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Cascades Reports Strong Results for the Fourth Quarter of 2020 and 3rd Consecutive Annual Record Levels of Sales and Adjusted OIBD

Positive containerboard industry dynamics support optimistic outlook

Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three-month period and fiscal year ended December 31, 2020.

Q4 2020 Highlights

  • Sales of $1,284 million (compared with $1,275 million in Q3 2020 (+1%) and $1,227 million in Q4 2019 (+5%))
  • As reported (including specific items)
    • Operating income of $109 million (compared with $73 million in Q3 2020 (+49%) and operating loss of $(1) million in Q4 2019)
    • Operating income before depreciation and amortization (OIBD)1 of $181 million (compared with $154 million in Q3 2020 (+18%) and $76 million in Q4 2019 (+138%))
    • Net earnings per share of $0.72 (compared with $0.51 in Q3 2020 and net loss per share of $(0.27) in Q4 2019)
  • Adjusted (excluding specific items)1
    • Operating income of $94 million (compared with $81 million in Q3 2020 (+16%) and $75 million in Q4 2019 (+25%))
    • OIBD of $166 million (compared with $162 million in Q3 2020 (+2%) and $152 million in Q4 2019 (+9%))
    • Net earnings per share of $0.42 (compared with $0.50 in Q3 2020 and $0.30 in Q4 2019)

2020 Annual Highlights

  • Sales of $5,157 million (compared with $4,996 million in 2019 (+3%))
  • As reported (including specific items)
    • Operating income of $366 million (compared with $261 million in 20192 (+40%))
    • Operating income before depreciation and amortization (OIBD)1 of $665 million (compared with $550 million in 20192 (+21%))
    • Net earnings per share of $2.04 (compared with $0.77 in 20192)
  • Adjusted (excluding specific items)1
    • Operating income of $376 million (compared with $315 million in 2019 (+19%))
    • OIBD of $675 million (compared with $604 million in 2019 (+12%))
    • Net earnings per share of $1.95 (compared with $1.02 in 2019)
  • Net debt1 of $1,679 million as at December 31, 2020 (compared with $1,982 million as at September 30, 2020) reflecting solid cash flow from operations, the $125 million equity offering and appreciation of the Canadian dollar. Net debt to adjusted OIBD ratio1 at 2.5x down from 3.0x at September 30, 2020.
  • Adjusted free cash flow of $285 million, or $2.97 per share, in 2020, compared to $107 million, or $1.14 per share, in 2019.
  • Total capital expenditures paid, net of disposals, of $195 million in 2020, compared to $231 million in 2019; Forecasted 2021 capital expenditures of between $450 million and $475 million include $250 million envelope for the Bear Island containerboard conversion project in Virginia, USA.
  • Announced planned progressive and permanent closure of tissue operations at the Laval plant, located in Québec, in June 2021, and that Tissue operations in Pennsylvania ceased in December 2020.
  • Reno De Medici S.p.A. (Boxboard Europe) announced the signature of a put option for the sale of its French subsidiary, which produces virgin fiber-based boxboard, in February 2021. The transaction is expected to close at the end of the second quarter of 2021.

1

For further details, please refer to the “Supplemental Information on non-IFRS Measures” section.

2

2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation.

Mario Plourde, President and CEO, commented: “We are very pleased with our strong fourth quarter performance. Consolidated adjusted OIBD of $166 million surpassed our cautious outlook for the period, represented an increase of 2% sequentially and 9% year-over, and drove annual profitability to a record level for the third consecutive year. These results demonstrate good operational execution within the context of a challenging environment, benefits being realized from our ongoing margin improvement initiatives, and the resiliency and dedication of our employees throughout the challenges of COVID-19. Sequentially, fourth quarter performance was driven by a solid contribution from the Containerboard segment, itself fueled by stronger than expected demand on both the manufacturing and converting side. The Tissue segment also generated good results, with stable consumer retail tissue demand helping to offset lower demand levels for Away-from-Home products as a result of COVID-19. The Tissue segment generated a solid fourth quarter adjusted OIBD margin of 10.5% in spite of ongoing challenging market conditions. The Specialty Products and European Boxboard segments generated slightly lower results in the quarter.

