Madam and monsieur, bienvenue à la téléconférence des résultats financiers du deuxième trimestre 2023 de Cascades. Je m'appelle Joëlle et je serai votre opératrice aujourd'hui. Toutes les lignes sont présentement en mode écoute seulement. Suite aux commentaires des dirigeants, il y aura une période de questions. Good morning. My name is Joëlle, 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, investor relations for Cascades. Ms. Aitken, you may begin your conference. Thank you, Joëlle. Good morning, everyone. 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 Plourde, President and CEO, and Allan Hogg, CFO. Also joining us for the question period at the end of the call will be Charles Malo, President and COO of Containerboard Packaging, Jérôme Porlier, the 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 Cascades will be hosting an Investor Day and Mill tour of our new recycled containerboard, Bear Island facility in Virginia on September 14th, 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. Mario? Thank you, Jennifer, and good morning, everyone. We are pleased with our Q2 consolidated result 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 Papers 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 containerboard, and higher selling price, prices in tissue and specialty packaging. These were partially offset by lower selling prices in containerboard, following the decrease in index prices. Year-over-year, EBITDA improve 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 containerboard. FX was slightly negative for our business sequentially, the impact of lower index prices on the top-line performance of our packaging segment more than offset 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 containerboard 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 containerboard, reflecting the commissioning and startup of the Bear Island mill in the second quarter. On the raw material side, highlighted on slide 5 and 6, the Q2 average index price for OCC decreased 66% year-over-year, 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 year. Transportation costs have also continued to ease. We are not expecting any significant evolution in the market condition in the short term, our operations are well supplied. Average index prices for white recycled paper grades decreased 70% sequentially in Q2, 22% from the prior year levels. We saw favorable market dynamics over the quarter, important index price reduction. Similar trends were seen with virgin pulp. 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 fire and 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 chart, changes in index prices take a few weeks before the impact flows to our result as it relates to level of inventory. Moving now to the result of each of our business segment, as highlighted on page 7-12 of the presentation. Beginning with the sequential performance, sales and containerboard 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 reflect 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 reflect 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 result also reflect that the Bear Island facility was a negative contributor to our performance, giving the mill is in ramping up. Year-over-year sales decreased marginally, and EBITDA decreased by $3 million, with lower selling prices and higher production costs 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 roll shipment and a 1% increase in converting shipments, mainly driven by higher volume in the US market. Specifically, converting shipment decreased by 0.6% in Canada year-over-year, outperforming the 2.8% decrease in the Canadian market. U.S. converting shipment increased 9.6%, above the 7.9% U.S. market decrease. Continuing with our packaging business, Q2 sales levels in our Specialty Products segment increased by 2% sequentially. This reflect higher volume in the cardboard and plastic sub-segment, partially offset by lower selling prices in our business and lower molded pulp volume. EBITDA decreased by $3 million sequentially, as higher overall volume benefit were more than offset by lower realized spread in all sub-segments. When compared to the prior year, Q2 sales decreased by $4 million or 2%, driven by softer volume in all business sub-segments and lower selling prices in cardboard product related to decrease in index pricing. 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, which had its strongest performance since Q2 2020, that reflected benefits from commercial, operational, and strategic initiatives. The repositioning of our tissue paper platform, announced at the end of April, progressed as planned in the second quarter, with the closure completed as scheduled in June and July. We anticipate that this decision, combined with the ongoing productivity optimization initiative, which are also progressing as expected, will continue to strengthen the performance of our tissue paper business going forward. Sales increased 7% sequentially, driven by higher selling prices and stronger volume, which reflected ongoing profitability and optimization initiatives. Shipment increased 8% from Q1, reflecting a 7% increase in shipment of converted product and a 10% increase in parent roll shipments. Sequentially, EBITDA improved. Improvement was driven by benefit from higher volumes, lower raw material, freight, and energy costs, and improvement in selling prices. Year-over-year, sales rose 22% with pricing and sales mix initiative, a more favorable exchange rate, and a slightly higher volume, all contributing to the stronger performance. Q2 EBITDA of $44 million, compared to a loss of $8 million in the prior year period. This year-over-year improvement was driven by higher selling