INVESTOR PRESENTATION, MONTREAL
September 11, 2017 DISCLAIMER FORWARD-LOOKING STATEMENT 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 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 and industry conditions. This presentation may also include 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 Corporation.
SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES – SPECIFIC ITEMS The Corporation incurs some specific items that adversely or positively affected its operating results. We believe it is useful for readers to be aware of these items, as they provide additional information to measure the performance, compare the Corporation's results between periods and to assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not necessarily reflective of the Corporation underlying business operations in measuring and comparing its performance and analyzing future trends. Our definition of specific items may differ from those of other corporations and some of them may arise in the future and may reduce the cash available to us.
They include, but are not limited to, charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing of long-term debt, some deferred tax assets provisions or reversals, premiums paid on long-term debt refinancing, gains or losses on the acquisition or sale of a business unit, gains or losses on the share of results of associates and joint ventures, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rate swaps, foreign exchange gains or losses on long-term debt, specific items of discontinued operations and other significant items of an unusual, non-cash or non-recurring nature. RECONCILIATION OF NON-IFRS MEASURES To provide more information for evaluating the Corporation's performance, the financial information included in this analysis contains certain data that are not performance measures under IFRS (“non-IFRS measures”) which are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance measures and non- IFRS measures is useful to both management and investors as they provide additional information to measure the performance and financial position of the Corporation. It also increases the transparency and clarity of the financial information. The following non-IFRS measures are used in our financial disclosures:
- Operating income before depreciation and amortization (OIBD): Used to assess operating performance and contribution of each segment when excluding depreciation & amortization. OIBD is widely used by investors as a measure of a corporation ability to incur and service debt and as an evaluation metric. - Adjusted OIBD: Used to assess operating performance and contribution of each segment on a comparable basis. - Adjusted operating income: Used to assess operating performance of each segment on a comparable basis. - Adjusted net earnings: Used to assess the Corporation‘s consolidated financial performance on a comparable basis. - Adjusted free cash flow: Used to assess the Corporation’s capacity to generate cash flows to meet financial obligation and/or discretionary items such as share repurchase, dividend increase and strategic investments. - Net debt to adjusted OIBD ratio: Used to measure the Corporation's credit performance and evaluate the financial leverage.
Non-IFRS measures are mainly derived from the consolidated financial statements but do not have meanings prescribed by IFRS. These measures have limitations as an analytical tool, and should not be considered on their own or as a substitute for an analysis of our results as reported under IFRS. In addition, our definitions of non-IFRS measures may differ from those of other corporations. Any such modification or reformulation may be significant.
All amounts in this presentation are in Canadian dollars unless otherwise indicated.
Please click here for the 2016 supplemental information on non-IFRS measures. Please click here for the Q2 2017 supplemental information on non-IFRS measures. 2 INVESTMENT THESIS
• Founded in 1964 by the Lemaire brothers in Kingsey Falls, Quebec, Canada 50+ Years of • 89 facilities1, 11,000 employees, operations in Canada, US and Production & Europe2 Focus on • 80% of Cascades’ products are made with recycled fibres Sustainable • Long-term circular economy advocates, practitioners & pioneers: Development ✓ “Closed-Loop” business model: Recovery & Recycling & Innovation → Manufacturing → Converting → Customers
