FINAL TRANSCRIPT - Cascades

FINALTRANSCRIPT

CascadesCanadaULC

ThirdQuarter2016ResultsConferenceCall

EventDate/Time:November11,2016-10:00a.m.E.T.

Length:43minutes

CORPORATEPARTICIPANTS

FINAL TRANSCRIPT

November 11, 2016 – 10:00 a.m. E.T. Cascades Canada ULC Third Quarter 2016 Results

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MarioPlourdeCascadesCanadaULC–PresidentandChiefExecutiveOfficerAllanHoggCascadesCanadaULC–VicePresidentandChiefFinancialOfficerCharlesMaloContainerboardPackagingGroup–PresidentandChiefOperatingOfficerLucLangevinSpecialtyProductsGroup–PresidentandChiefOperatingOfficerJeanJobinTissuePapersGroup–PresidentandChiefOperatingOfficerJenniferAitkenCascadesCanadaULC–DirectorofInvestorRelationsCONFERENCECALLPARTICIPANTSHamirPatelCIBCCapitalMarkets–AnalystSeanStewartTDSecurities–AnalystBillGarnettScotiabank–AnalystPaulQuinnRBCCapitalMarkets–AnalystKeithHowlettDesjardinsSecurities-AnalystPRESENTATION

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Operator

Bonjour, mesdames et messieurs. Bienvenue à la téléconférence des résultats financiers du

troisième trimestre 2016 de Cascades. Je m’appelle Steven et je serai votre opérateur aujourd’hui.

Toutesleslignessontprésentementenmodeécouteseulement.Suiteauxcommentairesdesdirigeants,

ilyauraunepériodedequestions.

Goodmorning,my name is Steve, and I’ll be your conferenceOperator today. At this time, I

wouldliketowelcomeeveryonetotheCascades’ThirdQuarter2016FinancialResultsConferenceCall.

All linesarecurrently ina listen-onlymode.Afterthespeakers’remarks,therewillbeaquestion-and-

answersession.

I will now pass the call to Jennifer Aitken, Director of Investor Relations for Cascades. Miss

Aitken,youmaybeginyourconference.

JenniferAitken–DirectorofInvestorRelations,Cascades

Thankyou,Operator.Goodmorning,everyone,andthankyouforjoiningour2016thirdquarter

conferencecall.Throughout thecall today,youwillhear fromMarioPlourde,ourPresidentandCEO,

Allan Hogg, our CFO, CharlesMalo, President and COO of our Containerboard Packaging Group, Luc

Langevin,PresidentandCOOofourSpecialtyProductsGroup,andJeanJobin,PresidentandCOOofour

TissuePapersGroup.

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After discussions surrounding our North American operations,Mariowill then discuss results

fromourBoxboardEuropeGroup,followedbysomeconcludingremarks,afterwhichwewillbeginthe

questionperiod.

Before I turn the call over to my colleagues, I would like to highlight that (inaudible) third

quarterresults,releasedonNovember3canbereviewedontheCompany’swebsite.Iwouldalsonote

that certain statementsmade during this callwill discuss historical and forward-lookingmatters. The

accuracyof these statements is subject risk factors that canhaveamaterial impactonactual results.

These risks are listed inourpublic filings. These statements, the InvestorPresentation, and thepress

releasealsoincludedatathatarenotmeasuresofperformanceunderIFRS.

Iwould liketoremindthemediaandInternetusersthattheyare in listen-onlymodeandcan

therefore, only listen to the call. If you have any questions, please feel free to contactme after the

session.

IwillnowturnthecallovertoourCEO,Mario.

MarioPlourde–PresidentandChiefExecutiveOfficer,CascadesCanadaULC

Thank you, Jennifer, and goodmorning everyone. Earlier thismorning,we released the third

quarterresultsthatwereinlinewithourforecasts.Onanadjustedbasis,wereportedearningspershare

of $0.32, versus $0.52 last year and $0.38 in the previous quarter. As discussed during our Q2

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conferencecalllastAugust,weexpectedchallengingmarketconditionsinEurope,andcostsandpricing

pressure(inaudible)toimpactQ3results.Asanticipated,thesedynamicswereimportantdrivingfactors

inourthirdquarterresults.

Thatsaid,ourNorthAmericanbusinesssegmentexecutedwellduringthequarter,withallthree

businesssegmentsgeneratinghighersalesyear-over-yearandourTissueandSpecialtyProductGroup

also increased their numbers of tonnes shipped. On the TPI front, our capacity utilization rate was

stablecomparedtotheprioryear.

