Cascades Reports Results for the First Quarter of 2023

"Higher sales, notably in Tissue, and lower raw material costs in our packaging businesses drove higher consolidated profitability levels." – Mario Plourde, President and CEO, Cascades.

May 11, 2023 - Cascades Inc. reports its unaudited financial results for the three-month period ended March 31, 2023.

Mario Plourde, President and CEO, commented: "We had a solid first quarter. All three businesses contributed to topline growth year-over-year, as benefits from higher selling prices and an advantageous exchange rate more than offset the impacts of a less favourable mix in Containerboard and lower volumes in Tissue Papers and Specialty Products. Higher sales, notably in Tissue, and lower raw material costs in our packaging businesses drove higher consolidated profitability levels.

Sequentially, sales were stable, with stronger volumes in all businesses counterbalancing the impacts of less favourable sales mixes in Containerboard and Tissue and lower selling prices in our packaging businesses. Containerboard results include the final insurance settlement payment of $7 million related to water effluent treatment issues that occurred at our Niagara Falls, NY complex in mid-2021, bringing the insurance settlement total to $12 million.

"We announced an important repositioning of our Tissue Papers operational platform at the end of April. This decision, which was not taken lightly due to its impact on our work force, is the culmination of an in-depth evaluation of the long-term positioning, competitiveness and performance potential of our tissue operations following disappointing results in recent years. Market conditions in this business have changed significantly, and the closure of these underperforming assets will strengthen not only the operational performance of this business, but its financial and environmental performance as well.

"In our Containerboard segment, we are very pleased to have announced that the Bear Island facility produced its first containerboard roll at the beginning of May. We provide more details on these positive announcements and what they mean for Cascades' longer-term objectives in our updated 2022 - 2024 Strategic Plan released today.

"From a consolidated perspective, our 2024 revenue target of approximately $5 billion remains unchanged, and our EBITDA (A) and free cash flow objectives have been slightly modified to reflect the announced changes to our operational platform and updated market forecasts. As a result of the lower cash generation levels of 2022 and higher Bear Island project cost, the Corporation has adjusted its leverage ratio objective to 2.5x to 3.0x by year-end 2024. The Corporation's capital allocation priorities will focus on debt repayment while limiting capital expenditures to 4% of revenues through 2024. Combined, this focus will support the Company's mid-term leverage ratio objective of 2.0x to 2.5x."

Discussing near-term outlook, Mr. Plourde commented, "On a consolidated basis, we are expecting slightly lower results in the second quarter, with lower results in our packaging businesses to offset forecasted stronger results in our Tissue Papers business. In Containerboard, this outlook reflects slightly softer demand, changes in index prices for raw materials and selling prices, and the non-recurrence of the $7 million final insurance settlement received in Q1. We are expecting similar results for our Specialty Products segment, with relatively stable volume, pricing and raw material costs.

Lastly, we expect results in our Tissue Papers segment to improve sequentially driven by the additional benefits from profitability initiatives, higher selling prices, lower raw material costs and stable demand."

Analysis of results for the three-month period ended March 31, 2023 (compared to the same period last year)

Sales of $1,134 million increased by $96 million compared with the same period last year. This reflects a net benefit of $76 million that was driven by higher selling prices in all business segments, partially offset by a slightly negative consolidated sales mix impact. The Canadian dollar - US dollar exchange rate was favourable for all businesses, contributing $47 million to total sales levels. These factors were partially offset by a $19 million impact related to lower volumes in the Tissue Papers and Specialty Products business segments.

The first quarter EBITDA (A)1 totaled $134 million, an increase of $76 million, or 131%, from the $58 million generated in the same period last year. This increase reflects the net benefits of $72 million related to price increases and changes in sales volumes and product assortment sold, and $44 million from more favourable raw material and FX. These benefits outweighed a net impact of $28 million related to production, logistics and energy costs and a $12 million negative contribution from Recovery and Recycling operations as a result of lower volume and recycled paper prices.

The main specific items, before income taxes, that impacted our first quarter 2023 operating loss and/or net loss were:

• $152 million of impairment charges on US assets (operating loss and net loss);
• $2 million gain from the sale of some machinery and equipment and $1 million of restructuring costs related to previously closed Tissue Papers plants in the US (operating loss and net loss);
• $1 million unrealized loss on financial instruments (operating loss and net loss);
• $9 million gain from the sale of an investment in a non-significant joint venture in the Tissue Papers segment (net loss).

For the three-month period ended March 31, 2023, the Corporation posted a net loss of $(75) million, or $(0.75) per common share, compared to a net loss of $(15) million, or $(0.15) per common share, in the same period of 2022. On an adjusted basis1, the Corporation generated net earnings of $33 million in the first quarter of 2023, or $0.32 per common share, compared to a net loss of $(15) million, or ($0.15) per common share, in the same period of 2022.

Founded in 1964, Cascades (TSX: CAS) offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs more than 11,700 women and men across a network of 85 facilities in North America and Europe.

SOURCE: Cascades Inc.