Cascades Inc (CADNF) Q4 2024 Earnings Call Highlights: Strong EBITDA Growth Amid Challenges

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Fri, Feb 21, 2025, 12:09 AM 4 min read

Revenue: Increased 6% year over year.
Consolidated EBITDA: $146 million, up 4% from Q3 and 20% year over year.
Containerboard EBITDA: $104 million, 17% margin, 16% increase from Q3.
Specialty Products EBITDA: Up 4% from Q3, 16% margin, 47% increase year over year.
Tissue EBITDA: $45 million, up 5% from Q3.
Net Loss Per Share: $0.13, compared to $0.57 loss last year and $0.01 earnings in Q3.
Adjusted Net Earnings Per Share: $0.25, compared to $0.05 last year and $0.27 in Q3.
Adjusted Cash Flow from Operations: $129 million, up from $103 million last year and $86 million in Q3.
Capital Investments: $148 million for the full year, forecasted $175 million for 2025.
Net Debt: Increased by $57 million in Q4, leverage at 4.2x.

Warning! GuruFocus has detected 8 Warning Signs with CADNF.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Cascades Inc (CADNF) reported a 6% year-over-year increase in sales for Q4 2024, driven by favorable selling prices and exchange rates.
Consolidated EBITDA increased by 20% year-over-year, reflecting stronger contributions from packaging activities.
The Containerboard segment saw a 16% sequential increase in EBITDA, marking the fourth consecutive quarter of improvement.
The Specialty Products business delivered solid results with a 9% year-over-year sales increase and a 47% improvement in EBITDA.
The company has implemented strategic initiatives to mitigate potential tariff impacts, including changes to raw material sourcing and production reallocation.

Negative Points

Cascades Inc (CADNF) reported a net loss per share of $0.13 for Q4 2024, compared to a net loss of $0.57 per share in the same period last year.
The Tissue business experienced a year-over-year EBITDA decrease of $16 million, mainly due to higher raw material costs.
Corporate activities saw an $11 million negative impact due to unfavorable exchange rate variations and higher health insurance costs for US employees.
The company faces potential risks from bilateral tariffs, which could impact approximately 15% of its revenues.
Net debt increased by $57 million in Q4, raising leverage to 4.2x, up from 3.4x at the end of 2023.

Q & A Highlights

Q: Recently, International Paper announced a large containerboard mill closure. Do you expect to see any other high-cost mills closing and additional capacity exiting the market going forward? A: Hugues Simon, President and CEO: We won't comment on competitors' actions, but we continuously monitor supply and demand. Currently, our order file is steady, reflecting seasonal volumes. However, potential tariffs could alter behaviors, and we are closely tracking the situation.

Q: In the scenario where tariffs are implemented, do you foresee any demand destruction from Canadian customers, and what do you see as the downside to industry box shipment volumes? A: Allan Hogg, CFO: For Cascades, about two-thirds of our raw production is in the US. The key risk is a slowdown in the Canadian economy, which would affect shipments, whether within Canada or to the US.

Q: Can you provide more detail on the Canadian sales exposure to the US, broken down between containerboard, tissue, and specialty packaging? Also, thoughts on your ability to pass tariffs on to customers? A: Hugues Simon, President and CEO: We have been preparing for potential tariffs since Q4. While we won't disclose specifics, we have plans to mitigate impacts. The ability to pass tariffs on to customers will vary by product line, and we are actively working on strategies with our customers.

Q: Can you give us an update on the Bear Island ramp-up and your uptime targets? A: Hugues Simon, President and CEO: Since Q3, we've improved our production gap by about 10-11%. While start-up hiccups are expected, we aim to meet our production targets by the end of 2025.

Q: Regarding your strategic priorities, what kind of improvements can you achieve in profitability, and how significant could the recalibration of your product offering be financially? A: Hugues Simon, President and CEO: We have internal targets but are not disclosing specifics due to economic uncertainties. Optimizing our product offering is significant and a priority, with a focus on low CapEx and fast returns.

Q: Could you explain what's driving the higher corporate costs? A: Allan Hogg, CFO: The increase is due to exchange rate losses on working capital and treasury items, and higher costs related to US health insurance for employees.

Q: On the Packaging segment unification, can you update us on the progress and when we should expect benefits from cross-selling? A: Hugues Simon, President and CEO: We are satisfied with the progress. Changes in teams and operations are already yielding benefits, and we expect continued improvements over the next 24 months.

Q: What are your thoughts on containerboard prices moving forward, given the current context and the announced price increase? A: Hugues Simon, President and CEO: We are awaiting the index results, which will be released soon. We have started invoicing non-indexed prices to some customers and will comment further once the index is updated.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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