2023
Annual
Report
Transfer Agent and Registrar
Computershare
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Telephone: 514-982-7888
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Head Office
Cascades Inc.
404 Marie-Victorin Blvd.
Kingsey Falls, Québec J0A 1B0 Canada
Telephone: 819-363-5100
Fax: 819-363-5155
Investor Relations
Cascades Inc.
Jennifer Aitken, MBA
Director, Investor Relations
investor@cascades.com
Telephone: 514-282-2697
www.cascades.com/en/investors
Cascades Inc’s, 2023 Annual Information Form
will be available, upon request, form the Corporation’s
head office as of March 28, 2024
This document will also be accessible via the Corporation’s website
(www.cascades.com) and will be filed on SEDAR
(www.sedarplus.ca) as of this date.
On peut se procurer la version française du présent rapport annuel
en s’adressant au siège social de la Société à l’adresse suivante :
Secrétaire corporatif
Cascades inc.
404, boulevard Marie-Victorin
Kingsey Falls (Québec)
J0A 1B0 Canada
Table of contents
Message from the President and Chief Executive Officer......................................................................................................................
Management’s Discussion & Analysis
Financial snapshot...............................................................................................................................................................................
Our business........................................................................................................................................................................................
Business highlights..............................................................................................................................................................................
Business drivers...................................................................................................................................................................................
Operational performance indicators.....................................................................................................................................................
Historical market prices of main products and raw materials...............................................................................................................
Sensitivity table....................................................................................................................................................................................
Financial overview - 2023....................................................................................................................................................................
Business segment review....................................................................................................................................................................
Corporate, Recovery and Recycling activities.....................................................................................................................................
Liquidity and capital resources.............................................................................................................................................................
Consolidated financial position as of December 31, 2023, 2022 and 2021.........................................................................................
Employee future benefits.....................................................................................................................................................................
Comments on the fourth quarter of 2023.............................................................................................................................................
2024 First quarter outlook....................................................................................................................................................................
Capital stock information......................................................................................................................................................................
Contractual obligations and other commitments..................................................................................................................................
Transactions with related parties.........................................................................................................................................................
Change in accounting policies and disclosures...................................................................................................................................
Critical accounting estimates and judgments.......................................................................................................................................
Controls and procedures......................................................................................................................................................................
Risk factors..........................................................................................................................................................................................
Contingencies......................................................................................................................................................................................
4
8
9
10
12
14
15
16
17
20
27
27
30
31
31
33
33
34
34
35
35
37
37
47
Supplemental information on non-IFRS Accounting Standards measures and other financial measures...........................................
48
Historical financial information.............................................................................................................................................................
55
Audited Consolidated Financial Statements
Management report..............................................................................................................................................................................
56
Independent auditor report...................................................................................................................................................................
57
Consolidated balance sheets...............................................................................................................................................................
61
Consolidated statements of earnings (loss).........................................................................................................................................
62
Consolidated statements of comprehensive income (loss)..................................................................................................................
63
Consolidated statements of equity.......................................................................................................................................................
64
Consolidated statements of cash flow..................................................................................................................................................
65
Segmented information........................................................................................................................................................................
66
Notes to consolidated financial statements..........................................................................................................................................
70
2023 Annual Report
3
Dear fellow shareholders,
I am very proud of what Cascades achieved this past year and encouraged by the performance of our businesses throughout
2023. We navigated the economic backdrop well, increasing sales by 4% and EBITDA (A)1 by 48% from 2022 levels, while
generating $397 million of cash flow from operations, up 53% year-over-year. We also decreased our net debt by $84 million and
our leverage ratio1 to 3.4x from 5.2x at the end of 2022. Following two challenging years, these solid sales and EBITDA (A)1 levels
are a testament to the hard work and dedication of our employees. “It takes a village” is a fitting recap of 2023, as the underlying
catalyst of this stronger performance was the steadfast commitment of each and every Cascader to generate lasting
operational improvement.
In my letter to you last year, I outlined our top priorities for 2023. Key among these were to capture the operational and financial
benefits from recent investments and profitability initiatives, notably in our Tissue Papers segment, and to complete the strategic
Bear Island project. We executed well, and adapted plans in response to the added complexity and higher costs that inevitably
accompanied the challenging supply chain, labour constraints and unrelenting cost inflation prevalent throughout the year. The
countermeasures implemented to offset these headwinds were successful, leading to significant benefits across our operations.
Likewise, we started commercial production at our Bear Island mill in May, the culmination of a project that spanned not only last
year’s challenging macro-environmental context, but the COVID-19 pandemic as well. While 2023 was certainly an eventful and
demanding year, the significant steps we have taken to reposition our business portfolio have reinforced our foundational
strengths supporting long-term transformative growth for Cascades.
We are continuing to optimize the operational platform of our
containerboard business in 2024 with the announcement of the
closure of three of our higher-cost facilities in Newtown,
Connecticut, and Trenton and Belleville, Ontario. This reduces
our annual capacity by 175,000 short tons of semi-chemical
medium containerboard and 500 million square
feet of
converted products. The majority of this converting capacity will
be transferred to other facilities.
Multiple layers of tissue
My reference to transformative change applies in equal measure
to the steps we have taken in our Tissue Papers business. We
made significant modifications to our operational platform in
2023, and while difficult from a human perspective, these
decisions were necessary. As the significant turnaround in this
business’s profitability levels—from a loss of $13 million in 2022
to a positive EBITDA (A)1 of $182 million in 2023—shows, these
decisions have produced important benefits. Following two very
challenging years, we made the difficult but ultimately right
decision to close underperforming plants in Barnwell, South
Carolina, Scappoose, Oregon and St. Helens, Oregon in 2023.
These moves reduced our annual manufacturing capacity by
142,000 short tons and our converting capacity temporarily by
10 million cases, as part of this capacity will be redeployed to
other facilities in 2024. Some of the manufacturing capacity that
was already integrated within our existing operational network
will be absorbed in our other facilities, while the tonnage
previously sold externally will not.
Containerboard: A bear out of hibernation
An excellent example of the groundwork that has been laid to
drive our future growth is the recently completed Bear Island
project, the largest in the Company’s history from an investment
standpoint. When fully ramped, this state-of-the-art mill will have
an annual capacity to produce 465,000 short tons of 100%
recycled containerboard at basis weights as low as 16 lbs.
Strategically, this is advantageous in two ways. First, the
sustainability of the product meets growing demand for eco-
friendly solutions from our customers and end-consumers and
increases the percentage of our recycled capacity to over 85%
of our
lower basis weight
containerboard products that deliver comparable quality to
heavier weight options provide our customers with sustainable
solutions that also cost less to transport. To this end, with the
linerboard
inclusion of Bear
manufacturing capacity
lightweight and advantageously
positioned within the North American industry with basis weights
under 26 pounds.
Island, over 50% of our
total production. Second,
is
Operationally, the addition of this mill optimizes the production
flexibility, geographic footprint, and competitiveness of our
containerboard manufacturing platform. The range of liner and
medium products that this mill can manufacture complements
what we produce at our Greenpac Mill, increasing the agility of
our operational base and providing our customers with a more
versatile offering of sustainable lightweight packaging solutions.
From a geographic perspective, the facility is strategically
located near Richmond, Virginia and Washington, DC, with very
good rail and road access and easy accessibility for recycled
fibre sourcing. It is also the southernmost manufacturing asset
in our containerboard platform, which allows for optimal service
for customers in the southern and midwestern US. Competitively
speaking, our two state-of-the-art machines in the Greenpac
and Bear Island mills are positioned within the first quartile of
the North American industry, optimizing our business platform
both in terms of cost base and machine width, positioning it
more competitively through economic downturns.
1 Some information represents non-IFRS Accounting Standards financial measures, other financial measures or non-IFRS Accounting Standards ratios which are not standardized under IFRS
Accounting Standards and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS
Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2023 Annual Report
5
A transformed asset base mobilized for the future
I have had the privilege to be at the helm of Cascades since
2013, and over my tenure as CEO, the Company has
undertaken perhaps its most intense transformative phase. We
have completely modernized the operational platform of our
containerboard business with the addition of the Greenpac Mill
in 2013, the Piscataway, New Jersey box plant in 2019 and the
Bear Island Mill in May 2023, and the repositioning and
upgrading of many of our other operating plants. We have also
invested in new modern equipment in our Specialty Packaging
business
for high-quality
sustainable packaging solutions. Likewise, our Tissue Papers
business has undergone enormous change, most notably in the
past two years, and today is equipped with an asset base that is
better positioned to meet the needs of our customers both
geographically and operationally.
the growing demand
to meet
Looking ahead, the transformative changes we have completed
position Cascades well for the future. In the coming year, we will
focus on optimizing the efficiency and productivity of our
modernized and repositioned asset base and leveraging the full
benefits of our recent investments. These, along with our goal of
reducing our debt, are central to delivering on the objectives set
out in our Strategic Plan. By focusing on these concrete actions,
Cascades will not only generate benefits for the Company, but
for our customers and other stakeholders as well.
On behalf of myself and Cascades’ management team, I would
like to thank you for your continued support and trust through
the challenges presented by the economic environment over the
past year. We are confident in the future, and in the ability of
Cascades to achieve long-term value from the comprehensive
transformation of our businesses
the Company, our
shareholders, our employees and other stakeholders. We look
forward to demonstrating this in 2024 and beyond.
for
initiatives were
implement profitability
in
Included
While favourable raw material pricing was an important tailwind
for the stronger performance of this business in 2023, the
repositioning of our operational platform and our multiple-year
the main
to
effort
catalysts.
these efforts were wide-ranging
commercial realignment decisions that involved adjustments to
our product offering and our customer base, and cost-saving
initiatives via productivity and efficiency improvements at the
production level. Today, this streamlined business is better
positioned to service our customers both geographically and
operationally, while also being equipped to reduce costs, create
synergies and generate sustained financial, operational and
environmental performance improvements going forward.
A strong legacy
On a more personal note, 2023 brought with it some sad news
for Cascades. One of the Company’s founders, Bernard
Lemaire, passed away in November. Along with his brothers,
Bernard founded and built Cascades on the principles of
entrepreneurship, sustainability and an unwavering belief that
employees are a company’s greatest resource. He leaves
behind a legacy that nurtures ingenuity, applauds relentless
determination and champions
importance of eco-
responsibility. This culture continues to lie at the very heart of
Cascades today and remains a guiding principle and source of
inspiration for all Cascaders, including myself. I believe it was
Isaac Newton who said, “If I have seen further, it is by standing
on the shoulders of giants,” and I couldn’t agree more. Bernard
Lemaire was indeed a giant on whose shoulders the Company’s
core principles were built, and Cascades would not be the
company it is today without his leadership and vision.
the
Our sustainable DNA has endured for 60 years
throughout
We will honor six decades of this legacy in 2024, celebrating the
60th anniversary of the Company’s founding. From our roots in
the first mill in Kingsey Falls, Québec, Cascades has grown into
one of North America’s
leading providers of sustainable
packaging and tissue products. The Company has changed
considerably
the years—in scale, geographic
footprint and business focus. What has not changed is our
engagement to the environment and our legacy of stewardship
in both this regard and in terms of social commitment. We are
honoured that Cascades was once more recognized as one of
the Global 100 most sustainable corporations in 2023, and
again in 2024, and as one of Canada’s Top 100 Employers by
The Globe and Mail for the fourth year in a row. What for
Cascades has been at the very heart of our DNA since the
Company was founded has gained widespread traction, and we
applaud this growing environmental focus from our customers,
our suppliers and the investment community at large. Our
comprehensive
2021–2025 Sustainability Action Plan
underscores just how committed Cascades is to not only eco-
responsibility, but
transparency
and accountability.
importantly,
just as
to
6
2023 Annual Report
2023 Annual Report
7
MANAGEMENT’S DISCUSSION & ANALYSIS
FINANCIAL SNAPSHOT
(in millions of Canadian dollars, unless otherwise noted) (unaudited)
Sales
Operating income
EBITDA (A)1
EBITDA (A) as a percentage of sales1
Net earnings (loss)
As reported
Adjusted1
Net earnings (loss) per common share (basic) (in Canadian dollars)
As reported
Adjusted1
Capital expenditures, net of disposals
Dividends declared per common share (in Canadian dollars)
FINANCIAL POSITION (as of December 31)
Total assets
Net debt1
Net debt / EBITDA (A) ratio1
Equity attributable to Shareholders
per common share (in Canadian dollars)
Working capital as a percentage of sales1, 2
KEY INDICATORS
Total shipments (in ’000 of s.t.)3
US$/CAN$ - Average rate
2023
4,638
40
558
12.0%
(76)
109
($0.76)
$1.08
343
$0.48
4,772
1,882
3.4x
1,739
$17.27
2022
4,466
33
376
8.4%
(34)
37
($0.34)
$0.37
482
$0.48
5,053
1,966
5.2x
1,871
$18.64
2021
3,956
50
389
9.8%
162
27
$1.60
$0.26
233
$0.48
4,566
1,351
3.5x
1,879
$18.63
9.9%
10.5%
8.6%
2,125
$0.74
2,027
$0.77
2,075
$0.80
FORWARD-LOOKING
The following document is the annual financial report and Management’s Discussion and Analysis (“MD&A”) of the operating results and financial position of
Cascades Inc. (“Cascades” or “the Corporation”) and should be read in conjunction with the Corporation’s Audited Consolidated Financial Statements and
accompanying notes for the years ended December 31, 2023 and 2022. Information contained herein includes any significant developments as of
February 21, 2024, the date on which the MD&A was approved by the Corporation’s Board of Directors. For additional information, readers are referred to the
Corporation’s Annual Information Form (“AIF”), which is published separately. Additional information relating to the Corporation is also available on the
SEDAR website at www.sedarplus.ca.
The financial information contained herein, including tabular amounts, is expressed in Canadian dollars, unless otherwise specified, and is prepared in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS® Accounting Standards),
unless otherwise specified. Unless otherwise specified or if required by context, the terms “we”, “our” and “us” refer to Cascades Inc. and all of its subsidiaries,
joint ventures and associates.
This MD&A is intended to provide readers with information that Management believes is necessary for an understanding of Cascades’ current results and to
assess the Corporation’s future prospects. Consequently, certain statements herein, including statements regarding future results and performance, are
forward-looking statements within the meaning of securities legislation, based on current expectations. The accuracy of such statements is subject to a
number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of
general economic conditions, decreases in demand for the Corporation’s products, prices and availability of raw materials, changes in relative values of
certain currencies, fluctuations in selling prices and adverse changes in general market and industry conditions. Cascades disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under
applicable securities regulations. This MD&A also includes price indices, as well as variance and sensitivity analysis that are intended to provide the reader
with a better understanding of the trends with respect to our business activities. These items are based on the best estimates available to the Corporation.
1 Some information represents non-IFRS Accounting Standards financial measures, other financial measures or non-IFRS Accounting Standards ratios which are not standardized under IFRS
Accounting Standards and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS
Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2 Percentage of sales = Average quarterly last twelve months (LTM) working capital / LTM sales.
3 Shipments do not take into account the elimination of business sector inter-segment shipments. Shipments from our Specialty Products segment are not presented, as different units
of measure are used.
8
2023 Annual Report
OUR BUSINESS
Cascades Inc. is a paper and packaging company that produces, converts and sells packaging and tissue products composed primarily of
recycled fibres. Established in 1964 in Kingsey Falls, Québec, Canada, the Corporation was founded by the Lemaire brothers, who saw the
economic and social potential of building a company focused primarily on the sustainable development principles of reusing, recovering
and recycling. 60 years later, Cascades is a multinational business with more than 70 operating facilities1 and approximately
10,000 employees1 across Canada and the United States. The Corporation currently operates three business segments:
(Business segments) (unaudited)
PACKAGING PRODUCTS
Containerboard
Specialty Products
TISSUE PAPERS
Number of
facilities1
2023 Sales2
(in $M)
% of sales
2023
Operating
income (loss)
(in $M)
2023
EBITDA (A)2, 3
(in $M)
2023
EBITDA (A)
Margin2, 3 (%)
% of
EBITDA (A)
26
17
10
2,277
642
1,615
50.2%
14.2%
35.6%
128
66
(2)
390
91
182
17.1%
14.2%
11.3%
58.8%
13.7%
27.5%
The locations of our facilities4 and employees by geographic segment in North America are as follows:
1 Including 50% owned joint ventures. The Corporation also has 18 Recovery and Recycling facilities which are included in Corporate Activities.
2 Excluding associates and joint ventures not included in consolidated results. Refer to Note 7 of the 2023 Audited Consolidated Financial Statements for more information on associates and
joint ventures.
3 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
4 Excluding sales offices, distribution and transportation hubs and corporate offices. Including main joint ventures.
2023 Annual Report
9
Our facilities2028%2231%1623%1318%Canada - QuébecUnited StatesCanada - OntarioCanada - Other provincesOur employees 4,70046%2,50024%1,90019%1,10011%Canada - QuébecUnited StatesCanada - OntarioCanada - Other provinces
BUSINESS HIGHLIGHTS
2022 - 2024 STRATEGIC PLAN
As part of the annual review of its strategy, the Corporation analyzes its overall business and the environment in which it competes, sets
objectives for the following year and the years ahead and approves its annual plans, all with a view to enhancing shareholder value. On
February 24, 2022, Management and the Board of Directors disclosed the Corporation’s 2022 to 2024 Strategic Plan, and subsequently
provided an update of the plan in conjunction with the Q1 2023 results on May 11, 2023. The presentation is available on the SEDAR
website at www.sedarplus.ca and on the Corporation’s website at www.cascades.com/en/investors.
The following is a summary of the 2024 financial targets set out in the Corporation’s 2022 to 2024 Strategic Plan in February 2022, and the
subsequent update made to these targets in May 2023:
2024 Financial Targets
Presented February 2022
Updated 2024 Financial Targets
May 2023
Financial
Targets
~$5.0B+ in 2024
1 Sales:
2 EBITDA (A) Margin4:
3 Capital expenditures (Capex): ~4% of sales in 2023-20241
4 Free cash flow2,3,4:
5 Net debt / EBITDA (A)4:
~13% - 15% in 2024
~9% - 11% of sales
2.0x - 2.5x by the end of 2024
~$5.0B
~12% - 14%
~$175M in 2024 (3.5% of sales)
~9% - 10% of sales
2.5x - 3.0x
UPDATE ON THE 2022 - 2024 STRATEGIC PLAN
Having completed two years out of its three year 2022 to 2024 Strategic Plan, and having successfully achieved the main business
objectives set out in the plan, namely delivering significant profitability improvement in the Tissue Papers segment and the successful start-
up of the Bear Island containerboard facility, the Corporation will not be providing any additional detailed financial updates. However,
regarding its 2024 financial objectives, due to existing business conditions, the Corporation does not currently expect to attain its sales
objective of $5 billion, and anticipates that its operations will generate levels at the lower-end of the targeted ranges for both EBITDA (A)
margin4 and free cash flow4. The Corporation’s net debt to EBITDA (A) ratio4 is also expected to be slightly higher than the stated 2024
year-end target. Ongoing profitability improvement initiatives in all business segments and recent price increases announced in the
containerboard segment may improve the Corporation’s 2024 financial performance, thus enabling it to attain the financial objectives for
2024 as previously disclosed.
TISSUE PAPERS SEGMENT PROFITABILITY PLAN
On April 25, 2023, the Corporation announced the repositioning of its Tissue Papers operating platform. This decision strengthens the
operational, financial and environmental performance of this business segment with the closure of assets that have been underperforming.
These actions simplify operations by concentrating the majority of tissue product operating activities at core, geographically well-
positioned, sites that offer opportunities for future development and will further consolidate the Corporation’s position as a leading
manufacturer of private label tissue products in the North American retail and Away-from-Home markets.
The profitability plan initiatives progressed as planned, with the closures completed as scheduled. We anticipate that these decisions,
combined with the ongoing productivity optimization initiatives, which are also progressing as expected, will continue to strengthen the
performance of our Tissue Papers business going forward, as demonstrated by the solid financial performance during the second half
of 2023.
BEAR ISLAND PROJECT
On May 2, 2023, we announced the production of the first roll of 100% lightweight recycled containerboard at the Bear Island, Virginia mill.
After the commissioning of the Greenpac mill nearly 10 years ago, the start-up of Bear Island marks another historic milestone in the
strategic modernization of our containerboard manufacturing network, allowing us to pursue long-term growth in packaging and enhance
our portfolio of sustainable packaging solutions for our customers on a North American scale.
The cost of the project was revised in February 2023 to approximately $690 million (~US$525 million) up from the initial total investment,
announced at the end of 2020, of $475 million (US$380 million) due to important cost inflation, delays in the completion of certain
construction milestones due to labour and material availability and changes required to the original construction plans. As of
December 31, 2023, the total cost of the project is in line with our expectations.
1 Excluding strategic projects.
2 Defined as EBITDA (A)4 - Capex.
3
Interests, cash tax, working capital, lease payments, dividends paid to non-controlling interests and other cash flow item requirements are estimated at $225M - $250M/year.
4 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
10
2023 Annual Report
BUSINESS DEVELOPMENTS
The following transactions should be taken into consideration when reviewing the overall and segmented analysis of the Corporation’s
2023 and 2022 results.
2023
CONTAINERBOARD PACKAGING
•
•
On February 13, 2024, the Corporation announced an important repositioning of its Containerboard operating platform. The
currently idled Trenton (Ontario) corrugated medium mill will not restart operations, while the Belleville (Ontario) and Newtown
(Connecticut) converting plants will be permanently closed, in a progressive manner, by May 31, 2024. The production from
these facilities will be moved to other plants with available capacity and more modern equipment.
On May 2, 2023, the Corporation announced the permanent closure of the paper machine no. 2 at the plant located in
Niagara Falls. The paper machine previously ceased its operations in November 2022.
SPECIALTY PRODUCTS
•
On September 22, 2023, the Corporation announced the consolidation of its isotherm packaging operations, resulting in the
closure of its facilities in Tacoma, Washington in October 2023 and Grand Rapids, Michigan in December 2023.
TISSUE PAPERS
•
On April 25, 2023, the Corporation announced an important repositioning of its Tissue Papers operating platform to enhance the
performance of the business. In June and July, Cascades closed its underperforming plants in Barnwell, South Carolina, and
Scappoose, Oregon, as well as the virgin paper tissue machine at its St. Helens plant, also in Oregon. On August 10, 2023, the
Corporation announced the closing of the second paper machine at its St. Helens plant, resulting in the complete shutdown of
the facility. Operations ceassed at the beginning of October 2023. Please refer to the “Business Highlights - 2022 - 2024
Strategic Plan” section for more details.
SIGNIFICANT FACTS
2023
•
On February 9, 2024, the Corporation entered into an agreement with its lenders for its existing revolving credit facility to extend
the maturity from July 2026 to July 2027. The financial conditions remain unchanged.
•
•
2022
•
In the fourth quarter of 2023, the Corporation entered into an $81 million (US$60 million) monthly rolling receivables’
monetization facility without recourse. As of December 31, 2023, the Corporation unrecognized receivables of $53 million related
to the facility.
On September 15, 2023, our subsidiary, Greenpac, entered into a 3-year credit agreement with a banking syndicate securing a
revolving credit facility authorized at US$150 million which bears interest at a variable rate based on the level of leverage ratio of
the subsidiary. Transaction fees amounting to US$2 million ($2 million) were capitalized in other assets.
On October 19, 2022, the Corporation entered into an agreement with its lenders for its existing credit agreement to increase its
authorized term loan to US$260 million from US$160 million and to extend the maturity from December 2025 to December 2027.
Concurrently, the Corporation extended its existing $750 million revolving credit facility maturity from July 2025 to July 2026. The
financial conditions of both facilities remain unchanged. The Corporation incurred $2 million in capitalizable transaction fees
related to the refinancing.
2023 Annual Report
11
BUSINESS DRIVERS
Cascades’ results may be impacted by fluctuations in the following areas:
EXCHANGE RATES
On a year-over-year basis, the average value of the Canadian
dollar decreased by 4% compared to the US dollar in 2023.
ENERGY COSTS
On a year-over-year basis, the average price of natural gas
decreased by 59% in 2023. In the case of crude oil, the average
price was 17% lower in 2023 than in 2022.
(unaudited)
2021
YEAR
Q1
Q2
Q3
Q4
YEAR
Q1
Q2
Q3
Q4
YEAR
2022
2023
US$/CAN$ - Average rate
$0.80
$0.79
$0.78
$0.77
$0.74
$0.77
$0.74
$0.74
$0.75
$0.73
$0.74
US$/CAN$ - End of the period rate
$0.79
$0.80
$0.78
$0.72
$0.74
$0.74
$0.74
$0.76
$0.74
$0.76
$0.76
Natural Gas Henry Hub - US$/mmBtu
$3.84
$4.95
$7.17
$8.20
$6.26
$6.64
$3.42
$2.10
$2.55
$2.88
$2.74
Crude oil (US$/barrel)
Source: Bloomberg
RAW MATERIALS
$65.15
$82.49
$109.25
$101.05
$83.39
$94.04
$77.85
$72.87
$75.49
$85.54
$77.94
Reference prices - virgin pulp in North America1
In 2023, the reference price for NBSK and NBHK decreased by 15% and
19%
reflecting global demand
supply dynamics.
respectively, compared
to 2022,
Reference prices - recycled fibre costs in North America1
The brown grade recycled paper No. 11 (old corrugated containers, OCC)
annual index price decreased by 48% while the recycled paper No. 56
(sorted residential papers, SRP) annual index price decreased by 65% in
2023 compared to 2022. The white grade recycled paper No. 37 (sorted
office papers, SOP) annual index price decreased by 28% in 2023
compared to 2022.
1 Source: RISI, excluding mixed papers
12
2023 Annual Report
US$/CAN$Q121Q221Q321Q421Q122Q222Q322Q422Q123Q223Q323Q4230.700.750.800.85Natural gas (US$/mmBtu)Crude oil (US$/Barrel)Q121Q221Q321Q421Q122Q222Q322Q422Q123Q223Q323Q423—1.503.004.506.007.509.00—20.0040.0060.0080.00100.00120.00Recycled paper No. 37 (SOP) (Northeast) (US$/s.t.)Recycled paper No. 11 (OCC) (Northeast) (US$/s.t.)Recycled paper No. 56 (SRP) (Northeast) (US$/s.t.)Q121Q221Q321Q421Q122Q222Q322Q422Q123Q223Q323Q42304080120160200240280Bleached hardwood kraft, mixed, Canada / US (US$/m.t.)Northern bleached softwood kraft, Canada (US$/m.t.)Q121Q221Q321Q421Q122Q222Q322Q422Q123Q223Q323Q4238001,0001,2001,4001,6001,800
FREIGHT
U.S. national van rates1
In 2023, the average national van rate decreased by 16% compared
to 2022.
Diesel2
The average price of diesel in Canada and in the U.S. decreased by 12%
and 16%, respectively, in 2023 compared to 2022.
1 Source : DAT Freight and analytics
2 Sources : In Canada : Canada Natural Resources. In the U.S. : Energy Information Administration
2023 Annual Report
13
US ($/Mile)Q121Q221Q321Q421Q122Q222Q322Q422Q123Q223Q323Q4232.252.502.753.003.253.50Canada (CAN$/Liter)US (US$/Gallon)Q121Q221Q321Q421Q122Q222Q322Q422Q123Q223Q323Q4230.901.201.501.802.102.402.503.003.504.004.505.005.506.00
OPERATIONAL PERFORMANCE INDICATORS
We use several operational performance indicators to monitor our action plan and analyze the progress we are making toward achieving
our long-term objectives. These indicators include the following:
(unaudited)
OPERATIONAL
Total shipments (in ’000 short tons (s.t.))1
Packaging Products
Containerboard
Tissue Papers
Total
Integration rate2
Containerboard
Tissue Papers
Manufacturing capacity utilization rate3
Containerboard
Tissue Papers
FINANCIAL
Working capital
In millions of CAN$, at the end of period4
As a percentage of sales4, 5
2021
2022
2023
YEAR
Q1
Q2
Q3
Q4
YEAR
Q1
Q2
Q3
Q4
YEAR
1,521
372
379
391
364
1,506
383
398
429
402
1,612
554
131
133
134
123
521
124
134
134
121
513
2,075
503
512
525
487
2,027
507
532
563
523
2,125
58%
74%
57%
79%
57%
82%
52%
85%
53%
87%
55%
83%
49%
84%
50%
83%
50%
87%
55%
94%
52%
87%
94%
82%
93%
84%
96%
81%
93%
88%
83%
81%
91%
83%
91%
81%
93%
86%
91%
92%
84%
96%
90%
91%
297
424
493
561
397
397
487
514
512
318
318
8.6%
9.3%
9.6%
10.2%
10.5%
10.5%
10.6%
10.6%
10.3%
9.9%
9.9%
1 Shipments do not take into account the elimination of business sector inter-segment shipments. Shipments from our Specialty Products segment are not presented, as different units
of measure are used.
2 Defined as: Percentage of manufacturing shipments transferred to our converting operations.
3 Defined as: Manufacturing internal and external shipments/practical capacity. Excluding Specialty Products segment manufacturing activities.
4 Some information represents non-IFRS Accounting Standards financial measures, other financial measures or non-IFRS Accounting Standards ratios which are not standardized under IFRS
Accounting Standards and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS
Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
5 Percentage of sales = Average quarterly last twelve months (LTM) working capital / LTM sales.
14
2023 Annual Report
HISTORICAL MARKET PRICES OF MAIN PRODUCTS AND RAW MATERIALS
These indexes should only be used as trend indicators. They may
differ from our actual selling prices and purchasing costs.
(unaudited)
Selling prices (average)
PACKAGING PRODUCTS
Containerboard (US$/short ton)
Linerboard 42-lb. unbleached kraft,
Eastern US (open market)
Corrugating medium 26-lb. semichemical,
Eastern US (open market)
Specialty Products (US$/short ton)
Uncoated recycled boxboard - bending chip,
20-pt. (series B)
TISSUE PAPERS (US$/short ton)
2021
2022
2023
2023 vs.2022
YEAR
Q1
Q2
Q3
Q4
YEAR
Q1
Q2
Q3
Q4
YEAR Change
%
833
895
935
935
915
920
872
852
845
832
850
(70)
(8%)
745
818
865
865
832
845
762
728
715
702
727
(118)
(14%)
845
1,027
1,067
1,100
1,100
1,073
1,053
1,040
1,040
1,020
1,038
(35)
(3%)
Parent rolls, recycled fibres (transaction)
1,156
1,213
1,271
1,291
1,290
1,266
1,269
1,233
1,196
1,190
1,222
(44)
Parent rolls, virgin fibres (transaction)
1,515
1,504
1,597
1,644
1,631
1,594
1,572
1,489
1,394
1,404
1,465
(129)
(3%)
(8%)
Raw material prices (average)
RECYCLED PAPER
North America (US$/short ton)
Sorted residential papers, No. 56 (SRP -
Northeast average)
Old corrugated containers, No. 11 (OCC -
Northeast average)
Sorted office papers, No. 37 (SOP -
Northeast average)
VIRGIN PULP (US$/metric ton)
80
98
107
98
127
140
137
109
23
35
81
105
18
33
18
47
28
59
48
83
28
55
(53)
(65%)
(50)
(48%)
134
205
235
252
248
235
222
183
142
135
170
(65)
(28%)
Northern bleached softwood kraft, Canada
1,478
1,527
1,743
1,800
1,745
1,704
1,675
1,510
1,293
1,312
1,448
(256)
(15%)
Bleached hardwood kraft, mixed, Canada/US
1,229
1,312
1,517
1,620
1,608
1,514
1,523
1,277
1,023
1,083
1,227
(287)
(19%)
Sources: RISI and Cascades
2023 Annual Report
15
SENSITIVITY TABLE2
The following table provides a quantitative estimate of the impact that potential changes in the prices of our main products, the costs of
certain raw materials, energy and the exchange rates may have on Cascades’ annual EBITDA (A)1, assuming, for each price change, that
all other variables remain constant. Estimates are based on Cascades’ 2023 manufacturing and converting external shipments and
consumption quantities. It is important to note that this table does not consider the Corporation’s use of hedging instruments for risk
management. These hedging policies and portfolios (see the “Risk Factors” section) should also be considered in order to fully analyze the
Corporation’s sensitivity to the highlighted factors.
