Cascades Reports Results for the Second Quarter of 2021, increases dividend 50%

Good packaging market dynamics partially mitigate softness in the Tissue industry and inflationary pressure on production costs; Dividend increased 50% reflecting commitmentshareholder value and confidence in long-term performanc.

KINGSEY FALLS, QC, Aug. 5, 2021 /CNW/ - Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period ended June 30, 2021.

Q2 2021 Highlights (comparative figures have been restated to reflect discontinued operations2)

  • Sales of $956 million (compared with $942 million in Q1 2021 (+1%) and $1,020 million in Q2 2020 (-6%))
  • As reported (including specific items)
    • Operating income of $23 million (compared with $44 million in Q1 2021 (-48%) and $64 million in Q2 2020 (-64%))
    • Operating income before depreciation and amortization (OIBD)1 of $87 million (compared with $109 million in Q1 2021 (-20%) and $127 million in Q2 2020 (-31%))
    • Net earnings per share of $0.02 (compared with $0.22 in Q1 2021 and $0.57 in Q2 2020)
  • Adjusted (excluding specific items1)
    • Operating income of $34 million (compared with $57 million in Q1 2021 (-40%) and $80 million in Q2 2020 (-58%))
    • OIBD of $98 million (compared with $122 million in Q1 2021 (-20%) and $143 million in Q2 2020 (-31%))
    • Net earnings per share of $0.07 (compared with $0.29 in Q1 2021 and $0.61 in Q2 2020)
  • Following the July 2021 announcement by the Corporation regarding the monetization of its 57.6% controlling equity interest in Reno de Medici S.p.A. (RDM) for €1.45 per share, expected to result in total net proceeds of $461 million, financial information for the Boxboard Europe segment is now presented as discontinued operations. The transaction is expected to close in the third quarter of 20212.
  • Quarterly dividend increased to $0.12 per share from $0.08 per share previously, effective for the second quarter payment, resulting in an annual dividend of $0.48 per share, from $0.32 per share previously, and a return of approximately 3%.
  • Net debt1 of $1,707 million as at June 30, 2021 (compared with $1,654 million as at March 31, 2021). Net debt to adjusted OIBD ratio1, 3 of 2.9x up from 2.5x as at March 31, 2021. Net debt amount does not reflect the RDM transaction.
  • Total capital expenditures, net of disposals, of $65 million in Q2 2021, compared to $71 million in Q1 20212, and to $36 million in Q2 20202; Forecasted 2021 capital expenditures of between $400 million and $425 million, encompassing $250 million for the Bear Island containerboard conversion project in Virginia, USA.
  • S&P Global rating agency revised its outlook on the Corporation to positive from stable.

1

Please refer to the "Supplemental Information on Non-IFRS Measures" section for a complete reconciliation.

2

2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

3

Not adjusted for discontinued operations.

 

Mario Plourde, President and CEO, commented: "Our second quarter results were below expectations, with the sequential shortfall driven by our tissue segment. This reflected several factors, the most prominent being $12 million due to higher raw material costs and $9 million related to the net impact of sales prices and mix variance in the current period. We continued to see lower demand levels in tissue in the quarter, notably in US consumer retail product categories, as customers worked through inventories built up throughout 2020 in response to COVID-19 demand volatility. Operationally, we made the decision to temporarily curtail some tissue converting production in June to manage inventories. Notwithstanding the tissue results this quarter, we see current demand contraction as being an interim response to COVID-19 volatility given the essential nature of these products. Looking ahead, the modernization completed across our tissue platform has equipped this segment to generate important benefits when demand levels begin to normalize. On the packaging side, the Containerboard and Specialty products businesses delivered good results. Higher selling prices in Containerboard that reflect only two of the three announced price increases, coupled with good volume, were however not sufficient to fully cover raw material and production cost inflation in the second quarter, while benefits from volume growth in Specialty products more than offset the impact of higher raw material costs. A less favourable foreign exchange rate impacted the performance of all our businesses in the second quarter.

We completed an important step in our strategic plan this quarter with the announced monetization of our 57.6% equity position in Reno de Medici. This move underscores our commitment to creating long term value for the Corporation and our shareholders, and is aligned with our objective of focusing on our core North American packaging and tissue businesses. The expected net proceeds of $461 million from the transaction will improve financial flexibility and support our initiatives aimed at improving the financial performance and competitive positioning of our North American businesses. We remain dedicated to prudently and strategically deploying capital to enhance our operational platforms, while also optimizing our capital structure and evaluating opportunities to increase shareholder return including aligning our dividend return with industry averages. To this end, we are pleased to announce that we are increasing our quarterly dividend by 50% to $0.12 per share as of the second quarter of 2021, reflecting our confidence in our long-term free cash flow generation and operational performance. On an annual basis, this translates into a dividend of $0.48 per share, and increases our yield to approximately 3%."