• 94.7 M common shares (~ 30% held by founders & directors) • Market cap3: CAN$1.34 B Publicly • TSX avg. daily trading volume3: 250,700 shares Traded for • Member of: S&P/TSX Composite Index and S&P/TSX Dividend over 30 Years Index (added June 19/17), S&P/TSX Clean Technology Index, S&P/TSX Small Cap Index, BMO Small Cap Index • Corporate credit ratings: Moody’s: Ba2 (Stable), S&P: BB- (Stable)
1 2 3 Including joint ventures. Via our 57.7% equity ownership in Reno de Medici S.p.A. (RdM) As of September 7, 2017 3 INVESTMENT THESIS
Leading market positions in growing North American packaging and Diversified tissue business segments, well-positioned in Europe Player, Strong # 6 containerboard producer in North America Competitive # 5 tissue producer in North America Positioning # 2 coated recycled boxboard producer in Europe1 # 1 paper collector in Canada, top 10 worldwide
Repositioned, invested & restructured over 2011 – 2016: • Invested more than $500M in modern equipment Focused on • $125M in annual working capital savings Value • Refocused NA platform on growing packaging & tissue segments Creation and 2017 – 2022 focus: Strategic • Organic growth, increasing integration, optimizing our geographic Growth footprint, investing in state of the art equipment • Monetize benefits from significant IT & internal processes optimizations • Differentiate via innovation, customer focus, our sustainable product offerings
1 Via our 57.7% equity ownership in Reno de Medici S.p.A. (RdM) 4 INVESTMENT THESIS
Financial Metrics 2016 Sales by Geography
✓ Revenues: $4.0 B (+6.2% 5-yr CAGR) 2016 SALES FROM 2016 SALES TO (SOURCE) (DESTINATION) ✓ Adj. EBITDA: $403 M (+9.0% 5-yr CAGR) 21% Europe1 22% ✓ Adj. CF Ops.: $324 M (+20.2% 5-yr CAGR) 28% U.S. 39% ✓ Net debt reduced by 11% to $1.5 B 51% Canada 39% ✓ Net debt/Adjusted EBITDA1: 3.8x Export: ~ 25% of our Canadian sales Financial Metrics LTM Q2-17 Sales by Segment
✓ Shipments: 3,124 (‘000 s.t.) Containerboard 2 31% ✓ Adjusted EBITDA margin: 8.9% 34% 1 LTM Q2-2017 Boxboard Europe ✓ ROCE: 3.8% sales Specialty Products $4,136M ✓ Working capital (% of sales): 10.5% Tissue Papers 16% 19% % before inter-segment sales ✓ Net debt/Adjusted EBITDA2: 4.2x
1 Via 57.7% equity ownership in Reno de Medici S.p.A. (RdM) 2 Pro-forma for the consolidation of Greenpac on a LTM basis. Supplemental information on non-IFRS measures for 2016 and Q2-2017. 5 INVESTMENT THESIS Tailwinds
✓ Full implementation of linerboard and medium price increases in containerboard ✓ Benefits from business process modernization and implementation of ERP platform ✓ Ramp-up of new state of the art tissue converting facility in Oregon ✓ New containerboard facility in NJ with expected start-up in Q2/18 ✓ Announced price increases in European Boxboard division Headwinds
✓ Fluctuations in raw material pricing – OCC, SOP, pulp ✓ Increased competitiveness and capacity additions in tissue segment ✓ Over-supply in hand towel jumbo roll segment ✓ Rumored and announced plant conversions in containerboard ✓ Canadian dollar exchange rate – USD and euro
6 OPERATING PERFORMANCE AND FINANCIAL SITUATION Strong Financial Profile
Sales (CAN$ M) Operating Income & Margin (CAN$ M and %)
CAGR: + 6.3% CAGR: + 19.7% 250 8.0% 4500 221 4,136 4,001 200 176 4000 3,861 153 162 6.0% 3,561 137 150 5.5% 3500 3,370 5.2% 4.0% 3,141 100 72 3.8% 4.0% 3.9% 3000 2.0% 50 2.3% 2500 0 0.0% 2012 2013 2014 2015 2016 LTM 2012 2013 2014 2015 2016 LTM Q2-17 Q2-17
1 1 Adjusted OIBD & Margin (CAN$ M and %) Adjusted Free Cash Flow per Share (CAN$)
CAGR: + 6.5% $1.58 460 426 403 16.0% $1.20 420440 367 380400 342 340 14.0% $0.78 $0.86 $0.85 340360 285 300320 12.0% 260280 240 10.0% 200220 11.0% 160180 10.1% 10.1% 8.0% 120140 9.1% 9.5% 8.9% 10080 6.0% 4060 ($0.28) 200 4.0% 2012 2013 2014 2015 2016 LTM 2012 2013 2014 2015 2016 LTM Q2-17 Q2-17 1 Supplemental information on non-IFRS measures for 2016 and Q2-2017. 7 OPERATING PERFORMANCE AND FINANCIAL SITUATION Consolidated Financial Ratios & Debt Maturities Net Debt / LTM Adjusted OIBD1 Interest Coverage Ratio2
5.0x 3 4.6x 4.7x 3 4.7x 4.6x 4.7x 4.0x 3.8x 4.2x 3.0x 3.4x 3.4x
2012 2013 2014 2015 2016 Q2 2012 2013 2014 2015 2016 Q2 2017 2017 Net Debt1 / Net Debt + Total Equity Long-Term Debt Maturities (as at June 30, 2017)
64% Weighted Average 713 62% 561 59% Interest Rate of 58% 57% 5.32% in 2016 54% 324 169 52
