Consumables

Cascades releases its 2012 third quarter results

Thursday 08. November 2012 - Cascades Inc. (TSX: CAS), a leader in the recovery and manufacturing of green packaging and tissue paper products, announces its financial results for the three-month period ended September 30, 2012.

Q3-2012 Financial Highlights
Sales of $906 million
(compared to $944 million in Q2-2012 (-4%) and $947 million in Q3-2011 (-4%))
Excluding specific items
EBITDA of $78 million
(compared to $84 million in Q2-2012 (-7%) and $79 million in Q3-2011 (-1%))
Net earnings per share of $0.07
(compared to net earnings of $0.08 in Q2-2012 and a net loss of $0.02 in Q3-2011)
Including specific items
EBITDA of $83 million
(compared to $77 million in Q2-2012 (+8%) and $53 million in Q3-2011 (+57%))
Net earnings per share of $0.05
(compared to net earnings of $0.08 in Q2-2012 and a net loss of $0.21 in Q3-2011)
Net debt of $1,542 million (compared to $1,585 million as at June 30, 2012), including $147 million of non-recourse debt
Price increase announcement in our containerboard sector
Strategic and Financial Initiatives
Major investments in several of our folding carton and microlithography plants and announcement of the closure of the Lachute (Québec) folding carton plant
Permanent closure of the napkin plant located on McNicoll Street in Toronto
Greenpac project machine installation proceeding as planned with expected start-up in July 2013
Extension and amendment of existing revolving credit facility resulting in lower interest costs
Establishment of a Small Shareholder Program for registered shareholders
Mr. Alain Lemaire, President and Chief Executive Officer, had the following comments on the third quarter results and near-term outlook:
“The results for our third quarter did not meet our expectations due to a strong Canadian dollar, operational issues, higher recycled office paper costs and a stronger seasonal decline in activity level in Europe.
Our Tissue Papers Group continued to contribute positively but was impacted by the increase in the average cost of its raw materials, namely white grades recycled papers. Our Specialty Products Group posted stable results. In Europe, shipments decreased significantly. As previously highlighted, downtimes, which are usual during this period of the year, have been longer in 2012 due to important investments undertaken at certain mills and lower order inflows. Financial results of our Containerboard Group show a sequential increase. However these results should have been better given the decline in recycled paper costs. During the last few quarters, operational problems at two of our manufacturing mills resulted in higher production and external supply costs. Downtime taken in September to address these problems further contributed to subpar performance. As a result, we were not able to fully benefit from the usual seasonality inherent to the third quarter and from more favorable recycled fiber prices.
In the short term, fundamentals in our sectors are positive. In the containerboard sector, the recent price hike announcement will contribute positively to our results during the next quarter with full implementation in the beginning of 2013. Demand in the tissue papers segment continues to be robust. The European market remains difficult but we are satisfied with progress made to improve our production assets following recent investments. Finally, we do not expect a significant increase in the level of recycled paper prices in the short term. For these reasons, prospects for the current quarter are encouraging despite the inherent seasonality associated with the month of December.”
Financial Summary
Results analysis for the three-month period ended September 30, 2012 (compared to the previous year)
In comparison with the same period last year, sales decreased by 4% to $906 million as of result of lower volumes, lower average selling prices and an unfavorable CAD/Euro exchange rate which more than offset the net impact of business acquisitions over divestitures and closures.
Operating income, excluding specific items, remained stable compared to Q3-2011 at $33 million as the above-mentioned factors were counterbalanced by lower raw material costs. On a segmented basis, our three sectors in North America surpassed their 2011 third quarter’s results. The third quarter is often softer in Europe and our Boxboard sector recorded lower operating income due to longer downtimes this year. When including specific items, the operating income amounted to $36 million in comparison to $7 million for the same period of last year. During the third quarter of 2011, foreign exchange gain on working capital items following the rapid depreciation of the Canadian dollar at the end of the quarter, combined with foreign exchange gain of approximately $14 million on the consideration received from the sale of Dopaco, had a significant impact on our operating income.
In the third quarter of 2012, these specific items impacted our operating income and/or net earnings (before tax):
a $6 million unrealized gain on financial instruments (impact on operating income and net earnings);
a $1 million loss resulting from impairment charges (operating income and net earnings);
a $2 million expense related to accelerated depreciation of assets due to restructuring measures (operating income and net earnings);
a $5 million foreign exchange loss on long-term debt and financial instruments (net earnings).
For further details, see the following tables on IFRS and non-IFRS measures reconciliation included herewith.
Net earnings excluding specific items amounted to $7 million ($0.07 per share) in the third quarter of2012 compared to a net loss of $2 million ($0.02 per share) for the same period in 2011. Including specific items, net earnings amounted to $5 million ($0.05 per share) compared to a net loss of $20 million ($0.21 per share) for the same quarter in 2011.
Results analysis for the three-month period ended September 30, 2012 (compared to the previous quarter)
In comparison to the previous quarter, sales decreased by 4% mostly due to the impact of lower volumes, lower average selling price, unfavorable foreign exchange rates and the impact of mill closures. Excluding specific items, operating income decreased by $4 million to reach $33 million primarily due to the above-mentioned factors that more than offset a decrease in raw material costs. Net earnings for the quarter remained stable at $7 million.
Net debt decreased by $43 million to $1,542 million due to a favorable exchange rate with regard to our debt and free cash flows generated.
Dividend on common shares and normal course issuer bid
The Board of Directors of Cascades declared a quarterly dividend of $0.04 per share to be paid December 13, 2012 to shareholders of record at the close of business on November 30, 2012. This dividend paid by Cascades is an “eligible dividend” as per the Income Tax Act (Bill C-28, Canada).
In the third quarter of 2012, Cascades purchased for cancellation 75,500 shares at an average price of $4.76 representing an aggregate amount of approximately $0.4 million.