We have made significant progress on the strategic side in 2020. A large portion of our announced  modernization investments in the Tissue segment have been completed, with the remaining two state-of-the-art converting lines expected to be installed in the coming quarters. In Containerboard, we announced details of our strategic Bear Island conversion project in mid-October, and helped to de-risk the project with a concurrent $125 million equity issuance offering. The European Boxboard segment announced the acquisition of Papelera del Principado S.A. (“Paprinsa”) and three affiliated companies, that will strengthen and consolidate Reno de Medici’s competitive positioning within European recycled boxboard markets, and is expected to close at the end of the first quarter of 2021. At the corporate level, we continued to proactively manage our long-term debt profile, redeeming our 2023 senior notes and issuing 2028 senior notes under beneficial terms. On a broader basis, we advanced our margin improvement initiatives throughout the year, with these efforts contributing approximately $75 million to our consolidated adjusted OIBD level in 2020.” & this news was shared to Prittle Prattle News via press release. 

Discussing near-term outlook, Mr. Plourde commented, “Our near-term outlook is positive despite ongoing COVID-19 related uncertainty. Demand levels in Containerboard remain strong which, combined with recent industry price increases, are expected to help offset raw material pricing headwinds. In Tissue, stronger than expected volumes in December, usual seasonal softness in the first quarter, and unfavourable demand impact on Away-from-Home products related to COVID-19 are expected to translate into weaker sequential performance. We expect the ongoing modernization, cost management and margin improvement initiatives to partially counter softer demand factors. Near-term performance in Specialty Products is forecasted to remain stable sequentially, with higher average selling prices and good demand trends for consumer food packaging offsetting slightly higher raw material costs. Results in European Boxboard are expected to remain stable, with higher volumes and a favourable exchange rate mitigating higher forecasted raw material and energy costs. On a consolidated basis, raw material costs are expected to be a headwind for our businesses sequentially, with average OCC prices increasing in line with usual seasonal trends for the period. Prices for white recycled fibers remain stable, while those for virgin pulp are expected to increase given recent moves in index pricing. Raw materials remain readily available, and we do not foresee any changes in this regard.

Looking further ahead, 2021 will be a busy year. The highlight will be our Bear Island containerboard project, which will account for the lion’s share of our capex program. We will also be finalizing modernization investments in our tissue converting operations, with all of these projects encompassed within our $450 to $475 million capital program for 2021. We expect these investments to be fully funded by solid projected cash flows for the year, in part driven by our ongoing margin improvement initiatives that are targeting net revenue management, production efficiency, organizational effectiveness and supply chain optimization. These initiatives are expected to contribute 1% annually to consolidated OIBD margins in both 2021 and 2022, regardless of external factors. As we continue to navigate the challenges and uncertainties inherent in the ongoing pandemic business environment, we remain focused on ensuring the health and safety of our employees, and on proactively engaging with our customers to ensure that their needs and expectations are met consistently, promptly and professionally.”

Financial Summary

Selected consolidated information

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

(unaudited)

2020

2019

Q4 2020

Q3 2020

Q4 2019

           

Sales

5,157

 

4,996

 

1,284

 

1,275

 

1,227

 

As Reported

         

Operating income before depreciation and amortization

(OIBD)1 2

665

 

550

 

181

 

154

 

76

 

Operating income (loss)2

366

 

261

 

109

 

73

 

(1)

 

Net earnings (loss)2

198

 

72

 

73

 

49

 

(26)

 

per share2

$

2.04

 

$

0.77

 

$

0.72

 

$

0.51

 

$

(0.27)

 

Adjusted1

         

Operating income before depreciation and

amortization (OIBD)

675

 

604

 

166

 

162

 

152

 

Operating income

376

 

315

 

94

 

81

 

75

 

Net earnings

187

 

96

 

42

 

48

 

29

 

per share

$

1.95

 

$

1.02

 

$

0.42

 

$

0.50

 

0.30

 

Margin (OIBD)

13.1

%

12.1

%

12.9

%

12.7

%

12.4

%

                               

Segmented OIBD as reported

           

(in millions of Canadian dollars) (unaudited)

2020

2019

Q4 2020

Q3 2020

Q4 2019

           

Packaging Products

         

Containerboard

436

443

150

101

98

Boxboard Europe

122

92

18

31

8

Specialty Products

58

52

15

16

9

           

Tissue Papers2

145

67

27

25

(3)

           

Corporate Activities

(96)

(104)

(29)

(19)

(36)

OIBD as reported

665

550

181

154

76

1

Please refer to the “Supplemental Information on Non-IFRS Measures” section for reconciliation of these figures.

