Cascades Reports Lower First Quarter Earnings
May 13, 2010 - Cascades Inc. announces its financial results for the three months ended March 31, 2010.
(All amounts in this press release are in Canadian dollars unless otherwise indicated.)
FIRST QUARTER HIGHLIGHTS
- Strong rebound in shipments, up 12% compared to the first quarter of
2009 (excluding the impact of the acquisition of the tissue assets of
- As expected, short-term pressure on profitability in the first
quarter due to the sharp and significant rise of recycled fibre and
- Net earnings of $0.00 per share compared to net earnings excluding
specific items of $0.22 per share and $0.38 per share including
specific items in the same period of last year.
- Operating income before depreciation and amortization (EBITDA)
excluding specific items of $78 million compared to $107 million in
- Cash flow from operations of $41 million compared to $70 million in
the first quarter of last year.
- Net debt down almost $300 million compared to March 31, 2009,
including $25 million in the first three months of the year.
- Purchase of $US159 million of our senior notes maturing in 2013 year-
to-date in 2010; approximately $US18 million remain outstanding.
Commenting on the first quarter results, Alain Lemaire, President and Chief Executive Officer stated: "As anticipated, our results were pressured in the first quarter as the Canadian dollar continued to rally and the spread between our selling prices and our raw material costs tightened considerably.
"However, we remain in good position as we continued to optimize our cost structure and we started to gradually implement selling price increases in most of our sectors. Also, the cost of certain grades of recycled fibre peaked in March, volumes and orders remained on their upward trend and we continued to proactively manage our cash flow. We should therefore progressively benefit from greatly improved business conditions in the second quarter."
RESULTS ANALYSIS FOR THE THREE-MONTH PERIOD ENDED
MARCH 31, 2010
In comparison with the same period last year, sales decreased by 3% to $942 million resulting from lower selling prices and the appreciation of the Canadian dollar partly offset by a 12% increase in shipments (excluding the impact of the acquisition of the tissue assets of Atlantic Packaging).
Net earnings excluding specific items amounted to $0 ($0.00 per share) in the first quarter of 2010 compared to $21 million ($0.22 per share) for the same period of last year. Including specific items, net earnings amounted to $0 ($0.00 per share) compared to $37 million ($0.38 per share) for the same quarter in 2009.
The operating income excluding specific items amounted to $23 million compared to $53 million in Q1 2009. Weaker energy and certain variable costs, the optimization of our cost structure as well as improved operating rates were more than offset by the negative effect of lower selling prices, higher raw material costs and the stronger Canadian dollar. When including specific items, operating income amounted to $27 million in comparison to $49 million in the same period of last year.
In the first quarter of 2010, these specific items impacted our operating income and/or net earnings (before tax):
- $4 million unrealized gain on financial instruments (impact on
operating income and net earnings);
- $3 million loss on long-term debt refinancing (impact on net
- $1 million foreign exchange loss on long-term debt and financial
instruments (impact on net earnings).
SECOND QUARTER OUTLOOK
"We expect a rebound in profitability mostly as a result of the significant momentum in pricing," Lemaire said. "Many of our operations will benefit from the selling price increases that were implemented during the first quarter and some recently announced additional hikes should be realized in the coming months. Also, the strong demand that we currently acknowledge in almost all our sectors as well as the usual seasonal pickup should continue to positively impact our operational efficiency and financial results.
"On the cost front, energy prices are currently lower than in the first three months of the year. In addition, the publication price of old corrugated containers (OCC), the main grade of recycled fibres consumed by Cascades, is down since its peak in March. All in all, we remain confident for the coming months, especially for our packaging operations," he added
Cascades produces, converts and markets packaging and tissue products that are composed mainly of recycled fibers. The company employs close to 12,500 employees, who work in more than 100 units located in North America and Europe.
SOURCE: Cascades Inc.