Cascades sales, income increase slightly in Q3

Cascades Inc., a packaging producer based in Kingsey Falls, Quebec, saw sales and income increase both sequentially and from the prior-year period in its latest third-quarter earnings report.

According to the packaging producer’s third-quarter earnings report, it achieved sales of CAN$1,030 million in the third quarter of the year, compared with $956 million in the second quarter of the year and CAN$1,014 million in the third quarter of 2020. The packaging producer also achieved operating income of CAN$73 million in the quarter compared with CAN$23 million in the second quarter of the year and CAN$54 million in the third quarter of 2020.

Cascades reports that operating income before depreciation and amortization (OIBD) was at CAN$136 million in the third quarter of the year compared with CAN$87 million in the second quarter of the year and CAN$123 million in the third quarter of 2020.

Following the company’s July announcement to monetize its 57.6 percent controlling equity interest in Reno de Medici S.p.A. for 1.45 euros per share, or CAN$461 million including foreign exchange contracts and before related transaction fees of CAN$11 million, Cascades finalized that sale in late October.

“Our exit from the European boxboard markets, recent 50 percent dividend increase and ongoing share buyback program through which 1.65 million shares were repurchased in the third quarter underscore our commitment to creating long-term value for the corporation and our shareholders,” says Mario Plourde, president and CEO of Cascades, on the company’s sale of its interest in Reno de Medici.

Within the quarter, total capital expenditures, net of disposals, were at CAN$4 million compared with CAN$65 million in the second quarter of the year and CAN$39 million in the third quarter of 2020. The company forecasts 2021 net capital expenditures to be between CAN$275 million and CAN$300 million, encompassing CAN$155 million for the company’s Bear Island containerboard conversion project in Virginia.

“Our Bear Island project is progressing as planned and sales commitments continue to be put in place,” Plourde said during the company’s third-quarter earnings report call Nov. 11. “We cannot confirm that 100 percent of year one production uptake has been contracted, and we have approximately 50 percent of the total plant capacity committed for multiyear contract.”

Plourde adds that the company’s third-quarter performance “reflects the ongoing dynamic nature of the North American macro environment and the announced production impact in our containerboard segment related to water-effluent treatment system issues at our Niagara Falls complex. We are encouraged with our results given this context, and with the sequential improvement in our tissue business.”

Within the quarter, Plourde says the company continued to face inflationary pressures on input costs—most notably raw materials—but also labor, transportation and energy costs across its operations in the third quarter.

During the company’s third-quarter earnings report call, Plourde reported that average index prices for old corrugated containers increased 179 percent year over year and 15 percent from the second quarter. “This reflects elevated domestic demand driven by strong containerboard industry production levels,” he said.

He reported that the average index price for tissue grades such as sorted office paper also rose notably in the third quarter, up 23 percent year over year and 30 percent from the second quarter of the year. “We have seen higher demand for white recycled [sorted office paper] and hybrid fiber related to a gradual increase in away-from-home tissue production. When combined with neutral fiber generation due to the ongoing limited office building activity, this has led to tighter market conditions and higher prices in recent months. We have managed well despite this condition and our mills remain adequately supplied.”

He adds that the effects of those costs were partially offset by the rollout of announced price increases.

“Sequentially in containerboard, good demand levels and realized benefits from the continued rollout of price increases helped to offset higher raw material prices and the impact from reduced production at our Niagara Falls complex, which reduced our sequential OIBD by CAN$26 million and CAN$10 million, respectively,” Plourde says.

Plourde reports that the company noticed positive demand and pricing trends in its tissue business in the third quarter, despite some higher input costs for raw materials and transportation.

Looking to the company’s fourth quarter, Plourde says the company is forecasting “sequentially stable results, with the impact of inflationary pressures on input costs largely mitigated by steady demand and the rollout of price increases” across Cascades’ business segments.

He adds, “In containerboard, solid demand and ongoing flow through of the third price increase are expected to offset higher raw material costs and inflationary headwinds in input costs. Likewise, good demand and price increases in specialty packaging are expected to counter cost pressure. Finally, considering unusual seasonal softness, we are forecasting results and demand levels in our tissue papers segment to be stable sequentially, with continued benefits from the ongoing rollout of sales price increases countering higher raw material prices and pressures on costs.”