2

2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation.

Segmented adjusted OIBD1

(in millions of Canadian dollars) (unaudited)

2020

2019

Q4 2020

Q3 2020

Q4 2019

           

Packaging Products

         

Containerboard

403

441

110

100

106

Boxboard Europe

129

108

27

29

24

Specialty Products

60

55

15

16

9

           

Tissue Papers

175

86

40

36

35

           

Corporate Activities

(92)

(86)

(26)

(19)

(22)

Adjusted OIBD

675

604

166

162

152

 

1 – Refer to the “Supplemental Information on Non-IFRS Measures” section.

         

Analysis of results for the three-month period ended December 31, 2020 (compared to the same period last year)

Sales of $1,284 million grew by $57 million, or 5%, compared with the same period last year. This was driven 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. This was partially offset by lower volumes in the Tissue segment attributable to continued COVID-19 related market contraction in the Away-from-Home segment. Year-over-year consolidated sales levels also benefited from favourable average selling prices and sales mix, with price increases realized in Tissue and stable pricing and sales mix in both Containerboard and Specialty Products more than mitigated the impacts of a less favourable pricing and mix environment for European Boxboard. Foreign exchange rates were beneficial for the European Boxboard business, which more than offset the impact of less favourable foreign exchange rates for Tissue and Containerboard.

The Corporation generated an operating income before depreciation and amortization (OIBD) of $181 million in the fourth quarter of 2020, up from $76 million in the fourth quarter of 2019. On an adjusted basis, fourth quarter OIBD totaled $166 million, an increase of $14 million, or 9% from the $152 million generated in the same period last year. Results from the Containerboard segment increased 4% year-over-year, as benefits from higher volumes and lower production costs more than offset the impact from higher raw material prices. Stronger year-over-year Tissue results reflected more favourable sales mix and price increases, the effects of which more than mitigated the effects of lower COVID-19 related volumes and higher raw material costs. Adjusted OIBD in the Specialty Products segment increased compared to the prior year period, as higher volumes, beneficial favourable pricing and sales mix, and lower energy and production costs offset higher raw material costs. Our North American business segments also benefited from the positive impacts being generated by our margin improvement program that was started in the first quarter of 2020. In Europe, lower energy and production costs, combined with beneficial foreign exchange rates and slightly higher volume, more than offset less favourable pricing and sales mix and slightly higher raw material costs.

On an adjusted basis1, fourth quarter 2020 OIBD stood at $166 million, versus $152 million in the previous year. The main specific items, before income taxes, that impacted our fourth quarter 2020 OIBD and/or net earnings were: 

  • $40 million gain from the sale of a building and the land of the Containerboard Packaging facility located in Etobicoke, Ontario, Canada (OIBD and net earnings);
  • $2 million environmental provision related to a Tissue plant in Pennsylvania, USA (OIBD and net earnings);
  • $8 million of restructuring charges recorded in Tissue and Corporate Activities as part of profitability improvement and restructuring initiatives (OIBD and net earnings);
  • $13 million of impairment charges, primarily in the Tissue Papers and Boxboard Europe segments, related to changes in the valuation of certain assets due to the current economic and market demand conditions (OIBD and net earnings);
  • $2 million unrealized loss on financial instruments (OIBD and net earnings);
  • $11 million unrealized gain on interest rate swaps and option fair value (net earnings);
  • $3 million foreign exchange gain on long-term debt and financial instruments (net earnings);
  • $3 million fair value revaluation loss on investments (net earnings).

For the 3-month periods ended December 31, 2020, the Corporation posted net earnings of $73 million, or $0.72 per share, compared to net loss of $26 million, or $(0.27) per share, in the same period of 2019. On an adjusted basis1, the Corporation generated net earnings of $42 million in the fourth quarter of 2020, or $0.42 per share, compared to net earnings of $29 million, or $0.30 per share, in the same period of 2019. 

1

For further details, please refer to the “Supplemental Information on non-IFRS Measures” section.

Dividend on common shares and normal course issuer bid

The Board of Directors of Cascades declared a quarterly dividend of $0.08 per share to be paid on March 25, 2021 to shareholders of record at the close of business on March 10, 2021. This dividend is an “eligible dividend” as per the Income Tax Act (R.C.S. (1985), Canada). Cascades purchased 190,200 shares for cancellation during the fourth quarter of 2020 at an average price of $14.46.