2012 2013 2014 2015 2016 Q2 1 year >1 year 2021 2022 2023 2017 Senior notes Revolver Debts without recourse Subsidiaries debts Revolving credit facility pushed from 2019 to 2021
Bank debt financial covenant ratios: Net funded debt to capitalization < 65% (currently at 47.60%), interest coverage ratio > 2.25x (currently at 3.98x). 1 Supplemental information on non-IFRS measures for 2016 and Q2-2017. 2 OIBD to interest expense. 3 Pro-forma for the consolidation of Greenpac on a LTM basis. Leverage ratio stands at 3.5x on a pro-forma basis following sale of Boralex investment in July 2017. 8 OPERATING PERFORMANCE AND FINANCIAL SITUATION Near-Term Leverage Target of 3.0x – 3.5x
6.0x 5.8x 5.0x 5.0x 4.6x 4.7x 4.0x 4.0x 3.8x 3.2x1
3.0x 1 2.4x 2.2x1 2.0x
1.0x
0.0x
2011 2012 2013 2014 2015 2016
2017E 2018E 2019E The $288 M of proceeds from the sale of our equity stake in Boralex on July 27, 2017, will enable us to achieve our leverage target ratio in 2017
1 Based on Street’s adjusted OIBD estimates $428 million for 2017 and $521 million for 2018. Assuming stable adjusted OIBD for 2019 ($521 million), FX US$/CAN$ at 1.25 and $100 million of free cash flows dedicated to debt reduction annually. Greenpac Mill included on a twelve month pro-forma basis. 2017e also takes into consideration the sale of our equity stake in Boralex. 9 RAW MATERIAL COSTS – INDEX LIST PRICES
Recycled Fibre Prices Virgin Pulp Prices (US$/ton) Current (US$/ton) Current (Sept.) (August) 200 1,200 179 175 1,100 1,100 150 155 1,000 125 975 900 100 75 800
50 700
Mar 15Mar 16Mar 17Mar
Feb 15Feb 16Feb 17Feb
Dec Dec 14 Dec 15 Dec 16
Aug Aug 14 Nov 14 Aug 15 Nov 15 Aug 16 Nov 16 Aug 17
May14 May15 May16 May17
Sept 14Sept 15Sept 16Sept 17Sept
June 14 June 15 June 16 June 17 June White grades (Basket of products) Brown grades (OCC) NBSK NBHK
Recovered Paper Prices Q2-2016 Q1-2017 Q2-2017 Q2/Q2 Q2/Q1 White grades - Basket of products (Northeast average)1 154 182 181 +17% -1% Brown grades - OCC No. 11 (Northeast average) 88 142 148 +68% +4%
Virgin Pulp Prices NBSK (Canadian sources delivered to Eastern US) 980 1,033 1,093 +12% +6% NBHK (Canada/US sources delivered to Eastern US) 847 853 942 +11% +10%
Q2 recovered paper prices remained elevated as strong domestic & foreign demand persisted
Source: RISI. 1 Basket of white recycled paper, including grades such as SOP, Hard White Envelope and Coated Book Stock; Northeast average. Weighted average based on Cascades’ consumption of each grade. 10 CONTAINERBOARD PACKAGING GROUP A Leading Canadian and Major North American Player ▪ Largest corrugated box producer in Canada with ~32% market share 16% 8% 1 1 15% Manufacturing - CAN ▪ 64% integration rate, targeting 85% in the mid-term 2016 Manufacturing - US ▪ Strong platform in Canada and growing presence in Sales U.S. Northeast $1,370M Converting - CAN ▪ Annual capacity of 1,531K s.t.(including Greenpac): ✓ 84% recycled vs. 16% virgin Converting - US ✓ 53% linerboard vs. 47% medium 61% Not including Greenpac Mill ▪ 2013-LTM Q2-17 sales CAGR: +8.7% LTM Q2-17 adjusted OIBD2 margin of 14% Strong Asset Base Improving Results CAN $ M 1,600 1,466 400 1,301 1,370 1,181 1,095 1,200 17.8% 300 15.8% 13.8% 13.9% 231 800 13.7% 216 202 200 164 170 158 150 135 400 104 108 100
0 0 2013 2014 2015 2016 LTM 1 Including associates and JVs and Greenpac. 2 Supplemental information on non-IFRS Q2-17 measures for 2016 and Q2-2017. 3 EBITDA margin including Greenpac on a pro-forma basis: Sales Operating Income Adj. OIBD 2& Margin3 15.6% in 2014, 21.3% in 2015, 18.5% in 2016 and 15.7% in LTM Q2-17. 11 CONTAINERBOARD PACKAGING GROUP Modernizing and Upgrading - Organic Growth New Conversion Plant in Piscataway, NJ • New state of the art conversion facility housing st Largest recycled 1 quartile equipment linerboard mill in • US$80 M project largely funded by sale of land of North America NYC plant (scheduled to close by end of 2018); 1 → 1,425 st/day property is currently listed for US$72 M → 26 pounds • Corrugator capacity: 2.4 billion ft2
st • Product differentiation: Greenpac XP grades • Q2/18 start-up planned, with focus in 1 year of 2 represent majority of total production operation to ramp up 1.5 billion ft to accommodate business transferred from Cascades’ other US • Take-or-pay agreement for 81% of the mill’s output northeast plants and new customers • Partners: 1 pension fund, 2 independent converters • When fully ramped-up, operation will increase integration rate by 5%, from current 64%3 • As of Q2/17: ownership increased to 62.5% from 59.7%, and Greenpac results are consolidated
