Cascades Reports Results for the First Quarter of 2022
Cascades Inc. reports its unaudited financial results for the three-month period ended March 31, 2022.
Q1 2022 Highlights (comparative figures have been restated to reflect discontinued operations 1)
- Sales of $1,038 million (compared with $1,028 million in Q4 2021 and $942 million in Q1 2021)
- As reported (including specific items)
- Operating income (loss) of $(4) million (compared with $(90) million in Q4 2021 and $44 million in Q1 2021)
- Operating income (loss) before depreciation and amortization (OIBD) of $56 million (compared with $(30) million in Q4 2021 and $109 million in Q1 2021)
- Net loss per common share of $(0.15) (compared with net earnings per common share of $1.04 in Q4 2021 and net earnings per common share of $0.22 in Q1 2021)
- Adjusted (excluding specific items2)
- Operating income (loss) of $(2) million (compared with $2 million in Q4 2021 and $57 million in Q1 2021)
- OIBD of $58 million (compared with $62 million in Q4 2021 and $122 million in Q1 2021)
- Net loss per common share of $(0.15) (compared with net loss per common share of $(0.09) in Q4 2021 and net earnings per common share of $0.29 in Q1 2021)
- Net debt2 of $1,549 million as of March 31, 2022 (compared with $1,351 million as of December 31, 2021). Net debt to adjusted OIBD ratio2 of 4.8x, up from 3.5x as of December 31, 2021.
- Total capital expenditures, net of disposals, of $96 million in Q1 2022, compared to $93 million in Q4 2021 and to $71 million in Q1 20211. Forecasted 2022 net capital expenditures of $415 million, encompassing $275 million for the Bear Island containerboard conversion project in Virginia, USA.
(1)2021 first quarter consolidated results and consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations.
(2) Some information represents Non-IFRS financial measures, other financial measures or Non-IFRS ratios which are not standardized under IFRS and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
Mario Plourde, President and CEO, commented: “Our first quarter performance was disappointing and lower than our expectations. While demand levels were stable for our packaging segments and continued to show positive underlying momentum in tissue, two main factors caused results to come in below our outlook. The first was the important escalation in production and operational costs, the effects of which were further compounded for our Tissue segment by persistently higher raw material prices. The second was logistics from both a cost and availability standpoint. Inflation driven fuel surcharges increased already elevated cost levels. The ongoing transportation constraints slowed order inflow levels from some customers experiencing shipping challenges while also delaying delivery of our products to some customers. Production was therefore temporarily adjusted in several of our operations, which impacted sales levels.
In the context of this high cost environment our Specialty Products segment performed well, as strong demand drove higher volumes and sales price increases were implemented. In our Tissue business, significant cost headwinds for fibre and logistics combined with planned revenue management actions being implemented to transition to an optimized customer and product portfolio resulted in a difficult quarter for this segment prior to benefits from profitability initiatives underway being realized. Finally, below expected results in our Containerboard segment reflect the immediate impact of higher input costs and a challenging transportation environment prior to the realization of benefits from the roll-out of recently announced price increases.”
Discussing near-term outlook, Mr. Plourde commented, “Looking ahead, we are implementing price increases in our packaging segments that will help to offset input cost headwinds. These, combined with good demand for our packaging products as we enter the summer season, will progressively improve profitability levels in the coming months. Our Bear Island project is advancing as planned with project costs and the December 2022 start-up date in line with our stated objectives. The elevated capital investments for this project combined with our lower consolidated financial results in the first quarter led to a notable increase in leverage. This course is expected to reverse with improved business performance in the coming months and future positive contribution from the Bear Island project following the facility’s start-up. In Tissue, we are encouraged with the progress of the profitability plan underway notwithstanding this segment’s first quarter results. As expected, benefits from these initiatives did not contribute materially to first quarter performance. Despite significant cost headwinds, we remain confident that we will be in the range of the 2022 target disclosed in our February strategic update, as benefits from previously announced price increases will begin to support this segment’s results in the second quarter, and will be further supplemented by additional price increases for Away-from-Home products announced for July 1 as well as continued revenue and cost optimization initiatives.”
Analysis of results for the three-month period ended March 31, 2022 (compared to the same period last year)
Sales of $1,038 million increased by $96 million compared with the same period last year1. This reflects an $84 million benefit from improvements in selling prices and sales mix, and higher volumes in the Tissue and Specialty Products segments. These were partially offset by lower Containerboard volumes that were largely due to challenges in supply chain and logistics, and difficult year-over-year comparison following very strong industry demand in the first quarter of last year.
The Corporation generated an operating income before depreciation and amortization (OIBD) of $56 million in the first quarter of 2022, down from $109 million in the first quarter of 20211. On an adjusted basis2, first quarter OIBD totaled $58 million, a decrease of $64 million, or 52% from the $122 million generated in the same period last year1. This decrease is largely attributable to higher raw material costs in all segments, important increases in production and logistics costs, and lower volume in the Containerboard segment.
The main specific items, before income taxes, that impacted our first quarter 2022 OIBD and/or net earnings were:
- $6 million of gain from the sale of land and a building related to a closed plant in Canada in Specialty Products segment (OIBD and net earnings);
- $1 million of additional costs related to asset relocation and severances in Tissue Papers segment (OIBD and net earnings);
- $7 million unrealized loss on financial instruments (OIBD and net earnings);
- $1 million foreign exchange gain on long-term debt and financial instruments (net earnings).
For the 3-month period ended March 31, 2022, the Corporation posted a net loss of $(15) million, or $(0.15) per common share, compared to net earnings of $22 million, or $0.22 per common share, in the same period of 2021. On an adjusted basis2, the Corporation generated a net loss of $(15) million in the first quarter of 2022, or $(0.15) per common share, compared to net earnings of $29 million, or $0.29 per common share, in the same period of 2021.
(1) 2021 first quarter consolidated results and consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations.
(2) Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.
Dividend on common shares and normal course issuer bid
The Board of Directors of Cascades declared a quarterly dividend of $0.12 per common share to be paid on June 9, 2022 to shareholders of record at the close of business on May 26, 2022. This dividend is an “eligible dividend” as per the Income Tax Act (R.C.S. (1985), Canada). During the first quarter of 2022, Cascades purchased 394,021 common shares for cancellation at a weighted average price of $13.04.
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About Cascades Inc.
Founded in 1964, Cascades offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs more than 11,700 women and men across a network of 85 facilities in North America and Europe. Driven by its participative management, half a century of experience in recycling, and continuous research and development efforts, Cascades continues to provide innovative products that customers have come to rely on, while contributing to the well-being of people, communities and the entire planet. Cascades’ shares trade on the Toronto Stock Exchange under the ticker symbol CAS.
Jennifer Aitken – Director, Investor Relations – firstname.lastname@example.org – (514) 282-2697
Source: Cascades Inc.