2020 Fourth Quarter Results Conference Call Details

Management will discuss the 2020 fourth quarter financial results during a conference call today at 9:00 a.m. EDT. The call can be accessed by dialing 1-888-231-8191 (international dial-in 1-647-427-7450). 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 March 25, 2021 by dialing 1-855-859-2056 (international dial-in 1-416-849-0833), access code 5877077.

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)

December 31,

2020

December 31,

2019

Assets

   

Current assets

   

Cash and cash equivalents

384

155

Accounts receivable

659

610

Current income tax assets

23

32

Inventories

569

598

Current portion of financial assets

5

10

 

1,640

1,405

Long-term assets

   

Investments in associates and joint ventures

82

80

Property, plant and equipment

2,772

2,770

Intangible assets with finite useful life

160

182

Financial assets

16

16

Other assets

50

55

Deferred income tax assets

170

153

Goodwill and other intangible assets with indefinite useful life

522

527

 

5,412

5,188

Liabilities and Equity

   

Current liabilities

   

Bank loans and advances

12

11

Trade and other payables

861

792

Current income tax liabilities

17

17

Current portion of long-term debt

102

85

Current portion of provisions for contingencies and charges

14

5

Current portion of financial liabilities and other liabilities

25

137

 

1,031

1,047

Long-term liabilities

   

Long-term debt

1,949

2,022

Provisions for contingencies and charges

57

49

Financial liabilities

6

5

Other liabilities

202

198

Deferred income tax liabilities

210

198

 

3,455

3,519

Equity

   

Capital stock

622

491

Contributed surplus

13

15

Retained earnings

1,146

1,003

Accumulated other comprehensive loss

(28)

(17)

Equity attributable to Shareholders

1,753

1,492

Non-controlling interests

204

177

Total equity

1,957

1,669

 

5,412

5,188

CONSOLIDATED STATEMENTS OF EARNINGS

 

For the 3-month periods ended

December 31,

For the years ended

December 31,

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

common shares) (unaudited)

2020

2019

2020

2019

Sales

1,284

1,227

5,157

4,996

Cost of sales and expenses

       

Cost of sales (including depreciation and amortization of $72 million

     for 3-month period (2019 — $77 million) and $299 million

     for the year (2019 — $289 million))

1,078

1,022

4,321

4,232

Selling and administrative expenses

112

133

460

453

Loss (gain) on acquisitions, disposals and others

(38)

5

(43)

(24)

Impairment charges and restructuring costs

21

67

52

78

Foreign exchange gain

(1)

(2)

Loss (gain) on derivative financial instruments

2

2

1

(2)

 

1,175

1,228

4,791

4,735

Operating income (loss)

109

(1)

366

261

Financing expense

26

27

105

101

Interest expense (revenue) on employee future benefits and other liabilities

(10)

(6)

(7)

42

Loss on repurchase of long-term debt

14

6

14

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

(3)

1

(6)

(6)

Fair value revaluation loss on investments

3

3

Share of results of associates and joint ventures

(5)

(3)

(14)

(9)

Earnings (loss) before income taxes

98

(34)

279

119

Provision for (recovery of) income taxes

21

(11)

45

19

Net earnings (loss) including non-controlling interests for the period

77

(23)

234

100

Net earnings attributable to non-controlling interests

4

3

36

28

Net earnings (loss) attributable to Shareholders for the period

73

(26)

198

72

Net earnings (loss) per common share

       

Basic

$

0.72

$

(0.27)

$

2.04

$

0.77

Diluted

$

0.72

$

(0.27)

$

2.02

$

0.75

Weighted average basic number of common shares outstanding

99,937,437

94,287,895

95,924,835

93,987,980

Weighted average number of diluted common shares

101,009,931

95,748,973

97,061,136

95,515,822

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

For the 3-month periods ended

December 31,

For the years ended

December 31,

(in millions of Canadian dollars) (unaudited)

2020

2019

2020

2019

Net earnings (loss) including non-controlling interests for the period

77

(23)

234

100

Other comprehensive income (loss)

       

Items that may be reclassified subsequently to earnings

       

Translation adjustments

       

Change in foreign currency translation of foreign subsidiaries

(50)

(18)

(7)

(75)

Change in foreign currency translation related to net investment hedging activities

30

13

3

45

Cash flow hedges

       

Change in fair value of foreign exchange forward contracts

1

Change in fair value of interest rate swaps

(1)

