Cascades Inc., Quebec, has released its unaudited financial results for the three-month period that ended Sept. 30.
“Our third-quarter performance was in line with expectations, notwithstanding the fact that our tissue segment continued to face unprecedented cost inflation and reduced productivity due to labor scarcity and inefficiencies,” commented Mario Plourde, president and CEO. “Companywide, improvements in volume, pricing and sales mix mitigated continued cost headwinds on a sequential and year-over-year basis. Importantly, the profitability initiatives that have been deployed throughout our tissue business absorbed this segment’s higher costs during the quarter.”
The company reported sales of $1,174 million increased by $144 million compared with the same period last year. This reflects $147 million of combined benefits from improvements in selling prices and sales mix in all business segments. The Canadian dollar – US dollar exchange rate was also favorable for all businesses, contributing $26 million to sales levels on a consolidated basis. These factors were partially offset by a $26 million impact related to lower volumes mainly in the Tissue Papers business segment.
The corporation generated an operating income before depreciation and amortization (OIBD) of $92 million in the third quarter of 2022, down from $136 million in the third quarter of 2021. On an adjusted basis, third quarter OIBD totaled $111 million, an increase of $4 million, or 4%, from the $107 million generated in the same period last year.
This increase is attributable to $138 million of improvements related to selling price and mix in all businesses, the benefits of which outweighed higher raw material, production, energy and logistics costs in all segments.
Discussing near-term outlook, Plourde commented, “In view of the persistent inflationary pressures on costs and current macroeconomic environment, we are taking a conservative approach to our near-term outlook. Accordingly, we expect sequentially stable results in our packaging businesses, with lower raw material cost tailwinds projected to counterbalance lower volumes.”
“For our Tissue segment, we anticipate improved sequential results driven by accruing benefits from profitability initiatives and stable demand levels. Our initiatives have delivered according to expectations thus far, despite certain timing delays in their implementations,” he added. “The exception to this is meeting our production targets, where we continue to put in place additional measures to narrow the shortfall. The temporary shutdown of one of the machines at our St. Helen’s facility in Oregon has not impacted our annualized longer-term Tissue profitability objectives. Production is expected to resume by mid-December, and costs associated with the shutdown will total approximately $6 million.”
“As we have highlighted previously, our tissue business performance has been impacted by persistent cost inflation this year. The effect on results is immediate, whereas the roll-out of corrective pricing and other commercial initiatives takes time to be implemented and generate benefits. Given the significant impact that this interval has had in the current year, our Tissue segment is expected to generate $8 to $12 million of adjusted OIBD1 in the fourth quarter of 2022 and, as such, will not achieve the $25 – $40 million adjusted OIBD1 target in the calendar year 2022. More importantly, notwithstanding these challenging conditions, our Tissue segment remains on track to deliver on its long-term objectives,” the CEO concluded.
The main specific items, before income taxes, that impacted Cascades’ third quarter 2022 OIBD and/or a net loss were:
- $2 million of impairment charges in the Containerboard Packaging segment on some equipment as part of the continuing optimization initiatives of the platform in Ontario, Canada (OIBD and a net loss);
- $14 million of impairment charges in the Tissue Papers segment on spare parts and on some property, plant and equipment related to a permanently closed plant in the USA (OIBD and a net loss);
- $3 million unrealized loss on financial instruments (OIBD and a net loss);
- $10 million foreign exchange loss on long-term debt and financial instruments (a net loss).
For the 3-month period ended September 30, 2022, the corporation posted a net loss of $(2) million, or $(0.02) per common share, compared to net earnings of $32 million, or $0.32 per common share, in the same period of 2021. On an adjusted basis, Cascades generated net earnings of $20 million in the third quarter of 2022, or $0.20 per common share, compared to a net loss of $(1) million, or ($0.01) per common share, in the same period of 2021.
To read the complete report, please visit Cascades website.