Cascades mar13pres


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Cascades mar13pres

  1. 1. CASCADES INC.Goldman Sachs2013 MontréalPaper & Forest Products Investor EventMarch 13, 2013
  2. 2. Certain statements in this presentation, including statements regarding future results and performance, are forward-lookingstatements within the meaning of securities legislation based on current expectations. The accuracy of such statements issubject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from thoseprojected, including, but not limited to, the effect of general economic conditions, decreases in demand for theCorporation’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 alsoinclude price indices as well as variance and sensitivity analyses that are intended to provide the reader with a betterunderstanding of the trends related to our business activities. These items are based on the best estimates available to theCorporation.The financial information included in this presentation also contains certain data that are not measures of performanceunder IFRS (“non-IFRS measures”). For example, the Corporation uses earnings before interest, taxes, depreciation andamortization (EBITDA) because it is the measure used by management to assess the operating and financial performanceof the Corporation’s operating segments. Such information is reconciled to the most directly comparable financialmeasures, as set forth in the “Supplemental Information on Non-IFRS Measures” section of our most recent quarterlyreport or annual report.Specific items are defined as items such as charges for impairment of assets, for facility or machine closures, accelerateddepreciation of assets due to restructuring measures, debt restructuring charges, gains or losses on sales of businessunits, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, foreignexchange 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.DISCLAIMER2
  3. 3. GREEN PACKAGING AND TISSUE PRODUCT OFFERING3Packaging Tissue PapersBoxboard Europe Containerboard SpecialtyProductsLeading NA packaging and tissue manufacturer with substantial recycling capabilities
  4. 4. BALANCED PACKAGING AND TISSUE PLAY4Packaging Products74% of Sales57% of EBITDACascades2012 Sales: $3,645M2012 EBITDA1: $304MTissue Papers26% of Sales43% of EBITDABoxboard Europe21% of Sales13% of EBITDAContainerboard32% of Sales29% of EBITDASpecialty Products21% of Sales15% of EBITDAExposure to less cyclical end-markets1 EBITDA excluding specific items. Breakdown of sales and EBITDA before eliminations & corporate activities.
  5. 5. CLOSED-LOOP BUSINESS MODEL5100+ business units32 units23 units58 unitsMay be sent torecycling centers77% recycled fibre(2.9M tons)NA integration rate (2012):34% (520K tons)NA integration rate (2012):51%Including seven manufacturing/converting tissue papers units and Reno De Medici’s units.Upstream and downstream integration
  6. 6. 5006007008009001,000Mar-10May-10Jul-10Sep-10Nov-10Jan-11Mar-11May-11Jul-11Sep-11Nov-11Jan-12Mar-12May-12Jul-12Sep-12Nov-12Jan-13Mar-13May-1320-pt clay coated news (CRB)Linerboard 42-lbCorrugating medium 26-lb($US/s.t.)MARKET DYNAMICS – CONTAINERBOARD6Containerboard industry fundamentals are positiveSources: RISI, Fiber Box Association, Paper Packaging Canada.North American Box Shipments428421405374386 387 3893703854004154304452006 2007 2008 2009 2010 2011 2012(billionsft2)Containerboard Price IncreasesSecond $US50/s.t. price increase announced for April 1st
  7. 7. MARKET DYNAMICS – CONTAINERBOARD7Sources: Company estimates, RISI, Fiber Box Association, Paper Packaging Canada.93%85%95%96% 96%86%82%86%90%94%98%2008 2009 2010 2011 2012 NRPContainerboard Utilization RateBalanced supply/demand equation with industry utilization rates exceeding 95%Major Producers : Top 3 = 65%IP35%Rock-Tenn19%GraphicPack.11%PCA7%Pratt3%Cascades3%Others22%