While both our Containerboard Packaging and TissueGroup benefited frompositive seasonal

trends inQ3, slightlybetterutilization inContainerboardyear-over-yearwasoffsetbya slightly lower

utilization at Tissue in the period.Weaker results from European operationswere largely due to the

longer than usual downtime in Q3 that was a direct reflection of the persistent challenging market

conditions. Q3 shipments weremarginally lower compared to last year, due to a reduction of 8,000

tonne in Europe, the effect of which were mostly offset by increased volume in North American

operations.

Lookingatourfinancialperformance,whenweexcludespecificitems,ourQ3AdjustedEBITDA

declined$31million,or23percentyear-over-yearto$103million.Allanwillprovidemoredetailslater.

Sequentially, Q3 Adjusted EBITDA decreased by $9 million, which translated into a margin of 10.1

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percent,whilethirdquartersalesincreasedby$23millionor2.3percentquarter-over-quartertobillion

dollars.

Movingonto thecostandpricingdynamicsduring thequarter,on the rawmaterials side, the

average quarterly price index for OCC brand paper-gradewas up 17 percent on both an annual and

sequentialbasis,whiletheaveragequarterlywhitefibrepricesindexdecreasedby1percentyear-over-

year, andwas up 7 percent sequentially. OCC prices have since come down $5 since August.On the

supply side, recycledmaterial levels should benefit from higher generation following the end of the

summer.

Lastly, let me now say a few words about the leverage. We continued to deliver on our

commitmenttolowerdebtduringthequarter,reducingitby2percentor$39million.However,inlight

ofourweakerAdjustedEBITDAperformance,ourleverageratioincreasedmarginallyto3.8timesfrom

3.6 times at the end of Q2. We expect this trend to be reversed as we successfully improve our

operationalperformance,reduceworkingcapital,andcontinuetoallocatefreecashflowtowardsdebt

repayment.

I will now let my colleague provide youmore details, and specific information, starting with

AllanandIwillthendiscusstheEuropeanoperations,followedbytheneartermoutlook.Allan?

AllanHogg–VicePresidentandChiefFinancialOfficer,CascadesCanadaULC

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Yes,thankyouMario,andgoodmorningeveryone.IwillbeginwithsalesonSlide12and13of

thepresentation.Onayear-over-yearbasis,thirdquartersalesdecreasedbyamarginal$5million.This

wasdrivenbyweaknessinEuropewherelowervolumeandlessfavourablesalesmixandsellingprices

translatedintolowersalesof$16million.

NorthAmericansalesvolumeincreasedinallthreesegments,withSpecialtyProductsdelivering

a good performance where sales increased $7million year-over-year. Sequentially, sales increased 2

percentor$22million,primarilya reflectionof stronger seasonal sales inTissueandContainerboard.

ThesalesincreasesinthesesegmentswereoffsetbyaweakerperformanceinEurope.

MovingnowtoEBITDAonSlide14,Q3AdjustedEBITDAof$103millionwas23percentoverlast

year, reflecting two main factors. First, apart from the weaker results out of Europe, reflecting the

persistentchallengingmarketconditions,thecontributionofourConatinerboardPackagingGroupwas

lowerby$10million.Charleswillgiveyoumorecolouronthisperformance.

Thesecondmainreasonarethehighercorporatecosts,dueinparttoafirewhichoccurredin

AugustintheRecycleFibreyardatourMississaugaOntarioConatinerboardmill,resultingina$4million

costimpact.Inaddition,wealsoincurred$2millionofadditionalcostsfortheongoinginitiativesweare

takingtoimplementanewERPsystemandtotransformourinternalbusinessprocesses.Thesefactors,

combined with foreign exchange losses on hedging instruments, and positive items of 2015, not

repeatedthisyear,explainthevolumes.

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I will note that going-forward, we expect that costs related to our business process

modernization to average approximately $7 million on a quarterly basis, through the end of 2017.

Sequentially,asdetailedonSlide15,Q3EBITDAdecreasedby$9million,again,reflectingweakerresults

from our European Boxboard Division, and higher corporate activity costs as noted above. These

impactswereslightlyoffsetbyimprovedresultsinTissuethatarelargelyattributabletohighervolume

andfavourablerawmaterialsandproductmix.

Slide16and17ofthepresentationillustratesthevolumesofourQ3EPS,andthedetailsofthe

specific items that affected our quarterly results, both on a year-over-year and sequential basis.

Compared to last year, our third quarter adjusted EPS decreased to $0.32 from $0.52 last year.

