Financial Reports & Markets
Cascades posts 5% increase in sales for Q4 20 compared to year ago
February 25, 2021 By Cascades/P&PC Staff
Cascades has reported strong results for fourth quarter and year-end 2020, posting sales of nearly $1.3 billion ($1,284 million, compared with $1,275 million in Q3 2020 and $1,227 million in Q4 2019).
For year-end 2020, the company cited sales of over $5.1 billion ($5,157 million, compared with $4,996 million in 2019, an increase of three per cent).
“We are very pleased with our strong fourth quarter performance. Consolidated adjusted OIBD of $166 million surpassed our cautious outlook for the period, represented an increase of two per cent sequentially and nine per cent year-over, and drove annual profitability to a record level for the third consecutive year,” says Mario Plourde, president and CEO of Cascades, in a statement.
“These results demonstrate good operational execution within the context of a challenging environment, benefits being realized from our ongoing margin improvement initiatives, and the resiliency and dedication of our employees throughout the challenges of COVID-19. Sequentially, fourth quarter performance was driven by a solid contribution from the containerboard segment, itself fuelled by stronger than expected demand on both the manufacturing and converting side.
“The tissue segment also generated good results, with stable consumer retail tissue demand helping to offset lower demand levels for away-from-home products as a result of COVID-19. The tissue segment generated a solid fourth quarter adjusted OIBD margin of 10.5 per cent in spite of ongoing challenging market conditions. The specialty products and European boxboard segments generated slightly lower results in the quarter.
“We have made significant progress on the strategic side in 2020. A large portion of our announced modernization investments in the tissue segment have been completed, with the remaining two state-of-the-art converting lines expected to be installed in the coming quarters. In containerboard, we announced details of our strategic Bear Island conversion project in mid-October, and helped to de-risk the project with a concurrent $125 million equity issuance offering.
“The European Boxboard segment announced the acquisition of Papelera del Principado S.A. and three affiliated companies that will strengthen and consolidate Reno de Medici’s competitive positioning within European recycled boxboard markets, and is expected to close at the end of the first quarter of 2021. At the corporate level, we continued to proactively manage our long-term debt profile, redeeming our 2023 senior notes and issuing 2028 senior notes under beneficial terms. On a broader basis, we advanced our margin improvement initiatives throughout the year, with these efforts contributing approximately $75 million to our consolidated adjusted OIBD level in 2020.”
Q4 2020 compared to Q4 2019
Sales of $1,284 million grew by $57 million, or five per cent, compared with the same period last year.
This was driven by stronger volumes in all packaging segments, most notably in the containerboard segment which benefited from strong demand on both the manufacturing and converting side.
This was partially offset by lower volumes in the tissue segment attributable to continued COVID-19 related market contraction in the away-from-home segment.
Year-over-year consolidated sales levels also benefited from favourable average selling prices and sales mix, with price increases realized in tissue and stable pricing and sales mix in both containerboard and specialty products more than mitigated the impacts of a less favourable pricing and mix environment for European boxboard.
Foreign exchange rates were beneficial for the European boxboard business, which more than offset the impact of less favourable foreign exchange rates for tissue and containerboard.
The corporation generated an operating income before depreciation and amortization (OIBD) of $181 million in the fourth quarter of 2020, up from $76 million in the fourth quarter of 2019.
On an adjusted basis, fourth quarter OIBD totaled $166 million, an increase of $14 million, or nine per cent from the $152 million generated in the same period last year. Results from the containerboard segment increased four per cent year-over-year, as benefits from higher volumes and lower production costs more than offset the impact from higher raw material prices.
Stronger year-over-year tissue results reflected more favourable sales mix and price increases, the effects of which more than mitigated the effects of lower COVID-19 related volumes and higher raw material costs. Adjusted OIBD in the specialty products segment increased compared to the prior year period, as higher volumes, beneficial favourable pricing and sales mix, and lower energy and production costs offset higher raw material costs.
“Our near-term outlook is positive despite ongoing COVID-19 related uncertainty,” says Plourde.
“Demand levels in containerboard remain strong which, combined with recent industry price increases, are expected to help offset raw material pricing headwinds. In tissue, stronger than expected volumes in December, usual seasonal softness in the first quarter, and unfavourable demand impact on away-from-home products related to COVID-19 are expected to translate into weaker sequential performance.
“We expect the ongoing modernization, cost management and margin improvement initiatives to partially counter softer demand factors. Near-term performance in specialty products is forecasted to remain stable sequentially, with higher average selling prices and good demand trends for consumer food packaging offsetting slightly higher raw material costs.
“Results in European boxboard are expected to remain stable, with higher volumes and a favourable exchange rate mitigating higher forecasted raw material and energy costs. On a consolidated basis, raw material costs are expected to be a headwind for our businesses sequentially, with average OCC prices increasing in line with usual seasonal trends for the period. Prices for white recycled fibres remain stable, while those for virgin pulp are expected to increase given recent moves in index pricing. Raw materials remain readily available, and we do not foresee any changes in this regard.
“Looking further ahead, 2021 will be a busy year. The highlight will be our Bear Island containerboard project, which will account for the lion’s share of our capex program. We will also be finalizing modernization investments in our tissue converting operations, with all of these projects encompassed within our $450 to $475 million capital program for 2021.”
Read the full Cascades financial report here.
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