Cascades Reports Lower First Quarter Earnings on Economic Factors

May 9, 2013 - Cascades Inc. announces its unaudited financial results for the three-month period ended March 31, 2013.

Mr. Alain Lemaire, Executive Chairman of the Board, had the following comments on the first quarter results:

"As we expected, the first quarter of 2013 was similar to what we experienced towards the end of 2012. This quarter was marked by weaker results in the Tissue Papers sector and a negative contribution from our boxboard activities in North America that offset the benefits from improved productivity and price increases in our containerboard activities.

On a segmented basis, maintenance expenses and lower average prices due to increased promotional activities in Canada and increased competition in the US affected our Tissue Papers sector. On the Containerboard front, the operating rate of our containerboard mills has improved during the first quarter.

However the current weakness of the Canadian economy impacted our corrugated product business as order levels in Eastern Canada were lower than expected. This Group was also impacted by the production of lower margin products by our boxboard manufacturing mills in North America. In Europe, lower energy prices and higher volumes more than offset the impact of lower selling prices. As for fiber, costs for brown grades and virgin pulp were higher than during the previous quarter which also impacted our results."

Results analysis for the three-month period ended March 31, 2013
(compared to the same period last year)
In comparison with the same period last year, sales increased by 3% to $914 million as of result of higher volumes, the net impact of business acquisitions over divestitures and closures and favorable exchange rates which more than offset lower average selling prices.

Operating income, excluding specific items, decreased from $26 million during Q1-2012 to $24 million for the first quarter of 2013 mainly as a result of lower selling prices which negated lower raw material costs and higher volume contribution. Compared to the first quarter of 2012, the operating income for our Boxboard Europe and Tissue Papers sectors was lower. Our Containerboard Group improved its operating income while our Specialty Products Group showed stable results. Finally, the costs related to corporate activities increased due to the fact that costs related to the implementation of our new ERP system are no longer capitalized.

When including specific items, operating income amounted to $20 million in comparison to $29 million for the same period of last year. In the first quarter of 2013, the following specific items impacted our operating income and/or net earnings (before tax):

  • a $5 million charge recorded following the establishment of employment contracts in favour of the new President and CEO and Presidents of the Containerboard, Specialty Products and Tissue Papers business segments (impact on operating income and net earnings);
  • a $1 million unrealized gain on financial instruments (operating income and net earnings);
  • a $2 million foreign exchange loss on long-term debt and financial instruments (net earnings).

The net loss excluding specific items amounted to $4 million ($0.04 per share) in the first quarter of 2013 compared to net earnings of $1 million ($0.01 per share) for the same period in 2012. Including specific items, the net loss amounted to $8 million ($0.09 per share) compared to net earnings of $3 million ($0.03 per share) for the same quarter in 2012.

Results analysis for the three-month period ended March 31, 2013
(compared to the previous quarter)
In comparison to the previous quarter, sales increased by 1% to reach $914 million. A favorable foreign exchange rate and higher shipments counterbalanced lower average selling prices. Excluding specific items, operating income increased by $2 million to reach $24 million. The same factors which explain the increase in sales combined with lower energy costs more than offset an increase in raw material costs and higher corporate expenses related to the ERP investment. The net loss for the first quarter of 2013 was $4 million compared to a net loss of $5 million during the previous quarter.

Net debt increased by $46 million to $1,581 million due to the exchange rate and seasonal working capital requirements.

Near-term outlook
In commenting on the outlook, Mr. Lemaire added: "We expect the strategic initiatives we undertook in 2012 to translate into a better performance in 2013, mostly in the second half of the year. In the short term, our Containerboard sector should perform better due to seasonality and improved productivity.

Furthermore, the price hike announced in Q4-2012 has been fully implemented and will be reflected for a full quarter in the second quarter. In addition, the current market environment leads us to believe that the second price increase will be successful. The Greenpac mill is expected to start production early in the third quarter. Within the current market conditions and depending on the progress of the start-up, the results of the mill should begin to have a positive impact on our earnings per share by the end of the year. Despite a challenging environment, our Tissue Papers Group should slightly improve its performance. In Europe, our backlogs haven't been that healthy since 2011 and the recent price increase announcement for certain products bodes well for the future. "

Founded in 1964, Cascades produces, converts and markets packaging and tissue products that are composed mainly of recycled fibres. The Corporation employs more than 12,000 employees, who work in more than 100 units located in North America and Europe. With its management philosophy, half a century of experience in recycling, and continuous efforts in research and development as driving forces, Cascades continues to serve its clients with innovative products. For additional information, visit: www.cascades.com

SOURCE: Cascades Inc.