CASCADE S NBF Québec Conférence Québec Conférence June 5, 2012
DISCLAIMER Certain statements in this presentation, including statements regarding future results and performance, are forward-looking statements within the meaning of securities legislation based on current expectations. The g g g p 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 Company’s products, the prices and availability of raw materials, changes in the relative values of certain currencies, fluctuations in selling prices and adverse changes in general market and industry conditions. This presentation also includes price indices as well as h i l k t d i d t diti Thi t ti l i l d i i di ll variance and sensitivity analyses that are intended to provide the reader with a better understanding of the trends related to our business activities. These items are based on the best estimates available to the Company. The financial information included in this presentation also contains certain data that are not measures of performance under IFRS (“non-IFRS measures”). For example, the Company uses earnings before interest, taxes, depreciation and amortization (EBITDA) because it is the measure used by management to assess the operating and financial performance of the Company’s operating segments Such information is the operating and financial performance of the Company s operating segments. Such information is reconciled to the most directly comparable financial measures, as set forth in the “Supplemental Information on Non-IFRS Measures” section of our most recent annual report or earnings press release. Specific items are defined as items such as charges for impairment of assets, for facility or machine S ifi it d fi d it h h f i i t f t f f ilit hi closures, debt restructuring charges, gains or losses on sales of business units, 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. All amounts in this presentation are in Canadian dollars unless otherwise indicated. 2
OVERVIEW – PACKAGING AND TISSUE PRODUCTS Boxboard Containerboard Specialty products Tissue papers Leading NA packaging and tissue manufacturer with substantial recycling capabilities Leading NA packaging and tissue manufacturer with substantial recycling capabilities 3
OVERVIEW – BALANCED PLAY ($ in millions) Cascades Q1-2012 LTM Sales 1 : $3,780 Q1 2012 LTM EBITDA , : $274 Q1-2012 LTM EBITDA 1, 2 : $274 Packaging P k i Tissue Papers Ti P 77% of Sales 23% of Sales 66% of EBITDA 34% of EBITDA Boxboard Europe Containerboard Specialty Products 24% of Sales 31% of Sales 22% of Sales 21% f EBITDA 21% of EBITDA 31% of EBITDA 31% f EBITDA 14% f EBITDA 14% of EBITDA Exposure to two healthiest P&P sectors and less cyclical end Exposure to two healthiest P&P sectors and less cyclical end- -markets markets 1 Adjusted for the full year consolidation of Reno de Medici and Papersource. 4 2 EBITDA excluding specific items and discontinued operations. Breakdown of sales and EBITDA before eliminations & corporate activities.
OVERVIEW – CLOSED-LOOP BUSINESS MODEL 100+ business units 100+ business units 76% recycled fibre (2.9M tons) NA integration rate (2011): 23 units 33% (580K tons) May be sent to 30 units recycling centers NA integration rate (2011): 47% 47% 62 units Upstream and downstream integration Upstream and downstream integration Including the 6 manufacturing/converting tissue papers units and Reno De Medici’s units. 5
OVERVIEW – RECYCLED FIBRE SUPPLY Recycled Fibre Supply Sources – North America 2008 Spot 2011 Spot Cascades Purchases Cascades Purchases Recovery 20% Recovery Recovery 19% 19% and Internal d I t l and Internal 32% 35% Contractual Contractual agreements agreements agreements 48% 46% Control over 80% of our fibre supply despite greater concentration on the supply side Control over 80% of our fibre supply despite greater concentration on the supply side 6
MARKET DYNAMICS – DEMAND Packaging Tissue (billions U.S. Total Tissue Consumption North American Box Shipments ('000 s.t.) ft2) 8,400 460 8,319 424 421 428 421 8,219 421 421 8 201 8,201 412 411 413 8,200 420 405 8,053 386 387 8,028 374 380 8,000 7 896 7,896 7,844 340 7,800 300 300 7,600 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Exposure to relatively stable / growing demand Exposure to relatively stable / growing demand Sources: RISI, Fiber Box Association, Paper Packaging Canada. 7
