Q2 2025 Cascades Inc Earnings Call

Speaker #4: Conférence des résultat financier du deuxieme trimestre de Cascades . Je m'appelle Sylvie et je Patrice . Aujourd'hui , toutes les links d'écoute seulement aux commentaires des dirigeants .

Speaker #4: IL y a une période de questions . Good morning . My name is Sylvie , and I will be your conference operator today .

Speaker #4: At this time I would like to welcome everyone to the Cascades second quarter 2020 financial results conference call . Note that all lines are currently in listen only mode .

Speaker #4: 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 .

Speaker #4: Mr. Aitken , you may begin your conference .

Speaker #5: Thank you . Operator . Good morning , everyone , and thank you for joining our second quarter 2020 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 .

Beginning with packaging, our second quarter sales were stable sequentially, this reflects improved pricing and slightly stronger. Volume offset by a negative exchange rate impact

Demand levels remain softer in Q2.

As customers continue to be cautious. Given the ongoing broad economic and trade uncertainty,

With the sand we provide box shipments that are for test cats and the Canadian and US Industries on site 7 and 8.

Second quarter will be the increase by 9% sequentially to 119 million dollars driven by higher selling prices.

Ibido margins improved by 1.3% to 15.6% in Q2.

While OCCC pricing was favorable, this was upset by higher input costs for the resulting from a different mix of products tools.

As expected production cost per ton were elevated in the quarter, due to lower operating rates, but were largely upset by favorable, energy transportation and sgna costs.

As previously disclosed, capacity was limited at the Green Pack Mill due to operational issues at the third-party team supplier.

Our team rapidly put in place remediation measures to limit the impact in production was almost back to normal in June.

The estimated impact of this event was 4 million dollars in the in the quarter.

The supplier resumed normal production forecasts can, as of the second week of July

year-over-year sales increased by 2% with benefits, from I higher selling prices and more favorable exchange rate more than offsetting negative volume and mixing back.

I was increased 38% from a year ago, period driven by higher selling prices and lower raw material costs.

Margin improved by 4.1% compared to last year.

To volume and corresponding higher production cost per test.

We are pleased with the progress made at our Berlin facility during the quarter.

Where production increased 8% to 82,000 tons compared to the first quarter?

We start steady improvements and more resilience. When fate with operational challenges,

Progress continued in July during which production levels.

average 1100, tons per day, which represents a proximately 91% of the targeted ramp up, production level,

It is our employees at Varian who are driving this difference. And would like to thank them for their focused, hard work, and incredible commitment.

We are forecasting, a stronger second half of 2025, and our confidence that will continue to close the gap. Before the end of the year,

I would note that this Improvement momentum and bearing contributed to our decision, to seize production at Niagara Falls on August 11th a month earlier than originally planned.

Baran is our priority.

And as we have previously stated, we have visited resources focused on continuing to improve its speed availability, while maintaining a high level of quality.

moving now to our tissue business,

second quarter sales, increased 8% sequentially, a stronger volumes and favorable pricing and mix fully upset and negative exchange rate impact.

Converted product shipments in short terms, increased 10% with away from home of 15% and Retail of 7%.

If the of 38 million marginally, increase from q1 with benefits from volume mix and selling prices of set by higher operating costs.

Sales were slightly below last year. Decreasing 1% this reflected a more favorable exchange rate of set by impacts from lower volume.

Shipments. Decrease 2% year-over-year reflecting a 1% decrease in retail and a 4%, decrease in away from us.

Year-over-year above that, increased by 16 million dollars, reflecting lower, volume higher, operating costs and a slightly lower average selling price.

Our tissue production was lower in the quarter. This is largely a reflection of our plan shutdowns, maintenance activities, and investments. In our operational platform, as we carry out strategic realignment of our go to market approach.

The reason 9 million of announced investments in our daily calls and going to be facilities.

Fall within this strategy and additional volume will be added in 2025 as this transition is completed.

Corporate activity cost of 20 million. In Q2, were largely unchanged, sequentially, but decreased 8 million year-over-year. We expect this lower cost level to continue for the remainder of the year.

I will now pass the call over to Atom, who will briefly discuss some of the financial highlights. Alex?