Sequentially,adjustedEPSdecreasedby$0.06.Inbothperiods,itreflectstheweakeroperatingresults,

partiallyoffsetbyahighercontributionfromourshareofresultsofassociatesandJVs.

OnSlide18and19,itillustratesthespecificitemsrecordedduringthequarter.Werecordeda

total of $10million of specific items inQ3 that impacted our quarterly net earnings.More precisely,

following the Q2 closure of its (inaudible) converting plan, our Tissue segment incurred impairment

chargesof$2millionrelatedtothere-evaluationofsomeequipmentanda$3millionprovisionrelated

to a lease contract. We also recorded a $7 million foreign exchange loss on our long-term U.S.

denominateddebtandrelatedfinancialinstruments.

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As illustrated on Slide 20, cash flow from operations stood at $68 million during the third

quarter of 2016, including payments of financing expenses totalling $38million. Capital expenditures

includingcapital leasepaymentstotaled$27million,resultinginafreecashflowof$37millionduring

thequarter.

Movingnow to thedebt reconciliation. Inaddition to the cash flow fromoperations,working

capitalprovided$22million if liquidity,whichwerepartlyused forCAPEXpaymentsandtooffset the

currencyimpactonourlong-termdebtduringthequarter. Iwouldalsonotethattotalavailablefunds

onourrevolvingcreditfacilitystoodat$550millionattheendofSeptember.

LookingnowatSlide22,wedetailourquarterlyEBITDAmarginandleverageratiowhentaking

intoaccounttheconsolidationofpartlyownedsubsidiariesandJointVenturesonaproportionatebasis.

Before finishing, please note that we provide updated financial information on Greenpac on

Slide23,detailsregardingeachsegmentsperformanceonSlide25to38,andadditionalinformationon

Slide32through37.

Thankyouforyourattention. IwillnowpassthecalltoCharlestodiscusstheContainerboard

PackagingGroup’sQ3results.Charles?

CharlesMalo–PresidentandChiefOperatingOfficer,ContainerboardPackagingGroup

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Thankyou,Allan,andgoodmorningeveryone.Duringthethirdquarterof2016,Containerboard

Groupshipmentsreached294,000shorttonnewhichrepresenteda4percentsequentialincrease.The

highervolumeinQ3stemmedfrombothmanufacturingandconvertingactivity.Onthecorrugatedside,

shipments increased 4 percent sequentially, outperforming both the 1 percent container market

increase,andthe3percentU.S.marketincrease.

Ourmanufacturing activities increase their operating rate to 96percent,which represents an

improvementof4percentcomparedtothepreviousquarter.Accordingly,ourexternalpapershipments

grewby3percent, andour integration (phon) rate includingpaper sold toour associated companies

stoodat68percent,whichisaslight1percentdecreasecomparedtothepreviousquarter.

Onthepricingfront,ouraveragesellingpriceincreasedbyCN$9pershorttonne,or1percent

on a sequential basis. On a segmented basis, our average containerboard Canadian selling price

remainedstable,whileourcorrugatedproducts’sellingpriceincreasedbyCDN$5pershorttonne.This

reflects the full impact of corrugated product price increases that were implemented in February to

offsetthenegativeimpactoftheweakerCanadiandollar.

Withregardstoprofitability, theContainerboardGroupgeneratedAdjustedQ3EBITDAof$58

million,whichrepresentsamarginof16percent.Thisrepresenteda3percentor$2millionsequential

decreaseandan18percentdecreasecomparedtotheprioryearlevel.

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Looking at our year-over-year performance, increased sales levels were counterbalanced by

higherrawmaterialcosts,andbyanincreaseinproductioncostspertonne,duetosalesmixandhigher

freight maintenance costs. Our sequentially lower results mostly reflect higher raw material costs,

mainlyduetothe$12shorttonneOCCpriceincrease,whichreducedourresultsby$4million.Similarly,

higherenergyandchemicalcostssubtractedanadditional$1millioneachfromAdjustedEBITDAlevels.

However, on the positive, higher volume and selling prices contributed $3 million and $1 million

respectivelytoourresultsduringthesameperiod.

With regards to our short-term outlook,we expect the fourth quarter demand to follow the

usuallowerseasonaltrend,whichwouldresultinlowerdemandthanQ3,butstabledemandonayear-

over-yearbasis.Onthepositiveside,weexpectsomebenefitfromthe$50shorttonnepriceincreasein

the containerboard sector, and an 8.5 percent increase in the corrugated sector that was recently

announced.

