CASCADES
CIBC High Yield
Conference
May 19, 2011
DISCLAIMER
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 Company’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 also includes 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 Company.
The financial information included in this presentation also contains certain data that are not measures of
performance under Canadian GAAP or IFRS (“non-GAAP or non-IFRS measures”). For example, the Company
uses earnings before interest, taxes, depreciation and amortization (EBITDA) because it is the measure used by
management to assess the operating and financial performance of the Company’s operating segments. Such
information is reconciled to the most directly comparable financial measures, as set forth in the “Supplemental
Information on Non-GAAP or Non-IFRS Measures” section of our most recent annual report or earnings press
release.
Specific items are defined as items such as charges for impairment of assets, for facility or machine closures,
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.
2
AGENDA
1.
Business overview
2.
Financial review
3.
Current market conditions
4.
Recent strategic developments
5.
Concluding remarks
3
BUSINESS OVERVIEW
4
BALANCED PACKAGING AND TISSUE PLAY
($ in millions)
Cascades
2010 Sales: $3,959
2010 EBITDA: $398
Packaging
79% of Sales
79% EBITDA
Boxboard
31% of Sales
24% Adjusted EBITDA
Containerboard
27% of Sales
37% Adjusted EBITDA
Tissue Papers
21% of Sales
21% EBITDA
Specialty Products
21% of Sales
18% Adjusted EBITDA
Leading North American packaging and tissue manufacturer with substantial recycling capabilities
EBITDA excluding specific items. Share of Sales and EBITDA excluding the impact of inter-segment sales and corporate activities. Based on Canadian GAAP.
5
INTEGRATED
23 units
May be sent to
recycling centers
34 units
59 units
One of two North American public companies in packaging & tissue
with leading market positions
6
SUSTAINABLE
Lost times frequency rate (OSHA)
Relative Green House Gas Emissions
(kg/metric
tonne)
300
8.0
296
6.6
6.0
5.4
260
4.9
4.0
209
220
198
2.0
-
180
2008
2009
2010
2008
2009
2010
The right approach to benefit from the “green” demand
7
FINANCIAL REVIEW
8
SUMMARY OF ANNUAL RESULTS (2010/GAAP)
4,000
3,900
3,959
400
3,877
3,800
3,700
3,600
3,500
14.0%
398
350
12.0%
306
300
10.0%
200
8.0%
100
6.0%
4.0%
0
2007
(M CAN$)
2008
2009
2007
2010
(% of sales)
Cash flow from operations (adjusted)
327
11.0%
2008
260
202
183
9.0%
7.0%
5.0%
100
0
2007
2008
2009
2010
1.13
1.00
0.65
0.75
0.50
3.0%
0.25
1.0%
0.00
2010
2009
Earnings per share
(CAN$)
1.50
1.25
300
200
(% of sales)
465
500
4,017
3,929
EBITDA
(M CAN$)
Sales
(M CAN$)
4,100
0.23
0.04
2007
2008
2009
2010
Lower results compared to 2009 but significantly better than previous years.
EBITDA, cash flow from operations (adjusted) and net earnings excluding specific items.
9
KEY PERFORMANCE INDICATORS (2010/GAAP)
Total Shipments
('000 s.t.)
Capacity utilization rate
3,600
3,500
96%
3,515
94%
3,396
3,400
94%
92%
3,330
3,300
90%
88%
88%
3,200
86%
86%
3,082
3,100
84%
3,000
82%
2007
2008
2009
2010
2007
2008
2009
2010
Working capital (% of sales)
Return on assets
18.0%
13.0%
11.9%
12.0%
16.5%
10.5%
11.0%
10.0%
93%
15.4%
14.2%
9.1%
14.0%
9.0%
7.8%
8.0%
16.0%
13.6%
12.0%
7.0%
6.0%
10.0%
2007
2008
2009
2010
2007
2008
2009
2010
Rebound in demand and operating rate.
Working capital as a % of sales at its lowest level in 5 years.
See notes page 50.
10
HISTORICAL BUSINESS CONDITIONS
Selling
prices
1 250
Cascades North American manufacturing selling price
and raw material cost indices (US$)
Raw material
costs
700
600
1 150
500
1 050
400
300
950
200
Selling prices index (US$)
US$/CAN$
Natural Gas Henry Hub - US$/mmBtu
Q4 2010
Q3 2010
Q2 2010
Q1 2010
Q4 2009
Q3 2009
Q2 2009
Q1 2009
Q4 2008
Q3 2008
Q2 2008
Q1 2008
Q4 2007
Q3 2007
Q2 2007
100
Q1 2007
850
Raw materials index (US$);
2007
2008
2009
2010
$0.93
$0.94
$0.88
$0.97
$6.86
$9.03
$3.99
$4.39
Less favourable business conditions compared to 2009 as $CAN appreciated and
implementation of price increases lagged cost inflation.
See notes page 50. Source: Bloomberg.
