Cascades Inc. reports its unaudited financial results for the three-month period ended March 31, 2021.
Mario Plourde, Cascades Inc. President and CEO commented: “Our first quarter consolidated results highlight the dynamic and challenging business environment in view of the ongoing COVID-19 pandemic. The sequential decrease in our results was largely driven by an important contraction in retail tissue demand as customers worked through high inventory levels built up throughout 2020, and continued lower volumes in Away-from-Home. Tissue volumes were also impacted by inclement weather in the quarter, which resulted in lost production in one of the Corporation’s Southern U.S. tissue plants. Conversely, the European Boxboard segment generated strong sequential sales growth in the period, the beneficial impact of which was offset by a notable increase in raw material prices and higher energy costs in the period. Solid demand levels and higher selling prices in the Containerboard segment were largely offset by transportation and raw material cost increases, and lower volume related to seasonality and scheduled maintenance downtime in the first three months of the year. Specialty Products generated strong sequential margin improvement.
Within the context of today’s unpredictable business environment, we are pleased with the progress we made in our strategic initiatives and investments during the first quarter. The optimization and modernization of our Tissue platform is nearing completion, and the strategic decisions and investments made in recent years have better equipped this business to navigate the current challenging market dynamics. In Containerboard, our Bear Island conversion project is advancing on schedule and on budget, and the European Boxboard segment is expected to close its acquisition of Papelera del Principado S.A. (“Paprinsa”) at the end of June 2021. We continued to focus on our margin improvement program, with these initiatives expected to contribute 1% annually to our consolidated adjusted OIBD level based on our 2019 reference year.”
Discussing near-term outlook, Plourde commented, “In light of continued uncertainty regarding the COVID-19 pandemic, we are maintaining a cautiously optimistic view for our near-term performance. Sequential results from our Tissue business are expected to remain stable, with performance over the longer-term expected to improve as consumer tissue demand normalizes once inventories are re-balanced, Away-from-Home demand increases as the economy and businesses reopen, and benefits are realized from the high single digit price increase announced for consumer and Away-from-Home tissue products beginning in the third quarter. We expect near-term Containerboard performance to reflect good demand and cumulative benefits from announced price increases, counterbalanced by raw material price inflation and planned maintenance downtime at our two Niagara Falls facilities in the second quarter. Near-term results for the Specialty Products are forecasted to remain stable sequentially, with higher volume and average selling prices offsetting slightly higher raw material costs. Lastly, sequential performance from the European Boxboard segment is expected to remain stable as good volumes and higher average selling price as a result of announced price increases should mitigate higher raw material costs.
More broadly speaking, we are focused on advancing our Bear Island containerboard project, and finalizing modernization investments in our tissue converting operations. These investments will be fully funded by projected operational cash flows for the year. We continue to remain vigilant on ensuring the health and safety of our employees, and on actively working with our customers to meet their evolving needs and expectations.”
ANALYSIS OF RESULTS FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2021 (COMPARED TO THE SAME PERIOD LAST YEAR)
Sales of $1,182 million decreased by $83 million, or 7%, compared with the same period last year. This was driven by lower volumes in the Tissue segment attributable to continued COVID-19 related market softness in the Away-from-Home segment, and an important contraction in consumer retail product volumes as customers rebalanced inventory levels that had been built up in response to elevated Covid-19 demand. This was partially offset by stronger volumes in all packaging segments, most notably in the Containerboard segment which benefited from strong demand on both the manufacturing and converting side. Year-over-year consolidated sales levels also benefited from more favourable average selling prices and sales mix, with price increases realized in Tissue and Containerboard. Foreign exchange rates were beneficial for the European Boxboard business, but these benefits were more than offset by the impact of less favourable foreign exchange rates in North America.
The Corporation generated an operating income before depreciation and amortization (OIBD) of $128 million in the first quarter of 2021, down from $157 million in the first quarter of 2020. On an adjusted basis1, first quarter OIBD totaled $141 million, a decrease of $16 million, or 10% from the $157 million generated in the same period last year. This decrease is largely attributable to lower Tissue results, which reflected difficult year-over-year comparisons following elevated Covid-19 related demand in the year-ago period and customer inventory management in the current period that impacted retail consumer demand levels. European Boxboard adjusted OIBD levels also decreased from the year ago period, as material cost inflation more than offset the benefits from improved volumes. Good results from the North American packaging segments partially counterbalanced these headwinds. Results from the Containerboard segment increased 9% year-over-year, with higher volumes and beneficial selling price and sales mix mitigating the impact of higher raw material prices, while those of Specialty Products increased 50% compared to the prior year period, driven by higher volumes and better realized spreads. Results also benefited from lower SG&A costs as a $10 million expected credit loss provision on accounts receivable amounts was recorded in 2020 in relation to the COVID-19 pandemic.
The main specific items, before income taxes, that impacted our first quarter 2021 OIBD and/or net earnings were:
- $5 million of restructuring charges recorded in Containerboard and Tissue as part of profitability improvement and restructuring initiatives (OIBD and net earnings);
- $8 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 March 31, 2021, the Corporation posted net earnings of $22 million, or $0.22 per share, compared to net earnings of $22 million, or $0.24 per share, in the same period of 2020. On an adjusted basis1, the Corporation generated net earnings of $29 million in the first quarter of 2021, or $0.29 per share, compared to net earnings of $39 million, or $0.42 per share, in the same period of 2020.
View the full report here.