Q1 2024 Cascades Inc Earnings Call

Operator: Mesdames et Messieurs, bienvenue à la téléconférence des résultats financiers du premier trimestre 2024 de Cascades. Je m'appelle Sylvie, et je serai votre opératrice aujourd'hui. Toutes les lignes sont présentement en mode d'écoute seulement. Après les commentaires des chefs, il y aura une période de questions.

It doesn't mean, she gave new electrical fit all of this is tough you know she did put me to message. The mill then capped the guest Scott Jim I pencil. It just says if a co pay that's the social suite to really plays off my adequate Selma Swyto come out that that's the case yeah. Good morning. My name is Sylvia and I will be your conference operator today.

Operator: Good morning, my name is Sylvia, and I will be your conference operator today. At this time, I would like to welcome everyone to Cascades' first quarter 2024 financial results conference call. At this time, all lines are currently in the listen-only mode.

Sylvia: At this time I would like to welcome everyone to Cascade first quarter 2024 financial results Conference call.

Sylvia: At this time all lines are currently in a listen only mode. After the Speakers' remarks, there will be a question and answer session. I will now pass the call to Jennifer Aitken director of Investor Relations for Cascade, But American you may begin.

Operator: After the speaker's remarks, there will be a question-and-answer session. I will now pass the call to Jennifer Aitken, Director of Investor Relations for Cascades. Ms. Aitken, you may begin.

Jennifer Aitken: Thank you, Sylvia. Good morning, everyone, and thank you for joining our first quarter 2024 conference call. We will begin with an overview of our operational and financial results, followed by some concluding remarks, after which we will begin the question period. Today's speakers will be Mario Plourde, President and CEO, and Alain Hogg, CFO. Also joining us for the question period at the end of the call are Charles Malo, President and COO of Container Board Packaging, Jérôme Parlier, President and COO of Specialty Products, Jean-David Tardif, President and COO of Tissue Papers, and Luc Langevin, Senior VP of Corporate Services.

Jennifer Aitken: Thank you Sydney.

Jennifer Aitken: Good morning, everyone and thank you for joining our first quarter 'twenty 'twenty four conference call. We will begin with an overview of our operational and financial results followed by some concluding remarks, after which we will begin the question period.

Jennifer Aitken: Today's speakers will be enough built president and CEO and Allan Hogg CFO also joining us for the question period at the end of the call are shall not know president and CEO of containerboard packaging toxic.

Jennifer Aitken: <unk>, President and COO of specialty products jumped at it hasn't dish president and COO of tissue papers and gift fiancee senior VP of corporate services.

Jennifer Aitken: Before I turn the call over to my colleagues, I would like to highlight that certain statements made during this call will discuss historical and forward-looking matters, and the accuracy of these statements is subject to risk factors that can have a material impact on actual results. These risks are listed in our public filing. These statements, the investor presentation, and the press release also include data that are not measures of performance under IFRS; please refer to our Q1 2024 investor presentation for details.

Jennifer Aitken: Before I turn the call over to my colleagues I would like to highlight that certain statements made during this call will discuss historical and forward looking matters.

Jennifer Aitken: Accuracy of these statements is subject to risk factors that can have a material impact on actual results. These risks are listed in our public filings.

Jennifer Aitken: These statements the Investor presentation and the press release also include data that are not measures of performance under I F. R. S.

Jennifer Aitken: Please refer to our Q1 'twenty 'twenty four investor presentation for details.

Jennifer Aitken: This presentation, along with our first quarter press release, can be found in the investors section of our website. If you have any questions, please feel free to contact us after the session. I will now turn the call over to our CEO, Mario.

Jennifer Aitken: This presentation, along with our first quarter press release can be found in the investors section of our website.

Jennifer Aitken: If you have any questions. Please feel free to contact us after the session I will now turn the call over to our CEO Matt Hill.

Matt Hill: Thank you Jennifer and good morning, everyone.

Mario Plourde: Thank you, Jennifer, and good morning, everyone. Let me begin with a quick overview of our consolidated results. First quarter sales levels decreased by roughly 2.5% sequentially and year over year. This performance was in line with our expectations.

Mario Plourde: Softer selling prices in all of our businesses were the main headwinds year over year, the effect of which was partially offset by a better sales mix in tissue and higher volume in our packaging businesses. Sequentially, sales mix, volume, and a less favorable exchange rate were the main factors behind the lower sales. Consolidated EBITDA of $103 million decreased 23% from the prior year and 16% from Q4.

Matt Hill: Let me begin with a quick overview of our consolidated results first quarter sales levels decreased by roughly two 5% sequentially and year over year.

Matt Hill: This performance was in line with our expectations softer selling prices in all of our businesses were the main headwinds year over year, the effects of which were partially upset by a better sales mix in tissue a stronger volume in our packaging businesses sequentially sounds mixed volume.

Matt Hill: And less favorable exchange rate, where the main factor behind the lower sales.

Matt Hill: Consolidated EBITDA was 100 and treat midyear decreased 23% from the prior year and 16% from Q4.

Mario Plourde: This performance was in line with expectations given recent index pricing movement, the impact of which was most prominent for our container board business. To this end, lower pricing and higher raw material costs were the main drivers of our lower performance year-over-year and fully offset beneficial volume and mix in packaging, lower raw material costs in tissue, and lower operational costs on a consolidated basis. sequentially, the combined impact of higher operational costs and a less favorable volume and sales mix far outweighed the slightly stronger crisis.

