greenpac - Cascades
GREENPAC The Future is Now
June 27, 2011
DISCLAIMER Certain statements in this presentation, including statements regarding future results and performance, are forward-looking statements within the meaning of securities legislation 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 Company’s 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 and industry conditions. This presentation also includes price indices as well as variance and sensitivity analyses that are intended to provide the reader with a better understanding of the trends related to our business activities. These items are based on the best estimates available to the Company. The financial information included in this presentation also contains certain data that are not measures of performance under IFRS (“non-IFRS measures”). For example, the Company uses earnings before interest, taxes, depreciation and amortization (EBITDA) because it is the measure used by management to assess the operating and financial performance of the Company’s operating segments. Such information is reconciled to the most directly comparable financial measures, as set forth in the “Supplemental Information on Non-IFRS Measures” section of our most recent annual report or earnings press release. Specific items are defined as items such as charges for impairment of assets, for facility or machine closures, debt restructuring charges, gains or losses on sales of business units, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, foreign exchange gains or losses on long-term debt and other significant items of an unusual or non-recurring nature. All amounts in this presentation are in Canadian dollars unless otherwise indicated. 2
AGENDA 1. Strategy and Market Fundamentals 2. Key Success Factors 3. Financial Overview 4. Concluding Remarks
3
STRATEGY AND MARKET FUNDAMENTALS
4
GREENPAC AT A GLANCE What? New state of the art lightweight recycled linerboard mill One 328-inch wide machine 540,000 short tons in total annual production capacity, largest recycled-based in North America Where? Niagara Falls (NY) How much? Total estimated cost: US$430 M Who? Norampac (Cascades, 59.7%), Caisse de dépôt et placement du Québec (20.2%), Jamestown Container and another industry converter (20.1%) When? Expected start-up: summer 2013 Why ? Strategic fit Key success factors 5
STRATEGIC FIT Closure of Quebec City (QC) corrugated box plant
2010
Sale of AvotVallée (France) linerboard mill
Sale of Dopaco
2011
Closure of Regina (SK) corrugated box plant
Greenpac
Closure of Leominster (MA) corrugated box plant
Sale of Versailles (CT) & Hebron (KY) boxboard facilities & ann. upgrade of CAN operations
Cascades is proactively adjusting its asset base, redeploying capital towards core segments in order to improve its product offering, competitiveness and profitability 6
STRATEGIC FIT Cascades' return on assets
(%) 16 14
15
14 12
12 9
10 8
11
8
6 4 2 0 2002
2007
2008
2009
2010
Target
Greenpac is expected to generate ROA above our consolidated target Return on assets (ROA) is defined as: EBITDA excluding specific items/total assets
7
STRATEGIC FIT Norampac mills (with capacity in s.t.) Linerboard: • Kingsey Falls (QC) • Mississauga (ON) • Greenpac (NY) Medium: • Burnaby (BC) • Trenton (ON) • Cabano (QC) • Niagara Falls (NY)
103,000 173,000 540,000 816,000 128,000 194,000 242,000 275,000 839,000
Manufacturing capacity breakdown Before Greenpac Linerboard: 25% Medium: 75%
After Greenpac Linerboard: 49% Medium: 51%
Before Greenpac Canada: 75% USA: 25%
After Greenpac Canada: 51% USA: 49%
Greenpac allows Norampac to rebalance its manufacturing and geographical exposure Return on assets is defined as: EBITDA excluding specific items/total assets
8
HEALTHY MARKET FUNDAMENTALS North American containerboard capacity change and operating rate
(M s.t.) 1.00
100%
Avrg. 2002-2010 (ex. 2009)=94%
0.50
95%
0.00
90%
-0.50 -1.00
85%
-1.50 -2.00
80% 2002
2003
2004
2005
Capacity change
2006
2007
2008
2009
2010
Capacity utilization rate
With the exception of 2009, containerboard market conditions have been healthy during the past years, with high operating rates and low level of inventories Source: RISI.
9
HEALTHY MARKET FUNDAMENTALS Price (US$/s.t.)
