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Cascades Posts Loss in 2005 on Costs, Currency

Feb. 23, 2006 (Press Release) - In 2005, Cascades was faced with an extremely challenging business environment, characterized by the combination of rising and volatile energy costs and a weakening $US.

Despite difficult conditions, Cascades was able to maintain positive cash-flow from operations. In commenting these yearly results, Mr. Alain Lemaire, President and Chief Executive Officer stated: "We are not satisfied with this year's financial performance, however we feel that the Company, with the solid support of its employees, showed good progression on the strategic initiatives identified in early 2004, including the divestiture of non-core distribution assets and an increased focus on the packaging and tissue segments. We intend to continue with ongoing measures aimed at reducing costs while closely monitoring non-performing assets."

For the fiscal year ended December 31, 2005, Cascades Inc. reports a net loss of $97 million ($1.19 per share) or $6 million of net earnings excluding specific items(1) ($0.07 per share). This compares with net earnings of $23 million ($0.28 per share) for the same period in 2004 or net earnings excluding specific items(1) of $16 million ($0.20 per share). Sales increased 6% to $3.5 billion from $3.3 billion in 2004.

2005 highlights

  • Cascades successfully divested its non-core distribution assets in the Fine Papers (closure pending) and Tissue segments and rationalized operations at a number of its under-performing units. Cascades recorded specific item(1) such as impairment charges, closure and restructuring costs for an after-tax amount of $103 million, which will contribute to better financial performance going forward;
  • Increased volumes, higher selling prices and business acquisitions allowed Cascades to maintain its operating income before depreciation excluding specifics items(1) at 2004 levels despite the negative impact of the appreciation of the Canadian dollar and higher energy costs;
  • Advantageous refinancing of our $CA 500 million credit facility to $CA 550 million, including a term facility of $CA 100 million. The renewed facility offers better covenants, lower interest payments and extended maturities;
  • Cascades recognized in 2005 by the Government of Canada through the Canadian Industry Program for Energy Conservation (CIPEC) for its employee energy efficiency awareness and training program; and
  • Cascades named amongst Canada's top 100 employers for the third consecutive year.

Mostly as a result of recent business acquisitions, sales increased by 4.5% during the fourth quarter of 2005, amounting to $842 million compared with $806 million for the same period last year.

Operating losses amounted to a negative $108 million for the period compared to operating income of $3 million last year. In general, higher prices were offset by increased energy and chemical costs and the appreciation of the $CA/$US exchange rate. In addition, we recorded during the quarter some impairment, closure and restructuring charges for an after-tax amount of $105 million.

Finally, included in the previous amount, we also recorded under the classification of assets held for sale, a $7 million after-tax loss on disposal of our Fine paper distribution assets (closure pending at year-end) and also a $10 million charge (non tax-deductible) resulting from a fine imposed on the company by the Canadian Competition Bureau. Net earnings for the fourth quarter ended December 31, 2005, amounted to a loss of $104 million ($1.28 per share) or $1 million of net earnings excluding specific items ($0.01 per share) compared to net earnings of $5 million ($0.06 per share) or net earnings of $2 million of excluding specific items ($0.03 per share) for the same period in 2004.

Outlook

Mr. Alain Lemaire, President and Chief Executive Officer stated: "As a result of Industry-wide rationalisation measures in many of the businesses we operate in, some indicators are now starting to point towards improving operating rates and prices, especially in the North-American packaging segment. These trends in conjunction with a relatively stable Tissue market appear positive, especially given our ability to cope with a high Canadian dollar, high energy costs, rising interest rates and increased foreign competition. Notwithstanding these positive signs, we will maintain our efforts and continue to further rationalize and adjust our cost structure."

SOURCE: Cascades Inc.




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