  8. 8. 7,8968,0288,2018,0538,2198,3198,4727,8008,0008,2008,4008,6002006 2007 2008 2009 2010 2011 2012( 000 s.t.)MARKET DYNAMICS – TISSUE PAPERS8New capacity to have more impact on national brands but potential trickle-down to AfHUS tissue consumptionSources: RISI, Fiber Box Association, Paper Packaging Canada.8,5128,9024961547,0007,5008,0008,5009,0009,5002011 NATissue CapacityNewcapacity12-13(TADand TADe)Newcapacity12-13(othergrades)Expectedclosures2013 NATissue Capacity(estimate)(000 s.t.)(260)Capacity additions in the tissue sector+4.5% +1.5%
  9. 9. 9Source: RISI and Company estimates; sales by countries exclude parent roll salesCascades’ Tissue Papers 2012 Sales – End-UsersBranded57%Privatelabel43%Branded16%Privatelabel84%Cascades’ Tissue Papers 2012 Sales – CountriesRetail54%AfH46%Retail53%AfH47%Canada (28%)US (72%)Retail45%Parentrolls16%AfH39%90%privatelabel36%brandedExposure to relatively stable / growing demandMARKET DYNAMICS – TISSUE PAPERS
  10. 10. OBM Average Annually List Prices 2011 2012 YoY YTD-2013Brown grades - OCC No. 11 (New England) 158 119 -25% 108White grades - SOP No. 37 (New England) 242 168 -31% 16529017516516590115050100150200250300Jan09Apr09July09Oct09Jan10Apr10July10Oct10Jan11Apr11July11Oct11Jan12Apr12July12Oct12Jan13(US$/ton) Main Recycled Fiber North Amercian OBM List PricesWhite grades (SOP) Brown grades (OCC)Recent price increases but costs not expected to average significantly more in 2013Sources: RISI, Bloomberg.MARKET DYNAMICS – RAW MATERIAL COSTSCurrent10Mar13
  11. 11. Cascades’ North American Fibre Supply11Control over 70% of our fibre supply despite greater concentration on the supply sideContractualAgreements46%CascadesRecoveryand Internal35%SpotPurchases19%2008ContractualAgreements40%CascadesRecoveryand Internal33%SpotPurchases27%2012MARKET DYNAMICS – RAW MATERIAL COSTS
  12. 12. 12Financial results impacted negatively by stronger CAD$ and variable cost inflationSource: BloombergIncrease +17% +0% +10% +21% +7%over+24 monthsChemicals – Increase over last 2 yearsMARKET DYNAMICS – OTHER DRIVERS0.600.650.700.750.800.850.900.951.000.800.850.900.951.001.051.10Q1-10Q2-10Q3-10Q4-10Q1-11Q2-11Q3-11Q4-11Q1-12Q2-12Q3-12Q4-12EURO/CAN$US$/CAN$US$/CAN$ Euro/CAN$Canadian dollar - recent 52-week high
  13. 13. Improve our ROCE to reach our cost of capitalReach industry comparable leverage ratiosImproving our profitability and financial situation through our Action PlanACTION PLANPRIORITIESTOOL ORPROCESSMEDIUM TERMOBJECTIVESFocused investingfor modernizationof core operations(and IT)Optimizing capitalallocation &reducing workingcapitalRestructuring ofunder-performingunits2 31Innovation4ERPWorking CapitalInitiativeOUR STRATEGIC ACTION PLAN13
  14. 14. ACTING ON OUR STRATEGIC PRIORITIES14Challenging Market Evolution  Proactive measures  Improved profitabilityIMPROVED PACKAGING PLATFORMFocused investing for modernization of core operations and IT1ERP• Consolidation of ourcorrugated products sector inOntario with the acquisitionof Bird and concurrentinvestments totaling $30M• Consolidation of our foldingcarton and microlithographyoperations with investmentstotaling $20M• Important investmentprogram• Blueprint andprogramming: 2011-2012• Implementation:2011-2015
  15. 15. 15• $99M total investment• Represents ± $1.05/share• Debt non-recourse to CascadesPartners OwnershipCascades 59.7%CDPQ 20.2%Two industry converters 20.1%• Largest recycled linerboard mill in NA:• 328 inches• 1,500 s.t./day of lightweight recycledlinerboard (26 pounds)• Most technologically advanced equipmentWill position us amongst leaders in terms of offering, productivity and profitabilityManufacturing capacity breakdownBefore AfterGreenpac GreenpacLinerboard 28% 51%Medium 72% 49%Canada 72% 49%USA 18% 51%Financial StructureOperational FactsTOWARDS MODERNIZATION : GREENPAC
