Cascades Reports Results for the Fourth Quarter and Full Year 2022

Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period and fiscal year ended December 31, 2022.

Q4 2022 Highlights

• Sales of $1,135 million (compared with $1,174 million in Q3 2022 and $1,028 million in Q4 2021)
• As reported
  • Operating loss of $(20) million (compared with $25 million in Q3 2022 and $(90) million in Q4 2021)
  • Net loss per common share of $(0.27) (compared with a net loss per common share of ($0.02) in Q3 2022 and net earnings per common share of $1.04 in Q4 2021)
• Adjusted (excluding specific items¹)
  • Earnings before interest, taxes, depreciation and amortization (EBITDA (A)) of $116 million (compared with $111 million in Q3 2022 and $62 million in Q4 2021)
  • Net earnings per common share of $0.22 (compared with net earnings per common share of $0.20 in Q3 2022 and a net loss per common share of ($0.09) in Q4 2021)

2022 Annual Highlights

• Sales of $4,466 million (compared with $3,956 million in 2021)
• As reported
  • Operating income of $33 million (compared with $50 million in 2021)
  • Net loss per common share of $(0.34) (compared with net earnings per common share of $1.60 in 2021)
• Adjusted (excluding specific items¹)
  • Earnings before interest, taxes, depreciation and amortization (EBITDA (A)) of $376 million (compared with $389 million in 2021)
  • Net earnings per common share of $0.37 (compared with net earnings per common share of $0.26 in 2021)
• Net debt¹ of $1,966 million as of December 31, 2022 (compared with $2,011 million as of September 30, 2022). Net debt to adjusted EBITDA (A) ratio¹ of 5.2x, down from 6.2x as of September 30, 2022.
• Total capital expenditures, net of disposals, of $149 million in Q4 2022 and $482 million in 2022. Forecasted 2023 net capital expenditures of approximately $325 million, including $175 million for the Bear Island containerboard conversion project in Virginia, USA.

Mario Plourde, President and CEO, commented: “We are pleased with our fourth quarter consolidated performance, which showed continued positive momentum in our Tissue Papers segment, and good underlying performance in our packaging segments. The wide-ranging profitability and operational initiatives that we have been progressively implementing throughout our operations gained traction as the year progressed, and fuelled the 10.2% consolidated EBITDA (A) margins in Q4. Our operations have faced more than $475 million of production, raw material, freight and energy cost headwinds within the span of the calendar year 2022 alone, and our teams have done an excellent job at executing multiple countermeasures. These have taken longer in our Tissue Papers segment, where price rebalancing takes time to be realized, but we are encouraged by the progress being made and expect continued benefits to be generated from operational and profitability initiatives across our operations.

1 Some information represents Non-IFRS financial measures, other financial measures or Non-IFRS ratios which are not standardized under IFRS and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

Our Containerboard segment generated solid results in the fourth quarter. As expected, sales decreased 5% sequentially, reflecting slightly softer shipment levels and average selling prices. These impacts were more than mitigated at the EBITDA (A) level by benefits from lower raw material pricing, more favourable FX, production and energy cost levels, and a $5 million partial insurance settlement related to water effluent treatment issues that occurred at our Niagara Falls, NY complex in mid-2021. Sequentially, fourth quarter sales levels also decreased for our Specialty Products business, largely driven by lower volumes in the cardboard and plastics sub-segments, resulting in lower EBITDA (A) levels for this business. Sales in our Tissue Papers segment were stable sequentially. This reflected higher selling prices and favourable FX, offset by lower volumes. This business doubled its EBITDA (A) as benefits from lower transportation costs, lower raw material costs and pricing initiatives mitigated the impact from lower volumes and higher production costs, the latter of which includes the impact of the temporary curtailment of one of our paper machines at our St. Helens, Oregon tissue facility since mid-September. Lastly, Corporate Activities generated a higher negative EBITDA (A) in the fourth quarter, a reflection of the impact that lower recycled paper prices and volume had on results in the Company’s Recovery & Recycling operations.

