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spk03: Good morning, my name is Joelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Cascades second quarter 2023 financial results conference call. All lines are currently in listen-only mode. After the speaker's remarks, there will be a question and answer session. I will now pass the call to Jennifer Aitken, Director of Investor Relations for Cascades. Ms. Aitken, you may begin your conference.
spk04: Thank you, Joelle. Good morning, everyone, and thank you for joining our second quarter 2023 conference call. We will begin with an overview of our operational and financial results, followed by some concluding remarks. after which we will begin the question period. Today's speakers will be Mario Plould, President and CEO, and Alan Hogg, CFO. Also joining us for the question period at the end of the call will be Charles Malot, President and COO of Container Board Packaging, Jérôme Poirier, newly appointed President and COO of the Specialty Products segment, Jean-David Tardif, President and COO of Tissue Papers, and Luc Langevin in his new role as Senior VP of Corporate Services. Before I turn the call over to my colleagues, I would like to highlight that certain statements made during this call will discuss historical and forward-looking matters. The accuracy of these statements is subject to risk factors that can have a material impact on actual results. These risks are listed in our public filings. These statements, the investor presentation, and the press release also include data that are not measures of performance under IFRS. Please refer to our Q2 2023 investor presentation for details. This presentation, along with our second quarter press release, can be found in the investor section of our website. Finally, I would like to mention that Cascade will be hosting an investor day and mill tour of our new recycled container board Bear Island facility in Virginia on September 14, 2023. If you have any questions regarding this, please feel free to contact us after the session. I will now turn the call over to our CEO.
spk02: Thank you, Jennifer, and good morning, everyone. We are pleased with our Q2 consolidated results and with the performance of each of our business segments. On a consolidated basis, sales increased 4% year-over-year, while adjusted EBITDA of $141 million rose 55% from the prior year. In both cases, results were driven by a stronger performance from our tissue paper segment that reflected pricing and strategic initiatives put in place over the past several quarters. More broadly, year-over-year top-line growth benefited from a more favorable exchange rate for all of our businesses, higher volumes in container board and higher selling prices in tissue and specialty packaging. These were partially upset by lower selling prices in container board following the decrease in index prices. Year-over-year EBITDA improved was also driven by stronger tissue results. Sequentially, sales increased 3%. This was driven by higher volumes in all of our business segments, most notably tissue in a better sales mix in container board. Ethics was slightly negative for our business sequentially, and the impact of lower index prices on the top line performance of our packaging segment more than upset the benefit from higher pricing in tissue paper. EBITDA increased 5% sequentially. This was driven by improved volume and mix in all business segments and lower transportation energy costs in the tissue and container board segments. Raw material costs and selling prices were headwinds for our packaging businesses, but were tailwinds for our tissue operation. Production costs were higher sequentially. mainly in container board reflecting the commissioning and startup of the Bear Island Mill in the second quarter. On the raw material side, highlighted on slide five and six, the Q2 average index price for OCC decreased 66% year-over-year, but increased 42% from Q1. The OCC market was relatively stable in the second quarter, with limited export activity and favorable seasonal fiber generation, albeit at a slower pace than recent years. Transportation costs have also continued to ease. We are not expecting any significant evolution in market conditions in the short term, and our operations are well supplied. Average index prices for white recycled paper grates decreased 70% sequentially in Q2 and 22% from the prior year levels. We saw favorable market dynamics over the quarter and important index price reduction. Similar trends were seen with Virgin Pops. The hardwood pulp index decreased 16% sequentially and year-over-year, while softwood pulp index prices decreased 10% from Q1 and 13% year-over-year. Conditions have improved for virgin pulp following lower demands from Asia, improved logistics and new capacity. the latter of which should largely offset any potential impact from recent forest fires, announced market-related downtime in the industry, and wood chip shortage. Material is available, and our mills are adequately supplied. I would remind you that changes in index prices take a few weeks before the impact flows to our results as it relates to level of inventory. Moving now to the results of each of our business segments, as highlighted on page 7 through 12 of the presentation. Beginning with the sequential performance, sales and container board were stable in Q2. This reflects higher volumes and beneficial sales mix, offset by the impacts from lower average selling prices, following the decrease in index pricing and the less favorable exchange rate. The 4% volume increase reflects a 1% increase in shipment of parent roll and a 7% increase in converted product shipments. Sequentially, converting shipments increased by 5.5% in Canada, outperforming the 2.7% increase in the Canadian market. U.S. converting shipments increased 13.8%, outperforming the 1.2% U.S. market increase. Q2 adjusted EBITDA of $96 million, or 17% on a margin basis, was below the Q1 levels, which, as a reminder, include the final $7 million insurance settlement from water effluent treatment issued in mid-2021 at our Niagara Falls Complex. Sequential Q2 EBITDA performance reflected lower selling prices and higher raw material costs following announced index price changes. These were partially offset by a more favorable sales mix and lower transportation and energy costs. I would also note that results also reflect that the Bear Island facility was a negative comparison. offsetting the beneficial impact from lower raw material, freight and energy costs. Year-over-year shipment increased by 5% in Q2, reflecting a 10% increase in external parent mainly driven by higher volume in the U.S. market. Specifically, converting shipment decreased by 0.6% in Canada year-over-year,
spk00: in the Canadian market. U.S.
spk02: converting shipment increased 9.6% above the 7.9% U.S. market decrease. Continuing with our packaging business, Q2 sales levels in our specialty product segment increased by 2% sequentially. This reflects higher volume in the cardboard and plastic subsegment
spk00: partially offset by lower selling prices in our business, and lower most frequently as higher overall volume benefits were more than offset by lower realized spread in all sub-segments.
spk01: in index pricing.
spk02: These were partially mitigated by a more favorable exchange rate and higher selling prices in the food packaging business. EBITDA level decreased by a marginal $1 million to $24 million in Q2, as benefit from higher realized spread were more than offset by the impact related to the lower volume and higher production costs. Moving now to our tissue business,
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