Cascades reports overall solid financial results in Q2 of 2020

Cascades Inc., Kingsey Falls, Quebec, achieved sales of about $1.29 billion in the second quarter of the year, which is on par with sales of roughly $1.28 billion for the same time last year. According to its earnings report for Q2 of 2020, Cascades' sales decreased 2 percent sequentially as elevated COVID-19-related demand present in the first quarter of the year subsided. 

“As expected, this resulted in lower volumes in all segments with the exception of Specialty Products. Sales increased modestly when compared to the comparable period last year, supported by a 12.5 percent growth in tissue,” the company states in its latest Q2 earnings report. 

Cascades’ second-quarter adjusted operating income before depreciation and amortization (OIBD) of $186 million, representing a 14.5 percent margin, was a quarterly record for the corporation and was 16 percent above the prior quarter and 19 percent over the prior-year period. The sequential performance was driven by improved results in all segments except Containerboard. The company says results of the Tissue and Containerboard segments were negatively affected by slightly lower volumes and slightly higher raw material costs compared with the prior quarter. 

At the end of the first quarter, the corporation viewed the sharp increases in prices of recycled fibers as “temporary.” Cascades reports that recycled fiber pricing has since decreased and is expected to remain within more normalized levels. 

Cascades’ year-over-year adjusted OIBD increase of $30 million largely was driven by its Tissue segment and, to a lesser extent, the Boxboard Europe segment. Cascades’ Specialty Products segment results were stable for year over year, while the results for the Containerboard segment decreased “mainly due to higher raw material costs and less favorable selling price and mix,” the company states.

“Our operations executed and adapted well during the second quarter, delivering improved consolidated results on both a sequential and year-over-year basis,” says Mario Plourde, president and CEO of Cascades. “This strong performance resulted in a record quarterly adjusted OIBD for the corporation, highlighting the resiliency of our business model focused on providing customers with essential, sustainable quality packaging and tissue solutions. The ability of our business segments to successfully navigate through the challenging second-quarter business environment is a testament to the commitment and hard work of our dedicated employees and a measurable indication of the operational improvements and cost reduction initiatives being generated by our strategic investments of the past few years.

“Looking ahead, we are cautiously optimistic regarding our operational performance given the weighting of our production that falls within essential tissue and packaging segments and the adaptability demonstrated by our business segments within the challenging business environment. In the near-term, this is counterbalanced by the ongoing potential economic impact related to COVID-19 and evolving consumption trends in end markets that have resulted from the pandemic. With this in mind, we are expecting consolidated results to decrease sequentially as benefits from favorable raw materials pricing are anticipated to be offset by lower expected volumes, notably in the Away-from-Home Tissue business and the usual lower seasonal third-quarter volumes in Europe.”

Plourde adds that the company has no updates on its Bear Island conversion project. White Birch Paper Co., Greenwich, Connecticut, had sold the Virginia newsprint mill to Cascades in July 2018. About two years ago, Cascades had announced plans to invest $275 million to make recycled paper products at the Bear Island mill. Plourde says analysis on that project has “continued at a slower pace” due in part to the uncertainty surrounding COVID-19.