CASCADES INC.€¦ · Certain statements in this presentation, including statements regarding...

CASCADES INC.

Review of Q3 2016 Financial Results

November 11, 2016

DISCLAIMER

2

Certain statements in this presentation, including statements regarding future results and performance, are forward-lookingstatements within the meaning of securities legislation based on current expectations. The accuracy of such statements issubject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from thoseprojected, including, but not limited to, the effect of general economic conditions, decreases in demand for Cascades Inc.’s(“Cascades,” “CAS,” the “Company,” the “Corporation,” “us” or “we”) products, the prices and availability of raw materials,changes in the relative values of certain currencies, fluctuations in selling prices and adverse changes in general market andindustry conditions. This presentation may also include price indices as well as variance and sensitivity analyses that areintended to provide the reader with a better understanding of the trends related to our business activities. These items are basedon the best estimates available to the Company.

The financial information included in this presentation also contains certain data that are not measures of performance underIFRS (“non-IFRS measures”). For example, the Company uses operating income before depreciation and amortization (“OIBD orEBITDA”) and adjusted operating income before depreciation and amortization (“adjusted OIBD or adjusted EBITDA”) becausesuch measures are used by management to assess the operating and financial performance of the Company’s operatingsegments. Such information is reconciled to the most directly comparable financial measures, as set forth in the “SupplementalInformation on Non-IFRS Measures” section of our most recent quarterly report or annual report.

Adjusted measures exclude specific items. Specific items are defined as items such as charges for or reversal of impairment ofassets, for facility or machine closures, accelerated depreciation of assets due to restructuring measures, premiums paid onlong-term debt refinancing, loss on refinancing of long-term debt, gains or losses on sales of business units, unrealized gains orlosses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rateswaps, foreign exchange gains or losses on long-term debt, other significant items of an unusual or non-recurring nature, and allsuch items included in discontinued operations or in the share of results of our associates and joint ventures.

All amounts in this presentation are in Canadian dollars unless otherwise indicated.

OPENING REMARKS

2014

Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 LTM

Financial results

Sales 3,561 910 950 1,026 975 3,861 1,003 998 1,021 3,997

Adjusted (excluding specific items)

EBITDA 340 85 103 134 104 426 106 112 103 425

Net earnings 20 17 24 49 22 112 34 35 30 121

Net earnings per share $0.21 $0.18 $0.25 $0.52 $0.23 $1.18 $0.35 $0.38 $0.32 $1.28

Cash flow from operations 277 35 86 110 106 337 56 116 68 346

2015 2016 (In millions of CAN$, except amount per

share)

$0.08

$0.18$0.25

$0.52

$0.23

$0.35$0.38

$0.32

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

(CAN$) Adjusted EPS

82 85

103

134

104 106 112103

4%

6%

8%

10%

12%

14%

16%

0

25

50

75

100

125

150

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

(% of sales)(M CAN$) Adjusted EBITDA

Note 1 – Excluding specific items such as premiums paid on the refinancing of the senior notes and restructuring costs.

SUMMARY OF QUARTERLY FINANCIAL RESULTS

4

Lower EBITDA YoY due to weaker European results, higher raw material & corporate costs

1

277

268

282

296

268277

284

294

80%

85%

90%

95%

100%

220

240

260

280

300

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

(% capacity

utilization)('000 s.t.)

144136

154 162

146143

158 163

80%

85%

90%

95%

100%

100

120

140

160

180

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

(% capacity


37 4144 45

4045

48 48

10

20

30

40

50

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

('000 s.t.)

263

296

286

266 263

278

267258

85%

90%

95%

100%

105%

220

240

260

280

300

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

(% capacity


Tissue Papers

HISTORICAL SEGMENTED QUARTERLY SHIPMENTS

5

Containerboard Boxboard Europe

Specialty Products1

Note 1 – Industrial packaging shipments only.

721

741

766 769

717

743 757 763

600

650

700

750

800

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

('000 s.t.) Total Shipments

90%

93% 93% 93%

89%

93%

91%

93%

80%

85%

90%

95%

100%

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

Capacity Utilization Rate (Manufacturing only)

12.3%11.9%

11.6%11.3% 11.3% 11.3% 11.4% 11.3%

9%

10%

11%

12%

13%

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

LTM Working Capital (% of LTM Sales)

9.4%

9.7%10.0%

10.8%11.2%

11.6%

11.9%

11.1%

8%

9%

10%

11%

12%

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

LTM Return on Assets

Note 1 – Not adjusted for discontinued operations. Note 2 – Not considering the Specialty Products Group. Utilization rate defined as total manufacturing shipments on practical capacity. Please refer to the 2015 Annual Report for the definition of the KPIs.