11
ANNUAL SEGMENTED EBITDA (2010/GAAP)
(M CAN$)
(% of sales)
Boxboard
14.0%
150
115
125
101
100
44
6.0%
33
25
4.0%
0
2.0%
2007
2008
(M CAN$)
2009
2010
100
67
75
74
75
60
150
0
0
10.0%
2007
2008
2009
2010
2008
100
2009
2010
(% of sales)
(M CAN$)
150
2.0%
14.0%
12.0%
10.0%
4.0%
154
50
6.0%
25
145
100
12.0%
50
16.0%
130
200
8.0%
(% of sales)
176
2007
(% of sales)
Specialty products
200
Containerboard
10.0%
8.0%
75
50
12.0%
(M CAN$)
Tissue papers
22.0%
154
19.0%
16.0%
90
90
65
13.0%
10.0%
50
7.0%
0
4.0%
2007
2008
2009
2010
Stable results in packaging vs. last year.
Significant turnaround in boxboard compared to 2007 and 2008.
EBITDA excluding specific items.
12
2010 VS. 2008 COMPARISON
2008
2010
Change
$0.94
$0.97
4%
819
765
(7%)
Natural gas costs (CAN$/GJ)
$7.26
$5.09
(30%)
Capacity utilization rate
88%
93%
5%
Sales (M$)
4,017
3,959
(1%)
EBITDA (M$)
306
398
30%
Free cash flow (M$)
(78)
72
+150 M$
EPS
$0.04
$0.65
1,525%
ROA
7.8%
10.5%
2.7%
Net debt (M$)
1,800
1,449
(20%)
US$/CAN$
Selling price index/raw material cost index spread (in US$)
Compared to 2008, despite stable sales, Cascades’ profitability significantly improved as the turnaround of assets, cost
reduction and better efficiency more than offset the appreciation of the CAN$ and the reduction of the spread.
EBITDA and EPS excluding specific items. See notes page 50.
13
TRANSITION TO IFRS: BALANCE SHEET
IFRS balance sheet
As at December 31, 2010
(In millions of Canadian dollars)
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Current income tax assets
Inventories
Financial assets
Future income tax assets
Long-term assets
Property, plant and equipment
Intangible assets
Other assets
Investments in associates and joint ventures
Goodwill
Financial assets
Future income tax assets
Liabilities and Shareholders’ equity
Current liabilities
Bank loans and advances
Accounts payable and accrued liabilities
Current income tax liabilities
Provisions
Future income tax liabilities
Current portion of financial liabilities
Current portion of long-term debt
Long-term liabilities
Long-term debt
Provisions for contingencies and charges
Other liabilities
Financial liabilities
Future income tax liabilities
Equity attributable to Shareholders
Capital stock
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Non-controlling interest
Total equity
CDN GAAP
IAS 19
IAS 36
Employee Impairment
benefits
Preliminary impacts
IAS 21
IAS 39
CTA
Factoring
IAS 31
Joint
Ventures
Disclosure
and others
IFRS
10
561
21
534
–
7
-
-
-
14
-
(4)
(73)
(58)
-
(12)
12
(7)
6
490
21
476
12
-
1,133
-
-
-
14
(135)
(7)
1,005
1,777
150
350
314
-
(90)
-
(108)
(6)
-
-
-
(116)
(20)
(5)
108
(1)
-
(171)
152
14
82
1,553
124
84
260
313
14
82
3,724
(90)
(114)
-
14
(169)
70
3,435
64
569
4
5
12
-
-
-
14
-
(23)
(80)
(2)
(5)
(60)
23
(5)
12
-
41
443
2
23
12
7
654
-
-
-
14
(110)
(30)
528
1,383
234
172
76
(45)
(30)
-
-
(31)
(15)
(1)
(11)
2
37
(99)
84
80
1,354
37
196
83
166
2,443
31
(30)
-
14
(168)
74
2,364
496
14
701
46
(122)
1
(90)
6
88
(88)
-
-
(2)
(2)
496
14
575
(37)
1,257
24
1,281
3,724
(121)
(121)
(90)
(84)
(84)
(114)
-
14
(1)
(1)
(169)
(4)
(4)
70
1,048
23
1,071
3,435
14
TRANSITION TO IFRS: STATEMENT OF EARNINGS
Preliminary impacts
Impairment Employee
benefits
CDN GAAP
Joint
ventures
(In millions of Canadian dollars)
Sales
Cost of sales and expenses
Cost of sales (excluding depreciation and amortization)
Depreciation and amortization
Selling and administrative expenses
Losses on disposal and other
Net impairment and other restructuring costs
Gain on financial instruments
Operating income
Financing expense
Loss on refinancing of long term debt
Foreign exchange loss on long-term debt and financial instruments
Provision for (recovery of) income taxes
Share of results of associates and joint ventures
Net earnings (loss) from continuing operations including noncontrolling interest
Net loss from discontinuing operations
Net earnings including non-controlling interest for the year