Change in fair value of commodity derivative financial instruments

(1)

2

(2)

Recovery of (provision for) income taxes

(2)

1

(2)

1

 

(22)

(5)

(4)

(31)

Items that are not released to earnings

       

Actuarial gain (loss) on employee future benefits

(3)

10

(22)

(3)

Recovery of (provision for) income taxes

1

(2)

6

1

 

(2)

8

(16)

(2)

Other comprehensive income (loss)

(24)

3

(20)

(33)

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

53

(20)

214

67

Comprehensive income attributable to non-controlling interests for the period

1

43

14

Comprehensive income (loss) attributable to Shareholders for the period

53

(21)

171

53

CONSOLIDATED STATEMENTS OF EQUITY

 

For the year ended December 31, 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 – End of previous year, as reported

491

15

1,000

(17)

1,489

177

1,666

Business combinations

3

3

3

Adjusted balance – Beginning of year

491

15

1,003

(17)

1,492

177

1,669

Comprehensive income (loss)

             

Net earnings

198

198

36

234

Other comprehensive income (loss)

(16)

(11)

(27)

7

(20)

 

182

(11)

171

43

214

Dividends

(31)

(31)

(16)

(47)

Issuance of common shares on public offering

125

(4)

121

121

Stock options expense

1

1

1

Issuance of common shares upon

  
exercise of stock options

10

(3)

7

7

Redemption of common shares

(4)

(4)

(8)

(8)

Balance – End of year

622

13

1,146

(28)

1,753

204

1,957

               
 

For the year ended December 31, 2019

(in millions of Canadian dollars)  (unaudited)

CAPITAL

STOCK

CONTRIBUTED

SURPLUS

RETAINED

EARNINGS

ACCUMULATED

OTHER

COMPREHENSIVE

INCOME (LOSS)

TOTAL EQUITY

ATTRIBUTABLE TO

SHAREHOLDERS

NON-

CONTROLLING

INTERESTS

TOTAL

EQUITY

Balance – End of previous year, as reported

490

16

1,000

2

1,508

180

1,688

Business combinations

(2)

(2)

(2)

Adjusted balance – End of previous year

490

16

998

2

1,506

180

1,686

New IFRS adoption

(9)

(9)

(9)

Adjusted balance – Beginning of year

490

16

989

2

1,497

180

1,677

Comprehensive income (loss)

             

Net earnings

72

72

28

100

Other comprehensive loss

(19)

(19)

(14)

(33)

 

72

(19)

53

14

67

Dividends

(23)

(23)

(17)

(40)

Issuance of common shares upon

    exercise of stock options

6

(1)

5

5

Redemption of common shares

(5)

(4)

(9)

(9)

Disposal of a subsidiary

(1)

(1)

Acquisition of non-controlling interests

(31)

(31)

1

(30)

Balance – End of year

491

15

1,003

(17)

1,492

177

1,669

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

For the 3-month periods ended

December 31,

For the years ended

December 31,

(in millions of Canadian dollars) (unaudited)

2020

2019

2020

2019

Operating activities

       

Net earnings (loss)

73

(26)

198

72

Adjustments for:

       

Financing expense and interest expense (revenue) on employee future benefits and

   other liabilities

16

21

98

143

Loss on repurchase of long-term debt

14

6

14

Depreciation and amortization

72

77

299

289

Loss (gain) on acquisitions, disposals and others

(38)

5

(43)

(27)

Impairment charges and restructuring costs

21

62

52

68

Unrealized loss (gain) on derivative financial instruments

2

2

1

(2)

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

(3)

1

(6)

(6)

Provision for (recovery of) income taxes

21

(11)

45

19

Fair value revaluation loss on investments

3

3

Share of results of associates and joint ventures

(5)

(3)

(14)

(9)

Net earnings attributable to non-controlling interests

4

3

36

28

Net financing expense paid

(6)

(32)

(79)

(133)

Premium paid on repurchase of long-term debt

(11)

(4)

(11)

Net income taxes paid

(10)

(13)

(9)

(27)

Dividends received

3

6

10

9

Provisions for contengencies and charges and others liabilities

(7)

(4)

(26)

(26)

 

146

91

567

401

Changes in non-cash working capital components

60

72

20

59

 

206

163

587

460

Investing activities

       

Disposals of associates and joint ventures

3

1

Payments for property, plant and equipment

(85)