KEY PERFORMANCE INDICATORS (KPIs)

6

Higher QoQ capacity utilization rate for Containerboard & Tissue; stable working capital

2

1 1

Sequentially:

Containerboard: 93% to 96%

Boxboard Europe: 92% to 89%

Tissue Papers: 89% to 93%

50

100

150

200

Au

g 1

3

Nov 1

3

Fe

b 1

4

Ma

y 1

4

Au

g 1

4

Nov 1

4

Fe

b 1

5

Ma

y 1

5

Au

g 1

5

Nov 1

5

Fe

b 1

6

Ma

y 1

6

Au

g 1

6

Nov 1

6

(US$/ton)Recycled Fibre Prices

White grades (Basket of products) Brown grades (OCC)

700

800

900

1,000

1,100

Ju

ly 1

3

Oct

13

Ja

n 1

4

Ap

r 1

4

Ju

ly 1

4

Oct

14

Ja

n 1

5

Ap

r 1

5

Ju

ly 1

5

Oct

15

Ja

n 1

6

Ap

r 1

6

Ju

ly 1

6

Oct

16

(US$/ton)Virgin Pulp Prices

NBSK NBHK

OBM Average Quarterly List Prices Q3-2015 Q2-2016 Q3-2016 Q3/Q3 Q3/Q2

White grades - Basket of products 165 154 164 -1% +7%

Brown grades - OCC No. 11 (Northeast) 90 90 105 +17% +17%

Virgin Pulp Prices

NBSK (Canadian sources delivered to Eastern US) 967 980 998 +3% +2%

NBHK (Canada/US sources delivered to Eastern US) 880 847 842 -4% -1%

RAW MATERIAL COSTS – INDEX LIST PRICES

7

Source: RISI.

Note 1 – Basket of white recycled paper, including grades such as SOP, Hard White Envelope and Coated Book Stock.

Note 1 – Weighted average based on Cascades’ consumption of each grade.

Current

(Nov.)

105

179995

830

Current

(Oct.)

Strong domestic & foreign demand pushed recovered paper prices up in Q3

1

4452 55

68

5655

60 58

8%

12%

16%

20%

24%

15

30

45

60

75

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016

(% of sales)(M CAN$)

1417

19

14

13

16 17

9

4%

8%

12%

16%

20%

5

10

15

20

25

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016


HISTORICAL SEGMENTED QUARTERLY ADJUSTED EBITDA

8


Tissue PapersSpecialty Products

10 10

14

1816

14

1618

4%

8%

12%

16%

20%

4

8

12

16

20

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016


21

15

23

4338 34

39

47

4%

8%

12%

16%

20%

0

12

24

36

48

Q42014

Q12015

Q22015

Q32015

Q42015

Q12016

Q22016

Q32016


(M CAN$)

Adjusted

EBITDA

Q2-2016

VolumeRaw

Materials

Selling

Prices &

Mix

Energy CAN$Reco. &

Recyc.

Acqu.

&

Divest.

Other

Costs

Adjusted

EBITDA

Q3-2016

39

47

44

2

(2)

20

30

40

50

60

(M CAN$)

Adjusted

EBITDA

Q2-2016

Reco. &

Recyc.CAN$

Raw

MaterialsEnergy

Other

Costs

Acqu.

&

Divest.

Volume

Selling

Prices &

Mix

Adjusted

EBITDA

Q3-2016

16

18

3 1

(1)(1)

8

12

16

20

24

(M CAN$)

Adjusted

EBITDA

Q2-2016

Energy CAN$Reco. &

Recyc.

Acqu.

&

Divest.

Volume

Selling

Prices &

Mix

Raw

Materials

Other

Costs

Adjusted

EBITDA

Q3-2016

17

9

2

(1)

(2)

(3)

(4)

5

10

15

20

25

(M CAN$)

Adjusted

EBITDA

Q2-2016

Volume

Selling

Prices &

Mix

CAN$Reco. &

Recyc.

Acqu.

&

Divest.