MARKET DYNAMICS – SUPPLY Top 5 producers' share of capacity 100% 100% 86% 86% 85% 85% 77% 76% 80% 66% 60% 40% 20% 0% North American European coated North American Canadian North American coated boxboard boxboard containerboard containerboard tissue C Cascades’s Market Share 3% 17% 3% 26% 7% (estimate) Increased consolidation over the last few years in our market segments Increased consolidation over the last few years in our market segments Sources: RISI, companies filings. 8
MARKET DYNAMICS – MARKET BALANCE Annual Average Capacity Utilization Rates 100% 100% 96% 92% 88% 84% 80% 76% 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 U.S. Containerboard Industry U.S. Coated Recycled Boxboard Industry U.S. Tissue Industry Balanced supply/demand equation with utilization rates at approximately 95% Balanced supply/demand equation with utilization rates at approximately 95% Sources: RISI, CEPI Cartonboard, Paper Packaging Canada , Fiber Box Association. 9
MARKET DYNAMICS – PRICING Tissue Packaging Cascades Tissue Papers Index Packaging Annual Average Selling Prices (January 1999 = 1,000) 1,200 1,700 1,669 1,153 , 991 991 1,600 1 600 1,000 909 1,500 800 1,400 710 597 1,300 600 640 560 420 1,200 400 1,148 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 1 100 1,100 2003 2004 2005 2006 2007 2008 2009 2010 2011 Virgin Coated Duplex Boxboard (GC2) Recycled White-Lined Chipboard Index (GD2) Recycled Boxboard - 20 pt claycoated news (transaction) Linerboard 42-lb, unbleached kraft, East US (transaction) Upward long Upward long-term pricing trend term pricing trend Source: RISI. 10
MARKET DYNAMICS – RAW MATERIAL COSTS Main Recycled Fiber North Amercian OBM List Prices (US$/ton) 300 290 250 200 150 Current 150 135 165 140 100 Whit White grades (SOP) d (SOP) 50 Brown grades (OCC) 0 r 08 y 08 08 08 r 09 y 09 09 09 r 10 y 10 10 10 r 11 y 11 11 11 r 12 08 09 10 11 12 08 09 10 11 Mar July Nov Mar July Nov Mar July Nov Mar July Nov Mar Jan Sept Jan Sept Jan Sept Jan Sept Jan May May May May Market anomaly: SOP trading close to OCC Market anomaly: SOP trading close to OCC OCC should trade at lower price OCC should trade at lower price Sources: RISI, Bloomberg. 11
MARKET DYNAMICS – FX AND OTHER INPUT COSTS Oil & chemicals Currency Since Since Dec. 2011 Dec. 2011 Jan. 2010 Jan. 2010 performance against Oil +9% +46% € Latex +10% +43% Pigments +1% +37% Q1-2012 vs Plastics +12% +29% Q4-2011 +2% +5% Starch +3% +28% CAN$ strength and input costs sky CAN$ strength and input costs sky-rocketing since 2010 rocketing since 2010 12
STRATEGIC ACTION PLAN – PRIORITY #1 Focused investing for modernization of core operations and IT 1 ATMOS (Voith) ATMOS (Voith) ERP ERP • $80M investment program $80M i t t • Full machine rebuilt • Blueprint and programming: • Swing machine with “TAD 2011-2012 equivalent” technology • Implementation: Implementation: • $30M investment $30M i t t 2011-2015 • First to install in North America • High-end tissue paper offering • Can use up to 100% recycled fiber Can use up to 100% recycled fiber • Lower energy costs Ch ll Challenging Market Evolution Proactive measures Ch ll Challenging Market Evolution i i M k t E M k t E l ti l ti P P Proactive measures Improved profitability ti ti I I Improved profitability d d fit bilit fit bilit 13 13
STRATEGIC ACTION PLAN – PRIORITY #1 (cont’d) • Financial flexibility not affected • Competitive advantage – Recycled liner • $99M total investment Largest in NA • • $84M in equity • $84M in equity • 540,000 short tons capacity • $15M in bridge loan Most technologically advanced equipment • • Debt non-recourse to Cascades Well-aligned with current market trends • • Strong Partnership • Norampac (Cascades) p ( ) 59.7% • Caisse de dépôt et placement du Québec 20.2% • Two industry converters 20.1% Will position us amongst leaders in terms of product offering, productivity and profitability Will Will position us amongst leaders in terms of product offering, productivity and profitability Will i i i i l l d d i i f f d d ff i ff i d d i i i i d d fi bili fi bili 14
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