Cascades Inc. reports its unaudited financial results for the three-month period ended September 30, 2020.
Mario Plourde, President and CEO, commented: "We are pleased with our consolidated third quarter results. Within an ever-evolving business environment, demand levels for containerboard remained robust. This strength drove higher sequential quarterly sales volume in this business, offsetting higher energy costs and an approximate $3 million impact from unplanned operational shutdowns at our Niagara Falls, NY complex. Similarly, our Specialty Products segment generated solid results, benefiting from strong demand for our sustainable food packaging product offerings. Results in our Tissue business were mixed. As expected, demand remained strong for consumer tissue, while the reverse was true for Away-from-Home products given the impact that Covid-19 is having on businesses, restaurants, hotels and schools. This segment, which accounts for approximately 40% of our annual tissue sales, experienced sharp decreases in demand for some products. We have taken steps to adjust production capacity by temporarily closing several facilities that serve this market, and continue to evaluate opportunities to adapt some capacity for different products. Lastly, results in the European Boxboard segment reflected the usual softer seasonal third quarter volumes, the effects of which were partially offset by favourable raw material pricing and lower energy costs.
On the strategic side, we are very pleased to have announced the launch of our Bear Island project in mid-October. This is an important strategic investment for our containerboard business, one which we are confident will benefit operational performance, enhance our product offering in lightweight recycled containerboard and position our containerboard platform for long-term profitable growth within this competitive industry. We are equally pleased to have completed the $125 million equity issuance (offering) that was announced concurrently with the Bear Island project. The proceeds of this offering will be primarily dedicated to financing Bear Island, but may also be used for other ongoing capital projects. The European Boxboard segment also announced the strategic acquisition of one of the main European coated chipboard players, Papelera del Principado S.A. ("Paprinsa"), and three smaller adjoining companies, that will strengthen and consolidate Reno de Medici's position as the number two manufacturer of recycled boxboard in Europe, while strengthening its competitive position in Spain and the surrounding markets."
Discussing near-term outlook, Mr. Plourde commented, "In light of ongoing ambiguity related to the pandemic, we are cautiously optimistic regarding our performance in the near-term. Demand dynamics in containerboard remain strong, with results expected to also benefit from the announced US$50/st price increase beginning in the fourth quarter. In Tissue, usual seasonal softness in the fourth quarter and Covid-19 driven demand contraction in the Away-from-Home product categories are expected to translate into weaker sequential performance. Ongoing modernization initiatives in this business, which include the integration of the Orchids assets and final investments in state-of-the-art converting equipment, are delivering targeted returns and will generate increasing benefits as implementation costs trend down. Near-term performance in Specialty Products is forecasted to remain solid, supported by continued strong demand trends for consumer food packaging, while sequential results in European Boxboard are expected to decrease slightly as a result of lack of certainty regarding volume and less favourable mix of products. On a consolidated basis, raw material costs are expected to continue to be favourable for our businesses. Looking ahead, results are projected to benefit from a margin improvement initiative started earlier this year that is expected to generate a 1% annual increase in our consolidated OIBD margin for the next two years. Given persistent uncertainty around Covid-19, we remain focused on the health and safety of our employees and working with our customers to ensure that their needs and expectations for our essential packaging and tissue products are not only met but surpassed. Cash flow management supported by operational flexibility, resilience and execution remain the top priorities for Cascades' management team, and will continue to be essential to successfully navigate the current unusual and less predictable environment."