(73)

(250)

(258)

Proceeds from disposals of property, plant and equipment

46

6

55

27

Change in intangible and other assets

(5)

(5)

(13)

(8)

Cash received (paid) for business combinations

3

2

(311)

Proceeds on disposals of a subsidiary, net of cash disposed

9

 

(44)

(69)

(203)

(540)

Financing activities

       

Bank loans and advances

3

(3)

1

(5)

Change in credit facilities

(50)

(278)

(131)

39

Issuance of unsecured senior notes, net of related expenses

1,026

409

1,026

Repurchase of unsecured senior notes

(776)

(264)

(776)

Increase in other long-term debt

33

(1)

33

6

Payments of other long-term debt, including lease obligations

(92)

(31)

(156)

(125)

Settlement of derivative financial instruments

1

Issuance of common shares on public offering, net of transaction fees

120

120

Issuance of common shares upon exercise of stock options

1

7

5

Redemption of common shares

(3)

(1)

(8)

(9)

Payment of other liabilities

(121)

Dividends paid to non-controlling interests

(3)

(3)

(16)

(17)

Dividends paid to the Corporation’s Shareholders

(9)

(8)

(31)

(23)

 

(1)

(74)

(156)

121

Net change in cash and cash equivalents during the period

161

20

228

41

Currency translation on cash and cash equivalents

(4)

(3)

1

(9)

Cash and cash equivalents – Beginning of the period

227

138

155

123

Cash and cash equivalents – End of the period

384

155

384

155

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, 2019.

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 December 31,

 

Canada

United States

Italy

Other countries

Total

(in millions of Canadian dollars) (unaudited)

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Packaging Products

                   

Containerboard

295

255

205

196

500

451

Boxboard Europe

82

62

172

181

254

243

Specialty Products

46

32

76

71

1

1

1

123

105

Intersegment sales

(4)

(3)

(2)

(6)

(3)

 

337

284

279

267

82

63

173

182

871

796

Tissue Papers

71

65

310

332

381

397

Intersegment sales and Corporate Activities

29

31

3

3

32

34

 

437

380

592

602

82

63

173

182

1,284

1,227

               

SALES TO

         

For the years ended December 31,

 

Canada

United States

Italy

Other countries

Total

(in millions of Canadian dollars) (unaudited)

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Packaging Products

                   

Containerboard

1,130

1,079

787

746

1

2

1,918

1,827

Boxboard Europe

322

309

730

739

1,052

1,048

Specialty Products

165

136

305

304

2

3

50

473

492

Intersegment sales

(13)

(13)

(5)

(1)

(18)

(14)

 

1,282

1,202

1,087

1,049

322

311

734

791

3,425

3,353

Tissue Papers

278

257

1,336

1,242

1

10

1,615

1,509

Intersegment sales and Corporate Activities

115

124

2

10

117

134

 

1,675

1,583

2,425

2,301

322

311

735

801

5,157

4,996

 

OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION

 

For the 3-month periods ended

December 31,

For the years ended

December 31,

(in millions of Canadian dollars) (unaudited)

2020

2019

2020

2019

Packaging Products

       

Containerboard

150

98

436

443

Boxboard Europe

18

8

122

92

Specialty Products

15

9

58

52

 

183

115

616

587

Tissue Papers

27

(3)

145

67

Corporate Activities

(29)

(36)

(96)

(104)

Operating income before depreciation and amortization

181

76

665

550

Depreciation and amortization

(72)

(77)

(299)

(289)

Financing expense and interest expense (revenue) on employee future benefits and other

   liabilities

(16)

(21)

(98)

(143)

Loss on repurchase of long-term debt

(14)

(6)

(14)

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

3

(1)

6

6

Fair value revaluation loss on investments

(3)

(3)

Share of results of associates and joint ventures

5

3

14

9

Earnings (loss) before income taxes

98

(34)

279

119

 

PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT

 

For the 3-month periods ended

December 31,

For the years ended

December 31,

(in millions of Canadian dollars) (unaudited)

2020

2019

2020

2019

Packaging Products

       

Containerboard

44

28

111

83

Boxboard Europe

18

15

41

56

Specialty Products

10

9

25

20

 

72

52

177

159

Tissue Papers

42

36

104

110

Corporate Activities

10

8

26

48

Total acquisitions

124

96

307

317

Proceeds from disposals of property, plant and equipment

(46)

(6)