Potential indirect sensitivity to the CAN$/US$ exchange rate is not considered in this table. Some of Cascades’ selling prices and raw
material costs in Canada are based on US dollar reference prices and costs that are then converted into Canadian dollars. Consequently,
fluctuations in the exchange rate may have a direct impact on the value of sales and purchases of Canadian facilities in Canada. However,
because it is difficult to measure the precise impact of this fluctuation, we do not take it into consideration in the following table. The impact
of the exchange rate on the working capital items and cash positions denominated in currencies other than CAN$ at the Corporation’s
Canadian units is also excluded. Fluctuations in foreign exchange rates may also impact the translation of the results of our non-Canadian
units into CAN$.
(unaudited)
SELLING PRICE (MANUFACTURING AND CONVERTING)3
Packaging
Linerboard 42-lb. unbleached kraft, Eastern US
Corrugating medium 26-lb. semichemical, Eastern US
Uncoated recycled boxboard - bending chip, 20-pt., Eastern US
Converting products (cartonboard based only)
Tissue Papers
RAW MATERIALS3
Packaging
Brown grades (OCC and others)
Groundwood grades (SRP and others)
Tissue Papers
Virgin pulp
Brown grades (OCC and others)
White grades (SOP and others)
NATURAL GAS
Packaging
Tissue Papers
EXCHANGE RATE4
U.S. subsidiaries translation
SHIPMENTS/
CONSUMPTION ('000
SHORT TONS, ’000 MMBTU
FOR NATURAL GAS)
INCREASE
EBITDA (A)1 IMPACT
(IN MILLIONS OF CAN$)
425
375
125
825
1,750
515
2,265
1,625
45
1,670
190
140
245
575
5,600
3,100
8,700
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$25/s.t.
US$1.00/mmBtu
US$1.00/mmBtu
CAN$/US$ 0.01 change
14
12
4
27
57
17
74
(54)
(1)
(55)
(6)
(5)
(8)
(19)
(7)
(4)
(11)
2
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2 Sensitivity calculated according to 2023 volumes or consumption with year-end closing exchange rate of CAN$/US$ 1.32, excluding hedging programs and the impact of related expenses
such as discounts, commissions on sales and profit-sharing.
3 Based on 2023 external manufacturing and converting shipments, as well as fibre and pulp consumption. Including purchases sourced internally from our recovery and recycling operations.
Adjusted to reflect acquisitions, disposals and closures, if needed.
4 As an example, from CAN$/US$ 1.32 to CAN$/US$ 1.33.
16
2023 Annual Report
FINANCIAL OVERVIEW - 2023
SALES
For the year ended December 31, 2023, consolidated sales totaled $4,638 million, an increase of $172 million, or 4%, compared to
$4,466 million in 2022. The exchange rate was favourable for all segments, while benefits from higher selling prices in the Tissue Papers
segment were partly offset by pricing pressures in the Containerboard Packaging segment. Sales levels benefited from stronger volume in
the Containerboard Packaging segment and a better sales mix in the Tissue Papers segment. These impacts were partly offset by lower
volume from the Specialty Products segment, lower sales from Recovery and Recycling activities and a less favourable sales mix in the
Containerboard Packaging segment.
Sales, in 2023, by geographic segment are as follows:
The main variances in sales in 2023, compared 2022, are shown below:
(in millions of Canadian dollars)
2023 Annual Report
17
Sales from (in %)56%44%United StatesCanadaSales to (in %)47%53%United StatesCanadaSALES ($M)4,466106102(1)(14)(21)4,6382022SalesF/XCAN$VolumeMixPriceRecovery &Recycling andOther items2023Sales
OPERATING INCOME AND EBITDA (A)1
For the year ended December 31, 2023, the Corporation recorded an operating income of $40 million, compared to an operating income of
$33 million in 2022. The operating income variance is explained by a significant specific items loss of $246 million, including impairment
charges amounting to $209 million recorded in 2023, and higher depreciation and amortization expense in 2023 offset by better overall
operating performance. For more details on impairment charges please refer to the “Segmented Information” section and Note 22 of the
2023 Audited Consolidated Financial Statements.
The Corporation recorded an EBITDA (A)1 of $558 million in 2023, compared to $376 million in 2022. Tissue Papers segment performance
was much stronger, Specialty Products segment results were stable and Containerboard Packaging segment contribution was lower. On a
consolidated basis, volume combined with lower raw material, freight and energy costs and a favourable exchange rate more than offset a
less favourable selling price and a lower contribution from Recovery and Recycling activities and higher general production costs mainly
stemming from inflation.
The main variances in operating income and in EBITDA (A)1 in 2023, compared to 2022, are shown below:
(in millions of Canadian dollars)
Raw materials
(EBITDA (A)1)
F/X CAN$
(EBITDA (A)1)
The impacts of these estimated costs are based on production costs per unit shipped externally or inter-segment, which are affected by yield, product
mix changes, inbound freight costs and purchase and transfer prices. In addition to market pulp and recycled fibre, these costs include purchases of
external boards and parent rolls for the converting sector, and other raw materials such as plastic and wood chips.
The estimated impact of the exchange rate is based on the Corporation’s Canadian export sales less purchases, denominated in US$, that are
impacted by exchange rate fluctuations and by the translation of our non-Canadian subsidiaries EBITDA (A)1 into CAN$. It also includes the impact of
exchange rate fluctuations on the Corporation’s Canadian units in currency other than the CAN$ on working capital items and cash positions, as well
as our hedging transactions. It excludes indirect sensitivity (please refer to the “Sensitivity Table” section for further details).
Production costs
(EBITDA (A)1)
Recovery and Recycling activities
(Sales and EBITDA (A)1)
These costs include the impact of variable and fixed costs based on production costs per unit shipped externally, which are affected by downtime
and efficiency.
While this sub-segment is integrated within the other segments of the Corporation, all variations in the results of Recovery and Recycling activities
are presented separately and on a global basis in the charts.
The sales and EBITDA (A)1 variances analysis by segment is shown in each business segment review (please refer to “Business Segment
Review” for more details).
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
18
2023 Annual Report
OPERATING INCOME AND EBITDA (A) ($M)332529137616251361912(14)(23)(61)558(246)(272)402022Operating incomeDepreciation and amortizationSpecificitems2022EBITDA (A)Raw materialsFreightVolume &MixEnergyF/XCAN$PriceRecovery &RecyclingProd.costs2023EBITDA (A)SpecificitemsDepreciation and amortization2023Operating income
DEPRECIATION AND AMORTIZATION
The depreciation and amortization expense increased by $20 million to $272 million in 2023, compared to $252 million in 2022. The
increase reflects the depreciation of the Canadian dollar which increased the depreciation expense in 2023 by $5 million. The start-up of
the Bear Island mill also contributed to the increase in the depreciation and amortization expense. The impact was partially offset by
impairment charges recorded over the last twelve months.
FINANCING EXPENSE
(in millions of Canadian dollars) (unaudited)
Interest on long-term debt (including lease obligations interest 2023 - $8 million; 2022 - $ 7 million)
Amortization of financing costs
Other interest and banking fees
Interest expense on employee future benefits
Unrealized loss on interest rate swaps
Foreign exchange loss on long-term debt and financial instruments
2023
113
3
7
4
1
—
128
2022
69
2
5
3
—
9
88
The financing expense amounted to $128 million in 2023, compared to $88 million in 2022, an increase of $40 million.
Higher interest rates and a higher level of debt resulted in a variance of $44 million. The variance is also impacted by the capitalization of
the financing expense related to the qualifying assets during the construction of the Bear Island mill, which amounts to $9 million in 2023,
compared to $15 million in 2022. The increase reflects the depreciation of the Canadian dollar which increased the financing expense in
2023 by $3 million. Also, the Corporation recorded an unrealized loss on interest rate swaps of $1 million in 2023 (nil in 2022).
The variance is also impacted by the foreign exchange loss on long-term debt and financial instruments. In 2023, the Corporation recorded
a gain of less than a million dollars, compared to a loss of $9 million in 2022.
The average interest rate on our revolving credit facility increased to 7.16% as of December 31, 2023 compared to 6.18% at the same date
in 2022. As of December 31, 2023, 36% of the Corporation’s total long-term debt was at a variable rate and 64% was at a fixed rate. As of
December 31, 2023, the Corporation had, on a consolidated basis, total U.S. dollar-denominated debt of US$1,263 million.
SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
Share of results of associates and joint ventures amounted to $22 million in 2023, compared to $19 million in 2022. In 2023, it included a
gain of $10 million on the disposal of non-significant joint ventures. For more information on share of results of associates and
joint ventures please refer to Note 7 of the 2023 Audited Consolidated Financial Statements.
RECOVERY OF INCOME TAXES
In 2023, the Corporation recorded a recovery of income taxes of $13 million, which compares to a recovery of income taxes of $22 million
in 2022.
(in millions of Canadian dollars) (unaudited)
Recovery of income taxes based on the combined basic Canadian and provincial income tax rate
Adjustment for income taxes arising from the following:
Difference in statutory income tax rate of foreign operations
Prior years reassessment1
Reversal of deferred income tax assets related to prior year losses1
Permanent differences
Recovery of income taxes
2023
(17)
3
5
1
(5)
4
(13)
2022
(10)
—
(6)
—
(6)
(12)
(22)
Greenpac is a limited liability company (LLC) and partners agreed to account for it as a disregarded entity for tax purposes. Consequently,
income taxes associated with Greenpac net earnings are proportionately recorded by each partner based on its respective share in the
LLC and no income tax provision is included in Greenpac’s net earnings. As such, although Greenpac is fully consolidated in the
Corporation’s results, only 92% of pre-tax book income is considered for tax provision purposes.
The effective tax rate and income taxes are affected by the results of certain subsidiaries and joint ventures located in countries where the
income tax rates are different from those in Canada, notably the United States. The normal effective tax rate is expected to be in the range
of 21% to 27%. The weighted-average applicable tax rate was 24.25% in 2023.
NET EARNINGS (LOSS)
For the year ended December 31, 2023, the Corporation posted a net loss of $(76) million, or ($0.76) per common share, compared to a
net loss of $(34) million, or ($0.34) per common share, in 2022. On an adjusted basis1, the Corporation posted net earnings of $109 million
in 2023, or $1.08 per common share, compared to net earnings of $37 million, or $0.37 per common share, in 2022.
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2023 Annual Report
19
BUSINESS SEGMENT REVIEW
PACKAGING PRODUCTS - CONTAINERBOARD
Our Industry
U.S. containerboard industry production and capacity utilization rate1
Total U.S. containerboard production amounted to 36.5 million short tons
in 2023, a decrease of 3% compared to 2022. As a result, the industry’s
capacity utilization rate decreased to 87% in 2023 from 89% in 2022.
U.S. containerboard inventories at box plants and mills2
The average inventory level decreased by 7% year-over-year in 2023. The
number of weeks of supply in inventory averaged 4.2x for the year, down
from 4.4x in 2022.
U.S corrugated box industry shipments2
Total U.S. corrugated box shipments decreased by 5% in 2023 compared
to 2022.
Canadian corrugated box industry shipments3
Canadian corrugated box shipments were stable in 2023 compared
to 2022.
Reference prices - containerboard1
2023 reference prices for linerboard and corrugating medium decreased
by 8% and 14%, respectively, compared to 2022.
Reference prices - recovered papers (brown grade)1
The average reference price of old corrugated containers no.11 (“OCC̑
decreased by 48% in 2023 compared to 2022.
̑”)
1 Source: RISI
2 Source: Fibre Box Association
3 Source: Canadian Corrugated and Containerboard Association
20
2023 Annual Report
40,09237,79736,49695%89%87%Total production (’000 s.t.)Capacity utilization rate20212022202320,00025,00030,00035,00040,00045,00080%85%90%95%100%2,5282,8382,6273.84.44.2Average inventory level (’000 s.t.)Weeks of supply202120222023—5001,0001,5002,0002,5003,0003.03.54.04.55.0416.2400.5380.6Total shipments (Billion sq. ft.)202120222023300.0350.0400.0450.036.535.635.6Total shipments (Billion sq. ft.)20212022202325.030.035.040.0745845727833920850Corrugating medium 26-lb. semichemical, Eastern U.S. (open market) (US$/s.t.)Linerboard 42-lb. unbleached kraft, Eastern U.S. (open market) (US$/s.t.)2021202220236007008009001,00012710555Old corrugated containers, no. 11 (OCC - Northeast average) (US$/s.t.)202120222023—20406080100120140
Our Performance
EBITDA (A)1 ($M)
Sales ($M) and EBITDA (A) margin1
The main variances2 in sales and EBITDA (A)1 for the Containerboard Packaging segment in 2023, compared to 2022, are shown below:
(in millions of Canadian dollars)
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2 For definitions of certain sales and EBITDA (A)1 variation categories, please refer to the "Financial Overview” section for more details.
2023 Annual Report
21
80991031191269610167EBITDA (A) ($M)Q122Q222Q322Q422Q123Q223Q323Q423050100150534569595567561562593561SALES ($M)EBITDA (A) margin (% of sales)Q122Q222Q322Q422Q123Q223Q323Q42320030040050060010%15%20%25%30%Shipments and manufacturing capacity utilization rate372379391364383398429402Shipments (’000 s.t.)Utilization rateQ122Q222Q322Q422Q123Q223Q323Q42320025030035040045080%85%90%95%100%Average selling price(CAN$/s.t.)(US$/s.t.)Q122Q222Q322Q422Q123Q223Q323Q4231,2001,3001,4001,5001,6009001,0001,1001,200SALES ($M)2,26516151(40)(160)2,2772022 SalesVolumeF/XCAN$MixPrice2023 SalesEBITDA (A) ($M)40110747161310(44)(160)3902022EBITDA (A)Raw materialsVolume & MixEnergyF/XCAN$ FreightProd.costsPrice 2023EBITDA (A)
2022
2023
Change in %
Shipments2 (’000 s.t.)
1,506
1,612
Average Selling Price
(CAN$/unit)
1,504
1,412
7%
-6%
Sales ($M)
2,265
2,277
1%
EBITDA (A)1 ($M)
401
18%
% of sales
390
17%
-3%
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards
Measures and Other Financial Measures” section for a complete reconciliation.
2 Shipments do not take into account the elimination of business sector inter-segment
shipments.
3 Including sales to other partners in Greenpac.
Total shipments increased by 106,000 s.t., or 7%, in 2023 compared
to 2022.
Parent roll shipments increased by 88,000 s.t., or 12%, compared to
2022. This increase reflects new volume associated with the
Bear Island facility ramping up production. With the addition of
Bear Island, the mill integration rate decreased by 3% to 52%.
Including sales to other partners3, the integration rate was 68% in
2023, compared to 72% in 2022. The manufacturing utilization rate
decreased by 1% to 90%, which includes the impact of the start-up of
Bear Island.
Shipments from converting activities increased by 18,000 s.t., or 2%
compared to 2022. In terms of square feet, our volume increased by
3% from 13.8 billion in 2022 to 14.2 billion in 2023. This reflects a 2%
increase in our Canadian converted products shipments, compared
to a stable performance for the Canadian industry. Our US converted
product shipments
in 2023,
outperforming the market decline of 5%. In terms of square feet per
day, our shipments from converting activities increased by 3% year-
over-year.
increased by 8% year-over-year
The average selling price decreased by 6% in 2023, reflecting a 11%
decrease for parent rolls and a 1% decrease for converted products.
Sales increased by $12 million, or 1%, in 2023 compared to 2022.
The lower average selling price subtracted $160 million from sales
while a less favourable sales mix removed another $40 million.
These negative impacts were more than offset by benefits of
$161 million related to greater volume and $51 million from the 4%
average depreciation of the Canadian dollar compared to the
US dollar.
EBITDA (A)1 decreased by $11 million, or 3%, from 2022. This
decrease reflects the negative impacts of $160 million from a lower
average selling price and $44 million due to higher production costs,
including chemicals, repair and maintenance, labour and other costs.
These headwinds were offset by a $107 million beneficial impact
related to lower raw material costs and $16 million from lower energy
costs. Higher volume and a less favourable sales mix also had a net
positive impact of $47 million, lower logistics and distribution costs
added $10 million, and the depreciation of the Canadian dollar added
$13 million. Results also include the impact on costs resulting from
the Bear Island mill commissioning and start-up in May 2023.
22
2023 Annual Report
BUSINESS SEGMENT REVIEW
PACKAGING PRODUCTS - SPECIALTY PRODUCTS
Our Performance
EBITDA (A)1 ($M)
Sales ($M) and EBITDA (A) margin1
The main variances2 in sales and EBITDA (A)1 for the Specialty Products segment in 2023, compared to 2022, are shown below:
(in millions of Canadian dollars)
2022
654
Sales ($M)
2023
642
EBITDA (A)1 ($M)
92
14%
% of sales
91
14%
Change in %
-2%
-1%
Sales decreased by $12 million, or 2%, in 2023 compared to 2022.
Lower volume in almost all of our sub-segments due to market
softening, labour constraints and operational issues, decreased sales
by $39 million. Higher average selling prices for most of our sub-
segments benefited sales levels by $11 million this year. In addition,
the 4% average depreciation of the Canadian dollar compared to the
US dollar had a positive impact of $16 million on sales.
EBITDA (A)1 decreased by $1 million, or 1%, in 2023 compared to
2022. This performance reflects the beneficial impacts from higher
realized spreads (selling price less raw materials) and depreciation of
the Canadian dollar, which contributed $31 million and $2 million,
respectively. These impacts were partially offset by higher operating,
maintenance and supplies costs and a lower production level, which
negatively impacted results by $24 million. In addition, lower volume
decreased results by $10 million.
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2 For definitions of certain sales and EBITDA (A)1 variation categories, please refer to the "Financial Overview” section for more details.
2023 Annual Report
23
2225252027242119EBITDA (A) ($M)Q122Q222Q322Q422Q123Q223Q323Q423051015202530157168168161161164157160SALES ($M)EBITDA (A) margin (% of sales)Q122Q222Q322Q422Q123Q223Q323Q4230501001502000%5%10%15%20%25%SALES ($M)6541611(39)6422022 SalesF/XCAN$PriceVolume 2023 SalesEBITDA (A) ($M)9220112(10)(24)912022 EBITDA (A)Raw materialsPriceF/XCAN$ Volume & MixProd.costs2023 EBITDA (A)
BUSINESS SEGMENT REVIEW
TISSUE PAPERS
Our Industry
U.S. tissue paper industry production (parent rolls) and capacity
utilization rate1
Total parent roll production was stable in 2023. The average capacity utilization rate
of 94% in 2023 increased by 1% compared to 93% in 2022.
U.S. tissue paper industry converted product shipments1
In 2023, shipments for the Retail and the Away-from-Home markets decreased by
2% and increased by 2%, respectively, compared to 2022.
Reference prices - parent rolls1
In 2023, the reference price for recycled and virgin parent rolls decreased by 3%
and 8%, respectively, compared to 2022.
Reference prices - recovered papers (white grade)1
The reference price of sorted office papers no.37 (“SOP”) decreased by 28% in
2023 compared to 2022.
Reference prices - market pulp1
In 2023, the reference price for NBSK and NBHK decreased by 15% and 19%,
respectively, compared to 2022, reflecting global demand supply dynamics.
1 Source: RISI
24
2023 Annual Report
9,4019,4849,49192%93%94%Total parent roll production (’000 s.t.)Capacity utilization rate2021202220237,0008,0009,00010,00011,00090%92%94%96%98%100%2,8792,9763,0356,4836,3836,282Shipments - Away-from-Home market (’000 s.t.)Shipments - Retail market (’000 s.t.)202120222023—2,0004,0006,0008,0001,1561,2661,2221,5151,5941,465Recycled parent roll (average publication price) (US$/s.t.)Virgin parent roll (average publication price) (US$/s.t.)202120222023—5001,0001,5002,000134235170Sorted office papers, no. 37 (SOP - Northeast average) (US$/s.t.)202120222023—501001502002501,2291,5141,2271,4781,7041,448Bleached hardwood kraft, mixed, Canada / U.S. (US$/m.t.)Northern bleached softwood kraft, Canada (US$/m.t.)202120222023—5001,0001,5002,000
Our Performance
EBITDA (A)1 ($M)
Sales ($M) and EBITDA (A) margin1
The main variances2 in sales and EBITDA (A)1 for the Tissue Papers segment in 2023, compared to 2022, are shown below:
(in millions of Canadian dollars)
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2 For definitions of certain sales and EBITDA (A)1 variation categories, please refer to the "Financial Overview” section for more details.
2023 Annual Report
25
(17)(8)4816446161EBITDA (A) ($M)Q122Q222Q322Q422Q123Q223Q323Q423-30-1501530456075314342382384387416422390SALES ($M)EBITDA (A) margin (% of sales)Q122Q222Q322Q422Q123Q223Q323Q4230100200300400-10%0%10%20%Shipments and manufacturing capacity utilization rate131133134123124134134121Shipments (’000 s.t.)Utilization rateQ122Q222Q322Q422Q123Q223Q323Q42305010015070%80%90%100%Average selling price(CAN$/s.t.)(US$/s.t.)Q122Q222Q322Q422Q123Q223Q323Q4232,2002,4002,6002,8003,0003,2003,4001,4001,6001,8002,0002,2002,400SALES ($M)1,4221353939(20)1,615 2022 SalesPriceMixF/XCAN$Volume 2023 SalesEBITDA (A) ($M)(13)1354135(16)182 2022EBITDA (A)PriceFreightRawmaterialsOthervariations 2023EBITDA (A)
2022
2023
Change in %
Shipments2 (’000 s.t.)
513
521
Average Selling Price
(CAN$/unit)
2,731
3,147
-2%
15%
Sales ($M)
1,422
1,615
14%
EBITDA (A)1 ($M)
(13)
(1)%
% of sales
182
11%
1,500%
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards
Measures and Other Financial Measures” section for a complete reconciliation.
2 Shipments do not take into account the elimination of business sector inter-segment
shipments.
In April 2023, the Corporation announced the repositioning of this
segment’s operating platform to strengthen its operational, financial
and environmental performance, which included the closure of
underperforming assets. We are very pleased with the benefits being
realized from these wide-ranging measures and other profitability
initiatives that have been executed in recent months.
Shipments decreased by 8,000 s.t., or 2%, in 2023 compared
to 2022.
Converted product shipments increased by 14,000 s.t., or 3%, with
9% higher volume in the Consumer Products market partially offset
by 4% lower shipments in the Away-from-Home market. In terms of
cases, shipments increased by 3.6 million cases, or 6%, to
62.4 million cases in 2023 compared to 2022. Parent roll shipments
decreased by 22,000 s.t., or 26%, in 2023 compared to 2022 mainly
due to the closure of two paper machines in Oregon and one mill in
South Carolina during the year. Network optimization also contributed
to higher integration of parent rolls. The integration rate increased to
87% during the period (94% in the fourth quarter), from 83% in 2022.
The 15% increase in the average selling price reflects price increase
initiatives in both the Away-from-Home and Consumer Products
markets during 2022 and 2023, the 4% average depreciation of the
Canadian dollar compared to the US dollar and a favourable sales
mix due to a higher proportion of converted products.
Sales increased by $193 million, or 14%. This was driven by
beneficial impacts of $135 million from a higher average selling price,
$39 million from a favourable sales mix, and $39 million related to the
favourable exchange rate. These benefits were partially offset by
lower volumes mainly related to the paper machine closures, which
negatively impacted sales by $20 million.
EBITDA (A)1 increased by $195 million mainly due to the higher
average selling price, which added $135 million. Additionally, lower
transportation costs added $41 million due to lower market rates and
savings generated from network optimization and lower raw material
costs added $35 million. These were partially offset by a $16 million
impact from higher production costs reflecting inflationary pressures
and slightly lower volume.
26
2023 Annual Report
CORPORATE, RECOVERY AND RECYCLING ACTIVITIES
Corporate, Recovery and Recycling activities recorded an EBITDA (A)1 of $(105) million in 2023, compared to $(104) million in 2022. The
EBITDA (A)1 of our Recovery and Recycling activities was $23 million lower in 2023 due to lower volume and decreasing recycled fibre
prices. Corporate activities results benefited from lower professional fees and stable operating costs, and a loss of $2 million in 2023 was
incurred following a fire at an external warehouse causing inventory losses.
STOCK-BASED COMPENSATION EXPENSE
Stock-based compensation expense recognized in Corporate activities amounted to $10 million in 2023, compared to $5 million in 2022.
For more details on stock-based compensation, please refer to Note 20 of the 2023 Audited Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities are presented in the following table:
(in millions of Canadian dollars) (unaudited)
Operating activities
Net loss attributable to Shareholders for the year
Adjustments for:
Financing expense
Depreciation and amortization
Impairment charges
Other loss (gain)
Restructuring costs
Unrealized loss on derivative financial instruments
Recovery of income taxes
Share of results of associates and joint ventures
Net earnings attributable to non-controlling interests
Net financing expense paid
Net income taxes paid
Dividends received
Provisions for contingencies and charges and other liabilities
Changes in non-cash working capital components
2023
(76)
128
272
209
12
23
2
(13)
(22)
23
(129)
(9)
9
(32)
397
113
510
2022
(34)
88
252
102
(20)
3
6
(22)
(19)
20
(87)
(5)
12
(36)
260
(116)
144
Cash flows from operating activities, excluding changes in non-cash working capital components, stood at $397 million in 2023, compared
to $260 million in 2022. This cash flow measurement is relevant to the Corporation’s ability to pursue its capital expenditure program and
reduce its indebtedness.
Cash flows from operating activities generated $510 million in liquidity in 2023, compared to $144 million generated in 2022. The increase
is driven by improved profitability and the significant decrease in the non-cash working capital compared to 2022. The Corporation paid
$129 million of financing expense in 2023, compared to $87 million in 2022. The Corporation also paid $9 million of income taxes in 2023,
compared to $5 million paid in 2022. Other elements include payments totaling $24 million in 2023 for severances and other restructuring
costs related to closures, compared to $12 million in 2022.
Changes in non-cash working capital components generated $113 million in liquidity in 2023, compared to $116 million used in 2022. A
lower inflation rate along with working capital improvement initiatives have allowed the Corporation to improve its cash converting cycle,
despite the fact that additional working capital was necessary in 2023 to support the start-up of the Bear Island mill. As of
December 31, 2023, average quarterly LTM working capital as a percentage of LTM sales1 stood at 9.9%, which compares to 10.5% as of
December 31, 2022.
In the fourth quarter of 2023, the Corporation entered into an $81 million (US$60 million) monthly rolling receivables’ monetization facility
without recourse. Under this agreement the Corporation considers the receivables transferred and accounts for as a sale. The
Corporation’s continuing involvement in the transferred assets is limited to servicing the receivables. In the fourth quarter of 2023, the
Corporation had unrecognized receivables of $53 million related to the facility of which the Corporation received $20 million as the
collection agent and recorded an account payable in the same amount to the transferred assets purchaser.
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2023 Annual Report
27
INVESTING ACTIVITIES
Investing activities are presented in the following table:
(in millions of Canadian dollars) (unaudited)
Investing activities
Disposals in associates and joint ventures
Payments for property, plant and equipment
Proceeds from disposals of property, plant and equipment
Change in intangible and other assets
Investing activities used $332 million in liquidity in 2023, compared to $486 million used in 2022.
DISPOSALS IN ASSOCIATES AND JOINT VENTURES
In 2023, the Corporation received $12 million from the sale of investments in non-significant joint ventures.
In 2022, the Corporation received $1 million from an advance made to an associate.
PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT
(in millions of Canadian dollars) (unaudited)
Total additions during the year
Variation of payments of acquisitions for property, plant and equipment included in “Trade and other payables”
Right-of-use assets acquisitions and provisions (non-cash)
Payments for property, plant and equipment
Proceeds from disposals of property, plant and equipment
Payments for property, plant and equipment net of proceeds from disposals
2023
12
(350)
7
(1)
(332)
2023
343
61
(54)
350
(7)
343
2022
1
(501)
19
(5)
(486)
2022
619
(31)
(87)
501
(19)
482
New capital expenditure projects, including right-of-use assets and provisions, by segment in 2023 were as follows:
(in millions of Canadian dollars)
The major capital projects that were initiated, are in progress or were completed in 2023 are as follows:
CONTAINERBOARD PACKAGING
•
Bear Island assets in Virginia, USA, for site preparation and conversion of equipment to recycled containerboard manufacturing (see
the “Business Highlights” section for more details).
•
Investment in equipment to optimize and increase the converting capacity in the USA.
SPECIALTY PRODUCTS
•
Investment in thermoforming and extrusion equipment to increase production capacity and transition the Plastics sub-segment to
recycled rigid plastics.
28
2023 Annual Report
19725353254ContainerboardSpecialty ProductsTissue PapersCorporate, Recovery and Recycling activitiesRight-of-use assets and provisions
PROCEEDS FROM DISPOSALS OF PROPERTY, PLANT AND EQUIPMENT
The main disposals of property, plant and equipment are as follows:
2023
The Tissue Papers segment received $4 million from the sale of a building and some machinery and equipment related to a previously
closed plant in the USA.
2022
The Specialty Products segment received $5 million from the sale of land and a building related to a closed plant in Canada. An additional
amount of $1 million deposited in escrow was collected in the first quarter of 2023.
CHANGE IN INTANGIBLE AND OTHER ASSETS
In 2023, the Corporation invested $1 million, compared to $3 million in 2022, in its information technology system and other
software developments. In 2022, the Corporation invested an additional $1 million for other assets, including deposits.
FINANCING ACTIVITIES
Financing activities are presented in the following table:
(in millions of Canadian dollars) (unaudited)
Financing activities
Bank loans and advances
Change in credit facilities
Increase in term loan
Payments of term loan
Increase in other long-term debt
Payments of other long-term debt, including lease obligations (2023 - $59 million; 2022 - $55 million)
Issuance of common shares upon exercise of stock options
Redemption of common shares
Dividends paid to non-controlling interests
Acquisition of non-controlling interests
Dividends paid to the Corporation’s Shareholders
2023
2022
(3)
(92)
—
—
99
(144)
2
—
(36)
(3)
(48)
(225)
2
323
355
(219)
—
(117)
1
(9)
(13)
(3)
(48)
272
Financing activities used $225 million in total liquidity in 2023, compared to $272 million generated in 2022, including $48 million
($48 million in 2022) in dividend payments to the Corporation’s Shareholders.
INCREASE IN (PAYMENTS OF) TERM LOAN
On October 19, 2022, the Corporation entered into an agreement with its lenders for its existing credit agreement to increase its authorized
term loan to US$260 million from US$160 million and to extend the maturity from December 2025 to December 2027. The increase portion
of the term loan was used to reduce the borrowings under the revolving credit facility.
INCREASE OF OTHER LONG-TERM DEBT
In 2023, other debt without recourse to the Corporation increased by $99 million, mainly related to the refinancing of our
subsidiary, Greenpac.
