third quarter Tissue Papers results were lower than the previous quarter due to higher average raw material costs and lower pricing related to the expected changes in the mix of products sold."

Discussing near-term outlook, Mr. Simon commented, "We expect fourth quarter results in each of our packaging business segments to be stable sequentially, as benefits from lower raw material costs and previously announced selling price increases will be offset by lower seasonal volumes. In Tissue Papers, slightly stronger sequential results are expected to benefit from lower average raw material costs, slightly stronger volumes, and selling price increase tailwinds offset by the impact from seasonal changes in sales mix.

As we look toward the medium and longer-term, we are focused on growing sustainable value for shareholders. Central to this is driving and capturing efficiency across our operational platforms, most notably by the ongoing scale-up of production at our Bear Island facility and ramp-up of our recently installed tissue converting lines. Prioritizing these areas, in conjunction with leveraging additional production capacity in all of our facilities through numerous efficiency optimization initiatives, will drive cash flow generation and debt reduction, both of which are key action areas across the Company. We will be all the more better positioned to deliver on both fronts as we implement the changes announced on October 30, and look forward to sharing details of our areas of strategic focus for the next 18 to 24 months in early 2025."

Financial Summary

Selected consolidated information

Segmented sales

Segmented operating income (loss)

Segmented EBITDA (A)¹

Analysis of results for the three-month period ended September 30, 2024 (compared to the same period last year)

The Corporation's third quarter sales of $1,201 million increased by $3 million compared with the same period last year. This was driven by $24 million of sales mix benefits in Tissue Papers and Containerboard, and $12 million related to more a favourable foreign exchange. Results also reflected a consolidated $7 million net benefit from higher selling prices. These were offset by a net negative impact of $40 million related to lower volumes in Containerboard and Tissue Papers, with the majority of this impact attributable to the changes made within the Tissue Papers operational platform in the past year to improve profitability.

The third quarter EBITDA (A)¹ totaled $140 million, a decrease of $21 million, or 13%, from the $161 million generated in the same period last year. This reflects consolidated net impacts of $35 million from higher raw material costs and $5 million related to volume and sales mix changes. These were partly offset by net benefits from higher selling prices and lower operating costs, and lower corporate costs, as expected.

The main specific items, before income taxes, that impacted our third quarter 2024 operating income and/or net earnings were:

• $7 million of impairment charge on assets related to a decision to discontinue product lines in Canada and in the United States (operating income and net earnings);
• $29 million of restructuring and other costs related to plant closures in Canada (operating income and net earnings);
• $2 million unrealized gain on financial instruments (operating income and net earnings);
• $2 million unrealized loss on interest rate hedge instruments (net earnings);
• $1 million foreign exchange gain on long-term debt and financial instruments net earnings.

For the three-month period ended September 30, 2024, the Corporation posted net earnings of $1 million, or $0.01 per common share, compared to net earnings of $34 million, or $0.34 per common share, in the same period of 2023. On an adjusted basis¹, the Corporation posted net earnings of $27 million in the third quarter of 2024, or $0.27 per common share, compared to net earnings of $45 million, or $0.44 per common share, in the same period of 2023.

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.12 per common share to be paid on December 5, 2024 to shareholders of record at the close of business on November 21, 2024. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). During the third quarter of 2024, Cascades purchased no common shares for cancellation.

2024 Third Quarter Results Conference Call Details

Management will discuss the 2024 third quarter financial results during a conference call today at 9:00 a.m. ET. The call can be accessed by dialing 1-800-990-4777 (international 1-289-819-1299). The conference call, including the investor presentation, will be broadcast live on the Cascades website (www.cascades.com) under the "Investors" section. A replay of the call will be available on the Cascades website and may also be accessed by phone until December 7, 2024 by dialing 1-888-660-6345 (international 1-289-819-1450), access code 18522 #.

Founded in 1964, Cascades offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs approximately 9,700 women and men across a network of close to 70 facilities in North America. Driven by its participative management, half a century of experience in recycling, and continuous research and development efforts, Cascades continues to provide innovative products that customers have come to rely on, while contributing to the well-being of people, communities and the entire planet. Cascades' shares trade on the Toronto Stock Exchange under the ticker symbol CAS. Certain statements in this release, including statements regarding future results and performance, are forward-looking statements 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 Corporation's products, increases in raw material costs, fluctuations in selling prices and adverse changes in general market and industry conditions and other factors.

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

SEGMENTED INFORMATION

The Corporation's operations are managed in three segments: Containerboard and Specialty Products (these two segments constitute the Corporation's Packaging Products) and Tissue Papers. The accounting policies of the reportable segments are the same as the Corporation's accounting policies described in Note 2.

The Corporation's operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM). The Chief Executive Officer has authority for resource allocation and management of the Corporation's performance and is therefore the CODM. The CODM assesses the performance of each reportable segment based on sales and earnings before interest, taxes, depreciation and amortization, adjusted to exclude specific items (EBITDA (A)). The CODM considers EBITDA (A) to be the best performance measure of the Corporation's activities.

Sales for each segment are prepared on the same basis as those of the Corporation. Inter-segment operations are recorded on the same basis as sales to third parties, which are at fair market value.