1 Mill capacity at 515,000 tons based on 90% production of lightweight products compared to initial stated capacity of 540,000 tons. 3 Q2/17, including associates and JVs and Greenpac. 12 CONTAINERBOARD PACKAGING GROUP Consolidated North American Competitive Landscape 2007 2013 2016
Smurfit Stone 20% IP 35% IP 33% ❖ Weyerhaeuser 16% ❖ Rock Tenn 20% ❖ WestRock 19% IP 11% Koch/GP 11% Koch/GP 10% GP 11% PCA 7% PCA 9% Temple Inland 9% Cascades1 4% Kapstone 4% PCA 6% Pratt 3% Cascades1 4% Cascades1 3% Kapstone 2% Pratt 4% Others 24% Others 18% Others 17%
Top-5 67% Top-5 77% Top-5 75%
% of total capacity
Source: RISI, Deutsche Bank, Company reports and estimates, Fibre Box Association, Paper Packaging Canada 1 Including Greenpac Mill in 2016 and 2013. Greenpac was not in operation in 2007 13 CONTAINERBOARD PACKAGING GROUP Sound Environment Fundamentals Sound Despite Added Capacity
• Capacity growth of ±1.8% annually Industry Operating Rates1 over 2015 - 2019 period 100% 90% • Sound industry fundamentals (July/17): 80% Cascades adjusted EBITDA increases ~$2.5M 70% with every 1% increase in our utilization rate ✓ YTD capacity utilization: 97.3% (97.9% in July) 60% ✓ Inventories: 2% above 10 year avg. Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 ✓ 3.7 weeks of supply below 10 year avg. of 3.9 2010 2011 2012 2013 2014 2015 2016 2017
• US$50/st containerboard price increase Industry Expected Capacity1 (M s.t.) 44.0 being implemented on rolls and boxes 1.0 42.9 0.9 41.9 42.0 • US$30/st corrugating medium price 0.4 41.0 Corr. Sup. Yr 2 0.6 40.6 PCA Yr 2 40.0 Kruger Yr 2 McKinley Yr 2 increase reflected in July (US$20/st) & 40.0 Kruger Yr 1 Corr. Sup. Yr 1 Productivity 0.8% Pratt Yr 2 Productivity 0.8% PCA Yr 1 Greif Yr 2 McKinley Yr 1 August (US$10/st) RISI publications IP Valliant Yr 2 Productivity 0.8% 38.0 SP Fiber Yr 2 Corr. Supplies WestRock shuts Productivity 0.8% 36.0 2015e New 2016e New 2017e New 2018e New 2019e 1 Source: RISI, Deutsche Bank, RBC, Company reports and estimates. New capacity capacity capacity capacity capacity, net of capacity shutdowns. (+1.5%) (+1.0%) (+2.2%) (+2.4%) 14 CONTAINERBOARD PACKAGING GROUP Business Drivers
Containerboard Benchmark Market Prices Brown Grades Recycled Fibre Prices
(US$/s.t.) (US$/s.t.) 750 200 700 180 650 160 140 600 120 550 100 500 80 450 60 400 40 Linerboard 42-lb. unbleached kraft, Eastern U.S. Old corrugated containers no. 11 (Northeast) 350 20 Corrugating medium 26-lb. semichemical, Eastern U.S. Old corrugated containers no. 11 (Midwest)
300 0
Mar 17
Mar 16
Mar 15
Mar 14
Mar 13
Mar 12
Mar 11
Mar 10
Mar 09
Mar 08
Feb 17
Feb 16
Feb 15
Feb 14
Feb 13
Feb 12
Feb 11
Feb 10
Feb 09
Feb 08
Aug 17 Sep 17
Aug 16 Sep 16
Aug 15 Sep 15
Aug 14 Sep 14
Aug 13 Sep 13
Aug 12 Sep 12
Aug 11 Sep 11
Aug 10 Sep 10
Aug 09 Sep 09
Aug 08 Sep 08
Aug 07 Sep 07 US$50/st containerboard price increase OCC up US $70/st in Q1/17, and $6/st in Q2/17 due reflected in RISI of April 2017; to strong domestic and foreign demand; Price rose US$30/st medium price increase $15/st in July, was flat in August, and decreased by reflected in RISI of July and August 2017 $10/st in September RISI publications.
Source: RISI 15 CONTAINERBOARD INDUSTRY STATISTICS U.S. Corrugated Boxes Shipments (BSF) RISI Forecast 2017 – 2021 CAGR: + 1.9% 408 414 392 399 384 376 364 369 357 359 360 360 345
2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F
U.S Containerboard Production & Utilization Capacity Rate (tons & %) 2017 – 2021 CAGR: + 2.5% RISI Forecast 50,000 105% 40,520 41,352 37,430 38,472 39,359 40,000 34,371 34,823 35,354 35,822 36,316 100% 31,517 33,766 34,024 30,000 95% 20,000 90% 10,000 85% 0 80% 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F
Source: FBA, RISI 16 BOXBOARD EUROPE GROUP Second Largest Coated Recycled Boxboard Producer in Europe
▪ 57.7% equity ownership of Reno de Medici, a public Coated 22% Italian company; 5 recycled (885K m.t.) & 1 virgin recycled boxboard (165K m.t.) mills boxboard 2016 ▪ Operations in Italy, France and Germany Sales $796M ▪ Simplified structure and investments made in Coated modernization virgin 78% boxboard ▪ Completed legal transfer of Cascades’ virgin mill in France to RdM in Q2-2016
