News Tissue
Cascades’ third quarter results for 2021 show improvement from previous quarter

Cascades recently reported its financial results for the third quarter of 2021, for the period ended September 30, 2021.

The highlights from the report as shared by the company are:

• Sales of $1,030 million [compared with $956 million in second quarter of 2021 ( up eight percent) and $1,014 million in the third quarter of 2020 (up two percent]
• As reported (including specific items)
  • Operating income of $73 million [compared with $23 million in the second quarter of 2021 (up 217 percent) and $54 million in the third quarter of 2020 (up 35 percent)]
  • Operating income before depreciation and amortization (OIBD) of $136 million [compared with $87 million in the second quarter of 2021 (up 56 percent) and $123 million in quarter three of 2020 (up 11 percent)]
  • Net earnings per common share of $0.32 (compared with $0.02 in the second quarter of 2021 and $0.51 in the third quarter of 2020)
• Adjusted (excluding specific items)
  • Operating income of $44 million [compared with $34 million in the second quarter of 2021 (up 29 percent) and $64 million in third quarter of 2020 (down 31 percent)]
  • OIBD of $107 million [compared with $98 million in the second quarter of 2021 (up nine percent) and $133 million in quarter three of 2020 (down 20 percent)]
  • Net loss per common share of $0.01 (compared with net earnings per common share of $0.07 in the second quarter of 2021 and net earnings per common share of $0.50 in the third quarter of 2020)
• Following the July 2021 announcement regarding the monetization of its 57.6 percent controlling equity interest in Reno de Medici S.p.A. (RDM) for €1.45 per share, or $461 million including foreign exchange contracts and before related transaction fees of $11 million, financial information for the boxboard Europe segment is presented as discontinued operations. The transaction closed on October 26, 2021.
• Net debt of $1,760 million as of September 30, 2021 (compared with $1,707 million as of June 30, 2021). Net debt to adjusted OIBD ratio of 3.8x up from 3.5x as of June 30, 2021. Taking into account the monetization of our investment in RDM, the net debt to adjusted OIBD ratio would have been 2.8x.
• During the third quarter, the Corporation purchased 1,651,600 common shares for cancellation at a weighted average price of $15.45.
• Total capital expenditures, net of disposals, of $4 million in the third quarter of 2021, compared to $65 million in the second quarter of 2021 and to $39 million in the third quarter of 2020; forecasted 2021 net capital expenditures of between $275 million and $300 million, encompassing $155 million for the Bear Island containerboard conversion project in Virginia, USA.

Mario Plourde, president and CEO, commented: “Our third quarter performance reflects the ongoing dynamic nature of the North American macro environment and the announced production impact in our containerboard segment related to water effluent treatment system issues at our Niagara Falls complex. We are encouraged with our results given this context, and with the sequential improvement in our tissue business. We continued to see inflationary pressures on input costs, notably raw materials, but also in labour, transportation and energy, across our operations in the third quarter, the effects of which were partially offset by the roll-out of announced price increases and our continued cost management initiatives. Sequentially, in containerboard, good demand levels and realized benefits from the continued roll-out of price increases helped to offset higher raw material prices and the impact from reduced production at our Niagara Falls complex, which reduced our sequential OIBD by $26 million and $10 million, respectively. Specialty packaging results reflected solid demand and incremental benefits from price increases which, combined, largely mitigated higher costs. On the tissue side, demand and pricing trends were more positive sequentially, while higher input costs, notably raw materials and transportation, remained headwinds.

At the corporate level, we successfully completed the monetization of our majority 57.6 percent equity position in Reno de Medici in late October. Our exit from European boxboard markets, recent 50 percent dividend increase and ongoing share buy-back program through which 1.65 million shares were repurchased in the third quarter, underscore our commitment to creating long term value for the Corporation and our Shareholders. As part of our focus to reinforce our financial flexibility and optimize our capital structure through a strategic deployment of capital, we subsequently completed the repurchase of US$299 million of our long-term notes on November 9, 2021.”

Discussing near-term outlook, Plourde added, “Looking ahead, we are forecasting sequentially stable results for the fourth quarter, with the impact of inflationary pressures on input costs largely mitigated by steady demand and the roll-out of price increases in our business segments. In containerboard, solid demand and ongoing flow-through of the third price increase are expected to offset higher raw material costs and inflationary headwinds in input costs. Likewise, good demand and price increases in Specialty packaging are expected to counter cost pressure. Finally, considering usual seasonal softness, we are forecasting results and demand levels in our tissue papers segment to be stable sequentially, with continued benefits from the ongoing roll-out of sales price increases countering higher raw material prices and pressures on costs.”

Analysis of results for the three-month period ended September 30, 2021 (compared to the same period last year)

Sales of $1,030 million increased by $16 million, or two percent, compared with the same period last year. This was driven by better pricing and mix in the packaging segments. These benefits were partially offset by a less favourable Canadian dollar – US dollar exchange rate, and lower volumes in the containerboard segment as a result of the water effluent system issues at the Niagara Falls complex.

The corporation generated an operating income before depreciation and amortization (OIBD) of $136 million in the third quarter of 2021, up from $123 million in the third quarter of 2020. On an adjusted basis, third quarter OIBD totaled $107 million, a decrease of $26 million, or 20 percent from the $133 million generated in the same period last year. This decrease is largely attributable to higher raw material costs and inflationary pressures in labour, transportation and energy in all segments, and lower volumes in Containerboard. These were partially offset by benefits of pricing increases in all business segments and better mix.

The main specific items, before income taxes, that impacted Cascades’ third quarter 2021 OIBD and/or net earnings were:

• $39 million of gains from the sale of buildings related to closed plants in the USA and Canada recorded in tissue papers segment (OIBD and net earnings);
• $5 million of restructuring charges and closure costs recorded in containerboard packaging segment and tissue papers segment as part of profitability improvement and restructuring initiatives (OIBD and net earnings);
• $5 million unrealized loss on financial instruments (OIBD and net earnings);
• $3 million foreign exchange loss on long-term debt and financial instruments (net earnings);
• $20 million total gain from a business combination and an unrealized gain on financial instruments within discontinued operations (net earnings).

For the three-month period ended September 30, 2021, the corporation posted net earnings of $32 million, or $0.32 per common share, compared to net earnings of $49 million, or $0.51 per common share, in the same period of 2020. On an adjusted basis, the corporation generated net loss of $1 million in the third quarter of 2021, or $ 0.01 per common share, compared to net earnings of $48 million, or $0.50 per common share, in the same period of 2020.