Linerboard Market Selling price and Spread Over Old Corrugated Container (OCC) Costs
700
Spread (US$/s.t.)
640
625 582
600 503
500 450
547
532
550
400
500
350
428
300
400 2005
2006
2007
Selling price
2008
2009
2010
YTD 2011
Selling price/OCC cost spread
Given improved operating rates, selling prices have moved upward and offset higher OCC costs Source: RISI. Reference selling price for the unbleached linerboard 42-lb kraft (East). Average OCC costs for the New York and Chicago areas.
10
PROJECTED HEALTHY FUTURE MKT FUNDAMENTALS North American Forecasted Containerboard Capacity (M s.t.) and Operating Rate 45 100% 43
98%
Capacity
2020F
2019F
2018F
90% 2017F
35 2016F
92% 2015F
37 2014F
94%
2013F
39
2012F
96%
2011F
41
2010
Greenpac represents 1% of current North American capacity
Avrg. 2011F-2020F=96%
Capacity utilization rate
Going forward, additional capacity and production (1-2%/year) is expected to be absorbed by improving internal demand (1%/year) and growing exports (6%/year) Source: RISI.
11
KEY SUCCESS FACTORS
12
ALIGNED WITH MARKET TRENDS Unbleached Recycled Linerboard Consumption
Greenpac: Basis weight range = 20# - 35 # Avrg. 31#
Reduced packaging trend = shift towards higher performance, lightweight linerboard Source: Pöyry. North American consumption figures.
13
ALIGNED WITH MARKET TRENDS
North American Corrugator Width Distribution
3 significant trends Larger corrugators Improved board quality and stability for smoothness and printability Stronger board for running corrugators at higher speed
Greenpac’s machine width and product offering will be optimal for most corrugators Source: RISI. North American figures
14
EFFICIENT AND LOW COST Unbleached Linerboard Assets Benchmarking
Greenpac’s machine will be one the largest of its kind in North America Source: Pöyry. North American consumption figures.
15
EFFICIENT AND LOW COST Paper machine 328-inch width 540,000 total production capacity Manufacturer: Metso Multi-Fourdrinier design allows maximum product parameter optimization Size press for improved smoothness and use of lower quality recycled material Stock preparation & anaerobic effluent equipment Manufacturer: Voith The latest in cleaning technology will supply excellent fibre to the machine Power and control technology Manufacturer: Siemens Modern controls allow on-the-run analysis of major problems from any location The equipment used to construct the Greenpac mill represents the most proven recent technological advances in recycled linerboard production 16
EFFICIENT AND LOST COST North American Unbleached Linerboard Assets Benchmarking
Low Cost Structure Favourable steam costs Favourable electricity costs Reduced freight costs Other fixed and labour costs low due to economies of scale
1st quartile
2nd quartile
3rd quartile
4rd quartile
Despite high OCC costs, costs Greenpac will be positioned in the first quartile on the cost curve Source: Pöyry. Cost modeling based on 100% operating rate estimated at 42#. Exchange rate=0.97 US$/CAN$. North American consumption figures.
17
EFFICIENT AND LOST COST North American Containerboard Industry EBITDA Benchmarking 40% 35% 30%
Norampac Industry's average RockTenn Acquisition of Southern Container (Solvay mill)
25% 20% 15% 10% 5% 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005
2006
2007
2008
2009
2010
2011
RockTenn, with the acquisition of the Solvay mill, has become the most profitable player in the containerboard industry… Greenpac targets the same level of profitability Source: company filings, Cascades. Industry includes Greif, International Paper, RockTenn, Temple-Inland, Packaging Corp. of America, Smurfit-Stone. EBITDA adjusted for specific and extraordinary items. Industry EBITDA mainly for the containerboard operations (manufacturing, converting), but can also include some other operations (boxboard, kraft, pulp, etc.)
18
INTEGRATED UPSTREAM Cascades’ North American Fibre Supply 2010 Cascades recovery; 31%
87% supplied internally or contracted Converting plants; 5%
Brokers; 13%
Contractual agreements; 51%
Greenpac will benefit from Cascades’ recovery operations (amongst the largest in North America), expertise, and strong control over its fibre supply 19
INTEGRATED UPSTREAM OCC Supply potential in an area with freight costs of US$30/s.t. or less (train or truck) = 7 M s.t.