Other

CostsEnergy

Raw

Materials

Adjusted

EBITDA

Q3-2016

60 583 1

(1) (1)(4)

30

40

50

60

70

SEGMENTED SEQUENTIAL ADJUSTED EBITDA WATERFALLS

9


Tissue PapersSpecialty Products

--

-

Higher containerboard and

converted products

Longer than usual

downtime taken

-

Weak demand &

depreciation of British pound

Different product mix

-

Higher promotional

activities

--

New additional volume &

AfH seasonality

Lower purchases of

external rolls

Higher selling prices &

favourable product mix

Higher OCC

prices

- - - -- - -

56%58% 57%

62%

64%

61%

45%

50%

55%

60%

65%

2011 2012 2013 2014 2015 Q32016

Net Debt / Net Debt + Total Equity

5.8x

5.0x

4.6x

4.7x

4.0x3.8x

3.0x

4.0x

5.0x

6.0x

7.0x

2011 2012 2013 2014 2015 Q32016

Net Debt / LTM Adjusted EBITDA

2.5x

3.0x

3.4x 3.4x

4.7x4.8x

2.0x

3.0x

4.0x

5.0x

6.0x

2011 2012 2013 2014 2015 Q32016

Interest Coverage Ratio

250

721

328

187

12336

0

200

400

600

800

1 year >1 year 2019 2021 2022 2023

Long-Term Debt Maturities

Senior notes Revolver

Debts without recourse Subsidiaries debts

CONSOLIDATED FINANCIAL RATIOS & DEBT MATURITIES

10Bank debt financial covenant ratios: Net funded debt to capitalization < 65% (currently at 57.9%), interest coverage ratio > 2.25x (currently at 4.64x).

Continuously working towards healthier financial ratios

FINANCIAL REVIEW

(M CAN$)

Sales

Q3-2015

Recovery

&

Recycling

Selling

Prices

& Mix

Acqu. &

DisposalsCAN$

Corp.

Elim.Volume

Sales

Q3-2016

Containerboard 353 5 8 1 (11) 356

Boxboard Europe 205 (9) (7) 189

Specialty Products 151 9 (7) (1) 1 5 158

Tissue Papers 341 (1) 2 342

Corporate & Elim. (24) 6 (6) (24)

Total 1,026 9 2 1 (2) (4) (11) 1,021

Q3 2015 – Q3 2016 YoY SALES RECONCILIATION

12

Favourable mix in recovery activities and containerboard were offset by lower volume

29

1,030

1,035

0

1,025

1,040

(4)

1,021

1

(2)

(11)

0%

1,026

(M CAN$)

(M CAN$)

Sales

Q2-2016Volume

Recovery

&

Recycling

CAN$

Selling

Prices

& Mix

Acqu. &

Disposals

Corp.

Elim.

Sales

Q3-2016

Containerboard 342 7 2 1 4 356

Boxboard Europe 197 (6) (1) (2) 1 189

Specialty Products 157 (2) 8 1 (1) (6) 1 158

Tissue Papers 324 11 4 2 1 342

Corporate & Elim. (22) 3 (5) (24)

Total 998 10 8 6 3 (2) (2) 1,021

Q2 2016 – Q3 2016 QoQ SALES RECONCILIATION

13

3

8

1,025

1,005

1,015

1,000

0

1,020

1,010

1,021

998

10

6(2)

(2)

+2%(M CAN$)

Volume, FX, pricing & a good performance in our recovery activities contributed to

increase sales

14

23% YoY decrease due to lower contribution from Containerboard, Europe & higher Corporate costs

0

140

120

130

100

110

(5)

Boxboard

Europe

Group

(20)

Q3-2015

Adjusted

EBITDA

134

Q3-2016

Adjusted

EBITDA

Containerboard

Packaging

Group

4

Tissue

Papers

Group

Specialty

Products

Group

Corporate

Activities

(10)

103

(M CAN$)

Q3 2015 – Q3 2016 YoY ADJUSTED EBITDA RECONCILIATION- Weaker volume

- Longer than usual seasonal downtime

- Depreciation of the British Pound

- Higher recycled fibre costs

- Mississauga fire

- Acceleration of ERP implementation and

business process re-engineering

- FX losses on hedging

- Q3-15 positive items not repeated in Q3-16

- Unfavourable index pricing for linerboard,

medium and OCC

- Slightly lower volume

- Higher production costs related to mix

- Higher freight, labor & maintenance costs

15

28

110

115

0

105

120

125

103

Q3-2016

Adjusted

EBITDA

Specialty

Products

Group

(2)

Tissue

Papers

Group

112

Q2-2016

Adjusted

EBITDA

(9)

Containerboard

Packaging

Group

Corporate

Activities

(8)

Boxboard

Europe

Group

(M CAN$)

