Cascades Inc., Kingsey Falls, Quebec, has released its third quarter of 2019 earnings results for the three-month period ended Sept. 30. The company achieved sales of about $1.26 billion in the quarter compared with $1.28 billion in the second quarter of 2019 and $1.18 billion in the third quarter of 2018.
According to a news release from Cascades, the company achieved operating income of about $135 million in the third quarter of 2019 compared with $82 million in the second quarter of 2019 and $78 million in the third quarter of 2018. Also, operating income before depreciation and amortization (OIBD) was $208 million in the third quarter of 2019.
“Cascades delivered solid consolidated third-quarter 2019 results, as demonstrated by the 24.9 percent OIBD margin realized by the Containerboard segment,” says Mario Plourde, president and chief executive officer at Cascades, regarding the company’s third-quarter earnings results.
Plourde says the company benefited this quarter from “favorable raw material pricing” and “customary seasonal demand levels” across the company’s platforms; however, he says there was some softness in containerboard and European boxboard end pricing. He adds that the company’s Tissue segment delivered strong 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.”
Looking ahead, Plourde says the company is well positioned to generate solid annual adjusted OIBD in 2019, with results after the first three quarters of this year about 15 percent above full-year 2017 performance and about equal to 92 percent 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 favorable raw material pricing mitigating the usual seasonal trends across our business platforms,” Plourde says in a news release on the company’s latest earnings report. “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,” he continues. “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 fiber prices on recovery operations and seasonality in packaging are expected to be offset by stable selling prices and beneficial raw material costs in packaging.”
During the company’s third-quarter 2019 earnings report conference call, the company reported that its Recovery business unit has been affected by low recovered fiber prices. The company noted that segment remains primarily focused on supplying the company’s mills with recovered fiber.
On the call, the company stated that it has noticed a “significant change” in old corrugated container (OCC) prices in particular. OCC prices dipped again at the start of November, and the company reported on the call that it expects the price of old corrugated containers (OCC) to be “close to a bottom price.”
Mergers and acquisitions, closures
During the third quarter of 2019, Cascades also concluded the acquisition of Orchids Paper Products for a total cash consideration of $237 million on Sept. 13. The assets acquired included the Barnwell, South Carolina, and Pryor, Oklahoma, operations, as well as certain other assets, including amended supply and other commercial arrangements with Fabrica de Papel San Francisco, S.A. de C.V., based in Mexicali, Mexico, and certain of its affiliates. The company reports that it expects an annual OIBD run rate of about $45 million from this asset by 2021.
In addition, the company had announced on Oct. 30 plans to close two tissue converting facilities in the U.S. by March 2020. Plourde says the closure of these two facilities is part of the company’s “strategic repositioning and optimization efforts in the Tissue segment.”