LTM Q2-17 adjusted OIBD1 margin of 7% Steady Contributor to Results CAN $ M 1,000 120 841 786 825 796 804 100 800 8.6% 7.6% 80 7.3% 72 6.7% 6.8% 63 600 57 53 55 60 40 29 400 19 22 20 11 0 200 -20 (28) 0 -40 2013 20142 2015 2016 LTM Q2-17 1 Supplemental information on non-IFRS measures for 2016 and Q2-2017. Sales Operating Income Adj. OIBD 1 & Margin 2 Including $9 million of energy credits. 17 BOXBOARD EUROPE GROUP Leading European Producer of Coated Board
Cartonboard Producers by Grade1 (2016) WLC Producers1 (2016)
Mayr-Melnhof
Reno De Medici
Weig Karton
Smurfit Kappa
Buchmann
Fiskeby Board
Barcelona Cartonboard
KappaStar
Pulp Mill Holding
Paprinsa
0 500 1000 1500
1 Source: PÖYRY, 2016, Reno de Medici. Capacity in 1,000 t/a. SBS = Solid Bleached Sulphate (virgin); FBB = Folding Boxboard (virgin); CUK = Coated Unbleached Kraft (virgin); WLC = White Lined Chipboard (recycled); LPB = Liquid Packaging Board (virgin). 18 SPECIALTY PRODUCTS GROUP A Diversified Packaging Player ▪ Largest paper collector in Canada with 19 facilities Recovery and 1.4 million s.t. of material processed in 2016 24% ▪ A leading position in industrial packaging with Cascades Sonoco JV 2016 Industrial Sales 46% packaging ▪ Strong growth potential in consumer packaging $620M ▪ 2016 sales (IFRS) of $620M, vs. $819M (Non-IFRS) Consumer with JVs at 100% 30% products ▪ 2013-LTM Q2-17 sales CAGR: +6.1% packaging
LTM Q2-17 adjusted OIBD1 margin of 11% Focusing on Growth Sectors CAN $ M 800 100 675 700 620 10.8% 579 80 600 548 568 10.5% 10.0% 73 500 65 58 60 400 7.5% 7.0% 51 53 300 41 40 40 31 200 20 100 16 6 0 0 2013 2014 2015 2016 LTM Q2-17 1 1 Supplemental information on non-IFRS measures for 2016 and Q2-2017. Sales Operating Income Adj. OIBD & Margin 19 SPECIALTY PRODUCTS GROUP Cascades Recovery+ Sub-Segment NA Recycled Fibre1 (2.6M st) • Business unit created via the merger of recovery operations & recycled fibre Brown recycled purchased buying group White recycled purchased • Manages procurement of all raw material 38% 31% (1.0M st) (0.8M st) fibre for Cascades’ North American Spot Recycled groundwood 25% operations purchased CIRCULAR ECONOMY APPROACH 11% (0.3M st) Recycled fibre collected & 16% USED by CAS (0.4M st) 4% (0.1M st) Recycled fibre collected & SOLD by CAS
• We use 29% of the 1.4M st of recycled fibre that we collect via our Recovery operations • Out of the 2.6M st of recycled fibre that we collect & purchase externally, we use 62% internally, and sell the remaining 38% to external customers
1 North America only. 20 TISSUE PAPERS GROUP A Canadian Leader and Important North American Player ▪ 5th largest tissue producer in NA based on capacity (650K s.t.) Retail 17% ▪ Growing footprint in Western U.S. 2016 ▪ 68% integration rate, targeting 85% in the mid-term 46% Away-from- Sales ▪ Repositioned and rebranded AfH product lines under Home $1,305M Cascades PRO brand to simplify product offering 37% Parent rolls ▪ Launched new Cascades consumer tissue paper lines in Canada: Fluff™ and Tuff™ brands ▪ 2013-LTM Q2-17 sales CAGR: +6.9% LTM Q2-17 adjusted OIBD1 margin of 10% Targeting 13% OIBD Margin Near Term CAN $ M 1,305 1,305 1,236 250 1,200 1,033 1,054 200 11.5% 12.9% 10.3% 9.6% 150 150 800 133 135 9.1% 119 106 96 100 400 64 75 63 48 50 0 0 2013 2014 2015 2016 LTM Q2-17 1 1 Supplemental information on non-IFRS measures for 2016 and Q2-2017. Sales Operating Income Adj. OIBD & Margin 21 TISSUE PAPERS GROUP Strong Position Across the North American Tissue Market
CAS Sales by Country (2016) Tissue Market Demand1
Canada (25%) US (75%) 160 Branded Away-from- Branded Away-from- 140 43% Home 27% Home 42% 47% 120 Private Private Demand At-Home Label Label At-Home 100
58% 73% Indexed U.S. Tissue 57% 53% 80 1996 2000 2004 2008 2012 2016
CAS North American Sales by End Markets (2016) North American Tissue Capacity Additions1
(M s.t.) 4% Retail - branded 12,500 17% 10,227 295 10,522 267 9,838 45 9,883 344 Retail - private label 10,000 9,571 Afh - branded 7,500 15% 42% AfH - private label 5,000 Parent rolls 2,500 22% 0 NA Tissue sales: 2013 2016 2017e 2018e 2019e ~ 75% recycled and ~ 25% virgin (+0.9%/year) (+0.0%) (+3.5%) (+2.9%) 1 Source: RISI 22 TISSUE PAPERS GROUP Diversified Capacity and Positioning
2016 NORTH AMERICAN TISSUE MANUFACTURERS Capacity Market Capacity Capacity ('000 s.t.) Share Retail AfH 1 Georgia-Pacific 2,849 29% 67% 33% 2 Procter & Gamble 1,494 15% 100% 0% 3 Kimberly-Clark 1,466 15% 67% 33% 4 SCA Tissue NA 784 8% 0% 100% 5 Cascades Tissue 650 7% 62% 38% 6 Clearwater Paper 435 4% 90% 10% 7 KP Tissue 400 4% 77% 23% 8 First Quality Tissue 319 3% 100% 0% 9 Irving Tissue 282 3% 100% 0% 10 ST Paper & Tissue 160 2% 0% 100% Others 1,044 10% TOTAL 9,883 100%