Q2 2016 – Q3 2016 QoQ ADJUSTED EBITDA RECONCILIATION

- Weaker volume

- Longer than usual seasonal downtime

- Depreciation of the British Pound

- Higher recycled fibre costs

- Mississauga fire

- Acceleration of ERP implementation

and business process re-engineering

- Lower R&D tax credits

European boxboard demand and investments in IT and business process are the main

drivers behind the sequential decrease

- Higher volume

- More favourable raw material and

product mix

Adjusted Specifics As reported Adjusted Specifics As reported

EBITDA 134 (12) 122 103 (5) 98

Depreciation (45) (45) (48) (48)

EBIT 89 (12) 77 55 (5) 50

Financing expenses & interest expense on

employee future benefits (23) (1) (24) (24) (24)

FX gain (loss) on LT debt and fin. Inst. (36) (36) (7) (7)

Share of results of associates and JVs 5 17 22 10 10

Profit (loss) before tax 71 (32) 39 41 (12) 29

Provision for income taxes (20) 7 (13) (11) 2 (9)

Non-controlling interests (2) (2) (4)

Net earnings (loss) 49 (27) 22 30 (10) 20

per share $0.52 ($0.28) $0.24 $0.32 ($0.11) $0.21

Change in after-tax operating results normalized @ 30% ($0.26) Lower contribution from Boxboard Europe and higher

costs from Corporate activities

Change in share of results of Associates and JVs - $0.06 Greater net contribution from Greenpac and Boralex

net of taxes and non-controlling interests

($0.20)

Q3-2015 Q3-2016

QUARTERLY YOY EPS VARIANCE – Q3 VS Q3

16

Adjusted Specifics As reported Adjusted Specifics As reported

EBITDA 112 112 103 (5) 98

Depreciation (47) (47) (48) (48)

EBIT 65 65 55 (5) 50

Financing expenses & interest expense on

employee future benefits (22) (22) (24) (24)

FX gain (loss) on LT debt and fin. Inst. 6 6 (7) (7)

Share of results of associates and JVs 7 (6) 1 10 10

Profit (loss) before tax 50 50 41 (12) 29

Provision for income taxes (14) 1 (13) (11) 2 (9)

Non-controlling interests (1) (1)

Net earnings (loss) 35 1 36 30 (10) 20

per share $0.38 $0.00 $0.38 $0.32 ($0.11) $0.21

Change in after-tax operating results normalized @ 30% ($0.09) Higher EBITDA from Tissue Group more than offset by

Boxboard Europe slow down and Coporate activities

costs increase

Change in income taxes provision (vs normalized 30%) $0.01

Change in share of results of Associates and JVs - $0.02 Greater contribution from Greenpac

net of taxes and non-controlling interests

($0.06)

Q2-2016 Q3-2016

QUARTERLY QoQ EPS VARIANCE – Q2 VS Q3

17

103

55

50(48) (2) (3)

0

20

40

60

80

100

120

AdjustedEBITDA

Dep. &amort.

Adjustedoperatingincome

Impairmentcharges

Restructuringcosts

Operatingincome

(M CAN$)

Container- Boxboard Specialty Tissue Corporate

(M CAN$) board Europe Products Papers Activities

Operating income (loss) 44 1 12 26 (33) 50

Specific items:

Impairment charges 2 2

Restructuring costs 3 3

Unrealized loss (gain) on financial instruments 1 (1)

Total specific items 1 5 (1) 5

Adjusted operating income (loss) 45 1 12 31 (34) 55

Depreciation and amortization 13 8 6 16 5 48

Adjusted EBITDA 58 9 18 47 (29) 103

Total

Q3-16 ADJUSTED EBITDA TO OPERATING INCOME RECONCILIATION

18

NET EARNINGSNET EARNINGS

PER COMMON SHARE 1

(in millions of Canadian dollars, except amount per common share) Q3-2016 Q3-2016

As per IFRS 20 $0.21

Specific items:

Impairment charges 2 $0.02

Restructuring costs 3 $0.02

Foreign exchange loss on long-term debt and financial

instruments 7 $0.07

Tax effect on specific items, other tax adjustments and

attributable to non-controlling interest1

(2) -

10 $0.11

Adjusted 30 $0.32

NET EARNINGS – IFRS VS ADJUSTED

19Note 1 – Specific amounts per common share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interest. Per share amounts in

line item ''Tax effect on specific items, other tax adjustments and attributable to non-controlling interest'' only include the effect of tax adjustments.

