Cascades Announces Solid Results for the Fourth Quarter and Full Year 2019

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  • Record Annual Sales and Adjusted OIBD Generated for the Year
  • Outlook is positive for 2020

KINGSEY FALLS, QCFeb. 27, 2020 - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period and the fiscal year ended December 31, 2019.

Q4 2019 Highlights

  • Sales of $1,227 million (compared to $1,264 million in Q3 2019 (-3%) and $1,196 million in Q4 2018 (+3%))
  • As reported1,3 (including specific items)
    • Operating loss of $1 million (compared to an operating income of $105 million in Q3 2019 (-101%) and an operating loss of $35 million in Q4 2018 (+97%))
    • Operating income before depreciation and amortization (OIBD)1 of $76 million (compared to $178 million in Q3 2019
      (-57%) and $35 million in Q4 2018 (+117%))
    • Net loss per share of $0.27 (compared to net earnings of $0.42 in Q3 2019 and a net loss of $0.71 in Q4 2018)
  • Adjusted1 (excluding specific items)
    • Operating income of $75 million (compared to $88 million in Q3 2019 (-15%) and $43 million in Q4 2018 (+74%))
    • OIBD of $152 million (compared to $161 million in Q3 2019 (-6%) and $113 million in Q4 2018 (+35%))
    • Net earnings per share of $0.30 (compared to $0.30 in Q3 2019 and $0.00 in Q4 2018)

2019 Annual Highlights

  • Sales of $4,996 million (compared to $4,649 million in 2018 (+7%))
  • As reported1,3 (including specific items)
    • Operating income of $258 million (compared to $228 million in 2018 (+13%))
    • OIBD of $547 million (compared to $472 million in 2018 (+16%))
    • Net earnings per share of $0.74 (compared to $0.60 in 2018)
  • Adjusted1 (excluding specific items)
    • Operating income of $315 million (compared to $245 million in 2018 (+16%))
    • OIBD of $604 million (compared to $489 million in 2018 (+24%))
    • Net earnings per share of $1.02 (compared to $0.83 in 2018)
  • Completed the acquisition of Orchids Paper Products2 activities for total cash consideration of US$235 million in September 2019
  • Announced the planned March 2020 closure of two U.S. tissue converting facilities at the end of October 2019
  • Senior Notes successfully refinanced in November 2019 in the amount of $1 billion
  • Exercised option to acquire the Caisse de dépôt et placement du Québec's ("CDPQ") 20.2% interest in the Greenpac Mill, increasing the Company's ownership to 86.3%; Transaction was effective January 3, 2020
  • Net debt of $1,963 million as at December 31, 2019 (compared to $1,769 million as at December 31, 2018) and net debt to adjusted OIBD ratio of 3.25x, down from 3.6x at year-end 2018
  • Impact of IFRS 16 accounting for leases: $99 million debt increase as of January 1, 2019, and approximately $30 million increase in full year OIBD for 2019

1

 For further details, please refer to the "Supplemental Information on non-IFRS Measures" section.

2

 Also referred to as the Orchids acquisition.

3

 2018 fourth quarter and 2019 third quarter results have been adjusted to reflect retrospective adjustments of purchase price allocation. Please refer to Note 5 of the 2019 audited financial statements for more details.



Mr. Mario Plourde, President and Chief Executive Officer, commented: "We are very pleased with the annual adjusted OIBD level of $604 million generated in 2019, the second consecutive year of record performance for Cascades. These historic results affirm the solid progress we are making with our growth, optimization and strategic initiatives.

On a sequential basis, fourth quarter results reflect the softer seasonal demand common to the end of the year, and less favourable pricing and sales mix in all business segments. These effects were partially mitigated by lower raw material prices for all of our segments, acquisitions completed throughout the year, and sequentially lower production costs in Tissue and European Boxboard. Year-over-year quarterly performance was similarly aided by lower raw material pricing and recent business acquisitions, in addition to lower energy costs. The resulting benefits outweighed less favourable sales pricing and mix in all segments with the exception of Tissue, and higher production costs in our North American operations in part due to the higher proportion of sales coming from converting activities.

On the strategic front, Cascades purchased the CDPQ's 20.2% interest in our Greenpac Mill on January 3, 2020. Increasing ownership of this state-of-the-art lightweight containerboard facility to 86.3% will improve available cash flow levels and reinforce the competitive positioning of the containerboard platform. In a similar vein, we continued to advance the integration of the Orchids activities during the quarter, and subsequently completed the conversion of the Barnwell paper machine from QRT to conventional paper in mid-January 2020. Finally, we successfully refinanced our senior notes in November, taking advantage of favourable market pricing conditions to proactively manage our debt profile.

Discussing near-term outlook, Mr. Plourde commented, "First quarter performance is projected to improve year-over-year, largely driven by improvements in the Tissue segment as a result of our strategic repositioning and ongoing integration of the Orchids activities. Results in our other three segments are expected to be stable, with pricing headwinds for these businesses expected to be offset by improved volumes and favourable raw material pricing in containerboard and Boxboard Europe.

Our operational outlook is positive for 2020. We are forecasting strong year-over-year improvement in the Tissue segment, moderate year-over-year improved results in Specialty Products and stable annual performance in Boxboard Europe. While pricing headwinds are expected to translate into softer annual Containerboard results, raw material prices continue to be a strong tailwind for this business, as does our focus on improved operational execution. On a consolidated basis, we expect to generate solid cash flow levels in 2020, of which approximately $250 million will be dedicated to capital expenditures. Based on current operational conditions, we expect the remaining cash flow to be in excess of $100 million. These funds will be allocated in part to the Bear Island conversion project, when approved and once the financial and operational structure is finalized, and to the reduction of our debt."

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Source: Cascades

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