Source: RISI 23 TISSUE PAPERS GROUP Business Drivers
Tissue Papers Benchmark Market Prices White Grades Recycled Fibre Prices
(US$/s.t.) (US$/s.t.) 1,500 350
1,400 300
1,300 250
1,200 200
1,100 150
1,000 100
900 Virgin parent rolls 50 Sorted office papers no. 37 (Northeast) Recycled parent rolls Sorted office papers no. 37 (Midwest)
800 0
Jul17
Jul16
Jul15
Jul14
Jul13
Jul12
Jul11
Jul10
Jul09
Jul08
Jul07
Jan17
Jan16
Jan15
Jan14
Jan13
Jan12
Jan11
Jan10
Jan09
Jan08
Mar 17
Mar 16
Mar 15
Mar 14
Mar 13
Mar 12
Mar 11
Mar 10
Mar 09
Mar 08
Sep 17
Sep 16
Sep 15
Sep 14
Sep 13
Sep 12
Sep 11
Sep 10
Sep 09
Sep 08 Sep 07
After years of volatility, parent roll prices have The recent increase is partially due to lower remained relatively stable since 2015 levels of material generation
Source: RISI 24 TISSUE PAPERS GROUP North American Tissue Market
N.A. Retail Tissue Product N.A. Away-from-Home Tissue Consumption (2016) Product Consumption (2016)
1% 2% 2%
Bathroom Toweling tissue 7% 7% 18% Toweling Bathroom tissue 44% Facial Napkins 52% 33% Napkins Facial 34%
Sanitary Sanitary
Towel and bathroom tissue products account for majority of tissue consumption
Source: RISI 25 2017-2022 STRATEGIC PLAN
26 POSITIONING FOR GROWTH Building on the Past, Positioning for the Future 2011 - 2016
WE MODERNIZED Acquisition of New tissue paper Consolidation Papersource machine in Oregon of Recovery • Invested more than $500M in ownership Acquisition of modern equipment Start-up of the a corrugated Start-up of WE OPTIMIZED Greenpac Mill box plant in the Wagram • $125M in annual savings by Consolidation of Connecticut tissue plant improving working capital Reno De Medici WE RESTRUCTURED • Closed 16 non-performing 2011 2012 2013 2014 2015 2016 assets, completed 6 asset sales, exited industries and consolidated operational Sale of Sale of Sale NA platforms in NA representing Dopaco Fine Papers Boxboard $1B in sales, 2% EBITDA margin activities WE INNOVATED • Launched many new products
27 POSITIONING FOR GROWTH Building on the Past, Positioning for the Future
Capital Expenditures (M$) • 2017B Capex ~ $200M 250 ✓ Mainly growth Capex $206M $200M 200 $184M $184M ✓ Mostly in the US $173M $161M 150 • Strong free cash flow has funded Capex 100 • Impacted by strong US$ 50 • Important investments made in Tissue Papers (2013-15) and 0 in Containerboard (2012-13) 2012 2013 2014 2015 2016 2017B • Significant IT & administrative Containerboard Boxboard Europe Specialty Products process modernization Tissue Papers Corporate & IT
28 POSITIONING FOR GROWTH Building on the Past, Positioning for the Future
UPGRADE OUR VALUE 1 PLATFORMS 2 CREATION
- Invest in organic growth - Increase profitability margin from 10% to 15% - Increase integration rate to 85% - Disciplined capital allocation - Grow US platform - Sustainable free cash flow generation - Optimize geographic footprint - Continued focus on debt reduction
3 INNOVATION & CUSTOMER FOCUS 2017 – 2022 - 2020: 20% of sales from innovative products 2017 – 2022 - Leverage our diversified portfolio to cross-sell STRATEGY - Reinforce positioning as THE provider of FOCUS AREAS sustainable packaging and tissue products - - 29 - 1 UPGRADE OUR PLATFORMS
Accelerate Modernization + Increase Integration + Optimize Footprint • Replace older equipment • Increase our integration rate • Improve geographic footprint • Invest in organic growth by investing in conversion to better serve our customers, capacity increase penetration of Scappoose, OR national accounts Containerboard
64%1 85%2
Grow our US platform & Tissue geographic footprint
68%1 85%2
Drummondville, QC
1Q2 2017 integration rate including associates, joint ventures and Greenpac. 2 Including associates, joint ventures. Containerboard integration including Greenpac. 30 2 CREATE VALUE ↑ Profitability Margin to 15% + Disciplined Capital Allocation
• Growth associated with potential Cash Flow from Operations 4 strategic investments and acquisitions INVEST IN OUR ASSET BASE • Modernize equipment • Transformation program benefits & • Opportunistic M&A 3 reduction of implementation costs • Increase integration, optimize footprint ±$50 M ANNUALLY DEBT REDUCTION • Objective = allocate at least $100M of • Monetize the benefits of our FCF toward debt reduction annually optimization, modernization and 2 • Near-term leverage ratio target of restructuring efforts 3.0 x - 3.5 x
