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Cascades Swings to 2nd Quarter Profit

Aug. 11, 2009 - Canadian tissue and packing producer Cascades Inc. said cost reduction initiatives along with strong sales and marketing efforts bolstered its 2nd quarter financial results (three months ended June 30, 2009). .

Note: All amounts in this press release are in Canadian dollars unless otherwise indicated.

  • Net earnings of $30 million ($0.30 per share) compared to a net loss of $25 million ($0.25 per share) in the second quarter of 2008. Excluding specific items, net earnings of $28 million ($0.28 per share) compared to a net loss of $11 million ($0.11 per share) in the same period of last year;
  • Operating income before depreciation and amortization (EBITDA) excluding specific items of $121 million, the highest in the Company's history, an increase of 13% compared to the previous quarter;
  • Cash flow from operations excluding specific items more than doubled compared to Q2 2008 to $85 million;
  • Net debt down by almost $150 million in comparison to the previous quarter;
  • Current cash availability of approximately $375 million, an increase of $75 million over the past three months;
  • Announcement of the acquisition of the tissue paper assets of Atlantic Packaging Products Ltd. in June. We received the approval from the Competition Bureau last week and we expect the closing of the transaction by the end of the quarter;
  • Cascades recognized as the 15th best corporate citizen in Canada by Corporate Knights magazine.

Operating income before depreciation (OIBD or EBITDA) and net earnings excluding specific items increased significantly to respectively $121 million and $28 million ($0.28 per share) in the second quarter of 2009 compared to $63 million and a net loss of $11 million ($0.11 per share) in the same period in 2008.

Excluding specific items, EBITDA also improved by $14 million in comparison to the previous quarter while net earnings increased by $7 million. This sequential rise constitutes the fifth quarter of consecutive growth in EBITDA.

Including specific items, the operating income before depreciation and net earnings also grew substantially to reach respectively $130 million and $30 million ($0.30 per share) in the second quarter of 2009 compared to $61 million and a net loss of $25 million ($0.25 per share) for the same quarter in 2008.

Commenting on the quarterly results, Mr. Alain Lemaire, President and Chief Executive Officer stated: "Our results have shown significant progress since the trough experienced in the first half of 2008. Today, we are very pleased to announce the highest quarterly EBITDA in Cascades' history. Results improved in all our sectors as we benefited from a favourable variable cost environment. These higher results also underscore the different cost reduction measures implemented in the past quarters, our initiatives in the field of innovation, as well as our efforts in sales and marketing.

"The operating income of our Tissue Group reached a new all-time high and our restructuring efforts in Europe and North America continued as the EBITDA of our boxboard operations increased from $3 million in Q2 2008 to $32 million in the second quarter of 2009. Finally, while our shipments grew by 5% compared to the previous quarter, we continued to take costly market downtime in our packaging sector."

Results analysis for the three-month period ended June 30, 2009

In comparison with the same period last year, sales decreased by 2% to $981 million reflecting a slight drop in selling prices and a 9% fall in shipments, and the depreciation of the Canadian dollar.

The operating income from continuing operations amounted to $75 million compared to $8 million last year. When excluding specific items, operating income from continuing operations increased by $56 million to $66 million. Despite lower sales volumes and selling prices, operating results mainly improved due to lower raw material and energy costs and the depreciation of the Canadian dollar. The operating income of the second quarter includes a charge of $3 million related to the loss of certain products as a result of a fire in an external warehouse in June.

The specific items that impacted the operating income in the second quarter of 2009 include $4 million in closure and restructuring costs and other elements, as well as a $13 million unrealized gain on commodity financial instruments. In addition to these specific items, the $30 million in net earnings also reflects a $2 million loss on derivative financial instruments and a $3 million foreign exchange loss on long-term debt.

Net debt decreased by $148 million compared to March 31st 2009 and the ratio of net debt to EBITDA excluding specific items in the last twelve months decreased from 5.0x in the first quarter of 2009 to 4.0x in the second quarter of 2009.

Near term outlook

"The seasonality associated with the third quarter leads us to anticipate a continuous recovery in demand. Also, we are encouraged by the recent stability of selling prices in certain of our sectors and the low cost of energy," Lemaire said.

"However, we remain very cautious in regards to short term business conditions given the steady increase in the cost of recycled fibres since the beginning of the year, the significant volatility of the Canadian dollar, as well as the scheduled downtime for maintenance or to keep the right level of inventories," he added.

About Cascades

Founded in 1964, Cascades produces, converts and markets packaging and tissue products composed mainly of recycled fibres. Cascades employs close to 13,000 employees.

SOURCE: Cascades Inc.




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