Matt Hill: This performance was in line with expectation given recent indexed pricing movement, the impact of which was most prominent for our containerboard business.

Matt Hill: To this end lower pricing and higher raw material costs were the main drivers of our lower performance year over year and fully upset beneficial volume and mix in packaging lower raw material costs in tissue and lower operational costs on a consolidated basis.

Matt Hill: Sequentially, the combined impact of all your operation operational costs, and less favorable volume and sales mix far outweighed slightly stronger pricing.

Matt Hill: On the raw materials side highlighted on slides five and six the Q1, the average index price for OCC and increased 206% year over year and 22% from Q4.

Mario Plourde: On the raw materials side, highlighted on slides 5 and 6, the Q1 average index price for OCC increased 206% year-over-year and 22% from Q4. The OCC markets saw consistent strong demand, including a growing amount needed for new recycled container board mail being ramped up, and lower seasonal generation levels, which put upward pressure on prices. However, we have no problems supplying the needs of our operation with good inventory management.

Matt Hill: The OTC market suck consistent strong demand.

Matt Hill: Clothing growing amount needed for new recycled containerboard mills being ramped up and of course, there's no generation levels, which put upward pressure on pricing.

Matt Hill: We have no problem supplying the needs of our operation with good inventory management.

Mario Plourde: Average Q1 index prices for white recycled paper grade increased 2% sequentially, but were 36% below the prior year level. The market was relatively balanced, with index prices not being significantly impacted by virgin pulp pricing. Paul Pricing was higher sequentially, up 10% in the case of softwood and 13% for hardwood. However, year over year, prices for both softwood and hardwood pulp remain lower, down 14% and 20%, respectively. Market conditions were impacted by multiple factors, including downtime and permanent closure in North America, a port strike and unplanned mail downtime in Finland, and reduced traffic and key shipping routes. Notwithstanding these market conditions, material has been readily available for our mail.

Matt Hill: Average Q1 index prices for white recycled paper grade increased 2% sequentially, but we're at 36% below prior year levels.

Matt Hill: The market was relatively balanced with index prices not being significantly impacted by Virgin pulp pricing movement.

Matt Hill: Pricing was higher sequentially up 10% in the case of softwood and 13% for hardwood.

Matt Hill: Year over year, however prices for both softwood and hardwood pulp remained lower down, 14% and 20% respectively.

Matt Hill: Market conditions were impacted by a multiple factor, including downtime and permanent closure in North America, a port strike and unplanned downtime in Finland and reduced traffic in key shipping routes. Notwithstanding these the market conditions. The material has been readily available for army.

Matt Hill: Yes.

Mario Plourde: Moving now to the results of each of our business segments, as highlighted on pages 7 through 12 of the presentation. Beginning with container boards, sequential cells decreased by a marginal 1% in Q1. This reflects lower selling prices following the index change in November 2023 and a less favorable sales mix and exchange rate. These were partially offset by higher volumes, with a 9% sequential increase in parent-owned shipments and a 3% decrease in converted product shipments, both related to seasonality. As previously announced, we took 19,800 short-term maintenance and inventory management related downtime during the quarter.

Matt Hill: Moving now to the results of each of our business segments as highlighted on page seven through 12 of the presentation.

Matt Hill: Beginning with containerboard sequential sales decreased by a marginal 1% in Q1.

Matt Hill: This reflect lower selling prices following index change in November 'twenty, 23, and a less favorable sales mix and exchange rates.

Matt Hill: These were partially upset by all your volumes with the 9% sequential increase in parent roll shipments and 3% decrease in converted product shipments both related to seasonality.

Matt Hill: As previously announced we took 19800 shorts turn off maintenance and inventory management related downtime in the quarter.

Mario Plourde: sequentially, converting shipment decreased 3% in Canada below the 1.7% decrease in the Canadian market. U.S. converting shipment decreased 3.7% below the 3.0, 2.3% in the U.S. market. Q1 adjusted EBITDA of 50 million, or 9% on a margin basis, was 25% below the Q4 level and was in line with expectations. The decrease reflects the impact of higher operating energy and raw material costs. The Trenton paper mill closure announced in February also had a negative impact on our first quarter results.

Matt Hill: Sequentially converting shipment decreased 3% in Canada below the one 7% decrease in the Canadian market U.

Matt Hill: U S converting shipments decreased three 7% below the tree to 43% in the U S market decrease.

Matt Hill: Adjusted EBITDA of 50 million or 9% on a margin basis was 25% below Q4 levels.

Matt Hill: And was in line with expectations.

Matt Hill: The decrease reflects the impact from higher operating energy and raw material costs that trend sort of paper mill closure announced in February also at the negative impact on our first quarter results.

Mario Plourde: The over year sales also decreased by 1%, with the impact of lower selling prices largely offset by higher volume. EBITDA decreased by 60%, a reflection of the combined impact from lower pricing and higher raw material and operational costs, including costs associated with Bear Island. These were partially offset by improved volume and a more favorable cell. The over-year shipment increased by 8% in Q1, largely due to the new Bear Island volume. Converting shipment increased by 7.4% in Canada, outperforming the 2.3% increase in the Canadian market. U.S.