(in millions of CAN$) Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 LTM

Cash flow from operations 244 35 70 110 107 322 56 107 68 338

Specific items1

33 - 16 - (1) 15 - 9 - 8

Adjusted cash flow from operations 277 35 86 110 106 337 56 116 68 346

Reflecting: Net financing expense paid (73) (44) (12) (29) (4) (89) (44) (3) (38) (89)

Capital expenditures & other assets2, capital

lease payments, net of disposals (181) (38) (50) (32) (53) (173) (57) (53) (27) (190)

Dividends (15) (4) (4) (3) (4) (15) (4) (4) (4) (16)

Adjusted free cash flow 81 (7) 32 75 49 149 (5) 59 37 140

Adjusted free cash flow per share $0.86 ($0.07) $0.34 $0.79 $0.52 $1.58 ($0.05) $0.62 $0.40 $1.49

201620152014

110 106

56

116

68

0

25

50

75

100

125

Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016

(M CAN$)Adjusted cash flow from operations

75

49

(5)

59

37

(20)

0

20

40

60

80

Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016

(M CAN$)Adjusted free cash flow

Note 1 – Specific items such as premiums paid on the refinancing of the senior notes and restructuring costs.Note 2 – Excluding increase in investments.

CASH FLOW OVERVIEW

20

Lower cash flow from operations YoY reduced free cash flow in Q3

2

Cash flow from operations more than offset unfavourable FX variation and CAPEX

NET DEBT RECONCILIATION – Q3-2016

21

25

23

4

1,625

1,664

1,500

1,550

1,600

1,650

1,700

Cash flow from

operations

(68)

Net Debt

06/30/2016

FX Rate

(1)

Dividends paid

& share

buyback, net of

share issuance

Var. in non-

cash work. cap.

components

(22)

Investments

and others

-2%

Net Debt

09/30/2016

Capital

investments, net

LTM Q2-2016 LTM Q3-2016

$456 M Adjusted EBITDA $425 M

3.6x Net debt/Adjusted EBITDA 3.8x

(M CAN$)

(in millions of Canadian dollars)

Selected financial data Q3-2016 Q3-2016 Q2-2016 Q3-2015

Sales 1,021 1,007 992 999

Adjusted EBITDA 103 114 121 144

Adjusted EBITDA - margin 10.1% 11.3% 12.2% 14.4%

Total assets 3,785 3,729 3,739 3,895

Net debt 1,625 1,723 1,762 1,889

Net debt/Adjusted EBITDA ratio2

3.8x 3.7x 3.6x 4.1x

Proportionate

consolidation1

As reported

(IFRS)

Note 1 – Selected financial data adjusted to proportionally reflect the impact of certain associates and joint ventures, namely Greenpac at 59.7%, Sonoco JVs at 50%, Reno de Medici at 57.7% and Recovery at 73% until November 30, 2015. Not adjusted for Boralex.

Note 2 – Ratio as reported based on LTM Adjusted EBITDA; ratio under proportionate consolidation based on LTM Adjusted EBITDA of $465M for Q3-2016, $495M for Q2-2016 and $464M for Q3-2015 (9- month period annualized).

PROPORTIONATE CONSOLIDATION – CASCADES

22

(in millions of US dollars)

2014 2015 LTM Q3-2016

Sales 210-230 235-250 240-255

Adjusted EBITDA 38-45 65-72 58-65

Adjusted EBITDA - margin 16%-20% 26%-30% 23%-27%

Net debt2,3

270 185 177

Net debt/Adjusted EBITDA ratio 6.0x-7.1x 2.6x-2.8x 2.7x-3.0x

Greenpac - Selected financial data1

Note 1 – Selected financial data is derived from the internal consolidated financials statements of Greenpac Holding LLC. Note 2 – Selected financial data at the end of the period.Note 3 – Net debt includes term and ECA loans, revolving credit facility, bridge loan and promissory notes from members, net of cash position. Long-term debt was

refinanced on May 6th, 2016.

FINANCIAL INFORMATION ON GREENPAC

23

SEGMENTED REVIEW

Results

Q3 2016 Q2 2016 Q3 2015

Shipments ('000 s.t.)

294 4% -1%

Average selling price

(CAN$/unit)

1,212 1% 1%

(US$/unit)

929 0% 2%

Sales ($M)

356 4% 1%

Adjusted EBITDA ($M)

58 -3% -15%

% of sales

16%

Change vs.

PACKAGING PRODUCTS / CONTAINERBOARD

25

Sequential 4% increase reflects higher shipments in both containerboard (+3%) and

corrugated box (+4%) activities.

On a consolidated basis, average selling prices increased by 1%, reflecting a

favourable product mix and price increases in corrugated boxes in Canada

announced in February 2016.

Containerboard average selling prices decreased by 2%

Lower adjusted EBITDA mainly due to higher raw material (mostly OCC),

production and energy costs, which were only partially offset by higher sales.