  16. 16. ACTING ON OUR STRATEGIC PRIORITIES16Challenging Market Evolution  Proactive measures  Improve profitability• Acquired one of the most modernconverting plants in NA• Integration level increased to 70% +• Reinforces positioning in away-from-home sector• 10 converting linesOptimizing capital allocation; reducing working capital2W/C ReductionPapersource Acquisition14.5% 14.4% 14.5%13.2%14.2%14.7%14.3%12.4%8%10%12%14%16%Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012Working Capital (% of Sales)
  17. 17. ACTING ON OUR STRATEGIC PRIORITIES17Restructuring of under-performing unitsChallenging Market Evolution  Proactive measures  Improved profitabilityPeriods 2004-2006 2006-2008 2008-2010 2011-2012StrategicmeasuresPackaging5 acquisitions7 closures2 salesTissue1 sale1 closure1 acquisitionPackaging2 mergers4 closures4 sales2 acquisitions1 partnershipPackaging2 closures2 acquisitionsTissue1 investment1 acquisitionPackaging4 sales1 investment10 closuresTissue1 acquisition3
  18. 18. ACTING ON OUR STRATEGIC PRIORITIES18Challenging Market Evolution  Proactive measures  Improve profitabilityImprovement and development of processes and products through innovation4Two-fingerdrink carrierMoka –Beige bath tissueClosing systemreducing air exchange
  19. 19. 3,6923,8623,4814,033 4,0253,8773,1823,625 3,6452,5003,0003,5004,0004,5002004 2005 2006 2007 2008 2009 2010 2011 2012(M CAN$) SALES259 26231434030546531022930401002003004005002004 2005 2006 2007 2008 2009 2010 2011 2012(M CAN$) EBITDAHISTORICAL FINANCIAL PERFORMANCE19Results impacted by challenging market conditions, lower shipments and higher cost inputEBITDA excluding specific items but including discontinued operations. Canadian GAAP (not adjusted for IFRS).2010 and 2011 figures presented under IFRS and exclude discontinued operations of Dopaco.IFRSCANADIAN GAAP IFRSCANADIAN GAAP
  20. 20. KEY PERFORMANCE INDICATORS (KPIs)Need for improvement in productivityThe capacity utilization rate is defined as: Shipments/Practical capacity. Paper manufacturing only.20661902822774808 826 804 8095006257508751000Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012(000 s.t.) Total Shipments90% 90%87%86%89%90%87% 88%80%83%86%89%92%Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012Capacity Utilization Rate
  21. 21. KEY PERFORMANCE INDICATORS (KPIs)Return on assets progressing; major improvement in working capital managementReturn on assets is defined as : LTM EBITDA excluding specific items/ LTM Average of total quarterly assets. It includes discontinued operations.Working capital includes accounts receivable plus inventories less accounts payable. 219.9%8.7%7.4%6.5%7.1%7.6% 7.5%8.1%6%7%8%9%10%Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012LTM Return on Assets14.5% 14.4% 14.5%13.2%14.2%14.7%14.3%12.4%8%10%12%14%16%Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012Working Capital (% of Sales)
  22. 22. 51710 1013117110.0%3.0%6.0%9.0%12.0%05101520Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012(% of sales)(M CAN$)Boxboard Europe19 202719212326 250.0%3.0%6.0%9.0%12.0%1015202530Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012(% of sales)(M CAN$)Containerboard10161828333935310.0%5.0%10.0%15.0%20.0%010203040Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012(% of sales)(M CAN$)Tissue Papers712 1321115 1580.0%3.0%6.0%9.0%12.0%05101520Q12011Q22011Q32011Q42011Q12012Q22012Q32012Q42012(% of sales)(M CAN$)Specialty ProductsHISTORICAL SEGMENTED EBITDAEBITDA excluding specific items. 22Tissue PapersBoxboard Europe ContainerboardSpecialty Products
  23. 23. BLX growth not fully reflected in its valuation; still represents ±$1.35/share for CAS23PERFORMANCE OF OUR EQUITY INVESTMENTS - BORALEXSource: Bloomberg and Boralex’ website; refer to October 2012 Investor Presentation for footnotes.Analyst RecommendationsAverage target1 top pick 13.00$4 buys or outperforms ~12.00$1 sector outperform 11.25$2 market or sector perform ~10.50$ComparativeValuation Matrix BLX INE NPI(based on 2013 figures)Price/Book 1.2x 1.6x 4.4xPrice/Cash flow 8.4x 12.9x 12.1xEV/EBITDA 10.5x 17.3x 12.2x