Matt Hill: Year over year sales also decreased by 1% with the impact of lower selling prices largely offset by all your volumes.

Matt Hill: EBITDA level decreased by 60% a reflection of the combined impact from lower pricing and are your raw material and operational costs, including costs associated with bear Island.

Matt Hill: These were partially offset by improved volume and a more favorable sales mix.

Matt Hill: Year over year shipment increased by 8% in Q1 largely related by the New Bear Island volume.

Matt Hill: Converting shipment increased by seven 4% in Canada outperforming the two 3% increase in the Canadian market.

Mario Plourde: Converting Shipments increased 16.8%, once again significantly outperforming the 1.1 U.S. market. Continuing with our packaging business, Q1 sales levels in our specialty product segment were stable sequentially, at slightly lower volume, and the impact from a less favorable exchange rate was offset by a better sales mix in the model pulp business. EBITDA increased by $6 million sequentially, driven by higher spread in the plastic business and lower operational costs, although these were partially offset by higher raw material costs in the cardboard segment. On a margin basis, the business Q1 margin was 15.6%.

Matt Hill: U S converting shipment increased 16.8% once again significantly outperforming the 1.1 U S market decrease.

Matt Hill: Continuing with our packaging business Q1 sales levels in our specialty products segment were stable sequentially as slightly lower volume.

Matt Hill: The impact from a less favorable exchange rate were offset by a better sales mix in the molded pulp business.

Matt Hill: EBITDA increased by 6 million sequentially, driven by higher spread in the plastic business and lower operational costs.

Matt Hill: These were partially offset by higher raw material costs in the card book segment on a margin basis. The business Q1 margin was 15, 26%.

Mario Plourde: When compared to the prior year, Q1 sales were stable as the impact from lower selling prices in the cardboard sub-segment was offset by benefits from higher volumes in the plastic business. EBITDA levels decreased by 2 million year-over-year to 25 million in Q1 as the impact from lower selling prices in cardboard and higher recycled fiber was partially offset by benefits from lower resin and better volume in our plastic packaging activity. Moving now to our tissue business.

Matt Hill: When compared to the prior year Q1 sales were stable as the impact from lower selling prices in the cardboard sub segment was offset by benefits from higher volumes in the plastic business. It.

Matt Hill: They did their levels decreased by 2 million year over year to 25 million in Q1 as the impact from lower selling prices in cardboard and all your recycled fiber were partially offset by benefits from lower resin and better volume in our plastics packaging activity.

Matt Hill: Moving now to our tissue business first quarter sales in this segment decreased 6% sequentially, reflecting a 14% decrease in volume M.

Mario Plourde: First quarter sales in the segment decreased 6% sequentially, reflecting a 14% decrease in volume in the wafer mold market that is attributable to usual seasonality and the impact from a less favorable exchange rate. First quarter EBITDA, a $50 million decrease from Q4 levels, reflecting lower average selling prices due to the contractual mechanism, higher raw material and maintenance costs and lower volume in the away from to a margin, of 13.6 remain solid but were below the Sales decreased by 5% year-over-year.

Matt Hill: N D away from a market that is attributable to a usual seasonality and the impact from a less favorable exchange rate.

Matt Hill: First quarter EBITDA of 50 million decreased from Q4 levels, reflecting lower average selling prices due to contractual mechanics, and how your raw material and maintenance costs and lower volume in the away from home.

Matt Hill: Q1 margin.

Matt Hill: Of $13 six remained solid but were below the 15, 6% in Q2.

Matt Hill: Previous periods.

Matt Hill: Sales decreased by 5% year over year. This reflects a 7% reduction in shipments zebu, which was driven by a 65% decrease in shipments of parent rolls following mill closure and all your internal consumption as highlighted by this business integration rate.

Mario Plourde: This reflects a 7% reduction in shipments, which was driven by a 65% decrease in shipments of parent roles following meal closure and higher internal consumption, as highlighted by this business integration rate increasing to 94% from 84% a year ago. On the converting side, shipments decreased by 3%, the result of a 5% decrease in the away-from-home following plant closure, offset by an 8% increase in retail. The average selling price increased by 3% driven by the lower proportion of parent role in the sales mix, partially offset by a slightly lower average selling price due to the contracted pricing model agreement and the less favorable exchange rate.

Matt Hill: Increasing to 94% from 84% a year ago period.

Matt Hill: On the converting side shipment decreased by 3%. The result of a 5% decrease in the away from home following plant closure offset by an 8% increase in retail.

Matt Hill: The average selling price increased by 3% driven by the lower proportion of parent rolls in the sales mix.

Matt Hill: Actually upset by a slightly lower average selling price due to contracted.

Matt Hill: Rising muddle agreement and a less favorable exchange rate.

Mario Plourde: Year-over-year, the Dow was well above prior-year levels. This is the outcome of lower raw material energy transportation and production costs, the last of which reflect benefits related to lower fixed cost levels following plant closure. These tailwinds were partially offset by lower selling prices and a net negative volume in the sales mix.

Matt Hill: Year over year, EBITDA was well above prior year levels. This is the outcome of lower raw material energy transportation and production cost.

Matt Hill: The last of which reflect benefits related to lower fixed cost level following plant closure.