Discussing near-term outlook, Mr. Plourde commented, "We are expecting improved results in the upcoming third quarter, supported by the roll-out of announced price increases in our Containerboard and Specialty Products segments, and a gradual normalization of demand in tissue. Notwithstanding our positive sequential outlook, the COVID-19 pandemic continues to bring with it the potential for volatility in operational and financial performance. As our second quarter results highlight, continued fluctuations in demand as well as pricing of raw materials and other input costs remain difficult to accurately predict, as does the timing and scope of economic reopening across North America. We are focused on effectively managing these uncertainties, taking decisive and necessary steps to meet the sometimes changing needs of our customers while also ensuring the safety of our employees. We are pleased with the flexibility our operations have demonstrated throughout what has been a challenging 18 months, and are very proud of the commitment and hard work of our employees."

Financial Summary

Selected consolidated information

(in millions of Canadian dollars, except amounts per share) (unaudited)

Q2 2021

Q1 20212

Q2 20202

       

Sales

956

942

1,020

As Reported

     

Operating income before depreciation and amortization (OIBD)1

87

109

127

Operating income

23

44

64

Net earnings

3

22

54

per share

$0.02

$0.22

$0.57

Adjusted1

     

Operating income before depreciation and amortization (OIBD)

98

122

143

Operating income

34

57

80

Net earnings

8

29

58

per share

$0.07

$0.29

$0.61

Margin (OIBD)

10.3 %

13.0 %

14.0 %

1

Please refer to the "Supplemental Information on Non-IFRS Measures" section for a complete reconciliation.

2

2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

 

Segmented OIBD as reported

(in millions of Canadian dollars) (unaudited)

Q2 2021

Q1 20212

Q2 20202

       

Packaging Products

     

Containerboard

95

96

83

Boxboard Europe

11

23

42

Specialty Products

18

18

16

       

Tissue Papers

(5)

18

48

       

Corporate Activities

(21)

(23)

(20)

Total before discontinued operations

98

132

169

Discontinued operations - Boxboard Europe

(11)

(23)

(42)

OIBD as reported

87

109

127

1

Please refer to the "Supplemental Information on Non-IFRS Measures" section for a complete reconciliation.

2

2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

 

Segmented adjusted OIBD1

(in millions of Canadian dollars) (unaudited)

Q2 2021

Q1 20212

Q2 20202

       

Packaging Products

     

Containerboard

100

108

94

Boxboard Europe

11

23

43

Specialty Products

18

18

17

       

Tissue Papers

1

20

54

       

Corporate Activities

(21)

(24)

(22)

Total before discontinued operations

109

145

186

Discontinued operations - Boxboard Europe

(11)

(23)

(43)

Adjusted OIBD1

98

122

143

1

Please refer to the "Supplemental Information on Non-IFRS Measures" section for a complete reconciliation.

2

2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

 

Analysis of results for the three-month period ended June 30, 2021 (compared to the same period last year2)

Sales of $956 million decreased by $64 million, or 6%, compared with the same period last year. This was driven by a less favourable Canadian dollar - US dollar exchange rate, and lower volumes in the Tissue segment following very strong retail demand in the year-ago period attributable to COVID-19 driven fluctuations in consumer buying patterns. This was partially offset by higher pricing and stronger volumes in all packaging segments and in Recovery & Recycling activities compared to the prior year period.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $87 million in the second quarter of 2021, down from $127 million in the second quarter of 2020. On an adjusted basis1, second quarter OIBD totaled $98 million, a decrease of $45 million, or 31% from the $143 million generated in the same period last year. This decrease is largely attributable to higher raw material costs in all segments, a less favourable exchange rate, lower volumes in Tissue and higher production costs in Containerboard that included inflationary pressure in labour, transportation and energy. Additionally, $9 million of R&D tax credits were recorded in the second quarter of 2020, while none was recorded in the current period.

The main specific items, before income taxes, that impacted our second quarter 2021 OIBD and/or net earnings were:

  • $6 million of impairment and restructuring charges recorded in Tissue as part of profitability improvement and restructuring initiatives (OIBD and net earnings);
  • $5 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 June 30, 2021, the Corporation posted net earnings of $3 million, or $0.02 per share, compared to net earnings of $54 million, or $0.57 per share, in the same period of 2020. On an adjusted basis1, the Corporation generated net earnings of $8 million in the second quarter of 2021, or $0.07 per share, compared to net earnings of $58 million, or $0.61 per share, in the same period of 2020.

1

Please refer to the "Supplemental Information on Non-IFRS Measures" section for a complete reconciliation.