Greenpac expected consumption Year 1 = +/- 440,000 st Year 2 = +/- 590,000 st
Significant and numerous OCC sources in the region 20
INTEGRATED DOWNSTREAM Contracted Mill Production (in ‘000 short tons / % of total production)
Customer 1; 120; 22,2% Norampac; 170; 31,5%
Customer 2; 50; 9,3% Customer 4; 50; 9,3%
Customer 3; 45; 8,3%
81% of mill production sold under contract 21
STRONG PROJECT MANAGEMENT TEAM Steering Committee comprised of Norampac & MiniMill Technologies (MMT): K.G. Rajan, Project Manager, President of MMT, 30+ years of experience. Was involved in the management & construction of the former Southern Container (now Rock-Tenn) Solvay Mill. Elgie Harrison, SVP Manufacturing, 40+ years of experience. Was involved in the start-up and management of two machines of the Cedar River mills. Ken Carter, Construction Manager, 30+ years of construction experience. Has managed the construction of five world-class paper machine installations, mainly with Willamette and Weyerhaeuser. Donnie Parks, VP Production, 40 years of experience. Has started and restarted more than a dozen mini-mills across N.A..
Past Experience of Construction Team Project Paper machine Paper machine Paper machine Paper machine Paper machine Boiler & Turbine generator Particleboard Mfg Facility Paper machine rebuild Powerhouse & scales Paper machine rebuild Shoe press Secondary fibre upgrade Precipitator upgrade Paper machine rebuild Chip storage & reclaim TOTAL
Budget (M US$)
Real cost vs. budget
477 380 600 500 280 224 100 80 40 30 24 14 14 12 7 2,782
-% -% (1)% -% -% +3% -% -% -% (2)% (18)% (3)% +3% -% +1% -%
Duration vs. scheduled On time On time + 3 weeks On time Early Early On time On time On time Early On time On time On time On time On time
First class project management team to reduce cost and time overrun risk; Norampac to be in charge of the day-to-day operations at start-up Source: MMT.
22
FINANCIAL OVERVIEW
23
CAPITAL STRUCTURE (M US$)
% of total equity
% of total capitalization
83.6 28.3 11.15 16.95 140.0
59.7% 20.2% 8.0% 12.1% 100%
19% 6% 2% 4% 31%
Equity Cascades Caisse de dépôt et placement Industry converter 1 Industry converter 2 Total equity Senior debt Term loan Revolver Total senior debt 1 Subordinated debt Cascades Caisse de dépôt et placement 1 Total subordinated debt Capitalized interests during construction TOTAL
203.9 25.0 228.9
45% 6% 51%
15.25 45.75 61.0 20.1
4% 10% 14% 4%
450.0
100%
Total for Cascades = US$99 M (Greenpac’s debt without recourse)
Balanced capital structure 1
Subordinated debt to bridge expected refundable tax credits in years 2 to 6.
24
GREENPAC FINANCIAL POTENTIAL (% of sales) 35
EBITDA Margins Benchmarking 31
30
24
25
19
20 15
27 21 16
29 23
19
19 13
12
10 5 0 2007 Norampac's N. American mills
Market linerboard selling price/OCC cost spread (US$/s.t.) US$/CAN$
2008
2009
Norampac's best 2 performing mills
2010 Greenpac
2007
2008
2009
2010
419 0.93
484 0.94
491 0.88
491 0.97
In most market conditions, Greenpac’s profitability is expected to be one of the best in the industry Sources: RISI, Bloomberg. EBITDA excluding specific items. Greenpac’s EBITDA margins based on Norampac’s internal financial model.
