CASCADES INC. Goldman Sachs 2013 Montréal Paper & Forest Products Investor Event March 13, 2013
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 Corporation’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 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 Corporation. 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 Corporation 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 Corporation’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 impairment of assets, for facility or machine closures, accelerated depreciation of assets due to restructuring measures, 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 Packaging Tissue Papers Boxboard Europe Containerboard Specialty Products Leading NA packaging and tissue manufacturer with substantial recycling capabilities 3
BALANCED PACKAGING AND TISSUE PLAY Cascades 2012 Sales: $3,645M 2012 EBITDA 1 : $304M Packaging Products Tissue Papers 74% of Sales 26% of Sales 57% of EBITDA 43% of EBITDA Boxboard Europe Containerboard Specialty Products 21% of Sales 32% of Sales 21% of Sales 13% of EBITDA 29% of EBITDA 15% of EBITDA Exposure to less cyclical end-markets 1 EBITDA excluding specific items. Breakdown of sales and EBITDA before eliminations & corporate activities. 4
CLOSED-LOOP BUSINESS MODEL 100+ business units 77% recycled fibre (2.9M tons) NA integration rate (2012): 23 units 34% (520K tons) May be sent to 32 units recycling centers NA integration rate (2012): 51% 58 units Upstream and downstream integration Including seven manufacturing/converting tissue papers units and Reno De Medici’s units. 5
MARKET DYNAMICS – CONTAINERBOARD North American Box Shipments Containerboard Price Increases (billions ($US/s.t.) ft2) 1,000 445 20-pt clay coated news (CRB) Linerboard 42-lb Corrugating medium 26-lb 428 900 430 421 800 415 405 700 400 389 387 386 385 600 374 370 500 Mar-10 May-10 Mar-11 May-11 Mar-12 May-12 Mar-13 May-13 Jul-10 Sep-10 Nov-10 Jan-11 Jul-11 Sep-11 Nov-11 Jan-12 Jul-12 Sep-12 Nov-12 Jan-13 2006 2007 2008 2009 2010 2011 2012 Second $US50/s.t. price increase announced for April 1 st Containerboard industry fundamentals are positive Sources: RISI, Fiber Box Association, Paper Packaging Canada. 6
MARKET DYNAMICS – CONTAINERBOARD Containerboard Utilization Rate Major Producers : Top 3 = 65% 98% 95% 96% 96% Rock-Tenn 93% 94% 19% Graphic 90% IP Pack. 35% 11% 86% 85% 86% PCA 7% 82% Pratt Others 3% 2008 2009 2010 2011 2012 NRP 22% Cascades 3% Balanced supply/demand equation with industry utilization rates exceeding 95% Sources: Company estimates, RISI, Fiber Box Association, Paper Packaging Canada. 7
MARKET DYNAMICS – TISSUE PAPERS Capacity additions in the tissue sector US tissue consumption +4.5% +1.5% ('000 s.t.) ( 000 s.t.) 9,500 8,600 154 496 8,902 8,472 9,000 (260) 8,400 8,512 8,319 8,500 8,219 8,201 8,200 8,000 8,053 8,028 8,000 7,500 7,896 7,000 7,800 2011 NA New capacity New capacity Expected 2013 NA 2006 2007 2008 2009 2010 2011 2012 Tissue Capacity '12-'13 '12-'13 closures Tissue Capacity (TAD and TADe) (other grades) (estimate) New capacity to have more impact on national brands but potential trickle-down to AfH Sources: RISI, Fiber Box Association, Paper Packaging Canada. 8
MARKET DYNAMICS – TISSUE PAPERS Cascades’ Tissue Papers 2012 Sales – Countries Cascades’ Tissue Papers 2012 Sales – End-Users Canada (28%) Retail AfH Retail 36% AfH 45% 46% branded 54% 39% Parent rolls 16% US (72%) Branded 90% AfH Retail 16% Private private 47% 53% label Branded 43% label 57% Private label 84% Exposure to relatively stable / growing demand 9 Source: RISI and Company estimates; sales by countries exclude parent roll sales
MARKET DYNAMICS – RAW MATERIAL COSTS Main Recycled Fiber North Amercian OBM List Prices (US$/ton) 300 290 250 Current 200 175 165 165 150 115 100 90 50 White grades (SOP) Brown grades (OCC) 0 Mar 13 Jan 09 Apr 09 Oct 09 Jan 10 Apr 10 Oct 10 Jan 11 Apr 11 Oct 11 Jan 12 Apr 12 Oct 12 Jan 13 July 09 July 10 July 11 July 12 OBM Average Annually List Prices 2011 2012 YoY YTD-2013 Brown grades - OCC No. 11 (New England) 158 119 -25% 108 White grades - SOP No. 37 (New England) 242 168 -31% 165 Recent price increases but costs not expected to average significantly more in 2013 10 Sources: RISI, Bloomberg.