Finally, a word on the performance of the Greenpac mill. During the third quarter of 2016,

Greenpac produced 126,000 short tonne of liner board. Notably, Cascade’s proportionate shares of

Greenpacnetearnings,excludingspecific items, increasedto$4millionor$0.04pershareduringQ3,

from$3millionor$0.03pershareinthepreviousquarter.

TheGreenpacexitratenowrepresents82percentofthetotalproductionofthemill,upfront82

percentinQ2.

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Thank you for your attention. I will now ask Mario to provide you with an overview of our

BoxboardactivitiesinEurope.Mario?


Thankyou,Charles.MarketconditionsinEuropeduringthefirstninemonthsoftheyearhave

beenchallengingandthishasnegatively impactedorder inflowlevels,bothontherecycledandvirgin

boardmarkets.InCanadiandollars,Q3salesdecreasedby$8millionsequentiallyto$189million.This

reflectstheexpectedlowerseasonalityinherentinQ3,inadditiontoseveralotherfactors.

Firstly, the average selling price in Europe decreased by 1 percent. This is the result ofweak

demand and a depreciation of the British Pound. Secondly, lower volume in both recycled and virgin

grades,which reflect the persistent challengingmarket conditions in Europe and the resulting longer

thanusualdowntimetakeninAugust.

Ona year-over-yearbasis,Q3 sales inCanadiandollardecreasedby8percentor$16million.

This similarly reflects a lower average selling price, lower demand, and an unfavourable geographical

salesmix.

ThirdquarterAdjustedEBITDAtotaled$9million,down$5million,comparedtothe lastyear,

and $8 million from Q3 levels—Q2 levels, sorry. This reflects lower volume and selling price as just

explainedandhigherrawmaterialcosts.

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LookingattheEuropeanmarkettrends,Iwillnotethatweaknessiswide-spread.Inthecountry

where(inaudible)isactive,white-linedchipboardpriceinQ3were4percentbelowlastyear’slevel,a

direct reflection of the broader weak market conditions and longer than usual scheduled downtime

takeninAugust.Foldingboxboardorderinflowduringthequarterwerealso2percentbelowthoseof

Q32015.

Onapositivenote, Iampleasedtoreport that (inaudible)newCEO,Mr.MikahlBianci (phon)

begin in itsnewroleonNovember1.Mr.Bianci isapaperandchemicalengineerwithmore than17

yearsofexperienceataleadingplayer’sinthepackagingsectors.

In the near-term, this market’s weakness will likely continue in Europe, order inflow levels

remains lower than last year’s level, while recycle fibre prices continue to be slightly higher due to

exportactivity.PriceincreaseswererecentlyannouncedforthebeginningofNovember.Atthistime,it

istoosoontotellhowitwillunfold.

I’ll thank you and I’ll ask Luc, to provide you with an overview of the performance of the

SpecialtyProductsGroup.Luc?

LucLangevin–PresidentandChiefOperatingOfficer,SpecialtyProductsGroup

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Thankyou,Mario.Goodmorning.I’mpleasedtoreportthattheSpecialtyProductsGrouphada

good third quarter.We did not incur significant variances during the quarter. Q3 sales totaled $157

million,andweresimilartoQ2inspiteoftheclosingofourdeinkedpulpmilllastJuly.

Thestablesaleslevelswerelargelytheresultofincreasedaveragesellingpricesinourrecovery

sub-segmentsduring thequarter.Q3EBITDA totaled$18million,a sequential increaseof13percent.

Thisstrongerperformancewasprimarilyduetotheimprovedspreadinourrecoverysub-segment.

Lookingmorespecificallyatourtopsegments,ourIndustrialPackagingEBITDAwasinlinewith

ourperformanceduringthesecondquarter,volumesremainedstrong inQ3,andaslightlyfavourable

exchangerateandlowerfixedcostmorethanoffsettheimpactofhigherrecycledmaterialcostsduring

thequarter.

TheConsumerProductsPackagingsub-segmentgeneratesQ3EBITDAthatwasalsoinlinewith

Q2results,whilespreadwasmarginally impactedbya lessfavourableproductmix.Resultsbenefitted

from the weaker Canadian dollar and reduced fixed costs. Shipment levels in this sub-segment

continuedtobesolid.

Lastly,theRecoveryandRecyclingsub-segmentimproveditsEBITDAby$2millioncomparedto

the previous quarter. This higher contribution reflects a consistent flow of material and improved

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averagesellingpricesduringthequarter.Operationaltemperamentswasgoodandourfixedcostswas

slightlyloweronasequentialbasis.