2

2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

 

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.12 per share to be paid on September 2, 2021 to shareholders of record at the close of business on August 18, 2021. This dividend is an "eligible dividend" as per the Income Tax Act (R.C.S. (1985), Canada). Cascades purchased no shares for cancellation during the second quarter of 2021.

2021 Second Quarter Results Conference Call Details

Management will discuss the 2021 second quarter financial results during a conference call today at 9:00 a.m. EDT. The call can be accessed by dialing 1-888-390-0620 (international dial-in 1-416-764-8651). The conference call, including the investor presentation, will be broadcast live on the Cascades website ( www.cascades.com under the "Investors" section). A replay of the call will be available on the Cascades website and may also be accessed by phone until September 5, 2021 by dialing 1-888-390-0541 (international dial-in 1-416-764-8677), access code 787468.

Founded in 1964, Cascades offers sustainable, innovative and value-added packaging, hygiene and recovery solutions. The company employs 12,000 women and men across a network of 85 facilities in North America and Europe. Driven by its participative management, half a century of experience in recycling, and continuous research and development efforts, Cascades continues to provide innovative products that customers have come to rely on, while contributing to the well-being of people, communities and the entire planet. Cascades' shares trade on the Toronto Stock Exchange under the ticker symbol CAS. Certain statements in this release, including statements regarding future results and performance, are forward-looking statements (as such term is defined under the Private Securities Litigation Reform Act of 1995) based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of general economic conditions, decreases in demand for the Corporation's products, increases in raw material costs, fluctuations in selling prices and adverse changes in general market and industry conditions and other factors listed in the Corporation's Securities and Exchange Commission filings.

CONSOLIDATED BALANCE SHEETS

(in millions of Canadian dollars) (unaudited)

June 30,
2021

December 31,
2020

Assets

   

Current assets

   

Cash and cash equivalents

171

384

Accounts receivable

508

659

Current income tax assets

19

23

Inventories

477

569

Current portion of financial assets

12

5

Assets classified as held for sale

735

 

1,922

1,640

Long-term assets

   

Investments in associates and joint ventures

82

82

Property, plant and equipment

2,406

2,772

Intangible assets with finite useful life

133

160

Financial assets

8

16

Other assets

46

50

Deferred income tax assets

149

170

Goodwill and other intangible assets with indefinite useful life

505

522

 

5,251

5,412

Liabilities and Equity

   

Current liabilities

   

Bank loans and advances

7

12

Trade and other payables

608

861

Current income tax liabilities

12

17

Current portion of long-term debt

72

102

Current portion of provisions for contingencies and charges

11

14

Current portion of financial liabilities and other liabilities

19

25

Liabilities classified as held for sale

392

 

1,121

1,031

Long-term liabilities

   

Long-term debt

1,799

1,949

Provisions for contingencies and charges

52

57

Financial liabilities

8

6

Other liabilities

123

202

Deferred income tax liabilities

190

210

 

3,293

3,455

Equity

   

Capital stock

622

622

Contributed surplus

13

13

Retained earnings

1,171

1,146

Accumulated other comprehensive loss

(40)

(28)

Equity attributable to Shareholders

1,766

1,753

Non-controlling interests

192

204

Total equity

1,958

1,957

 

5,251

5,412

 

CONSOLIDATED STATEMENTS OF EARNINGS

 

For the 3-month periods ended June 30,

For the 6-month periods ended June 30,

(in millions of Canadian dollars, except per common share amounts and number of common shares) (unaudited)

2021

2020

2021

2020

Sales

956

1,020

1,898

2,061

Cost of sales and expenses

       

Cost of sales (including depreciation and amortization of $64 million for 3-month period (2020 — $63 million) and $129 million for 6-month period (2020 — $123 million))

834

855

1,631

1,718

Selling and administrative expenses

87

86

174

193

Loss on acquisitions, disposals and others

1

2

Impairment charges and restructuring costs

6

15

11

15

Foreign exchange loss (gain)

1

(1)

2

(1)

Loss on derivative financial instruments

5

13

 

933

956

1,831

1,927

Operating income

23

64

67

134

Financing expense

20

26

42

52

Interest expense on employee future benefits

1

1

2

2

Foreign exchange loss (gain) on long-term debt and financial instruments

(3)

(9)

(6)

8

Share of results of associates and joint ventures

(5)

(3)

(7)

(6)

Earnings before income taxes

10

49

36

78

Provision for income taxes

2

7

8

17

Net earnings from continuing operations including non-controlling interests for the period

8

42

28

61

Results from discontinued operations

(3)

24

5

38

Net earnings including non-controlling interests for the period

5

66

33

99

Net earnings attributable to non-controlling interests

2

12

8

23

Net earnings attributable to Shareholders for the period

3

54

25

76

Net earnings from continuing operations per share

       