Sequential increase in sales due to higher shipments, a favourable exchange rate,

the acquisition of the Newtown, CT, plant, on June 1, 2016, in exchange for our

Thompson, CT, operations, and higher average selling prices in the corrugated box

activities in Canada.

Comments on sequential performance

Results

Q3 2016 Q2 2016 Q3 2015


258 -3% -3%


(CAN$/unit)

734 -1% -5%

(Euros/unit)

504 -1% -5%

Sales ($M)

189 -4% -8%


9 -47% -36%

% of sales

5%

Change vs.

PACKAGING PRODUCTS / BOXBOARD EUROPE

26


Decrease in shipments of both recycled and virgin grades linked to longer than

usual seasonal downtime and to weak demand in Europe.

Weak demand put pressure on the average selling prices of both recycled and

virgin grades in Europe, especially in overseas markets.

The depreciation of the British Pound also negatively impacted average selling

prices.

Lower sales, higher recycled fibre and maintenance costs due to longer than usual

seasonal summer maintenance resulted in a sequential adjusted EBITDA decrease

of 47%.

These above-mentioned items led to a 4% decrease in sales.

Results

Q3 2016 Q2 2016 Q3 2015


48 0% 7%

Sales ($M)

158 1% 5%


18 13% 0%

% of sales

11%

Change vs.

PACKAGING PRODUCTS / SPECIALTY PRODUCTS

27

Shipments for Industrial Packaging remained stable sequentially, but increased by

7% year-over-year due to good productivity at our URB mill. Shipments in the

Consumer Packaging and Recovery segments were also stable.

Higher average selling prices and a more favourable product mix in the Recovery

segment more than offset the negative impact on sales from the closure of the

Auburn, ME, deinked pulp plant during the second quarter.

Industrial Packaging shipments only


Higher margins in the Recovery segment more than offset an increase in selling

and administrative expenses, which resulted in a 13% sequential increase in

adjusted EBITDA in the third quarter.

Results

Q3 2016 Q2 2016 Q3 2015


163 3% 1%


(CAN$/unit)

2,093 2% 0%

(US$/unit)

1,604 0% 0%

Sales ($M)

342 6% 0%


47 21% 9%

% of sales

14%

Change vs.

TISSUE PAPERS

28

Converted products increased by 3% due to the usual seasonality in the Away-from-

Home segment and additional volume from major customers in the Canadian and

U.S. retail market.

External parent roll shipments increased by 3% due to seasonality in the Away-

from-Home market.

A better product mix, and a price increase in the Canadian consumer products

beginning at the end of April, positively impacted average selling prices.

Favourable impact related to FX on average selling prices in Canadian dollars.

All in all, these items had a positive impact of 6% on sales.

Higher shipments and average selling prices were the main drivers of the sequential

increase in adjusted EBITDA. Despite higher recycled fiber costs, a higher utilization

of internal parent rolls contributed to improve raw materials costs. These

improvements were partially offset by higher promotional activities.


CONCLUDING REMARKS

AND

Q&A

Q4-2016 vs

Q3-2016

Boxboard

Europe

EBITDA

ImpactContainerboard

EBITDA

Impact

Specialty

Products

EBITDA

ImpactTissue Papers

EBITDA

Impact

Volume Stable Slight decrease Slight decrease Slight decrease

Average selling

pricesStable Slight increase Stable Slight increase

Raw material costs Slight decrease Stable Stable Stable

CAN$ vs

other currencyStable Stable Stable Stable

Energy costs Slight decrease Slight increase Slight increase Slight increase

NEAR TERM OUTLOOK

30

+

I

• Continuing challenging market conditions in

Europe

• Seasonality-related decrease in Q4 volume

in North America

• Higher energy costs for North America, in

part due to cooler Fall temperatures

• $50/s.t. containerboard price increase for

Linerboard and Medium on October 1, 2016 in

North America

• Gradual flow-through on contractual and non-

contractual box business

• FX still favourable (stable)

APPENDIX

(M CAN$)

Adjusted

EBITDA

Q3-2015

Selling

Prices &

Mix

Energy

Recovery

&

Recycling

Acqu. &

DisposalsCAN$

Raw

MaterialsVolume

Other

Costs

Adjusted

EBITDA

Q3-2016

Containerboard 68 5 (1) (4) (10) 58

Boxboard Europe 14 (9) 3 (2) (2) 5 9

Specialty Products 18 1 (1) 2 (2) 18

Tissue Papers 43 1 3 47

Corporate & Elim. (9) 6 (1) (2) (4) (19) (29)

Total 134 2 2 1 (2) (4) (4) (26) 103

Note 1 – Raw materials include fibre used by mills and parent rolls used by converting operations as well as freight costs on raw materials