Less: Non-controlling interest income
Net earnings (loss) for the year
EBITDA excluding specific items
Net earnings excluding specific items
EPS excluding specific items
IFRS
Others
(350)
-
-
-
3,173
212
395
8
50
(1)
3,837
122
109
3
4
6
(15)
(280)
(15)
(35)
(330)
(20)
(4)
(16)
(5)
(11)
(18)
(18)
(36)
36
36
7
-
(5)
(2)
14
7
(7)
2
(9)
(2)
-
(2)
21
(1)
20
3
17
-
29
(7)
(7)
(7)
2
3,959
398
(35)
63
-
0.65
-
29
29
-
2
2
-
7
3,609
2,888
179
358
22
32
(1)
3,478
131
107
3
4
17
(28)
45
(1)
44
3
41
370
14
3
1
81
0.15
0.03
0.01
0.84
15
TRANSITION TO IFRS: KEY RATIOS
(for the year ended December 31, 2010)
Cdn GAAP
IFRS
Change

EBITDA / Sales
10.0%
10.3%
0.3%

Return on assets
10.5%
10.6%
0.1%

Return on equity
5.0%
7.7%
2.7%

3.65
3.46
(0.19)

53.6%
57.1%
3.5%

3.65
3.77
0.12

Profitability ratios
Debt ratios
EBITDA / Interests
Net Debt / Capitalization
Net Debt / EBITDA
Not
adjusted
for
the sale
of
Dopaco
Overall, ratios remain relatively stable
All ratios excluding specific items.
16
SUMMARY OF Q1 2011 RESULTS (IFRS)
(In millions of CAN$, except amount per share)
Financial results
Sales
Excluding specific items
EBITDA
Net earnings (loss)
Net earnings (loss) per share
Cash flow from operations (adjusted)
EBITDA
(M CAN$)
2009
(Canadian
GAAP)
Year
Q1
Q2
Q3
Q4
Year
Q1
3,359
759
808
832
783
3,182
774
408
110
1.13
281
59
4
0.04
43
85
26
0.27
41
94
33
0.35
72
72
17
0.17
41
310
80
0.83
197
37
1
0.01
15
(% of sales)
100
80
10.0%
80
9.0%
60
7.0%
40
5.0%
20
3.0%
0
1.0%
6.0%
4.0%
Q2 2010
Q3 2010
Q4 2010
Q1 2011
(% of sales)
11.0%
40
Q1 2010
Cash flow from operations (adjusted)
100
8.0%
0
(M CAN$)
2011 (IFRS)
12.0%
60
20
2010 (IFRS)
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
As anticipated, profitability came down in Q1 due challenging business conditions
and operational difficulties in a few units.
EBITDA, net earnings and cash flow from operations (adjusted) excluding specific items.
17
Q4 2010- Q1 2011 EBITDA VARIANCE ANALYSIS
(M CAN$)
100
98
80
60
(16)
72
(10)
2
3
9
5
11
7
40
57
37
8
10
20
0
Q4 2010
Discontin.
Joint
(previous
operations
ventures
Canadian
(Dopaco)
GAAP)
(M CAN$)
Containerboard
37
Boxboard
24
(16)
(7)
Specialty products
16
(3)
Tissue papers
23
Corporate
(2)
Total
98
(16)
(10)
Others
3
(1)
(2)
-
Selling
Q4 2010
Shipments prices &
(IFRS)
mix
40
1
12
23
(4)
72
Variation
of the
CAN$
Energy
costs
Other
costs
(5)
2
1
(6)
(8)
(5)
2
(1)
1
(1)
3
(2)
(3)
(2)
(2)
(1)
(3)
(1)
(2)
(2)
(3)
(5)
(7)
Raw
material
costs &
mix
(9)
(1)
(10)
Discontin.
Q1 2011
Joint
operations
(IFRS)
ventures
(Dopaco)
19
5
7
10
(4)
37
11
7
2
11
9
Q1 2011
including
Dopaco
and JVs
19
23
9
10
(4)
57
The significant increase of input costs (with some lag from Q4 2010) and the CAN$ led to weaker
results in Q1. Also, Q4 2010 EBITDA was positively impacted by 6M$ in “one-time” items.
EBITDA excluding specific items.
18
RENO DE MEDICI: FULL CONSOLIDATION IN Q2
Reno de Medici (RdM)
1. Cascades currently owns 40.99% of outstanding shares
2. Cascades can acquire up to 5% per year on the open market
3. Cascades has the option to acquire 9.07% from one shareholder « Industria Innovatione»
• Cascades has a call option to buy for €0.43 per share until Dec. 31, 2012
• Industria has a put option to sell for €0.41 per share from Jan 2013 to March 31, 2014
• Total potential investment of €14-15 M
4. Put / Call option for Cascades virgin assets in effect
• 2011 is reference year
• Paid in cash or in additional shares of RdM
• May represent 10%-20% of outstanding shares of RdM (depending on acquisition structure)
Due to the option in place (9.07%) and to its current position (41%), Cascades will begin to
fully consolidate RdM’s results in its financial statements in Q2 2011
19
RENO DE MEDICI: RECENT FINANCIAL RESULTS
2010
Q1
Q2
Q3
Q4
Year
Q1
115
7
106
235
127
11
118
239
125
10
110
227
137
12
107
245
504
40
107
946
138
11
99
241
(In millions of euro, except shipments)
Financial results
Sales
EBITDA
Net debt
Shipments ('000 m.t.)