MARKET DYNAMICS – RAW MATERIAL COSTS Cascades’ North American Fibre Supply 2008 2012 Spot Spot Cascades Purchases Cascades Purchases Recovery 19% Recovery 27% and Internal and Internal 35% 33% Contractual Contractual Agreements Agreements 40% 46% Control over 70% of our fibre supply despite greater concentration on the supply side 11
MARKET DYNAMICS – OTHER DRIVERS Canadian dollar - recent 52-week high Chemicals – Increase over last 2 years US$/CAN$ EURO/CAN$ 1.10 1.00 0.95 1.05 0.90 1.00 0.85 0.95 0.80 0.75 0.90 0.70 0.85 0.65 0.80 0.60 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 US$/CAN$ Euro/CAN$ Increase +17% +0% +10% +21% +7% over +24 months Financial results impacted negatively by stronger CAD$ and variable cost inflation 12 Source: Bloomberg
OUR STRATEGIC ACTION PLAN 1 3 4 2 Focused investing Optimizing capital ACTION PLAN Restructuring of for modernization allocation & PRIORITIES under-performing Innovation of core operations reducing working units (and IT) capital TOOL OR Working Capital ERP Initiative PROCESS Improve our ROCE to reach our cost of capital MEDIUM TERM OBJECTIVES Reach industry comparable leverage ratios Improving our profitability and financial situation through our Action Plan 13
ACTING ON OUR STRATEGIC PRIORITIES 1 Focused investing for modernization of core operations and IT IMPROVED PACKAGING PLATFORM ERP • Important investment • Consolidation of our program corrugated products sector in Ontario with the acquisition • Blueprint and of Bird and concurrent programming: 2011-2012 investments totaling $30M • Implementation: • Consolidation of our folding 2011-2015 carton and microlithography operations with investments totaling $20M Challenging Market Evolution Proactive measures Improved profitability 14
TOWARDS MODERNIZATION : GREENPAC Operational Facts Financial Structure • $99M total investment • Largest recycled linerboard mill in NA: • Represents ± $1.05/share • 328 inches • Debt non-recourse to Cascades • 1,500 s.t./day of lightweight recycled linerboard (26 pounds) Partners Ownership • Most technologically advanced equipment Cascades 59.7% CDPQ 20.2% Manufacturing capacity breakdown Two industry converters 20.1% Before After Greenpac Greenpac Linerboard 28% 51% Medium 72% 49% Canada 72% 49% USA 18% 51% Will position us amongst leaders in terms of offering, productivity and profitability 15
ACTING ON OUR STRATEGIC PRIORITIES 2 Optimizing capital allocation; reducing working capital Papersource Acquisition W/C Reduction Working Capital (% of Sales) • Acquired one of the most modern 16% 14.2% 14.7% 14.3% converting plants in NA 14.5% 14.4% 14.5% 14% • Integration level increased to 70% + 13.2% 12.4% • Reinforces positioning in away- 12% from-home sector 10% • 10 converting lines 8% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Challenging Market Evolution Proactive measures Improve profitability 16
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