KINGSEY FALLS, QC, CNW – Cascades Inc. reports its unaudited financial results for the three-month period ended June 30, 2021.

Q2 2021 Highlights (comparative figures have been restated to reflect discontinued operations²)

• Sales of $956 million (compared with $942 million in Q1 2021 (+1%) and $1,020 million in Q2 2020 (-6%))
• As reported (including specific items)
  • Operating income of $23 million (compared with $44 million in Q1 2021 (-48%) and $64 million in Q2 2020 (-64%))
  • Operating income before depreciation and amortization (OIBD)¹ of $87 million (compared with $109 million in Q1 2021 (-20%) and $127 million in Q2 2020 (-31%))
  • Net earnings per share of $0.02 (compared with $0.22 in Q1 2021 and $0.57 in Q2 2020)
• Adjusted (excluding specific items¹)
  • Operating income of $34 million (compared with $57 million in Q1 2021 (-40%) and $80 million in Q2 2020 (-58%))
  • OIBD of $98 million (compared with $122 million in Q1 2021 (-20%) and $143 million in Q2 2020 (-31%))
  • Net earnings per share of $0.07 (compared with $0.29 in Q1 2021 and $0.61 in Q2 2020)
• Following the July 2021 announcement by the Corporation regarding the monetization of its 57.6% controlling equity interest in Reno de Medici S.p.A. (RDM) for €1.45 per share, expected to result in total net proceeds of $461 million, financial information for the Boxboard Europe segment is now presented as discontinued operations. The transaction is expected to close in the third quarter of 2021².
• Quarterly dividend increased to $0.12 per share from $0.08 per share previously, effective for the second quarter payment, resulting in an annual dividend of $0.48 per share, from $0.32 per share previously, and a return of approximately 3%.
• Net debt¹ of $1,707 million as at June 30, 2021 (compared with $1,654 million as at March 31, 2021). Net debt to adjusted OIBD ratio^{1, 3} of 2.9x up from 2.5x as at March 31, 2021. Net debt amount does not reflect the RDM transaction.
• Total capital expenditures, net of disposals, of $65 million in Q2 2021, compared to $71 million in Q1 2021², and to $36 million in Q2 2020²; Forecasted 2021 capital expenditures of between $400 million and $425 million, encompassing $250 million for the Bear Island containerboard conversion project in Virginia, USA.
• S&P Global rating agency revised its outlook on the Corporation to positive from stable.

1	Please refer to the “Supplemental Information on Non-IFRS Measures” section for a complete reconciliation.
2	2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.
3	Not adjusted for discontinued operations.

Mario Plourde, President, and CEO, commented: “Our second-quarter results were below expectations, with the sequential shortfall driven by our tissue segment. This reflected several factors, the most prominent being $12 million due to higher raw material costs and $9 million related to the net impact of sales prices and mix variance in the current period. We continued to see lower demand levels in tissue in the quarter, notably in US consumer retail product categories, as customers worked through inventories built up throughout 2020 in response to COVID-19 demand volatility. Operationally, we made the decision to temporarily curtail some tissue converting production in June to manage inventories. Notwithstanding the tissue results this quarter, we see current demand contraction as being an interim response to COVID-19 volatility given the essential nature of these products. Looking ahead, the modernization completed across our tissue platform has equipped this segment to generate important benefits when demand levels begin to normalize. On the packaging side, the Containerboard and Specialty products businesses delivered good results. Higher selling prices in Containerboard that reflect only two of the three announced price increases, coupled with good volume, were however not sufficient to fully cover raw material and production cost inflation in the second quarter, while benefits from volume growth in Specialty products more than offset the impact of higher raw material costs. A less favourable foreign exchange rate impacted the performance of all our businesses in the second quarter.

We completed an important step in our strategic plan this quarter with the announced monetization of our 57.6% equity position in Reno de Medici. This move underscores our commitment to creating long-term value for the Corporation and our shareholders and is aligned with our objective of focusing on our core North American packaging and tissue businesses. The expected net proceeds of $461 million from the transaction will improve financial flexibility and support our initiatives aimed at improving the financial performance and competitive positioning of our North American businesses. We remain dedicated to prudently and strategically deploy capital to enhance our operational platforms, while also optimizing our capital structure and evaluating opportunities to increase shareholder return including aligning our dividend return with industry averages. To this end, we are pleased to announce that we are increasing our quarterly dividend by 50% to $0.12 per share as of the second quarter of 2021, reflecting our confidence in our long-term free cash flow generation and operational performance. On an annual basis, this translates into a dividend of $0.48 per share, and increases our yield to approximately 3%.”