Basic

$0.04

$0.43

$0.21

$0.58

Diluted

$0.04

$0.43

$0.21

$0.57

Net earnings per common share

       

Basic

$0.02

$0.57

$0.24

$0.81

Diluted

$0.02

$0.57

$0.24

$0.80

Weighted average basic number of common shares outstanding

102,281,072

94,459,257

102,280,243

94,354,030

Weighted average number of diluted common shares

103,285,361

95,600,602

103,360,930

95,562,296

         

Net earnings attributable to Shareholders:

       

Continuing operations

5

40

22

54

Discontinued operations

(2)

14

3

22

Net earnings

3

54

25

76

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

For the 3-month periods ended June 30,

For the 6-month periods ended June 30,

(in millions of Canadian dollars) (unaudited)

2021

2020

2021

2020

Net earnings including non-controlling interests for the period

5

66

33

99

Other comprehensive income (loss)

       

Items that may be reclassified subsequently to earnings

       

Translation adjustments

       

Change in foreign currency translation of foreign subsidiaries

(14)

(39)

(29)

43

Change in foreign currency translation of foreign subsidiaries from discontinued operations

(1)

(6)

(20)

14

Change in foreign currency translation related to net investment hedging activities

9

22

18

(26)

Change in foreign currency translation related to net investment hedging activities from discontinued operations

3

12

(8)

Cash flow hedges

       

Change in fair value of interest rate swaps

1

Change in fair value of commodity derivative financial instruments

2

3

Provision for income taxes

(2)

(3)

Provision for income taxes from discontinued operations

(2)

 

(6)

(19)

(21)

23

Items that are not released to earnings

       

Actuarial gain (loss) on employee future benefits

4

(25)

21

(15)

Recovery of (provision for) income taxes

(1)

7

(6)

4

 

3

(18)

15

(11)

Other comprehensive income (loss)

(3)

(37)

(6)

12

Comprehensive income including non-controlling interests for the period

2

29

27

111

Comprehensive income (loss) attributable to non-controlling interests for the period

2

8

(1)

31

Comprehensive income attributable to Shareholders for the period

21

28

80

Comprehensive income (loss) attributable to Shareholders:

       

Continuing operations

3

8

27

58

Discontinued operations

(3)

13

1

22

Comprehensive income

21

28

80

 

CONSOLIDATED STATEMENTS OF EQUITY

 

For the 6-month period ended June 30, 2021

(in millions of Canadian dollars)   
   (unaudited)

CAPITAL STOCK

CONTRIBUTED SURPLUS

RETAINED EARNINGS

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS

TOTAL EQUITY
ATTRIBUTABLE TO
SHAREHOLDERS

NON-CONTROLLING INTERESTS

TOTAL EQUITY

Balance - Beginning of period

622

13

1,146

(28)

1,753

204

1,957

Comprehensive income (loss)

             

Net earnings

25

25

8

33

Other comprehensive income (loss)

15

(12)

3

(9)

(6)

 

40

(12)

28

(1)

27

Dividends

(16)

(16)

(10)

(26)

Acquisition of non-controlling interests

1

1

(1)

Balance - End of period

622

13

1,171

(40)

1,766

192

1,958

   
 

For the 6-month period ended June 30, 2020

(in millions of Canadian dollars)
   (unaudited)

CAPITAL STOCK

CONTRIBUTED SURPLUS

RETAINED EARNINGS

ACCUMULATED
OTHER
COMPREHENSIVE
LOSS

TOTAL EQUITY
ATTRIBUTABLE TO
SHAREHOLDERS

NON-CONTROLLING INTERESTS

TOTAL EQUITY

Balance - Beginning of period

491

15

1,003

(17)

1,492

177

1,669

Comprehensive income

             

Net earnings

76

76

23

99

Other comprehensive income (loss)

(11)

15

4

8

12

 

65

15

80

31

111

Dividends

(15)

(15)

(9)

(24)

Issuance of common shares upon exercise of stock options

9

(2)

7

7

Redemption of common shares

(2)

(3)

(5)

(5)

Balance - End of period

498

13

1,050

(2)

1,559

199

1,758

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

For the 3-month periods ended June 30,

For the 6-month periods ended June 30,

(in millions of Canadian dollars) (unaudited)

2021

2020

2021

2020

Operating activities from continuing operations

       

Net earnings attributable to Shareholders for the period

3

54

25

76

Results from discontinued operations

3

(24)

(5)

(38)

Results from discontinued operations attributable to non-controlling interests

(1)

10

2

16

Net earnings from continuing operations

5

40

22

54

Adjustments for:

       

