Business News

Cascades posts significantly improved results in the second quarter

Tuesday 11. August 2009 - Cascades Inc. (CAS on the Toronto stock exchange), a leader in recovery and in green packaging and tissue paper products, announces its financial results for the three months ended June 30, 2009.

(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 third quarter;

Cascades recognized as the 15th best corporate citizen in Canada by Corporate Knights magazine.

Financial Highlights





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, 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 on long-term debt 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

Mr. Alain Lemaire, President and Chief Executive Officer added: “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. 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.”


Dividend on Common Shares and normal course issuer bid

The Board of Cascades declared a quarterly dividend of $0.04 per share to be paid September 18, 2009 to shareholders of record at the close of business on September 4, 2009. This dividend paid by Cascades is an “eligible dividend” as per the Income Tax Act (Bill C-28, Canada). In addition, in the second quarter of 2009, in accordance with its normal course issuer bid program, Cascades did not purchase any share. Since the beginning, Cascades has purchased for cancellation 1,081,200 common shares at an average price of $2.12 per share representing an aggregate amount of approximately $2.3 million.


Supplemental information on non-GAAP measures

Operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income, cash flow from operations and cash flow from operations per share are not measures of performance under Canadian GAAP. The Company includes operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income, cash flow from operations and cash flow from operations per share because they are measures used by management to assess the operating and financial performance of the Company’s operating segments. Additionally, the Company believes that these items provide additional measures often used by investors to assess a company’s operating performance and its ability to meet debt service requirements. However, operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income, cash flow from operations and cash flow from operations per share does not represent, and should not be used as a substitute for net earnings or cash flows from operating activities as determined in accordance with Canadian GAAP, and they are not necessarily an indication of whether cash flow will be sufficient to fund our cash requirements. In addition, our definition of operating income before depreciation and amortization, earnings before interests, taxes, depreciation and amortization, operating income, cash flow from operations and cash flow from operations per share may differ from those of other companies. Cash flow from operations is defined as cash flow from operating activities as determined in accordance with Canadian GAAP excluding the change in working capital components and cash flow from operations per share is determined by dividing cash flow from operations by the weighted average number of common shares of the period.

Operating income before depreciation and amortization excluding specific items, earnings before interests, taxes, depreciation and amortization excluding specific items, operating income excluding specific items, net earnings excluding specific items, net earnings per common share excluding specific items, cash flow from operations excluding specific items and cash flow from operations per share excluding specific items are non-GAAP measures. The Company believes that it is useful for investors to be aware of specific items that have adversely or positively affected its GAAP measures, and that the above mentioned non-GAAP measures provide investors with a measure of performance with which to compare its results between periods without regard to these specific items. The Company’s measures excluding specific items have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation.

Specific items are defined to include charges for impairment of assets, charges for facility or machine closures, debt restructuring charges, gains or losses on sale of business unit, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, foreign exchange gains or losses on long-term debt and other significant items of an unusual or non-recurring nature.