Matt Hill: Tail winds were partially offset by lower selling prices and a net negative volume and sales mix effects.

Allan Hogg: Allan will now discuss the main highlights of our financial performance. Allan.

Matt Hill: Linda will now discuss the main highlights of our financial performance either yes. Thank you Matthew and good morning, everyone. So slide 13, and 14 illustrate the specific items recorded during the quarter that mean items that impacted EBITDA was $28 million of restructuring costs related to the closure of <unk>.

Allan Hogg: Yes, thank you Mario, and good morning everyone. Slides 13 and 14 illustrate the specific items recorded during the quarter. The main items that impacted EBITDA were $28 million of restructuring costs related to the closure of plants, mainly in container board and tissue, that occurred over the last 12 months. Slide 15 and 16 illustrate the year-over-year sequential variance of our Q1 adjusted earnings per share and the reconciliation with specific items that affected our results.

Linda: <unk>, mainly in containerboard and tissue that occurred over the last 12 months.

Linda: Slide 15, and 16 illustrate the year over year sequential volumes of our Q1.

Linda: Adjusted earnings per share and the reconciliation with the specific items that affected our results.

Allan Hogg: As reported, Q1 net loss per share was $0.20 compared to a net loss per share of $0.75 last year and $0.57 in Q4 of 2023. On an adjusted basis, net results per share were zero in the current quarter. This compares to net earnings per share of $0.32 in last year's results and net earnings per share of $0.05 in Q4. Year over year, this variance mainly reflects lower EBITDA and higher financing and depreciation expenses, while sequential variance reflects lower EBITDA levels.

Linda: As reported Q1 net loss per share was <unk> 20 <unk>.

Linda: This compared to a net loss per share of 75 cents last year and 57 in Q4 of 2023.

Linda: On an adjusted basis net resolves the share were zero in the current quarter. This compared to net earnings per share of <unk> 32 cents in last year's results and net earnings per share of <unk> in Q4 yields.

Linda: Year over year. This variance, mainly reflects lower EBITDA and higher financing and depreciation expenses why sequential volumes reflects lower EBITDA levels.

Allan Hogg: As highlighted on slide 17, first quarter adjusted cash flow from pharma operations was $46 million, down from $90 million in the year-ago period and $103 million sequentially. Adjusted cash flow use in the first quarter improved year-over-year, largely reflecting last year's lower capital... The lower capital investment associated with the Bay Island project. Sequentially, adjusted cash flow farm operations decreased due to lower EBITDA and higher net financing expenses paid in the first quarter.

Linda: As highlighted on slide 17 first quarter adjusted cash flow from operations was $46 million down from $90 million in the year ago period and $103 million sequentially.

Linda: Adjusted cash flow used in the first quarter improved year over year largely reflecting.

Linda: Last year lower capital in.

Linda: The lower capital investment associated with the Maryland project sequentially adjusted cash flow from operations decreased two.

Linda: Lower EBITDA due to lower EBITDA and higher net financing expenses paid in the first quarter.

Linda: Slide 18 provides detail on our capital investments new investment in the first quarter totaled $25 million.

Allan Hogg: Slide 18 provides detail about our capital investments. New investments in the first quarter totaled $25 million. For 2024, our planned capital investment of $175 million has not changed. Moving now to our net debt reconciliation, sequentially, our net debt increased by $138 million in the first quarter, reflecting lower cash flow from farm operations and a $38 million negative impact from a less favorable exchange rate. $41 million in paid capital investments and a negative working capital variance, which is usual in the first quarter.

Linda: For 2020 for our planned capital investment of 125 75 million have not change moving.

Linda: Moving now to our NIM definitely conciliation sequentially, our net debt increased by $138 million in the first quarter, reflecting a lower cash flow from operations of $38 million negative impact from a less favorable exchange rate $41 million in paid capital investments and then.

Linda: You got to have working capital Alliance, which is usual in the first quarter.

Linda: Our leverage stands at three eight times at the end of Q1 from three four times at the end of 2023.

Allan Hogg: Our leverage stands at 3.8 times at the end of Q1 from 3.4 times at the end of 2023. In mid-April, the company entered into a $175 million unsecured, delayed drop term loan facility to manage upcoming maturities, notably the January 2025 Canadian dollar senior note. In the event it is drawn upon, the new facility will mature on December 31st, 2026 and will bear interest at a variable rate. Financial ratios and information about maturities are detailed on slide 20, and other information and analysis can be found on slides 23 through 30 of the deck. Mario will now conclude the call with some brief comments, and I need to disconnect before we begin the question period. Okay, Mario?

Linda: In mid April the company entered into a $175 million unsecured delayed draw term loan facility to manage upcoming maturities, notably the January 2025, Canadian dollars senior notes, India than it is drawn upon the new facility.

Linda: Mature on December 31, 2026, and will bear interest at a variable rate financial.

Linda: Financial ratios and information about maturities are detailed on slide 20, and other information and analysis can be found on slides 23 through 30 of the deck Mario will now conclude the call with some brief comments on each of modular before we begin the question for you.

Mario Plourde: Thank you, Allan. We provide details regarding our near-term outlook on slide 21 of the presentation. I would remind you that this outlook is based on current index pricing and our forecast and expectations as of today. Actual results may differ from this outlook in the event of movements in the index prices, both in terms of raw material costs and selling prices. We have modified how we present our outlook to provide greater clarity.

