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Cascades Reports Rise in Second Quarter Profit

August 2, 2006 (Press Release) - Cascades Inc. reports net earnings of $33 million ($0.41 per share) for the quarter ended June 30, 2006 or $16 million ($0.20 per share) excluding specific items(1). This compares with net earnings of $4 million ($0.05 per share) for the same period in 2005.

Commenting on the quarterly results, Mr. Alain Lemaire, President and Chief Executive Officer stated: "We are pleased with our recent results as they demonstrate our ability to adapt to a new business environment. These new realities may have led to difficult decisions in recent months, however they also comforted us with our strategies. With the help of our employees we intend to continue in this direction in order to further ensure the company's financial health and stability."

Three-month period ended June 30, 2006

Taking into account the reclassification in Q1 2006 of the Thunder Bay coated paper mill as a discontinued operation, sales decreased by 2% during the second quarter of 2006 amounting to $841 million compared to $862 million in 2005. Operating income from continuing operations amounted to $44 million which compares to the $33 million achieved for the same period last year. Generally speaking, higher volumes, selling prices and management's emphasis on non-performing assets combined with a reduction in energy costs and depreciation expenses more than offset higher prices for fibre. The $33 million of net earnings realized during the second quarter includes amongst others, a $12 million after-tax unrealized foreign exchange gain on long-term debt and a $5 million recovery of future taxes resulting from the recently announced progressive reduction of Canadian corporation income taxes.

Six-month period ended June 30, 2006

Net earnings for the six-month period ended June 30, 2006 were $39 million ($0.48 per share) or $22 million when excluding certain specific items ($0.27 per share). This compares with net earnings of $4 million ($0.05 per share) or $3 million when excluding certain specific items ($0.04 per share) for the corresponding period in 2005. Operating income from continuing operations amounted to $75 million. This amount compares to $53 million achieved for the same period last year.

Outlook

Mr. Alain Lemaire, President and Chief Executive Officer added: "We anticipate business conditions will remain challenging for the remainder of the year given the potential softening of demand coming from the United-States, the volatility of the Canadian dollar and energy prices in addition to the recently observed fiber price increases. We will continue to be very proactive managing our costs, focusing on our non-performing assets and integrating recent acquisitions. Furthermore, we also intend to continue exploring selective acquisition opportunities in our key business segments as well as the potential divestiture of a limited number of non-core assets."

Dividend on common shares and normal course issuer bid

Cascades' Board of Directors declared a quarterly dividend of $0.04 per share to be paid September 19, 2006 to shareholders of record at the close of business on September 6, 2006. Pursuant to its normal course issuer bid, the Company purchased during the second quarter 27 800 of its common shares for a total of 49 000 shares purchased for the first six months of the year.

SOURCE: Cascades Inc.




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