Thank you and good morning everyone.

So slide 13 and 14 illustrate, the specific items recorded during the quarter, which impacted operating income by 29 million.

The main items were 23 million of impairment charges resulting from the closure of the Niagara Falls meal.

In addition, there was also a 4 million loss on derivatives financial instruments.

Flight 15 and 16 illustrate, the year-over-year and sequential variance of our Q2 adjusted earnings per share and the reconciliation with a specific items that affected our quarterly results.

As reported, Q2 net loss per share was 3 cents, compared to a net loss per share of 1 cent last year and 7 cents in Q1.

On an adjusted basis. Net earnings per. Share were 19 cents in the current quarter.

This compared to net. Earnings per share of 8 cents last year and 13 cents in the first quarter of 2025.

These increases reflect stronger. If the, in the current quarter.

As highlighted on slide 17 second quarter adjusted. Cash flow from operations was 101 million up from 95 million in the year ago, period. And from 62 million in q1.

I just said cash flow generated in the second quarter. Improved year-over-year, largely reflecting stronger, operating results and lower levels of capital investments in 2025.

These were upset by higher. Dividends paid to minority interests.

Sequentially, adjusted cash flow generated increased for the same reasons.

18 provides detail about our Capital Investments new Investments for the second quarter. Total 38 million

For 2025, we revised our forecasts to 150 million dollars of capital expenditures.

In the second quarter, we also received cash proceeds of 26 million from asset divestitures.

Moving North on net debt reconciliation as detail on slide. 19 sequentially our net debt decreased by 1002 million. In the second quarter mainly due to a more favorable exchange rate on our US denominated debt

Our leverage ratio went down to 3.8 times from 4.2 times at the end of the first quarter.

During the quarter, we also refinance a portion of our US dollars in your notes and we increased and extended the revolving facility in Greenback.

In addition, on July 31st, we also concluded that the extension of our revolving facility from 2027 to 2029.

the financial conditions of these 2 facilities, remained the same

These refinancing activities improve our maturity and liquidity profile.

Are available liquidity improved by 400 million since the end of q1 to 595 million.

Financial ratios and information about maturities are detailed on slide 20 and other information and Analysis can be found on slides, 24 through 32 of the debt.

I will not pass the call back to Ugg, will conclude for some brief comments before we begin the comment. The question period.

Thank you, Alan.

We're expecting stronger considered results in the third quarter and provide a breakdown by segment, on slide 21.

And packaging, raw material, and sending price. Trends are anticipated to be favorable.

However, we remain cautious regarding them and levels due to the potential impact from continued macro uncertainty.

History, results are expected to strengthen sequentially with stronger, volume supported by raw material and sending price trends.

Before putting the call to questions, I'd like to provide an update on our need from areas of focus for 2025 and 2026.

Over recent months, we've identified a variety of value, creating opportunities to our focus on excellence.

As we have stated in the past our key priorities are targeting production. Efficiency commercial strategies and cost reduction.

I'm pleased to share today that we expect ongoing initiatives to benefit our baseline profitability levels by $100 million on an annual run rate basis by the end of 2026.

We continue to pursue other opportunities with a view to both offset, any potential adverse market conditions and optimize our go to market approach.

Lastly, we are on track to achieve our 80 million dollar objective of the money, monetization of redundant assets and now expect to reach this target before the end of June 2026 6 months earlier than originally plan. Free cash flow will be allocated to the reduction of our long-term debt.

With that. We can now open the call to questions, operator.

Thank you merci.

See what is a reposing question. Thank you. If you would like to ask a question at this time simply press

Star the number 1 on your telephone keypad. And if you would like to withdraw from the question queue, please press star. Then to again, if you have a question, please press star, then 1 on your telephone keypad,

In your first question will be from Amir Patel at CIBC Capital Market. Please go ahead.

Hi, good morning.

He with respect to the 100 million uh, annual run rate uh profitability Improvement by the end of 2026. Um, how much of that is been achieved uh so far

Give us time to put something that's very resilient to anything in the economy. And that the leakage is as minimum as possible, but, uh, I want to say that we're we're on schedule. If you took put like a stable curve of 100, by the end of 2026. So some of it is already achieved

Okay, I'm sorry just to clarify. So that's the starting point is the end of 24.