Looking forward, we expect overall business conditions to remain favourable in the fourth

quarter,within thecontextof lowerseasonaldemand that isusuallyobservedduring theperiod.Our

plantsarecurrentlybusyandunlessweexperienceasignificantdropofactivityaroundThanksgiving,we

remaincautiouslyoptimisticfortheremainderoftheyear.

Thankyouforyourattentionandwe’llnowpassthecalltoJeanwhowillpresentresultsforthe

TissuePapersGroup.

JeanJobin–PresidentandChiefOperatingOfficer,TissuePapersGroup

Thank you, Luc.Goodmorning everyone. I’mpleased to report that for the sixth consecutive

quarter, the Tissue Group improved its quarterly performance on a year-over-year basis in Q3. In

additiontothis,I’mveryproudtoannouncethatwealsosetanewhistoricalquarterlyreportinQ3by

generating$47millionofEBITDAwhich representsclose to14percentmarginbasis, representinga7

percentimprovementoverourQ2EBITDAof$39million,andcorrespondingmarginof12.3percent.

The second half of our summer season remained strong and contributed to our solid third

quarterresults.Both(inaudible)andconvertedproductshipmentsincreased3percentcomparedtothe

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previous quarter.We also generated a newhistorical quarterly report in terms of converted product

shipments.

Intermsofpricing,ouraveragethirdquartersellingprice increased2percentonasequential

basis. This improvement wasmainly driven by the following reasons: the weakness of the Canadian

dollar,thefullrealizationofthesecondquarterCanadian(inaudible)marketpriceincrease,andfinally,a

favourablecustomerandproductmix.

Year-over-year, our average selling price declined slightly, reflecting a slight decrease in

(inaudible)pricingandalessfavourableCanadiandollarexchangerate.Iwouldremindyouthatroughly

75percentofoursalesare intheU.S.,andtherefore,aslightlystrongerCanadiancurrencyyear-over-

yearnegativelyimpactsresults.

Combined,ourhighershipmentandhigheraveragesellingprice,asI justdiscussed,translated

intoa5percentsales increaseonasequentialbasis.Onanoperationalbasis,wecontinueto improve

ourproductivity,recycledfibrecostscontinuedtoincrease,butthiswasmorethanoffsetbyareduction

in the amount of externally sourced (inaudible) in thequarter.Q3profitability levelswerenegatively

impacted by a higher marketing investment in both the consumer products and in Cascade pro

segments,whichisthenewAway-From-Homebranding.

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Finally,wecontinuedtomakegoodprogresswithourWestCoastprojectandarehappywith

this progression. Looking ahead to Q4, which is typically lower demand season for tissue, we are

expecting lowervolume,primarily inCascadeprowhichcatertotheAway-From-Homemarket,andin

the(inaudible)segment.

Asusual, inorder tomanage inventory levels, somehandpapermachines shutdownmaybe

necessary.Remember, thatwealsoannounceda5percentprice increase in June in theCascadepro

Canadianmarkets,whichisslowlystartingto impactourresultsduetothecurrentmarketconditions.

WeannouncedanotherCascadeproincreaseupto6percentforbothCanadianandU.S.markets.

These increases are effectiveDecember 1, andwill be gradually implementedupon customer

contractrenewalandareexpectedtoimpactourresultsin2017.Thankyou,Iwillnowturnbackthecall

toMariofortheconclusion.Mario?

MarioPlourde-PresidentandChiefExecutiveOfficer,CascadesCanadaULC

Thankyou,Jean.Lookingahead,weexpectNorthAmericanresultstoreflectatypicallyslower

seasonalityinboththeTissueandtheContainerboardsegments,inthelastthreemonthsoftheyear.In

Europe,challengingmarketrealitiesareexpectedtocontinuetonegatively impactoperationalresults,

throughtheendof2016.

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Onthepricingside,theannouncedcontainerboardpriceincreasewasimplementedNovember

1,however,itwillhaveonlyamarginalfinancialbenefitinQ4duetothetimingofitsroleoutandthe

contractparameters.Moremeasurablebenefitwillbecome in the firstquarterof2017. InTissue, the

benefit from the full realization of the second quarter Canadian retail market price increase should

continuetobenefitresultsonayear-over-yearbasis.

On the cost side, OCC index price have decreased by $5 since August, when coupled with a

greater generation and recycledmaterial flowing the endof the summer,wewould expect amarket

supplydynamictobemorefavourableinQ4,whichwouldbenefitbothourContainerboardandTissue

segments.Asalways,ourfocusremainsonsecuringfavourabletermswithoursupplierandsuccessfully

fulfillallofourmaterialinputneeds.