Mario: Thank you Ellen we provide details regarding our near term outlook on slide 21 of the presentation.

Mario: I would remind you that this outlook is based on current index pricing and our forecast and expectation as of today.

Mario: <unk> results may differ from this outlook in the event of movements in the index pricing both in terms of raw material costs and selling prices, we have modify how we present our outlook to provide greater clarity.

Mario Plourde: Starting with the container board segment, we are expecting Q2 results to be stronger sequentially. This reflects higher selling prices as the benefit from index pricing movement begins to flow through results, and good volume giving stronger seasonal trends. Raw material costs remain elevated and will continue to be a headwind for the business. We are also planning approximately 27,000 short-term maintenance downtime during the quarter. This includes 11,000 short tons at Greenpac to align with major maintenance that is occurring at our steam supplier.

Mario: Starting with containerboard segment, we are expecting Q2 results to be stronger sequentially. This reflects higher selling prices as the benefits from index pricing movement begins to flow through result, and good volume, giving stronger seasonal trends raw material costs remain elevated and we.

Mario: We'll continue to be headwinds for the business.

Mario: We are also planning approximately 27000 tons short term maintenance downtime in the quarter.

Mario: This includes 11000 short ton at Green pack to align with major maintenance that is occurring at our steam supplier.

Mario: To offset your operational and raw material costs, which continue to rise and have not been fully mitigated by the partial recognition of the last increase we have announced a $60 per ton increase for liner and an $80 per ton increase for medium effects.

Mario Plourde: To offset higher operational and raw material costs, which continue to rise and have not been fully mitigated by the partial recognition of the last increase, we have announced a $60 per ton increase for liner and an $80 per ton increase for medium effective June 3rd. Results in the specialty product segments are expected to be stable sequentially, reflecting higher selling prices in some business segments and efficiency improvement. Raw material costs are also expected to be a headwind for this business sequentially.

Mario: <unk> June 3rd.

Mario: Results in the specialty products segments are expected to be stable sequentially, reflecting higher selling prices in some business segments and efficiency improvement raw material costs are also expected to be a headwind for this business sequentially.

Mario Plourde: Our outlook for tissue is for second quarter results to be stable with benefits from stronger volume largely offset by lower selling prices due to the timing effect of the customer pricing agreement and higher raw materials. Let me conclude by saying that we remain positive about the future performance of our businesses, and our team continues to manage each of them with a view to driving profitability, efficiency, and productivity in their competitive positioning. We can now open the calls to question the operator. Merci. Si vous voulez poser une question,...

Mario: Our outlook for tissue is for second quarter results to be stable with benefits from stronger volume largely offset by lower selling prices due to the timing effect of customer pricing agreement and are your raw material costs.

Speaker Change: Let me conclude by saying that we remain positive about the future performance of our businesses and our teams continue to manage each of them with a view of driving profitability efficiency productivity and their competitive positioning with that we can now open the calls to questions.

Mario: Great.

Speaker Change: Maxie so hopefully it was a gift to the ECB Blake <unk> ASO little cloud telephony.

Operator: Merci. Si vous souhaitez poser une question, veuillez, si possible, utiliser l'étoile suivie du 1 sur votre téléphone clavier. Et si vous souhaitez retirer votre question, veuillez appuyer sur l'étoile suivie du 2.

Speaker Change: Let's start with I guess till the previous <unk>.

Speaker Change: Thank you, ladies and gentlemen, if you would like to ask a question simply press Star then the number one on your telephone keypad and if you would like to withdraw from the question queue. Please press star followed by two again if you have a question. Please press Star then the number one on your telephone keypad.

Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, simply press star then number 1 on your telephone keypad. And if you would like to withdraw from the question queue, please press star followed by 2. Again, if you have a question, please press star and number 1 on your telephone keypad, and your first question will be from Premier Patel at CIBC Capital Markets. Please go ahead. Please unmute, Amir. I'm sorry; I'm not getting a response.

Speaker Change: And your first question will be from <unk> Patel at CIBC capital markets. Please go ahead.

Speaker Change: Yeah.

Amir: Please on mute Amir.

Speaker Change: I'm, sorry, not getting a response, we will move to Sean Stewart of TD Cowen.

Operator: We will move to Sean Stewart at TD Cowern.

Sean Steuart: Thank you and good morning, everyone a couple of questions on containerboard.

Mario Plourde: Thank you, and good morning, everyone. A couple questions on container boards. Mario, I'm wondering if you can comment on the tension in the market right now. It doesn't seem like inventories are too low across the system ahead of the June price increase efforts. What are your thoughts on the ability to pass through price hikes when it's a cost push exercise instead of a tight market-induced initiative?

Speaker Change: Mary I wondering if you can comment on on your thoughts on tension in the market right now it doesn't seem like inventories are.

Sean Steuart: Our two low across the system ahead of the June price increase efforts.

Sean Steuart: Your thoughts on an ability to pass through price hikes, when it's a cost push exercise and instead of a.

Mario: Tight market.

Mario: Induced initiatives.

Mary: Well considering the market actually we saw as I would see a slower beginning of the year this year, but.

