CASCADES INC. NBF Québec Conference June 5, 2013
INTRODUCTION Where we come from • Unique culture – green visionaries, opportunistic turnarounds, importance of autonomy and empowerment, open book and profit sharing, decentralized structure • Business model challenged with dollar at parity and volatile recycled fibre costs Our recent performance and financial situation • Pressures from cost inflation • Slow growth, particularly in Canada • Productivity and profitability improvement necessary • 2011 left us with an over-levered balance sheet • No immediate maturity but we need to address the debt situation Our action plan • Started at the end of 2011 • A lot has been done but the plan is not completed yet • Balance sheet reflects investments but benefits not yet in results • Start-up of the Greenpac mill in July 2013 Preserving and improving a Canadian success story 2
OVERVIEW OF OUR OPERATIONS Green packaging and tissue product offering Packaging Products Tissue Papers Containerboard Boxboard Europe Specialty Products Leading NA packaging and tissue manufacturer with substantial recycling capabilities 3
OVERVIEW OF OUR OPERATIONS Closed-loop business model 100+ business units 77% recycled fibre (2.9M tons) NA integration rate (2012): CLIENTS 23 units 34% (520K tons) 32 units May be sent to recycling centers NA integration rate (2012): • Containerboard Group 56% 58 units • Tissue Papers Group 69% Upstream and downstream integration in North America Including seven manufacturing/converting tissue papers units and Reno De Medici’s units. 4
OVERVIEW OF OUR OPERATIONS Balanced play in less cyclical sectors Cascades 2013 LTM Sales: $3,668M 2013 LTM EBITDA: $300M Packaging Products Tissue Papers 74% of Sales 26% of Sales 58% of EBITDA 42% of EBITDA Containerboard Boxboard Europe Specialty Products 32% of Sales 21% of Sales 21% of Sales 31% of EBITDA 12% of EBITDA 15% of EBITDA Exposure to two healthiest sectors in the Pulp and Paper industry LTM figures as at 03/31/2013. EBITDA excluding specific items. Breakdown of sales and EBITDA before eliminations & corporate activities. 5
OUR FINANCIAL PERFORMANCE AND SITUATION Historical performance EBITDA Sales (M CAN$) (M CAN$) 4,500 500 2 465 3,929 4,017 3,877 1 4,000 400 350 2 3,625 3,645 3,668 310 315 300 306 304 1 3,500 300 3,278 3,182 229 3,000 200 2,500 100 2006 2007 2008 2009 2010 2011 2012 03/31/13 2006 2007 2008 2009 2010 2011 2012 03/31/13 LTM LTM IFRS IFRS CANADIAN GAAP CANADIAN GAAP Results impacted by challenging market conditions, lower shipments and higher cost input EBITDA excluding specific items. Note 1 – Elimination of joint venture consolidation Note 2 – Impact of Dopaco divestiture and elimination of joint venture consolidation 6
OUR FINANCIAL PERFORMANCE AND SITUATION Historical segmented EBITDA Containerboard Boxboard Europe Containerboard Boxboard Europe (M CAN$) (% of sales) (M CAN$) (% of sales) 30 12.0% 20 12.0% 27 26 17 25 25 23 25 9.0% 15 9.0% 21 13 11 11 11 19 20 10 10 20 6.0% 10 6.0% 7 15 3.0% 5 3.0% 10 0.0% 0 0.0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 2011 2011 2012 2012 2012 2012 2013 2011 2011 2011 2012 2012 2012 2012 2013 Specialty Products Tissue Papers Specialty Products Tissue Papers (M CAN$) (% of sales) (M CAN$) (% of sales) 39 20 12.0% 40 20.0% 35 33 31 15 15 29 28 15 9.0% 30 15.0% 13 12 11 11 18 10 8 6.0% 20 16 10.0% 5 3.0% 10 5.0% 2 0 0.0% 0 0.0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 2011 2011 2012 2012 2012 2012 2013 2011 2011 2011 2012 2012 2012 2012 2013 7 EBITDA excluding specific items.