The start-up of the Bear Island project is scheduled for the end of March. Capital investments for this project totaled $107 million in the fourth quarter and $335 million in the calendar year 2022. The Company expects to invest $175 million to complete the project in 2023, with these investments weighted to the first half of the year. As we have stated previously, the elevated capital investment levels for this project combined with lower profitability levels generated by our Tissue Papers segment resulted in an important increase in our leverage ratio in 2022. We expect this trend to reverse as production is ramped up at our Bear Island facility, and operational and financial performance of our Tissue Papers segment continue to improve.”

Discussing near-term outlook, Mr. Plourde commented, “We are remaining prudent in our outlook, as macro-economic conditions continue to be challenging and unpredictable, and inflationary pressures on costs, while easing, continue. Despite this, we have started 2023 in a good position to drive growth throughout the year. We expect sequentially lower results in our Containerboard segment in Q1. This reflects the $5 million partial insurance settlement received in the current quarter and a continuation of slightly softer volume and selling prices, the impacts of which will not be offset by lower raw material cost tailwinds. The Specialty Products business is expected to generate moderately stronger results in the first quarter, as favourable trends in pricing and volume counter the persistently higher production cost environment. Lastly, we expect results in our Tissue Papers segment to slightly improve sequentially. While we anticipate continued positive momentum from operational and profitability initiatives, more favourable raw material prices, and good demand from retail tissue products, our tempered outlook for this segment reflects softer demand for Away-from-Home products, and the delayed restart of the machine at our St. Helens, Oregon facility that occurred on February 10. As far as our longer-term outlook, we will provide a comprehensive update of our 2022- 2024 Strategic Plan in conjunction with our Q1 2023 results on May 11, 2023.”

Analysis of results for the three-month period ended December 31, 2022 (compared to the same period last year)

Sales of $1,135 million increased by $107 million compared with the same period last year. This reflects $139 million of combined benefits from improvements in selling prices and sales mix in all business segments. The Canadian dollar – US dollar exchange rate was also favourable for all businesses, contributing $54 million to sales levels on a consolidated basis. These factors were partially offset by a $73 million impact related to lower volumes mainly in the Tissue Papers business segment.

The fourth quarter EBITDA (A)¹ totaled $116 million, an increase of $54 million, or 87%, from the $62 million generated in the same period last year. This increase reflects the net consolidated benefits of $106 million related to price increases and changes in sales volumes and product assortment sold, and $7 million from more favourable raw material and FX. These benefits outweighed higher production, energy and logistics costs in all segments, and a negative contribution from Recovery & Recycling operations as a result of lower volume and recycled paper prices.

The main specific items, before income taxes, that impacted our fourth quarter 2022 operating loss and/or net loss were:

• $8 million impairment charge on property, plant and equipment for Containerboard Packaging plants (operating loss and net loss);
• $3 million impairment charge on goodwill in the Specialty Products segment (operating loss and net loss);
• $75 million impairment charge on property, plant and equipment for Tissue Papers plants in USA (operating loss and net loss);
• $10 million gain from the sale of land related to a closed Specialty Products plant in Canada (operating loss and net loss);
• $2 million restructuring costs in the Tissue Papers segment (operating loss and net loss);
• $4 million unrealized gain on financial instruments (operating loss and net loss);
• $3 million foreign exchange gain on long-term debt and financial instruments (net loss);
• $3 million deferred tax benefit as a result of a tax election related to the discontinued operations realized in 2021 (net loss).

For the 3-month period ended December 31, 2022, the Corporation posted a net loss of $(27) million, or $(0.27) per common share, compared to net earnings of $105 million, or $1.04 per common share, in the same period of 2021. On an adjusted basis¹, the Corporation generated net earnings of $22 million in the fourth quarter of 2022, or $0.22 per common share, compared to a net loss of $(9) million, or ($0.09) per common share, in the same period of 2021.

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

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 March 23, 2023 to shareholders of record at the close of business on March 9, 2023. This dividend is an “eligible dividend” as per the Income Tax Act (R.C.S. (1985), Canada). During the fourth quarter of 2022, Cascades purchased no common shares for cancellation.

For the complete press release, click here.

About Cascades Inc.

Founded in 1964, Cascades (TSX: CAS) offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs more than 11,700 women and men across a network of 85 facilities in North America and Europe. 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.

Contact:

Jennifer Aitken – Director, Investor Relations – jennifer_aitken@cascades.com – (514) 282-2697

Source: Cascades Inc.