Atthecorporatelevel,wewillcontinuetoinvestintheimplementationofournewERPplatform

and other ongoing initiatives tomodernize our internal business process platform. Looking ahead at

2017, we are committed to continue deleveraging our balance sheet, while also improving our

competitive position through strategic and focused investments. At the heart of this is a successful

implementationofourstrategicactionplan,whichincludescontinuingtoincreaseourintegrationrate

inTissueandConatinerboard,maximizingourcapacityutilization,andbeingdisciplinedonourcapital

allocationandexecution.

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Tofinish,Iwanttohighlightthatwefirmlybelievethatourcurrenteffortswilldeliverstrategic

andfinancialbenefitsinthemid-andlong-term.However,intheshort-termresults,namelythoseofQ4

willreflectourhigherinvestmentlevelsandongoingtransformationefforts.

Iwillnowopenthelineforthequestionperiod.Operator?

Q&A

Operator

Merci.Sivousvoulezposerunequestion,veuillezs’ilvousplaîtcomposer l’étoilesuivieduun

survotreclaviertéléphonique.Sivousvoulezretirervotrequestion,composezlecarré.

Thankyou.Ifyouwouldliketoaskaquestion,simplypressstar,thenthenumberoneonyour

telephonekeypad. If youwould like towithdrawyourquestion,pleasepress thepoundkey.Again, if

youhaveaquestion,pleasepressstar,thenthenumberoneonyourtelephonekeypad.We’llpausefor

justamomenttocompiletheQ&Aroster.

YourfirstquestioncomesfromHamirPatelwithCIBCCapitalMarkets.Yourlineisnowopen.

HamirPatel–CIBCCapitalMarkets

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Hi,goodmorning.Ihadacoupleofquestions,Mario,inBoxboardEuropeyoureferencedsome

pricehikes that havebeen announced. Could you speak tomaybewhat level of increases havebeen

announcedbyCascades?


We announced $60 Euro on all material recycled in virgin for November 1. As you know in

Europe, the implementation of a price increase takes some time because of the contract and the

conditionsinEurope,soit’s$60EuroweannouncedinEurope.


Okay,thanks,andjustturningtotheContainerboardsegment,questionforCharles.WhenPulp

&PaperWeekraisedpricesinOctober,therewassomecommentaryinthearticlethatsomemedium

producers out therewere looking for additional price hikes on top of the $50 to sort of restore the

mediumlinerstomorenormalizedlevels.Haveyouseenthatplayoutintherecyclemarket?

CharlesMalo–PresidentandChiefOperatingOfficer,ConatinerboardPackagingGroup

I’mnotgoing tocommentonmarket,butourannouncementhasbeen$50bothon the liner

andthemedium.


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Right,okaysoeventhoughthePulp&PaperWeekprintedthe$40,yoursensethatthemarket

isstillpushingfor$50?

CharlesMalo–PresidentandChiefOperatingOfficer,ConatinerboardPackagingGroup

Weare—onour side,wehaveannounced toour customers the$50, thePulp&Papermove

$40,andwe’restillaimingatthe$50beforetheendoftheyear.


Great, thanks. That’s helpful, just final question I had for Jean on the Tissue business. You

referencedAway-From-Homepricehike,IthinkyousaidthatwasjustinCanada.Couldyoumaybejust

describethatagain?Whatthatisandifyourcompetitorshavefollowedsuitonthatannouncement?

JeanJobin–PresidentandChiefExecutiveOfficer,TissuePapersGroup

Well,whatwedid,ifyourememberinJune,wehaveannounceda5percentpriceincreasefor

allofourCanadian,Away-From-Homemarket.Ofcourse,asyouknowintheAway-From-Homethere’s

alotofbusinessundercontract,soit’snotthedayonethatyouseethe5percent.Butwhencontracts

getrenewed,weallposta5percentsothatwasAway-From-Home.Whatweannouncednowwasupto

6percent inbulkmarketCanadaandU.S.,andwe’re strategicallyplacing those increases towhatwe

needtohavebysegments.

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Asforthecompetitors,Icannotcommentonwhattheydoortheywon’tdo,butthere’ssome

publicannouncementsontheirsidethattheydosometimes,thatyoushouldreferto.


Okay,great.Thanks,that’sallIhad.

Operator

YournextquestioncomesfromSeanStewartwithTDSecurities.Yourlineisnowopen.

SeanStewart–TDSecurities

Thanks,goodmorningeveryone.QuestionsonthecorporateexpensesandIjustwashopingyou

guys could maybe unbundle this for me. The Mississauga fire, $4 million impact, that was fully

embeddedincorporatecosts,isthatcorrect?


