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Cascades Inc. (TSX: CAS) reports its unaudited financial results for the three month period ended September 30, 2016 .
Q3 2016 Highlights
• Sales of $1,021 million (compared to $998 million in Q2 2016 (+2%) and $1,026 million in Q3 2015 (stable))
• Adjusted (excluding specific items) • OIBD of $103 million (compared to $112 million in Q2 2016 (-8%) and $134 million in Q3 2015 (-23%))
• Net earnings per common share of $0.32 (compared to $0.38 in Q2 2016 and $0.52 in Q3 2015)
• As reported (including specific items) • OIBD of $98 million (compared to $112 million in Q2 2016 (-13%) and $122 million in Q3 2015 (-20%)
• Net earnings per common share of $0.21 (compared to $0.38 in Q2 2016 and $0.24 in Q3 2015)
• Net debt of $1,625 million as at September 30, 2016 (compared to $1,664 million as at June 30, 2016 ) and net debt to adjusted OIBD ratio at 3.8x.
Mr. Mario Plourde , President and Chief Executive Officer, commented: “Our third quarter results were in line with our forecasts for the period. Good execution by our North American operations helped counterbalance the weaker results generated by our European boxboard business during the quarter, which had been expected given the persistent challenging market conditions. On a consolidated basis, this translated into softer financial results year-over-year, consistent with the near-term outlook we provided when we disclosed our second quarter results in August. It is important to highlight that our performance this quarter also includes a total of $6 million of additional costs related to the fire at our Mississauga ( Ontario ) containerboard mill in August, and the ongoing initiatives we are taking to implement a new ERP platform, transform internal business processes and increase efficiency levels across our business.
Operationally, we are pleased with the overall productivity of our North American operations during the quarter, with all three business segments reporting slightly higher sales year-over-year, and the Tissue and Specialty Products groups also increasing the total number of tons shipped. Our Containerboard Packaging segment also increased capacity utilization by 1% to 96%, and when including paper sold to our associate companies, successfully increased its integration rate to 68% in the current period from 64% in the third quarter of 2015.
Moving to our financial performance, third quarter consolidated adjusted OIBD was down year-over-year, as expected, as a result of the continued weakness in Europe and a lower contribution from our Containerboard Packaging Group during the period. Partially offsetting this was a record performance from our Tissue Group, which generated an adjusted OIBD margin of 14% for the quarter, driven by good volume, a more favourable sales mix and successful implementation of the previously announced Consumer Products price increase in Canada beginning at the end of April. Our Specialty Products Group segment also had a good quarter, with a 7% increase in shipments and higher prices driving increased spreads in Recovery & Recycling activities. Lower adjusted OIBD from our Containerboard Packaging Group was in line with our forecasts, as higher input costs through the summer coupled with lower published containerboard index pricing put pressure on margins prior to the price increase announced in August, and which will be implemented beginning in the fourth quarter.
Lastly, we continued to follow through on our commitment to lower our debt, decreasing it by 2% or $39 million during the third quarter. As expected, our short-term weaker consolidated adjusted OIBD during the quarter resulted in our leverage ratio marginally increasing to 3.8x from 3.6x at the end of June. We expect this trend to be reversed as we improve our operational performance, reduce working capital, and continue to allocate free cash flow toward debt repayment.”