PAYMENTS OF OTHER LONG-TERM DEBT
In 2023, the Corporation repaid $73 million of other debt without recourse to the Corporation, which was refinanced as described above.
Also, the Corporation repaid lease obligations of $59 million in 2023, compared to $55 million in 2022.
ISSUANCE OF COMMON SHARES UPON EXERCISE OF STOCK OPTIONS AND REDEMPTION OF COMMON SHARES
The Corporation issued 333,743 common shares at an average price of $5.40 as a result of the exercise of stock options in 2023,
representing an aggregate amount of $2 million (in 2022 - $1 million for 355,686 common shares issued at an average price of $4.47).
The Corporation purchased no common shares for cancellation in 2023 (in 2022 - $9 million for 854,421 common shares for cancellation at
an average price of $11.07).
DIVIDENDS PAID TO NON-CONTROLLING INTERESTS AND ACQUISITION OF NON-CONTROLLING INTERESTS
Dividends paid to non-controlling interests in Greenpac and Falcon Packaging (distributor in the Specialty Products segment) amounted to
$36 million in 2023 ($13 million in 2022). In 2023, the Corporation also increased its participation in Falcon Packaging for a contribution of
$3 million ($3 million in 2022).
2023 Annual Report
29
CONSOLIDATED FINANCIAL POSITION
AS OF DECEMBER 31, 2023, 2022 AND 2021
The Corporation’s financial position and ratios are as follows:
(in millions of Canadian dollars, unless otherwise noted) (unaudited)
Cash and cash equivalents
Total assets
Total debt1
Net debt1
Equity attributable to Shareholders
Non-controlling interests
Total equity
Total equity and net debt1
Ratio of net debt/(total equity and net debt)1
Shareholders’ equity per common share (in Canadian dollars)
December 31,
2023
December 31,
2022
December 31,
2021
54
4,772
1,936
1,882
1,739
42
1,781
3,663
102
5,053
2,068
1,966
1,871
57
1,928
3,894
174
4,566
1,525
1,351
1,879
48
1,927
3,278
51.4%
$17.27
50.5%
$18.64
41.2%
$18.63
The following table reflects the Corporation’s secured debt rating/corporate rating/unsecured debt rating:
Credit rating (outlook)
December 31, 2022
December 31, 2023
MOODY’S
Baa3/Ba2/Ba3 (stable)
Baa3/Ba2/Ba3 (stable)
STANDARD & POOR’S
BB+/BB-/BB- (stable)
BB+/BB-/BB- (stable)
During the first quarter of 2022, STANDARD & POOR’S revised the Corporation’s outlook to stable from positive on cost headwinds and
reaffirmed its ’BB-’ rating.
NET DEBT1 RECONCILIATION
The variance in the net debt1 (total debt1 less cash and cash equivalents) in 2023 are shown below, with the applicable financial
ratios included:
(in millions of Canadian dollars)
376
5.2x
EBITDA (A)1 (last twelve months) ($M)
Net debt / EBITDA (A) ratio1
558
3.4x
1 Some information represents non-IFRS Accounting Standards financial measures, other financial measures or non-IFRS Accounting Standards ratios which are not standardized under IFRS
Accounting Standards and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS
Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
30
2023 Annual Report
1,966(397)(113)(39)(13)(7)50853501,882Net debt as of December 31, 2022Cash flowfrom oper.activitiesChanges in non-cashworking capital components F/X CAN$Investments and othersProceeds from disposals of property, plant and equipmentRight-of-use assets acquisitionsDividends paid &change in capitalstockPayments for property, plant and equipmentNet debt as of December 31, 2023
Liquidity available via the Corporation’s credit facilities, cash and cash equivalent balance and the anticipated cash flow generated by its
operating activities are expected to provide sufficient funds to meet our financial obligations and to fulfill our capital expenditure program
for the next twelve months. 2024 capital expenditures are forecasted to be approximately $175 million. As of December 31, 2023, the
Corporation had $485 million (net of letters of credit in the amount of $13 million) available on its $750 million credit facility (excluding the
credit facilities of our subsidiary Greenpac). Cash and cash equivalents as of December 31, 2023 are comprised as follows: $39 million in
the parent company and restricted subsidiaries (as defined in the credit agreement) and $15 million in unrestricted subsidiaries,
mainly Greenpac.
EMPLOYEE FUTURE BENEFITS
The Corporation’s employee future benefits assets and liabilities amounted to $189 million and $229 million, respectively, as of
December 31, 2023, including an amount of $65 million for post-employment benefits other than pension plans. The pension plans include
an amount of $26 million, which does not require any funding by the Corporation until it is paid to the employees. This amount is not
expected to increase, as the Corporation has reviewed its benefits program to phase out some of them for future retirees.
With regard to pension plans, the Corporation’s risk is limited, since all defined benefit pension plans are closed to new employees and
fewer than 5% of its active employees are subject to those pension plans, while the remaining employees are part of the Corporation’s
defined contribution plans, such as group RRSPs or 401(k).
The measurement date of the employee future benefits plans is December 31 of each year. An actuarial evaluation is performed at least
every three years. Based on their liabilities balances as of December 31, 2023, 94% of the Corporation’s plans had been evaluated on
December 31, 2022 (19% in 2021).
Considering the assumptions used and the asset ceiling limit, the surplus status for accounting purposes of its pension plans amounted to
$19 million as of December 31, 2023, compared to a surplus of $10 million in 2022. The 2023 pension plan expense was $3 million and the
cash outflow was $4 million. Due to the investment returns in 2023 and the change in the impact of the minimum funding requirement
(asset ceiling), the expected expense for these pension plans is $2 million in 2024. As for the cash flow requirements, these pension plans
are expected to require a net contribution of approximately $1 million in 2024. Finally, on a consolidated basis, the solvency ratio of the
Corporation’s funded pension plans has increased to approximately 138%.
COMMENTS ON THE FOURTH QUARTER OF 2023
SALES
Sales of $1,138 million increased by $3 million in the fourth quarter of 2023, compared to $1,135 million in the same period of 2022. Higher
volume in Packaging Products, a better sales mix and a favourable foreign exchange rate in all segments had a positive impact on sales.
These factors were partially offset by lower volume in the Tissue Papers segment and lower selling prices in all segments.
OPERATING LOSS AND EBITDA (A)1
The Corporation generated an operating loss of $(24) million in the fourth quarter of 2023, compared to an operating loss of $(20) million in
the same period of 2022. The Corporation recorded an EBITDA (A)1 of $122 million in the fourth quarter of 2023, compared to $116 million
in the same period of 2022, an increase of $6 million. The increase reflects the positive impact from lower production costs, energy, raw
materials and freight. Also, volume and mix contributed positively in the packaging segments as well as lower raw material costs, mainly in
the Tissue Papers segment. These positive impacts were partially offset by lower selling prices in all segments.
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2023 Annual Report
31
The main variances1 in sales, in operating loss and in EBITDA (A)2 in the fourth quarter of 2023, compared to the same period of 2022, are
shown below:
(in millions of Canadian dollars)
NET EARNINGS (LOSS)
For the three-month period ended December 31, 2023, the Corporation posted a net loss of $(57) million, or ($0.57) per common share,
compared to a net loss of $(27) million, or ($0.27) per common share, for the same period in 2022. On an adjusted basis2, the Corporation
generated net earnings of $5 million in the fourth quarter of 2023, or $0.05 per common share, compared to net earnings of $22 million, or
$0.22 per common share, in the same period in 2022.
1 For definitions of certain sales and EBITDA (A)2 variation categories, please refer to the "Financial Overview” section for more details.
2 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2023 Annual Report
32
SALES ($M)1,135571042(70)1,138Q4 2022SalesVolumeMixRecovery &Recycling and Other itemsF/XCANPriceQ4 2023SalesOPERATING LOSS AND EBITDA (A) ($M)(20)62741162516151363(2)(70)122(73)(73)(24)Q4 2022 Operating lossDepreciation and amortizationSpecificitemsQ4 2022EBITDA (A)Volume& MixProd.costsRawmaterialsEnergyFreightRecovery &RecyclingF/XCAN$PriceQ4 2023EBITDA (A)SpecificitemsDeprciationand amortizationQ4 2023 Operating loss
2024 FIRST QUARTER OUTLOOK
On a consolidated basis, we are forecasting that our results in the first quarter of 2024 will decrease sequentially. This is driven by lower
expected results in our Containerboard segment due to higher raw material costs, slightly lower average selling prices and lower
production levels to manage inventory following softer demand in the fourth quarter. Along with the strategic investments made in recent
years, these factors contributed to our decision to permanently remove higher-cost capacity from our manufacturing platform. We continue
to implement commercial strategies and cost optimization initiatives to drive profitability in this business, while increasing the agility and
market responsiveness of our platform. To this end, we are pleased with the ramp-up of our Bear Island facility, and the addition of this top
tier mill to our containerboard mill network augments its competitiveness from an operational, geographic positioning and cost perspective.
Results in the Tissue Papers segment are also expected to slightly decrease sequentially reflecting increases in raw material pricing and
normal seasonal softness at the beginning of the year, while results in Specialty Packaging are expected to improve thanks to efficiency
improvements, notably in the plastics sub-segment. More broadly, while our outlook for volume remains prudent for our packaging
businesses in the first quarter given economic uncertainty, benefits from ongoing profitability initiatives will continue to create value across
our businesses for Cascades, our customers and our shareholders.
CAPITAL STOCK INFORMATION
COMMON SHARE TRADING
Cascades’ stock is traded on the Toronto Stock Exchange (TSX) under the ticker symbol “CAS”. From January 1, 2023 to
December 31, 2023, Cascades’ common share price fluctuated between $8.61 and $12.98. During the same period, 37.9 million Cascades
common shares were traded on the Toronto Stock Exchange. On December 31, 2023, Cascades’ common shares closed at $12.73. This
compares with a closing price of $8.46 on the same closing day last year.
COMMON SHARES OUTSTANDING
As of December 31, 2023, the Corporation’s issued and outstanding capital stock consisted of 100,695,370 common shares (100,361,627
as of December 31, 2022) and 3,172,527 issued and outstanding stock options (2,794,344 as of December 31, 2022). In 2023, the
Corporation purchased no common shares for cancellation, while 333,743 stock options were exercised, 730,876 stock options
were granted and 18,950 stock options were forfeited.
As of February 21, 2024, issued and outstanding capital stock consisted of 100,707,211 common shares and 3,160,686 stock options.
NORMAL COURSE ISSUER BID PROGRAM
The Corporation did not renew its normal course issuer bid program in 2023.
The normal course issuer bid announced on March 17, 2022 enabled the Corporation to purchase for cancellation up to
2,015,053 common shares between March 19, 2022 and March 18, 2023. During that period, the Corporation purchased 460,400 common
shares for cancellation at an average price of $9.38 for $4 million.
DIVIDEND POLICY
On February 21, 2024, Cascades’ Board of Directors declared a quarterly dividend of $0.12 per common share to be paid on
March 21, 2024 to shareholders of record at the close of business on March 7, 2024. On February 21, 2024, dividend yield was 3.2%.
TSX Ticker: CAS
Common shares outstanding (in millions)1
Closing price (in Canadian dollars)1
Average daily volume2
Dividend yield1
Q1
Q2
Q3
2021
Q4
Q1
Q2
Q3
2022
Q4
Q1
Q2
Q3
2023
Q4
102.3
102.3
100.9
100.9
100.5
100.8
100.4
100.4
100.4
100.7
100.7
100.7
$15.73
$15.26
$15.67
$13.97
$12.82
$10.13
$8.04
$8.46
$10.99
$11.69
$12.27
$12.73
342,616
433,394
278,277
272,438
250,944
299,332
293,260
259,071
225,154
139,265
121,774
119,877
2.0%
2.1%
3.1%
3.4%
3.7%
4.7%
6.0%
5.7%
4.4%
4.1%
3.9%
3.8%
1 On the last day of the quarter
2 Average daily volume on the Toronto Stock Exchange
2023 Annual Report
33
CASCADES’ COMMON SHARE PRICE FOR THE PERIOD FROM JANUARY 1, 2021 TO DECEMBER 31, 2023
(in Canadian dollars)
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
The Corporation’s principal contractual obligations and commercial commitments relate to outstanding debt, capital expenditures, raw
materials and supplies, intangible assets, service agreements, leases and obligations for its pension and post-employment benefit plans.
The following table summarizes these obligations as of December 31, 2023:
CONTRACTUAL OBLIGATIONS
Payment due by period (in millions of Canadian dollars) (unaudited)
Long-term debt, including capital and interest
Commitments for capital expenditures, raw materials and supplies
and intangible assets
Service agreements and exempted leases
Leases not yet commenced but already signed
Pension plans and other post-employment benefits1
Total contractual obligations
TOTAL
2,375
61
58
2
515
3,011
LESS THAN
ONE YEAR
179
48
30
—
12
269
BETWEEN ONE
AND FIVE YEARS
2,132
13
27
2
68
2,242
OVER FIVE YEARS
64
—
1
—
435
500
1 These amounts represent all the benefits payable to current members during the following years and thereafter without limitations. The majority of benefit payments are payable from trustee-
administered funds. The difference will come from future investment returns expected on plan assets and future contributions that will be made by the Corporation for services rendered after
December 31, 2023.
TRANSACTIONS WITH RELATED PARTIES
The Corporation has also entered into various agreements with its joint-venture partners, significantly influenced companies and entities
that are affiliated with one or more of its directors for the supply of raw materials, including recycled paper, virgin pulp and energy, as well
as the supply of unconverted and converted products and other agreements entered into in the normal course of business. Aggregate
sales by the Corporation to its joint-venture partners and other affiliates totaled $317 million and $367 million for 2023 and 2022,
respectively. Aggregate purchases by the Corporation from its joint-venture partners and other affiliates came to $161 million and
$154 million for 2023 and 2022, respectively.
34
2023 Annual Report
Q121Q221Q321Q421Q122Q222Q322Q422Q123Q223Q323Q423$8.00$10.00$12.00$14.00$16.00$18.00
CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
A. NEW IFRS ACCOUNTING STANDARDS ADOPTED
Disclosure of Accounting Policy Information - Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the International Accounting Standards Board (IASB®) amended IAS 1 Presentation of Financial Statement and IFRS
Practice Statement 2 Making Materiality Judgements to require the Corporation to disclose its material accounting policies rather than its
significant accounting policies.
implementation of
The
Financial Statements.
these standard amendments resulted
in no significant
impact of
the Corporation’s Consolidated
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts was issued in May 2017 as replacement for IFRS 4 Insurance Contracts. The amendments deferred the
application date of IFRS 17 to January 1, 2023. IFRS 17 Insurance Contracts, applies to insurance contracts regardless of the entity that
issues them and so it does not apply only to traditional insurance entities. IFRS 17 Insurance Contracts defines an insurance contract as
an agreement where one party, the insurer, accepts significant insurance risk from another party, the policy holder, by agreeing to
compensate the policy holder if a specified uncertain future event adversely affects the policy holder.
The standard became effective on January 1, 2023 and had no impact on the Corporation’s Consolidated Financial Statements.
International Tax Reform—Pillar Two Model Rules, amendments to IAS 12 Income Taxes
On May 23, 2023, the IASB published an amendment to IAS 12 to introduce a mandatory temporary exemption to the accounting for
deferred taxes arising from jurisdictional tax law enacted or substantively enacted to implement the Pillar Two Model Rules that were
published by the Organisation for Economic Co-operation and Development (OECD) and new disclosure requirements for affected entities.
The Global Anti-Base Erosion Rules (GloBE) are a key component of the Pillar Two Model Rules and ensure large multinational
enterprises pay a minimum level of tax on the income arising in each of the jurisdictions where they operate. The impact on the
Corporation of the Pillar Two Model rules, including GloBE, is under assessment and a reasonable estimate shall be available once
applicable jurisdictional tax law is substantively enacted.
B. RECENT IFRS ACCOUNTING STANDARDS NOT YET ADOPTED
IAS 7 and IFRS 7 Amendments Relating to Supplier Finance Arrangements
IAS 7 and IFRS 7 Amendments Relating to Supplier Finance Arrangements require disclosures to enhance the transparency of supplier
finance arrangements and their effects on an entity’s liabilities, cash flows and exposure to liquidity risk. The Corporation has an
arrangement that is subject to the new requirements and is currently evaluating the impact on the disclosures in the Consolidated
Financial Statements.
Amendment to IAS 1 – Non-current liabilities with covenants
These amendments clarify how conditions with which an entity must comply within twelve months after the reporting period affect the
classification of a liability. The Corporation has covenants that are subject to this amendment and evaluates that there is no impact on the
disclosures in the Consolidated Financial Statements as of December 31, 2023.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with IFRS Accounting Standards requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial statements and disclosure of contingencies at the balance sheet date,
and the reported amounts of revenues and expenses during the reporting period. On a regular basis and with the information available,
Management reviews its estimates, including those related to environmental costs, employee future benefits, collectability of accounts
receivable, financial instruments, contingencies, income taxes, useful life and residual value of property, plant and equipment and
impairment of property, plant and equipment and intangible assets. Actual results could differ from those estimates. When adjustments
become necessary, they are reported in earnings in the period in which they occur.
2023 Annual Report
35
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
A.
In determining the recoverable amount of an asset or CGU, based on the market approach, Management uses the value of comparable
assets on the market. In determining the recoverable amount of an asset or CGU, based on the income approach, Management uses
several key assumptions, including estimated shipment levels, foreign exchange rates, revenue growth rates, adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA (A)) margins1, discount rates, capitalization rate and capital expenditures.
The Corporation believes its assumptions are reasonable. Based on available information at the assessment date, however, these
assumptions involve a high degree of judgment and complexity. Management believes that the following assumptions are the most
susceptible to change and therefore could impact the valuation of the assets in the next year.
DESCRIPTION OF SIGNIFICANT IMPAIRMENT TESTING ASSUMPTIONS
(see Note 22 of the 2023 Audited Consolidated Financial Statements)
REVENUES, ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA (A)) MARGINS1,
CASH FLOWS AND GROWTH RATES
The assumptions used for revenues were based on the segment’s internal budget and were projected for a period of five years and a long-
term growth rate of 3% was applied thereafter. The assumption used for EBITDA (A) margin1 was based on the segment’s historical
performance. In arriving at its forecasts, the Corporation considers past experience, economic trends such as gross domestic product
growth and inflation, as well as industry and market trends.
DISCOUNT RATES
The Corporation assumed a discount rate in order to calculate the present value of its projected cash flows. The discount rate represents a
weighted average cost of capital (WACC) for comparable companies operating in similar industries of the applicable CGU, group of CGUs
or reportable segment based on publicly available information.
CAPITALIZATION RATES
The Corporation assumed a capitalization rate in order to calculate the present value of its property cash flows. The capitalization rate
represents a real estate valuation measure used to compare different real estate investments. The capitalization rate is calculated as the
ratio between the annual rental income produced by a real estate asset to its current market value.
FOREIGN EXCHANGE RATES
When estimating the fair value less cost of disposal, foreign exchange rates are determined using the financial institution’s average
forecast for the first two years of forecasting. For the following three years, the Corporation uses the last five years’ historical average of
the foreign exchange rate. Terminal rate is based on historical data of the last ten years and adjusted to reflect Management’s
best estimate of market participants expectations.
SHIPMENTS
The assumptions used are based on the Corporation’s internal budget for the next year and are usually held constant for the established
capacity, for new capacity the ramp up is considered over the forecast period. In arriving at its budgeted shipments, the Corporation
considers past experience, economic, industry and market trends.
Considering the sensitivity of the key assumptions used, there is measurement uncertainty since adverse changes in one or a combination
of the Corporation’s key assumptions could cause a significant change in the carrying amounts of these assets.
INCOME TAXES
B.
The Corporation is required to estimate the income taxes in each jurisdiction in which it operates. This includes estimating a value for
existing tax losses based on the Corporation’s assessment of its ability to use them against future taxable income before they expire. If the
Corporation’s assessment of its ability to use the tax losses proves inaccurate in the future, more or less of the tax losses might be
recognized as assets, which would increase or decrease the income tax expense and, consequently, affect the Corporation’s results in the
relevant year.
C. EMPLOYEE BENEFITS
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of
high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity
approximating the terms of the related pension liability.
The cost of pensions and other retirement benefits earned by employees is determined by actuaries using the projected benefit method
pro-rated on years of service and Management’s best estimate of expected plan investment performance, salary escalations, retirement
ages of employees and expected health care costs. The accrued benefit obligation is evaluated using the market interest rate at the
evaluation date. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. All assumptions are
reviewed annually.
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
36
2023 Annual Report
CONTROLS AND PROCEDURES
EVALUATION OF THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER
FINANCIAL REPORTING
The Corporation’s President and Chief Executive Officer and its Vice-President and Chief Financial Officer have designed, or caused to be
designed under their supervision, disclosure controls and procedures (DC&P) and internal controls over financial reporting (ICFR), as
defined in National Instrument 52-109, “Certification of Disclosure in Issuer’s Annual and Interim Filings”.
The purpose of internal controls over financial reporting (ICFR) is to provide reasonable assurance regarding the reliability of the
Corporation’s financial reporting and the preparation of financial statements in accordance with IFRS Accounting Standards. The President
and Chief Executive Officer and the Vice-President and Chief Financial Officer certify disclosures in annual and interim filings under
Regulation 52-109 using the internal control framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
During the year ended December 31, 2023, there were no changes in the Corporation’s ICFR that materially affected or are reasonably
likely to materially affect the Corporation’s ICFR.
RISK FACTORS
As part of its ongoing business operations, the Corporation is exposed to certain market risks, including risks ensuing from changes in
selling prices for its principal products, costs of raw materials, interest rates and foreign currency exchange rates, all of which impact the
Corporation’s financial position, operating results and cash flows. The Corporation manages its exposure to these and other market risks
through regular operating and financing activities and, on a limited basis, through the use of derivative financial instruments. We use these
derivative financial instruments as risk management tools, not for speculative investment purposes. The following is a discussion of key
areas of business risks and uncertainties that we have identified and our mitigating strategies. The risk areas below are listed in no
particular order, as risks are evaluated based on both severity and probability. Readers are cautioned that the following is not an
exhaustive list of all the risks we are exposed to, nor will our mitigation strategies eliminate all risks listed.
Risks relating to the Corporation’s business
Macroeconomic risks
In the last years, economies and markets have faced the phenomena of inflation, the control of which is the focus of all regulatory
institutions around the world. Towards the end of the year 2023 the inflation came down and the raises of the benchmark interest rate are
halted, but the lag effect impact is still of concern. Inflation represents a significant risk to macroeconomic stability, it results in rising energy
and commodity costs, global equity and capital markets may experience significant volatility and weakness. The market for our securities
proved resilient, however highly volatile. Our operations are subject to significant cost pressures and increased costs of labour and our
employee compensation expenses. If our costs continue to be subject to significant inflationary pressures, we may not be able to fully
offset such higher costs through price increases and there is no assurance that our revenues will increase at the same rate to maintain the
same level of profitability. Our clients may have difficulty and may delay their payment for the acquired goods.
Although Cascades does not have direct activities in areas of armed conflicts around the world, a prolonged armed conflict between
countries or an expansion of an armed conflict to other countries could have a materially adverse effect on world economies and on the
Corporation in a variety of ways, including: (i) a general decrease in consumer spending from lower confidence levels; (ii) severe price
inflation; (iii) disruptions in capital and financial markets; (iv) disruptions in supply chain; and (v) an increase in cyber security risk.
If the Corporation does not successfully manage the demand, supply and operational challenges associated with the effects of
the pandemic or other similar widespread public health concerns, our results could be negatively impacted.
The Corporation’s business may be negatively impacted by the fear of exposure to, actual effects of, or government response to, the
pandemic, such as travel restrictions, business shutdowns or limitations, shelter-in-place orders, recommendations or mandates from
governmental authorities to avoid large gatherings or to self-quarantine as a result of the pandemic, or other shutdowns and restrictions.
These impacts include, but are not limited to:
•
Significant reductions in demand or significant volatility in demand for one or more of the Corporation’s products, which may be
caused by, among other things: quarantine or other travel restrictions, financial hardship, shifts in demand away from one or
more of the Corporation’s products, including our Away-from-Home products or our industrial packaging products, or consumer
stockpiling activity which may result in a decrease in demand for our products in one period as a result of excessive purchases of
the Corporation’s products in another period. If prolonged, these events further increase the difficulty of planning for operations
and may adversely impact the Corporation’s results;
2023 Annual Report
37
•
•
•
•
Inability to meet the Corporation’s customers’ needs and achieve cost targets due to disruptions in the Corporation’s
manufacturing and supply arrangements caused by constrained workforce capacity or the loss or disruption of other significant
manufacturing or supply materials such as raw materials or other finished product components, transportation, or other
manufacturing and distribution capability. While the Corporation has not been required to do so to date, in the future the
Corporation may be required to limit or shutdown our manufacturing facilities to comply with any future, more stringent
government mandates, which may adversely impact the Corporation’s results;
Failure of third parties on which the Corporation relies, including its suppliers, contract manufacturers, distributors and other
contractors, to meet their obligations to the Corporation, or significant disruptions in their ability to do so, which may be caused
by their own financial or operational difficulties or their inability to deliver goods or services based on governmental restrictions or
other mandates and may adversely impact the Corporation’s operations;
Increased expenses related to the implementation of procedures to comply with governmental regulations and recommendations
and maintain the health and safety of the Corporation’s employees such as remote working (which, in turn, creates additional
cyber security risks), health screenings and enhanced cleaning and sanitation protocols. The Corporation could continue to incur
costs related to its mitigation efforts and it may have to enact additional, more expensive measures to continue to comply with
governmental regulations and recommendations, which may become more stringent in the future, in order to ensure the health
and safety of its employees; or
Government actions in one or more of the jurisdictions in which Cascades operates, resulting in Cascades no longer having the
benefits of being deemed an “essential business” (or other government actions undertaken to restrict the business activities of
businesses deemed essential) and, as a result, forcing the Corporation to scale back its operations or halt them entirely, or
government action resulting in any of our suppliers, contract manufacturers, distributors and other contractors no longer being
deemed essential and thus impacting the Corporation’s ability to deliver its products and services to its customers, which may
adversely impact its operations and results.
Despite the Corporation’s efforts to manage and remedy these impacts to the Corporation, their ultimate impact also depends on factors
beyond its control, including the duration and severity of the pandemic, as well as third-party actions taken to contain its spread and
mitigate its public health effects. The adverse effects described above may also apply to other epidemics, pandemics and other public
health emergencies.
To the extent the pandemic adversely affects the Corporation’s business, operations, financial condition and operating results, it may also
have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to the Corporation’s
high level of indebtedness, its need to generate sufficient cash flows to service its indebtedness, and its ability to comply with the
covenants contained in the agreements that govern its indebtedness.
The markets for some of the Corporation’s products tend to be cyclical in nature and prices for some of its products, as well as
raw material and energy costs, may fluctuate significantly, which can adversely affect its business, operating results, profitability
and financial position.
The markets for some of the Corporation’s products, particularly containerboard, are cyclical. As a result, prices for these types of products
and for its two principal raw materials, recycled paper and virgin fibre, have fluctuated significantly in the past and will likely continue to
fluctuate significantly in the future, principally due to market imbalances between supply and demand. Demand is heavily influenced by the
strength of the global economy and the countries or regions in which Cascades does business, particularly Canada and the United States,
the Corporation’s two primary markets. Demand is also influenced by fluctuations in inventory levels held by customers and consumer
preferences. Supply depends primarily on industry capacity and capacity utilization rates. In periods of economic weakness, reduced
spending by consumers and businesses results in decreased demand, which can potentially cause downward price pressure. Industry
participants may also, at times, add new capacity or increase capacity utilization rates, potentially causing supply to exceed demand and
exerting downward price pressure. In addition, in the event of depressed market prices for recycled paper, the availability of recycled paper
may decrease.
Depending on market conditions and related demand, Cascades may have to take market-related downtime. In addition, the Corporation
may not be able to maintain current prices or implement additional price increases in the future. If Cascades is unable to do so, its
revenues, profitability and cash flows could be adversely affected. In addition, other participants may introduce new capacity or increase
capacity utilization rates, which could also adversely affect the Corporation’s business, operating results and financial position.
Prices for recycled and virgin fibre also fluctuate considerably. The costs of these materials present a potential risk to the Corporation’s
profit margins in the event that it is unable to pass along price increases to its customers on a timely basis. Although changes in the price
of recycled fibre generally correlate with changes in the price of products made from recycled paper, this may not always be the case. If
Cascades were unable to implement increases in the selling prices for its products to compensate for increases in the price of recycled or
virgin fibre, the Corporation’s profitability and cash flows would be adversely affected.
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2023 Annual Report
In addition, Cascades uses energy, mainly natural gas and fuel oil, to generate steam, which it then uses in the production process and to
operate machinery. Energy prices, particularly for natural gas and fuel oil, have continued to remain very volatile. Cascades continues to
evaluate its energy costs and consider ways to factor energy costs into its pricing. However, should energy prices increase, the
Corporation’s production costs, competitive position and operating results would be adversely affected. A substantial increase in energy
costs would adversely affect the Corporation’s operating results and could have broader market implications that could further adversely
affect the Corporation’s business or financial results.
Cascades faces significant competition and some of its competitors may have greater cost advantages, be able to achieve
greater economies of scale or be able to better withstand periods of declining prices and adverse operating conditions, which
could negatively affect the Corporation’s market share and profitability.
The markets for the Corporation’s products are highly competitive. In some of the markets in which Cascades competes, such as tissue
papers, it competes with a small number of other producers. In some businesses, such as the containerboard industry, competition tends
to be global. In others, such as the tissue industry, competition tends to be regional. In the Corporation’s packaging products segment, it
also faces competition from alternative packaging materials, such as plastic and Styrofoam, which can lead to excess capacity, decreased
demand and pricing pressures.
Competition in the Corporation’s markets is primarily based on price, as well as customer service and the quality, breadth and performance
characteristics of its products. The Corporation’s ability to compete successfully depends on a variety of factors, including:
•
•
•
the Corporation’s ability to maintain high plant efficiencies, operating rates and lower manufacturing costs;
the availability, quality and cost of raw materials, particularly recycled and virgin fibre, as well as labour; and
the cost of energy.
Some of the Corporation’s competitors may, at times, have lower fibre, energy and labour costs and less restrictive environmental and
governmental regulations to comply with than Cascades. For example, fully integrated manufacturers or those whose requirements for pulp
or other fibre are met fully from their internal sources, may have some competitive advantages over manufacturers that are not fully
integrated, such as Cascades, in periods of relatively high raw material pricing, in that the former are able to ensure a steady source of
these raw materials at costs that may be lower than prices in the prevailing market. In contrast, competitors that are less integrated than
Cascades may have cost advantages in periods of relatively low pulp or fibre prices because they may be able to purchase pulp or fibre at
prices lower than the costs the Corporation incurs in the production process. Other competitors may be larger in size or scope than
Cascades, which may allow them to achieve greater economies of scale on a global basis or to better withstand periods of declining prices
and adverse operating conditions.
In addition, there has been an increasing trend among the Corporation’s customers towards consolidation. With fewer customers in the
market for the Corporation’s products, the strength of its negotiating position with these customers could be weakened, which could have
an adverse effect on its pricing, margins and profitability.
Because of the Corporation’s international operations, it faces political, social and exchange rate risks that can negatively affect
its supply chain, manufacturing capabilities, distribution activities, operating results, net earnings and financial condition.