Mario Plourde: Well, considering the market, actually, you know, we saw, I would say, a slower beginning to the year this year. But as we speak, we see a pickup in demand in most of our business segments, most notably in distribution and e-coms. So, you know, we're coming into a more active season. With the possibility of a price increase, I would say the increase in cost in the business in general for the last 12 months certainly justified this price increase to go through, especially since the last price increase has not been reflected in the index. So, you know, I would say just the cost increase would justify that increase to go through. But it's difficult for us to predict because, you know, we don't control this, but that's my take on that.

Sean Steuart: Okay, thanks for that. Those thoughts.

Mary: As we speak we see a pickup in demands in most of our business segments. Most most notably in the distribution and e-commerce.

Mario: So where.

Mario: We're coming into a more active season.

Mario: The possibility of a price increase I would see the increasing costs in the business in general for the last 12 months certainly justify these price increases go through especially with the last price increase has not been reflected in the index. So.

Mario: I would suggest the cost increase would justify that increase to go through but difficult.

Speaker Change: <unk> to us to predict because we don't control this.

Mario: That's my that's.

Mario: My take on that.

Speaker Change: Okay. Thanks for that those thoughts.

Charles Malo: I also wanted to ask about integration rates in your container board segment. Any updated thoughts on the best approach to raise those integration rates going forward? So you're not so exposed to parent roles? Organic versus M&A? Any updated thoughts on options for your company on that?

Speaker Change: Also wanted to ask about integration rates in your containerboard segment.

Mario: Any updated thoughts on the best approach to raise those integration rates going forward. So you are not so exposed to parent rolls.

Mario: Organic versus M&A any updated thoughts on options for your company on that front.

Charles Malo: So, Sean, this is Charles. So, there are a few things. The first part for us is to maximize the use of our network that we have already installed. And you can see that we're making progress on that, as Mario mentioned. The strategic markets that we decided to go after are paying off when you look at our growth compared to what's going on in the market, being EECOM and distribution, so this is going in the right direction.

Mario: So Sean this is a this is charles.

Sean: There's a few things the first part for us is to.

Charles: Maximize the use of our network that we have already installed.

Charles: You can see that we're making progress on that as Mario mentioned.

Charles: Yeah.

Mario: Yes.

Mario: Our strategic markets that we decided to go after are paying off when you look at our growth compared to what's going on in the market.

Mario: B.

Mario: E Comm and distribution. So this is going in the right direction. So just by that.

Charles Malo: So just by that, this is the first step that we are focusing on. The fact that we also took some of the capacity, closing down our non-efficient mill in Trempton, also has an impact on our overall numbers. And yes, we are looking now and looking at the opportunity for our growth, but our first move was really to make sure that we would ramp up our Bear Allens facility first, and then work also on expanding our growth through acquisition or refill. We're looking at both.

Mario: This is the first step that we are focusing on the fact that we also.

Mario: It took some of the capacity closing down our.

Mario: Non efficient mill and strengthen also has an impact on our overall.

Mario: Numbers.

Mario: And yes, we are looking now.

Mario: And looking at opportunity for our growth.

Mario: But our first move was really too.

Mario: Make sure that we would ramp up our bear island facility.

Mario: And then working also on extending our.

Mario: Growth with acquisition or Greenfield Greenfield, we're looking at both.

Speaker Change: Thanks, Charles for that detail, that's all I have thanks.

Sean Steuart: Thanks, Charles, for that detail. That's all I have. Thank you.

Mario: Thank you next question will be from Matthew Mckellar at RBC capital markets. Please go ahead.

Operator: Thank you. The next question will be from Matthew McKellar at RBC Capital Markets. Please go ahead.

Matthew McKellar: Hi, Good morning, Thanks for taking my questions. Maybe first operating costs are called out as a factor for containerboard and tissue in Q1, and you noted higher operational costs and containerboard is a factor for Q2.

Matthew McKellar: Hi, good morning. Thanks for taking my questions. Maybe first, operating costs were called out as a factor for container board and tissue in Q1, and you noted higher operational costs in container board as a factor for Q2. Could you give a bit more color on what you're seeing and where you're seeing the most pressure on costs today?

Matthew McKellar: Could you give a bit more color on what youre, seeing and where youre seeing the most pressure on cost today.

Speaker Change: Okay. So a few points first of all Q1 is the source for our containerboard.

Charles Malo: So a few points, first of all, Q1, this is Charles, for a container board. In Q1, the energy due to seasonality is always one that has a bit more pressure on our costs. But the other one which puts a lot of pressure on our overall cost right now is the fiber, the OCC, which has a major impact on the overall cost of our operation. The other thing is we now have the full impact of the cost structure of Bear Island, and we're still in ramp-up mode as we speak.

Matthew McKellar: In Q1.

Matthew McKellar: The energy due to sit down.

Speaker Change: As always.

Speaker Change: One that has a bit more pressure on our costs.

Mario: But the.

Mario: The other one which makes a lot of pressure on our overall cost right now is the.

Mario: The fiber or the OCC.

Mario: Which has a major impact on the overall for our operations the other thing.

Mario: As we now have the full impact of the cost structure of the ground and we are still in ramp up and ramp up as we speak.

Mario: <unk> done it is speaking for tissue raw materials definitly than most.

