Cascades Reports Results for the Fourth Quarter and Full Year 2023

Results in Tissue Papers business drives stronger annual performance

KINGSEY FALLS, QC, Feb. 22, 2024 /PRNewswire/ – Cascades Inc. (TSX:CAS) reports its unaudited financial results for the three-month period and fiscal year ended December 31, 2023.

Q4 2023 Highlights

Sales of $1,138 million (compared with $1,198 million in Q3 2023 and $1,135 million in Q4 2022);

Operating loss of $(24) million (compared with operating income of $80 million in Q3 2023 and operating loss of $(20) million in Q4 2022);

Net loss per common share of ($0.57) (compared with net earnings per common share of $0.34 in Q3 2023 and a net loss per common share of ($0.27) in Q4 2022);

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA (A)1) of $122 million (compared with $161 million in Q3 2023 and $116 million in Q4 2022);

Adjusted net earnings per common share1 of $0.05 (compared with $0.44 in Q3 2023 and $0.22 in Q4 2022).

2023 Annual Highlights

Sales of $4,638 million (compared with $4,466 million in 2022);

Operating income of $40 million (compared with $33 million in 2022);

Net loss per common share of ($0.76) (compared with ($0.34) in 2022);

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA (A)1) of $558 million (compared with $376 million in 2022);

Adjusted net earnings per common share1 of $1.08 (compared with $0.37 in 2022);

Net debt1 of $1,882 million as of December 31, 2023 (compared with $1,966 million as of December 31, 2022). Net debt to EBITDA (A) ratio1 of 3.4x, down from 5.2x as of December 31, 2022;

Total capital expenditures, net of disposals, of $46 million in Q4 2023 and $343 million in 2023. The Corporation’s 2024 forecasted net capital expenditures of approximately $175 million is unchanged.

Discussing results for the fiscal year 2023, Mario Plourde, President and CEO, commented: “We are pleased with our strong annual performance in 2023, with our operations generating a 4% increase in sales and a 48% increase in EBITDA (A)1 levels compared to the prior year. Our Tissue Papers segment drove these stronger results, generating $182 million of EBITDA (A)1 in 2023, a significant improvement from last year that reflects the hard work done over the past two years.”

Mario Plourde, President and CEO, continued: “In the fourth quarter of 2023, our Tissue Papers and Specialty Packaging businesses generated good results, meeting expectations. We are pleased with the continued strong performance of our Tissue segment, which generated an EBITDA (A)1 margin of 15.6% in the quarter, a testament to the benefits derived by the significant repositioning and profitability initiatives that have been implemented across this business. The Containerboard segment continued to deliver solid volume of corrugated converted products. However, fourth quarter results in this segment were below expectations. Sequential performance of this business was impacted by lower average selling prices, higher costs and lower parent roll shipments, the latter of which underscores this segment’s lower integration rate and also reflects the planned 49,000 short tons of maintenance and economic downtime taken during the period. Notwithstanding lower consolidated profitability, we reduced our net debt levels due to strong cash flows from operations and lower capital expenditures during the quarter. Consequently, our leverage ratio1 improved to 3.4x from 3.8x at the end of Q3.”

Discussing near-term outlook, Mr. Plourde commented, “On a consolidated basis, we are forecasting that our results in the first quarter of 2024 will decrease sequentially. This is driven by lower expected results in our Containerboard segment due to higher raw material costs, slightly lower average selling prices and lower production levels to manage inventory following softer demand in the fourth quarter. Along with the strategic investments made in recent years, these factors contributed to our decision to permanently remove higher-cost capacity from our manufacturing platform. We continue to implement commercial strategies and cost optimization initiatives to drive profitability in this business, while increasing the agility and market responsiveness of our platform. To this end, we are pleased with the ramp-up of our Bear Island facility, and the addition of this top tier mill to our containerboard mill network augments its competitiveness from an operational, geographic positioning and cost perspective. Results in the Tissue Papers segment are also expected to slightly decrease sequentially reflecting increases in raw material pricing and normal seasonal softness at the beginning of the year, while results in Specialty Packaging are expected to improve thanks to efficiency improvements, notably in the plastics sub-segment. More broadly, while our outlook for volume remains prudent for our packaging businesses in the first quarter given economic uncertainty, benefits from ongoing profitability initiatives will continue to create value across our businesses for Cascades, our customers and our shareholders.”

Financial Summary

Selected consolidated information

Segmented sales

Segmented operating income (loss)

Segmented EBITDA (A)1

Analysis of results for the three-month period ended December 31, 2023 (compared to the same period last year)
The fourth quarter sales of $1,138 million increased by $3 million compared with the same period last year. This reflects consolidated net benefits of $57 million due to higher volume and $10 million from a more favourable sales mix. These increases were almost entirely offset by a $70 million impact from lower selling prices in all of our business segments, the most notable being in our Containerboard business where lower index selling prices impacting sales by $60 million compared to the prior year period.

The fourth quarter EBITDA (A)1 totaled $122 million, an increase of $6 million, or 5%, from the $116 million generated in the same period last year. This increase was driven by continued improvement in the Tissue Papers segment, which generated an EBITDA (A)1 of $61 million in the quarter, or 15.6% on a margin basis, reflecting benefits from implemented profitability initiatives, and lower raw material, logistics and energy costs.

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

$73 million of impairment charges on assets, restructuring costs and an other costs related to the closure of plants in Canada and in the USA (operating loss and net loss);
$1 million unrealized loss on interest rate swaps (net loss);
$1 million foreign exchange loss on long-term debt and financial instruments (net loss);
$1 million gain from the sale of an investment in a non-significant joint venture in the Corporate activities (net loss).

For the three-month period ended December 31, 2023, the Corporation posted a net loss of $(57) million, or ($0.57) per common share, compared to a net loss of $(27) million, or ($0.27) per common share, in the same period of 2022. On an adjusted basis1, the Corporation posted net earnings of $5 million in the fourth quarter of 2023, or $0.05 per common share, compared to net earnings of $22 million, or $0.22 per common share, in the same period of 2022.

Dividend on common shares and normal course issuer bid
The Board of Directors of Cascades declared a quarterly dividend of $0.12 per common share to be paid on March 21, 2024 to shareholders of record at the close of business on March 7, 2024. This dividend is an “eligible dividend” as per the Income Tax Act (R.C.S. (1985), Canada). During the fourth quarter of 2023, Cascades purchased no common shares for cancellation.

2023 Fourth Quarter Results Conference Call Details
Management will discuss the 2023 fourth quarter financial results during a conference call today at 9:00 a.m. ET. The call can be accessed by dialing 1-888-390-0620 (international 1-416-764-8651). The conference call, including the investor presentation, will be broadcast live on the Cascades website (www.cascades.com) under the “Investors” section. A replay of the call will be available on the Cascades website and may also be accessed by phone until March 22, 2024 by dialing 1-888-390-0541 (international 1-416-764-8677), access code 373082.

Founded in 1964, Cascades offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs approximately 10,000 women and men across a network of more than 70 facilities in North America. Driven by its participative management, half a century of experience in recycling, and continuous research and development efforts, Cascades continues to provide innovative products that customers have come to rely on, while contributing to the well-being of people, communities and the entire planet. Cascades’ shares trade on the Toronto Stock Exchange under the ticker symbol CAS. Certain statements in this release, including statements regarding future results and performance, are forward-looking statements based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of general economic conditions, decreases in demand for the Corporation’s products, increases in raw material costs, fluctuations in selling prices and adverse changes in general market and industry conditions and other factors.

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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