The Corporation’s international operations present it with a number of risks and challenges, including:
•
•
•
•
effective marketing of its products in other countries;
tariffs and other trade barriers;
different regulatory schemes and political environments applicable to the Corporation’s operations in areas such as
environmental and health and safety compliance; and
exposure to health epidemics and pandemics and other highly communicable diseases or viruses.
Cascades has customers and operations located outside Canada. In 2023, approximately 53% of the Corporation’s consolidated sales
were in the United States. In 2023, 21% of sales from Canadian operations were made to the United States. In 2023, 6% of sales from
USA operations were made to Canada.
In addition, the Corporation’s consolidated financial statements are reported in Canadian dollars, while a portion of its sales is made in
other currencies, primarily the U.S. dollar. A decrease of the Canadian dollar against the U.S. dollar could adversely affect the
Corporation’s operating results and financial condition. As of December 31, 2023, the Corporation had, on a consolidated basis, total U.S.
dollar-denominated debt of US$1,263 million.
2023 Annual Report
39
Moreover, in some cases, the currency of the Corporation’s sales does not match the currency in which it incurs costs, which can
negatively affect the Corporation’s profitability. Fluctuations in exchange rates can also affect the relative competitive position of a
particular facility where the facility faces competition from non-local producers, as well as the Corporation’s ability to successfully market its
products in export markets. As a result, if the Canadian dollar were to remain permanently strong compared to the US dollar, it could affect
the profitability of the Corporation’s facilities, which could lead Cascades to shutdown facilities either temporarily or permanently, all of
which could adversely affect its business or financial results.
The Corporation uses various foreign exchange forward contracts and related currency option instruments to anticipate sales net of
purchases, interest expenses and debt repayment. These hedging instruments may not be effective in offsetting risks, may generate
losses or otherwise may adversely affect the Corporation’s financial results as compared to what its results would have been had the
hedges not been implemented.
The Corporation’s operations are subject to comprehensive environmental regulations and involve expenditures which may be
material in relation to its operating cash flow.
The Corporation is subject to environmental laws and regulations imposed by the various governments and regulatory authorities in all
countries in which it operates. These environmental laws and regulations impose stringent standards on the Corporation regarding, among
other things:
•
•
•
•
•
air emissions;
water discharges;
use and handling of hazardous materials;
use, handling and disposal of waste; and
remediation of environmental contamination.
The Corporation is also subject to the U.S. Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”),
as well as to other applicable legislation in the United States and Canada that holds companies accountable for the investigation and
remediation of hazardous substances. The Corporation, for some of our Québec plants, is also subject to an emissions market aimed at
reducing worldwide CO2 emissions. Each unit has been allocated emission rights (“CO2 quota”). On a calendar year basis, the Corporation
must buy the necessary credits to cover its deficit on the open market if its emissions are higher than quota.
The Corporation’s failure to comply with applicable environmental laws, regulations or permit requirements may result in civil or criminal
fines, penalties or enforcement actions. These may include regulatory or judicial orders enjoining or curtailing operations or requiring
corrective measures, the installation of pollution control equipment or remedial actions, any of which could entail significant expenditures. It
is difficult to predict the future development of such laws and regulations or their impact on future earnings and operations, but these laws
and regulations may require capital expenditures to ensure compliance. In addition, amendments to or more stringent implementation of,
current laws and regulations governing the Corporation’s operations could have a material adverse effect on its business, operating results
or financial position. Furthermore, although Cascades generally tries to plan for capital expenditures relating to environmental and health
and safety compliance on an annual basis, actual capital expenditures may exceed those estimates. In such an event, Cascades may be
forced to curtail other capital expenditures or other activities. In addition, the enforcement of existing environmental laws and regulations
has become increasingly strict. The Corporation may discover currently unknown environmental problems or conditions in relation to its
past or present operations or may face unforeseen environmental liabilities in the future.
These conditions and liabilities could have the following effects:
•
•
require site remediation or other costs to maintain compliance or correct violations of environmental laws and regulations; or
result in governmental or private claims for damage to persons, property or the environment.
Either of these possibilities could have a material adverse effect on the Corporation’s financial condition or operating results.
Cascades may be subject to strict liability and, under specific circumstances, joint and several (solidary) liability for the investigation and
remediation of soil, surface and groundwater contamination, including contamination caused by other parties on properties that it owns or
operates and on properties where the Corporation or its predecessors have arranged for the disposal of regulated materials. As a result,
the Corporation is involved from time to time in administrative and judicial proceedings and inquiries relating to environmental matters. The
Corporation may become involved in additional proceedings in the future, the total amount of future costs and other environmental
liabilities of which could be material.
To date, the Corporation is in compliance, in all material respects, with all applicable environmental legislation or regulations. However, the
Corporation expects to incur ongoing capital and operating expenses in order to achieve and maintain compliance with applicable
environmental requirements.
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2023 Annual Report
Climate change could negatively affect Cascades’ business and operations.
There is concern that carbon dioxide and other greenhouse gases in the atmosphere have an adverse impact on global temperatures,
weather patterns and the frequency and severity of extreme weather and natural disasters. The Corporation operates plants and delivers
products to clients in locations that may be subject to climate stress events such as sea-level rise and increased storm frequency or
intensity. Caused by climate change or not, the occurrence of one or more natural disasters or extreme weather conditions, such as a
hurricane, tornado, earthquake, fire or flooding, may disrupt the productivity of the Corporation’s facilities or the operation of its supply
chain and unfavourably impact the demand for or its consumers’ ability to purchase, its products. Further, climate changes could require
higher remediation and insurance costs for the Corporation.
Concern over climate change may result in new or increased regional, federal and/or global legal and regulatory requirements to reduce or
mitigate the effects of greenhouse gases or to limit or impose additional costs on commercial water use due to local water scarcity
concerns. In the event that such regulation is more stringent than current regulatory obligations or the measures that the Corporation is
currently undertaking to monitor and improve its energy efficiency and water conservation, the Corporation may experience disruptions in,
or significant increases in its costs of, operation and delivery and the Corporation may be required to make additional investments in
facilities and equipment or relocate its facilities. In particular, increasing regulation of fuel emissions could substantially increase the cost of
energy, including fuel, required to operate the Corporation’s facilities or transport and distribute its products, thereby substantially
increasing the distribution and supply chain costs associated with its products. As a result, the effects of climate change could negatively
affect the Corporation’s business and operations.
There is also increased focus, including by governmental and non-governmental organizations, investors, customers and consumers on
environmental sustainability matters, including deforestation, land use, climate impact, water use and recyclability or recoverability of
packaging, including plastic. The Corporation’s reputation could be damaged if it or others in its industry do not act, or are perceived not to
act, responsibly with respect to the Corporation’s impact on the environment.
Cascades may be subject to losses that might not be covered in whole or in part by its insurance coverage.
Cascades carries comprehensive liability, fire and extended coverage insurance on all of its facilities, with policy specifications and insured
limits customarily carried in its industry for similar properties. In addition, some types of losses, such as losses resulting from wars, acts of
terrorism or natural disasters, are generally not insured because they are either uninsurable or not economically practical. Moreover,
insurers have recently become more reluctant to insure against these types of events. Should an uninsured loss or a loss in excess of
insured limits occur, Cascades could lose capital invested in that property, as well as the anticipated future revenues derived from the
manufacturing activities conducted on that property, while remaining obligated for any mortgage indebtedness or other financial obligations
related to the property. Any such loss could adversely affect its business, operating results or financial condition.
Labour disputes or shortages could have a material adverse effect on the Corporation’s cost structure and ability to run its mills
and plants as it depends on attracting and retaining qualified personnel.
As of December 31, 2023, the Corporation had approximately 10,000 employees, with approximately 30% of its workforce unionized. The
Corporation’s inability to negotiate acceptable contracts with its unions upon expiration of an existing contract could result in strikes or work
stoppages by the affected workers and increased operating costs as a result of higher wages or benefits paid to union members. If the
unionized workers were to engage in a strike or another form of work stoppage, Cascades could experience a significant disruption in
operations or higher labour costs, which could have a material adverse effect on its business, financial condition, operating results and
cash flows. Of the 28 collective bargaining agreements, 3 have expired and are currently under negotiation, 7 will expire in 2024 and 4 will
expire in 2025.
The Corporation generally begins the negotiation process several months before agreements are due to expire and is currently in the
process of negotiating with the unions where the agreements have expired or will soon expire. However, Cascades may not be successful
in negotiating new agreements on satisfactory terms, if at all.
Cascades’s success depends in part upon its ability to continue to attract and retain qualified management, regulatory, technical, and sales
and marketing executives and personnel in various geographical locations. The failure to attract, integrate, motivate and retain skilled and
qualified personnel could have a material adverse effect on the business. The Corporation competes for such personnel against numerous
companies. There can be no assurance that it will be successful in attracting or retaining such personnel and the failure to do so could
have a material adverse effect on our financial condition and results of operations.
2023 Annual Report
41
Cascades may make investments in entities that it does not fully control and may not receive dividends or returns from those
investments in a timely fashion or at all.
Cascades has established joint ventures, made investments in associates and acquired significant participation in subsidiaries in order to
increase its vertical integration, enhance customer service and increase efficiency in its marketing and distribution in the United States and
other markets. The Corporation’s principal joint ventures, associates and significant participation in subsidiaries are:
•
•
two 50%-owned joint ventures with Sonoco Products Corporation, of which one is in Canada (two plants) and one is in the
United States (two plants), that produce specialty paper packaging products such as headers, rolls and wrappers; and
a 79.90%-owned subsidiary, Greenpac Holding LLC, a North American manufacturer of linerboard. The percentage including
indirect ownership stands at 86.35% for consolidation and accounting purposes (see Note 7 of the 2023 Audited Consolidated
Financial Statements for more details).
Apart from Greenpac Holding LLC, Cascades does not have control over these entities. The Corporation’s inability to control entities in
which it invests may affect its ability to receive distributions from these entities or to fully implement its business plan. The incurrence of
debt or entrance into other agreements by an entity not under the Corporation’s control may result in restrictions or prohibitions on that
entity’s ability to pay distributions to the Corporation. Even where these entities are not restricted by contract or by law from paying
dividends or making distributions to Cascades, the Corporation may not be able to influence the payout or timing of these dividends or
distributions. In addition, if any of the other investors in a non-controlled entity fail to observe their commitments, the entity may not be able
to operate according to its business plan or Cascades may be required to increase its level of commitment. If any of these events were to
transpire, the Corporation’s business, operating results, financial condition and ability to make payments on indebtedness could be
adversely affected.
In addition, the Corporation has entered into various shareholder agreements relating to its joint ventures and equity investments. Some of
these agreements contain “shotgun” provisions, which provide that if one Shareholder offers to buy all the shares owned by the other
parties to the agreement, the other parties must either accept the offer or purchase all the shares owned by the offering Shareholder at the
same price and conditions. Some of the agreements also stipulate that, in the event that a Shareholder is subject to bankruptcy
proceedings or otherwise defaults on any indebtedness, the non-defaulting parties to that agreement are entitled to invoke the “shotgun”
provision or sell their shares to a third party. The Corporation’s ability to purchase the other Shareholders’ interests in these joint ventures if
they were to exercise these “shotgun” provisions could be limited by the covenants in the Corporation’s credit facility and the indenture.
In addition, Cascades may not have sufficient funds to accept the offer or the ability to raise adequate financing should the need arise,
which could result in the Corporation having to sell its interests in these entities or otherwise alter its business plan.
Acquisitions have been and are expected to continue to be a substantial part of the Corporation’s growth strategy, which could
expose the Corporation to difficulties in integrating the acquired operation, diversion of management time and resources, and
unforeseen liabilities, among other business risks.
Acquisitions have been a significant part of the Corporation’s growth strategy. Cascades expects to continue to selectively seek strategic
acquisitions in the future. The Corporation’s ability to consummate and to effectively integrate any future acquisitions on terms that are
favourable to it may be limited by the number of attractive acquisition targets, internal demands on its resources and, to the extent
necessary, its ability to obtain financing on satisfactory terms, if at all. Acquisitions may expose the Corporation to additional
risks, including:
•
•
•
•
•
•
difficulties in integrating and managing newly acquired operations and improving their operating efficiency;
difficulties in maintaining uniform standards, controls, procedures and policies across all of the Corporation’s businesses;
entry into markets in which Cascades has little or no direct prior experience;
the Corporation’s ability to retain key employees of the acquired company;
disruptions to the Corporation’s ongoing business; and
diversion of management time and resources.
In addition, future acquisitions could result in Cascades’ incurring additional debt to finance the acquisition or possibly assuming additional
debt as part of it, as well as costs, contingent liabilities and amortization expenses. The Corporation may also incur costs and divert
Management’s attention for potential acquisitions that are never consummated. For acquisitions Cascades does consummate, expected
synergies may not materialize. The Corporation’s failure to effectively address any of these issues could adversely affect its operating
results, financial condition and ability to service debt, including its outstanding senior notes.
42
2023 Annual Report
Although Cascades performs a due diligence investigation of the businesses or assets that it acquires and anticipates continuing to do so
for future acquisitions, the acquired business or assets may have liabilities that Cascades fails or is unable to uncover during its due
diligence investigation and for which the Corporation, as a successor owner, may be responsible. When feasible, the Corporation seeks to
minimize the impact of these types of potential liabilities by obtaining indemnities and warranties from the seller, which may in some
instances be supported by deferring payment of a portion of the purchase price. However, these indemnities and warranties, if obtained,
may not fully cover the liabilities because of their limited scope, amount or duration, or the financial resources of the indemnitor or
warrantor, or for other reasons.
The Corporation undertakes impairment tests, which could result in a write-down of the value of assets and, as a result, have a
material adverse effect.
IFRS Accounting Standards requires that Cascades undertakes impairment tests of long-lived assets and goodwill to determine whether a
write-down of such assets is required. A write-down of asset value as a result of impairment tests would result in a non-cash charge that
reduces the Corporation’s reported earnings. Furthermore, a reduction in the Corporation’s asset value could have a material adverse
effect on the Corporation’s compliance with total debt-to-capitalization tests under its current credit facilities and, as a result, limit its ability
to access further debt capital.
Messrs. Laurent and Alain Lemaire and their families (the “Lemaire”) as well as Mr. Bernard Lemaire’s family collectively own a
significant percentage of the common shares.
The Lemaire collectively own a significant percentage of the common shares of the Corporation and there may be situations in which their
interests and the interests of other holders of shares do not align. There is no formal agreement among the Lemaire with respect to the
voting of their common shares and, over the past few years, the control of their shares has become more dispersed within their respective
families. However, because the Corporation’s remaining shares are widely held, the Lemaire may still effectively be able to influence:
•
•
•
the election of all of the Corporation’s directors and, as a result, control matters requiring board approval;
matters submitted to a shareholder vote, including mergers, acquisitions and consolidations with third parties and the sale of all
or substantially all of the Corporation’s assets; and
the Corporation’s business direction and policies.
If Cascades is not successful in retaining or replacing its key personnel, including its President and Chief Executive Officer, its
Vice-President and Chief Financial Officer, its Chief of Strategy and Legal Affairs, and its Executive Chairman of the Board and
co-founder Alain Lemaire, the Corporation’s business, financial condition or operating results could be adversely affected.
Although Cascades believes that its key personnel will remain active in the business and that Cascades will continue to be able to attract
and retain other talented personnel and replace key personnel should the need arise, competition in recruiting replacement personnel
could be significant. Cascades does not carry key-man insurance on the members of its senior management.
Alain Lemaire announced that he would be stepping down as Executive Chairman of the Board as of May 9, 2024. The Board has
designated Patrick Lemaire as his replacement and is confident that he is a worthy successor and possesses all the qualities required to
successfully take on the role of Chairman. In addition, Alain Lemaire will continue to sit on the Board as a director and will thus be able to
continue to share his knowledge and expertise with the Board and Management.
Cascades’ business activities, intellectual property, operating results and financial position could suffer if Cascades is unable to
protect its information systems against, or effectively respond to, cyber-attacks or other cyber incidents.
The Corporation relies on information technology, other computer resources and its employees to process, transmit and store electronic
data in its daily business activities and to carry out important operational and marketing activities. Despite the implementation of security
measures, the Corporation’s technology systems and those of third parties on which it relies, are vulnerable to damage, disability or failure
due to computer viruses, malware or other harmful circumstance, intentional penetration or disruption of the Corporation’s information
technology resources by a third party, natural disasters, hardware or software corruption or failure or error (including a failure of security
controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure,
intentional or unintentional personnel actions (including the failure to follow its security protocols), or lost connectivity to its networked
resources. A significant and extended disruption in the functioning of these resources would result in an interruption of the Corporation’s
operations and could damage its reputation and cause the Corporation to lose customers, sales and revenue.
2023 Annual Report
43
In addition, security breaches involving the Corporation’s systems or third-party providers may occur, such as unauthorized access, denial
of service, computer viruses and other disruptive problems caused by hackers. This could result in the unintended public disclosure or the
misappropriation of proprietary, personal and confidential information or in the inability to access company data (including due to
ransomware), and require the Corporation to incur significant expense to address and resolve these kinds of issues. The release of
confidential information may also lead to identity theft and related fraud, litigation or other proceedings against the Corporation by affected
individuals and/or business partners and/or by regulators and the outcome of such proceedings, which could include penalties or fines,
could have a material and adverse effect on its business activities, intellectual property, operating results and financial condition. The
occurrence of any of these incidents could result in adverse publicity, loss of consumer confidence or employees, and reduced sales and
profits. In addition, the costs of maintaining adequate protection against such threats, including potentially higher insurance costs, as they
develop rapidly in the future (or as legal requirements related to data security increase) could be material. Cyber security represents a
company-wide challenge and the related risks are part of the enterprise risk management program that is presented to the Corporation’s
audit and finance committee.
As a result of the foregoing, the Corporation may have to modify its business systems and practices with the goal of further improving data
security, which would result in increased expenditures and operating complexity. Although the Corporation has to date not experienced any
material losses relating to cyber-attacks or other information security breaches, there can be no assurance that it will not incur such losses
in the future. The Corporation’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving
nature of these threats. As cyber threats continue to evolve, the Corporation may be required to expend additional resources to continue to
modify or enhance protective measures or to investigate and remediate any security vulnerabilities.
Risks relating to the Corporation’s indebtedness
The significant amount of the Corporation’s debt could adversely affect its financial health and prevent it from fulfilling its
obligations under its outstanding indebtedness.
The Corporation has a significant amount of debt. As of December 31, 2023, it had $1,882 million of net debt1 outstanding on a
consolidated basis, including lease obligations of $189 million and net cash and cash equivalents of $54 million.
The Corporation’s leverage could have major consequences for holders of its shares. For example, it could:
•
•
•
•
make it more difficult for the Corporation to satisfy its obligations with respect to its indebtedness;
increase the Corporation’s vulnerability to competitive pressures and to general adverse economic or market conditions and
require it to dedicate a substantial portion of its cash flow from operations to servicing debt, reducing the availability of its cash
flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;
limit its flexibility in planning for, or reacting to, changes in its business and industry; and
limit its ability to obtain additional sources of financing.
The Corporation’s ability to service its indebtedness will depend on its ability to generate cash in the future. The Corporation cannot
provide assurance that its business will generate sufficient cash flow from operations or that future borrowings will be available in an
amount sufficient to enable it to service its indebtedness or to fund other liquidity needs. Additionally, if the Corporation is not in compliance
with the covenants and obligations under its debt instruments, it would be in default, and the lenders could call the debt, which would have
a material adverse effect on its business.
Cascades may incur additional debt in the future, which would intensify the risks it now faces as a result of its leverage as
described above.
Even though the Corporation is substantially leveraged, it and its subsidiaries will be able to incur substantial additional indebtedness in the
future. Although its credit facility and the indentures governing the notes restrict the Corporation and its restricted subsidiaries from
incurring additional debt, these restrictions are subject to important exceptions and qualifications. As of December 31, 2023, the
Corporation had $485 million (net of letters of credit in the amount of $13 million) available on its $750 million revolving credit facility
(excluding the credit facilities of our subsidiary Greenpac). If the Corporation or its subsidiaries incur additional debt, the risks that it and
they now face as a result of its leverage could intensify.
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
44
2023 Annual Report
The Corporation’s operations are substantially restricted by the terms of its debt, which could limit its ability to plan for or react
to market conditions, or to meet its capital needs.
The Corporation’s credit facilities and the indenture governing its senior notes include a number of significant restrictive covenants. These
covenants restrict, among other things, the Corporation’s ability to:
•
•
•
•
•
•
•
•
•
•
•
incur debt;
pay dividends on stock, repurchase stock or redeem subordinated debt;
make investments;
sell assets, including capital stock in subsidiaries;
guarantee other indebtedness;
enter into agreements that restrict dividends or other distributions from restricted subsidiaries (solely in the case of the
Corporation’s credit facility);
enter into transactions with affiliates;
create or assume liens securing debt;
sell or transfer lease back transactions;
engage in mergers or consolidations; and
enter into a sale of all or substantially all of our assets.
These covenants could limit the Corporation’s ability to plan for or react to market conditions or to meet its capital needs.
The Corporation’s current credit facility contains other, more restrictive covenants, including financial covenants that require it to achieve
certain financial and operating results, and maintain compliance with specified financial ratios. The Corporation’s ability to comply with
these covenants and requirements may be affected by events beyond its control and it may have to curtail some of its operations and
growth plans to maintain compliance.
The restrictive covenants contained in the Corporation’s senior note indenture, along with the Corporation’s credit facility, do not apply to its
joint ventures, minority investments and unrestricted subsidiaries.
The Corporation’s failure to comply with the covenants contained in its credit facility or its senior note indenture, including as a
result of events beyond its control or due to other factors, could result in an event of default that could cause accelerated
repayment of the debt.
If Cascades is not able to comply with the covenants and other requirements contained in the indenture, its credit facility or its other debt
instruments, an event of default under the relevant debt instrument could occur. If an event of default does occur, it could trigger a default
under its other debt instruments, Cascades could be prohibited from accessing additional borrowings and the holders of the defaulted debt
could declare amounts outstanding with respect to that debt, which would then be immediately due and payable. The Corporation’s assets
and cash flow may not be sufficient to fully repay borrowings under its outstanding debt instruments. In addition, the Corporation may not
be able to refinance or restructure the payments on the applicable debt. Even if the Corporation were able to secure additional financing, it
might not be available on favourable terms. A significant or prolonged downtime in general business and difficult economic conditions may
affect the Corporation’s ability to comply with the covenants in its debt instruments and could require it to take actions to reduce its debt or
to act in a manner contrary to its current business objectives.
Cascades is a holding corporation and depends on its subsidiaries to generate sufficient cash flow to meet its debt
service obligations.
Cascades is structured as a holding corporation and its only significant assets are the capital stock or other equity interests in its
subsidiaries, joint ventures, investments in associates and minority investments. As a holding corporation, Cascades conducts
substantially all of its business through these entities. Consequently, the Corporation’s cash flow and ability to service its debt obligations
are dependent on the earnings of its subsidiaries, joint ventures, investments in associates and minority investments, and the distribution
of those earnings to Cascades, or on loans, advances or other payments made by these entities to Cascades. The ability of these entities
to pay dividends or make other payments or advances to Cascades will depend on their operating results and will be subject to applicable
laws and contractual restrictions contained in the instruments governing their debt. In the case of the Corporation’s joint ventures,
associates and minority investments, Cascades may not exercise sufficient control to cause distributions to itself. Although its credit facility
and the indenture, respectively, limit the ability of its restricted subsidiaries to enter into consensual restrictions on their ability to pay
dividends and make other payments to the Corporation, these limitations do not apply to its joint ventures, associates, minority investments
or unrestricted subsidiaries. The limitations are also subject to important exceptions and qualifications.
2023 Annual Report
45
The ability of the Corporation’s subsidiaries to generate cash flow from operations that is sufficient to allow the Corporation to make
scheduled payments on its debt obligations will depend on their future financial performance, which will be affected by a range of
economic, competitive and business factors, many of which are outside of the Corporation’s control. If the Corporation’s subsidiaries do not
generate sufficient cash flow from operations to satisfy the Corporation’s debt obligations, Cascades may have to undertake alternative
financing plans, such as refinancing or re-structuring its debt, selling assets, reducing or delaying capital investments, or seeking to raise
additional capital. Refinancing may not be possible and assets may not be able to be sold, or, if they are sold, Cascades may not realize
sufficient amounts from those sales. Additional financing may not be available on acceptable terms, if at all, or the Corporation may be
prohibited from incurring it, if available, under the terms of its various debt instruments in effect at the time. The Corporation’s inability to
generate sufficient cash flow to satisfy its debt obligations, or to refinance its obligations on commercially reasonable terms, would have an
adverse effect on its business, financial condition and operating results. The earnings of the Corporation’s operating subsidiaries and the
amount that they are able to distribute to the Corporation as dividends or otherwise may not be adequate for the Corporation to service its
debt obligations.
Variable rate indebtedness subjects Cascades to interest rate risk, which could cause its debt service obligations to
increase significantly.
The Corporation’s borrowings under its credit facility bear interest at variable rates and, accordingly, expose the Corporation to interest rate
risk. If interest rates increase, our debt service obligations on our variable rate indebtedness could increase even though the amount
borrowed remained the same and our net income could decrease. The applicable margin with respect to the loans under the Corporation’s
credit facility is a percentage per annum equal to a reference rate plus the applicable margin. In order to manage its exposure to interest
rate risk, the Corporation may in the future enter into derivative financial instruments, typically interest rate swaps and caps, involving the
exchange of floating for fixed rate interest payments. If the Corporation is unable to enter into interest rate swaps, it may adversely affect
its cash flow and may impact its ability to make required principal and interest payments on its indebtedness For all the outstanding
variable rate indebtedness agreements the Corporation adopted SOFR (Secured Overnight Financing Rate) for establishing its
interest rate.
Risks related to the common shares
The market price of the common shares may fluctuate and purchasers may not be able to resell the common shares at or above
the Offering Price.
The market price of the common shares may fluctuate due to a variety of factors relative to the Corporation’s business, including
announcements of new developments, fluctuations in the Corporation’s operating results, sales of the common shares in the marketplace,
failure to meet analysts’ expectations, general conditions in all of our segments or the worldwide economy and related uncertainty, many of
which are beyond the Corporation’s control. In recent years, the common shares, the stock of other companies operating in the same
sectors and the stock market in general have experienced significant price fluctuations, which have been unrelated to the operating
performance of the affected companies. There can be no assurance that the market price of the common shares will not continue to
experience significant fluctuations in the future, including fluctuations that are unrelated to the Corporation’s performance.
Payments of dividends
Any decision to pay dividends on the common shares is subject to the discretion of the Board of Directors and based on, among other
things, Cascades’ earnings and financial requirements for operations, the satisfaction of applicable solvency tests for the declaration and
payment of dividends and other conditions existing from time to time. As a result, no assurance can be given as to whether Cascades will
declare and pay any dividends in the future, or the frequency or amount of any such dividend.
Potential dilution
The Corporation’s articles permit the issuance of an unlimited number of common shares and an unlimited number of Class A and Class B
preferred shares, issuable in series. In order to successfully complete targeted acquisitions or to fund its other activities, the Corporation
may issue additional equity securities that could dilute share ownership. The dilutive effect of these issuances may adversely affect the
Corporation’s ability to obtain additional capital or impair the Corporation’s share price.
46
2023 Annual Report
CONTINGENCIES
ENVIRONMENTAL RESTORATION
The Corporation uses some landfill sites. A provision has been recognized at fair value for the costs to be incurred for the restoration of
these sites. The additional provision recorded in 2023 relates to the announced closure of a containerboard mill, in February 2024, that
triggered significant changes in the assumptions.
ENVIRONMENTAL COSTS
The Corporation is currently working with representatives of the Ontario Ministry of the Environment (MOE) - Northern Region and
Environment Canada - Great Lakes Sustainability Fund in Toronto regarding its potential responsibility for an environmental impact
identified at its former Thunder Bay facility. Both authorities lead the working group and they are developing a site management plan
relating to the sediment quality adjacent to Thunder Bay’s lagoon. Several meetings have been held during the past years with the MOE
and Environment Canada and a management plan based on sediment dredging has been proposed by a third-party consultant. Both
governments are looking at this proposal with stakeholders to agree on this remediation action plan that would likely be implemented in the
coming years.
The Corporation has recorded an environmental reserve to address its estimated exposure for this matter.
LEGAL CLAIMS
In the normal course of operations, the Corporation is party to various legal actions and contingencies, mostly related to contract disputes,
environmental and product warranty claims, and labour issues. While the final outcome with respect to legal actions outstanding or pending
as of December 31, 2023 cannot be predicted with certainty, it is Management’s opinion that the outcome will not have a material adverse
effect on the Corporation’s consolidated financial position, the results of its operations or its cash flows.
2023 Annual Report
47
SUPPLEMENTAL INFORMATION ON NON-IFRS ACCOUNTING STANDARDS MEASURES
AND OTHER FINANCIAL MEASURES
SPECIFIC ITEMS
The Corporation incurs some specific items that adversely or positively affect its operating results. We believe it is useful for readers to be
aware of these items as they provide additional information to measure performance, compare the Corporation’s results between periods,
and assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not
necessarily reflective of the Corporation’s underlying business operations in measuring and comparing its performance and analyzing
future trends. Our definition of specific items may differ from that of other corporations and some of these items may arise in the future and
may reduce the Corporation’s available cash.
They include, but are not limited to, charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing and
repurchase of long-term debt, some deferred tax asset provisions or reversals, premiums paid on repurchase of long-term debt, gains or
losses on the acquisition or sale of a business unit, gains or losses on the share of results of associates and joint ventures, unrealized
gains or losses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rate
swaps and option fair value revaluation, foreign exchange gains or losses on long-term debt and financial instruments, fair value
revaluation gains or losses on investments, specific items of discontinued operations and other significant items of an unusual, non-cash or
non-recurring nature.
RECONCILIATION AND USES OF NON-IFRS ACCOUNTING STANDARDS AND OTHER FINANCIAL
MEASURES
To provide more information for evaluating the Corporation’s performance, the financial information included in this analysis contains
certain data that are not performance measures under IFRS Accounting Standards (“non-IFRS Accounting Standards measures”), which
are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance and capital
measures, as well as non-IFRS Accounting Standards measures, is useful to both Management and investors, as they provide additional
information to measure the performance and financial position of the Corporation. This also increases the transparency and clarity of the
financial information. The following non-IFRS Accounting Standards measures and other financial measures are used in our
financial disclosures:
Non-IFRS Accounting Standards measures
•
Adjusted earnings before interest, taxes, depreciation and amortization or EBITDA (A): represents the operating income (as published
in Consolidated Statement of Earnings (Loss) of the Consolidated Financial Statements) before depreciation and amortization
excluding specific items. Used to assess recurring operating performance and the contribution of each segment on a
comparable basis.
•
•
•
Adjusted net earnings: Used to assess the Corporation’s consolidated financial performance on a comparable basis.
Adjusted cash flow: Used to assess the Corporation’s capacity to generate cash flows to meet financial obligations and/or
discretionary items such as share repurchases, dividend increases and strategic investments.
Free cash flow: Used to measure the excess cash the Corporation generates by subtracting capital expenditures (excluding strategic
projects) from the EBITDA (A).
• Working capital: Used to assess the short-term liquidity of the Corporation.
Other financial measures
•
Total debt: Used to calculate all the Corporation’s debt, including long-term debt and bank loans. Often put in relation to equity to
calculate the debt-to-equity ratio.
Net debt: Used to calculate the Corporation’s total debt less cash and cash equivalents. Often put in relation to EBITDA (A) to
calculate net debt to EBITDA (A) ratio.
