CASCADES INC. Goldman Sachs 2013 Montral Paper & Forest - - PowerPoint PPT Presentation

CASCADES INC.

Goldman Sachs 2013 Montréal Paper & Forest Products Investor Event March 13, 2013

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 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, 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 may also include price indices as well as 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 Corporation. 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 Corporation uses earnings before interest, taxes, depreciation and amortization (EBITDA) because it is the measure used by management to assess the operating and financial performance

• f the Corporation’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 quarterly report or annual report. Specific items are defined as items such as charges for impairment of assets, for facility or machine closures, accelerated depreciation of assets due to restructuring measures, 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.

DISCLAIMER

2

GREEN PACKAGING AND TISSUE PRODUCT OFFERING

3 Packaging Tissue Papers Boxboard Europe Containerboard Specialty Products

Leading NA packaging and tissue manufacturer with substantial recycling capabilities

BALANCED PACKAGING AND TISSUE PLAY

4

Packaging Products

74% of Sales 57% of EBITDA

Cascades

2012 Sales: $3,645M 2012 EBITDA1: $304M Tissue Papers

26% of Sales 43% of EBITDA Boxboard Europe

21% of Sales 13% of EBITDA

Containerboard

32% of Sales 29% of EBITDA

Specialty Products

21% of Sales 15% of EBITDA

Exposure to less cyclical end-markets

1 EBITDA excluding specific items. Breakdown of sales and EBITDA before eliminations & corporate activities.

CLOSED-LOOP BUSINESS MODEL

5

100+ business units

32 units 23 units 58 units May be sent to recycling centers 77% recycled fibre (2.9M tons) NA integration rate (2012): 34% (520K tons) NA integration rate (2012): 51%

Including seven manufacturing/converting tissue papers units and Reno De Medici’s units.

Upstream and downstream integration

500 600 700 800 900 1,000 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13

20-pt clay coated news (CRB) Linerboard 42-lb Corrugating medium 26-lb

($US/s.t.)

MARKET DYNAMICS – CONTAINERBOARD

6

Containerboard industry fundamentals are positive

Sources: RISI, Fiber Box Association, Paper Packaging Canada.

North American Box Shipments

428 421 405 374 386 387 389 370 385 400 415 430 445 2006 2007 2008 2009 2010 2011 2012

(billions ft2)

Containerboard Price Increases

Second $US50/s.t. price increase announced for April 1st

MARKET DYNAMICS – CONTAINERBOARD

7

Sources: Company estimates, RISI, Fiber Box Association, Paper Packaging Canada.

93% 85% 95% 96% 96% 86% 82% 86% 90% 94% 98% 2008 2009 2010 2011 2012 NRP

Containerboard Utilization Rate

Balanced supply/demand equation with industry utilization rates exceeding 95%

Major Producers : Top 3 = 65%

IP 35% Rock-Tenn 19% Graphic Pack. 11% PCA 7% Pratt 3% Cascades 3% Others 22%

7,896 8,028 8,201 8,053 8,219 8,319 8,472 7,800 8,000 8,200 8,400 8,600 2006 2007 2008 2009 2010 2011 2012 ( 000 s.t.)

MARKET DYNAMICS – TISSUE PAPERS

8

New capacity to have more impact on national brands but potential trickle-down to AfH

US tissue consumption

Sources: RISI, Fiber Box Association, Paper Packaging Canada.

8,512 8,902 496 154 7,000 7,500 8,000 8,500 9,000 9,500 2011 NA Tissue Capacity New capacity '12-'13 (TAD and TADe) New capacity '12-'13 (other grades) Expected closures 2013 NA Tissue Capacity (estimate) ('000 s.t.) (260)

Capacity additions in the tissue sector

+4.5% +1.5%

9

Source: RISI and Company estimates; sales by countries exclude parent roll sales

Cascades’ Tissue Papers 2012 Sales – End-Users

Branded 57% Private label 43% Branded 16% Private label 84%

Cascades’ Tissue Papers 2012 Sales – Countries

Retail 54% AfH 46% Retail 53% AfH 47% Canada (28%) US (72%) Retail 45%

Parent rolls 16%

AfH 39%

90% private label 36% branded

Exposure to relatively stable / growing demand

MARKET DYNAMICS – TISSUE PAPERS

OBM Average Annually List Prices 2011 2012 YoY YTD-2013 Brown grades - OCC No. 11 (New England) 158 119