• Consolidate Greenpac results (Q2/17) DIVIDENDS & SHARE REPURCHASES 1 • New Oregon tissue conversion • Maintain current strategy facility
31 3 FOCUS ON CUSTOMERS AND INNOVATION
Hand towel dispenser with new, patented dispenser technology Produces innovative, lightweight recycled linerboard – XP grades
Low-density PETE containing 80% post- consumer material OBJECTIVE: 20% of sales from innovative products in 2020
Recyclable insulated container, made with Water-based coating that FSC® certified acts as a barrier against recycled materials grease and humidity for takeout containers Polystyrene foam packaging containing 25% recycled material 32 APPENDIX
33 Q2 2017 PERFORMANCE – FINANCIAL RESULTS
112 107 103 323 82 75 65 50 48 161 33 31 36 35 20 30 4 15 12 24
Q2 Q3 Q4 Q1 Q2 Q2 Q3 Q4 Q1 Q2 2016 2016 2016 2017 2017 2016 2016 2016 2017 2017
Operating Income Adjusted OIBD1 Net Earnings Adjusted Net Earnings1 Figures above in millions of CAN$ Figures above in millions of CAN$
2016 2017 (In millions of CAN$, except amount per share) Q1 Q2 Q3 Q4 Year Q1 Q2 LTM Financial results Sales 1,003 998 1,021 979 4,001 1,006 1,130 4,136 Operating income 73 65 50 33 221 31 48 162 Adjusted OIBD1 106 112 103 82 403 75 107 367 Net earnings 75 36 20 4 135 161 323 508 Adjusted net earnings1 34 35 30 15 114 12 24 81 Net earnings per share $0.79 $0.38 $0.21 $0.04 $1.42 $1.70 $3.41 $5.36 Adjusted net earnings per share1 $0.35 $0.38 $0.32 $0.16 $1.21 $0.13 $0.25 $0.86
Net earnings of $323 million or $3.41 per share in Q2 2017 reflects revaluation gain on Greenpac acquisition 1 Supplemental information on non-IFRS measures for 2016 and Q2-2017. 34 BUSINESS SEGMENTS Historical Segmented Operating Income and Margin
2 Containerboard (CAN$ M and %) Boxboard Europe (CAN$ M and %)
170 158 135 14% 40 29 5% 150 104 108 12% 30 19 22 13% 10% 3% 100 12% 20 11 8% 3 3% 9% 9% 9% 10 2% 3% 1% 50 6% 0 4% 1% -1% 0 2% -10 0% (3%) (13) -20 -50 0% -3% -2% -30 -100 (1%) -4% -40 (28) -5% 2012 2013 2014 2015 2016 LTM 2012 2013 2014 1 2015 2016 LTM Q2-17 Q2-17
Specialty Products (CAN$ M and %) Tissue Papers (CAN$ M and %)
60 51 53 9% 120 106 12% 8% 92 50 7% 100 10% 31 8% 8% 10% 75 40 6% 80 9% 64 63 8% 30 5% 60 48 6% 19 5% 4% 20 16 3% 40 6% 4% 6 5% 5% 3% 3% 2% 5% 10 1% 20 2% 0 1% 0% 0 0% 2012 2013 2014 2015 2016 LTM 2012 2013 2014 2015 2016 LTM Q2-17 Q2-17 1 Including $9 million of energy credits 2 Via our 57.7% equity ownership in Reno de Medici S.p.A. (RdM) 35 BUSINESS SEGMENTS Historical Segmented Adjusted OIBD3 and Margin
2 Containerboard (CAN$ M and %) Boxboard Europe (CAN$ M and %)
250 231 216 19% 80 72 9% 202 70 63 200 17% 57 55 8% 150 164 18% 15% 60 9% 53 16% 50 43 8% 7% 150 13% 7% 90 14% 14% 14% 40 7% 7% 6% 100 11% 30 9% 6% 5% 50 20 10% 7% 10 4% 0 5% 0 3% 2012 2013 2014 2015 2016 LTM 2012 2013 2014 1 2015 2016 LTM Q2-17 Q2-17
Specialty Products (CAN$ M and %) Tissue Papers (CAN$ M and %)
80 73 12% 160 150 16% 65 138 133 135 70 58 11% 140 119 14% 60 10% 120 10% 11% 14% 96 12% 50 37 41 40 10% 9% 100 13% 40 8% 80 11% 10% 30 7% 60 10% 10% 8% 20 7% 7% 6% 40 9% 10 7% 5% 20 6% 0 4% 0 4% 2012 2013 2014 2015 2016 LTM 2012 2013 2014 2015 2016 LTM Q2-17 Q2-17 1 Including $9 million of energy credits 2 Via our 57.7% equity ownership in Reno de Medici S.p.A. (RdM) 3 Supplemental information on non-IFRS measures for 2016 and Q2-2017. 36 HISTORICAL RESULTS
(In million of Canadian dollars) Q2-17 Q1-17 2016 Q4-16 Q3-16 Q2-16 Q1-16 2015 2014 Sales Containerboard 428 346 1,370 336 356 342 336 1,301 1,181 Boxboard Europe 213 211 796 191 189 197 219 825 841 Specialty Products 188 173 620 156 158 157 149 579 568 Tissue Papers 338 306 1,305 319 342 324 320 1,236 1,054 Inter-segment sales and corporate activities (37) (30) (90) (23) (24) (22) (21) (80) (83) Total 1,130 1,006 4,001 979 1,021 998 1,003 3,861 3,561
Operating Income Containerboard 30 33 158 28 44 46 40 170 108 Boxboard Europe 13 5 19 3 1 7 8 (28) 29 Specialty Products 14 13 51 14 12 16 9 31 6 Tissue Papers 17 8 75 12 26 18 19 64 48 Corporate activities (26) (28) (82) (24) (33) (22) (3) (84) (54) Total 48 31 221 33 50 65 73 153 137
Adjusted OIBD1 Containerboard 56 45 216 43 58 60 55 231 164 Boxboard Europe 21 14 53 11 9 17 16 63 72 Specialty Products 20 18 65 17 18 16 14 58 40 Tissue Papers 35 23 150 30 47 39 34 119 96 Corporate activities (25) (25) (81) (19) (29) (20) (13) (45) (32) Total 107 75 403 82 103 112 106 426 340 Adjusted OIBD 1 Margin 9.5% 7.5% 10.1% 8.4% 10.1% 11.2% 10.6% 11.0% 9.5%
