KINGSEY FALLS, QC, Aug. 12, 2014 (CNW) -Cascades Inc. , a leader in the recovery and manufacturing of green packaging and tissue paper products, announces its unaudited financial results for the three-month period ended June 30, 2014.
Mr. Mario Plourde, President and Chief Executive Officer, had the following comments on the second quarter results: "The second quarter was marked by important decisions in continuation of our strategic action plan. The sale of our fine papers activities, the announcement of our exit from the kraft paper market and the closure of the Djupafors mill clearly demonstrate our willingness to rationalize our operations to focus on our core sectors. We also took advantage of favorable market conditions by refinancing more than $700 million of senior notes on terms that will be more advantageous in the long term. These decisions, while having a negative impact on our net results in the short term, will positively impact our profitability in the medium and long term and give us more flexibility to invest in our strategic assets. Even if some of these decisions were difficult to make, we need to appreciate the progress achieved and keep in mind that they will strengthen the financial situation of the company.
We are even more satisfied with the results for the quarter since they were positive despite the negative impact of non-recurring charges resulting from our strategic initiatives. Excluding these items, our EBITDA continued to grow on a comparable basis, both sequentially and compared to the same period of last year. The Containerboard Group was the main contributor to this growth. The Boxboard Europe Group also performed well during the quarter despite the lack of energy credits while the Specialty Products Group generated improved results when excluding the impact of discontinued operations. The Tissue Papers Group did better than in the first quarter but was unable to match last year's performance due to lower shipments in the retail market. Finally, the Greenpac mill continued to ramp-up as planned with daily production averaging close to 1,200 short tons in June."
Q2 2014 Strategic Highlights
- Refinancing of our 2016 and 2017 senior notes at favorable terms; net debt now standing at $1,645 million (compared to $1,708 million as at March 31, 2014);
- Exit from the fine papers sector with the divestiture of three units for $39 million;
- Closure of the Djupafors boxboard mill in Sweden;
- Exit from the kraft paper market with the announcement of the closure of the East Angus mill to occur in October 2014.
Q2 2014 Financial Highlights (considering the fine papers activities and Djupafors mills as discontinued operations)
- Sales of $985 million ($1,034 million with discontinued operations)
- (compared to $941 million in Q1 2014 (+5%) and $934 million in Q2 2013 (+5%))
- Excluding specific items
- EBITDA of $91 million ($93 million with discontinued operations)
- (compared to $77 million in Q1 2014 (+18%) and $81 million in Q2 2013 (+12%))
- Net earnings per share of $0.08
- (compared to $0.01 in Q1 2014 and $0.09 in Q2 2013)
- Including specific items
- EBITDA of $51 million ($4 million with discontinued operations)
- (compared to $81 million in Q1 2014 (-37%) and $80 million in Q2 2013 (-36%))
- Net loss per share of $0.88
- (compared to $0.01 in Q1 2014 and net earnings of $0.03 in Q2 2013)
- The following specific items, before income taxes, impacted our operating income and/or net earnings:
- a $43 million impairment charge following the revaluation of certain assets in our Packaging Products groups ($27 million) and the write-off of notes receivable linked to our former boxboard mill sold in 2011 to Fusion Paperboard following the announcement of its closure ($16 million) (operating income and net earnings);
- a $5 million pension plan curtailment gain, net of closure costs, further to the announced closure of the East Angus kraft paper mill (operating income and net earnings);
- a $2 million unrealized loss on derivative financial instruments (operating income and net earnings)
- a $44 million loss on the refinancing of our senior notes (net earnings);
- a $13 million foreign exchange gain on long-term debt and financial instruments (net earnings);
- a $2 million loss included in the share of results of affiliates and joint ventures (net earnings);
- a $38 million net loss resulting from discontinued operations of our fine papers activities and our boxboard mill in Sweden (net earnings).
Results analysis for the three-month period ended June 30, 2014 compared to the same period last year
In comparison with the same period last year, sales increased by 5% to $985 million during the second quarter of 2014 as favorable exchange rates and higher selling prices in our Containerboard Group more than offset lower shipments and the negative impacts of divestitures, namely the creation of a joint venture in New Brunswick.
Operating income, excluding specific items, increased from $38 million in the second quarter of 2013 to $45 million in the second quarter of 2014. In addition to the above-mentioned factors, a decrease in subcontracting and SG&A costs also contributed to counter the negative impacts of higher raw material costs. When including specific items, operating income amounted to $5 million in the second quarter of 2014 in comparison to $37 million for the same period of last year.
Net earnings excluding specific items amounted to $7 million ($0.08 per share) in the second quarter of 2014 compared to $8 million ($0.09 per share) for the same period in 2013. Including specific items, the net loss amounted to $83 million ($0.88 per share) in the second quarter of 2014 compared to net earnings of $2 million ($0.03 per share) in the same quarter in 2013 due to charges related to the refinancing, impairments and losses on discontinued operations.
Results analysis for the three-month period ended June 30, 2014 compared to the previous quarter
In comparison to the previous quarter, sales increased by 5% to reach $985 million in the second quarter of 2014 as higher shipments more than offset the negative impact of unfavorable foreign exchanges.
Operating income, excluding specific items, increased from $33 million in the first quarter of 2014 to $45 million in the second quarter of 2014. In addition to higher shipments, a decrease in energy costs and other production costs also contributed to counter the negative impacts of higher raw material costs and less favorable exchange rates.
Net debt decreased by $63 million to $1,645 million due to stronger cash flows from operations, a favorable exchange rate and proceeds from the sale of the fine papers activities. We also paid $33 million of refinancing costs during the quarter.
For further details, see the tables on IFRS and non-IFRS measures reconciliation, included herewith.
In commenting on the near-term outlook, Mr. Plourde added: "Going forward, we expect stable market conditions and recycled paper prices. We will take three weeks of downtime at the Santa Giustina boxboard mill in Italy for a major rebuild of one of the paper machines. Consequently, we now expect our 2014 results to be similar to what we generated in 2013. On a more positive note, our exit from declining sectors that normally require substantial maintenance expenditures puts us in a better position for the future. Our recent refinancing will result in interest savings of close to $15 million per year, and, when combined with the proceeds of the sale of our fine papers activities, has provided for $100M of additional financial flexibility."
Dividend on common shares and normal course issuer bid
The Board of Directors of Cascades declared a quarterly dividend of $0.04 per share to be paid September 11, 2014 to shareholders of record at the close of business on August 29, 2014. This dividend paid by Cascades is an "eligible dividend" as per the Income Tax Act (Bill C-28, Canada).
In the second quarter of 2014, Cascades did not purchase shares.