Financing expense and interest expense on employee future benefits

21

27

44

54

Depreciation and amortization

64

63

129

123

Loss on acquisitions, disposals and others

1

2

Impairment charges and restructuring costs

6

15

11

15

Unrealized loss on derivative financial instruments

5

13

Foreign exchange loss (gain) on long-term debt and financial instruments

(3)

(9)

(6)

8

Provision for income taxes

2

7

8

17

Share of results of associates and joint ventures

(5)

(3)

(7)

(6)

Net earnings attributable to non-controlling interests

3

2

6

7

Net financing expense paid

(4)

(7)

(44)

(23)

Net income taxes received (paid)

(1)

(1)

1

9

Dividends received

5

5

5

5

Provisions for contingencies and charges and other liabilities

(11)

(15)

(13)

(16)

 

87

125

169

249

Changes in non-cash working capital components

(47)

(19)

(72)

(43)

 

40

106

97

206

Investing activities from continuing operations

       

Disposals (investments) in associates and joint ventures

1

(1)

1

(1)

Payments for property, plant and equipment

(66)

(37)

(137)

(101)

Proceeds from disposals of property, plant and equipment

1

1

1

2

Change in intangible and other assets

(7)

(3)

(11)

(4)

Cash received from business combinations

2

 

(71)

(40)

(146)

(102)

Financing activities from continuing operations

       

Bank loans and advances

1

(5)

(2)

Change in credit facilities

(1)

(40)

(1)

57

Increase in other long-term debt

5

5

Payments of other long-term debt, including lease obligations

(20)

(10)

(44)

(20)

Settlement of derivative financial instruments

1

1

Issuance of common shares upon exercise of stock options

4

7

Redemption of common shares

(5)

Payment of other liabilities

(121)

Dividends paid to non-controlling interests and acquisition of non-controlling interests

(4)

(4)

(8)

(7)

Dividends paid to the Corporation's Shareholders

(8)

(8)

(16)

(15)

 

(27)

(57)

(69)

(105)

Change in cash and cash equivalents during the period from continuing operations

(58)

9

(118)

(1)

Change in cash and cash equivalents from discontinued operations and reclassification of cash and cash equivalent as held for sale

(98)

6

(88)

2

Net change in cash and cash equivalents during the period

(156)

15

(206)

1

Currency translation on cash and cash equivalents

(1)

(6)

(7)

6

Cash and cash equivalents - Beginning of the period

328

153

384

155

Cash and cash equivalents - End of the period

171

162

171

162

 

SEGMENTED INFORMATION

The Corporation analyzes the performance of its operating segments based on their operating income before depreciation and amortization, which is not a measure of performance under International Financial Reporting Standards (IFRS). However, the chief operating decision-maker (CODM) uses this performance measure to assess the operating performance of each reportable segment. Earnings for each segment are prepared on the same basis as those of the Corporation. Intersegment operations are recorded on the same basis as sales to third parties, which are at fair market value. The accounting policies of the reportable segments are the same as the Corporation's accounting policies described in its most recent audited consolidated financial statements for the year ended December 31, 2020.

The Corporation's operating segments are reported in a manner consistent with the internal reporting provided to the CODM. The Chief Executive Officer has authority for resource allocation and management of the Corporation's performance and is therefore the CODM.

The Corporation's operations are managed in four segments: Containerboard, Boxboard Europe and Specialty Products (which constitutes the Corporation's Packaging Products), and Tissue Papers.

   

SALES TO

 

For the 3-month periods ended June 30,

 

Canada

United States

Italy

Other countries

Total

(in millions of Canadian dollars) (unaudited)

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

Packaging Products

                   

Containerboard

301

268

196

186

497

454

Boxboard Europe

83

80

170

185

253

265

Specialty Products

58

42

73

78

131

120

Inter-segment sales

(3)

(4)

(4)

(1)

(7)

(5)

 

356

306

265

263

83

80

170

185

874

834

Tissue Papers

58

65

239

359

297

424

Inter-segment sales and Corporate Activities

34

28

4

(1)

38

27

 

448

399

508

621

83

80

170

185

1,209

1,285

Discontinued operations — Boxboard Europe

(83)

(80)

(170)

(185)

(253)

(265)

 

448

399

508

621

956

1,020

 

   

SALES TO

 

For the 6-month periods ended June 30,

 

Canada

United States

Italy

Other countries

Total

(in millions of Canadian dollars) (unaudited)

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

Packaging Products

                   

Containerboard

600

528

400

383

1

1,000

912

Boxboard Europe

174

161

365

376

539

537

Specialty Products

105

77

148

154

2

253

233

Inter-segment sales

(7)

(7)

(7)

(1)

(14)

(8)

 