EBITDA
(M euro)
(M euro)
14
120
12
115
10
110
8
105
6
100
4
95
2
90
0
85
Q1 2010
Q2 2010
Q3 2010
Q4 2010
2011
Q1 2011
Net debt
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Steady improvement in results and financial position in recent years.
20
CURRENT MARKET CONDITIONS
21
UPWARD SELLING PRICES
Y-o-Y Price increases, US$ or euro (Jan. 2010 / April 2011)
225
200
175
150
125
100
100
(12%)
110
(21%)
110
(22%)
120
(13%)
121
(16%)
130
(13%)
143
(25%)
182
(19%)
75
50
25
0
Fine paperLinerboard Medium Kraft paper CRB N.A. C. virgin
CRB
C. virgin
boxboard Europe boxboard
N.A.
Europe
Price increases implemented across the board in packaging in 2010,
still moving upward in boxboard.
External reference prices. Source: RISI
22
UPWARD SELLING PRICES
Segment
Capacity/
leverage
Announced
effective date
Announced Increase
Boxboard
North America
Recycled board
234,000 s.t.
April/May
40 US$/s.t.
Boxboard
Europe
Recycled board
1,010,000 m.t.
April
50 €/m.t.
222,000 m.t.
April
85 €/m.t.
80 M$.
March-June
4 to 8%
Kraft papers
110,000 s.t.
April
50 US$/s.t.(certain grades)
Deinked pulp
82,000 s.t.
May/June
5%
Uncoated board
103,000 s.t.
June
30 US$/s.t.
Parent rolls
220,000 s.t.
March/April
50 US$/s.t.
Away-from-home Canada
May
Up to 6%
Away-from-home U.S.
June
Up to 9%
July
7.5%
August
7.5%
Specialty
products
Tissue papers
Virgin board
Consumer prod. pack.
Retail Canada, branded
Retail Canada, pr. label
Price increases announced by Cascades.
425 M$
23
CONTAINERBOARD CONVERSION RISK
AbitibiBowater to Permanently Close Paper Production at Coosa Pines, Alabama
Operation
MONTREAL, Feb. 14 /CNW Telbec/ - AbitibiBowater announced today that it will
permanently close its paper machine at its Coosa Pines, Alabama operation and cease its
pilot project to manufacture recycled lightweight and ultra lightweight packaging and
linerboard grades within the next 30 days. AbitibiBowater remains committed to its fluff
pulp assets at the facility.
"Coosa Pines has made progress in the production of recycled lightweight and ultra
lightweight packaging and linerboard. Upon review, however, the substantial capital
investment that would be required at the site to make it low-cost in these grades could not
be justified," stated Richard Garneau, President and Chief Executive Officer.
Conversion to lightweight containerboard: not as easy as it looks!
24
NORTH AMERICAN TISSUE CAPACITY CHANGE
Company
Location
Notes
Furnish
Date
Tons
Fraser Papers
P&G
Irving Tissue
Total
Blue Heron
First Quality Tissue
Total
Georgia-Pacific
South Georgia Tissue
Clearwater Paper
First Quality Tissue
Georgia-Pacific
Total
Wausau Paper
P&G
Total
Gorham, NH
Box Elder, UT
Fort Edward, NY
Mill closure
New PM; TAD
New PM; TAD
R
V
V
2010:Q4
2010:Q4
2010:Q4
Mill shut-down
New greenfield TAD mill; first PM
V&R
V
2011:Q1
2011:Q3
Crossett, AR
undecided location
Shelby, NC
Anderson, SC
Port Hudson, LA
PM8 rebuild to f-TAD quality
New PM; parent rolls only
New greenfield TAD mill
New greenfield TAD mill, 2nd PM
PM8 rebuild to f-TAD quality
V
V&R
V
V
V
2012:Q2*
2012:Q2
2012:Q3
2012:Q3
2012:Q4*
Harrodsburg, KY
Box Elder, UT
New PM; Voith "ATMOS" PM
New PM; TAD
R
V
2013:Q1
2013:Q3*
(41 000)
80,000
35,000
74,000
(32 000)
70,000
112,000
25,000*
33,000
70,000
70,000
35,000*
233,000
75,000
80,000
155,000
Oregon City, OR
Anderson, SC
% of total
current
capacity
0%
1%
0%
1%
0%
1%
1%
0%
0%
1%
1%
0%
3%
1%
1%
2%
V = Virgin
R = Recycled
TAD = Through-Air-Dried
* = estimated
New capacity in line with annual growth rate in the tissue industry
Source: RISI
25
RECENT STRATEGIC
DEVELOPMENTS
26
RECENT STRATEGIC DEVELOPMENTS
1. Management team:
• Appointment of Mario Plourde as Chief Operating Officer (COO)
2. Balance sheet:
• Refinancing of revolving credit facility
• Sale of Dopaco
3. Containerboard:
• Sale of the Avot-Vallée (FR) white-top linerboard mill
• Consolidation of operations in New England
4. Boxboard:
• Increased ownership in Reno De Medici
5. Tissue papers:
• Investment in new technology to develop high-end product offering
27
APPOINTMENT OF MARIO PLOURDE
• Appointed as COO of Cascades, effective February 23, 2011.