Yes, the starting point is the end of of 24. Exactly.

Okay, great, thanks. Uh, that's helpful. And are you able to give us some visibility on how profitability is fairing at, uh, at bare Island? Um, you know, relative to perhaps where steady state would be uh and and when do you expect to be fully ramped up, their

So, uh, great question. Uh, as we stated in the call, the, uh, I mean, we've seen consistent improvement in bearing over the last, uh, 12 weeks, as from a productivity standpoint. When we discussed the Q4 and Q1 results, we also stated that, uh, you know, it was either break even or making a small profit. So clearly right now, with improved pricing and better profit, and, and, and better productivity, uh, we are on the positive side on bearing. We don't provide any specific meal by mail, but, uh, you know, one says just with simple math and an 8% improvement, uh, quarter to quarter, with the month of July, uh, being, uh, very positive, uh, with uh,

Additional improvement from the second quarter is even more positive. We're at 91% of our ramp up curve uh in July and we expect to uh continue to fill that Gap as I we stated before and we're still very confident to fill it before the end of this year, which makes Barren a profitable asset.

Okay great. Uh thanks and just the last question um from a recovered paper standpoint. I know 1 of the

Fair Island was its uh flexibility is it uh.

Running a lot more.

To see.

No, we're mostly running on a new CC. When you look at the price gap, between mixed paper and UCC, uh, versus the plus and minus from a cost standpoint. Uh, it's providing also more, uh, stability, uh, on the productivity level and where I am. So, we'll start playing with that. When we, you know, we have more economic reasons to do it giving the pricing spread between uccc and uh, and mixed paper. Uh, and and the flexibility will help us to uh, to change, you know, depending on Dynamics and pricing. We're seeing very uh steady pricing in uccc with the uh recent uh closure announcement of Niagara Falls. I mean, it's also reducing uh some of our consumption so we're able to optimize our system to get further, you know, better.

Price for our platform.

Okay, great. Uh thanks. That's all I had. I'll turn it over.

Thank you. Thank

Next question will be from Sean Stewart at TD Cowen. Please go ahead.

Thank you, good morning. Um, couple questions want to start with tissue, uh, your reference, uh, more positive Q3 outlook on, primarily driven by volume gains. I'm wondering if you can speak to the magnitude of the pulp price. Correction we've seen here in in recent months and I suppose the potential for tissue price concessions, on the back of that regarding your guiding to flat racing here in the near term. But um how you expect weaker input costs could translate into the uh the price environment for tissue

Yeah, great question. You got a few questions in the in your question, I'll try to take them a bit separate on on, on, on the Paul prices. Uh, we've done a lot of work over the the last few quarters to have more flexibility, you know, between hardwood softwood eucalyptus or recycle fiber so that we can uh therefore optimize with uh, with pricing changes and and we're starting to see some of the benefits of that with more flexibility as for, uh, you know, supply and demand were. I mean, we're running full full full on on our tissue. Uh, segment. Everything we produce is sold so

We're very confident with the spread that, uh, we're forecasting in the third quarter. Uh, so we we foresee that, uh, uh, it's all about making sure to deliver the volume. That's already committed and sold at a specific price.

Wins near-term mainly tied to trade issues, but it does seem like there's a lot of capacity closures coming through the the back half of the year.

How do you view tension in that market evolving here? Uh, as presumably, we could be in a situation with Rising operating rates later in the year.