• 25%

108 White grades - SOP No. 37 (New England) 242 168

• 31%

165

290 175

165

165 90

115

50 100 150 200 250 300 Jan 09 Apr 09 July 09 Oct 09 Jan 10 Apr 10 July 10 Oct 10 Jan 11 Apr 11 July 11 Oct 11 Jan 12 Apr 12 July 12 Oct 12 Jan 13 (US$/ton)

Main Recycled Fiber North Amercian OBM List Prices

White grades (SOP) Brown grades (OCC)

Recent price increases but costs not expected to average significantly more in 2013

Sources: RISI, Bloomberg.

MARKET DYNAMICS – RAW MATERIAL COSTS

Current

10

Mar 13

Cascades’ North American Fibre Supply

11

Control over 70% of our fibre supply despite greater concentration on the supply side

Contractual Agreements 46% Cascades Recovery and Internal 35% Spot Purchases 19%

2008

Contractual Agreements 40% Cascades Recovery and Internal 33% Spot Purchases 27%

2012

MARKET DYNAMICS – RAW MATERIAL COSTS

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Financial results impacted negatively by stronger CAD$ and variable cost inflation

Source: Bloomberg

Increase +17% +0% +10% +21% +7%

• ver

+24 months

Chemicals – Increase over last 2 years

MARKET DYNAMICS – OTHER DRIVERS

0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 0.80 0.85 0.90 0.95 1.00 1.05 1.10

Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12

EURO/CAN$ US$/CAN$

US$/CAN$ Euro/CAN$

Canadian dollar - recent 52-week high

Improve our ROCE to reach our cost of capital Reach industry comparable leverage ratios Improving our profitability and financial situation through our Action Plan ACTION PLAN PRIORITIES TOOL OR PROCESS MEDIUM TERM OBJECTIVES

Focused investing for modernization

• f core operations

(and IT) Optimizing capital allocation & reducing working capital Restructuring of under-performing units

2 3 1

Innovation

4

ERP Working Capital Initiative

OUR STRATEGIC ACTION PLAN

13

ACTING ON OUR STRATEGIC PRIORITIES

14

Challenging Market Evolution  Proactive measures  Improved profitability IMPROVED PACKAGING PLATFORM Focused investing for modernization of core operations and IT

1

ERP

• Consolidation of our

corrugated products sector in Ontario with the acquisition

• f Bird and concurrent

investments totaling $30M

• Consolidation of our folding

carton and microlithography

• perations with investments

totaling $20M

• Important investment

program

• Blueprint and

programming: 2011-2012

• Implementation:

2011-2015

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• $99M total investment
• Represents ± $1.05/share
• Debt non-recourse to Cascades

Partners Ownership Cascades 59.7% CDPQ 20.2% Two industry converters 20.1%

• Largest recycled linerboard mill in NA:
• 328 inches
• 1,500 s.t./day of lightweight recycled

linerboard (26 pounds)

• Most technologically advanced equipment

Will position us amongst leaders in terms of offering, productivity and profitability Manufacturing capacity breakdown Before After Greenpac Greenpac Linerboard 28% 51% Medium 72% 49% Canada 72% 49% USA 18% 51% Financial Structure Operational Facts

TOWARDS MODERNIZATION : GREENPAC

ACTING ON OUR STRATEGIC PRIORITIES

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Challenging Market Evolution  Proactive measures  Improve profitability

• Acquired one of the most modern

converting plants in NA

• Integration level increased to 70% +
• Reinforces positioning in away-

from-home sector

• 10 converting lines

Optimizing capital allocation; reducing working capital

2

W/C Reduction Papersource Acquisition

14.5% 14.4% 14.5% 13.2% 14.2% 14.7% 14.3% 12.4%

8% 10% 12% 14% 16% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Working Capital (% of Sales)

ACTING ON OUR STRATEGIC PRIORITIES

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Restructuring of under-performing units Challenging Market Evolution  Proactive measures  Improved profitability