• Part of the transition process.
• Mr. Plourde to have the operating responsibility for Cascades’ North
American boxboard, containerboard, specialty products and tissue paper
segments.
• Mr. Plourde to remain President and COO of the Specialty Products Group
until the appointment of his successor.
• Joined Cascades in 1985 as a controller. Was appointed President and
COO of the Specialty Products Group in 2000.
28
DOPACO TRANSACTION HIGHLIGHTS
1. Cash consideration of US$400 million
• Purchase price of 7.0 times 2010 adjusted EBITDA (in US$) and 7.7 times
2008-2010 EBITDA (in US$) average
• Estimated proceeds of US$337 million net of cash tax payment and
transaction fees
• Net proceeds to be used to pay down debt
• Subject to customary working capital and net debt adjustments
2. Cascades to continue to provide boxboard to Dopaco through a five year
supply agreement
3. Closing of the transaction announced on May 2, 2011
EBITDA excluding specific items.
29
DOPACO TRANSACTION RATIONALE
1. Strengthened financial position and improved financial flexibility
• Net debt reduction of US$337 million
•
•
Net debt down almost CAN$700 million in the last 24 months
Future Capex needs significantly reduced
2. Unlocked value for shareholders
• Attractive EBITDA multiples
• Improving Cascades’ financial risk profile
3. Strategic decision
• Focus going forward on core tissue, packaging, and recycling activities
4. Limited integration with our boxboard manufacturing operations
• 46,000 tons shipped to Dopaco in 2010 on total shipments of 365,000 tons
• Stand-alone management team, very limited synergies with Cascades
30
NET DEBT VARIANCE
(M CAN$)
1,600
1,500
1,397
35
1,400
10
27
5
(1)
1,445
(28)
1,300
1,200
1,124
1,100
321
1,000
Net debt
Dec. 31,
2010
CAPEX
Other
Dividend,
F/X
Var. of Cash flow Net debt Sale of Net debt
assets & bbacks change & working from oper. March 31, Dopaco March 31,
investments
others
capital & disc. Op. 2011
2011,
adjusted for
the sale
Despite weaker quarter and usual seasonal increase in working capital, net debt relatively stable.
However, with the sale of Dopaco, net debt down 40% or almost $700 M in 2 years.
For Dopaco, net debt reduction using estimated net proceeds of US$337 M and an 1.0491 US$/CAN$ exchange rate.
31
BALANCE SHEET & KEY FINANCIAL RATIOS
2010
Q1
Q2
Q3
Q4
Q1
Total assets
Total debt
Net debt*
3,452
1,469
1,454
3,497
1,522
1,508
3,544
1,477
1,462
3,437
1,403
1,397
3,452
1,455
1,445
3,172
1,134
1,124
Shareholders' equity
Book value per share
1,067
$11.01
1,081
$11.18
1,101
$11.40
1,049
$10.86
1,038
$10.77
1,138
$11.80
436
102
422
104
410
106
369
109
345
109
288
109
LTM EBITDA
LTM Interest
Net debt / LTM EBITDA
Debt / Debt + Equity
60.0%
2011
Q1 djusted for
sale of Dopaco
57.2%
5.0
58.4%
4.5
55.0%
49.6%
50.0%
4.0
45.0%
3.5
40.0%
3.0
Q4 2010
Q1 2011
Q1 2011
adjusted for
sale of Dopaco
4.2
3.9
3.8
Q4 2010
Q1 2011
Q1 2011 adjusted
for sale of
Dopaco
With the sale of Dopaco, significant improvement in debt ratios.
For Dopaco, net debt reduction using estimated net proceeds of US$337 M and an 1.0491 $US/$CAN exchange rate. EBITDA excluding specific items.
32
RENEWAL OF CREDIT AGREEMENT
Before
After
Structure
$750 M revolving credit facility
$100 M term loan
$750 M revolving credit facility
Maturity
Credit facility: December 2011
Term loan: February 2012
February 2015
Interest rate
Credit facility: LIBOR + 275 bps
Term loan: LIBOR + 287.5 bps
LIBOR + 212.5 bps
Standby fees
70 bps
22.5% x (spread over LIBOR) = 48 bps
Funded Debt to Capitalization Ratio ≤ 65%
Interest Coverage Ratio ≥ 2.25x
Funded Debt to Capitalization Ratio ≤ 65%
Interest Coverage Ratio ≥ 2.25x
Covenants
Addressing upcoming maturities while reducing costs of borrowing and improving flexibility.