Non-IFRS Accounting Standards ratios
•
•
Net debt to EBITDA (A) ratio: Ratio used to assess the Corporation’s ability to pay its debt and evaluate financial leverage.
EBITDA (A) margin: Ratio used to assess operating performance and the contribution of each segment on a comparable basis
calculated as a percentage of sales.
Adjusted net earnings per common share: Ratio used to assess the Corporation’s consolidated financial performance on a
comparable basis.
Net debt / Net debt + Shareholders’ equity: Ratio used to evaluate the Corporation’s financial leverage and thus the risk
to Shareholders.
•
•
•
• Working capital as a percentage of sales: Ratio used to assess the Corporation’s operating liquidity performance.
•
Adjusted cash flow per common share: Ratio used to assess the Corporation’s financial flexibility.
48
2023 Annual Report
•
Free cash flow ratio: Ratio used to measure the liquidity and efficiency of how much more cash the Corporation generates than it uses
to run the business by subtracting capital expenditures (excluding strategic projects) from the EBITDA (A) calculated as a percentage
of sales.
Non-IFRS Accounting Standards and other financial measures are mainly derived from the consolidated financial statements, but do not
have meanings prescribed by IFRS Accounting Standards. These measures have limitations as an analytical tool and should not be
considered on their own or as a substitute for an analysis of our results as reported under IFRS Accounting Standards. In addition, our
definitions of non-IFRS Accounting Standards and other financial measures may differ from those of other corporations. Any such
modification or reformulation may be significant.
The chief operating decision-maker (CODM) assesses the performance of each reportable segment based on sales and earnings before
interest, taxes, depreciation and amortization, adjusted to exclude specific items (EBITDA (A)). The CODM considers EBITDA (A) to be the
best performance measure of the Corporation’s activities.
EBITDA (A) by business segment is reconciled to IFRS Accounting Standards measure, namely operating income (loss), and is presented
in the following table:
(in millions of Canadian dollars) (unaudited)
Operating income (loss)
Depreciation and amortization
Impairment charges
Other loss (gain)
Restructuring costs
Unrealized loss (gain) on derivative financial instruments
EBITDA (A)
(in millions of Canadian dollars) (unaudited)
Operating income (loss)
Depreciation and amortization
Impairment charges
Other gain
Restructuring costs
Unrealized gain on derivative financial instruments
EBITDA (A)
(in millions of Canadian dollars) (unaudited)
Operating income (loss)
Depreciation and amortization
Impairment charges
Other loss (gain)
Restructuring costs
Unrealized loss (gain) on derivative financial instruments
EBITDA (A)
2023 Annual Report
For the 3-month period ended December 31, 2023
Containerboard
Specialty
Products
Tissue Papers
(33)
39
43
18
1
(1)
67
13
5
1
(1)
1
—
19
34
17
4
(4)
10
—
61
Corporate,
Recovery and
Recycling
activities
Consolidated
(38)
(24)
12
—
—
—
1
73
48
13
12
—
(25)
122
For the 3-month period ended December 31, 2022
Containerboard
Specialty
Products
Tissue Papers
Corporate,
Recovery and
Recycling
activities
Consolidated
85
30
8
—
—
(4)
119
22
5
3
(10)
—
—
20
(86)
(41)
17
75
—
2
—
8
10
—
—
—
—
(31)
(20)
62
86
(10)
2
(4)
116
For the year ended December 31, 2023
Containerboard
Specialty
Products
Tissue Papers
Corporate,
Recovery and
Recycling
activities
Consolidated
128
141
104
18
1
(2)
390
66
21
2
—
2
—
91
(2)
(152)
67
103
(6)
20
—
182
43
—
—
—
4
(105)
40
272
209
12
23
2
558
49
(in millions of Canadian dollars) (unaudited)
Operating income (loss)
Depreciation and amortization
Impairment charges
Other gain
Restructuring costs
Unrealized loss (gain) on derivative financial instruments
EBITDA (A)
For the year ended December 31, 2022
Containerboard
Specialty
Products
Tissue Papers
Corporate,
Recovery and
Recycling
activities
Consolidated
266
118
10
—
—
7
401
86
19
3
(16)
—
—
92
(175)
(144)
74
89
(4)
3
—
(13)
41
—
—
—
(1)
(104)
33
252
102
(20)
3
6
376
The following table reconciles net loss and net loss per common share, as reported, with adjusted net earnings and adjusted net earnings
per common share:
(in millions of Canadian dollars, except per common share amounts and number
of common shares) (unaudited)
2023
2022
2023
2022
2023
2022
2023
2022
For the 3-month periods
ended December 31,
NET EARNINGS (LOSS)
For the years
ended December 31,
For the 3-month periods
ended December 31,
NET EARNINGS (LOSS)
PER COMMON SHARE1
For the years
ended December 31,
(57)
(27)
(76)
(34)
($0.57)
($0.27)
($0.76)
($0.34)
As reported
Specific items:
Impairment charges
Other loss (gain)
Restructuring costs
Unrealized loss (gain) on derivative financial instruments
Unrealized loss on interest rate swaps
Foreign exchange loss (gain) on long-term debt and
financial instruments
Tax effect on specific items, other tax adjustments and
attributable to non-controlling interests1
Adjusted
Weighted average basic number of common shares
outstanding
Share of results of associates and joint ventures
(1)
48
13
12
—
1
1
86
(10)
2
(4)
—
(3)
—
209
12
23
2
1
—
(10)
102
(20)
3
6
—
9
—
$0.35
$0.10
$0.10
—
$0.01
$0.64
($0.09)
$0.02
($0.03)
—
$1.56
$0.09
$0.18
$0.01
$0.01
—
($0.02)
—
($0.01)
—
($0.08)
(12)
(22)
(52)
(29)
62
5
49
22
185
109
71
37
$0.07
$0.62
$0.05
($0.03)
$0.49
$0.22
$0.07
$1.84
$1.08
$0.76
($0.17)
$0.03
$0.04
—
$0.08
—
($0.03)
$0.71
$0.37
The following table reconciles cash flow from operating activities with EBITDA (A):
(in millions of Canadian dollars) (unaudited)
Cash flow from operating activities
Changes in non-cash working capital components
Net income taxes paid
Net financing expense paid
Provisions for contingencies and charges and other liabilities, net of dividends received
EBITDA (A)
100,685,574 100,361,627 100,542,206 100,647,972
For the 3-month periods
ended December 31,
For the years
ended December 31,
2023
240
(149)
—
20
11
122
2022
196
(96)
—
15
1
116
2023
510
(113)
9
129
23
558
2022
144
116
5
87
24
376
1 Specific amounts per common share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per common share amounts in line item “Tax effect
on specific items, other tax adjustments and attributable to non-controlling interests” only include the effect of tax adjustments. Please refer to “Recovery of income taxes” section for
more details.
50
2023 Annual Report
The following table reconciles cash flow from operating activities with cash flow from operating activities (excluding changes in non-cash
working capital components) and adjusted cash flow from operating activities. It also reconciles adjusted cash flow from operating activities
to adjusted cash flow generated (used), which is also calculated on a per common share basis:
For the 3-month periods
ended December 31,
For the years
ended December 31,
(in millions of Canadian dollars, except per common share amounts or as otherwise noted) (unaudited)
Cash flow from operating activities
Changes in non-cash working capital components
Cash flow from operating activities (excluding changes in non-cash working
capital components)
Restructuring costs paid
Adjusted cash flow from operating activities
Payments for property, plant and equipment
Change in intangible and other assets
Lease obligation payments
Proceeds from disposals of property, plant and equipment
Dividends paid to non-controlling interests
Dividends paid to the Corporation’s Shareholders
Adjusted cash flow generated (used)
2023
240
(149)
91
12
103
(47)
—
(15)
1
42
(3)
(12)
27
2022
196
(96)
100
3
103
(160)
(2)
(15)
11
(63)
(4)
(12)
(79)
2023
510
(113)
397
24
421
(350)
(1)
(59)
7
18
(36)
(48)
(66)
Adjusted cash flow generated (used) per common share (in Canadian dollars)
$0.27
($0.79)
($0.66)
2022
144
116
260
12
272
(501)
(5)
(55)
19
(270)
(13)
(48)
(331)
($3.29)
Weighted average basic number of common shares outstanding
100,685,574
100,361,627
100,542,206
100,647,972
The following table reconciles payments for property, plant and equipment, excluding strategic projects and free cash flow. It also provides
these two metrics as a percentage of sales:
(in millions of Canadian dollars) (unaudited)
Sales
EBITDA (A)
Payments for property, plant and equipment
Less: strategic projects included above1
Payments for property, plant and equipment, excluding strategic projects
Free cash flow: EBITDA (A) less payments for property plant and equipment, excluding strategic projects
Free cash flow / Sales
Payments for property, plant and equipment, excluding strategic projects / Sales
The following table reconciles working capital as reported:
December 31,
2023
4,638
558
350
(205)
145
413
8.9%
3.1%
December 31,
2022
4,466
376
501
(335)
166
210
4.7%
3.7%
(in millions of Canadian dollars) (unaudited)
Accounts receivable
Inventories
Trade and other payables
Working capital
December 31,
2023
December 31,
2022
December 31,
2021
453
568
(703)
318
556
587
(746)
397
510
494
(707)
297
1 Strategic projects include the investment for the Bear Island construction project.
2023 Annual Report
51
The following table reconciles total debt and net debt with the ratio of net debt to adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA (A)):
(in millions of Canadian dollars, except ratios) (unaudited)
Long-term debt
Current portion of long-term debt
Bank loans and advances
Total debt
Less: Cash and cash equivalents
Net debt as reported
Last twelve months EBITDA (A)
Net debt / EBITDA (A) ratio
December 31,
2023
December 31,
2022
December 31,
2021
1,869
67
—
1,936
(54)
1,882
558
3.4x
1,931
134
3
2,068
(102)
1,966
376
5.2x
1,450
74
1
1,525
(174)
1,351
389
3.5x
SPECIFIC ITEMS
The Corporation incurred the following specific items in 2023 and in 2022:
IMPAIRMENT CHARGES
2023
The Containerboard Packaging segment recorded an impairment charge of $2 million on spare parts and $59 million on some land
($3 million), building ($22 million) and equipment ($34 million) of a CGU (cash generating unit) subsequent to the permanent closure of one
paper machine in the USA. The decision was the result of competitive market conditions, which make the CGU less profitable. The
recoverable amount of the assets in operation, totaling $39 million, was determined using fair value less the cost of disposal based on the
market approach of comparable assets on the market.
The Containerboard Packaging segment also recorded an impairment charge in the fourth quarter of $8 million on spare parts and
$35 million on some land ($1 million), building ($12 million) and equipment ($22 million) related to closure of plants announced in
February 2024 in Ontario, Canada and in Connecticut, USA. The recoverable amount of the assets totaling $35 million, was determined
using fair value less cost of disposal based on the market approach of comparable assets on the market.
The Specialty Products segment recorded an impairment charge of $1 million on spare parts in the fourth quarter and $1 million on some
equipment related to a closed plant in the USA. The recoverable amount was determined using fair value less the cost of disposal based
on the market approach of comparable assets on the market.
The Tissue Papers segment recorded an impairment charge of $23 million on spare parts ($4 million in the fourth quarter) and $80 million
on some buildings ($10 million) and equipment ($70 million), consequent to the strategic repositioning of its operating platform. The
decision includes the permanent closure of three plants in the USA. The recoverable amount of $130 million for these three CGUs was
determined using fair value less cost of disposal based on the market approach of comparable assets on the market, as well, for one of the
plants, the recoverable amount of the real estate was established using the income method over a period of 20 years and a capitalization
rate of 7.25%, no impairment recognized for the latest.
2022
The Containerboard Packaging segment recorded an impairment charge of $10 million ($8 million in the fourth quarter) on some property,
plant and equipment related to the closure of a plant in Canada and to unused assets in Canada and the USA. The recoverable amount
was determined using the market approach of comparable assets on the market.
The Specialty Products segment recorded an impairment charge of $3 million in the fourth quarter on goodwill, related to the closure of a
plant in the USA. The recoverable amount of goodwill was determined using an income approach.
The Tissue Papers segment recorded an impairment charge of $4 million on spare parts and $10 million on some property, plant and
equipment related to the permanent closure of a plant in the USA. The recoverable amount was determined using the market approach of
comparable assets on the market.
The Tissue Papers segment also recorded, in the fourth quarter, an impairment charge of $55 million on machinery and equipment related
to assets acquired in 2019 in the USA due to slower ramp-up and lower efficiency than expected. The recoverable amount was determined
using the market approach of comparable assets on the market. For the same plants, an impairment charge related to buildings of
$20 million was recorded. The recoverable amount was established using the income method over a period of 20 years and a
capitalization rate of 7.25%.
52
2023 Annual Report
OTHER LOSS (GAIN)
2023
The Containerboard Packaging segment recorded an environmental obligation of $18 million in the fourth quarter related to the closure of a
plant announced in February 2024 in Ontario, Canada.
The Specialty Products segment recorded a $1 million loss on a contract of a closed plant in the USA.
The Specialty Products segment also recorded a $1 million gain in the fourth quarter from the sale of some machinery and equipment
related to a closed plant in the USA.
The Tissue Papers segment recorded a $2 million gain from the sale of some machinery and equipment related to a previously closed
plant in the USA.
The Tissue Papers segment also recorded a $4 million gain in the fourth quarter on a contract related to a closed plant in the USA.
2022
The Specialty Products segment recorded a $16 million ($10 million in the fourth quarter) gain from the sale of lands and a building related
to closed plants in Canada.
The Tissue Papers segment recorded a $4 million gain from the settlement of a supply agreement.
RESTRUCTURING COSTS
2023
The Containerboard Packaging segment recorded costs totaling $1 million in the fourth quarter related to closed plants in Canada.
The Specialty Products segment recorded costs totaling $2 million ($1 million in the fourth quarter) related to closed plants in the USA.
The Tissue Papers segment recorded costs totaling $20 million ($10 million in the fourth quarter) related to the closures of the plants
and severances, in the USA.
2022
The Tissue Papers segment recorded additional costs totaling $3 million ($2 million in the fourth quarter) related to assets relocation
and severances.
UNREALIZED LOSS (GAIN) ON DERIVATIVE FINANCIAL INSTRUMENTS
The Containerboard Packaging segment recorded an unrealized gain of $2 million in 2023 (unrealized gain of $1 million in the fourth
quarter), compared to an unrealized loss of $7 million in 2022 (unrealized gain of $4 million in the fourth quarter), from a steam contract
embedded derivatives related to our Niagara Falls containerboard complex.
Corporate activities recorded an unrealized loss of $4 million in 2023 (unrealized loss of $1 million in the fourth quarter) compared to an
unrealized gain of $1 million in 2022 (nil in the fourth quarter) due to the financial hedging contracts for natural gas purchases.
UNREALIZED LOSS ON INTEREST RATE SWAPS
In 2023, the Corporation recorded an unrealized loss on interest rate swaps of $1 million in the fourth quarter (nil in 2022).
FOREIGN EXCHANGE LOSS (GAIN) ON LONG-TERM DEBT AND FINANCIAL INSTRUMENTS
In 2023, the Corporation recorded a gain of less than a million dollars (loss of $1 million in the fourth quarter) on its US$ denominated debt
and related financial instruments, compared to a loss of $9 million in 2022 (gain of $3 million in the fourth quarter). The foreign exchange
loss (gain) on long-term debt and financial instruments is composed of foreign exchange forward contracts not designated for
hedge accounting.
2023 Annual Report
53
SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES
In 2023, the Corporation recorded a gain in the consolidated statement of earnings in the line item “Share of results of associates and joint
ventures” of $10 million ($1 million in the fourth quarter) from the sale of investments in non-significant joint ventures.
SPECIFIC ITEMS INCLUDED IN RECOVERY OF INCOME TAXES
In 2023, the Corporation recorded the following specific items related to its recovery of income taxes:
•
•
•
$4 million of deferred tax expense as a result of the settlement of tax assessments of previous years;
provision of $2 million (recovery of $3 million in 2022) in relation to a tax audit that is expected to result in an increase of the tax
expense previously recorded on the gain from the sale of discontinued operations in 2021;
$1 million of deferred tax expense as a result of the expected changes to applicable effective state tax rates following the
repositioning of its Tissue Papers operating platform in the USA.
54
2023 Annual Report
HISTORICAL FINANCIAL INFORMATION
(in millions of Canadian dollars, unless otherwise noted) (unaudited)
Sales
Packaging Products
Containerboard
Specialty Products
Inter-segment sales
Tissue Papers
Inter-segment sales, Corporate, Recovery and Recycling
activities
Total
2021
2022
2023
YEAR
Q1
Q2
Q3
Q4
YEAR
Q1
Q2
Q3
Q4
YEAR
2,009
548
(32)
2,525
1,272
534
157
(8)
683
314
569
168
(10)
727
342
595
168
(11)
752
382
567
161
(7)
721
384
2,265
654
(36)
2,883
1,422
561
161
(7)
715
387
562
164
(9)
717
416
593
157
(7)
743
422
561
160
(8)
713
390
2,277
642
(31)
2,888
1,615
159
3,956
41
1,038
50
1,119
40
1,174
30
1,135
161
4,466
32
1,134
35
1,168
33
1,198
35
1,138
135
4,638
Operating income (loss)
50
(4)
32
25
(20)
33
(80)
64
80
(24)
40
EBITDA (A)1
Packaging Products
Containerboard
Specialty Products
Tissue Papers
Corporate, Recovery and Recycling activities
Total
Margin (EBITDA (A) / Sales) (%)1
Net earnings (loss)
Adjusted1
Net earnings (loss) from continuing operations per basic
common share (in Canadian dollars)
Net earnings (loss) from discontinued operations per
basic common share (in Canadian dollars)
Net earnings (loss) per common share (in Canadian
dollars)
Basic
Diluted
Basic, adjusted1
372
74
446
27
(84)
389
9.8%
162
27
(27)
58
5.6%
(15)
(15)
(25)
91
8.1%
10
10
80
22
102
(17)
99
25
124
(8)
103
25
128
4
119
20
139
8
(21)
111
(31)
116
401
92
493
(13)
(104)
376
126
27
153
16
96
24
120
44
101
21
122
61
67
19
86
61
390
91
481
182
(35)
134
(23)
141
(22)
161
(25)
122
(105)
558
9.5%
10.2%
8.4%
11.8%
12.1%
13.4%
10.7%
12.0%
(2)
20
(27)
22
(34)
37
(75)
33
22
26
34
45
(57)
5
(76)
109
($0.59)
($0.15)
$0.10
($0.02)
($0.27)
($0.34)
($0.75)
$0.22
$0.34
($0.57)
($0.76)
$2.19
—
—
—
—
—
—
—
—
—
—
$1.60
$1.59
$0.26
($0.15)
($0.15)
($0.15)
—
$0.10
$0.10
$0.10
($0.02)
($0.02)
$0.20
($0.27)
($0.27)
$0.22
($0.34)
($0.34)
$0.37
($0.75)
($0.75)
$0.32
$0.22
$0.22
$0.27
$0.34
$0.34
$0.44
($0.57)
($0.57)
$0.05
($0.76)
($0.76)
$1.08
Cash flow from operating activities (excluding
changes in non-cash working capital components)
247
19
81
60
100
260
89
117
100
91
397
Payments for property, plant and equipment
Net debt1
Net debt / EBITDA (A) (LTM) ratio1
(286)
(102)
(117)
(122)
(160)
(501)
(140)
(104)
(59)
(47)
(350)
1,351
1,549
1,712
2,011
1,966
1,966
2,070
2,076
2,088
1,882
1,882
3.5x
4.8x
5.4x
6.2x
5.2x
5.2x
4.6x
4.1x
3.8x
3.4x
3.4x
1 Please refer to the “Supplemental Information on Non-IFRS Accounting Standards Measures and Other Financial Measures” section for a complete reconciliation.
2023 Annual Report
55
MANAGEMENT REPORT
TO THE SHAREHOLDERS OF CASCADES INC.
February 21, 2024
The accompanying Consolidated Financial Statements are the responsibility of the Management of Cascades Inc. and have been reviewed
by the Audit and Finance Committee and approved by the Board of Directors.
The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards as issued by
the International Accounting Standards Board (IFRS® Accounting Standards) and include certain estimates that reflect Management’s
best judgment.
The Management of the Corporation is also responsible for all other information included in this Annual Report and for ensuring that this
information is consistent with the Corporation’s Consolidated Financial Statements and business activities.
The Management of the Corporation is responsible for the design, establishment and maintenance of appropriate internal controls and
procedures for financial reporting, to ensure that financial statements for external purposes are fairly presented in conformity with IFRS
Accounting Standards. Such internal control systems are designed to provide reasonable assurance on the reliability of the financial
information and the safeguarding of assets.
An independent auditor and internal auditors have free and independent access to the Audit and Finance Committee, which comprises
outside independent directors. The Audit and Finance Committee, which meets regularly throughout the year with members of
Management and the external and internal auditors, reviews the Consolidated Financial Statements and recommends their approval to the
Board of Directors.
The Consolidated Financial Statements have been audited by PricewaterhouseCoopers LLP, whose report is provided below.
/s/ Mario Plourde
MARIO PLOURDE
/s/ Allan Hogg
ALLAN HOGG
PRESIDENT AND CHIEF EXECUTIVE OFFICER
KINGSEY FALLS, CANADA
VICE-PRESIDENT AND CHIEF FINANCIAL OFFICER
KINGSEY FALLS, CANADA
56
2023 Annual Report
Independent auditor’s report
To the Shareholders of Cascades Inc.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of
Cascades Inc. and its subsidiaries (together, the Corporation) as at December 31, 2023 and 2022, and its financial performance and its
cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IFRS Accounting Standards).
What we have audited
The Corporation’s consolidated financial statements comprise:
•
•
•
•
•
•
the consolidated balance sheets as at December 31, 2023 and 2022;
the consolidated statements of earnings (loss) for the years then ended;
the consolidated statements of comprehensive income (loss) for the years then ended;
the consolidated statements of equity for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, comprising material accounting policy information and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Corporation in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements for the year ended December 31, 2023. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Impairment assessment of property, plant and equipment
Refer to the Segmented Information, note 2 – Summary of
significant accounting policies, note 4 – Critical accounting
estimates and judgments and note 22 – Impairment charges to the
consolidated financial statements.
Total net book value of property, plant and equipment amounted to
$2,808 million as at December 31, 2023. At the end of each
reporting period, management assesses whether there is an
indicator that the carrying amount of an asset or a group of assets
may be higher than its recoverable amount. When the recoverable
amount of an asset or cash-generating unit (CGU) is lower than the
carrying amount, the carrying amount is reduced to the recoverable
amount. A CGU is the lowest level of a group of assets for which
there are separately identifiable cash inflows. The recoverable
amount is the higher of fair value less cost of disposal and value in
use of an asset or CGU. The recoverable amount of each asset or
CGU is determined by management using the fair value less cost
of disposal based on the market approach if a market exists or the
income approach. In determining the recoverable amount of an
asset or CGU based on the market approach, management used
the value of comparable assets on the market and applied a high
degree of judgment in determining the value of comparable assets
on the market.
How our audit addressed the key audit matter
Our approach to addressing the matter included the following
procedures, among others:
• Tested how management determined the recoverable amounts
of the assets or CGUs related to property, plant and equipment
for which an indicator of impairment was identified, which
included the following:
–
including
the mathematical accuracy of
Tested the appropriateness of the methods and approach
used,
the
recoverable amount calculations.
Tested the underlying data used in the recoverable amount
calculations.
For assets or CGUs where the market approach was used
by management, professionals with specialized skill and
knowledge in the field of valuation assisted in testing the
reasonableness of the value of comparable assets on the
market identified by management.
For assets or CGUs where the income approach was used
by management, professionals with specialized skill and
knowledge in the field of valuation assisted in developing an
independent point estimate of the recoverable amount of
each of these assets of CGUs, and compared each
independent point estimate to management’s estimate of
the recoverable amount to evaluate the reasonableness of
management’s estimate.
–
–
–
2023 Annual Report
57
How our audit addressed the key audit matter
Our approach to addressing the matter included the following
procedures, among others:
• Tested how management determined the recoverable amount of
at
Containerboard
segment
the
December 31, 2023, which included the following:
–
Packaging
as
Tested the appropriateness of the method and approach
used and the mathematical accuracy of the recoverable
amount calculation.
Tested the underlying data used in the recoverable amount
calculation.
Tested the reasonableness of the assumptions related to
estimated shipment levels, foreign exchange rates, revenue
growth rates, EBITDA (A) margins and capital expenditures
by considering (i) the budget approved by the Board of
Directors, (ii) the current and past performance of the
segment and (iii) external market and industry data, and
whether these assumptions were consistent with evidence
obtained in other areas of the audit, as applicable.
Professionals with specialized skill and knowledge in the
field of valuation assisted in testing the reasonableness of
the discount rate applied by management based on
available data of comparable companies.
–
–
–
the
Key audit matter
In determining the recoverable amount of an asset or CGU, based
on
income approach, management uses several key
assumptions, including the capitalization rate. For the year ended
December 31, 2023, management determined the recoverable
amounts of certain assets or CGUs related to property, plant and
equipment for which an indicator of impairment was identified were
lower than the carrying amounts and recorded impairment charges
of $175 million for property, plant and equipment.
We considered this a key audit matter due to the high degree of
judgment required by management in determining the recoverable
amounts of assets or CGUs related to property, plant and
equipment for which indicators of impairment were identified,
including the determination of the value of comparable assets on
the market and the use of key assumptions. This has resulted in
significant audit effort and a high degree of subjectivity and
complexity in performing procedures to test the recoverable
amounts of assets or CGUs determined by management.
Professionals with specialized skill and knowledge in the field of
valuation assisted us in performing the procedures.
Impairment assessment of goodwill – Containerboard
Packaging segment
Refer to the Segmented Information, note 2 – Summary of
significant accounting policies, note 4 – Critical accounting
estimates and judgments and note 22 – Impairment charges to the
consolidated financial statements
Management performs an impairment assessment of goodwill
annually, or more frequently if events or circumstances indicate
that the carrying value may be impaired.
Goodwill is allocated to CGUs for the purpose of impairment
assessment based on the level at which management monitors it,
which is not higher than an operating segment. An impairment loss
is recognized if the carrying amount of a CGU or group of CGUs
exceeds its recoverable amount. The recoverable amount is the
higher of fair value less cost of disposal and value in use.
Total net book value of goodwill as at December 31, 2023
amounted to $481 million and was allocated to the Containerboard
Packaging segment. Management performed its annual goodwill
impairment test for the Containerboard Packaging segment as at
December 31, 2023. The
the
Containerboard Packaging segment was determined using the fair
value less cost of disposal based on the income approach.
recoverable amount of
In determining the fair value less cost of disposal, management
applied a high degree of judgment in developing several key
assumptions,
foreign
including estimated shipment
exchange rates, revenue growth rates, adjusted earnings before
taxes, depreciation and amortization (EBITDA) (A)
interest,
margins, the discount rate and capital expenditures. No impairment
was recognized as a result of the 2023 impairment assessment.
levels,
the recoverable amount of
judgment required by management
We considered this a key audit matter due to the significance of the
goodwill balance of the Containerboard Packaging segment and
the high degree of
in
determining
the Containerboard
Packaging segment as at December 31, 2023, including the use of
key assumptions. This has resulted in significant audit effort and a
in performing
high degree of subjectivity and complexity
procedures to test the recoverable amount. Professionals with
specialized skill and knowledge in the field of valuation assisted us
in performing the procedures.
58
2023 Annual Report
Other information
Management is responsible for the other information. The other information comprises the Management’s Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS
Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Corporation’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Corporation or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Corporation’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
•
•
•
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Corporation’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Corporation to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
2023 Annual Report
59
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
Corporation to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the
audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in
our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Sonia Boisvert.
/s/ PricewaterhouseCoopers LLP1
Montréal, Quebec
February 21, 2024
[1] FCPA auditor, public accountancy permit No. A116853
60
2023 Annual Report
CONSOLIDATED BALANCE SHEETS
(in millions of Canadian dollars)
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Current income tax assets
Inventories
Current portion of financial assets
Long-term assets
Investments in associates and joint ventures
Property, plant and equipment
Intangible assets with finite useful life
Financial assets
Other assets
Deferred income tax assets
Goodwill and other intangible assets with indefinite useful life
Liabilities and Equity
Current liabilities
Bank loans and advances
Trade and other payables
Current income tax liabilities
Current portion of long-term debt
Current portion of provisions for contingencies and charges
Current portion of financial liabilities and other liabilities
Long-term liabilities
Long-term debt
Provisions for contingencies and charges
Financial liabilities
Other liabilities
Deferred income tax liabilities
Equity
Capital stock
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Equity attributable to Shareholders
Non-controlling interests
Total equity
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
2023 Annual Report
NOTE
December 31,
2023
December 31,
2022
23
5
6
15
7
8 and 13
9
15
10
18
9
23
11
12 and 23
14
15 and 16
12 and 23
14
15
16 and 17
18
19
20
7
54
453
12
568
1
1,088
94
2,808
55
—
78
167
482
4,772
—
703
6
67
14
29
819
1,869
61
5
94
143
2,991
613
15
1,096
15
1,739
42
1,781
4,772
102
556
11
587
9
1,265
94
2,945
73
4
70
114
488
5,053
3
746
4
134
8
22
917
1,931
41
7
97
132
3,125
611
14
1,212
34
1,871
57
1,928
5,053
61
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
For the years ended December 31 (in millions of Canadian dollars, except per common share
amounts and number of common shares)
NOTE
Sales
Supply chain and logistic
Wages and employee benefits expenses
Depreciation and amortization
Maintenance and repair
Other operational costs
Impairment charges
Other loss (gain)
Restructuring costs
Unrealized loss on derivative financial instruments
Operating income
Financing expense
Share of results of associates and joint ventures
Loss before income taxes
Recovery of income taxes
Net loss including non-controlling interests for the year
Net earnings attributable to non-controlling interests
Net loss attributable to Shareholders for the year
Net loss per common share
Basic
Diluted
Weighted average basic number of common shares outstanding
Weighted average number of diluted common shares
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
21
22
15.4 A (iv)
12 and 23
7
18
7
2023
4,638
2,741
1,082
272
236
21
209
12
23
2
40
128
(22)
(66)
(13)
(53)
23
(76)
2022
4,466
2,836
992
252
217
45
102
(20)
3
6
33
88
(19)
(36)
(22)
(14)
20
(34)
($0.76)
($0.76)
100,542,206
100,964,908
($0.34)
($0.34)
100,647,972
101,092,352
62
2023 Annual Report
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the years ended December 31 (in millions of Canadian dollars)
Net loss including non-controlling interests for the year
Other comprehensive income (loss)
Items that may be reclassified subsequently to earnings
Translation adjustments
Change in foreign currency translation of foreign subsidiaries
Change in foreign currency translation related to net investment hedging activities
Cash flow hedges
Change in fair value of commodity derivative financial instruments
Recovery of income taxes
Items that are not released to earnings
Actuarial gain on employee future benefits
Provision for income taxes
Other comprehensive income (loss)
Comprehensive income (loss) including non-controlling interests for the year
Comprehensive income attributable to non-controlling interests for the year
Comprehensive income (loss) attributable to Shareholders for the year
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
NOTE
2023
(53)
2022
(14)
18
17
18
(25)
11
(6)
—
(20)
9
(2)
7
(13)
(66)
22
(88)
78
(23)
3
2
60
33
(8)
25
85
71
23
48
2023 Annual Report
63
CONSOLIDATED STATEMENTS OF EQUITY
(in millions of Canadian
dollars)
Balance - Beginning of year
Comprehensive income (loss)
Net earnings (loss)
Other comprehensive
income (loss)
Dividends
Stock options expense
Issuance of common shares
upon exercise of stock
options
Acquisitions of non-controlling
interests
Balance - End of year
NOTE
CAPITAL STOCK
611
CONTRIBUTED
SURPLUS
14
For the year ended December 31, 2023
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME
34
RETAINED
EARNINGS
1,212
TOTAL EQUITY
ATTRIBUTABLE TO
SHAREHOLDERS
1,871
NON-
CONTROLLING
INTERESTS
57
TOTAL EQUITY
1,928
—
—
—
—
—
2
—
613
—
—
—
—
1
—
—
15
(76)
7
(69)
(48)
—
—
1
1,096
—
(19)
(19)
—
—
—
—
15
(76)
(12)
(88)
(48)
1
2
1
1,739
23
(1)
22
(36)
—
—
(1)
42
(53)
(13)
(66)
(84)
1
2
—
1,781
19
(in millions of Canadian
dollars)
Balance - Beginning of year
NOTE
CAPITAL STOCK
614
CONTRIBUTED
SURPLUS
14
For the year ended December 31, 2022
ACCUMULATED
OTHER
COMPREHENSIVE
INCOME (LOSS)
(23)
RETAINED
EARNINGS
1,274
TOTAL EQUITY
ATTRIBUTABLE TO
SHAREHOLDERS
1,879
NON-
CONTROLLING
INTERESTS
48
TOTAL EQUITY
1,927
Comprehensive income
Net earnings (loss)
Other comprehensive
income
Dividends
Stock options expense
Issuance of common shares
upon exercise of stock
options
Redemption of common
shares
Acquisitions of non-controlling
interests
Balance - End of year
19
19
—
—
—
—
—
2
(5)
—
611
—
—
—
—
1
(1)
—
—
14
(34)
25
(9)
(48)
—
—
(4)
(1)
1,212
—
57
57
—
—
—
—
—
34
(34)
82
48
(48)
1
1
(9)
(1)
1,871
20
3
23
(13)
—
—
—
(1)
57
(14)
85
71
(61)
1
1
(9)
(2)
1,928
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
64
2023 Annual Report
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31 (in millions of Canadian dollars)
Operating activities
Net loss attributable to Shareholders for the year
Adjustments for:
Financing expense
Depreciation and amortization
Impairment charges
Other loss (gain)
Restructuring costs
Unrealized loss on derivative financial instruments
Recovery of income taxes
Share of results of associates and joint ventures
Net earnings attributable to non-controlling interests
Net financing expense paid
Net income taxes paid
Dividends received
Provisions for contingencies and charges and other liabilities
Changes in non-cash working capital components
Investing activities
Disposals in associates and joint ventures
Payments for property, plant and equipment
Proceeds from disposals of property, plant and equipment
Change in intangible and other assets
Financing activities
Bank loans and advances
Change in credit facilities
Increase in term loan
Payments of term loan
Increase in other long-term debt
NOTE
12 and 23
22
15.4 A (iv)
18
7
7
7
14, 16 and 17
12 and 23
7
23
23
12 and 23
12 and 23
12 and 23
Payments of other long-term debt, including lease obligations (2023 - $59 million; 2022 - $55 million)
12, 13 and 23
Issuance of common shares upon exercise of stock options
Redemption of common shares
Dividends paid to non-controlling interests
Acquisition of non-controlling interests
Dividends paid to the Corporation’s Shareholders
Net change in cash and cash equivalents during the year
Currency translation on cash and cash equivalents
Cash and cash equivalents - Beginning of the year
Cash and cash equivalents - End of the year
The accompanying notes are an integral part of these Audited Consolidated Financial Statements.