Periods 2004-2006 2006-2008 2008-2010 2011-2012 Strategic measures Packaging 5 acquisitions 7 closures 2 sales Tissue 1 sale 1 closure 1 acquisition Packaging 2 mergers 4 closures 4 sales 2 acquisitions 1 partnership Packaging 2 closures 2 acquisitions Tissue 1 investment 1 acquisition Packaging 4 sales 1 investment 10 closures Tissue 1 acquisition

3

ACTING ON OUR STRATEGIC PRIORITIES

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Challenging Market Evolution  Proactive measures  Improve profitability Improvement and development of processes and products through innovation

4

Two-finger drink carrier Moka – Beige bath tissue Closing system reducing air exchange

3,692 3,862 3,481 4,033 4,025 3,877 3,182 3,625 3,645

2,500 3,000 3,500 4,000 4,500 2004 2005 2006 2007 2008 2009 2010 2011 2012 (M CAN$)

SALES

259 262 314 340 305 465 310 229 304

100 200 300 400 500 2004 2005 2006 2007 2008 2009 2010 2011 2012 (M CAN$)

EBITDA

HISTORICAL FINANCIAL PERFORMANCE

19

Results impacted by challenging market conditions, lower shipments and higher cost input

EBITDA excluding specific items but including discontinued operations. Canadian GAAP (not adjusted for IFRS). 2010 and 2011 figures presented under IFRS and exclude discontinued operations of Dopaco.

IFRS CANADIAN GAAP IFRS CANADIAN GAAP

KEY PERFORMANCE INDICATORS (KPIs)

Need for improvement in productivity

The capacity utilization rate is defined as: Shipments/Practical capacity. Paper manufacturing only.

20

661 902 822 774 808 826 804 809

500 625 750 875 1000 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 ('000 s.t.)

Total Shipments 90% 90% 87% 86% 89% 90% 87% 88%

80% 83% 86% 89% 92% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Capacity Utilization Rate

KEY PERFORMANCE INDICATORS (KPIs)

Return on assets progressing; major improvement in working capital management

Return on assets is defined as : LTM EBITDA excluding specific items/ LTM Average of total quarterly assets. It includes discontinued operations. Working capital includes accounts receivable plus inventories less accounts payable.

21

9.9% 8.7% 7.4% 6.5% 7.1% 7.6% 7.5% 8.1%

6% 7% 8% 9% 10% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

LTM Return on Assets 14.5% 14.4% 14.5% 13.2% 14.2% 14.7% 14.3% 12.4%

8% 10% 12% 14% 16% Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Working Capital (% of Sales)

5 17 10 10 13 11 7 11

0.0% 3.0% 6.0% 9.0% 12.0% 5 10 15 20 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 (% of sales) (M CAN$) Boxboard Europe

19 20 27 19 21 23 26 25

0.0% 3.0% 6.0% 9.0% 12.0% 10 15 20 25 30 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 (% of sales) (M CAN$) Containerboard

10 16 18 28 33 39 35 31

0.0% 5.0% 10.0% 15.0% 20.0% 10 20 30 40 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 (% of sales) (M CAN$) Tissue Papers

7 12 13 2 11 15 15 8

0.0% 3.0% 6.0% 9.0% 12.0% 5 10 15 20 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 (% of sales) (M CAN$) Specialty Products

HISTORICAL SEGMENTED EBITDA

EBITDA excluding specific items.

22

Tissue Papers Boxboard Europe Containerboard Specialty Products

BLX growth not fully reflected in its valuation; still represents ±$1.35/share for CAS

23

PERFORMANCE OF OUR EQUITY INVESTMENTS - BORALEX

Source: Bloomberg and Boralex’ website; refer to October 2012 Investor Presentation for footnotes.

Analyst Recommendations Average target 1 top pick 13.00$ 4 buys or outperforms ~12.00$ 1 sector outperform 11.25$ 2 market or sector perform ~10.50$

Comparative

Valuation Matrix BLX INE NPI (based on 2013 figures) Price/Book 1.2x 1.6x 4.4x Price/Cash flow 8.4x 12.9x 12.1x EV/EBITDA 10.5x 17.3x 12.2x

Reno is a turnaround story in a tough economic environment

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• 30.6% interest received in 2007 in exchange

for our CRB mills

• RDM is a public company
• Market cap: 57M €
• TEV/EBITDA: 5.5x (LTM); 3.5x (2013E)
• P/BV: 0.4x
• Current ownership : 48.5%
• Put option requiring us to buy additional 9%
• Fully consolidated in our results