33
DEBT SCHEDULE
(M CAN$)
Long-term debt repayment schedule (Dec. 31, 2010)
600
500
400
7.75%
Not adjusted for
sale of Dopaco
L + 212.5 bps
300
7.875%
7.75%
200
100
0
6.75% / 7.25%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Senior unsecured
notes (US$ 18M)
Revolver
(CAN$ 750M)
Senior unsecured
notes (US$ 500M)
Senior unsecured
notes (CAN$ 200M)
Senior unsecured notes
(US$ 250M)
With refinancing of revolver, all short term maturities are now addressed.
34
CONCLUDING REMARKS
35
RESULTS TO IMPROVE
• Demand and backlogs remain healthy.
• Selling price increases being implemented or announced in
boxboard, specialty products and tissue paper segments.
• Operational action plans underway aimed at:
• reducing fixed and SG&A costs;
• optimizing production and efficiencies
• proactively managing cash flow.
• At strategic level, question, analyze and make the difficult
decisions to:
• adjust our portfolio of assets;
• improve our competitiveness.
Recent initiatives
Closure of
Leominster box plant
Sale of Dopaco and
Avot-Vallée
Cascades will be able to rebound in the coming quarters,
as we have historically done so in the past.
36
PROACTIVELY ADJUSTING ASSET BASE
2006
 Implementation of several restructuring measures in our fine paper operations
 Acquisition of Domtar’s 50% stake in Norampac
 Acquisition of recycled boxboard assets (Simkins, Caraustar)
 Sale of our fine papers distribution assets
 Closure of our pulp mill and sawmill
2007
 Sale of our interest in two boxboard converting joint ventures
 Sale of Red Rock, Ontario containerboard mill and Thunder Bay, Ontario fine papers mill
2008
 Merger of our European recycled boxboard assets with Reno De Medici S.p.A
 Closure of Toronto, Ontario recycled boxboard mill
 Sale of our Greenfield, France deinked pulp mill
2009
 Acquisition of Atlantic Packaging’s tissue paper assets
 Acquisition of Yorkshire Paper Corporation and Sonoco’s Canadian Recycling Operations
2011
 Sale of the Avot-Vallée white-top linerboard mill
 Sale of Dopaco
 Increased ownership in Reno De Medici S.p.A
 Consolidation of New England corrugated box operations
Proactively adjusting asset base to reduce costs, improve financial flexibility and
redeploy capital towards core segments
37
CONCLUDING REMARKS
1. Proactively addressing issues
2. Cascades to maintain strong focus on financial ratios,
profitability and free cash flow
3. Future development of Cascades to come through strategic
investments (Capex and acquisitions) in core operations
• To position our asset base amongst the best in the industry
in terms of productivity and profitability
• To improve product offering and customer service
• To reduce financial and operational risk
Objective: continue to balance sound balance sheet with strategic investments
38
APPENDICES
39
CONTAINERBOARD MARKET
U.S. Corrugated box industry shipments and ISM correlation
70
65
60
55
50
45
40
35
30
15%
10%
5%
0%
-5%
-10%
-15%
Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr
07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11
Shipments
Canadian Corrugated box industry shipments
15%
10%
5%
0%
2.80
2.60
2.40
-5%
-10%
-15%
-20%
2.20
2.00
1.80
Jan Apr July Oct Jan AprJuly Oct Jan AprJuly Oct Jan AprJuly Oct Jan
07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11
Shipments
ISM Manufacturing Index
U.S. Corrugated box shipments
Annual change 2010
YoY change YTD April 2011
(M MSF)
3.00
Annual change
Canadian Corrugated box shipments
3%
1%
Annual change 2010
YoY change YTD March 2011
1%
(3%)
Steady pick up in manufacturing activity in the U.S. leading improving box demand.
Slower start in produce market season impacted Canadian demand in Q1.
Source: Fiber Box Association, Paper Packaging Canada.
40
CONTAINERBOARD MARKET
(M s.t.)
U.S. containerboard inventories at box plants and mills
(weeks)
('000 s.t.)
2.8
5.5
3,250
2.6
5.0
3,000
2.4
4.5
2,750
2.2
4.0
2.0
3.5
1.8
3.0
Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr
07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11
Millions short tons
Weeks of supply
110%
100%
2,500
90%
2,250
80%
2,000
1,750
70%
Jan AprJuly Oct Jan AprJuly Oct Jan AprJuly Oct Jan AprJuly Oct Jan
07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11
T otal Production
Containerboard inventories
Weeks of supply
YoY change April 2011 (weeks)
U.S. containerboard industry production and capacity
utilization rate
Capacity utilization rate
Containerboard production
3.8
0.2
Annual change 2010
YoY change YTD March 2011
Capacity utiliza. rate YTD March 2011
7%
2%
95 %
Market conditions remain healthy;
High operating rates and normal seasonal level of inventories.