Yesitis.


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Okayand justbased—Iwant tomake sure I’munderstanding your guidance correctly; the$7

millionperquarterthroughtheendof2017,that’sjustforfinishingofftheERPimplementation?Isthat

therightwaytothinkaboutit?


TheERPandthebusinesstransformationofourprocess.Inthepast,wesaidabout$4millionto

$5million a quarter, nowwe’remore to the average of $7million becausewe’re pushing hard and

acceleratingthepacetofinishthatprogrammebytheendofnextyear.


So, how should we think about overall corporate costs and I guess this assumes the foreign

exchangehedgingpart of it constant. But for 2017, on a quarterly basis, howwould you think about

youroverallcorporatecoststrending?


Well, we have not finished the budget, but around maybe the $15 million to $20 million,

depending on what the FX is doing and all the share based compensation, so that’s pretty hard to

predict.Butyes.


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TheERProll-outwouldbefinishedbytheendofnextyear,isthattherightwaytothinkabout

it?


That’sthetarget,yes.


Okayandthen,nextquestion;Greenpac,inlightofthedebtrefinancingyoufinishedearlierthis

year, and presuming this price hike is fully implemented. Can you speak to dividends you expect to

potentiallypulloutofthatinvestmentin2017?


We have a Board in Greenpac, so we have not had any discussion at this point on dividend

distribution,sowewill—IwillrefertothatdiscussionatthatpointwhenwehavethatdiscussioninQ1

of2017.


Okay,that’sallIhavefornow.Thanksguys.

Operator

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YournextquestioncomesfromBillGarnettwithScotiabank.

BillGarnett–Scotiabank

Hi, guys. I appreciate you saying that itmight be a bit tough to speak to the Containerboard

pricemoveandyou’resayingitshouldbelayeredinkindoflighterinQ4andmorefullyinQ1.But,can

youmaybehelpus thinkabouthow thebenchmarkpricemove shouldaffecthow it’s going tomove

throughyourConatinerboardsalesversuscorrugatedboxes,andthenCanadaversustheU.S.?


Okay, so we have—with RGV we have a 68 percent integration rate in our Containerboard

sector,butourownconverting facilityare54percentof theoverall. So,on the54percentconverted

product,thepriceincreasestarts30daysafterthemovementofthePulp&Paperandgoesaboutthree

to four months for the full implementation. So, starting on—I would say on the 54 percent of the

volume,westartabitinQ4,butmainlyinQ1’17.Ontherolled,Iwouldsaythattherolledorthenon-

integratedbusinessstrictlyonthecontainerboard,theimplementationstartsNovember1.


Okay, perfect. That’s great. Then on tissue, now that you’ve acquired an interest in the

Longhornconverting facility,canyoutalkaboutwhatthatdoes foryour integrationrate intheTissue

business?

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26


Yes,thankyouBill.Yes,Longhornisnotabigplantatthispoint.Longhornispartofthelonger

strategyforus.So,ontheintegration,it’snotevenchangingourintegrationrate,notevenby1percent

at this point. So it’s still—it’s still minimum at this point because we have to align trim to be really

compatibledowntheroad.


Okay,andintermsofyourmarketinginvestmentinthatbusiness,doyouexpectcurrentlevels

tokindofbeyouraveragespendonthat?Ordoyouexpecttoinvestmoreinmarketinginitiativesgoing

forward?


No,wewon’tinvestmore.Weareonthehikeintermsofinvestmentatthispointbecausewe

haverebrandtheAway-From-HomeintoCascadesProandmadeahugeworkonthebrandrealization

aswell.Verywellreceivedbythemarket,bytheway,andsamethingintheconsumerproductwiththe

Cascadebrandworkingveryhardrightnow.So,Q4wouldstillbehigherthannormally,butafterthatit’s

goingtosettledowntoregularlevels.


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Okay.


If I can just add on the Conatinerboard and Packaging side, we have also announced an 8.5

percentpriceincreasethatstartedtoseeimplementationinNovemberintheconvertedproducts.


Okay,thanksguys.That’sallIhad.

Operator

YournextquestioncomesfromPaulQuinnwithRBCCapitalMarkets

PaulQuinn–RBCCapitalMarkets

Yes,thanksverymuch,andgoodmorningguys.


Goodmorning.


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Youseema littlereluctanttodiscusscontainerboardpricingwhich isprettysurprising;no, I’m

just kidding.Maybe you can talk about your discussionswith your customers and your order file on

Octoberspecifically,andhowthatchangedyear-over-year?Specifically,withrespecttotheIguessQ3

average?