prices and lower transportation costs, the benefit of which more than offset higher operating costs. Allan will now discuss the main highlights of our financial performance, after which I will discuss our near-term outlook and conclude our presentation. Allan? Thank you, Mario. Good morning, everyone. On slide 13 and 14, we illustrate the specific items that were recorded during the quarter. The main items that impacted our EBITDA were $8 million of impairment charges and restructuring costs in our tissue segment related to U.S. assets. Slide 15 and 16 illustrate the year-over-year and sequential variance of our Q2 adjusted earnings per share, and the reconciliation with the specific items that affected our quarterly results. As reported, Q2 net earnings per share were $0.22. This compared to net earnings per share of $0.10 last year, and a net loss of $0.75 per share in Q1. On an adjusted basis, net earnings per share were $0.27 in the current quarter. This compared to net earnings per share of $0.10 in last year's results, and net earnings per share of $0.32 in Q1. Year-over-year, this variance mainly reflects improved adjusted EBITDA, while sequential variance reflects higher financing expenses, partially offset by higher adjusted EBITDA levels. As highlighted on slide 17, second quarter adjusted cash flow from operations increased by $41 million year-over-year to $122 million, and adjusted cash flow levels improved by $52 million year-over-year. This was driven by higher operating results and lower net CapEx paid in the second quarter of this year. Slide 18 provides detail about our capital investments. Paid capital expenditures, net of disposal and accounts payable variation, totaled $241 million in the first six months of 2023, and $104 million in Q2. For 2023, our planned capital investments of $325 million have not changed. Moving now to our net debt reconciliation, as detailed on slide 19. Our net debt increased by $6 million in the second quarter. This is a reflection of the combined effects of our current investment in Bear Island and usual working capital requirements, slightly exceeding cash flow from operating activities and favorable exchange rates. Our leverage ratio of 4.1 x is down from 4.6 at the end of Q1. As we have mentioned in the past, we expect this leverage trend to continue with improved operating performance of our tissue segment and ramp up of operations at the Bear Island facility. Financial ratios and information about maturities are detailed on slide 20. Sequentially over year sales and EBITDA performance analysis can be found on slide 20, 23-26 of the deck. Cost of sales and SG&A detail on slide 27. Historical index pricing on slides 28 and 29. Mario will now conclude the call with some brief comments on our near-term outlook before we begin the question period. Mario? Thank you, Allan. We provide details regarding our near-term outlook on slide 21 of the presentation. As a reminder, this outlook is based on current forecasts and expectation and may change in the coming weeks. Our near-term outlook for Containerboard is for results to be stable sequentially. This reflects the ongoing ramp-up of the production levels at the Bear Island facility, slightly higher raw material costs, lower average selling price, and slightly softer volume. Year-over-year performance is expected to be lower, with the impact from cost inflation and lower selling prices following recent index price decrees expected to offset benefit accruing from lower raw material costs and the Bear Island ramp-up. We are also expecting stable results sequentially from the Specialty Products segment. This reflects usual seasonal volume, stable selling prices, trend and raw material costs, and capacity and efficiency improvement. Year-over-year results are also expected to be stable. Our outlook for tissue is for the third quarter result to slightly improve sequentially and to be significantly above prior year levels. This stronger outlook reflect a more favorable raw material prices, ongoing profitability and productivity optimization initiative, and stable volume. Before wrapping up the call, we invite you to reach out to Jennifer directly for full details of our Bear Island Mill tour and Investor Day on September 14th, 2023. We look forward to seeing you then. With that, we can now open the calls to questions. Operator? Merci. Si vous voulez poser une question, veuillez s'il vous plaît composer étoile suivi de 1 sur votre clavier téléphonique. Si vous voulez retirer votre question, composez étoile 2. Thank you. If you would like to ask a question, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star two. Again, if you have a question, please press star, then one on your telephone keypad. We'll pause for a moment to compile the Q&A roster. Your first question comes from Hamir Patel with CIBC Capital Markets. Please go ahead. Hi, good morning. Mario, are you able to give us an update as to what type of operating rate you're seeing at Bear Island today? When do you expect the mill to be a positive contributor? The mill will probably be a positive contributor in this, in the next quarter. Starting in August, we'll probably see a break even or little profitability. Q2 and Q4 quarter will be positive contributor. Okay, great. Thanks. That's helpful. Just a question for Charles. On the containerboard side, you know what? It looks like you're, you've been outperforming the market. The Canadian market looks like it's been fairing better than the U.S. What do you think is driving the outperformance, in Canada on both sides of the border? When I look at the market, I'll talk about the destocking first. We think that most of the destocking is done. When I look at