25
FINANCIAL IMPACT (P/L) FOR CASCADES No full or proportionate consolidation • Greenpac’s results will flow through “Share of results” line in Statements of Earnings
Factor
Impact on Cascades’ Statements of Earnings & Cash Flow
Norampac’s purchase volume discount
(+) EBITDA & Cash flow
Norampac’s management fees to Greenpac
(+) EBITDA & Cash flow
Cascades’ bridge loan to Greenpac
(-) Financing expenses, (+) Cash flow
Cascades’ equity investment
(+) Financing expenses, (-) Cash flow
Greenpac’s net earnings Greenpac’s dividends
(+) EPS (+) Cash flow
All in all, Greenpac is expected to have a positive impact on Cascades’ EBITDA, net results and cash flow once ramp-up is achieved EBITDA and EPS excluding specific items.
26
FINANCIAL IMPACT (B. SHEET) FOR CASCADES March 31, 2011 (adjusted for the sale of Dopaco)
March 31, 2011 (adjusted for the sale of Dopaco and full investment in Greenpac)
Change
271 117
368 86
97 (31)
1,079
1,145
66
Long-term assets Investments in associates and JVs Other assets Long-term liabilities Long-term debt
Equity Bridge loan Already invested (March 31, 2011) To invest (before year-end 2011)
M US$ 84 15 99 (31) 68
M CAN$ 82 15 97 (31) 66
Cascades’ investment in Greenpac to have marginal impact on total debt 27
CONCLUDING REMARKS
28
CONCLUDING REMARKS Through Greenpac, 1. Norampac positions itself amongst sector leaders in terms of: • Product offering • Productivity • Profitability 2. Cascades’ maintains and carefully manages: • Financial flexibility • Operational risk
Objective: maintain sound balance sheet with continuing to invest strategically 29
APPENDICES
30
TIMELINE Start of Detailed Engineering/Remediation
October 2010
Breaking ground
July 2011
Completion of Paper Machine & OCC Building
March 2012
Completion of Electrical & Instrumentation Installation
April 2013
Completion of Mechanical & Piping Installation
May 2013
Checkout and Commissioning Complete
June 2013
Sheet on Reel (not later than)
July 2013
Approximately 2 years until start-up of production 31
For more information: www.cascades.com/investors Didier Filion Director, Investor Relations [email protected] 514-282-2697
32
CREDIT: IMAGE ECOterre
June 27, 2011
DISCLAIMER Certain statements in this presentation, including statements regarding future results and performance, are forward-looking statements within the meaning of securities legislation 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 Company’s 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 and industry conditions. This presentation also includes price indices as well as variance and sensitivity analyses that are intended to provide the reader with a better understanding of the trends related to our business activities. These items are based on the best estimates available to the Company. The financial information included in this presentation also contains certain data that are not measures of performance under IFRS (“non-IFRS measures”). For example, the Company uses earnings before interest, taxes, depreciation and amortization (EBITDA) because it is the measure used by management to assess the operating and financial performance of the Company’s operating segments. Such information is reconciled to the most directly comparable financial measures, as set forth in the “Supplemental Information on Non-IFRS Measures” section of our most recent annual report or earnings press release. Specific items are defined as items such as charges for impairment of assets, for facility or machine closures, debt restructuring charges, gains or losses on sales of business units, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, foreign exchange gains or losses on long-term debt and other significant items of an unusual or non-recurring nature. All amounts in this presentation are in Canadian dollars unless otherwise indicated. 2
AGENDA 1. Strategy and Market Fundamentals 2. Key Success Factors 3. Financial Overview 4. Concluding Remarks
3
STRATEGY AND MARKET FUNDAMENTALS
4