Paul,I’mnotsureIunderstand,canyourepeatthequestion,please?


Well,youjustdeliveredQ3results,soI’mjustwonderingpost-Q3,i.e.October,whatyouseein

termsof shipping levelsonayear-over-yearbasis,andhowthat relates to theQ3average,andwhat

yourorderfile’slike?


Yes,okay. Icansaythatweareorderbookingrightnow,areprettygoodonbothsidesofthe

border,bothontherollsandalsoontheconvertedproduct.


Okayand then, just—goingback toBill’squestionon the roll-outon thecontainerboardprice

increase.So,IthinkIunderstoodthisandthanksfortheextracolour,butmaybejusttoclarify;onthe

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rollswhichIguessmakeupthenon-integratedside,32percentyouexpecttorealizeatNovember1?

Then,reallyonyourownstuff,the54percent,that’s30daysafterreceiptsothat’sreallyDecember1?

ShouldIreaditthatway?


Well, where it starts exactly so when the Pulp & Paper—I’m going to use on the boxes, the

convertedwhichis54percentofouroverallbusiness.AftermostofourbusinessmoveswiththePulp&

Papermovement,so30daysafter,andwehavedifferentcontracts,upsanddownssothat’swhywe’re

sayingthattheincreasewilltakethreetofourmonthstogoin.Someofourcontractsare30daysafter

theP&P,someofthecontractsare60days,andsomeare90days,butupsanddowns.So,that’swhy

we’resayingthatit’sgoingtotakeaboutthreetofourmonthstofullyimplementit.Somewillgointhe

Q4,butmostofit,about80percentwillbeinQ12017.


Excellent, thanks verymuch. Then just lastly, on the debt and capital allocation side, you’ve

announcedanumberofpriceincreasesfor(inaudible),bothontissueandcontainerboardandifthose

flow through you should generate quite a bit of cash. After you spent your strategic CAPEX on your

business to improvecompetitiveness,where is thepriorities forcashbetweensharebuybacksandan

increaseinthedividend?

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Goodmorning,Paul.It’sMariospeaking.Basically,youknow,wewillkeeponfocusingtowards

thedebtstill,aswementionedmanytimes.Youknowwe’dliketobecloserto3timesdebttoEBITDA,

sowe’renotthereyet.So,mostofwhatwewillgenerateinadditiontowhatwearenow,aftertheprice

increaseswillbegoingtowardsthat.IntermsofCAPEXanddividends,Iguessthesequestionswillcome

lateronbecauseweareinbudgetsessionaswespeak,sowedon’thaveafullviewoftheCAPEXandI

guessthedividendswill—thedividenddiscussionwillbecominglateron,so.Butmostlytowardsdebtat

themoment.


Allright,that’sallIhad.Bestofluck.

Operator

Again, if you would like to ask a question, please press star, then the number one on your

telephonekeypad.YournextquestioncomesfromKeithHowlettwithDesjardinsSecurities.Yourlineis

nowopen.

KeithHowlett–DesjardinsSecurities

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31

Yes, Iwonder if you can tell uswhat your year-to-date spending is on the ERP andefficiency

initiatives.


That’snotsomethingweareopentodiscussatthistime,butwesaidinthepastwe’rerunning

at$4millionto$5millionaquarter,nowit’smaybemoretowards$7millionofaverage.Wecandoa

rangewiththesenumbers,so.


Allright,thanks,andthenjustonEuropeanBoxboard,Igatherthelargestplayerhasannounced

a price increase, but is everybody in the industry or what percentage of the industry is suggesting

they’regoingtoraiseprices?


Idon’tknowat thispoint. Iknowa few largeplayershaveannounced,andwedidannounce.

ButIdidn’tmaketheevaluationof—completeevaluationofthemarket,soit’sprettytoughtoanswer

preciselyyourquestion.


HowlongdoesittakeinEuropetoimplementapriceincrease?

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Sometimesaslongassixmonths.


Great,thanksverymuch.


Thankyou.

Operator

Thankyou.Therearenofurtherquestionsatthistime.Mr.Plourde,pleasecontinue.


Allright,thankyoueveryone.Haveagooddayandwe’llbetalkinginthenextquarter.

Operator

Merci, mesdames et messieurs. Cela met fin à la conférence d’aujourd’hui. Vous pouvez

maintenantraccrocher.

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33

Thank you, ladies and gentlemen. This concludes today’s conference call. You may now

disconnect.

FINAL TRANSCRIPT - Cascades

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