Business News

Cascades reports first quarter results

Thursday 08. May 2008 - Cascades Inc. ("Cascades") (Symbol: CAS-TSX) reports a net loss of $4 million ($0.04 per share) for the quarter ended March 31, 2008. This compares with net earnings of $22 million ($0.22 per share) for the same period in 2007.

When excluding specific items(1), the net loss for the first quarter of 2008 amounted to $9 million ($0.09 per share) compared to net earnings of $5 million ($0.05 per share) for the same quarter in 2007.

Business highlights

– Decrease in profitability in comparison to Q1 2007, mostly explained by
significantly higher fibre costs and the appreciation of the Canadian
dollar as well as challenging business conditions in the boxboard and
tissue paper sectors.

– Increase of 7% in shareholders’ equity compared to Q1 2007.

– Cascades continues to proactively address less performing assets:

– Integration of our North American boxboard operations with our
containerboard operations (Norampac):

– Action plan to be determined in the coming months to optimize the
asset base and improve the profitability of boxboard operations;

– Completed merger of the European recycled boxboard operations with
those of Reno de Medici S.p.A. on March 1, 2008;

– Ongoing cost reduction initiatives and strategic divestiture of
assets:

– Current initiatives to reduce workforce in certain mills of the
Specialty Products Group and the Tissue Group;

– The sale of a recycled pulp mill for $41 million translates into a
$24 million pre-tax gain.

– Amendments to our banking facility providing more flexibility and
liquidity.

– Boralex led consortium is selected for the development of wind power
projects totalling 272 MW.
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Commenting on the quarterly results, Mr. Alain Lemaire, President and Chief Executive Officer stated: “Market conditions continued to deteriorate as the cost of recycled paper and energy increased while in Canada, demand weakened in some of our groups. Of all of our business sectors boxboard continues to be the most challenged. The decision to integrate the North American boxboard and folding carton operations into Norampac represents a further step in our ongoing efforts to improve profitability. We are convinced this move will create a stronger packaging group that will be better able to respond to the needs of the market. Our other business groups have also moved decisively to address under performing assets, the sale of Greenfield SAS being the most recent example. We are confident these efforts will make Cascades a more profitable company that is better positioned to meet the challenges of the future.”

Three-month period ended March 31, 2008
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For the quarter ended March 31, 2008 which takes into account the 30.6% proportionate consolidation of the results of Reno de Medici S.P.A., for a one-month period, sales decreased by 4.1% amounting to $959 million compared to $1 billion achieved last year.

Operating loss from continuing operations amounted to $6 million compared to an operating income of $57 million achieved for the same period last year. Operating income from continuing operations excluding specific items for the quarter amounted to $8 million compared to $33 million in 2007. The 2008 specific items mostly consist of a $8 million of closure costs relating to the Red Rock mill (Norampac) and the restructuring of the North American boxboard operations as well as a $6 million charge related to the Reno de Medici merger.

Outlook
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Mr. Alain Lemaire, President and Chief Executive Officer added: “We expect a seasonal pickup in activity in most of our business segments which when combined with better overall selling prices and the recent drop in fibre costs should positively impact our second quarter results. We will continue managing our portfolio of assets proactively and concentrating our efforts on the successful integration of our North American boxboard activities to the Norampac operations. Management at Norampac, which is presently conducting a comprehensive review of the boxboard operations, is expected to determine its action plan in the coming months to optimize the asset base and improve the profitability of those operations. Furthermore, we will aggressively intensify our cost reduction program and tighten management of our cash flows to improve our overall competitiveness as well as our financial flexibility. As we have demonstrated in the past three years, we remain focused on delivering on our action plan and we will not hesitate to act to stay ahead of the curve in the face of a rapidly changing environment.”

Dividend on Common Shares and normal course issuer bid
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The Board of Cascades declared a quarterly dividend of $0.04 per share to be paid June 13, 2008 to shareholders of record at the close of business on May 30, 2008. This dividend paid by Cascades is an “eligible dividend” as per the proposed changes to the Income Tax Act (Bill C-28, Canada).

In addition, during the course of the first quarter, in accordance with its normal course issuer bid, Cascades has repurchased for cancellation 282,300 common shares at an average price of $7.83 per share representing an aggregate amount of approximately $2.2 million. The company’s issuer bid has been renewed March 13, 2008 and will enable Cascades to acquire up to 4,946,517 common shares until March 12, 2009.

Supplemental information on non-GAAP measures

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, 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, 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, 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 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.