GREENPAC AT A GLANCE What? New state of the art lightweight recycled linerboard mill One 328-inch wide machine 540,000 short tons in total annual production capacity, largest recycled-based in North America Where? Niagara Falls (NY) How much? Total estimated cost: US$430 M Who? Norampac (Cascades, 59.7%), Caisse de dépôt et placement du Québec (20.2%), Jamestown Container and another industry converter (20.1%) When? Expected start-up: summer 2013 Why ? Strategic fit Key success factors 5
STRATEGIC FIT Closure of Quebec City (QC) corrugated box plant
2010
Sale of AvotVallée (France) linerboard mill
Sale of Dopaco
2011
Closure of Regina (SK) corrugated box plant
Greenpac
Closure of Leominster (MA) corrugated box plant
Sale of Versailles (CT) & Hebron (KY) boxboard facilities & ann. upgrade of CAN operations
Cascades is proactively adjusting its asset base, redeploying capital towards core segments in order to improve its product offering, competitiveness and profitability 6
STRATEGIC FIT Cascades' return on assets
(%) 16 14
15
14 12
12 9
10 8
11
8
6 4 2 0 2002
2007
2008
2009
2010
Target
Greenpac is expected to generate ROA above our consolidated target Return on assets (ROA) is defined as: EBITDA excluding specific items/total assets
7
STRATEGIC FIT Norampac mills (with capacity in s.t.) Linerboard: • Kingsey Falls (QC) • Mississauga (ON) • Greenpac (NY) Medium: • Burnaby (BC) • Trenton (ON) • Cabano (QC) • Niagara Falls (NY)
103,000 173,000 540,000 816,000 128,000 194,000 242,000 275,000 839,000
Manufacturing capacity breakdown Before Greenpac Linerboard: 25% Medium: 75%
After Greenpac Linerboard: 49% Medium: 51%
Before Greenpac Canada: 75% USA: 25%
After Greenpac Canada: 51% USA: 49%
Greenpac allows Norampac to rebalance its manufacturing and geographical exposure Return on assets is defined as: EBITDA excluding specific items/total assets
8
HEALTHY MARKET FUNDAMENTALS North American containerboard capacity change and operating rate
(M s.t.) 1.00
100%
Avrg. 2002-2010 (ex. 2009)=94%
0.50
95%
0.00
90%
-0.50 -1.00
85%
-1.50 -2.00
80% 2002
2003
2004
2005
Capacity change
2006
2007
2008
2009
2010
Capacity utilization rate
With the exception of 2009, containerboard market conditions have been healthy during the past years, with high operating rates and low level of inventories Source: RISI.
9
HEALTHY MARKET FUNDAMENTALS Price (US$/s.t.)
Linerboard Market Selling price and Spread Over Old Corrugated Container (OCC) Costs
700
Spread (US$/s.t.)
640
625 582
600 503
500 450
547
532
550
400
500
350
428
300
400 2005
2006
2007
Selling price
2008
2009
2010
YTD 2011
Selling price/OCC cost spread
Given improved operating rates, selling prices have moved upward and offset higher OCC costs Source: RISI. Reference selling price for the unbleached linerboard 42-lb kraft (East). Average OCC costs for the New York and Chicago areas.
10
PROJECTED HEALTHY FUTURE MKT FUNDAMENTALS North American Forecasted Containerboard Capacity (M s.t.) and Operating Rate 45 100% 43
98%
Capacity
2020F
2019F
2018F
90% 2017F
35 2016F
92% 2015F
37 2014F
94%
2013F
39
2012F
96%
2011F
41
2010
Greenpac represents 1% of current North American capacity
Avrg. 2011F-2020F=96%
Capacity utilization rate
Going forward, additional capacity and production (1-2%/year) is expected to be absorbed by improving internal demand (1%/year) and growing exports (6%/year) Source: RISI.
11
KEY SUCCESS FACTORS
12
ALIGNED WITH MARKET TRENDS Unbleached Recycled Linerboard Consumption
Greenpac: Basis weight range = 20# - 35 # Avrg. 31#
Reduced packaging trend = shift towards higher performance, lightweight linerboard Source: Pöyry. North American consumption figures.
13
ALIGNED WITH MARKET TRENDS
North American Corrugator Width Distribution
3 significant trends Larger corrugators Improved board quality and stability for smoothness and printability Stronger board for running corrugators at higher speed
Greenpac’s machine width and product offering will be optimal for most corrugators Source: RISI. North American figures
14
EFFICIENT AND LOW COST Unbleached Linerboard Assets Benchmarking
Greenpac’s machine will be one the largest of its kind in North America Source: Pöyry. North American consumption figures.