Q3 2015 – Q3 2016 YoY ADJUSTED EBITDA RECONCILIATION

32

1

130

140

120

110

0

(4)

-23%

103

(26)

(4)(2)

22134

(M CAN$)

1

Adjusted EBITDA decrease due to higher corporate & raw material costs

(M CAN$)

Adjusted

EBITDA

Q2-2016

Volume

Recovery

&

Recycling

Selling

Prices &

Mix

CAN$ EnergyAcqu. &

Disposals

Raw

Materials

Other

Costs

Adjusted

EBITDA

Q3-2016

Containerboard 60 3 1 (1) (4) (1) 58

Boxboard Europe 17 (1) (2) 2 (3) (4) 9

Specialty Products 16 (1) 3 (1) 1 18

Tissue Papers 39 4 2 4 (2) 47

Corporate & Elim. (20) 3 (1) (3) (8) (29)

Total 112 5 3 3 1 (6) (15) 103

Q2 2016 – Q3 2016 QoQ ADJUSTED EBITDA RECONCILIATION

33

133

130

120

110

0

-8%

103

(15)

(6)5

112

(M CAN$)

1

Note 1 – Raw materials include fibre used by mills and parent rolls used by converting operations as well as freight costs on raw materials

Higher raw material & corporate costs more than offset strong volume and

increase in recovery activities

0.60

0.70

0.80

0.90

1.00

0.60

0.70

0.80

0.90

1.00

Q3-

13

Q4-

13

Q1-

14

Q2-

14

Q3-

14

Q4-

14

Q1-

15

Q2-

15

Q3-

15

Q4-

15

Q1-

16

Q2-

16

Q3-

16

Euro€/CAN$US$/CAN$ Exchange rates

US$/CAN$ EURO€/CAN$

FOREIGN EXCHANGE

34Source: Bloomberg.

Hedging Program – US$ Cash flows

2016

• 23% to 58% of exposure (net of interest) hedged at an

average rate of 1.18 CAN$/US$ to 1.21 CAN$/US$

2017



2018



As a percentage of 2016 EBITDA

• Between 10% to 20% hedged for next 12 to 24 months

EBITDA sensitivity estimated to be $3M for every US$0.01 variation against the CAN$

2014 2015 2016

Averages Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3

Q3 2016

Q3 2015

Q3 2016

Q2 2015

Energy prices

Natural gas Henry Hub (US$/mmBtu) 4.42 2.98 2.64 2.77 2.27 2.67 2.09 1.95 2.80 2% 44%

Crude oil WTI (US$/barrel) 96.48 51.08 52.84 50.39 43.92 49.56 30.92 43.43 46.95 (7%) 8%

Change

0

20

40

60

80

100

120

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Q3-

13

Q4-

13

Q1-

14

Q2-

14

Q3-

14

Q4-

14

Q1-

15

Q2-

15

Q3-

15

Q4-

15

Q1-

16

Q2-

16

Q3-

16

Crude oil

(US$)Natural gas

(US$)Energy prices

Natural gas (US$/mmBtu) Crude oil (US$/barrel)

ENERGY PRICES

35Source: Bloomberg.

Hedging Program – Natural gas

• Canada:

• 2016: 59% at 3.92 CAN$/GJ

• 2017: 57% at 3.94 CAN$/GJ

• U.S.:

• 2016: 41% at 3.96 US$/mmBtu

• 2017: 45% at 3.91 US$/mmBtu

500

600

700

800

900

1,000

1,100

1,200

Ju

l 13

Se

p 1

3

Nov 1

3

Ja

n 1

4

Ma

r 1

4

Ma

y 1

4

Ju

l 14

Se

p 1

4

Nov 1

4

Ja

n 1

5

Ma

r 1

5

Ma

y 1

5

Ju

l 15

Se

p 1

5

Nov 1

5

Ja

n 1

6

Ma

r 1

6

Ma

y 1

6

Ju

l 16

Se

p 1

6

Boxboard Europe - Selected Products

Coated duplex - virgin board (GC2)

White-lined chipboard - recycled board (GD2)

(Euro€/m.t.)

800

900

1,000

1,100

1,200

1,300

1,400

1,500

Ju

l 13

Se

p 1

3

Nov 1

3

Ja

n 1

4

Ma

r 1

4

Ma

y 1

4

Ju

l 14

Se

p 1

4

Nov 1

4

Ja

n 1

5

Ma

r 1

5

Ma

y 1

5

Ju

l 15

Se

p 1

5

Nov 1

5

Ja

n 1

6

Ma

r 1

6

Ma

y 1

6

Ju

l 16

Se

p 1

6

Tissue Papers - Selected Products

Virgin parent rolls

Recycled parent rolls

(US$/s.t.)

