“Cascades delivered solid consolidated third quarter 2019 results, as demonstrated by the 24.9% OIBD margin realized by the Containerboard segment. In addition to our improved execution at the operational level, we benefited from favourable raw material pricing and customary seasonal demand levels across our platforms, notwithstanding some softness in Containerboard and European Boxboard end-pricing. The Tissue segment delivered very encouraging year-over-year and sequential financial improvements, with positive raw material costs and selling price levels providing additional support for the benefits being derived from ongoing growth investments and initiatives in this segment,” said Mario Plourde, president, and chief executive officer, Cascades.

“We concluded the acquisition of the Orchids activities during the third quarter, and subsequently announced, at the end of October, the closure of two tissue converting facilities in the U.S. by March 2020, as part of our strategic repositioning and optimization efforts in the Tissue segment. In a similar vein, we advanced our capital investments and projects across our operations and continued to align our Specialty Products platform with the Company’s longer-term strategic objectives via the sale of our European industrial packaging operations,” said Plourde.

Discussing the outlook for Cascades, Plourde continued “After nine months, the Company is well-positioned to generate solid annual adjusted OIBD in 2019, with results after the first three quarters 15% above full year 2017 performance and already equal to 92% of full-year 2018 adjusted OIBD performance. On a consolidated basis, we expect fourth-quarter results to improve year-over-year, with operational enhancements in tissue and favourable raw material pricing mitigating the usual seasonal trends across our business platforms. On a segmented basis, near-term results in Containerboard are expected to decrease sequentially and be stable year-over-year reflecting a combination of usual seasonality and market dynamics. Tissue results are expected to show important year-over-year improvements in the fourth quarter, while sequential performance will be down reflecting the usual seasonal trends. European Boxboard performance is expected to slightly decrease sequentially but improve year-over-year as a result of lower raw material costs and a modest recovery in volume. Lastly, we anticipate stable results in Specialty Products year-over-year and a slight decrease sequentially, as the impact of lower recycled fibre prices on recovery operations and seasonality in packaging are expected to be offset by stable selling prices and beneficial raw material costs in packaging.”

Financial Summary

Selected consolidated information
(in millions of Canadian dollars, except amounts per share) (unaudited) Q3 2019 Q2 2019 Q3 2018
Sales 1,264 1,275 1,175
As reported
Operating income before depreciation and amortization (OIBD)1 208 154 139
Operating income 135 82 78
Net earnings 70 31 36
per share $ 0.74 $ 0.33 $ 0.38
Operating income before depreciation and amortization (OIBD) 161 156 137
Operating income 88 84 76
Net earnings 28 26 38
per share $ 0.30 $ 0.28 $ 0.40
Margin (OIBD) 12.7 % 12.2 % 11.7 %
1 – Refer to the “Supplemental Information on Non-IFRS Measures” section.
Segmented OIBD as reported
(in millions of Canadian dollars) (unaudited) Q3 2019 Q2 2019 Q3 2018
Packaging Products
Containerboard 120 114 116
Boxboard Europe 25 30 19
Specialty Products 12 13 15
Tissue Papers 76 17 5
Corporate Activities (25) (20) (16)
OIBD as reported 208 154 139
Segmented adjusted OIBD1
(in millions of Canadian dollars) (unaudited) Q3 2019 Q2 2019 Q3 2018
Packaging Products
Containerboard 118 113 117
Boxboard Europe 25 30 19
Specialty Products 14 13 14
Tissue Papers 24 18 5
Corporate Activities (20) (18) (18)
Adjusted OIBD 161 156 137
1 – Refer to the “Supplemental Information on Non-IFRS Measures” section.

Analysis of results for the three-month period ended September 30, 2019 (compared to the same period last year)

Sales of $1,264 million increased by $89 million, or 8%, compared with the same period last year, attaining a record level for the third quarter. Specifically, Tissue sales increased by $23 million, or 6%, reflecting a higher average selling price, the addition of Orchids Paper assets as of mid-September and a more favourable exchange rate. These benefits were partially offset by slightly lower volume following the previously announced closure of two paper machines in Ontario. European Boxboard sales increased by $46 million, or 22%, compared with the previous year, largely driven by the business acquisition in Spain at the end of 2018. Year-over-year results similarly benefited from slightly higher comparable volume, while less favourable selling price and mix and Canadian dollar – euro exchange rate negatively impacted results in the current period. The Specialty Products segment generated a 7% or $12 million sales improvement year-over-year, reflecting 2018 acquisitions and a slight improvement in pricing and sales mix. Combined, these benefits more than offset lower results from the Recovery & Recycling sub-segment due to price erosion of recycled material. Lastly, sales in the Containerboard Packaging group increased by $1 million year-over-year, as improved volume and more favourable exchange rate were largely offset by less favourable average selling price and sales mix year-over-year.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $208 million in the third quarter of 2019. This compares with the $139 million generated in the same period last year. This increase reflects a $52 million gain in the Tissue segment related to the acquisition of Orchids Paper assets, more favourable raw material prices across all four businesses, slightly higher volumes in all segments with the exception of Tissue, and business acquisitions completed in the last twelve months. More favourable selling prices and sales mix in Tissue also contributed to the year-over-year improvement, the benefits of which were partially offset by adverse average selling price trends in Containerboard and European Boxboard during the period. Operating results for 2019 also include the beneficial impact of IFRS 16 accounting for leases, which increased third quarter 2019 OIBD by approximately $7 million. On an adjusted basis1, third quarter 2019 OIBD stood at $161 million, versus $137 million in the previous year.

The main specific items, before income taxes, that impacted our third quarter 2019 OIBD and/or net earnings were:

  • $52 million gain in Tissue Papers related to the acquisition of Orchids (OIBD and net earnings)
  • $4 million charge in Corporate Activities associated with transaction fees paid for the Orchids’ asset acquisition (OIBD and net earnings)
  • $2 million gain in Containerboard Packaging related to the sale of a building and land (OIBD and net earnings)
  • $2 million loss following the conclusion of the sale of the Specialty Products operations in France and the closure of a facility in the second quarter (OIBD and net earnings)
  • $7 million unrealized loss on the fair value revaluation of an option granted in the Bear Island project (net earnings)

For the 3-month period ended September 30, 2019, the Corporation posted net earnings of $70 million, or $0.74 per share, compared with net earnings of $36 million, or $0.38 per share, for the same period in 2018. On an adjusted basis1, the Corporation generated net earnings of $28 million in the third quarter of 2019, or $0.30 per share, compared with net earnings of $38 million, or $0.40 per share, for the same period in 2018.