CASCADE S ALWAYS IN ACTION Goldman Sachs 2012 Montral Paper - PowerPoint PPT Presentation

CASCADE S ALWAYS IN ACTION Goldman Sachs 2012 Montréal Paper & Forest Products Investor E vent March 14, 2012

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 the Company’s 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 also includes 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 earnings before interest, taxes, depreciation and amortization (EBITDA) because it is the measure 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 annual report or earnings press release. Specific items are defined as items such as charges for impairment of assets, for facility or machine closures, debt restructuring charges, gains or losses on sales of business units, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, foreign exchange gains or losses on long-term debt and other significant items of an unusual or non-recurring nature. All amounts in this presentation are in Canadian dollars unless otherwise indicated. 2

GREEN PACKAGING AND TISSUE PRODUCT OFFERING Boxboard Containerboard Specialty products Tissue papers Leading NA packaging and tissue manufacturer with substantial re Leading NA packaging and tissue manufacturer with substantial recycling capabilities cycling capabilities 3

BALANCED PACKAGING AND TISSUE PLAY ($ in millions) Cascades 2011 Sales 1 : $3,869 2011 EBITDA 1, 2 : $257 Packaging Tissue Papers 78% of Sales 22% of Sales 69% of EBITDA 31% of EBITDA Boxboard Containerboard Specialty Products 34% of Sales 24% of Sales 21% of Sales 26% of EBITDA 30% of EBITDA 12% of EBITDA Exposure to less cyclical end- -markets markets Exposure to less cyclical end 1 Adjusted for the full year consolidation of Reno de Medici and Papersource. 4 2 EBITDA excluding specific items and discontinued operations. Breakdown of sales and EBITDA before eliminations & corporate activities.

CLOSED ‐ LOOP BUSINESS MODEL 100+ business units 100+ business units 76% recycled fibre (2.9M tons) NA integration rate (2011): 23 units 32% (655K tons) May be sent to 27 units recycling centers NA integration rate (2011): 47% 62 units Upstream and downstream integration Upstream and downstream integration Including the 6 manufacturing/converting tissue papers units and Reno De Medici’s units. 5

NORTH AMERICAN RECYCLED FIBRE SUPPLY 2008 Spot 2011 Spot Cascades Purchases Cascades Purchases Recovery 20% Recovery 19% and Internal and Internal 32% 35% Contractual Contractual agreements agreements 48% 46% Control over 80% of our fibre supply despite greater concentration on the supply side Control over 80% of our fibre supply despite greater concentrati on on the supply side 6

MARKET DYNAMICS – DEMAND Packaging Tissue (billions U.S. Total Tissue Consumption North American Box Shipments ('000 s.t.) ft2) 8,400 460 8,319 424 421 428 421 8,219 8,201 412 411 413 8,200 420 405 8,053 386 387 8,028 374 380 8,000 7,896 7,844 340 7,800 300 7,600 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Exposure to relatively stable / growing demand Exposure to relatively stable / growing demand Sources: RISI, Fiber Box Association, Paper Packaging Canada. 7

MARKET DYNAMICS – SUPPLY Top 5 producers' share of capacity 100% 86% 85% 77% 76% 80% 66% 60% 40% 20% 0% North American European coated North American Canadian North American coated boxboard boxboard containerboard containerboard tissue Cascades’s Market Share 3% 17% 3% 26% 7% (estimate) Increased consolidation over the last few years in our market segments gments Increased consolidation over the last few years in our market se Sources: RISI, companies filings. 8

MARKET DYNAMICS – MARKET BALANCE Annual Average Capacity Utilization Rates 100% 96% 92% 88% 84% 80% 76% 2007 2008 2009 2010 2011 U.S. Containerboard Industry U.S. Coated Recycled Boxboard Industry U.S. Tissue Industry Balanced supply/demand equation with utilization rates at approximately 95% imately 95% Balanced supply/demand equation with utilization rates at approx Sources: RISI, CEPI Cartonboard, Paper Packaging Canada , Fiber Box Association. 9