EBITDA (A) does not have a standardized meaning under IFRS Accounting Standards; accordingly, it may not be comparable to similarly named measures used by other companies. Investors should not view EBITDA (A) as an alternative measure to, for example, net earnings, or as a measure of operating results, which are IFRS Accounting Standards measures.

Sales by country by business segment are shown in the following table:

EBITDA (A) by business segment is reconciled to IFRS Accounting Standards measure, namely operating income (loss), and is shown in the following table:

Payments for property, plant and equipment by business segment are shown in the following table:

SUPPLEMENTAL INFORMATION ON NON-IFRS ACCOUNTING STANDARDS MEASURES AND OTHER FINANCIAL MEASURES

SPECIFIC ITEMS

The Corporation incurs some specific items that adversely or positively affect its operating results. We believe it is useful for readers to be aware of these items as they provide additional information to measure performance, compare the Corporation's results between periods, and assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not necessarily reflective of the Corporation's underlying business operations in measuring and comparing its performance and analyzing future trends. Our definition of specific items may differ from that of other corporations and some of these items may arise in the future and may reduce the Corporation's available cash.

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 asset provisions or reversals, premiums paid on repurchase of long-term debt, 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 hedge instruments and option fair value revaluation, foreign exchange gains or losses on long-term debt and financial instruments, fair value revaluation gains or losses on investments, specific items of discontinued operations and other significant items of an unusual, non-cash or non-recurring nature.

RECONCILIATION AND USES OF NON-IFRS ACCOUNTING STANDARDS MEASURES AND OTHER FINANCIAL 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 Accounting Standards ("non-IFRS Accounting Standards measures"), which are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance and capital measures, as well as non-IFRS Accounting Standards measures, is useful to both Management and investors, as they provide additional information to measure the performance and financial position of the Corporation. This also increases the transparency and clarity of the financial information. The following non-IFRS Accounting Standards measures and other financial measures are used in our financial disclosures:

Non-IFRS Accounting Standards measures

• Adjusted earnings before interest, taxes, depreciation and amortization or EBITDA (A): represents the operating income (as published in the Consolidated Statement of Earnings (Loss) of the Consolidated Financial Statements) before depreciation and amortization excluding specific items. Measure used to assess recurring operating performance and the contribution of each segment on a comparable basis.
• Adjusted net earnings: Measure used to assess the Corporation's consolidated financial performance on a comparable basis.
• Adjusted cash flow: Measure used to assess the Corporation's capacity to generate cash flows to meet financial obligations and/or discretionary items such as share repurchases, dividend increases and strategic investments.
• Free cash flow: Measure used to calculate the excess cash the Corporation generates by subtracting capital expenditures (excluding strategic projects) from the EBITDA (A).
• Working capital: Measure used to assess the short-term liquidity of the Corporation.

Other financial measures

• Total debt: Measure used to calculate all the Corporation's debt, including long-term debt and bank loans. Often put in relation to equity to calculate the debt-to-equity ratio.
• Net debt: Measure used to calculate the Corporation's total debt less cash and cash equivalents. Often put in relation to EBITDA (A) to calculate net debt to EBITDA (A) ratio.

Non-IFRS Accounting Standards ratios

• Net debt to EBITDA (A) ratio: Ratio used to assess the Corporation's ability to pay its debt and evaluate financial leverage.
• EBITDA (A) margin: Ratio used to assess operating performance and the contribution of each segment on a comparable basis calculated as a percentage of sales.
• Adjusted net earnings per common share: Ratio used to assess the Corporation's consolidated financial performance on a comparable basis.
• Ratio of net debt / (total equity and net debt): Ratio used to evaluate the Corporation's financial leverage and the risk to Shareholders.
• Working capital as a percentage of sales: Ratio used to assess the Corporation's operating liquidity performance.
• Adjusted cash flow per common share: Ratio used to assess the Corporation's financial flexibility.
• Free cash flow ratio: Ratio used to measure the liquidity and efficiency of how much more cash the Corporation generates than it uses to run the business by subtracting capital expenditures (excluding strategic projects) from the EBITDA (A) calculated as a percentage of sales.

Non-IFRS Accounting Standards measures and other financial measures are mainly derived from the consolidated financial statements, but do not have meanings prescribed by IFRS Accounting Standards. 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 Accounting Standards. In addition, our definitions of non-IFRS Accounting Standards measures and other financial measures may differ from those of other corporations. Any such modification or reformulation may be significant.

The CODM assesses the performance of each reportable segment based on sales and earnings before interest, taxes, depreciation and amortization, adjusted to exclude specific items (EBITDA (A)¹). The CODM considers EBITDA (A)¹ to be the best performance measure of the Corporation's activities.

EBITDA (A)¹ by business segment is reconciled to IFRS Accounting Standards measure, namely operating income (loss), and is shown in the following table:

The following table reconciles net earnings and net earnings per common share, as reported, with adjusted net earnings¹ and adjusted net earnings per common share¹:

The following table reconciles cash flow from operating activities with EBITDA (A)¹:

The following table reconciles cash flow from operating activities with cash flow from operating activities (excluding changes in non-cash working capital components) and adjusted cash flow from operating activities¹. It also reconciles adjusted cash flow from operating activities¹ to adjusted cash flow generated (used)¹, which is also calculated on a per common share basis:

The following table reconciles total debt¹ and net debt¹ with the ratio of net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA (A))¹:

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SOURCE Cascades Inc.