15
EFFICIENT AND LOW COST Paper machine 328-inch width 540,000 total production capacity Manufacturer: Metso Multi-Fourdrinier design allows maximum product parameter optimization Size press for improved smoothness and use of lower quality recycled material Stock preparation & anaerobic effluent equipment Manufacturer: Voith The latest in cleaning technology will supply excellent fibre to the machine Power and control technology Manufacturer: Siemens Modern controls allow on-the-run analysis of major problems from any location The equipment used to construct the Greenpac mill represents the most proven recent technological advances in recycled linerboard production 16
EFFICIENT AND LOST COST North American Unbleached Linerboard Assets Benchmarking
Low Cost Structure Favourable steam costs Favourable electricity costs Reduced freight costs Other fixed and labour costs low due to economies of scale
1st quartile
2nd quartile
3rd quartile
4rd quartile
Despite high OCC costs, costs Greenpac will be positioned in the first quartile on the cost curve Source: Pöyry. Cost modeling based on 100% operating rate estimated at 42#. Exchange rate=0.97 US$/CAN$. North American consumption figures.
17
EFFICIENT AND LOST COST North American Containerboard Industry EBITDA Benchmarking 40% 35% 30%
Norampac Industry's average RockTenn Acquisition of Southern Container (Solvay mill)
25% 20% 15% 10% 5% 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005
2006
2007
2008
2009
2010
2011
RockTenn, with the acquisition of the Solvay mill, has become the most profitable player in the containerboard industry… Greenpac targets the same level of profitability Source: company filings, Cascades. Industry includes Greif, International Paper, RockTenn, Temple-Inland, Packaging Corp. of America, Smurfit-Stone. EBITDA adjusted for specific and extraordinary items. Industry EBITDA mainly for the containerboard operations (manufacturing, converting), but can also include some other operations (boxboard, kraft, pulp, etc.)
18
INTEGRATED UPSTREAM Cascades’ North American Fibre Supply 2010 Cascades recovery; 31%
87% supplied internally or contracted Converting plants; 5%
Brokers; 13%
Contractual agreements; 51%
Greenpac will benefit from Cascades’ recovery operations (amongst the largest in North America), expertise, and strong control over its fibre supply 19
INTEGRATED UPSTREAM OCC Supply potential in an area with freight costs of US$30/s.t. or less (train or truck) = 7 M s.t.
Greenpac expected consumption Year 1 = +/- 440,000 st Year 2 = +/- 590,000 st
Significant and numerous OCC sources in the region 20
INTEGRATED DOWNSTREAM Contracted Mill Production (in ‘000 short tons / % of total production)
Customer 1; 120; 22,2% Norampac; 170; 31,5%
Customer 2; 50; 9,3% Customer 4; 50; 9,3%
Customer 3; 45; 8,3%
81% of mill production sold under contract 21
STRONG PROJECT MANAGEMENT TEAM Steering Committee comprised of Norampac & MiniMill Technologies (MMT): K.G. Rajan, Project Manager, President of MMT, 30+ years of experience. Was involved in the management & construction of the former Southern Container (now Rock-Tenn) Solvay Mill. Elgie Harrison, SVP Manufacturing, 40+ years of experience. Was involved in the start-up and management of two machines of the Cedar River mills. Ken Carter, Construction Manager, 30+ years of construction experience. Has managed the construction of five world-class paper machine installations, mainly with Willamette and Weyerhaeuser. Donnie Parks, VP Production, 40 years of experience. Has started and restarted more than a dozen mini-mills across N.A..
Past Experience of Construction Team Project Paper machine Paper machine Paper machine Paper machine Paper machine Boiler & Turbine generator Particleboard Mfg Facility Paper machine rebuild Powerhouse & scales Paper machine rebuild Shoe press Secondary fibre upgrade Precipitator upgrade Paper machine rebuild Chip storage & reclaim TOTAL
Budget (M US$)
Real cost vs. budget
477 380 600 500 280 224 100 80 40 30 24 14 14 12 7 2,782
-% -% (1)% -% -% +3% -% -% -% (2)% (18)% (3)% +3% -% +1% -%
Duration vs. scheduled On time On time + 3 weeks On time Early Early On time On time On time Early On time On time On time On time On time
First class project management team to reduce cost and time overrun risk; Norampac to be in charge of the day-to-day operations at start-up Source: MMT.