Source: RISI.
41
BOXBOARD MARKETS
U.S. folding coated recycled boxboard industry production and
('000 s.t.)
capacity utilization rate
190
180
170
160
150
140
130
120
Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan
07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11
T otal Production
Coated recycled boxboard order inflow from Europe (WLC)
(m.t.)
70,000
105%
100%
95%
90%
85%
80%
75%
70%
Capacity utilization rate
U.S. coated recycled boxboard production
Annual change 2010
2%
YoY change YTD March 2011
(1 %)
Capacity utilization rate YTD March 2011 96 %
60,000
50,000
40,000
30,000
20,000
1
4
7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
2008
2009
2010
2011
(weeks)
European coated recycled boxboard demand
Annual change 2010
YoY change YTD Week 18 2011
13 %
(7 %)
Strong demand for coated recycled boxboard in North America;
In Europe, market remains healthy and is readjusting following long delays in delivery in 2010.
Sources: RIS, CEPI. 5-week weekly moving average for European data.
42
TISSUE MARKET
Retail
('000 s.t.)
U.S. tissue paper industry
converted product shipments
Away-f-home ('000 s.t.) U.S. tissue paper industry production (parent rolls) and
capacity utilization rate
('000 s.t.)
10%
6%
4%
5%
2%
0%
-2%
0%
700
675
650
625
600
-5% 575
-4%
-6%
-10%
Jan AprJuly Oct Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan
07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11
For the retail market
550
98%
96%
94%
92%
90%
88%
86%
84%
Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan Apr July Oct Jan
07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11
Total parent roll production
Capacity utilization rate
For the away-from-home market
Tissue paper converted product shipments
Annual change (retail & AfH) 2010
2%
YoY change (ret. & AfH) YTD March 2011 2 %
Tissue paper production
Annual change 2010
2%
YoY change YTD March 2011
2%
Capacity utilization rate YTD March 2011 94 %
Overall demand continues to pick up and price increases announced for H2 2011
Source: RISI.
43
LESS CYCLICAL
U.S. Corrugated Box Shipments Industry Breakdown
Durable
goods &
freight; 14%
U.S. Folding Carton Industry Breakdown
Others; 14%
Food
products;
44%
Other non
durable;
42%
Durable
goods; 4%
Health,
beauty &
other non
durable;
19%
Food &
beverages;
63%
U.S. Tissue Paper Products Shipments Industry Breakdown
Away-fromhome
31%
Retail (at
home)
69%
Similar to industry, Cascades’ sales are mostly exposed to
relatively stable and less cyclical end-use markets
44
LEADERSHIP POSITIONS
RECOVERY
• #1 Canadian recycled paper collector
PACKAGING
• #1 Canadian containerboard producer (Norampac)
• #2 European in coated recycled boxboard
• #3 North American coated recycled boxboard
TISSUE
• #1 “green” tissue papers retail brand in Canada
• #2 Canadian producer and #4 in North America
One of two North American public companies in packaging & tissue
with leading market positions
45
DIVESTITURE OF DOPACO
1. Cascades has agreed to sell Dopaco to Reynolds Group Holdings Limited (“RGHL”).
2. Dopaco, a wholly owned subsidiary of Cascades, is a leading producer of cups and
folding cartons for the quick service restaurants and food distribution service
industries in North America
• Headquartered in Exton, PA, Dopaco operates six plants that convert
approximately 165,000 tonnes of boxboard annually.
London,
Ontario
Stockton, CA
Brampton,
Ontario
Downingtown, PA
Kinston, NC
St. Charles, IL
3. RGHL is a global manufacturer and supplier of consumer food and beverage
packaging and storage products.
46
DOPACO TRANSACTION FINANCIAL IMPACT
Revenue breakdown (2010)
Tissue
Papers
21%
Specialty
Products
21%
Boxboard
32%
Containerboard
26%
EBITDA breakdown (2010)
Tissue Papers
21%
Specialty
Products
18%
Boxboard
24%
Containerboard
37%
Revenue breakdown (2010 pro forma)
Tissue
Papers
23%
Specialty
Products
24%
Boxboard
23%
Containerboard
30%
EBITDA breakdown (2010 pro forma)
Tissue
Papers
25%
Specialty
Products
21%
Boxboard
11%
Containerboard
43%
47
MARKET PRICES AND COSTS SUMMARY
Change
These indexes should only be used as indicator of trends and they
be different than our actual selling prices or purchasing costs.