Jean-David Tardif: On our side, Matthew Jean-David speaking for Tissue, raw material is definitely the most..., significant impact. I would say that, as you see, virgin pulp prices increase month after month, but we saw a decrease in the SOP last month, so that was good news for us. Maintenance costs were a little bit higher in Q1, but back under control for the coming quarter.

Mario: <unk>.

Mario: Significant and Becker was as you see it versus both the prices increases month estimate, but we see a decrease in DSO last months.

Mario: The good news for us.

Mario: Maintenance costs were higher in Q1, but.

Mario: Back under control for the coming quarters.

Speaker Change: Great Thanks for that color.

Matthew McKellar: Great. Thanks for that, Keller.

Speaker Change: It would be next.

Speaker Change: When you first announced the Bear Island conversion project I think you were talking about ramping up operationally, it's about 80% within a year or so it sounds like things are going well, but if you can confirm if that's roughly where you are today that'd be helpful and then.

Speaker Change: If you could give us a sense too if I mean were sort of financial contribution is in terms of where you ultimately had.

Speaker Change: Ultimately intend to end up.

Mario: That would be helpful. I know you talked about being breakeven last quarter any sense of where you are today would be would be great. Thanks.

Speaker Change: Well, Matthew we we won't comment on specific contribution now but.

Speaker Change: You can imagine with market condition. There is some impact on bear island, but I'll, let Charles comment on the productivity and the volume side of it yet so we're still in line with our ramp up.

Matthew McKellar: Next, when you first announced the barrier island conversion project, I think you were talking about ramping up operationally to about 80% within a year. So, it sounds like things are going well, but if you could confirm if that's roughly where you are today, that would be helpful.

Charles: Towards the end of the year.

Mario: A year later, you mentioned that percentage is still aligned with that.

Matthew McKellar: If you could give us a sense, too, of where your financial contribution is in terms of where you ultimately intend to end up, that would be helpful. I know you talked about being breakeven last quarter. Any sense of where you are today would be great. Thanks.

Mario: We're getting closer to this as we speak.

Mario Plourde: Well, Matthew, we won't comment on specific contribution now, but you can imagine that with market conditions, there's some impact on Bear Island, but I'll let Charles comment on the productivity and the volume side of it.

Charles: Right now what we're doing is really as you know one we havent start up like this.

Charles Malo: Yeah, so we're still in line with our ramp-up towards the end of the year. As you mentioned, the percentage is still aligned with that. Actually, we're getting closer to this as we speak. That's why right now, what we're doing is really, as you know, when we have a startup like this, the beginning is to qualify the product, qualify the customers, and now we're in the stage of making sure that we optimize. So working on our consumables, looking at how we can improve our cost structures, so this is really what we are working on as we speak, because the ramp-up on the productivity and the quality of the product is really going according to what we have planned.

Charles: At the beginning as to qualify product qualifier to two customers and now we're in the stage of making sure that we optimize so working on our consumables looking after how can we.

Charles: Through our cost structures. So this is really what we are working on as we speak but give the ramp up on productivity.

Charles: The quality of the product.

Charles: Going according to.

Charles: When we have one.

Speaker Change: Great. Thanks, and last one for me.

Speaker Change: Your sequential EBITDA reconciliation for the last few quarters. Each noted lower results from recovery operations can you give us just a bit more detail on why results for each of the last couple of quarters.

Matthew McKellar: Great, thanks. And last one for me. You're sequential, even the reconciliations for the last two quarters each noted lower results from recovery operations. Can you give us just a bit more detail on why results were lower in each of the last couple quarters?

Matthew McKellar: While the results are up, you may...

Speaker Change: The results are up you mean.

Matthew McKellar: It's possible I misunderstood, but on slide 27, I think I noted lower results from recovery operations.

Speaker Change: Possibly I misunderstood, but.

Speaker Change: On slide 27, I think I noted lower results from recovery operations Yeah.

Luc Langevin: Luc, do you want to comment on the overall condition of the recovery operation?

Speaker Change: Luke do you want to comment on the overall.

Speaker Change: Condition in the recovery operations.

Luc Langevin: Yeah, well, the overall situation, you know, through the year of 2023, the situation improved because the margins improved in the recovery business. We're still slightly impacted by volume, as now, as generation has been slightly softer than it used to be in the first quarter of 2000 and in the first quarter of 2024 compared to the previous years, representing pretty much what the economy is currently. I don't know if this answers your questions.

Luke: Yes, it will be.

Luke: Overall through the year of 2023, these tuition improve because the margins improve and the recovery business.

Luke: We are still slightly impacted by the volume is now.

Speaker Change: As the generation has been.

Speaker Change: Slightly softer than it used to be in the first quarter of 2000.

Speaker Change: In the first quarter of 2024 versus the previous years, representing pretty much what the economy is currently.

Speaker Change: I don't know if it answers your questions.

Matthew McKellar: So, Matthew, we improved the company over a year, but it was slightly lower.

Speaker Change: Okay.

Charles: We improved year over year, but it was slightly lower.

Luc Langevin: Thank you. Exactly.

Charles: And exact potentially.

Speaker Change: Okay. Thanks for the help that's all for me and I'll turn it back.

Matthew McKellar: Okay, thanks for the help. That's all for me. I'll turn it back.