19
19
7
7
2023
(76)
128
272
209
12
23
2
(13)
(22)
23
(129)
(9)
9
(32)
397
113
510
12
(350)
7
(1)
(332)
(3)
(92)
—
—
99
(144)
2
—
(36)
(3)
(48)
(225)
(47)
(1)
102
54
2022
(34)
88
252
102
(20)
3
6
(22)
(19)
20
(87)
(5)
12
(36)
260
(116)
144
1
(501)
19
(5)
(486)
2
323
355
(219)
—
(117)
1
(9)
(13)
(3)
(48)
272
(70)
(2)
174
102
2023 Annual Report
65
SEGMENTED INFORMATION
The Corporation’s operations are managed in three segments: Containerboard and Specialty Products (which constitutes the Corporation’s
Packaging Products) and Tissue Papers. The accounting policies of the reportable segments are the same as the Corporation’s accounting
policies described in Note 2.
The Corporation’s operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker (CODM). The Chief Executive Officer has authority for resource allocation and management of the Corporation’s
performance and is therefore the CODM. The CODM assesses the performance of each reportable segment based on sales and earnings
before interest, taxes, depreciation and amortization, adjusted to exclude specific items (EBITDA (A)). The CODM considers EBITDA (A) to
be the best performance measure of the Corporation’s activities.
Sales for each segment are prepared on the same basis as those of the Corporation. Inter-segment operations are recorded on the same
basis as sales to third parties, which are at fair market value.
EBITDA (A) does not have a standardized meaning under IFRS Accounting Standards; accordingly, it may not be comparable to similarly
named measures used by other companies. Investors should not view EBITDA (A) as an alternative measure to, for example, net earnings,
or as a measure of operating results, which are IFRS Accounting Standards measures.
Assets by business segment are presented in the following table:
(in millions of Canadian dollars)
Packaging Products
Containerboard
Specialty Products
Tissue Papers
Corporate, Recovery and Recycling activities
Intersegment eliminations
Investments in associates and joint ventures
Other investments
Property, plant and equipment by geographic segment are as follows:
(in millions of Canadian dollars)
Canada
United States
December 31,
2023
TOTAL ASSETS
December 31,
2022
2,740
362
3,102
954
678
(59)
4,675
94
3
4,772
2,789
365
3,154
1,216
641
(55)
4,956
94
3
5,053
PROPERTY, PLANT AND EQUIPMENT
December 31,
2023
December 31,
2022
961
1,847
2,808
1,005
1,940
2,945
Goodwill, customer relationships and client lists, and other finite and indefinite useful life intangible assets
by geographic segment are as follows:
(in millions of Canadian dollars)
Canada
United States
GOODWILL, CUSTOMER RELATIONSHIPS
AND CLIENT LISTS, AND OTHER FINITE AND
INDEFINITE USEFUL LIFE INTANGIBLE
ASSETS
December 31,
2023
December 31,
2022
262
275
537
277
284
561
66
2023 Annual Report
Sales by country by business segment are presented in the following table:
For the years ended December 31 (in millions of Canadian dollars)
2023
Canada
2022
United States
Other countries
2023
2022
2023
2022
2023
Packaging Products
Containerboard
Specialty Products
Inter-segment sales
Tissue Papers
Inter-segment sale, Corporate, Recovery and Recycling activities
1,314
230
1,326
236
961
408
938
417
(15)
(18)
(16)
(18)
1,529
1,544
551
100
449
138
1,353
1,064
27
1,337
973
22
2,180
2,131
2,444
2,332
2
4
—
6
—
8
14
1
1
—
2
—
1
3
2,277
642
(31)
2,888
1,615
135
4,638
Total
2022
2,265
654
(36)
2,883
1,422
161
4,466
SALES TO
EBITDA (A) by business segment is reconciled to IFRS Accounting Standards measure, namely operating
income (loss), and is presented in the following table:
(in millions of Canadian dollars)
Operating income (loss)
Depreciation and amortization
Impairment charges
Other loss (gain)
Restructuring costs
Unrealized loss (gain) on derivative financial instruments
EBITDA (A)
(in millions of Canadian dollars)
Operating income (loss)
Depreciation and amortization
Impairment charges
Other gain
Restructuring costs
Unrealized loss (gain) on derivative financial instruments
EBITDA (A)
NOTE Containerboard
Specialty
Products
Tissue Papers
Corporate,
Recovery and
Recycling
activities
Consolidated
For the year ended December 31, 2023
22
128
141
104
18
1
(2)
121
390
66
21
2
—
2
—
4
91
(2)
(152)
67
103
(6)
20
—
117
182
43
—
—
—
4
4
(105)
40
272
209
12
23
2
246
558
NOTE
Containerboard
Specialty
Products
Tissue Papers
Corporate,
Recovery and
Recycling
activities
Consolidated
For the year ended December 31, 2022
22
266
118
10
—
—
7
401
86
19
3
(16)
—
—
92
(175)
(144)
74
89
(4)
3
—
(13)
41
—
—
—
(1)
(104)
33
252
102
(20)
3
6
376
IMPAIRMENT CHARGES
2023
The Containerboard Packaging segment recorded an impairment charge of $2 million on spare parts and $59 million on some land
($3 million), building ($22 million) and equipment ($34 million) of a CGU (cash generating unit) subsequent to the permanent closure of one
paper machine in the USA. The decision was the result of competitive market conditions, which make the CGU less profitable. The
recoverable amount of the assets in operation, totaling $39 million, was determined using fair value less the cost of disposal based on the
market approach of comparable assets on the market.
The Containerboard Packaging segment also recorded an impairment charge of $8 million on spare parts and $35 million on some land
($1 million), building ($12 million) and equipment ($22 million) related to closure of plants announced in February 2024 in Ontario, Canada
and in Connecticut, USA. The recoverable amount of the assets totaling $35 million, was determined using fair value less cost of disposal
based on the market approach of comparable assets on the market.
2023 Annual Report
67
The Specialty Products segment recorded an impairment charge of $1 million on spare parts and $1 million on some equipment related to
a closed plant in the USA. The recoverable amount was determined using fair value less the cost of disposal based on the market
approach of comparable assets on the market.
The Tissue Papers segment recorded an impairment charge of $23 million on spare parts and $80 million on some buildings ($10 million)
and equipment ($70 million), consequent to the strategic repositioning of its operating platform. The decision includes the permanent
closure of three plants in the USA. The recoverable amount of $130 million for these three CGUs was determined using fair value less cost
of disposal based on the market approach of comparable assets on the market, as well, for one of the plants, the recoverable amount of
the real estate was established using the income method over a period of 20 years and a capitalization rate of 7.25%, no
impairment recognized for the latest.
2022
The Containerboard Packaging segment recorded an impairment charge of $10 million on some property, plant and equipment related to
the closure of a plant in Canada and to unused assets in Canada and the USA. The recoverable amount was determined using the market
approach of comparable assets on the market.
The Specialty Products segment recorded an impairment charge of $3 million on goodwill, related to the closure of a plant in the USA. The
recoverable amount of goodwill was determined using an income approach.
The Tissue Papers segment recorded an impairment charge of $4 million on spare parts and $10 million on some property, plant and
equipment related to the permanent closure of a plant in the USA. The recoverable amount was determined using the market approach of
comparable assets on the market.
The Tissue Papers segment also recorded an impairment charge of $55 million on machinery and equipment related to assets acquired in
2019 in the USA due to slower ramp-up and lower efficiency than expected. The recoverable amount was determined using the market
approach of comparable assets on the market. For the same plants, an impairment charge related to buildings of $20 million was recorded.
The recoverable amount was established using the income method over a period of 20 years and a capitalization rate of 7.25%.
OTHER LOSS (GAIN)
2023
The Containerboard Packaging segment recorded an environmental obligation of $18 million related to the closure of a plant announced in
February 2024 in Ontario, Canada. For further details, please refer to Note 14 and Note 26.
The Specialty Products segment recorded a $1 million loss on a contract of a closed plant in the USA.
The Specialty Products segment also recorded a $1 million gain from the sale of some machinery and equipment related to a closed plant
in the USA.
The Tissue Papers segment recorded a $2 million gain from the sale of some machinery and equipment related to a previously closed
plant in the USA.
The Tissue Papers segment also recorded a $4 million gain on a contract related to a closed plant in the USA.
2022
The Specialty Products segment recorded a $16 million gain from the sale of lands and a building related to closed plants in Canada.
The Tissue Papers segment recorded a $4 million gain from the settlement of a supply agreement.
RESTRUCTURING COSTS
2023
The Containerboard Packaging segment recorded costs totaling $1 million related to closed plants in Canada.
The Specialty Products segment recorded costs totaling $2 million related to closed plants in the USA.
The Tissue Papers segment recorded costs totaling $20 million related to the closures of the plants and severances, in the USA.
2022
The Tissue Papers segment recorded additional costs totaling $3 million related to assets relocation and severances.
68
2023 Annual Report
UNREALIZED LOSS (GAIN) ON DERIVATIVE FINANCIAL INSTRUMENTS
The Containerboard Packaging segment recorded an unrealized gain of $2 million in 2023 and an unrealized loss of $7 million in 2022,
from a steam contract embedded derivatives related to our Niagara Falls containerboard complex.
Corporate activities recorded an unrealized loss of $4 million in 2023 and an unrealized gain of $1 million in 2022 due to the financial
hedging contracts for natural gas purchases.
Payments for property, plant and equipment by business segment are presented in the following table:
For the years ended December 31 (in millions of Canadian dollars)
Packaging Products
Containerboard
Specialty Products
Tissue Papers
Corporate, Recovery and Recycling activities
Total acquisitions
Right-of-use assets acquisitions and provisions (non-cash)
Acquisitions for property, plant and equipment included in “Trade and other payables”
Beginning of the year
End of the year
Payments for property, plant and equipment
Proceeds from disposals of property, plant and equipment
Payments for property, plant and equipment net of proceeds from disposals
PAYMENTS FOR PROPERTY, PLANT AND
EQUIPMENT
2023
2022
223
32
255
39
49
343
(54)
289
106
(45)
350
(7)
343
481
40
521
55
43
619
(87)
532
75
(106)
501
(19)
482
2023 Annual Report
69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are in millions of Canadian dollars, except per common share and option amounts and number of common shares
and options.)
NOTE 1
GENERAL INFORMATION
Cascades Inc. and its subsidiaries (together “Cascades” or the “Corporation”) produce, convert and market packaging and tissue products
composed mainly of recycled fibres. Cascades Inc. is incorporated and domiciled in Québec, Canada. The address of its registered office
is 404 Marie-Victorin Boulevard, Kingsey Falls. Its common shares are listed on the Toronto Stock Exchange under the ticker
symbol “CAS”.
The Board of Directors approved the Consolidated Financial Statements on February 21, 2024.
NOTE 2
SUMMARY OF MATERIAL ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Corporation prepares its financial statements in accordance with Canadian generally accepted accounting principles (GAAP) as set
forth in Part I of the Chartered Professional Accountants of Canada (CPA Canada) Handbook – Accounting, which incorporates
International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards). The
key accounting policies applied in the preparation of these Consolidated Financial Statements are described below.
BASIS OF MEASUREMENT
The Consolidated Financial Statements have been prepared under the historical cost convention, except for the revaluation of certain
financial assets and liabilities, including derivative instruments, which are measured at fair value.
BASIS OF CONSOLIDATION
These Consolidated Financial Statements include the accounts of the Corporation, which include:
SUBSIDIARIES
Subsidiaries are all entities over which the Corporation has control, where control is defined as the power to direct decisions about relevant
activities. The existence and effect of potential voting rights that are exercisable or convertible are considered when assessing whether the
Corporation controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Corporation.
They are unconsolidated from the date on which control ceases. Accounting policies of subsidiaries have been changed, where necessary,
to ensure consistency with the policies adopted by the Corporation. The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Corporation. Results of operations are consolidated commencing on the date of acquisition. The
purchase consideration is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at
the date of exchange. The transaction costs directly attributable to the acquisition are expensed. Identifiable assets acquired, as well as
liabilities and contingent liabilities assumed in a business combination, are measured initially at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interests. The excess of the purchase consideration over the fair value of the Corporation’s
share of the identifiable net assets acquired is recorded as goodwill. If the purchase consideration is less than the fair value of the net
assets of the subsidiary acquired, the difference is recognized directly in the consolidated statement of earnings. Intercompany
transactions, balances and unrealized gains on transactions between subsidiaries are eliminated.
The following are the principal subsidiaries of the Corporation:
Cascades Canada ULC
Cascades USA Inc.
Greenpac Holding LLC1
1 Including indirect ownership, percentage stands at 86.35% for accounting purposes. See Note 7 for more details.
PERCENTAGE OWNED (%)
JURISDICTION
100
100
79.90
Canada
Delaware
Delaware
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2023 Annual Report
REVENUE FROM CONTRACT WITH CUSTOMERS
The revenues of the Corporation come mainly from sales of packaging and tissue products that are recognized at a point in time. Sales of
goods in the consolidated statement of earnings are recognized by the Corporation when control of the goods has been transferred, being
when the goods are delivered to customers and when all performance obligations have been fulfilled.
The amounts recognized as sales of goods represent the fair values of the considerations received or receivable from third parties on the
sales of goods to customers, net of returns, volume rebates and discounts, at which time there are no conditions for the payment to
become due other than the passage of time. Accumulated experience is used to estimate and provide for discounts and returns (expected
value method), whereas volume discounts are assessed based on anticipated annual sales (most likely amount method). The transaction
price is not adjusted for the time value of money since all sales are due within twelve months.
FINANCIAL INSTRUMENTS AND HEDGING RELATIONSHIPS
Financial assets and financial liabilities are recognized when the Corporation becomes a party to the contractual provisions of the
instrument. Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet when there
is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or to realize the asset and
settle the liability simultaneously.
A. CLASSIFICATION
On initial recognition, the Corporation determines the financial instruments classification as per the following categories:
•
•
•
instruments measured at amortized cost;
instruments measured at fair value through other comprehensive income (FVOCI);
instruments measured at fair value through net income (FVTPL).
The financial instruments’ classification under IFRS 9 is based on the business model in which a financial asset is managed and on its
contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial instrument in the scope of the
standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated at FVTPL:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
Equity investments not subject to significant influence and held for trading are classified as FVTPL. The Corporation, on initial recognition,
may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (OCI). This election is
made on an investment-by-investment basis.
Financial liabilities are measured at amortized cost unless they must be measured at FVTPL (such as derivatives) or if the Corporation
elects to measure them at FVTPL.
B. EVALUATION
Financial instruments at amortized cost
Financial instruments at amortized cost are initially measured at fair value and subsequently at amortized cost, using the effective interest
method, less any impairment loss. Interest income, foreign exchange gains and losses and impairment are recognized in the consolidated
statement of earnings.
Financial instruments at fair value
Financial instruments are initially and subsequently measured at fair value and transaction costs are accounted for in the consolidated
statement of earnings. When the Corporation elects to measure a financial liability at FVTPL, gains or losses related to the Corporation’s
own credit risk are accounted for in the consolidated statement of earnings.
IMPAIRMENT
C.
The Corporation prospectively estimates the expected credit losses associated with the debt instruments accounted for at amortized cost
or FVOCI. The impairment methodology used depends on whether there is a significant increase in the credit risk or not. For trade
receivables, the Corporation measures loss allowances at an amount equal to lifetime expected credit loss (ECL) as allowed by IFRS 9
under the simplified method.
2023 Annual Report
71
D. DERECOGNITION
Financial assets
The Corporation derecognizes a financial asset when and only when the contractual rights to the cash flows from the financial asset have
expired or when contractual rights to the cash flows have been transferred.
Financial liabilities
The Corporation derecognizes a financial liability when and only when it is extinguished, meaning when the obligation specified in the
contract is discharged, cancelled or expired. The difference between the carrying amount of the extinguished financial liability and the
consideration paid or payable, including non-cash assets transferred or liabilities assumed, is recognized in the consolidated statement
of earnings.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, bank balances and short-term liquid investments with original maturities of three
months or less.
ACCOUNTS RECEIVABLE
Accounts receivable are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method,
less an expected credit loss allowance that is based on expected collectability.
INVENTORIES
Inventories of finished goods are valued at the lower of cost, which is established using the average production cost, and net realizable
value. Inventories of raw materials as well as supplies and spare parts are valued at the lower of cost and replacement value, which is the
best available measure of their net realizable value. Cost for both raw materials and supplies and spare parts is determined using the
average cost. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion
and the estimated costs necessary to make the sale.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment are recorded at cost, including capitalized interest incurred during the construction period of qualifying
assets, less accumulated depreciation and net impairment losses. Repairs and maintenance costs are charged to the consolidated
statement of earnings during the period in which they are incurred. Residual values, method of depreciation and useful lives of the assets
are reviewed annually and adjusted if appropriate.
Depreciation is calculated on a straight-line basis as follows:
Buildings
Machinery and equipment
Automotive equipment
Right-of-use assets
Between 10 and 33 years
Between 3 and 30 years
Between 5 and 10 years
Lease term
BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use, are added to the cost of those assets until all the activities necessary to
prepare the asset for its intended use are complete. The capitalized borrowing costs for major acquisition, construction or production of
qualifying assets, which are financed through non directly attributable sources, are calculated using the actual interest rate, if not available
the Cascades’ long-term incremental borrowing rate. All other borrowing costs are recognized in the consolidated statement of earnings in
the period in which they are incurred.
INTANGIBLE ASSETS
Intangible assets consist primarily of customer relationships and client lists, as well as application software. They are recorded at cost less
accumulated amortization and impairment losses and amortized on a straight-line basis over the estimated useful lives as follows:
Application software
Enterprise Resource Planning (ERP)
Customer relationships and client lists
Other intangible assets with finite useful life
Between 3 and 10 years
7 years
Between 2 and 20 years
Between 2 and 20 years
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
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2023 Annual Report
GOODWILL AND OTHER INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIFE
Goodwill and other intangible assets with an indefinite useful life are recognized at cost less any impairment losses. They have an
indefinite useful life due to their permanent nature since they are acquired rights or not subject to wear and tear.
IMPAIRMENT
A. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS WITH FINITE USEFUL LIFE
At the end of each reporting period, the Corporation assesses whether there is an indicator that the carrying amount of an asset or a group
of assets may be higher than its recoverable amount, which is described in section C hereunder. For that purpose, assets are grouped at
the lowest levels for which there are separately identifiable cash inflows (cash generating units (CGUs)). If there is any indication that an
individual asset may be impaired, the recoverable amount shall be estimated for the individual asset.
When the recoverable amount is lower than the carrying amount, the carrying amount is reduced to the recoverable amount. Impairment
losses are recorded immediately in the consolidated statement of earnings in the line item “Impairment charges”. Impairment losses are
evaluated for potential reversals when events or changes in circumstances warrant such consideration. The revalued carrying value is the
lower of the estimated recoverable amount and the carrying amount that would have been determined had no impairment loss been
recognized and depreciation had been taken previously on the asset or CGU. A reversal of impairment loss is recorded directly in the
consolidated statement of earnings in the line item “Impairment charges”.
B. GOODWILL AND OTHER INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIFE
Goodwill and other intangible assets are assessed for impairment annually on December 31 or when an event or a circumstance occurs
and indicates that the value could be permanently impaired. Goodwill is allocated to CGUs for the purpose of impairment assessment
based on the lower level at which Management monitors it, which is not higher than an operating segment. The allocation is made to CGUs
that are expected to benefit from the business combination in which the goodwill and other intangible assets with an indefinite useful life
arose. Impairment loss on goodwill is not reversed.
C. RECOVERABLE AMOUNTS
A recoverable amount is the higher of fair value less cost of disposal and value in use. To determine the recoverable amount of each asset
or CGU, the Corporation uses the fair value less cost of disposal calculation based on the market approach, if a market exists for the asset
or CGU, or the income approach.
LONG-TERM DEBT
Long-term debt is recognized initially at fair value, net of financing costs incurred. Long-term debt is subsequently carried at amortized
cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement
of earnings over the period of the term of the debt using the effective interest method.
Financing costs paid on establishment of the revolving credit facility are recognized as deferred financing costs in the consolidated balance
sheet under other assets and are amortized on a straight-line basis over the anticipated period of the credit facility.
LEASES
The Corporation recognizes, in the consolidated balance sheet, a lease liability and a corresponding right-of-use asset at the date at which
the leased asset is available for use. Subsequently, lease payments are allocated between the liability and finance cost. Right-of-use
assets are depreciated over the lease term on a straight-line basis.
The lease liability equals the net present value of the lease payments discounted using the interest rate implicit in the lease or the
Corporation’s incremental borrowing rate, which is determined for each lease.
Right-of-use assets are measured at cost, which includes the initial lease liability amount, lease payments made at or before the lease
commencement date less lease incentives, initial direct costs and restoration costs.
The Corporation uses the low-value exception, as well as the short-term exception on all categories of assets, except buildings.
The Corporation does not apply IFRS 16 to leases of intangible assets.
2023 Annual Report
73
ENVIRONMENTAL RESTORATION OBLIGATIONS AND ENVIRONMENTAL COSTS
An obligation to incur restoration and environmental costs arises when environmental disturbance is caused by the development or
ongoing production of a plant or landfill site. Such costs arising from the installation of a plant and other site preparation work are provided
for and capitalized at the start of each project or as soon as the obligation to incur such costs arises. Decommissioning costs are recorded
at the estimated amount at which the obligation could be settled at the consolidated balance sheet date and are charged against earnings
over the life of the operation through the depreciation of the asset and the unwinding of the discount on the provision. The discount rate is
the pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Costs for restoring
subsequent site damage that is created on an ongoing basis during production are provided for at their present values and charged against
earnings as the obligation arises.
Changes in the measurement of a liability relating to the decommissioning of a plant or other site preparation work resulting from changes
in the estimated timing or amount of the cash flow or a change in the discount rate are added to or deducted from the cost of the related
asset in the current year. If a decrease in the liability exceeds the carrying amount of the asset, the excess is recognized immediately in
the consolidated statement of earnings. If the asset value is increased and there is an indication that the revised carrying value is not
recoverable, an impairment test is performed in accordance with the accounting policy for impairment testing.
EMPLOYEE BENEFITS
The Corporation offers funded and unfunded defined benefit pension plans, defined contribution pension plans and group registered
retirement savings plans (RRSPs) that provide retirement benefit payments for most of its employees. The defined benefit pension plans
are usually contributory and are based on the number of years of service and, in most cases, the average salary or compensation at the
end of a career. Retirement benefits are not adjusted based on inflation. The Corporation also offers its employees some post-employment
benefit plans such as a retirement allowance, group life insurance and medical and dental plans. However, these benefits, other than
pension plans, are not funded. Furthermore, the medical and dental plans upon retirement are being phased out and are no longer offered
to the majority of new retirees and the retirement allowance is not offered to those who do not meet certain criteria.
The liability recognized in the consolidated balance sheet in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated at least
every three years by independent actuaries using the projected unit credit method and regularly updated by Management for any material
transactions and changes in circumstances, including changes in market prices and interest rates up to the end of the reporting period.
As well, when an asset is recorded for a pension plan, its carrying value cannot be greater than the future economic benefit that the
Corporation will get from the asset. The future economic benefit includes the suspension of contribution if the pension plan provisions allow
for it under the minimum funding requirements. When there is a minimum funding requirement, it can increase the liability recorded. All
special contributions legally required to fund a plan deficit are considered. For plans for which an actuarial evaluation is required as of
December 31, 2023, a schedule of contributions is estimated to establish the minimum funding requirement. For other plans, we have used
contributions from the most recent actuarial report.
Actuarial gains and losses that arise in calculating the present value of the defined benefit obligation and the fair value of plan assets are
recorded in the consolidated statement of other comprehensive income and recognized immediately in retained earnings without recycling
to the consolidated statement of earnings. Past service costs are recognized immediately in the consolidated statement of earnings.
When restructuring a plan results in a curtailment and settlement occurring at the same time, the curtailment is accounted for before
the settlement.
Interest costs on pensions and other post-employment benefits are recognized in the consolidated statement of earnings as “Financing
expense”. The measurement date of the employee future benefits plans is December 31 of each year. An actuarial evaluation is performed
at least every three years. Based on their balances as of December 31, 2023, 94% of the Corporation’s plans had been evaluated on
December 31, 2022 (19% in 2021).
FOREIGN CURRENCY TRANSLATION
Items included in the financial statements of each of the Corporation’s entities are measured using the currency of the primary economic
environment in which the business unit operates (the “functional currency”). The Consolidated Financial Statements are presented in
Canadian dollars, which is Cascades’ functional currency.
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2023 Annual Report
SHARE-BASED PAYMENTS
The Corporation uses the fair value method of accounting for stock-based compensation awards granted to officers and key employees.
This method consists of recording expenses to earnings based on the vesting period of each tranche of options granted. The fair value of
each tranche is calculated based on the Black-Scholes option pricing model. This model was developed for use in estimating the fair value
of traded options that have no vesting restrictions and are fully transferable. When stock options are exercised, any considerations paid by
employees, as well as the related stock-based compensation, are credited to capital stock.
DIVIDEND DISTRIBUTION
Dividend distribution to the Corporation’s Shareholders is recognized as a liability in the Consolidated Financial Statements in the period in
which the dividends are approved by the Corporation’s Board of Directors.
EARNINGS PER COMMON SHARE
Basic earnings per common share are determined using the weighted average number of common shares outstanding during the period.
Diluted earnings per common share are determined by adjusting the weighted average number of common shares outstanding for dilutive
instruments, which are primarily stock options, using the treasury stock method to evaluate the dilutive effect of stock options. Under this
method, instruments with a dilutive effect, which is when the average market price of a share for the period exceeds the exercise price, are
considered to have been exercised at the beginning of the period and the proceeds received are considered to have been used to redeem
common shares of the Corporation at the average market price for the period.
NOTE 3
CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
A. NEW IFRS ACCOUNTING STANDARDS ADOPTED
Disclosure of Accounting Policy Information - Amendments to IAS 1 and IFRS Practice Statement 2
In February 2021, the International Accounting Standards Board (IASB®) amended IAS 1 Presentation of Financial Statement and IFRS
Practice Statement 2 Making Materiality Judgements to require the Corporation to disclose its material accounting policies rather than its
significant accounting policies.
implementation of
The
Financial Statements.
these standard amendments resulted
in no significant
impact of
the Corporation’s Consolidated
IFRS 17 Insurance Contracts
IFRS 17 Insurance Contracts was issued in May 2017 as replacement for IFRS 4 Insurance Contracts. The amendments deferred the
application date of IFRS 17 to January 1, 2023. IFRS 17 Insurance Contracts, applies to insurance contracts regardless of the entity that
issues them and so it does not apply only to traditional insurance entities. IFRS 17 Insurance Contracts defines an insurance contract as
an agreement where one party, the insurer, accepts significant insurance risk from another party, the policy holder, by agreeing to
compensate the policy holder if a specified uncertain future event adversely affects the policy holder.
The standard became effective on January 1, 2023 and had no impact on the Corporation’s Consolidated Financial Statements.
International Tax Reform—Pillar Two Model Rules, amendments to IAS 12 Income Taxes
On May 23, 2023, the IASB published an amendment to IAS 12 to introduce a mandatory temporary exemption to the accounting for
deferred taxes arising from jurisdictional tax law enacted or substantively enacted to implement the Pillar Two Model Rules that were
published by the Organisation for Economic Co-operation and Development (OECD) and new disclosure requirements for affected entities.
The Global Anti-Base Erosion Rules (GloBE) are a key component of the Pillar Two Model Rules and ensure large multinational
enterprises pay a minimum level of tax on the income arising in each of the jurisdictions where they operate. The impact on the
Corporation of the Pillar Two Model rules, including GloBE, is under assessment and a reasonable estimate shall be available once
applicable jurisdictional tax law is substantively enacted.