698

598

541

536

174

161

365

379

1,778

1,674

Tissue Papers

115

135

474

734

1

589

870

Inter-segment sales and Corporate Activities

65

54

5

70

54

 

878

787

1,020

1,270

174

161

365

380

2,437

2,598

Discontinued operations — Boxboard Europe

(174)

(161)

(365)

(376)

(539)

(537)

 

878

787

1,020

1,270

4

1,898

2,061

 

 

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

 

For the 3-month periods ended June 30,

For the 6-month periods ended June 30,

(in millions of Canadian dollars) (unaudited)

2021

2020

2021

2020

Packaging Products

       

Containerboard

95

83

191

185

Boxboard Europe

11

42

34

73

Specialty Products

18

16

36

27

 

124

141

261

285

Tissue Papers

(5)

48

13

93

Corporate Activities

(21)

(20)

(44)

(48)

Operating income before depreciation and amortization before discontinued operations

98

169

230

330

Discontinued operations — Boxboard Europe

(11)

(42)

(34)

(73)

Operating income before depreciation and amortization

87

127

196

257

Depreciation and amortization

(64)

(63)

(129)

(123)

Financing expense and interest expense on employee future benefits

(21)

(27)

(44)

(54)

Foreign exchange gain (loss) on long-term debt and financial instruments

3

9

6

(8)

Share of results of associates and joint ventures

5

3

7

6

Earnings before income taxes

10

49

36

78

 

 

PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT

 

For the 3-month periods
ended June 30,

For the 6-month periods
ended June 30,

(in millions of Canadian dollars) (unaudited)

2021

2020

2021

2020

Packaging Products

       

Containerboard

52

15

106

31

Boxboard Europe

10

4

17

9

Specialty Products

8

4

16

9

 

70

23

139

49

Tissue Papers

4

15

12

39

Corporate Activities

7

5

11

11

Total acquisitions before discontinued operations

81

43

162

99

Discontinued operations — Boxboard Europe

(10)

(4)

(17)

(9)

Total acquisitions

71

39

145

90

Proceeds from disposals of property, plant and equipment

(1)

(1)

(1)

(2)

Right-of-use assets acquisitions and acquisitions included in other debts

(12)

(4)

(12)

(11)

 

58

34

132

77

Acquisitions for property, plant and equipment included in "Trade and other payables"

       

Beginning of period

49

32

46

52

End of period

(42)

(30)

(42)

(30)

Payments for property, plant and equipment net of proceeds from disposals

65

36

136

99

 

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES SPECIFIC ITEMS

The Corporation incurs some specific items that adversely or positively affect its operating results. We believe it is useful for readers to be aware of these items as they provide additional information to measure performance, compare the Corporation's results between periods, and assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not necessarily reflective of the Corporation's underlying business operations in measuring and comparing its performance and analyzing future trends. Our definition of specific items may differ from those of other corporations and some of them may arise in the future and may reduce the Corporation's available cash.

They include, but are not limited to, charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing and repurchase of long-term debt, some deferred tax asset provisions or reversals, premiums paid on repurchase of long-term debt, gains or losses on the acquisition or sale of a business unit, gains or losses on the share of results of associates and joint ventures, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rate swaps and option fair value revaluation, foreign exchange gains or losses on long-term debt and financial instruments, fair value revaluation gain or losses on investments, specific items of discontinued operations and other significant items of an unusual, non-cash or non-recurring nature.

RECONCILIATION OF NON-IFRS MEASURES

To provide more information for evaluating the Corporation's performance, the financial information included in this analysis contains certain data that are not performance measures under IFRS ("non-IFRS measures"), which are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance measures and non-IFRS measures is useful to both Management and investors, as they provide additional information to measure the performance and financial position of the Corporation. This also increases the transparency and clarity of the financial information. The following non-IFRS measures are used in our financial disclosures:

  • Operating income before depreciation and amortization (OIBD): Used to assess operating performance and the contribution of each segment when excluding depreciation and amortization. OIBD is widely used by investors as a measure of a corporation's ability to incur and service debt and as an evaluation metric.
  • Adjusted OIBD: Used to assess operating performance and the contribution of each segment on a comparable basis.
  • Adjusted operating income: Used to assess operating performance of each segment on a comparable basis.
  • Adjusted net earnings: Used to assess the Corporation's consolidated financial performance on a comparable basis.
  • Adjusted free cash flow: Used to assess the Corporation's capacity to generate cash flows to meet financial obligations and/or discretionary items such as share repurchase, dividend increase and strategic investments.
  • Net debt to adjusted OIBD ratio: Used to measure the Corporation's credit performance and evaluate financial leverage.
  • Net debt to adjusted OIBD ratio on a pro-forma basis: Used to measure the Corporation's credit performance and evaluate the financial leverage on a comparable basis, including significant business acquisitions and excluding significant business disposals, if any.