Selling prices
Cascades North American US$ index (index 2005 = 1,000)1
PACKAGING
Boxboard
North America (US$/ton)
Recycled boxboard - 20pt. Clay coated news (transaction)
Europe (Euro/tonne)
Recycled white-lined chipboard (GD2) index2
Virgin coated duplex boxboard (GC2) index3
Containerboard (US$/ton)
Linerboard 42-lb. unbleached kraft, East US (transaction)
Corrugating medium 26-lb. Semichemical, East U.S. (transaction)
Specialty products
(US$/ton, tonne for deinked pulp)
Recycled boxboard - 20pt. Bending chip (transaction)
Deinked pulp (f.o.b; U.S. air-dried & wet-lap, post-consumer)
Unbleached kraft paper, Grocery bag 30-lb.
Uncoated white 50-lb. offset, rolls
TISSUE PAPERS
Cascades Tissue papers (index 1999 = 1,000)4
Raw materials
Cascades North American US$ index (index 2005 = 300)5
RECYCLED PAPER
North America (US$/ton)
Corrugated containers, no. 11 (New England)
Special news, no. 8 (ONP - Chicago & NY average)
Sorted office papers, no. 37 (SOP - Chicago & NY average)
Europe (Euro/tonne)
6
Recovered paper index
VIRGIN PULP (US$/tonne)
Bleached softwood kraft Northern, East U.S.
Bleached hardwood kraft Northern mixed, East U.S.
WOODCHIPS – Conifer eastern Canada (US$/odmt)
Sources: RISI, Dow Jones, Random Lengths and Cascades. See notes p. 50.
2009
Average Average Average
Q1
Q2
Average Average
Q3
Q4
Change
Q12011 Q12011 Q12011 Q12011
2010
2011 Q12010 Q12010 Q42010 Q42010
Average Average
Q1
(unit)
(%)
(unit)
(%)
1,109
1,106
1,180
1,223
1,234
1,186
1,238
132
12%
4
0%
754
790
825
843
855
828
880
90
11%
25
3%
592
985
580
976
631
1,025
656
1,063
690
1,155
639
1,055
690
1,155
110
179
19%
18%
0
0
0%
0%
547
517
580
550
640
610
640
610
640
610
625
595
640
610
60
60
10%
11%
0
0
0%
0%
565
601
926
855
575
708
960
868
625
752
1,020
917
625
755
1,047
938
650
755
1,060
933
619
743
1,022
914
667
748
1,025
930
92
40
65
62
16%
6%
7%
7%
17
-7
-35
-3
3%
-1%
-3%
0%
1,617
1,617
1,623
1,615
1,620
1,619
1,631
14
1%
11
1%
258
426
409
397
452
421
470
44
10%
18
4%
68
56
120
149
90
225
146
92
198
131
78
218
170
95
216
149
88
214
182
128
223
33
38
-2
22%
42%
-1%
12
33
7
7%
35%
3%
53
100
120
126
132
120
146
46
46%
14
11%
718
609
121
880
776
125
993
908
121
1000
900
120
967
840
124
960
856
123
970
820
123
90
44
-2
10%
6%
-2%
3
-20
-1
0%
-2%
-1%
48
HEDGING PORTFOLIO 2011
1. Cash flow USD, net exposure including interest ($170 M$):
• US$ 52.5 M at $1.14 (31% of exposure)
2. Natural gas:
• Canada:
• 2011: 75% at around 6.30 CAN$/GJ
•
U.S.:
• 2011: 75% at around 6.50 US$/mmBtu
49
NOTES
1.
2.
3.
4.
5.
6.
7.
8.
9.
The Cascades North American selling prices index represents an approximation of the Company’s manufacturing selling prices in North America (excluding
Converting products). It is weighted according to shipments and is based on the average selling price of our North American manufacturing operations of
boxboard, containerboard, specialty products and tissue paper. It considers the change in the mix of products sold. This index should only be used as a trend
indicator.
The Cascades North American raw materials index represents the average weighted cost paid for some of our manufacturing raw materials namely, recycled fiber,
virgin pulp and woodchips in North America. It is weighted according to the volume of purchase. This index should only be used as an a trend indicator and it may
differ from our actual manufacturing purchasing costs and our purchase mix.
The capacity utilization rate is defined as: Shipments/Practical capacity. Paper manufacturing only.
Return on assets is a non-GAAP measure and 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. It excludes an unpaid provision for closure and restructuring costs. It also
excludes the current portion of derivatives financial instruments and the current portion of future taxes liability.
The Cascades recycled white-lined chipboard selling prices index represents an approximation of Cascades’ recycled grades selling prices in Europe. It is
weighted by country.
The Cascades virgin coated duplex boxboard selling prices index represents an approximation of Cascades’ virgin grades selling prices in Europe. It is weighted
by country.
The Cascades Tissue paper selling prices index represents a mix of primary and converted products, and is based on the product mix at the end of 2006.
The Cascades recovered paper index represents an approximation of Cascades’ recovered paper purchase prices in Europe. It is weighted by country based on
the recycled fibre supply mix of 2009.
50
For more information:
www.cascades.com/investors
Didier Filion
Director, Investor Relations
didier_filion@cascades.com
514-282-2697
51
CREDIT: IMAGE ECOterre