Operator: Thank you. Again, if you would like to ask a question, please press star then number 1 on your telephone keypad. And your next question will be from Zachary Evershed at National Bank. Please go ahead.

Speaker Change: Thank you. Thank you.

Speaker Change: Again, if you would like to ask a question. Please press Star then the number one on the telephone keypad.

Speaker Change: And your next question will be from Zachary <unk> of National Bank. Please go ahead.

Zachary: Thank you good morning, everyone and congrats on the quarter.

Zachary Evershed: Thank you. Good morning, everyone, and congratulations on the quarter. Good morning.

Zachary: Good morning, good morning.

Zachary: I was hoping you could give us a bit more detail on the customer pricing model in tissue because it does look like pulp costs are increasing sequentially over the last two quarters, but youre getting some lower selling prices. So are those tied to S&P.

Zachary Evershed: I was hoping you'd give us a bit more detail on the customer pricing model in tissue because it does look like pulp costs are increasing sequentially over the last two quarters, but you're getting some lower selling prices. So are those tied to SOP? Yeah.

Speaker Change: Yes, I have a two multiple index into this.

Jean-David Tardif: Yeah, it's multiple indexed into this, SOP, virgin pulp, freight energy, depending on the customers, there's different components, but most of the time it's on a six-month basis, so that's why there's a lag between increased decrease or adjustment. So, that's why we saw that effect lagging behind, I would say, the end expression.

Zachary: The Virgin pulp freight energy there is depending on the customers there are different components, but.

Zachary: Most of the time, it's on six months basis. So that's why there's a lag between increase decrease or adjustment.

Zachary: That's why we saw that that affects lagging behind.

Zachary: The index prices.

Speaker Change: Gotcha. Thanks.

Jean-David Tardif: And maybe we could add how much of the percentage we said in the past? Right now, we are talking about 25% of the volume being titled. Of retail? Mainly retail? Yeah.

Speaker Change: And maybe we can add how much of the percentage we said in the past.

Speaker Change: Right now we are talking about 25% of the volume being down on the retail or the retail mainly mainly in retail.

Speaker Change: Hi, good price change okay.

Zachary: Got you thanks.

Zachary: And then would you say your plans for the fiber mix at Bear Island of change given movement in OCC and mixed costs.

Speaker Change: I'm, sorry, I missed the beginning of the question of.

Speaker Change: The recipe.

Speaker Change: Find has changed as of yet so.

Speaker Change: We are in ramp up.

Speaker Change: So what we're doing right now on our first step was to produce.

Speaker Change: So thats, what we did.

Speaker Change: I would say towards the end of the year.

Speaker Change: In Q4, but the beginning of that.

Zachary: This year in 2024.

Zachary: We are increasing the content of the MX product at the mill.

Zachary: But we are.

Zachary: <unk> also in making sure that we produced a good quality and we have control on our product, but yes. The goal is to.

Zachary: Use.

Zachary: Investment that we made at the mill as you know.

Speaker Change: We can go.

Speaker Change: Up to <unk>.

Speaker Change: <unk> is a 60% depending on what we produce in mix waste. So we're not at that stage right now.

Speaker Change: But we are growing month after month, increasing the percentage.

Speaker Change: To benefit because right now it does bring a benefit too.

Speaker Change: That's great. Thanks, good color I'll turn it over.

Speaker Change: Thank you.

Speaker Change: At this time there appears we have no further questions. Mr. Plourde. Please continue.

Jean-David Tardif: [inaudible]

Plourde: Yes. Thank you everyone for being on the call. This morning, we will.

Zachary Evershed: And then would you say your plans for the fiber mix at Bear Island have changed given movements in OCC and mixed costs?

Zachary Evershed: I'm sorry; I missed it.

Charles Malo: of the recipe in Bear Island. Has the plan not been changed? Yes, so we are in ramp-up mode. So what we're doing right now, our first step was to produce the paper. So that's what we did, I would say, towards the end of the year in Q4. But at the beginning of this year, in 2024, we are increasing the content of the mixed product at the mill. But we are cautious also in making sure that we produce good quality and we have control over our product.

Charles Malo: But yes, the goal is to use the investment that we made at the mill. As you know, we can go up to an average of 60% depending on what we produce in mixed waste. So we're not at that stage right now, but we are going month after month, increasing the percentage to benefit because right now it does bring a benefit.

Zachary Evershed: That's great, thanks. Good color. I'll turn it over.

Plourde: Nice rest of the weekend, though to see you on the next call. Thank you very much.

Mario Plourde: At this time, it appears we have no further questions. Mr. Plourde, please continue.

Operator: Yeah, thank you everyone for being on the call this morning. We wish you a nice rest of the week and hope to see you on the next call. Thank you very much. Thank you, ladies and gentlemen. That brings us to the end of today's conference. Thank you, ladies and gentlemen.

Operator: Merci mesdames et Messieurs, cela m'est fait pour la conférence d'aujourd'hui, vous pouvez maintenant reprendre votre ligne. Thank you, ladies and gentlemen, this concludes today's conference call. You may now disconnect your line.

Speaker Change: Matthew Medina with Mr. <unk>, Zhang from Jacob will provide novack Oc.

Operator: ?? ?? ?? ?? ?? ?? ?? ??

Speaker Change: Ladies and gentlemen. This concludes today's conference call you may now disconnect your lines.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].