Non-IFRS measures are mainly derived from the consolidated financial statements, but do not have meanings prescribed by IFRS. These measures have limitations as an analytical tool and should not be considered on their own or as a substitute for an analysis of our results as reported under IFRS. In addition, our definitions of non-IFRS measures may differ from those of other corporations. Any such modification or reformulation may be significant.

The reconciliation of operating income (loss) to OIBD, to adjusted operating income (loss) and to adjusted OIBD by business segment is as follows:

 

Q2 2021

 

Including Discontinued Operations

Exclusion of
Discontinued
Operations1

As reported

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue Papers

Corporate
Activities

Boxboard
Europe

Consolidated

Operating income (loss)

64

(1)

14

(22)

(33)

1

23

Depreciation and amortization

31

12

4

17

12

(12)

64

Operating income (loss) before depreciation and amortization

95

11

18

(5)

(21)

(11)

87

Specific items:

             

Loss on acquisitions, disposals and others

2

(2)

Impairment charges

1

1

Restructuring costs

5

5

Unrealized loss (gain) on derivative financial instruments

5

(2)

2

5

 

5

6

11

Adjusted operating income (loss) before depreciation and amortization

100

11

18

1

(21)

(11)

98

Adjusted operating income (loss)

69

(1)

14

(16)

(33)

1

34

 

 

Q1 2021

 

As reported in 2021

Exclusion of
Discontinued
Operations1

As reported

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Boxboard
Europe

Consolidated

Operating income (loss)

65

12

15

(36)

(12)

44

Depreciation and amortization

31

11

3

18

13

(11)

65

Operating income (loss) before depreciation and amortization

96

23

18

18

(23)

(23)

109

Specific items :

             

Restructuring costs

3

2

5

Unrealized loss (gain) on derivative financial instruments

9

(1)

8

 

12

2

(1)

13

Adjusted operating income (loss) before depreciation and amortization

108

23

18

20

(24)

(23)

122

Adjusted operating income (loss)

77

12

15

2

(37)

(12)

57

1 2021 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

 

 

Q2 2020

 

As reported in 2020

Exclusion of
Discontinued
Operations1

As reported

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard
Europe

Specialty
Products

Tissue
Papers

Corporate
Activities

Boxboard
Europe

Consolidated

Operating income (loss)

54

30

11

31

(32)

(30)

64

Depreciation and amortization

29

12

5

17

12

(12)

63

Operating income (loss) before depreciation and amortization

83

42

16

48

(20)

(42)

127

Specific items:

             

Loss on acquisitions, disposals and others

1

1

Impairment charges

8

5

13

Restructuring costs

1

1

2

Unrealized loss (gain) on derivative financial instruments

2

1

(2)

(1)

 

11

1

1

6

(2)

(1)

16

Adjusted operating income (loss) before depreciation and amortization

94

43

17

54

(22)

(43)

143

Adjusted operating income (loss)

65

31

12

37

(34)

(31)

80

1 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

 

Net earnings, as per IFRS, is reconciled below with operating income, adjusted operating income and adjusted operating income before depreciation and amortization:

(in millions of Canadian dollars) (unaudited)

Q2 20211

Q1 20211

Q2 20201

       

Net earnings attributable to Shareholders for the period

3

22

54

Net earnings attributable to non-controlling interests

2

6

12

Results from discontinued operations

3

(8)

(24)

Provision for income taxes

2

6

7

Share of results of associates and joint ventures

(5)

(2)

(3)

Foreign exchange gain on long-term debt and financial instruments

(3)

(3)

(9)

Financing expense and interest expense on employee future benefits

21

23

27

Operating income

23

44

64

Specific items:

     

Loss on acquisitions, disposals and others

1

Impairment charges

1

13

Restructuring costs

5

5

2

Unrealized loss on derivative financial instruments

5

8

 

11

13

16

Adjusted operating income

34

57

80

Depreciation and amortization

64

65

63

Adjusted operating income before depreciation and amortization

98

122

143

1 2021 and 2020 consolidated results have been adjusted to reflect retrospective adjustments of discontinued operations.