or compare the Canadian market and the U.S., we always tend to see that over quarters, they're about equal, and that's historically what we've seen. There is a bit of a difference right now, but we're gonna keep our comments for maybe next quarter. When I look at our own performance compared to the market, the reason why we're, we've been outperforming the market is really related to the past investment that we made, both in Canada and also in the U.S. We, we did some strategic investment, and now they're, they're paying off. This is positive for us. Okay, great. Thanks, thanks, Charles. That's, that's all I had. I'll turn it over. Your next question comes from Sean Steuart with TD Securities. Please go ahead. Thanks. Good morning, everyone. Just wanna follow up on Hamir's question with respect to Bear Island. Can you tell us how much start-up costs might have been expensed in the Q2 results? How, how much did the asset weigh on, on the, the EBITDA for that segment this quarter? Has the expected ramp-up curve changed at all from the guidance you would have given us a quarter ago? Well, first, Sean, I'll answer the first part of your question. We've decided not to provide the contribution specifically for that mill. Going forward, we will not provide any details. As we said in the text, it was a negative contributor in Q2, and that's how we want to see the Bear Island start-up. I'll let Charles maybe answer the following question. Just on the ramp-up curve, I mean, we, we have been delayed, but since the delay or after the delay, the ramp-up is going in the right direction. As you know, when you look at a project of that size, what we're seeing or experiencing right now are normal glimpse. The, also the learning curve for the employees, but we're seeing this as a positive start-up. And we are on the positive side, we've been using internally the product that we're producing in Bear Island. The results are very good, the quality of the paper. And also outside customers are using our paper, and we're getting the same feedback. The stage where we are in is to add some more products to and grade to our products, and we are in the course of qualifying the product to our outside customers. I would say that the ramp-up is going in the right direction, but again, the delays that we saw are affecting our total volume for the year. Okay. Thanks for that detail. That's useful. Second question is on tissue. Congratulations on, on the strong rebound there. I, I guess I'm, I'm just trying to understand, when I look at your results for the second quarter and annualize them, you're seemingly ahead of the target that you would have set for 2024. I, I'm just trying to understand what you can control, with respect to the restructuring initiatives, what sort of incremental contribution from that segment can we expect through the second half of this year and into 2024? I'm, I'm just trying to gauge the, the cadence of further gains in margins for that segment. Yeah. Good morning, Sean, Jean-David. We remain confident for the 2024 target, and at this moment, we stay focused on the number we've committed to. There's still some uncertainty in the market when we talk about, you know, inflation, the away-from-home market, et cetera. Yes, the market conditions are better, but at this moment, we're gonna stay prudent on the guidance for next year. Internally, I can tell you that things are going good, we believe that this is sustainable. The performance that we're delivering the second quarter is gonna stay. A lot of work has been done, you know, internally in terms of cost saving, efficiency improvement, et cetera. At this moment, at this moment, we'll see a better quarter ahead, but again, we remain focused on the, on the next year target that we, we committed to. Okay. Thanks very much, everyone. That's all I have. Your next question comes from Matthew McKellar with Arbor- Mark, we are being cautious with the with our numbers that we or the tendency that we show. I can tell you that what we're seeing at the beginning of the Q3 right now, the trend is, is good. Again, the economy, the uncertainty, and there's also the seasonality of the, the mix that we have. We've been seeing a lot of weather impact, so that's why we've been cautious in the volume. Right now, when we look at July and the beginning of August, the trend seems to be positive side. Okay, thanks. Maybe next up, in your Specialty Products business, you mentioned that molded pulp results are weaker sequentially with operational challenges and some equipment. Can you provide a bit more color on what went on there, what the impact was in the quarter, and whether any impacts will persist into Q3? Thank you for the question, Matthew. In fact, for the molded pulp, yes, we experienced some operational issues that slowed down our shipments. However, we're seeing, I would say, more positive trend in term of Q3, and we're foreseeing to come back for Q4 in term of volume, because we, as we mentioned in the text, we reduced the shipment based on operational. However, we have a plan to come back to our normal impact on Q4. Demand is really there. Yeah, exactly. We just, we just have to produce and, And we- make sure we are efficient. Yeah, that's it. Mm-hmm. Okay, thanks. Then last for me, I think you talked about expecting a stable market for old corrugated containers in Q3. With new recycled containerboard capacity entering the market and wrapping up, and assuming demand continues to trend modestly higher, do you expect stable conditions to persist beyond Q3? Are you at all concerned about the potential for rising OCC costs over the next 12 months? Hi, Matthew, this is Luc. I can answer this questions. You know, currently, I cannot speak for the long term, what the market will be, because, you know, it's a global market, which is more impacted by sometimes imports than the domestic demand. What I can say for now is that we are typically in a low seasonal season now, and we can really easily have access to OCC at this moment and support the solid ramp up of our Bear Island mill in the Southeast. We have no challenge now to get the, to get the OCC we're looking for. For the moment, we. You know, there will be an additional, a new publication this Friday, but we don't see any change in the market conditions for the moment. It's not an issue for us for the supply side. Okay, thanks. That's all for me. I'll turn it back. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the one. Your next question comes from Zachary Evershed with National Bank Financial. Please go ahead. Good morning, everyone. Congrats on the quarter. Thank you. Thank you. Thank you. For Bear Island, can you tell us a bit about the quality of the paper coming out of that? You, you did say that you're happy with it, so does that mean that it's completely up to spec now? What end markets is that feeding into? Okay. Thank you, Zachary, for the question, and thank you, by the way, for congratulations on the quarter. We're pretty happy about it. The product right now is responding very well. Quality is as expected when we designed the mill. I mentioned that we're still in the qualification mode because when we start up, we start with higher basis weight, easier product to do, like medium. From then, I'm gonna use that. Basically, what we're doing right now in our ramp-up mode, we're moving more the mix towards higher performance grades, like XP, high performance, lighter weight. We are in that process right now. The response for the quality of the product is very, very good. The finish of the sheet also is good. When I look at where it is going, strategically, we have decided to build that paper mill to supply the new trends on the market. Meaning, distribution, e-commerce, and the demand for customers that are looking also for high-performance paper, but lower basis weight and being able to provide some more performance paper. Really, we build that for the new trends and what, what we're seeing right now is it's going in that direction. Our focus now, qualifying product, and this is, this is really, what we're doing right now, working with our customers, to, to improve, or increase the number of grades available. This is normal, again, in a ramp-up mode for a paper mill. That's great color. Thanks. Then in terms of the overall market, you're not the only new capacity ramping up. What's, what's the bidding environment like for placing paper and boxes? I'm sorry, can you just precise a bit more the question? Yeah. Are you running into a high level of competition when you're trying to secure. I mean, you guys did pre-sell a lot of the Bear Island volumes. Are you seeing, in the rest of the network, a lot of competition on price? I'm not going to comment on on price. Just on the network that we have, because we can offer, yes, Bear Island is a part of the overall that we have. What we're doing right now, we, we invested in Bear Island to be better equipped to compete. Again, we have a lighter weight, we have high performance both in in the medium, also in the in minor. When we look at the market, we're positioning ourselves to provide some product that are helping customers to be more competitive. That's, that's basically the approach that we have. We think that the more equipped we're gonna be, better we can offer to our customers and, better we're gonna be able to compete and create value. That's, that's our goal. Thank you for that. Just one last one for me. What are you hearing from your containerboard customers in terms of demand recovery post-destocking? The, our own, customers, are pretty much, balanced when you look at the inventory, and it reflects, what we're seeing, overall. I think that, from the information we get, that people are pretty much balanced right now, and we should be, past the destocking, phase that we saw in, end of 2022 and the beginning of 2023. Thank you very much. I'll turn it over. Your next question comes from Frederic Tremblay with Desjardins. Please go ahead. Thanks. Good morning. Questions on the tissue. What's your view on the outlook for selling prices and, and promotional activity in tissue? The reason for the question is essentially because I'm wondering if the decrease in pulp pricing that we've seen will eventually make its way into lower tissue prices or, or more aggressive promotional activity in the market. Yeah. Good morning, Frederic. I won't comment on what will happen with pricing in the coming quarter, for sure, but what I can tell you is that overall, the, the market that we're playing with, in terms of the private label and the segment that we're playing it within the private label and also the customer mix that we have, I think we're well positioned to be in good shape for the coming quarters in terms of pricing and volume. Overall, we'll see how things will go, but we're working with customer, we're close to our customer, we have a good customer base, and we'll adjust this. We'll see where the market will go. Okay. That's all I had. Thank you. Thank you. There are no further questions at this time. Monsieur Plourde, please continue. Thank you, everyone, for being on the call today, we're looking forward to see you at in our Investor Day in Bear Island on September 14th. In the meantime, I wish you a very good summer. Thank you, everyone. Thank you. Merci, mesdames et messieurs. Thank you, ladies and gentlemen, this concludes today's conference call. You may now disconnect.