  24. 24. Reno is a turnaround story in a tough economic environment24• 30.6% interest received in 2007 in exchangefor our CRB mills• RDM is a public company• Market cap: 57M €• TEV/EBITDA: 5.5x (LTM); 3.5x (2013E)• P/BV: 0.4x• Current ownership : 48.5%• Put option requiring us to buy additional 9%• Fully consolidated in our resultsCascades’ Ownership in Reno de Medici• 2nd supplier of boxboard in Europe• Excellent geographical coverage of WesternEurope with production facilities in mainmarkets• Wide range of packaging products – virginand recycled• Competitive cost structure will allow tocompete against Asian supply• Three WLC units seen as European classfacilities• Capital structure in good positionCompetitive PositioningPERFORMANCE OF OUR EQUITY INVESTMENTS - RDM40302602040602010 2011 2012(millions €)Reno de Medici’s EBITDA
  25. 25. DEBT PROFILE25Leverage ratio improvement due to increased profitabilityNote: EBITDA excluding specific items. Starting in Q2 2011, LTM EBITDA / Interest includes 100% of RDM. Starting in Q4 2011, also includes 100% of Papersource.Cascades’ bank debt financial covenant ratios: Net funded debt to capitalization < 65% (currently at 55%),interest coverage ratio > 2.25x (currently at 3.01x).57%59%54%57%59%61%45%50%55%60%65%2007 2008 2009 2010 2011 2012Debt / Debt + Equity4.6x5.9x3.3x4.5x5.8x5.0x3.0x4.0x5.0x6.0x7.0x2007 2008 2009 2010 2011 2012Net debt / LTM EBITDA3.4x3.0x4.6x2.9x2.5x3.1x1.0x2.0x3.0x4.0x5.0x2007 2008 2009 2010 2011 2012Interest Coverage RatioBefore20169%201641%201733%202017%Long-termDebt MaturitiesDistribution
  26. 26. CREDIT AGREEMENT TERMS26Advantageous credit terms providing flexibilityFebruary 2011 February 2012Structure $750 M revolving credit facility $750 M revolving credit facilityMaturity February 2015 February 2016Interest rate LIBOR + 212.5 bps LIBOR + 175 bpsStandby fees 48 bps 35 bpsCovenants1 Funded Debt to Capitalization Ratio ≤ 65%Interest Coverage Ratio ≥ 2.25xFunded Debt to Capitalization Ratio ≤ 65%Interest Coverage Ratio ≥ 2.25x1 On an adjusted consolidated basisCurrent Debt / Cap Ratio : 51%Current Interest Coverage Ratio : 3.3x
  27. 27. 27CAPITAL ALLOCATIONImportant capital allocation decisions since FY20101 EBITDA excluding specific items. Starting in Q4 2011, ratios include 100% of Papersource. 2012E and 2013E ratios are based on forecasts by analysts and debt remaining at Q2 2012 level.1,3971,535(298)(287)27825099834470080090010001100120013001400150016001700Total Debt12/31/2010DopacosaleCash flowfrom op.Var. ofworkingCapital$CAN Acqu. &consol.Capex,net of disp.GreenpacinvestmentLeases &othersDividends&buy-backsNet Debt12/31/2012(M CAN$)(20) (11)
  28. 28. CAPEX PROGRAM28Gradual capex program to improve asset base while maintaining financial flexibilityCapital Expenditures Distribution in 2012 - $198M Capex requests for 2013 initially approved at approximately $175M First allocation of $150M Amount subject to change depending on operating results and economic conditionsCorporate24%BoxboardEurope15%Tissuepapers17%Specialtyproducts8%Container -board36%By segmentOthers25%Health &Safety3%Energy5%CostReduction,Productivity&Maintenance67%By project category
  29. 29. 29Taking the steps to be ready for tailwindsPOTENTIAL BENEFITS STEMMING FROM OUR RECENT INITIATIVES• Modernization initiatives (±$150M capex program per year)• Papersource integration• Bird Packaging integration• Announced price increases in the containerboard sector• Containerboard productivity rate to revert to historical levels• Streamlining of converting operations in New England, Ontario andQuébec• 18 divestitures/closures since 2008, some of which unprofitable units• Greenpac contribution and valuation• Complete turnaround and modernization of European platform• Complete ramp-up of Atmos tissue paper machine• Boralex project pipeline• Benefits from ERP upgradeImprovementin theeconomicenvironmentinNorth AmericaandEurope