Cascades Reports Results for the First Quarter of 2024

Q1 2024 Highlights:

Sales of $1,109 million (compared with $1,138 million in Q4 2023 and $1,134 million in Q1 2023);
Operating income of $9 million (compared with operating loss of $(24) million in Q4 2023 and operating loss of $(80) million in Q1 2023);
Net loss per common share of ($0.20) (compared with ($0.57) in Q4 2023 and ($0.75) in Q1 2023);
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA (A)1) of $103 million (compared with $122 million in Q4 2023 and $134 million in Q1 2023);
Adjusted net earnings (loss) per common share1 of $0.00 (compared with adjusted net earnings per common share1 of $0.05 in Q4 2023 and adjusted net earnings per common share1 of $0.32 in Q1 2023);
Net debt1 of $2,020 million as of March 31, 2024 (compared with $1,882 million as of December 31, 2023). Net debt to EBITDA (A) ratio1 of 3.8x, up from 3.4x as of December 31, 2023;
On April 12, 2024, the Corporation entered into a $175 million delayed draw unsecured term loan credit facility to manage upcoming maturities;
Total capital expenditures, net of disposals, of $41 million in Q1 2024, compared to $46 million in Q4 2023 and $137 million in Q1 2023. The Corporation's 2024 forecasted net capital expenditures of approximately $175 million is unchanged.

Mario Plourde, president and CEO, commented: "First quarter 2024 results met expectations, considering the context of elevated raw material prices, and ongoing inflationary pressure on operational costs. Sequentially, Tissue Papers executed well, with increased average selling prices partially offsetting the impacts from higher maintenance costs and softer seasonal volumes. Results in Containerboard decreased from the previous quarter, as spreads remained under pressure due to cost headwinds, most noticeably in raw materials and energy, and lower selling prices prior to the implementation of published index price increases effective in the second quarter. The softer results similarly reflect costs associated with the Trenton mill, which ceased operations at the end of January prior to its permanent closure at the end of February. Conversely, Specialty Products had a solid quarter, driven by favourable sequential raw material and selling prices, and operational cost benefits reflecting efficiency and productivity initiatives. Lower consolidated profitability levels, higher seasonal working capital requirements and a less favourable exchange rate during the quarter resulted in our leverage ratio1 increasing to 3.8x from 3.4x at the end of 2023."

Discussing near-term outlook, Plourde commented, "Consolidated second quarter results are expected to be stronger sequentially, driven by improved performance in our Containerboard segment as index price increases are implemented, and stable results in the Tissue Papers and Specialty Packaging businesses. We are continuing to advance the Bear Island facility ramp-up. It is progressing well, and we are pleased that the mill has achieved production levels above its rated daily capacity on several occasions. Broadly, we are cautiously optimistic for near-term volumes in our packaging businesses given continued economic uncertainty, and remain focused on profitability, efficiency and productivity initiatives and the ramp-up of Bear Island to create value throughout our operations."

Analysis of results for the three-month period ended March 31, 2024 (compared to the same period last year):

The first quarter sales of $1,109 million decreased by $25 million compared with the same period last year. This decrease was driven by a $64 million impact from lower selling prices in all of our business segments. This was partially offset by a $23 million benefit from a more favourable sales mix in the Tissue segment, and a $16 million benefit from higher volume, the latter of which was a net result of a $46 million volume benefit in our packaging businesses and a $30 million negative volume impact in our Tissue business that reflects operational platform changes including closures completed in the past year.

The first quarter EBITDA (A)1 totaled $103 million, a decrease of $31 million, or 23 percent, from the $134 million generated in the same period last year. This decrease was largely driven by lower selling prices, primarily in the Containerboard segment, and higher raw material costs in our packaging businesses, the effects of which were partially offset by stronger volumes in these businesses. Production and freight costs were a headwind in Containerboard but were a tailwind for the Tissue Papers business, largely attributable to the optimization of this segment's operational base.

The main specific items, before income taxes, that impacted our first quarter 2024 operating income and/or net loss were:

$28 million of impairment charges on assets, restructuring costs and other costs related to the closure of plants in Canada and the USA (operating income and net loss);

$1 million unrealized gain on financial instruments (operating income and net loss);

$2 million unrealized gain on interest rate swaps (net loss);

$1 million foreign exchange loss on long-term debt and financial instruments (net loss);

For the three-month period ended March 31, 2024, the Corporation posted a net loss of $(20) million, or ($0.20) per common share, compared to a net loss of $(75) million, or ($0.75) per common share, in the same period of 2023. On an adjusted basis1, the Corporation posted a net loss of less than a million dollars in the first quarter of 2024, or $0.00 per common share, compared to net earnings of $33 million, or $0.32 per common share, in the same period of 2023.

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