Cascades Inc.

Good morning. My name is Julie and I will be your conference operator today. At this time, I would like to welcome everyone to the Cascades fourth quarter 2023 financial results conference call. All lines are currently in a lesson-only mode. After the speaker's remarks, there will be a question and answer session. I will now pass the call to Jennifer Epkin, Director of Investor Relations for Cascades. You may begin your conference.

Thank you, Julie. Good morning, everyone, and thank you for joining our fourth 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. Joining us for the question period at the end of the call will be Charles Malot, President and COO of Container Board Packaging, Jérôme Parlier, President and COO of Specialty Products, Jean-David Tardif, President and COO of Tissue Papers, and Luc Langevin, 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 Q4 2023 investor presentation for details. This presentation, along with our fourth quarter press release, can be found in the investor section of our website. If you have any questions, please feel free to contact us after the session. I will now turn the call over to our CEO.

Thank you, Jennifer, and good morning, everyone. Let me begin with a quick overview of our full year 2023 results. We've increased sales and EBITDA by 4% and 48%, respectively, from 2022 levels. We are pleased with this solid performance and the turnaround in our tissue business in particular, where favorable market conditions and our wide-ranging profitability initiative successfully repositioned this business operation and equipped it to generate an EBITDA of $182 million in the year. We finished the year with a slightly lower net debt levels, notwithstanding the significant investment made throughout the year in the Bear Island facility, and improved our leverage to 3.4 times from 5.2 times last year. Moving now to our Q4 results, on a consolidated basis, sales were stable year over year, while adjusted EBITDA of $122 million rose 5% from the prior year. Pricing was a headwind for top-line performance, the effect of which were offset by stronger volume. Year-over-year bid levels were also impacted by lower pricing, but this was mitigated by lower raw material production, energy and freight costs, and better volume in our packaging businesses. Sequentially, sales decreased 5%, impacted by lower pricing in addition to lower volume, the effect of which more than offset benefit of a more favorable exchange rate. EBITDA decreased 24% from Q3 due to our container board performance, which was impacted by lower selling prices and volume and higher raw material costs. On the raw materials side, highlighted on slide 5 and 6, the Q4 average index price for OCC increased 127%, 37% year-over-year and 41% from Q3. The OCC market saw consistent strong demand and lower seasonal generation levels, which resulted in tighter market dynamics and put upward pressure on pricing. We have no problems applying the needs of our operations with good inventory management. Average Q4 index prices for white recycled paper grades decreased 5% sequentially and 44% from the prior year levels. We began to see less favorable market dynamics over the quarter with index prices continuing to broadly mirror virgin palm. Pricing for these fiber were slightly higher sequentially with price increase starting late in 2023. Year-over-year, however, prices for both hardware and softwood pulp remain lower, down 33% and 25% respectively. Market condition reflects lower softwood pulp supply, following downtime and permanent closure in North America, and uncertainty around short-term Asian demand level and potential effect from the conflict in the Red Sea. Notwithstanding these market conditions, the material has been readily available for our mills. Moving now to the results of each of our business segments as highlighted on page 7 through 12 of the presentation. Beginning with Container Board, sequential sales decreased 5% in Q4. This reflects lower volume driven by a 13% sequential decrease in parallel shipments and a lower average selling prices. As previously announced, we took 19,000 short-term of maintenance downtime in the quarter and an additional 30,000 short-term of downtime giving seasonality and softer end-of-year market conditions. Sequentially, converting shipment increased 0.6% in Canada, slightly below the 0.9% increase in the Canadian market. U.S. converting shipment increased 5.6%, well above the 0.2% U.S. market decrease. Q4 adjusted EBITDA of 67 million, or 12% on a margin basis, was 35% below Q3 levels. reflecting the impact from lower average selling prices and volume and higher raw material and production costs. The over-year sales decreased by 6 million with the impact of lower selling prices, offset by higher volume. EBITDA level decreased by 44% with the impact from the lower pricing and higher raw material and operational costs more than offsetting improved volume, and lower energy costs. Year-over-year shipment increased by 10% in Q4, largely related to the new Bear Island volume. Converting shipment increased by 7.4% in Canada, outperforming the 4.6% increase in the Canadian market. U.S. converting shipment increased 11.2%, once again significantly outperforming the 0.4% U.S. market increase. Before moving on to the specialty product segment, I would like to add some color regarding the sequential performance of our container board segment. As we stated in our press release, four-quarter results were below expectation. Converted product shipment remained solid, but usual seasonality and softer demand and parent role impacted results. Our low integration rate also impacted us this quarter following decrease in index pricing. OCC costs also continued to increase in the quarter, which, when coupled with the lower selling prices, put pressure on margin. With Bear Island ramping up and recent investment in our converting facility, our operating platform is more agile, more competitive, and better positioned regardless of the economic backdrop. and we are focused on generating benefits from its increased agility and market responsiveness. This contributes to our decision to permanently close three of our facilities, giving their future capital investment requirements, current market dynamics, and their higher level of operating costs due to the age of its equipment. Continuing with our packaging businesses, Q4 sales levels in our specialty product segment increased by 2% sequentially, reflecting higher volume in a multiple business and a more favorable exchange rate. EBITDA decreased by 2 million sequentially, driven by lower volume in sub-segment and higher year-end maintenance costs. Operating costs were slightly higher and realized spreads were stable. When compared to the prior year, Q4 sales were stable, decreasing 1 million, as the impact from lower selling prices was offset by benefit from higher volume. EBITDA level decreased by 1 million year-over-year to 19 million in Q4, as the impact from lower selling prices and higher production costs were partially offset by lower raw material costs and beneficial volume in mix. Moving now to our tissue business, which generated a strong quarterly EBITDA margin of 15.6%. This performance was driven by better spread, but it also a testament to the benefit being realized from the wide-ranging initiative implemented over the recent quarter that involved repositioning of its operational platform, including closer of several facilities. To this end, sales decreased 8% sequentially. This reflects the 10% reduction in shipment levels, which was driven by a 3% decrease in shipment on the converting side and a 60% decrease in parent row shipment that itself reflects the closure of our St. Helene Mill and higher integration rate of 94% in Q4. Shipments have converted away-from-home and retail products decreased 7% and 1% respectively from Q3, both of which are an outcome of volume sold in Q3 from facilities that were recently closed. The average selling price increased by 3%, driven by the lower proportion of parental in the sales mix and a favorable exchange rate. These benefits were partially offset by a slightly lower average selling price of converted product due to the contracted pricing model agreement. Q4 EBITDA of $61 million, or 15.6% on a margin basis, was stable with Q3 level. This is the outcome of benefit related to lower fixed cost level following the plant closure, fully offsetting impact from a net negative volume and self-mix effect. Year-over-year, sales rose 2% with sales mix initiatives, offsetting the impact from lower pricing and volume. It did increase $53 million from the prior year period. This was driven by lower production, raw material, freight, and energy costs. Alan will now discuss the main highlight of our financial performance. Alan?