Cascades’ Ownership in Reno de Medici

• 2nd supplier of boxboard in Europe
• Excellent geographical coverage of Western

Europe with production facilities in main markets

• Wide range of packaging products – virgin

and recycled

• Competitive cost structure will allow to

compete against Asian supply

• Three WLC units seen as European class

facilities

• Capital structure in good position

Competitive Positioning

PERFORMANCE OF OUR EQUITY INVESTMENTS - RDM

40 30 26 20 40 60 2010 2011 2012

(millions €)

Reno de Medici’s EBITDA

DEBT PROFILE

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Leverage ratio improvement due to increased profitability

Note: EBITDA excluding specific items. Starting in Q2 2011, LTM EBITDA / Interest includes 100% of RDM. Starting in Q4 2011, also includes 100% of Papersource. Cascades’ bank debt financial covenant ratios: Net funded debt to capitalization < 65% (currently at 55%),interest coverage ratio > 2.25x (currently at 3.01x).

57% 59% 54% 57% 59% 61% 45% 50% 55% 60% 65% 2007 2008 2009 2010 2011 2012

Debt / Debt + Equity

4.6x 5.9x 3.3x 4.5x 5.8x 5.0x 3.0x 4.0x 5.0x 6.0x 7.0x 2007 2008 2009 2010 2011 2012

Net debt / LTM EBITDA

3.4x 3.0x 4.6x 2.9x 2.5x 3.1x 1.0x 2.0x 3.0x 4.0x 5.0x 2007 2008 2009 2010 2011 2012

Interest Coverage Ratio

Before 2016 9% 2016 41% 2017 33% 2020 17%

Long-term Debt Maturities Distribution

CREDIT AGREEMENT TERMS

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Advantageous credit terms providing flexibility

February 2011 February 2012 Structure $750 M revolving credit facility $750 M revolving credit facility Maturity February 2015 February 2016 Interest rate LIBOR + 212.5 bps LIBOR + 175 bps Standby fees 48 bps 35 bps Covenants1 Funded Debt to Capitalization Ratio ≤ 65% Interest Coverage Ratio ≥ 2.25x Funded Debt to Capitalization Ratio ≤ 65% Interest Coverage Ratio ≥ 2.25x

1 On an adjusted consolidated basis

Current Debt / Cap Ratio : 51% Current Interest Coverage Ratio : 3.3x

27

CAPITAL ALLOCATION

Important capital allocation decisions since FY2010

1 EBITDA excluding specific items. Starting in Q4 2011, ratios include 100% of Papersource. 2012E and 2013E ratios are based on forecasts by analysts and debt remaining at Q2 2012 level.

1,397 1,535 (298) (287) 278 250 99 83 44 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 Total Debt 12/31/2010 Dopaco sale Cash flow from op.

• Var. of

working Capital $CAN

• Acqu. &

consol. Capex, net of disp. Greenpac investment Leases &

• thers

Dividends & buy-backs Net Debt 12/31/2012 (M CAN$) (20) (11)

CAPEX PROGRAM

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Gradual capex program to improve asset base while maintaining financial flexibility

Capital Expenditures Distribution in 2012 - $198M

• Capex requests for 2013 initially approved at approximately $175M
• First allocation of $150M
• Amount subject to change depending on operating results and economic conditions

Corporate 24% Boxboard Europe 15% Tissue papers 17% Specialty products 8%

Container - board 36%

By segment

Others 25% Health & Safety 3% Energy 5% Cost Reduction, Productivity & Maintenance 67%

By project category

29

Taking the steps to be ready for tailwinds

POTENTIAL BENEFITS STEMMING FROM OUR RECENT INITIATIVES

• Modernization initiatives (±$150M capex program per year)
• Papersource integration
• Bird Packaging integration
• Announced price increases in the containerboard sector
• Containerboard productivity rate to revert to historical levels
• Streamlining of converting operations in New England, Ontario and

Québec

• 18 divestitures/closures since 2008, some of which unprofitable units
• Greenpac contribution and valuation
• Complete turnaround and modernization of European platform
• Complete ramp-up of Atmos tissue paper machine
• Boralex project pipeline
• Benefits from ERP upgrade

Improvement in the economic environment in North America and Europe