22
FINANCIAL OVERVIEW
23
CAPITAL STRUCTURE (M US$)
% of total equity
% of total capitalization
83.6 28.3 11.15 16.95 140.0
59.7% 20.2% 8.0% 12.1% 100%
19% 6% 2% 4% 31%
Equity Cascades Caisse de dépôt et placement Industry converter 1 Industry converter 2 Total equity Senior debt Term loan Revolver Total senior debt 1 Subordinated debt Cascades Caisse de dépôt et placement 1 Total subordinated debt Capitalized interests during construction TOTAL
203.9 25.0 228.9
45% 6% 51%
15.25 45.75 61.0 20.1
4% 10% 14% 4%
450.0
100%
Total for Cascades = US$99 M (Greenpac’s debt without recourse)
Balanced capital structure 1
Subordinated debt to bridge expected refundable tax credits in years 2 to 6.
24
GREENPAC FINANCIAL POTENTIAL (% of sales) 35
EBITDA Margins Benchmarking 31
30
24
25
19
20 15
27 21 16
29 23
19
19 13
12
10 5 0 2007 Norampac's N. American mills
Market linerboard selling price/OCC cost spread (US$/s.t.) US$/CAN$
2008
2009
Norampac's best 2 performing mills
2010 Greenpac
2007
2008
2009
2010
419 0.93
484 0.94
491 0.88
491 0.97
In most market conditions, Greenpac’s profitability is expected to be one of the best in the industry Sources: RISI, Bloomberg. EBITDA excluding specific items. Greenpac’s EBITDA margins based on Norampac’s internal financial model.
25
FINANCIAL IMPACT (P/L) FOR CASCADES No full or proportionate consolidation • Greenpac’s results will flow through “Share of results” line in Statements of Earnings
Factor
Impact on Cascades’ Statements of Earnings & Cash Flow
Norampac’s purchase volume discount
(+) EBITDA & Cash flow
Norampac’s management fees to Greenpac
(+) EBITDA & Cash flow
Cascades’ bridge loan to Greenpac
(-) Financing expenses, (+) Cash flow
Cascades’ equity investment
(+) Financing expenses, (-) Cash flow
Greenpac’s net earnings Greenpac’s dividends
(+) EPS (+) Cash flow
All in all, Greenpac is expected to have a positive impact on Cascades’ EBITDA, net results and cash flow once ramp-up is achieved EBITDA and EPS excluding specific items.
26
FINANCIAL IMPACT (B. SHEET) FOR CASCADES March 31, 2011 (adjusted for the sale of Dopaco)
March 31, 2011 (adjusted for the sale of Dopaco and full investment in Greenpac)
Change
271 117
368 86
97 (31)
1,079
1,145
66
Long-term assets Investments in associates and JVs Other assets Long-term liabilities Long-term debt
Equity Bridge loan Already invested (March 31, 2011) To invest (before year-end 2011)
M US$ 84 15 99 (31) 68
M CAN$ 82 15 97 (31) 66
Cascades’ investment in Greenpac to have marginal impact on total debt 27
CONCLUDING REMARKS
28
CONCLUDING REMARKS Through Greenpac, 1. Norampac positions itself amongst sector leaders in terms of: • Product offering • Productivity • Profitability 2. Cascades’ maintains and carefully manages: • Financial flexibility • Operational risk
Objective: maintain sound balance sheet with continuing to invest strategically 29
APPENDICES
30
TIMELINE Start of Detailed Engineering/Remediation
October 2010
Breaking ground
July 2011
Completion of Paper Machine & OCC Building
March 2012
Completion of Electrical & Instrumentation Installation
April 2013
Completion of Mechanical & Piping Installation
May 2013
Checkout and Commissioning Complete
June 2013
Sheet on Reel (not later than)
July 2013
Approximately 2 years until start-up of production 31
For more information: www.cascades.com/investors Didier Filion Director, Investor Relations [email protected] 514-282-2697
32
CREDIT: IMAGE ECOterre