(55)

(27)

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

(27)

(8)

(63)

(50)

 

51

82

189

240

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

       

Beginning of year

28

31

46

37

End of year

(40)

(46)

(40)

(46)

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

39

67

195

231

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: 

 

Q4 2020

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard Europe

Specialty Products

Tissue Papers

Corporate Activities

Consolidated

Operating income (loss)

122

5

12

10

(40)

109

Depreciation and amortization

28

13

3

17

11

72

Operating income (loss) before depreciation and amortization

150

18

15

27

(219)

181

Specific items:

           

Loss (gain) on acquisitions, disposals and others

(40)

2

(38)

Impairment charges (reversals)

(2)

9

5

1

13

Restructuring costs

6

2

8

Unrealized loss on derivative financial instruments

2

2

 

(40)

9

13

3

(15)

Adjusted operating income (loss) before depreciation and amortization

110

27

15

40

(26)

166

Adjusted operating income (loss)

82

14

12

23

(37)

94

 

Q3 2020

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard Europe

Specialty Products

Tissue 111Papers

Corporate Activities

Consolidated

Operating income (loss)

71

19

11

3

(31)

73

Depreciation and amortization

30

12

5

22

12

81

Operating income (loss) before depreciation and amortization

101

31

16

25

(19)

154

Specific items :

           

Gain on acquisitions, disposals and others

(5)

(2)

(7)

Impairment charges

13

13

Restructuring costs

3

3

Unrealized loss (gain) on derivative financial instruments

1

(2)

(1)

 

(1)

(2)

11

8

Adjusted operating income (loss) before depreciation and amortization

100

29

16

36

(19)

162

Adjusted operating income (loss)

70

17

11

14

(31)

81

 

Q4 2019

(in millions of Canadian dollars) (unaudited)

Containerboard

Boxboard Europe

Specialty Products

Tissue Papers1

Corporate Activities

Consolidated

Operating income (loss)

69

(6)

5

(21)

(48)

(1)

Depreciation and amortization

29

14

4

18

12

77

Operating income (loss) before depreciation and amortization

98

8

9

(3)

(36)

76

Specific items:

           

Loss on acquisitions, disposals and others

4

1

5

Inventory adjustment resulting from business acquisition

2

2

Impairment charges

2

14

34

14

64

Restructuring costs

1

2

3

Unrealized loss (gain) on derivative financial instruments

1

2

(1)

2

 

8

16

38

14

76

Adjusted operating income (loss) before depreciation and amortization

106

24

9

35

(22)

152

Adjusted operating income (loss)

77

10

5

17

(34)

75

Net earnings (loss), 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)

2020

20191

Q4 2020

Q3 2020

Q4 2019

           

Net earnings (loss) attributable to Shareholders for the period

198

72

73

49

(26)

Net earnings attributable to non-controlling interests

36

28

4

9

3

Provision for (recovery of) income taxes

45

19

21

(3)

(11)

Fair value revaluation loss on investments

3

3

Share of results of associates and joint ventures

(14)

(9)

(5)

(3)

(3)

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

(6)

(6)

(3)

(11)

1

Financing expense and interest expense (revenue) on employee future benefits and other liabilities and

  other liabilities and loss on repurchase of long-term debt

104

157

16

32

42

Operating income

366

261

109

73

6

Specific items:

         

Loss (gain) on acquisitions, disposals and others

(43)

(24)

(38)

(7)

5

Inventory adjustment resulting from business acquisition

2

2

Impairment charges

39

69

13

13

64

Restructuring costs

13

9

8

3

3

Unrealized loss (gain) on derivative financial instruments

1

(2)

2

(1)

2

 

10

54

(15)

8

76

Adjusted operating income

376

315

94

81

82

Depreciation and amortization

299

289

72

81

77

Adjusted operating income before depreciation and amortization

675

604

166

162

159

1

2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation.