2023 Annual Report
75
B. RECENT IFRS ACCOUNTING STANDARDS NOT YET ADOPTED
IAS 7 and IFRS 7 Amendments Relating to Supplier Finance Arrangements
IAS 7 and IFRS 7 Amendments Relating to Supplier Finance Arrangements require disclosures to enhance the transparency of supplier
finance arrangements and their effects on an entity’s liabilities, cash flows and exposure to liquidity risk. The Corporation has an
arrangement that is subject to the new requirements and is currently evaluating the impact on the disclosures in the Consolidated
Financial Statements.
Amendment to IAS 1 – Non-current liabilities with covenants
These amendments clarify how conditions with which an entity must comply within twelve months after the reporting period affect the
classification of a liability. The Corporation has covenants that are subject to this amendment and evaluates that there is no impact on the
disclosures in the Consolidated Financial Statements as of December 31, 2023.
NOTE 4
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with IFRS Accounting Standards requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial statements and disclosure of contingencies at the balance sheet date,
and the reported amounts of revenues and expenses during the reporting period. On a regular basis and with the information available,
Management reviews its estimates, including those related to environmental costs, employee future benefits, collectability of accounts
receivable, financial instruments, contingencies, income taxes, useful life and residual value of property, plant and equipment and
impairment of property, plant and equipment and intangible assets. Actual results could differ from those estimates. When adjustments
become necessary, they are reported in earnings in the period in which they occur.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
A.
In determining the recoverable amount of an asset or CGU, based on the market approach, Management uses the value of comparable
assets on the market. In determining the recoverable amount of an asset or CGU, based on the income approach, Management uses
several key assumptions, including estimated shipment levels, foreign exchange rates, revenue growth rates, adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA (A)) margins, discount rates, capitalization rate and capital expenditures.
The Corporation believes its assumptions are reasonable. Based on available information at the assessment date, however, these
assumptions involve a high degree of judgment and complexity. Management believes that the following assumptions are the most
susceptible to change and therefore could impact the valuation of the assets in the next year.
DESCRIPTION OF SIGNIFICANT IMPAIRMENT TESTING ASSUMPTIONS (see Note 22)
REVENUES, ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA (A)) MARGINS,
CASH FLOWS AND GROWTH RATES
The assumptions used for revenues were based on the segment’s internal budget and were projected for a period of five years and a long-
term growth rate of 3% was applied thereafter. The assumption used for EBITDA (A) margin was based on the segment’s historical
performance. In arriving at its forecasts, the Corporation considers past experience, economic trends such as gross domestic product
growth and inflation, as well as industry and market trends.
DISCOUNT RATES
The Corporation assumed a discount rate in order to calculate the present value of its projected cash flows. The discount rate represents a
weighted average cost of capital (WACC) for comparable companies operating in similar industries of the applicable CGU, group of CGUs
or reportable segment based on publicly available information.
CAPITALIZATION RATES
The Corporation assumed a capitalization rate in order to calculate the present value of its property cash flows. The capitalization rate
represents a real estate valuation measure used to compare different real estate investments. The capitalization rate is calculated as the
ratio between the annual rental income produced by a real estate asset to its current market value.
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2023 Annual Report
FOREIGN EXCHANGE RATES
When estimating the fair value less cost of disposal, foreign exchange rates are determined using the financial institution’s average
forecast for the first two years of forecasting. For the following three years, the Corporation uses the last five years’ historical average of
the foreign exchange rate. Terminal rate is based on historical data of the last ten years and adjusted to reflect Management’s
best estimate of market participants expectations.
SHIPMENTS
The assumptions used are based on the Corporation’s internal budget for the next year and are usually held constant for the established
capacity, for new capacity the ramp up is considered over the forecast period. In arriving at its budgeted shipments, the Corporation
considers past experience, economic, industry and market trends.
Considering the sensitivity of the key assumptions used, there is measurement uncertainty since adverse changes in one or a combination
of the Corporation’s key assumptions could cause a significant change in the carrying amounts of these assets.
INCOME TAXES
B.
The Corporation is required to estimate the income taxes in each jurisdiction in which it operates. This includes estimating a value for
existing tax losses based on the Corporation’s assessment of its ability to use them against future taxable income before they expire. If the
Corporation’s assessment of its ability to use the tax losses proves inaccurate in the future, more or less of the tax losses might be
recognized as assets, which would increase or decrease the income tax expense and, consequently, affect the Corporation’s results in the
relevant year.
C. EMPLOYEE BENEFITS
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of
high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity
approximating the terms of the related pension liability.
The cost of pensions and other retirement benefits earned by employees is determined by actuaries using the projected benefit method
pro-rated on years of service and Management’s best estimate of expected plan investment performance, salary escalations, retirement
ages of employees and expected health care costs. The accrued benefit obligation is evaluated using the market interest rate at the
evaluation date. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. All assumptions are
reviewed annually.
NOTE 5
ACCOUNTS RECEIVABLE
(in millions of Canadian dollars)
Accounts receivable - Trade
Receivables from related parties
Less: expected credit loss allowance
Trade receivables - net
Other
NOTE
25
2023
419
19
(7)
431
22
453
2022
502
27
(4)
525
31
556
As of December 31, 2023, trade receivables of $93 million, including $47 million within 30 days (December 31, 2022 - $132 million,
including $61 million within 30 days) were past due.
Past due receivables are before any commercial claims, which are accounted under customers contracts liabilities. For further details,
please refer to Note 11.
2023 Annual Report
77
Movements in the Corporation’s expected credit loss allowance are as follows:
(in millions of Canadian dollars)
Balance at beginning of year
Provision for expected credit loss allowance
Receivables written off during the year as uncollectable
Balance at end of year
2023
2022
4
5
(2)
7
4
1
(1)
4
The change in the expected credit loss allowance has been included in “Other operational costs” in the consolidated statement of earnings.
The maximum exposure to credit risk at the reporting period approximates the carrying value of each class of receivable mentioned above.
NOTE 6
INVENTORIES
(in millions of Canadian dollars)
Finished goods
Raw materials
Supplies and spare parts
2023
246
111
211
568
2022
238
135
214
587
As of December 31, 2023, finished goods, raw materials and supplies and spare parts inventories have been adjusted to their net
realizable value (NRV) requiring a provision of $10 million, $2 million and $18 million, respectively (December 31, 2022 - $9 million,
$2 million and $8 million).
In 2023, the Corporation reversed no provision that gets recorded against spare parts inventories (none in 2022). No reversal of previously
written-down finished goods or raw materials inventory occurred in 2023 or 2022. The cost of raw materials and supplies and spare parts
included in “Supply chain and logistic” amounted to $1,597 million (2022 - $1,611 million).
NOTE 7
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES AND SUBSIDIARIES WITH NON-
CONTROLLING INTERESTS
A.
INVESTMENTS IN ASSOCIATES AND JOINT VENTURES ARE DETAILED AS FOLLOWS:
(in millions of Canadian dollars)
Investments in associates
Investments in joint ventures
2023
26
68
94
2022
25
69
94
INVESTMENTS IN ASSOCIATES
B.
The Corporation did not hold any significant participation in associates in 2023 and 2022.
INVESTMENTS IN JOINT VENTURES
C.
The following are the principal joint ventures of the Corporation and the Corporation’s percentage of equity owned:
Cascades Sonoco US Inc.1
Cascades Sonoco inc.1
Maritime Paper Products Limited Partnership (MPPLP)2
Tencorr Holdings Corporation3
2023-2022 PERCENTAGE EQUITY OWNED (%)
PRINCIPAL ESTABLISHMENT
50 Birmingham, Alabama and Tacoma, Washington, United States
50
40
33.33
Kingsey Falls and Berthierville, Québec, Canada
Dartmouth, Nova Scotia, Canada
Brampton, Ontario, Canada
1 Joint ventures producing specialty paper packaging products such as headers, rolls and wrappers.
2 MPPLP is a Canadian corporation converting containerboard.
3 Tencorr Holdings Corporation operates as a supplier of corrugated sheet stock.
78
2023 Annual Report
The Corporation’s joint ventures information (100%), translated in millions of Canadian dollars, is as follows:
(in millions of Canadian dollars)
Condensed balance sheet
Cash and cash equivalents
Current assets (other than cash and cash equivalents and current
financial assets)
Long-term assets (other than long-term financial assets)
Current liabilities (other than current financial liabilities)
Current financial liabilities
Long-term liabilities (other than long-term financial liabilities)
Long-term financial liabilities
Condensed statement of earnings
Sales
Depreciation and amortization
Financing expense
Provision for (recovery of) income taxes
Net earnings
Other comprehensive income (loss)
Translation adjustment
Total comprehensive income
Dividends received from joint ventures
(in millions of Canadian dollars)
Condensed balance sheet
Cash and cash equivalents
Current assets (other than cash and cash equivalents and current
financial assets)
Long-term assets (other than long-term financial assets)
Current liabilities (other than current financial liabilities)
Current financial liabilities
Long-term liabilities (other than long-term financial liabilities)
Long-term financial liabilities
Condensed statement of earnings
Sales
Depreciation and amortization
Financing expense
Provision for (recovery of) income taxes
Net earnings (loss)
Other comprehensive income (loss)
Translation adjustment
Total comprehensive income (loss)
Dividends received from joint ventures
CASCADES SONOCO US INC.
CASCADES SONOCO INC.
2023
MARITIME PAPER
PRODUCTS LIMITED
PARTNERSHIP
TENCORR HOLDINGS
CORPORATION
4
23
34
7
2
4
4
82
5
—
1
5
(1)
4
1
7
24
15
8
1
2
1
90
2
—
4
11
—
11
5
15
27
30
8
—
—
—
127
4
—
—
6
—
6
—
16
23
10
29
4
3
—
166
1
—
(1)
—
—
—
—
2022
CASCADES SONOCO US INC.
CASCADES SONOCO INC.
MARITIME PAPER
PRODUCTS LIMITED
PARTNERSHIP
TENCORR HOLDINGS
CORPORATION
1
28
39
13
2
5
6
108
5
1
2
7
3
10
3
4
30
15
11
1
2
2
112
2
—
5
13
—
13
4
1
33
30
4
—
—
—
138
3
—
—
4
—
4
—
17
21
10
27
4
3
—
138
1
—
(2)
(1)
—
(1)
—
Commitments of the joint ventures are less than a million dollars in 2023 and 2022.
D. NON-SIGNIFICANT ASSOCIATES AND JOINT VENTURES
The carrying value of investments in associates and joint ventures that do not have a significant impact on the Corporation is as follows:
(in millions of Canadian dollars)
Non-significant associates
Non-significant joint ventures
2023 Annual Report
2023
26
5
31
2022
25
9
34
79
The shares of results of non-significant associates and joint ventures for the Corporation are as follows:
(in millions of Canadian dollars)
Non-significant associates
Non-significant joint ventures
Gain from the sale of investments in non-significant joint ventures
2023
1
1
10
12
2022
5
2
—
7
In 2023, the Corporation recorded a gain in the consolidated statement of earnings in the line item “Share of results of associates and joint
ventures” of $10 million from the sale of investments in non-significant joint ventures. The Corporation received $12 million from
these sales.
The Corporation received dividends of $3 million from these associates and joint ventures as of December 31, 2023 (December 31, 2022 -
$5 million).
E. SUBSIDIARIES WITH NON-CONTROLLING INTERESTS
The Corporation’s information for its subsidiaries with significant non-controlling interests is as follows:
(in millions of Canadian dollars, unless otherwise noted)
Principal establishment
FALCON
PACKAGING LLC
Ohio,
United States
2023
GREENPAC
HOLDING LLC
New York,
United States
FALCON
PACKAGING LLC
Ohio,
United States
2022
GREENPAC
HOLDING LLC
New York,
United States
Percentage of shares held by non-controlling interests (accounting basis)
11.00%
13.65%
14.00%
13.65%
Net earnings attributable to non-controlling interests
Non-controlling interests accumulated at the end of the year
Dividends paid to non-controlling interests
Condensed balance sheet
Cash and cash equivalents
Current assets (other than cash and cash equivalents and current financial assets)
Long-term assets (other than long-term financial assets)
Current liabilities (other than current financial liabilities)
Current financial liabilities
Long-term liabilities (other than long-term financial liabilities)
Long-term financial liabilities
Condensed statement of earnings
Sales
Depreciation and amortization
Net earnings
Condensed cash flow
Cash flows from operating activities
Cash flows used for investing activities
Cash flows used for financing activities
1
2
1
8
19
31
15
—
—
2
224
1
11
14
—
(13)
22
40
35
3
103
483
52
9
1
102
532
38
167
228
(8)
(250)
2
3
1
7
20
33
15
1
—
4
207
1
10
12
—
(10)
18
54
12
34
127
522
51
75
1
18
569
39
139
178
(6)
(159)
In 2023, the Corporation increased its participation in Falcon Packaging LLC in the Specialty Products segment for a contribution of
$3 million (2022 - $3 million) representing the last tranche of a call option.
80
2023 Annual Report
NOTE 8
PROPERTY, PLANT AND EQUIPMENT
(in millions of Canadian dollars)
As of January 1, 2022
Cost
Accumulated depreciation and impairment
Net book amount
Year ended December 31, 2022
Opening net book amount
Additions
Disposals
Depreciation
Impairment charges
Others
Exchange differences
Closing net book amount
As of December 31, 2022
Cost
Accumulated depreciation and impairment
Net book amount
Year ended December 31, 2023
Opening net book amount
Additions
Disposals
Depreciation
Impairment charges
Others
Exchange differences
Closing net book amount
As of December 31, 2023
Cost
Accumulated depreciation and impairment
Net book amount
NOTE
LAND AND LAND
IMPROVEMENTS
BUILDINGS AND
LEASEHOLD
IMPROVEMENT
MACHINERY AND
EQUIPMENT
AUTOMOTIVE
EQUIPMENT
RIGHT-OF-USE
ASSETS
(Note 13)
22
22
112
—
112
112
1
—
—
—
—
4
117
117
—
117
117
—
(1)
—
(4)
—
(1)
111
115
4
111
980
379
601
601
139
—
(22)
(22)
(1)
28
723
1,152
429
723
723
80
(1)
(28)
(44)
(5)
(11)
714
1,177
463
714
3,391
1,774
1,617
1,617
378
(1)
(144)
(73)
13
84
1,874
3,849
1,975
1,874
1,874
196
—
(153)
(127)
—
(28)
1,762
3,780
2,018
1,762
132
89
43
43
14
—
(10)
—
—
—
47
143
96
47
47
17
—
(11)
—
1
(1)
53
154
101
53
277
128
149
149
87
(2)
(56)
—
1
5
184
359
175
184
184
50
(3)
(60)
—
(1)
(2)
168
382
214
168
TOTAL
4,892
2,370
2,522
2,522
619
(3)
(232)
(95)
13
121
2,945
5,620
2,675
2,945
2,945
343
(5)
(252)
(175)
(5)
(43)
2,808
5,608
2,800
2,808
Property, plant and equipment includes assets in the process of construction or installation with a book value of $67 million
(December 31, 2022 - $698 million of which $575 million is for the new Bear Island containerboard mill). Deposits on purchases of
machinery and equipment represent $1 million (December 31, 2022 - less than a million dollars).
In 2023, $10 million (2022 - $15 million) of interest incurred on qualifying assets was capitalized. The weighted average capitalization rate
on funds borrowed in 2023 was 5.68% (2022 - 4.88%).
The Corporation recorded impairment charges of $175 million in 2023 (2022 - $95 million), for further details please refer to Note 22.
The Corporation revised the allocation among categories of property, plant and equipment and removed the category “Other”, the amounts
for 2022 were adjusted accordingly.
2023 Annual Report
81
NOTE 9
GOODWILL AND OTHER INTANGIBLE ASSETS WITH FINITE AND INDEFINITE USEFUL LIFE
(in millions of Canadian dollars)
As of January 1, 2022
Cost
Accumulated amortization and impairment
Net book amount
Year ended December 31, 2022
Opening net book amount
Additions
Impairment charges
Amortization
Exchange differences
Closing net book amount
As of December 31, 2022
Cost
Accumulated amortization and impairment
Net book amount
Year ended December 31, 2023
Opening net book amount
Additions
Amortization
Exchange differences
Closing net book amount
As of December 31, 2023
Cost
Accumulated amortization and impairment
Net book amount
APPLICATION
SOFTWARE
AND ERP
CUSTOMER
RELATIONSHIPS
AND
CLIENT LISTS
NOTE
OTHER
INTANGIBLE
ASSETS WITH
FINITE
USEFUL LIFE
TOTAL
INTANGIBLE
ASSETS WITH
FINITE
USEFUL LIFE
OTHER
INTANGIBLE
ASSETS WITH
INDEFINITE
USEFUL LIFE
TOTAL
INTANGIBLE
ASSETS WITH
INDEFINITE
USEFUL LIFE
GOODWILL
22
161
108
53
53
2
—
(16)
—
39
163
124
39
39
1
(15)
—
25
135
110
25
132
98
34
34
—
—
(3)
2
33
134
101
33
33
—
(4)
—
29
133
104
29
4
3
1
1
—
—
—
—
1
4
3
1
1
—
—
—
1
4
3
1
297
209
88
88
2
—
(19)
2
73
301
228
73
73
1
(19)
—
55
272
217
55
472
—
472
472
—
(3)
—
18
487
487
—
487
487
—
—
(6)
481
481
—
481
1
—
1
1
—
—
—
—
1
1
—
1
1
—
—
—
1
1
—
1
473
—
473
473
—
(3)
—
18
488
488
—
488
488
—
—
(6)
482
482
—
482
The Corporation recorded no impairment charges in 2023 (2022 - $3 million), for further details please refer to Note 22.
NOTE 10
OTHER ASSETS
(in millions of Canadian dollars)
Long-term notes receivable
Other investments
Deferred charges and financing costs
Employee future benefits
NOTE
2023
2022
9
3
20
46
78
8
3
19
40
70
17
An amortization expense of $1 million (2022 - $1 million) was booked against deferred charges and financing costs.
82
2023 Annual Report
NOTE 11
TRADE AND OTHER PAYABLES
(in millions of Canadian dollars)
Trade payables
Payables to related parties
Customers contracts liabilities
Accrued expenses
Movements in the Corporation’s customers contracts liabilities are as follows:
(in millions of Canadian dollars)
Balance at beginning of year
Provision for customers contracts liabilities
Customers contracts liabilities payments
Exchange differences
Balance at end of year
NOTE 12
LONG-TERM DEBT
(in millions of Canadian dollars)
NOTE
25
2023
505
3
60
135
703
2023
72
151
(162)
(1)
60
2022
532
6
72
136
746
2022
64
124
(118)
2
72
NOTE
MATURITY
2023
2022
2026
2025
2026
2028
2027
Revolving credit facility, weighted average interest rate of 7.16% as of December 31, 2023
and consists of US$190 million (December 31, 2022 - US$258 million)
12(a)
5.125% Unsecured senior notes of $175 million
5.125% Unsecured senior notes of US$206 million
5.375% Unsecured senior notes of US$445 million and $5 million of unamortized premium
as of December 31, 2023 (December 31, 2022 - US$445 million and $6 million of
unamortized premium)
Term loan of US$260 million, interest rate of 7.46% as of December 31, 2023
Lease obligations with recourse to the Corporation
Other debts with recourse to the Corporation
Lease obligations without recourse to the Corporation
Other debts without recourse to the Corporation
Less: Unamortized financing costs
Total long-term debt
Less:
12(a)
12(b)
12(b)
12(c)
Current portion of lease obligations with recourse to the Corporation
Current portion of other debts with recourse to the Corporation
Current portion of lease obligations without recourse to the Corporation
Current portion of other debts without recourse to the Corporation
12(c)
252
175
272
595
344
174
23
15
93
1,943
7
1,936
51
8
8
—
67
1,869
350
175
279
610
352
186
31
22
69
2,074
9
2,065
46
12
8
68
134
1,931
a. On October 19, 2022, the Corporation entered into an agreement with its lenders for its existing credit agreement to increase its
authorized term loan to US$260 million from US$160 million and to extend the maturity from December 2025 to December 2027.
Concurrently, the Corporation extended its existing $750 million revolving credit facility maturity from July 2025 to July 2026. The
financial conditions of both facilities remain unchanged. The Corporation incurred $2 million in capitalizable transaction fees related to
the refinancing.
As of December 31, 2023, accounts receivable and inventories totaling approximately $869 million (December 31, 2022 - $987 million)
and property, plant and equipment having a net book value of $241 million (December 31, 2022 - $243 million) were pledged as
collateral for the Corporation’s revolving credit facility.
2023 Annual Report
83
b. The Corporation has leases for various items of property, plant and equipment. Lease obligations are secured, as the rights to the
leased asset revert to the lessor in the event of default. For more details on future payments, see Note 15.4 C.
c. In the third quarter of 2023, the loan scheduled to mature on December 11, 2023 was fully repaid. On September 15, 2023, our
subsidiary, Greenpac, entered into a 3-year credit agreement with a banking syndicate securing a revolving credit facility authorized at
US$150 million which bears interest at a variable rate based on the level of leverage ratio of the subsidiary. Transaction fees amounting
to US$2 million ($2 million) were capitalized in other assets.
NOTE 13
LEASES
a. The consolidated balance sheet includes, in “Property, plant and equipment”, the amounts hereunder as right-of-use assets relating to
leases. 2023 and 2022 right-of-use assets under IFRS 16 are as follows:
(in millions of Canadian dollars)
Land
Buildings
Machinery and equipment
Automotive equipment
Others
Net book amount
Additions to the right-of-use assets during the 2023 financial year were $50 million (2022 - $87 million).
b. The consolidated statements of earnings include the following amounts relating to leases:
(in millions of Canadian dollars)
Depreciation and amortization of right-of-use assets
Buildings
Machinery and equipment
Automotive equipment
Others
Financing expense
2023
2
119
2
44
1
168
2022
2
130
1
50
1
184
2023
2022
38
1
21
—
60
8
33
1
21
1
56
7
Expenses relating to short-term leases, low-value assets and variable lease payments not included in the lease obligation were less than
a million dollars in 2023 (2022 - $1 million).
c. The total cash outflow for leases, including the interest, in 2023 was $67 million (2022 - $62 million).
d. Refer to Note 12 for liabilities and to Note 15.4 C for future contractual payments of lease obligations.
e. The future cash flows arising from leases not yet commenced but already signed are the following as of December 31, 2023 and 2022:
(in millions of Canadian dollars)
No later than one year
Later than one year but no later than five years
More than five years
2023
2022
AUTOMOTIVE EQUIPMENT
AUTOMOTIVE EQUIPMENT
—
2
—
2
—
1
1
2
84
2023 Annual Report
NOTE 14
PROVISIONS FOR CONTINGENCIES AND CHARGES
(in millions of Canadian dollars)
As of January 1, 2022
Additional provision
Payments
Revaluation
Unwinding of discount
As of December 31, 2022
Additional provision
Payments
Revaluation
Unwinding of discount
Other
As of December 31, 2023
Analysis of total provisions:
(in millions of Canadian dollars)
Long-term
Current
ENVIRONMENTAL
RESTORATION
OBLIGATIONS
ENVIRONMENTAL
COSTS
LEGAL CLAIMS
SEVERANCES
OTHERS
TOTAL
PROVISIONS
18
—
—
(4)
1
15
18
—
—
1
—
34
24
2
(6)
—
—
20
1
6
1
(4)
—
—
3
1
3
1
(2)
—
—
2
7
(3)
(2)
(7)
—
—
—
18
—
—
8
10
—
—
—
2
8
1
—
—
—
9
3
—
(1)
—
—
11
2023
61
14
75
59
5
(12)
(4)
1
49
30
(12)
(1)
1
8
75
2022
41
8
49
ENVIRONMENTAL RESTORATION
The Corporation uses some landfill sites. A provision has been recognized at fair value for the costs to be incurred for the restoration of
these sites. The additional provision recorded in 2023 relates to the announced closure of a containerboard mill, in February 2024, that
triggered significant changes in the assumptions. For further details please refer to “Segmented Information” section.
ENVIRONMENTAL COSTS
An environmental provision is recorded when the Corporation has an obligation caused by its ongoing or abandoned operations.
The Corporation is currently working with representatives of the Ontario Ministry of the Environment (MOE) - Northern Region and
Environment Canada - Great Lakes Sustainability Fund in Toronto regarding its potential responsibility for an environmental impact
identified at its former Thunder Bay facility. Both authorities lead the working group and they are developing a site management plan
relating to the sediment quality adjacent to Thunder Bay’s lagoon. Several meetings have been held during the past years with the MOE
and Environment Canada and a management plan based on sediment dredging has been proposed by a third-party consultant. Both
governments are looking at this proposal with stakeholders to agree on this remediation action plan that would likely be implemented in the
coming years.
The Corporation has recorded an environmental reserve to address its estimated exposure for this matter.
LEGAL CLAIMS
In the normal course of operations, the Corporation is party to various legal actions and contingencies, mostly related to contract disputes,
environmental and product warranty claims, and labour issues. While the final outcome with respect to legal actions outstanding or pending
as of December 31, 2023 cannot be predicted with certainty, it is Management’s opinion that the outcome will not have a material adverse
effect on the Corporation’s consolidated financial position, the results of its operations or its cash flows.
2023 Annual Report
85
NOTE 15
FINANCIAL INSTRUMENTS
15.1 FAIR VALUE OF FINANCIAL INSTRUMENTS
The classification of financial instruments as of December 31, 2023 and 2022, along with the respective carrying amounts and fair values,
is as follows:
(in millions of Canadian dollars)
NOTE
CARRYING AMOUNT
FAIR VALUE
CARRYING AMOUNT
FAIR VALUE
2023
2022
Financial assets at fair value through profit
or loss
Derivatives
Equity investments
Financial liabilities at fair value through profit
or loss
Derivatives
Financial liabilities at amortized cost
Long-term debt
Derivatives designated as hedge
Asset derivatives
Liability derivatives
15.4
15.4
15.4
15.4
1
3
(9)
1
3
7
3
7
3
(9)
(14)
(14)
(1,936)
(1,918)
(2,065)
(1,969)
—
(1)
—
(1)
6
(1)
6
(1)
15.2 DETERMINING THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument is the amount of consideration that would be received upon the sale of an asset or paid to transfer a
liability in an orderly transaction between market participants as of the measurement date.
i.
ii.
The fair value of cash and cash equivalents, accounts receivable, notes receivable, bank loans and advances, trade and other
payables and provisions approximates their carrying amounts due to their relatively short maturities.
The fair value of investment in shares is based on observable market data and is quoted on the Toronto Stock Exchange and
classified as level 1.
iii. The fair value of long-term debt and some other liabilities is based on observable market data and on the calculation of
discounted cash flows. Discount rates were determined based on local government bond yields adjusted for the risks specific to
each of the borrowings and for the credit market liquidity conditions and are classified as levels 1 and 3.
iv. The fair value of derivative instruments, which include forward contracts, swap agreements and embedded derivatives accounted
for separately, is calculated as the present value of the estimated future cash flows using an appropriate interest rate yield curve
and a forward foreign exchange rate. Assumptions are based on market conditions prevailing at each reporting date and are
classified as level 2. The fair value of derivative instruments reflects the estimated amounts that the Corporation would receive or
pay to settle the contracts at the reporting date.
15.3 HIERARCHY OF FINANCIAL ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
The following table presents information about the Corporation’s financial assets and financial liabilities measured at fair value on a
recurring basis as of December 31, 2023 and 2022 and indicates the fair value hierarchy of the Corporation’s valuation techniques to
determine such fair value. Three levels of inputs that may be used to measure fair value are:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or
similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
Level 3 – Inputs that are generally unobservable and typically reflect Management’s estimates of assumptions that market participants
would use in pricing the asset or liability.
86
2023 Annual Report
(in millions of Canadian dollars)
Financial assets
Equity investments
Derivative financial assets
Financial liabilities
Derivative financial liabilities
(in millions of Canadian dollars)
Financial assets
Equity investments
Derivative financial assets
Financial liabilities
Derivative financial liabilities
CARRYING AMOUNT
QUOTED PRICES IN ACTIVE
MARKETS FOR IDENTICAL
ASSETS (LEVEL1)
SIGNIFICANT
OBSERVABLE INPUTS
(LEVEL 2)
2023
SIGNIFICANT
UNOBSERVABLE INPUTS
(LEVEL 3)
3
1
4
(10)
(10)
—
—
—
—
—
—
1
1
(10)
(10)
3
—
3
—
—
CARRYING AMOUNT
QUOTED PRICES IN ACTIVE
MARKETS FOR IDENTICAL
ASSETS (LEVEL1)
SIGNIFICANT
OBSERVABLE INPUTS
(LEVEL 2)
2022
SIGNIFICANT
UNOBSERVABLE INPUTS
(LEVEL 3)
3
13
16
(15)
(15)
—
—
—
—
—
—
13
13
(15)
(15)
3
—
3
—
—
15.4 FINANCIAL RISK MANAGEMENT
The Corporation’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash
flow interest rate risk and price risk), credit risk and liquidity risk. The Corporation’s overall risk management program focuses on the
unpredictability of the financial market and seeks to minimize potential adverse effects on the Corporation’s financial performance. The
Corporation uses derivative financial instruments to hedge certain risk exposures.
Risk management is carried out by a central treasury department and a management committee acting under policies approved by the
Board of Directors. They identify, evaluate and hedge financial risks in close cooperation with the business units. The Board provides
guidance for overall risk management, covering specific areas such as foreign exchange risk, interest rate risk and credit risk, use of
derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
Summary
(in millions of Canadian dollars)
ASSETS
LIABILITIES
2023
RISK
Price risk
Interest rate risk
Other risk
NOTE
SHORT-TERM
LONG-TERM
TOTAL
SHORT-TERM
LONG-TERM
TOTAL
15.4 A (ii)
15.4 A (iii)
15.4 A (iv)
—
—
1
1
—
—
—
—
—
—
1
1
(5)
—
—
(5)
(4)
(1)
—
(5)
(9)
(1)
—
(10)
2022
(in millions of Canadian dollars)
ASSETS
LIABILITIES
RISK
Currency risk
Price risk
NOTE
SHORT-TERM
LONG-TERM
TOTAL
SHORT-TERM
LONG-TERM
TOTAL
15.4 A (i)
15.4 A (ii)
2
7
9
—
4
4
2
11
13
(3)
(5)
(8)
—
(7)
(7)
(3)
(12)
(15)
2023 Annual Report
87
A. MARKET RISK
i.
Currency risk
The Corporation operates internationally and is exposed to foreign exchange risks arising from various currencies as a result of its export
of goods produced in Canada and in the United States. Foreign exchange risk arises from future commercial transactions, recognized
assets and liabilities, and net investments in foreign operations. These risks are partially covered by purchases and debt.
The Corporation manages foreign exchange exposure by entering into various foreign exchange forward contracts and currency option
instruments related to anticipated sales, purchases, interest expense and repayment of long-term debt. Management has implemented a
policy for managing foreign exchange risk against its functional currency. The Corporation’s risk management policy is to hedge 25% to
90% of anticipated cash flows in each major foreign currency for the next twelve months and to hedge 0% to 75% for the subsequent
twenty-four months. The Corporation may designate these foreign exchange forward contracts as a cash flow hedge of future anticipated
sales, cost of sales, interest expense and repayment of long-term debt denominated in foreign currencies. Gains or losses from these
derivative financial instruments designated as hedges are recorded in “Accumulated other comprehensive income” net of related income
taxes and are reclassified to earnings as adjustments to sales, cost of sales, interest expense or foreign exchange loss (gain) on long-term
debt in the period in which the respective hedged item affected earnings.
In 2023, approximately 21% of sales from Canadian operations were made to third parties in the United States.