1 Supplemental information on non-IFRS measures for 2016 and Q2-2017. 37 NEAR TERM OUTLOOK
• Gradual price increase in corrugated boxes following the US$50/st containerboard price • Higher OCC costs in North America and increase reflected in RISI in April 2017 Europe
• US$20/st corrugating medium price increase I • Other recovered paper prices in North reflected in RISI in July 2017 America and Europe remain high + • €40/mt recycled boxboard (WLC) price • NBSK and NBHK pulp prices remain high increase in Europe, effective September 1, 2017 • Appreciation of the CAN$ vs US$ • Slightly lower energy costs
Operating Operating Operating Operating Q3-2017 vs Boxboard Specialty Income Containerboard Income Income Tissue Papers Income Q2-2017 Europe Products Impact Impact Impact Impact
Volume Slight decrease Slight increase Slight increase Slight increase
Average selling Slight increase Increase Stable Slight increase prices Average raw material Slight increase Slight increase Slight increase Slight increase costs
CAN$ exchange rate Stable Appreciation Appreciation Appreciation
Energy costs Stable Slight decrease Slight decrease Slight decrease
38 CONTAINERBOARD PACKAGING GROUP Greenpac Mill Acquisition – Accounting Factsheet
Fact Sheet • Interest of one partner classified in other liabilities due to put option
• Cascades share of profit before tax 78.3%
• Minority interest 21.7%
• Client list and amortizable fixed assets increase $53 million
• Goodwill addition $256 million
• Net debt increase $219 million • Provision for income tax calculated on 62.5% of profit before tax
• Including one equity partner classified as liability, interest expense up $5 million on a quarterly basis (including $2 million non-cash)
39 TISSUE PAPERS GROUP Newest Investment: Converting Facility in Oregon • Expands tissue footprint on US West Coast • US$64M investment • 40% integration with St. Helens, OR tissue paper plant, located ~12 km away, resulting in a ~9% increase in overall integration rate to 78% • State-of-the-art facility, with annual production capacity of 5.2 M cases or ~ 58,000 s.t. of finished product • Manufactures virgin & recycled bathroom tissue products and paper hand towels for the US AfH market • 3 production lines are installed and in production • Fully commissioned at the end of Q2/17, on schedule 40 5-YEAR SHAREHOLDER RETURN CAS vs. Indices
TSX TSX Container- Tissue CAS Composite Small Cap board Index Index 550% 1 Year 119% 103% 98% 126% 81% 3 Year 241% 97% 92% 112% 80% 450% 5 Year 291% 123% 104% 211% 106%
350%
250%
150%
50%
2012-12 2013-09 2012-09 2013-03 2013-06 2013-12 2014-03 2014-06 2014-09 2014-12 2015-03 2015-06 2015-09 2015-12 2016-03 2016-06 2016-09 2016-12 2017-03 2017-06 2017-09
Cascades TSX Composite Index TSX Small Cap Index Containerboard Index1 Tissue Index 2
CAS added to the TSX Composite Index June 19, 2017 Note: Shareholder return excludes dividend yield. As of market close September 7, 2017. Source: Bloomberg 1 Containerboard Index includes the following companies: International Paper, WestRock (starting June 24, 2015), Packaging Corp of America and KapStone. 41 2 Tissue Index includes the following companies: Kimberly-Clark, Clearwater Paper, KP Tissue (starting December 13, 2012) and Orchids Paper. SHAREHOLDERS & ANALYST COVERAGE Major Shareholders % Analyst City Bank Lemaire Brothers, BoD & employees 33.7% Letko Brosseau 14.2% Leon Aghazarian Montréal National Bank Caisse de Dépôt et Placement du QC 5.0% Keith Howlett Toronto Desjardins Dimensional Fund Advisors 3.4% Benoît Laprade Montréal Scotiabank Norges Bank (Government of Norway) 1.8% Hamir Patel Vancouver CIBC Royal Bank of Canada 1.5% Paul Quinn Vancouver Royal Bank of Canada Vanguard Group 1.4% Sean Stuart Toronto TD Bank IA Financial Group 1.2% SEI Investments 0.8% Boston Partners 0.5% Putnam Investments 0.4% BlackRock 0.3% Analyst Recommendations1
Ownership Breakdown1
Lemaire brothers, BoD & Sector Outperform 24.5% CAS employees 33.7% 50.0% 50.0% Institutional Sector Perform
41.8% Retail
1 As of September 7, 2017 . Source: Bloomberg, InfoSuite 42 GEOGRAPHICALLY DIVERSIFIED
43 For more information: www.cascades.com/investors Jennifer Aitken, MBA Director, Investor Relations 514-282-2697 or [email protected]
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