The following table reconciles net earnings (loss) and net earnings (loss) 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 (LOSS)

 

NET EARNINGS (LOSS) PER SHARE 1

 

2020

20192

Q4 2020

Q3 2020

Q4 2019

 

2020

20192

Q4 2020

Q3 2020

Q4 2019

                       

As per IFRS

198

72

73

49

(26)

 

$

2.04

$

0.77

$

0.72

$

0.51

$

(0.27)

Specific items:

                     

Loss (gain) on acquisitions, disposals and others

(43)

(24)

(38)

(7)

5

 

$

(0.38)

$

(0.28)

$

(0.34)

$

(0.05)

$

0.04

Inventory adjustment resulting from business acquisition

2

2

 

$

0.02

$

0.02

Impairment charges

39

69

13

13

64

 

$

0.29

$

0.53

$

0.09

$

0.10

$

0.49

Restructuring costs

13

9

8

3

3

 

$

0.10

$

0.07

$

0.05

$

0.03

$

0.02

Unrealized loss (gain) on derivative financial instruments

1

(2)

2

(1)

2

 

$

0.02

$

(0.02)

$

0.02

$

0.01

Loss on repurchase of long-term debt

6

14

6

14

 

$

0.05

$

0.11

$

0.05

$

0.11

Unrealized gain on interest rate swaps and option fair value

(11)

(11)

(1)

 

$

(0.12)

$

(0.12)

$

(0.01)

Foreign exchange loss (gain) on long-term debt

  and financial instruments

(6)

(6)

(3)

(11)

1

 

$

(0.05)

$

(0.06)

$

(0.02)

$

(0.12)

$

0.01

Fair value revaluation loss on investments

3

3

 

$

0.02

$

0.02

Tax effect on specific items, other tax adjustments

  and attributable to non-controlling interest1

(13)

(38)

(5)

(4)

(35)

 

$

(0.02)

$

(0.12)

$

(0.02)

$

(0.12)

 

(11)

24

(31)

(1)

55

 

$

(0.09)

$

0.25

$

(0.30)

$

(0.01)

$

0.57

Adjusted

187

96

42

48

29

 

$

1.95

$

1.02

$

0.42

$

0.50

$

0.30

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.

2

2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation.

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

(in millions of Canadian dollars) (unaudited)

2020

20191

Q4 2020

Q3 2020

Q4 2019

Cash flow from operating activities

587

460

206

136

163

Changes in non-cash working capital components

(20)

(59)

(60)

(30)

(72)

Depreciation and amortization

(299)

(289)

(72)

(81)

(77)

Net income taxes paid

9

27

10

1

13

Net financing expense paid

79

133

6

49

32

Premium paid on long-term debt repurchase

4

11

4

11

Gain (loss) on acquisitions, disposals and others

43

27

38

7

(5)

Impairment charges and restructuring costs

(52)

(68)

(21)

(16)

(62)

Unrealized gain (loss) on derivative financial instruments

(1)

2

(2)

1

(2)

Dividend received, employee future benefits and others

16

17

4

2

(2)

Operating income

366

261

109

73

(1)

Depreciation and amortization

299

289

72

81

77

Operating income before depreciation and amortization

665

550

181

154

76

1

2019 third quarter consolidated results have been adjusted to reflect retrospective adjustments of purchase price allocation

The following table reconciles cash flow from operating activities with cash flow from operating activities (excluding changes in non-cash working capital components) and adjusted cash flow from operating activities. It also reconciles adjusted cash flow from operating activities 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)

2020

2019

Q4 2020

Q3 2020

Q4 2019

Cash flow from operating activities

587

460

206

136

163

Changes in non-cash working capital components

(20)

(59)

(60)

(30)

(72)

Cash flow from operating activities (excluding changes in non-cash working

   capital components)

567

401

146

106

91

Specific items paid

15

24

6

9

16

Adjusted cash flow from operating activities

582

425

152

115

107

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

(250)

(278)

(55)

(60)

(80)

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

(47)

(40)

(12)

(11)

(11)

Adjusted free cash flow

285

107

85

44

16

Adjusted free cash flow per share

$

2.97

$

1.14

$

0.85

$

0.46

$

0.17

Weighted average basic number of shares outstanding

95,924,835

93,987,980

99,937,437

95,019,694

94,287,895

                     

1

Excluding increase in investments

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)

December 31, 2020

September 30, 2020

December 31, 2019

Long-term debt

1,949

1,947

2,022

Current portion of long-term debt

102

253

85

Bank loans and advances

12

9

11

Total debt

2,063

2,209

2,118

Less: Cash and cash equivalents

384

227

155

Net debt

1,679

1,982

1,963

Adjusted OIBD (last twelve months)

675

661

604

Net debt / Adjusted OIBD ratio

2.5 x

3.0 x

3.3 x

Source:

Allan Hogg

Vice-President and Chief Financial Officer

By PR Newswire

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