Yeah, so I mean we we announced that next week. We're we're on April uh, August 11th. Sorry we're we're closing our negara Falls facility. When you look at the asset that we have in the, you know, kind of pure line, of bore line of board and medium, uh, we have first quartile assets. Uh, you look at the market, I mean, we remain very, very cautious. We're seeing more resilience in the food and beverage, uh, we're trying to focus our long-term Partnerships where we can have a bit more resilience and more stability. Uh, we use, uh, the, uh, the, the additional production at bare Island to, uh, you know, it's, it's a steady flow Improvement, we've seen more, uh, stability in the increase. So it's giving us the ability to plan better and to build on, uh, on those sales. Uh, but we remain cautious with, uh, I mean, don't think they need to explain in much details are the, uh, the

Unknown in the economy. Uh, we are seeing uh, you know, we we talked about uh, flat demand for the second quarter and that's basically what we saw versus the first quarter. Uh, when you look at our guidance for uh, the third quarter, it's pretty pretty flat. You know, when what we're seeing today, I mean we have some seasonal positive Trends with uh the farming uh industry in Quebec and Ontario. That's very seasonal. But that's uh that's looking pretty decent. We're, we're pleased with what we're seeing right now, but again, I mean we're as you, you, well mentioned the the unstability with the, uh, the trade policies can can flip that. Uh, so

You know we're we'll be ready for any upswing in demand uh with with planning as long as we can. But also like looking at uh the type of uh of business where we want to put our sales to have more resilience in our system.

Okay.

That's a great detail. Uh, that's all I have for now. Thanks very much.

Thank you.

Ladies and gentlemen, again a reminder to please press star 1 on your telephone keypad. Should you have any questions?

And your next question will be, from Matthew McCullough at RBC Capital markets. Please go ahead.

Good morning. Thanks for taking my questions. I was wondering if you could give us just a bit more detail on some of the most significant initiatives to drive the $100 million in targeted profitability improvements and how that might split between packaging and tissue. And then how should we think about the closure of Niagara Falls in the context of that $100 million target? Thanks.

Yeah, thank you for your question. Uh do you 100 million dollar initiative? When you look at uh you know as a good practice we always have a funnel you know, that that adds up to more than than 100 million of initiatives. Understanding that you know there's leakage there's good ideas that won't convert to uh to a bit though Improvement. So you know I I like to say that to achieve a 100 million you got to work on probably twice as much to uh to make sure that you you net a significant amount. So to provide that you know, a breakdown by business is not something that that we're going to do. But what I can share is that, you know, to achieve our 100 million you got to work on more than 100 million and that they're, they're basically split in uh, efficiency initiatives, uh, cost reduction and sales uh, strategy on uh, on all of our product lines. Uh, we we have

10 key priorities. Uh, internally that we focus on right now and the approach that we've taken is that, you know, we lots of focus. Not too many uh, uh, priorities but making sure that we convert those uh those initiatives into real dollars for the uh, bottom line.

And as for Niagara Falls, uh, I mean the the closure would bring uh, some some cost reduction overall too. When you look at equal volume across our system, I mean that brings a significant uh cost reduction on our platform.

Okay, thanks for that color.

You mentioned getting bigger in container boards. To just zoom out a bit, could you remind us how you view the strategic value of Cascades, being a producer of both packaging products and tissue products? Thanks.

Yeah, so if you if you look at the size that we have, where we see the, the big, you know, those strategic value is to do more with the existing assets. Uh, and I mean, the 100 million that we discussed is, uh, is part of that strategy. Uh, you look at the efficiency of some of our operations versus where they can be to be like, you know, second quartile not even top of the first quartile. Uh, we can increase our uh, our ability to go to market, uh, with that. So that that's where we're going to focus. And as far as the value to, to customers with, uh, with kaskad, I mean, we're really focusing on, uh, being the best in service being time. All the time. Good quality, uh, reliable supplier. And we've, I mean, we're seeing, uh, every day, uh, some some good examples of that, uh, were small in North America, but we have a significant presence in, uh, in Canada.

So that, that part of the market, we are a significant player and we're seeing similar Trends in in tissue where the opening rate of kaskad and even the industry is, is very full. It's very resilient business in uncertain Economic Times like today where we see a lot more stability and predictability in, uh, in sales volume. So the, the the plan right now is to optimize what we have to make it either in the first or second quartile. So that we're more resilient when the economy turns down

Okay, thanks for the detail. I'll pass it back.

Thank you.

And at this time,

there are no further questions.

Please proceed.

Well, thank you for all the great questions. Thanks for taking the time and uh, looking forward to have some of the 1-on-1 discussions. Thank you.

Thank you, ladies and gentlemen. This does conclude your conference call for today. You may now disconnect.