 

The following table reconciles net earnings and net earnings per share, as per IFRS, with adjusted net earnings and adjusted net earnings per share:

(in millions of Canadian dollars, except amounts per share) (unaudited)

NET EARNINGS

   

NET EARNINGS PER SHARE 1

 

Q2 20211

Q1 2021

Q2 2020

   

Q2 20211

Q1 2021

Q2 2020

                 

As per IFRS

3

22

54

   

$0.02

$0.22

$0.57

Specific items:

               

Loss on acquisitions, disposals and others

1

   

Impairment charges

1

13

   

$0.01

$0.10

Restructuring costs

5

5

2

   

$0.04

$0.03

$0.02

Unrealized loss on derivative financial instruments

5

8

   

$0.03

$0.06

Foreign exchange gain on long-term debt and financial instruments

(3)

(3)

(9)

   

($0.03)

($0.02)

($0.09)

Included in discontinued operations, net of tax

1

   

$0.01

Tax effect on specific items, other tax adjustments and attributable to non-controlling interest1

(3)

(3)

(4)

   

 

5

7

4

   

$0.05

$0.07

$0.04

Adjusted

8

29

58

   

$0.07

$0.29

$0.61

1

Specific amounts per share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per share amounts in line item ''Tax effect on specific items, other tax adjustments and attributable to non-controlling interests'' only include the effect of tax adjustments.

 

The following table reconciles cash flow from operating activities from continuing operations with operating income and operating income before depreciation and amortization:

(in millions of Canadian dollars) (unaudited)

Q2 20211

Q1 20211

Q2 20201

Cash flow from operating activities from continuing operations

40

57

106

Changes in non-cash working capital components

47

25

19

Depreciation and amortization

(64)

(65)

(63)

Net income taxes paid (received)

1

(2)

1

Net financing expense paid

4

40

7

Loss on acquisitions, disposals and others

(1)

Impairment charges and restructuring costs

(6)

(5)

(15)

Unrealized loss on derivative financial instruments

(5)

(8)

Provisions for contingencies and charges and other liabilities

6

2

10

Operating income

23

44

64

Depreciation and amortization

64

65

63

Operating income before depreciation and amortization

87

109

127

1 2021 and 2020 consolidated results and consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations.

 

The following table reconciles cash flow from operating activities from continuing operations with cash flow from operating activities from continuing operations (excluding changes in non-cash working capital components) and adjusted cash flow from operating activities from continuing operations. It also reconciles adjusted cash flow from operating activities from continuing operations to adjusted free cash flow, which is also calculated on a per share basis:

(in millions of Canadian dollars, except amount per share or otherwise mentioned) (unaudited)

Q2 20211

Q1 20212

Q2 20202

Cash flow from operating activities from continuing operations

40

57

106

Changes in non-cash working capital components

47

25

19

Cash flow from operating activities from continuing operations(excluding changes in non-cash working capital components)

87

82

125

Specific items paid

2

4

Adjusted cash flow from operating activities from continuing operations

89

86

125

Capital expenditures & other assets1 and right-of-use assets payments, net of disposals

(83)

(86)

(47)

Dividends paid to the Corporation's Shareholders and to non-controlling interests

(10)

(12)

(12)

Adjusted free cash flow generated (used)

(4)

(12)

66

Adjusted free cash flow generated (used) per share (in Canadian dollars)

($0.04)

($0.12)

$0.70

Weighted average basic number of shares outstanding

102,281,072

102,279,404

94,459,257

1

Excluding increase in investments

2

2021 and 2020 consolidated cash flows have been adjusted to reflect retrospective adjustments of discontinued operations.

 

The following table reconciles total debt and net debt with the ratio of net debt to adjusted operating income before depreciation and amortization (adjusted OIBD):

(in millions of Canadian dollars) (unaudited)

June 30,

2021

March 31,

2021

June 30,

2020

Long-term debt

1,799

1,889

1,975

Current portion of long-term debt

72

87

255

Bank loans and advances

7

6

9

Total debt

1,878

1,982

2,239

Less: Cash and cash equivalents

171

328

162

Net debt as reported

1,707

1,654

2,077

Net debt of discontinued operations classified as held for sale1

(6)

11

Net debt - before reclassification as held for sale1

1,701

1,665

2,077

Adjusted OIBD including $90 million (June 30, 2021), $122 million (March 31, 2021) and $122 million (June 30, 2020) from discontinued operations (last twelve months)1

582

659

660

Net debt / Adjusted OIBD1

2.9 x

2.5 x

3.1 x

       

Net debt as reported

1,707

1,654

2,077

Expected net proceeds of disposal of RDM1

(461)

Pro forma net debt

1,246

1,654

2,077

Adjusted OIBD as reported on a last twelve months basis

492

659

660

Pro forma net debt / Adjusted OIBD1

2.5 x

2.5 x

3.1 x

1 Net debt / Adjusted OIBD before discontinued operations in the Boxboard Europe segment.

 

Media:
Christine Beaulieu
Communications Director
819-363-5161

Investors
Jennifer Aitken, MBA
Director, Investor Relations
514-282-2697

Source:
Allan Hogg
Vice-President and Chief Financial Officer