Cascades Q2 earnings down from last year; CEO says Bear Island ramp-up remains priority

Cascades Inc. released its second quarter 2024 financial results late last week, and while earnings are down from a year ago, the new CEO of the Kingsey Falls, Quebec-based paper and packaging company expects the second half of the year to produce stronger results.

The company’s sales increased by 1 percent to CAD$1.18 billion ($1.3 billion) in the second quarter of this year compared with CAD$1.7 billion ($1.23 billion) in the same period last year, which Cascades attributes to strong sales in all three of its business segments. However, operating income, net earnings and earnings before interest, taxes, depreciation and amortization (EBITDA) all decreased year over year.

Overall, operating income is down from CAD$64 million ($47 million) last year to CAD$34 million ($25 million) in the most recently completed quarter, while net earnings are down from CAD$22 million ($16 million) to CAD$1 million ($727,655) and EBITDA is down from CAD$141 million ($103 million) to CAD$112 million ($81.5 million).

Cascades CEO Hugues Simon, who assumed the position earlier this summer, says the company’s consolidated results should be stronger sequentially, driven by improved containerboard results as price increases are implemented and production efficiency levels are normalized. Cascades experienced unplanned extended downtime at its Bear Island and Greenpac mills, impacting production.

“Consolidated results are also expected to benefit from stable results in the specialty packaging business,” he continues. “At the same time, higher pulp prices and softer pricing due largely to a less favorable sales mix are expected to translate into lower results from the tissue papers segment.

“More broadly, the ongoing Bear Island facility ramp-up remains a priority, as is the roll-out of announced price increases in containerboard and continued focus on profitability, efficiency and productivity initiatives throughout our operations."

Sales in each of the company’s business segments—containerboard, specialty products and tissue papers—all increased slightly year over year, and while operating income and EBITDA in specialty products and tissue papers increased, the containerboard business experienced decreases in both areas.

Cascades’ containerboard business operating income is down from CAD$62 million ($45 million) in the second quarter last year to CAD$15 million ($11 million) in the most recent quarter, while EBITDA is down from CAD$96 million ($70 million) to CAD$60 million ($44 million).

Other than the extended downtime at its Bear Island and Greenpac mills, Cascades reports no economic downtime in its mill network during the second quarter, a quarterly improvement from the 6,200 short tons worth of economic downtime taken in the first quarter.

The company also reports strong domestic demand for old corrugated containers (OCC) driven by new recycled containerboard mills being ramped up, and says fiber generation increased with typical favorable seasonal generation and consistent export volumes. It expects “relatively stable” OCC market dynamics in the coming months.

However, Cascades reports continued longer-term structural decline in market supply of sorted office paper.

Cascades full second quarter 2024 earnings presentation can be found here.