Discussing near-term outlook, Mr. Plourde commented, “We are expecting improved results in the upcoming third quarter, supported by the roll-out of announced price increases in our Containerboard and Specialty Products segments, and a gradual normalization of demand in tissue. Notwithstanding our positive sequential outlook, the COVID-19 pandemic continues to bring with it the potential for volatility in operational and financial performance. As our second-quarter results highlight, continued fluctuations in demand as well as pricing of raw materials and other input costs remain difficult to accurately predict, as does the timing and scope of economic reopening across North America. We are focused on effectively managing these uncertainties, taking decisive and necessary steps to meet the sometimes changing needs of our customers while also ensuring the safety of our employees. We are pleased with the flexibility our operations have demonstrated throughout what has been a challenging 18 months, and are very proud of the commitment and hard work of our employees.”

Financial Summary

Selected consolidated information

(in millions of Canadian dollars, except amounts per share) (unaudited)	Q2 2021	Q1 20212	Q2 20202
Sales	956	942	1,020
As Reported
Operating income before depreciation and amortization (OIBD)1	87	109	127
Operating income	23	44	64
Net earnings	3	22	54
per share	$0.02	$0.22	$0.57
Adjusted1
Operating income before depreciation and amortization (OIBD)	98	122	143
Operating income	34	57	80
Net earnings	8	29	58
per share	$0.07	$0.29	$0.61
Margin (OIBD)	10.3 %	13.0 %	14.0 %
1	Please refer to the “Supplemental Information on Non-IFRS Measures” section for a complete reconciliation.
2	2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

Segmented OIBD as reported

(in millions of Canadian dollars) (unaudited)	Q2 2021	Q1 20212	Q2 20202
Packaging Products
Containerboard	95	96	83
Boxboard Europe	11	23	42
Specialty Products	18	18	16
Tissue Papers	(5)	18	48
Corporate Activities	(21)	(23)	(20)
Total before discontinued operations	98	132	169
Discontinued operations – Boxboard Europe	(11)	(23)	(42)
OIBD as reported	87	109	127
1	Please refer to the “Supplemental Information on Non-IFRS Measures” section for a complete reconciliation.
2	2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

Segmented adjusted OIBD¹

(in millions of Canadian dollars) (unaudited)	Q2 2021	Q1 20212	Q2 20202
Packaging Products
Containerboard	100	108	94
Boxboard Europe	11	23	43
Specialty Products	18	18	17
Tissue Papers	1	20	54
Corporate Activities	(21)	(24)	(22)
Total before discontinued operations	109	145	186
Discontinued operations – Boxboard Europe	(11)	(23)	(43)
Adjusted OIBD1	98	122	143
1	Please refer to the “Supplemental Information on Non-IFRS Measures” section for a complete reconciliation.
2	2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

Analysis of results for the three-month period ended June 30, 2021 (compared to the same period last year²)

Sales of $956 million decreased by $64 million, or 6%, compared with the same period last year. This was driven by a less favourable Canadian dollar – US dollar exchange rate, and lower volumes in the Tissue segment following very strong retail demand in the year-ago period attributable to COVID-19 driven fluctuations in consumer buying patterns. This was partially offset by higher pricing and stronger volumes in all packaging segments and in Recovery & Recycling activities compared to the prior year period.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $87 million in the second quarter of 2021, down from $127 million in the second quarter of 2020. On an adjusted basis¹, second quarter OIBD totaled $98 million, a decrease of $45 million, or 31% from the $143 million generated in the same period last year. This decrease is largely attributable to higher raw material costs in all segments, a less favourable exchange rate, lower volumes in Tissue and higher production costs in Containerboard that included inflationary pressure in labour, transportation and energy. Additionally, $9 million of R&D tax credits were recorded in the second quarter of 2020, while none was recorded in the current period.

The main specific items, before income taxes, that impacted our second quarter 2021 OIBD and/or net earnings were:

• $6 million of impairment and restructuring charges recorded in Tissue as part of profitability improvement and restructuring initiatives (OIBD and net earnings);
• $5 million unrealized loss on financial instruments (OIBD and net earnings);
• $3 million foreign exchange gain on long-term debt and financial instruments (net earnings);

For the 3-month period ended June 30, 2021, the Corporation posted net earnings of $3 million, or $0.02 per share, compared to net earnings of $54 million, or $0.57 per share, in the same period of 2020. On an adjusted basis¹, the Corporation generated net earnings of $8 million in the second quarter of 2021, or $0.07 per share, compared to net earnings of $58 million, or $0.61 per share, in the same period of 2020.

1	Please refer to the “Supplemental Information on Non-IFRS Measures” section for a complete reconciliation.
2	2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.12 per share to be paid on September 2, 2021 to shareholders of record at the close of business on August 18, 2021. This dividend is an “eligible dividend” as per the Income Tax Act (R.C.S. (1985), Canada). Cascades purchased no shares for cancellation during the second quarter of 2021.