OUR FINANCIAL PERFORMANCE AND SITUATION Key performance indicators (KPIs) ('000 s.t.) Capacity Utilization Rate Total Shipments 95% 1000 92% 92% 875 826 831 808 809 90% 804 89% 89% 750 88% 87% 86% 625 83% 500 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 2012 2012 2012 2012 2013 2012 2012 2012 2012 2013 Containerboard only: Containerboard only: 86% (for the quarter) 87% (for the quarter) 92% (for March 2013) Capacity utilization rate improving and shipments picking up Refer to Notes included in the Appendix. 8
OUR FINANCIAL PERFORMANCE AND SITUATION Our debt profile Objective: reduce debt below long term average Maturities well spread out • Banking Facilities: $422M • Increase in ratios due to challenging FY2011 and • Senior Notes: $958M modernization program • Other Debt (net): $201M • Short-term objective to improve profitability • Total Net Debt: $1,581M • Assuming debt remains the same, leverage ratio to improve • Available Liquidity (03/2013): $300M • Mid-term objective to reach industry standards Debt Maturity (towards 3x EBITDA) 7.0x 5.9x 5.8x5.0x4.8x4.4x 6.0x 4.5x4.8x5.0x 2017 4.7x 2020 4.5x 5.0x 33% 3.8x 3.3x 17% 4.0x 3.0x 2.0x Pre-2016 1.0x 9% 0.0x 2013E 2014E 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2016 41% Average 2003-2012 1 : 4.7x No significant maturity before 2016 and sufficient liquidity 9 1 EBITDA excluding specific items. 2013E and 2014E ratios are based on forecasts by analysts and debt remaining at 03/31/2013 level.
OUR FINANCIAL PERFORMANCE AND SITUATION Investment program • Capex requests for 2013 initially approved at Capital Expenditures Distribution in 2012 - $198M approximately $175M • First allocation of $150M • Including ~$60-70M of maintenance By segment capex Container- Amount subject to change depending • board 36% on operating results and economic Specialty Products conditions 7% Corporate Mostly dedicated towards converting • 10% Tissue operations Papers IT 17% 15% Boxboard Europe 15% Gradual capex program to improve asset base while maintaining financial flexibility 10
OUR BUSINESS DRIVERS Raw material costs Virgin Pulp Prices Main Recycled Fiber North Amercian OBM (US$/ (US$/tonne) ton) List Prices 300 1,100 Current 250 1,000 Current 930 200 900 150 150 800 835 100 700 100 50 600 May 13 Mar 13 Jan 11 July 12 Apr 11 July 11 Oct 11 Jan 12 Apr 12 Oct 12 Jan 13 Apr 13 Jan 11 Apr 11 Oct 11 Jan 12 Apr 12 Oct 12 Jan 13 July 11 July 12 White grades (SOP) Brown grades (OCC) NBSK NBHK OBM Average Quarterly List Prices Q1-2012 Q4-2012 Q1-2013 YoY QoQ 135 98 108 -20% +10% Brown grades - OCC No. 11 (New England) 163 172 165 +1% -4% White grades - SOP No. 37 (New England) Virgin Pulp Prices 873 863 898 +3% +4% NBSK (Canadian sources delivered to US East) 714 744 791 +11% +6% NBHK (Canada/US sources delivered to US East) Based on 2012 shipments, EBITDA sensitivity to US$15 or €/s.t. change: ±$47M 11 Sources: RISI, Bloomberg.
OUR BUSINESS DRIVERS Raw material dynamics Our North American Recycled Fibre Supply Our strategy • Short term: 2012 • constant review of our inventory strategy Cascades Recovery • prepare for Greenpac project to and Currently control minimize market disruption Internal over 80% of our Spot • Long term: 33% fibre supply Purchases • ensure control over fiber supply despite 27% greater • develop substitute grades Contractual concentration Agreement • potential to increase virgin content on the supply side 40% in certain circumstances • continue to close the loop with customers retailers Largest recycled paper collector in Canada 12
OUR BUSINESS DRIVERS Cost structure and FX Raw materials, energy & supplies = 62% of 2012 COGS A weaker CAN$ would be a game changer US$/CAN$ €/CAN$ 1.10 0.85 Supplies and 1.05 0.80 Raw material chemicals and 12% Maintenance consumables 1.00 0.75 7% 32% Freight 0.95 0.70 8% 0.90 0.65 Energy Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 10% Wages and benefits 18% US$/CAN$ €/CAN$ Others 13% • US$/CAN$ forecasts by top-5 Canadian banks • Range 2013 0.95 to 0.99 (average 0.97) • Range 2014 0.91 to 1.01 (average 0.98) Stronger CAN$ and significant variable cost inflation negatively impact results 13 Source: Bloomberg
OUR STRATEGIC ACTION PLAN Four priorities 1 2 3 4 Modernize Innovate Optimize core operations Restructure to improve and ACTION PLAN capital allocation (and IT) through underperforming develop PRIORITIES and reduce focused units processes and working capital investments products Improve our ROCE to reach our cost of capital MEDIUM TERM OBJECTIVES Reach industry comparable leverage ratios Improving our profitability and financial situation through our Action Plan 14
Modernize core operations (and IT) through 1 focused investments Initiatives undertaken since the beginning of our Action Plan • Construction of the Greenpac linerboard mill in Containerboard – Manufacturing Niagara Falls, NY • Consolidation of our platform in Ontario Containerboard – Converting • Consolidation of our folding carton platform in Canada Boxboard – Converting • Installation in 2010 of an ATMOS machine in Candiac Tissue Papers – Manufacturing • Launch of an important upgrade of our ERP system Corporate 15
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