MARKET DYNAMICS – PRICING Tissue Packaging Cascades Tissue Papers Index Packaging Annual Average Selling Prices (January 1999 = 1,000) 1,200 1,700 1,669 1,153 991 1,600 1,000 909 1,500 800 1,400 710 597 1,300 600 640 560 420 1,200 400 1,148 2004 2005 2006 2007 2008 2009 2010 2011 1,100 2003 2004 2005 2006 2007 2008 2009 2010 2011 Virgin Coated Duplex Boxboard (GC2) Recycled White-Lined Chipboard Index (GD2) Recycled Boxboard - 20 pt claycoated news (transaction) Linerboard 42-lb, unbleached kraft, East US (transaction) Upward long- -term pricing trend term pricing trend Upward long Source: RISI. 10

MARKET DYNAMICS – RAW MATERIAL COSTS Main Recycled Fiber North Amercian List Prices (US$/ton) 300 290 250 200 170 165 150 140 100 50 White grades (SOP) Brown grades (OCC) 0 Jan 12 Jan 07 May 07 Sept 07 Jan 08 May 08 Sept 08 Jan 09 May 09 Sept 09 Jan 10 May 10 Sept 10 Jan 11 May 11 Sept 11 EBITDA sensitivity to 15$U.S. or € €/s.t. change in recycled fiber costs = 48 M$ /s.t. change in recycled fiber costs = 48 M$ EBITDA sensitivity to 15$U.S. or Sources: RISI, Bloomberg. 11

MARKET DYNAMICS – INPUT COST INFLATION Natural gas Crude oil Energy prices Chemical products price variation (US$) (US$) 160% 7 110 100 6 150% 90 5 140% 80 4 70 130% 3 Average 60 120% 2 50 ’11: +16% 1 110% 40 0 30 ’10: +4% 100% Jan 09 Apr 09 July 09 Oct 09 Jan 10 Apr 10 July 10 Oct 10 Jan 11 Apr 11 July 11 Oct 11 Jan 10 Mar 10 May 10 July 10 Nov 10 Jan 11 Mar 11 May 11 July 11 Nov 11 Jan 12 Sept 10 Sept 11 Natural gas (US$/mmBtu) Crude oil (US$/barrel) Starch Wax Latex Pigment Plastic Increase over 2 years+ +25% +8% +22% +32% +17% Financial results impacted by significant variable cost inflation n Financial results impacted by significant variable cost inflatio Source: Bloomberg. 12

ACTING ON OUR STRATEGIC PRIORITIES IN 2011 Focused investing for modernization of core operations and IT 1 ATMOS (Voith) ERP ATMOS (Voith) ERP • $80M investment program • Full machine rebuilt • Blueprint and programming: • Swing machine with “TAD 2011-2012 equivalent” technology • Implementation: • $30M investment 2011-2015 • First to install in North America • High-end tissue paper offering • Can use up to 100% recycled fiber • Lower energy costs Challenging Market Evolution   Proactive measures Proactive measures   Improved profitability Improved profitability Challenging Market Evolution 13 13

TOWARDS MODERNIZATION : GREENPAC • Financial flexibility not affected • Competitive advantage – Recycled liner • $99M total investment Largest in NA • • $84M in equity • 540,000 short tons capacity • $15M in bridge loan Most technologically advanced equipment • • Debt non-recourse to Cascades Well-aligned with current market trends • • Strong Partnership • Norampac (Cascades) 59.7% • Caisse de dépôt et placement du Québec 20.2% • Two industry converters 20.1% Will position us amongst leaders in terms of product offering, productivity and profitability roductivity and profitability Will position us amongst leaders in terms of product offering, p 14

ACTING ON OUR STRATEGIC PRIORITIES IN 2011 Optimizing capital allocation between sectors and investments; reducing working capital 2 Papersource Acquisition Papersource Acquisition W/C Reduction W/C Reduction Working capital (% of sales) • Acquired one of the most modern 20.0% converting plants in NA 18.0% 16.3% • Integration level increased to 70% + 16.1% 16.0% 15.0% 14.8% 15.0% 14.7% 14.6% • Reinforces positioning in away- 13.7% 14.0% from-home sector 12.0% • 10 converting lines 10.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2010 2010 2010 2011 2011 2011 2011 Challenging Market Evolution   Proactive measures Proactive measures   Improve profitability Improve profitability Challenging Market Evolution 15 15