Cascades decreased Operating Income Before Depreciation (OIBD) by 7% amid 13% sales increase in 2Q2017 y-o-y. According to the announcement, the company’s sales accounted for CAD 1,130 million, generating OIBD of CAD 104 million in the period (9.5% margin).
Mr. Mario Plourde, President and CEO, commented:
“We have made significant progress on our strategic objectives in recent months with the Greenpac transaction, the inauguration of the new state of the art tissue converting plant in Scappoose, Oregon , the sale of our equity interest in Boralex and, more recently, the announcement of the construction of a new ultra modern containerboard converting plant in Piscataway, New Jersey . To this end, our second quarter results provide a more comprehensive picture of our North American Containerboard business following the consolidation of the results of the Greenpac Mill at the beginning of the quarter. This acquisition resulted in a gain of CAD 281 million on net earnings, and added CAD 219 million to our total net debt levels. However, on a pro-forma basis including Greenpac’s results for the last twelve months, our leverage ratio stood at 4.2x as of the end of the second quarter, essentially unchanged from the previous quarter.
That said, our second quarter results fell short of expectations, most notably in our Containerboard segment. On a consolidated basis, the benefits realized year-over-year as a result of Greenpac and implementation of price increases in Containerboard, were limited by higher raw material costs, slightly lower volumes in Tissue, and higher operational costs primarily in Containerboard and Corporate activities.
Looking more specifically at our Containerboard business, the addition of Greenpac increased quarterly sales and operating income both sequentially and year-over-year. On a year-over-year basis, results were impacted by higher raw material costs, most notably OCC, which exceeded the benefits being realized from recent price increases which have yet to be fully implemented. Sequentially, the increases in price that have already been realized and a favourable product mix offset the incremental higher raw material cost during the second quarter. Higher operational, logistics and some unusual costs also tempered Containerboard operating income performance during the current period.
Second quarter results in our Tissue business decreased year-over-year as the benefits of higher realized average selling prices and favourable sales mix were more than offset by lower sales of jumbo rolls in the current period, as well as costs related to brand repositioning and the start-up of the new Oregon converting plant. On a sequential basis, Tissue results increased as a result of better seasonal volumes and improvements in average selling price, the benefits of which were partially offset by higher raw material costs.
As was the case in the first quarter, higher recycled fibre prices benefited results in our Specialty Products business in the second quarter. In addition, higher selling prices in the Industrial and Consumer Products packaging sectors similarly contributed to the improved results. Our Boxboard Europe segment improved results both sequentially and on a year-over-year basis. This reflects improved pricing, and strong order intake levels, which are attributable to a continued strengthening of market fundamentals. These improvements, along with lower energy prices, mitigated the impact of higher raw material prices on both a sequential and year-over-year basis.
Finally, the sale of our equity position in Boralex announced on July 27th will provide us with the means to improve our positioning within our core markets and strengthen our balance sheet. Proceeds from this transaction were used to repay the borrowings under our credit facility and to reduce our net debt leverage ratio, which, including this transaction, now stands at 3.5x on a pro-forma basis.
We are similarly pleased that Cascades was added to the S&P/TSX Composite Index effective June 19, 2017 , as this provides increased exposure to a wider base of investors, and supports our efforts to deliver on our commitments to shareholders.”
In 1Q2017 Cascades increased OIBD margin to 7.5%
Earlier Cascades announced closure of its packaging plant in the US.
The company is a North American leader in the recovery, manufacturing and converting of green packaging and tissue paper products. The products are composed mainly of recycled fibres. Cascades employs almost 11,000 people at more than 90 production units in North America and Europe.