625

650

675

700

725

750

Ju

l 13

Oct

13

Ja

n 1

4

Ap

r 1

4

Ju

l 14

Oct

14

Ja

n 1

5

Ap

r 1

5

Ju

l 15

Oct

15

Ja

n 1

6

Ap

r 1

6

Ju

l 16

Oct

16

Specialty Products - Selected Products

20-pt uncoated bending chip (URB)

(US$/s.t.)

400

450

500

550

600

650

700

Ju

l 13

Oct

13

Ja

n 1

4

Ap

r 1

4

Ju

l 14

Oct

14

Ja

n 1

5

Ap

r 1

5

Ju

l 15

Oct

15

Ja

n 1

6

Ap

r 1

6

Ju

l 16

Oct

16

Containerboard - Selected Products

Linerboard 42-lb. unbleached kraft, Eastern U.S.

Corrugating medium 26-lb. semichemical, Eastern U.S.

(US$/s.t.)

SELECTED REFERENCE PRICES

36Source: RISI.

Current

(Oct)

540

655

Current

(Oct)

Current

(Sept)

7251,298

Current

(Sept)

1,043

652

1,022

2014 2015 2016

Year Q1 Q2 Q3 Q4 Year Q1 Q2 Q3

(units) (%) (units) (%)

Selling prices (average)

PACKAGING PRODUCTS

Boxboard Europe (Euro/tonne)

Recycled white-lined chipboard (GD2) index1 670 656 658 679 676 667 664 659 652 (27) (4%) (7) (1%)

Virgin coated duplex boxboard (GC2) index2 1,093 1,061 1,061 1,061 1,061 1,061 1,049 1,044 1,043 (18) (2%) (1) (0%)

Containerboard (US$/ton)

Linerboard 42-lb. unbleached kraft, Eastern U.S. (open market) 630 630 630 630 630 630 615 615 615 (15) (2%) 0 0%

Corrugating medium 26-lb. semichemical, Eastern U.S. (open market) 575 563 560 560 545 557 518 515 505 (55) (10%) (10) (2%)

Specialty Products (US$/ton, tonne for deinked pulp)

Uncoated recycled boxboard - 20pt. bending chip (transaction) 698 700 700 700 735 709 735 725 725 25 4% 0 0%

TISSUE PAPERS (US$/ton)

Parent rolls, recycled fibres (transaction) 1,036 955 979 994 1,013 985 1,016 1,012 1,017 23 2% 5 0%

Parent rolls, virgin fibres (transaction) 1,264 1,228 1,244 1,259 1,279 1,252 1,273 1,273 1,287 28 2% 14 1%

Raw materials (average)

RECYCLED PAPER

North America (US$/ton)

Special news, no. 8 (ONP - Northeast average) 63 59 58 58 58 58 58 63 76 18 31% 13 21%

Corrugated containers, no. 11 (OCC - Northeast average) 100 81 78 88 86 83 83 88 101 13 15% 13 15%

Sorted office papers, no. 37 (SOP - Northeast average) 155 158 155 150 137 150 138 142 153 3 2% 11 8%

Europe (Euro/tonne)

Recovered paper index3 109 106 116 123 117 115 115 124 135 12 10% 11 9%

VIRGIN PULP (US$/tonne)

Northern bleached softwood kraft, Canada 1,025 995 980 967 945 972 943 980 998 31 3% 18 2%

Northern bleached hardwood kraft, mixed, Canada/U.S. 856 843 873 880 880 869 873 847 842 (38) (4%) (5) (1%)

Q3 2016

vs. Q2 2016

Q3 2016

vs. Q3 2015These indexes should only be used as an indicator of trends and they may be

different than our actual selling prices or purchasing costs

SELECTED REFERENCE PRICES AND FIBRE COSTS

37

Sources: RISI, Cascades and Reno de Medici.Note 1 – The index is based on publication prices and represents an approximation of Cascades’ recycled grades selling prices in Europe. It is weighted by country. Note 2 – The index is based on publication prices and represents an approximation of Cascades’ virgin grades selling prices in Europe. It is weighted by country.Note 3 – The recovered paper index is based on publication prices and represents an approximation of Cascades’ recovered paper purchase prices in Europe. It is weighted by country.

38

For more information:www.cascades.com/investors

Jennifer Aitken, MBA

Director, Investor Relations

514-282-2697 or [email protected]

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