The Corporation’s outstanding foreign exchange contracts totaled less than a million dollars as of December 31, 2023. The following table
summarizes the Corporation’s commitments to buy and sell foreign currencies as of December 31, 2022:
EXCHANGE RATE
MATURITY
NOTIONAL AMOUNT
(IN MILLIONS)
FAIR VALUE (IN MILLIONS
OF CANADIAN DOLLARS)
2022
Repayment of long-term debt
Derivatives at fair value through profit or loss and classified in
Foreign exchange loss (gain) on long-term debt:
Currency option to sell US$ for CAN$
Foreign exchange forward contracts to buy US$ for CAN$
Forecasted sales and purchases
1.3290
1.3290
July 2023
July 2023
US$113
US$102
Currency put option instrument to sell US$ for CAN$
1.3971
0 to 12 months
US$26
(3)
2
(1)
—
(1)
The fair values of foreign exchange forward contracts and currency options are determined using the discounted value of the difference
between the value of the contract at expiry, calculated using the contracted exchange rate and the exchange rate the financial institution
would use if it renegotiated the same contract under the same conditions as of the consolidated balance sheet date. The discount rates are
adjusted for the credit risk of the Corporation or of the counterparty, as applicable. When determining credit risk adjustments, the
Corporation considers master netting agreements, if applicable.
In 2023, if the Canadian dollar had strengthened by $0.01 against the US dollar on average for the year with all other variables held
constant, operating income for the year would have been less than a million dollars lower. This is based on the net exposure of total US
sales less US purchases of the Corporation’s Canadian operations and operating income of the Corporation’s US operations, but excludes
the effect of this change on the denominated working capital components. The interest expense would have been approximately
$1 million higher.
CURRENCY RISK ON TRANSLATION OF SELF-SUSTAINING FOREIGN SUBSIDIARIES
The Corporation has certain investments in foreign operations whose net assets are exposed to foreign currency translation risk. The
Corporation may designate part of its long-term debt denominated in foreign currencies as a hedge of the net investment in self-sustaining
foreign subsidiaries. Gains or losses resulting from the translation to Canadian dollars of long-term debt denominated in foreign currencies
and designated as net investment hedges are recorded in “Accumulated other comprehensive income”, net of related income taxes.
The table below shows the effect on consolidated equity of a 10% change in the value of the Canadian dollar against the US dollar as of
December 31, 2023 and 2022. The calculation includes the effect of currency hedges of net investment in US foreign entities and assumes
that no changes occurred other than a single currency exchange rate movement.
The exposures used in the calculations are the foreign currency-denominated equity and the hedging level as of December 31, 2023
and 2022, with the hedging instruments being the long-term debt denominated in US dollars.
88
2023 Annual Report
Consolidated Shareholders’ equity: Currency effect before tax of a 10% change:
(in millions of Canadian dollars)
10% change in the CAN$/US$ rate
BEFORE HEDGES
HEDGES
2023
NET IMPACT
BEFORE HEDGES
HEDGES
2022
NET IMPACT
78
46
32
83
34
49
Price risk
ii.
The Corporation is exposed to commodity price risk on old corrugated containers, commercial pulp, electricity and natural gas. The
Corporation uses derivative commodity contracts to help manage its production costs. The Corporation may designate these derivatives as
cash flow hedges of anticipated purchases of energy. Gains or losses from these derivative financial instruments designated as hedges
are recorded in “Accumulated other comprehensive income”, net of related income taxes, and are reclassified to earnings as adjustments
to “Supply chain and logistic” in the same period, as the respective hedged item affects earnings.
The fair value of these contracts is as follows:
QUANTITY
MATURITY
2023
FAIR VALUE (IN MILLIONS
OF CANADIAN DOLLARS)
Forecasted purchases
Derivatives designated as held for trading and reclassified in “Supply chain and logistic”
Natural gas:
US portfolio
4,475,000 mmBtu
2024 to 2026
Derivatives designated as cash flow hedges and reclassified in
“Supply chain and logistic” (effective portion)
Natural gas:
US portfolio
2,161,000 mmBtu
2024 to 2025
(4)
(4)
(1)
(5)
Forecasted purchases
Derivatives designated as held for trading and reclassified in “Supply chain and logistic”
Natural gas:
Canadian portfolio
US portfolio
Derivatives designated as cash flow hedges and reclassified in
"Supply chain and logistic" (effective portion)
Natural gas:
US portfolio
QUANTITY
MATURITY
2022
FAIR VALUE (IN MILLIONS
OF CANADIAN DOLLARS)
292,000 mmBtu
823,000 mmBtu
2023
2023 to 2025
3,050,2905 mmBtu
2023 to 2025
—
1
1
5
6
In 2013, the Corporation entered into an agreement to purchase steam. The agreement includes an embedded derivative and the fair
value as of December 31, 2023 was a deficit of less than a million dollars (as of December 31, 2022 - deficit of $1 million). The Corporation
also has an agreement to purchase steam that includes an embedded derivative with a negative value of $4 million as of
December 31, 2023 (as of December 31, 2022 - negative value of $6 million).
The fair value of derivative financial instruments other than options is established utilizing a discounted future expected cash flows method.
Future expected cash flows are determined by reference to the forward price or rate prevailing on the assessment date of the underlying
financial index (exchange or interest rate or commodity price) according to the contractual terms of the instrument. Future expected cash
flows are discounted at an interest rate reflecting both the maturity of each flow and the credit risk of the party to the contract for which it
represents a liability (subject to the application of relevant credit support enhancements). The fair value of derivative financial instruments
that represent options is established utilizing similar methods that reflect the impact of the potential volatility of the financial index
underlying the option on future expected cash flows.
2023 Annual Report
89
The table below shows the effect of changes in the price of virgin pulp, natural gas and electricity as of December 31, 2023 and 2022. The
calculation includes the effect of price hedges of these commodities and assumes that no changes occurred other than a single change
in price.
The exposures used in the calculations are the commodity consumption and the hedging level as of December 31, 2023 and 2022, with
the hedging instruments being derivative commodity contracts.
Consolidated commodity consumption: Price change effect before tax:
(in millions of Canadian dollars1)
US$25/s.t. change in virgin pulp price
US$1/mmBtu. change in natural gas price
US$1/MWh change in electricity price
2023
2022
BEFORE HEDGES
HEDGES
NET IMPACT
BEFORE HEDGES
HEDGES
NET IMPACT
6
11
2
—
4
—
6
7
2
6
11
2
—
4
—
6
7
2
1 Sensitivity calculated with an exchange rate of 1.30 CAN$/US$ for 2023 and 1.35 CAN$/US$ for 2022.
Interest rate risk
iii.
The Corporation has no significant interest-bearing assets.
The Corporation’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Corporation to cash
flow interest rate risk. Borrowings issued at fixed rates expose the Corporation to fair value interest rate risk.
When appropriate, the Corporation analyzes its interest rate risk exposure. Various scenarios are simulated taking into consideration
refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Corporation calculates the
impact on earnings of a defined interest rate shift. For each simulation, the same interest rate shift is used for all currencies. The scenarios
are run only for liabilities that represent the major interest-bearing positions. As of December 31, 2023, approximately 36% (2022 - 37%) of
the Corporation’s long-term debt was at variable rates.
As of December 31, 2023, the Corporation had the following outstanding interest rate option contracts:
LOW - HIGH RANGE
MATURITY
NOTIONAL AMOUNT
(IN MILLIONS)
FAIR VALUE (IN MILLIONS
OF CANADIAN DOLLARS)
2023
Variable interest payments
Derivatives at fair value through profit or loss and classified in
“Financing expense”
Interest collar
1.60% - 5.35%
2026 to 2027
US$150
(1)
Based on the outstanding long-term debt as of December 31, 2023, the impact on interest expense of a 1% change in rate would be
approximately $7 million (impact on net earnings is approximately $5 million).
iv. Unrealized loss on derivative financial instruments is as follows:
(in millions of Canadian dollars)
Unrealized loss on derivative financial instruments
2023
2
2022
6
Please refer to the “Segmented Information” section of the Consolidated Financial Statements for the years ended December 31, 2023 and
2022, for more information.
B. CREDIT RISK
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions. The
Corporation reduces this risk by dealing with credit-worthy financial institutions.
The Corporation is exposed to credit risk on the accounts receivable from its customers. In order to reduce this risk, the Corporation’s
credit policies include the analysis of the financial position of its customers and the regular review of their credit limits. In addition, the
Corporation believes there is no particular concentration of credit risk due to the geographic diversity of customers and the procedures for
the management of commercial risks. Derivative financial instruments include an element of credit risk should the counterparty be unable
to meet its obligations.
90
2023 Annual Report
Trade receivables are recognized initially at fair value and are subsequently measured at amortized cost using the effective interest
method, less loss allowance. An expected credit loss allowance of trade receivables is established when there is objective evidence that
the Corporation will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties
of the debtor, probability that the debtor will enter into bankruptcy or financial reorganization, and default or delinquency in payments are
considered indicators that the trade receivable is impaired. Each trade receivables is evaluated considering the collection history to identify
impairment. The amount of the expected credit loss allowance represents the estimated credit loss. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is recorded in the consolidated statement of earnings in
“Other operational costs”. When a trade receivable is not collectible, it is written off against the loss allowance. Subsequent recoveries of
amounts previously written off are credited against “Other operational costs” in the consolidated statement of earnings.
Loans and notes receivables from business disposals are recognized at fair value. There are no past due amounts as of
December 31, 2023.
C. LIQUIDITY RISK
Liquidity risk is the risk that the Corporation will not be able to meet its obligations as they fall due. The following are the contractual
maturities of financial liabilities as of December 31, 2023 and 2022:
(in millions of Canadian dollars)
Non-derivative financial liabilities:
Trade and other payables
Revolving credit facility
Unsecured senior notes
Term loan
Lease obligations with recourse to the Corporation
Other debts with recourse to the Corporation
Lease obligations without recourse to the Corporation
Other debts without recourse to the Corporation
Derivative financial liabilities
(in millions of Canadian dollars)
Non-derivative financial liabilities:
Bank loans and advances
Trade and other payables
Revolving credit facility
Unsecured senior notes
Term loan
Lease obligations with recourse to the Corporation
Other debts with recourse to the Corporation
Lease obligations without recourse to the Corporation
Other debts without recourse to the Corporation
Derivative financial liabilities
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
LESS THAN
ONE YEAR
BETWEEN
ONE AND
TWO YEARS
BETWEEN
TWO AND
FIVE YEARS
703
252
1,037
344
174
23
15
93
10
703
315
1,250
447
211
26
16
110
10
703
18
55
26
57
8
9
6
5
—
18
229
26
37
2
6
6
4
—
279
966
395
56
13
1
98
1
2,651
3,088
887
328
1,809
CARRYING
AMOUNT
CONTRACTUAL
CASH FLOWS
LESS THAN
ONE YEAR
BETWEEN
ONE AND
TWO YEARS
BETWEEN
TWO AND
FIVE YEARS
3
746
350
1,058
352
186
31
22
69
15
3
746
426
1,331
466
227
32
23
73
15
3
746
22
56
23
52
13
9
71
8
—
—
22
56
23
45
8
7
—
4
—
—
382
586
420
57
11
7
2
3
2023
MORE THAN
FIVE YEARS
—
—
—
—
61
3
—
—
—
64
2022
MORE THAN
FIVE YEARS
—
—
—
633
—
73
—
—
—
—
As of December 31, 2023, the Corporation and its subsidiaries had unused credit facilities of $591 million (December 31, 2022 -
$438 million), net of outstanding letters of credit of $13 million (December 31, 2022 - $15 million).
2,832
3,342
1,003
165
1,468
706
2023 Annual Report
91
D. OTHER RISKS
MONETIZATION OF ACCOUNTS RECEIVABLE
In the fourth quarter of 2023, the Corporation entered into an $81 million (US$60 million) monthly rolling receivables’ monetization facility
without recourse. Under this agreement the Corporation considers the receivables transferred and accounts for as a sale. The
Corporation’s continuing involvement in the transferred assets is limited to servicing the receivables.
In the fourth quarter of 2023, the Corporation had unrecognized receivables of $53 million related to the facility of which the Corporation
received $20 million as the collection agent and recorded an account payable in the same amount to the transferred assets purchaser. The
Corporation recorded as interest expenses of less than a million for the year ended December 31, 2023. The interest is charged on a
monthly basis and paid on the settlement date.
STOCK-BASED COMPENSATION
The Corporation entered into an agreement to hedge the share price volatility related to its Deferred Share Units and Performance Share
Unit plans. As of December 31, 2023, the agreement’s notional amount was 1,066,000 shares at a price of $12.28 (December 31, 2022,
the agreement’s notional amount was 1,066,000 shares at a price of $8.34). The fair value as of December 31, 2023 was a receivable of
less than a million dollars (December 31, 2022 - receivable: less than a million dollars).
NOTE 16
OTHER LIABILITIES
(in millions of Canadian dollars)
Employee future benefits
Other
Less: Current portion
NOTE
17
20
2023
92
26
118
(24)
94
2022
95
16
111
(14)
97
As of December 31, 2023, the balance on the line “Other” includes no amount (December 31, 2022 - $2 million) pertaining to a call option
granted to the Corporation by one of the minority shareholders of Falcon Packaging LLC.
92
2023 Annual Report
NOTE 17
EMPLOYEE FUTURE BENEFITS
The Corporation operates various post-employment plans, including both defined benefit and defined contribution pension plans and post-
employment benefit plans, such as retirement allowance, group life insurance and medical and dental plans. The table below outlines
where the Corporation’s post-employment amounts and activity are included in the Consolidated Financial Statements.
(in millions of Canadian dollars)
Consolidated balance sheet obligations for
Defined pension benefits - Assets (Surplus)
Defined pension benefits - Liabilities
Post-employment benefits other than defined benefit pension plans
Net long-term liabilities on consolidated balance sheet
Expenses recorded in consolidated statement of earnings for
Defined pension benefits
Defined contribution benefits
Post-employment benefits other than defined benefit pension plans
Consolidated other comprehensive income remeasurements for
Defined pension benefits
Post-employment benefits other than defined benefit pension plans
NOTE
2023
2022
17 A
17 B
17 A
17 B
(46)
27
(19)
65
46
3
35
4
42
(8)
(1)
(9)
(40)
30
(10)
65
55
5
37
4
46
(20)
(13)
(33)
A. DEFINED BENEFIT PENSION PLANS
The Corporation offers funded and unfunded defined benefit pension plans, defined contribution pension plans and group RRSPs that
provide retirement benefit payments for most of its employees. The defined benefit pension plans are usually contributory and are based
on the number of years of service and, in most cases, the average salary or compensation at the end of a career. Retirement benefits are
not partially adjusted based on inflation.
The majority of benefit payments are payable from trustee administered funds; however, for the unfunded plans, the Corporation meets the
benefit payment obligation as it falls due. Plan assets held in trusts are governed by local regulations and practices in each country.
Responsibility for governance of the plans - overseeing all aspects of the plans, including investment decisions and contribution
schedules - lies with the Corporation. The Corporation has established Investment Committees to assist in the management of the plans
and has also appointed experienced, independent professional experts such as investment managers, investment consultants, actuaries
and custodians.
2023 Annual Report
93
The movement in the net defined benefit obligation and fair value of plan assets of defined benefit pension plans over the year is
as follows:
(in millions of Canadian dollars)
As of January 1, 2022
Current service cost
Interest expense (income)
Impact on consolidated profit or loss
Remeasurements
Return on plan assets, excluding amounts included in interest income
Gain from change in demographic assumptions
Gain from change in financial assumptions
Experience loss
Impact of remeasurements on consolidated other comprehensive income (loss)
Contributions
Employers
Plan participants
Benefit payments
As of December 31, 2022
Current service cost
Interest expense (income)
Settlement (annuity discharge)
Impact on consolidated profit or loss
Remeasurements
Return on plan assets, excluding amounts included in interest income
Loss from change in financial assumptions
Experience gain
Change in asset ceiling, excluding amounts included in interest expense
Impact of remeasurements on consolidated other comprehensive income (loss)
Contributions
Employers
Plan participants
Benefit payments
As of December 31, 2023
PRESENT VALUE
OF OBLIGATION
FAIR VALUE OF
PLAN ASSETS
475
4
14
18
—
(1)
(93)
1
(93)
—
1
(29)
372
2
19
(210)
(189)
—
10
(2)
—
8
—
1
(28)
164
(482)
—
(13)
(13)
73
—
—
—
73
(5)
(1)
29
(399)
—
(19)
210
191
(4)
—
—
—
(4)
(4)
(1)
28
(189)
TOTAL
(7)
4
1
5
73
(1)
(93)
1
(20)
(5)
—
—
(27)
2
—
—
2
(4)
10
(2)
—
4
(4)
—
—
(25)
IMPACT OF
MINIMUM
FUNDING
REQUIREMENT
(ASSET CEILING)
17
—
—
—
—
—
—
—
—
—
—
—
17
—
1
—
1
—
—
—
(12)
(12)
—
—
—
6
TOTAL
10
4
1
5
73
(1)
(93)
1
(20)
(5)
—
—
(10)
2
1
—
3
(4)
10
(2)
(12)
(8)
(4)
—
—
(19)
94
2023 Annual Report
The defined benefit obligation and plan assets are composed by country as follows:
(in millions of Canadian dollars)
Present value of funded obligations
Fair value of plan assets
Deficit (surplus) of funded plans
Impact of minimum funding requirement (asset ceiling)
Present value of unfunded obligations
Liabilities (assets) on consolidated balance sheet
(in millions of Canadian dollars)
Present value of funded obligations
Fair value of plan assets
Deficit (surplus) of funded plans
Impact of minimum funding requirement (asset ceiling)
Present value of unfunded obligations
Liabilities (assets) on consolidated balance sheet
The significant actuarial assumptions are as follows:
Discount rate obligation (ending period)
Discount rate obligation (beginning period)
Discount rate (current service cost)
Salary growth rate
Inflation rate
CANADA
UNITED STATES
136
188
(52)
6
26
(20)
2
1
1
—
—
1
CANADA
UNITED STATES
337
393
(56)
17
27
(12)
8
6
2
—
—
2
2023
TOTAL
138
189
(51)
6
26
(19)
2022
TOTAL
345
399
(54)
17
27
(10)
CANADA
4.60%
5.20%
4.60%
Between 2.00%
and 2.50%
2.00%
2023
UNITED STATES
4.70%
4.90%
4.70%
N/A
N/A
CANADA
5.20%
3.00%
5.20%
Between 2.00%
and 2.50%
2.00%
2022
UNITED STATES
4.90%
2.40%
4.90%
N/A
N/A
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in each
territory. For Canadian pension plans, which represent 98% of all pension plans, these assumptions translate into an average life
expectancy in years for a pensioner retiring at age 65:
Retiring at the end of the reporting period
Male
Female
Retiring 20 years after the end of the reporting period
Male
Female
2023
22.1
24.4
23.1
25.4
2022
22.0
24.4
23.0
25.3
The sensitivity of the Canadian defined benefit obligation to changes in assumptions is set out below. The effects on each plan of a change
in an assumption are weighted proportionately to the total plan obligations to determine the total impact for each assumption presented.
Discount rate
Salary growth rate
Life expectancy
2023 Annual Report
IMPACT ON DEFINED BENEFIT OBLIGATION
CHANGE IN ASSUMPTION
INCREASE IN ASSUMPTION
DECREASE IN ASSUMPTION
0.25%
0.25%
(2.80%)
0.50%
3.00%
(0.50%)
INCREASE / DECREASE BY ONE YEAR IN ASSUMPTION
1.60%
95
Plan assets, which are funding the Corporation’s defined pension plans, are comprised as follows:
(in millions of Canadian dollars)
Cash and short-term investments
Bonds
Canadian bonds
Foreign bonds
Shares
Canadian shares
Foreign shares
Mutual funds
Foreign bond mutual funds
Foreign equity mutual funds
Alternative investment funds
Other
Insured annuities
(in millions of Canadian dollars)
Cash and short-term investments
Bonds
Canadian bonds
Foreign bonds
Shares
Canadian shares
Foreign shares
Mutual funds
Foreign bond mutual funds
Canadian equity mutual funds
Foreign equity mutual funds
Alternative investment funds
Other
Insured annuities
LEVEL 1
LEVEL 2
LEVEL 3
6
47
—
47
13
2
15
—
—
—
—
—
—
68
—
33
1
34
—
—
—
1
40
30
71
16
16
121
—
—
—
—
—
—
—
—
—
—
—
—
—
—
LEVEL 1
LEVEL 2
LEVEL 3
7
54
—
54
13
3
16
—
2
—
—
2
—
—
79
—
46
1
47
—
—
—
5
1
45
32
83
190
190
320
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2023
%
3.2%
42.9%
7.9%
37.5%
8.5%
2022
%
1.8%
25.3%
4.0%
21.3%
47.6%
TOTAL
6
80
1
81
13
2
15
1
40
30
71
16
16
189
TOTAL
7
100
1
101
13
3
16
5
3
45
32
85
190
190
399
The plan assets do not include any shares of the Corporation. The Corporation has purchased annuity contracts of an approximate value
of $16 million ($190 million in 2022) to fulfill future benefits payments. The Corporation filed for a statutory discharge in 2023 for all annuity
contracts, which resulted in a full settlement of benefits for pensioners covered by those contracts unless it was not allowed as per their
provincial pension legislation.
96
2023 Annual Report
B. POST-EMPLOYMENT BENEFITS OTHER THAN DEFINED BENEFIT PENSION PLANS
The Corporation also offers its employees some post-employment benefit plans, such as retirement allowance, group life insurance, and
medical and dental plans. However, these benefits, other than pension plans, are not funded. Furthermore, the medical and dental plans
upon retirement are being phased out and are no longer offered to the majority of new retirees and the retirement allowance is not offered
to employees hired after 2002.
The amounts recognized in the consolidated balance sheet composed by country are determined as follows:
(in millions of Canadian dollars)
Present value of unfunded obligations
Liabilities on consolidated balance sheet
(in millions of Canadian dollars)
Present value of unfunded obligations
Liabilities on consolidated balance sheet
CANADA
UNITED STATES
62
62
3
3
CANADA
UNITED STATES
61
61
4
4
The movement in the net defined benefit obligation for post-employment benefits over the year is as follows:
(in millions of Canadian dollars)
As of January 1, 2022
Current service cost
Interest expense
Impact on consolidated profit or loss
Remeasurements
Gain from change in financial assumptions
Experience gain
Impact of remeasurements on consolidated other comprehensive income (loss)
Benefit payments
As of December 31, 2022
Current service cost
Interest expense
Impact on consolidated profit or loss
Remeasurements
Loss from change in financial assumptions
Experience gain
Impact of remeasurements on consolidated other comprehensive income (loss)
Benefit payments
As of December 31, 2023
PRESENT VALUE OF
OBLIGATION
FAIR VALUE OF
PLAN ASSET
79
2
2
4
(12)
(1)
(13)
(5)
65
1
3
4
2
(3)
(1)
(3)
65
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2023
TOTAL
65
65
2022
TOTAL
65
65
TOTAL
79
2
2
4
(12)
(1)
(13)
(5)
65
1
3
4
2
(3)
(1)
(3)
65
The method of accounting, assumptions relating to discount rate and life expectancy, and the frequency of valuations for post-employment
benefits are similar to those used for defined benefit pension plans, with the addition of actuarial assumptions relating to the long-term
increase in health care costs of 4.71% a year on average (2022 - 4.81%).
2023 Annual Report
97
The sensitivity of the defined benefit obligation to changes in assumptions is set out below. The effects on each plan of a change in an
assumption are weighted proportionately to the total plan obligations to determine the total impact for each assumption presented.
Discount rate
Salary growth rate
Health care cost increase
Life expectancy
IMPACT ON OBLIGATION FOR POST-EMPLOYMENT BENEFITS
CHANGE IN ASSUMPTION
INCREASE IN ASSUMPTION
DECREASE IN ASSUMPTION
0.25%
0.25%
1.00%
(1.70%)
0.30%
1.10%
1.60%
(0.30%)
(1.00%)
INCREASE / DECREASE BY ONE YEAR IN ASSUMPTION
(0.40%)
C. RISKS AND OTHER CONSIDERATIONS RELATIVE TO POST-EMPLOYMENT BENEFITS
Through its defined benefit plans, the Corporation is exposed to a number of risks, the most significant of which are detailed below.
Assets volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields and if plan assets underperform this
yield, it will create an experience loss. Most of the pension plans hold a proportion of equities, which are expected to outperform corporate
bonds in the long term while contributing volatility and risk in the short term.
The Corporation has reduced the level of investment risk by investing more in assets that better match the liabilities and by
purchasing annuities.
As of December 31, 2023, 65% of the plan’s invested assets are in fixed income. As of December 31, 2023, the total value of insured
annuities is $16 million.
However, the Corporation believes that due to the long-term nature of the plan liabilities and the strength of the supporting group, a level of
continuing equity investment is an appropriate element of the Corporation’s long-term strategy to manage the plans efficiently. Plan assets
are diversified, so the failure of an individual stock would not have a big impact on the plan assets taken as a whole. The pension plans do
not face a significant currency risk.
Changes in bond yields
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the
plans’ bond holdings.
Inflation risk
The benefits paid are not indexed. Only future benefits for active members are based on salaries. Therefore, this risk is not significant.
Life expectancy
The majority of the plans obligations are to provide benefits for the member’s lifetime, so increases in life expectancy will result in an
increase in the plans liabilities.
Each sensitivity analysis disclosed in this note is based on changing one assumption while holding all other assumptions constant. In
practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the
defined benefit obligation to variations in significant actuarial assumptions, the same method (present value of the defined benefit
obligation calculated using the projected unit credit method at the end of the reporting period) has been applied as for calculating the
liability recognized in the consolidated balance sheet.
As of December 31, 2023, the aggregate net surplus of the Corporation’s funded pension plans (mostly in Canada) amounted to
$51 million (a surplus of $54 million as of December 31, 2022). Current agreed expected service contributions amount to $2 million and will
be made in the normal course of business. As for the cash flow requirement, these pension plans are expected to require a net contribution
of less than a million dollars in 2024, since $2 million of employer service contribution will be paid from plan surplus.
The weighted average duration of the defined benefit obligation is 11 years (2022 - 9 years).
98
2023 Annual Report
Expected maturity analysis of undiscounted pension and other post-employment benefits:
(in millions of Canadian dollars)
Pension benefits
Post-employment benefits other than defined benefit pension plans
As of December 31, 2023
ONE YEAR
TWO YEARS
BETWEEN THREE
AND FIVE YEARS
BETWEEN SIX
AND TEN YEARS
7
5
12
8
11
19
28
21
49
353
82
435
TOTAL
396
119
515
These amounts represent all the benefits payable to current members during the following years and thereafter without limitations. The
majority of benefit payments are payable from trustee administered funds. The difference will come from future investment returns
expected on plan assets and future contributions that will be made by the Corporation for services rendered after December 31, 2023.
NOTE 18
INCOME TAXES
a. The recovery of income taxes is as follows:
(in millions of Canadian dollars)
Current taxes
Deferred taxes
2023
12
(25)
(13)
2022
11
(33)
(22)
b. The recovery of income taxes based on the effective income tax rate differs from the recovery of income taxes based on the combined
basic rate for the following reasons:
(in millions of Canadian dollars)
Recovery of income taxes based on the combined basic Canadian and provincial income tax rate
Adjustment for income taxes arising from the following:
Difference in statutory income tax rate of foreign operations
Prior years reassessment
Reversal of deferred income tax assets related to prior year losses
Permanent differences
Recovery of income taxes
2023
(17)
3
5
1
(5)
4
(13)
The weighted average income tax rate for the year ended December 31, 2023 was 24.25% (2022 - 24.27%).
c. The provision for income taxes relating to components of consolidated other comprehensive income (loss) is as follows:
(in millions of Canadian dollars)
Foreign currency translation related to hedging activities
Cash flow hedge
Actuarial gain on post-employment benefit obligations
Provision for income taxes in comprehensive income (loss)
2023
1
(1)
2
2
2022
(10)
—
(6)
—
(6)
(12)
(22)
2022
(3)
1
8
6
2023 Annual Report
99
d. The analysis of deferred tax assets and deferred tax liabilities, without taking into consideration the offsetting of balances within the
same tax jurisdiction, is as follows:
(in millions of Canadian dollars)
Deferred income tax assets:
Deferred income tax assets to be recovered
Jurisdiction legal entities reclassification
Deferred income tax liabilities:
Deferred income tax liabilities to be recovered
Jurisdiction legal entities reclassification
e. The variance of the deferred income tax account is as follows:
(in millions of Canadian dollars)
Balance at beginning of year
Through consolidated statements of earnings (loss)
Variance of income tax credit, net of related income tax
Through consolidated statements of comprehensive income (loss)
Exchange differences
Balance at end of year
2023
507
(340)
167
483
(340)
143
24
2023
(18)
25
21
(2)
(2)
24
2022
372
(258)
114
390
(258)
132
(18)
2022
(54)
33
13
(6)
(4)
(18)
f. The variance in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
DEFERRED INCOME TAX ASSET
(in millions of Canadian dollars)
As of January 1, 2022
Through consolidated statements of earnings
(loss)
Variance of income tax credit
Through consolidated statements of
comprehensive income (loss)
Others
Exchange differences
As of December 31, 2022
Through consolidated statements of earnings
(loss)
Variance of income tax credit
Others
Exchange differences
As of December 31, 2023
RECOGNIZED
TAX BENEFIT
ARISING
FROM
INCOME TAX
LOSSES
EMPLOYEE
FUTURE
BENEFITS
127
23
19
—
—
—
7
153
89
—
—
(2)
240
(5)
—
(6)
—
—
12
—
—
12
—
24
EXPENSE ON
RESEARCH
UNUSED TAX
CREDITS
FINANCIAL
INSTRUMENTS
LONG-TERM
DEBT
LONG TERM
DEBT
FINANCE
LEASES
OTHERS
6
24
—
—
—
—
30
5
—
—
(1)
34
71
2
13
—
—
2
88
(23)
21
—
(1)
85
—
3
—
—
—
—
3
(1)
—
—
—
2
3
40
(3)
(13)
—
—
—
—
—
—
—
—
—
—
—
—
21
1
49
(12)
—
11
(1)
47
29
6
—
—
—
2
37
29
—
10
(1)
75
TOTAL
299
33
13
(6)
21
12
372
87
21
33
(6)
507
100
2023 Annual Report
DEFERRED INCOME TAX LIABILITIES
(in millions of Canadian dollars)
As of January 1, 2022
Through consolidated statements of earnings (loss)
Others
Exchange differences
As of December 31, 2022
Through consolidated statements of earnings (loss)
Through consolidated statements of comprehensive
income (loss)
Others
Exchange differences
As of December 31, 2023
EMPLOYEE
FUTURE
BENEFITS
PROPERTY,
PLANT AND
EQUIPMENT
LONG-TERM
DEBT
INTANGIBLE
ASSETS
FINANCIAL
INSTRUMENTS
INVESTMENTS
OTHERS
—
—
—
—
—
—
2
12
—
14
312
7
21
15
355
57
—
13
(4)
421
—
—
—
—
—
2
—
8
—
10
23
(9)
—
—
14
1
—
—
—
15
3
—
—
—
3
(3)
—
—
—
—
14
3
—
1
18
5
—
—
—
23
1
(1)
—
—
—
—
—
—
—
—
TOTAL
353
—
21
16
390
62
2
33
(4)
483
g. The Corporation has recognized accumulated losses for income tax purposes amounting to approximately $940 million, which may be
carried forward to reduce taxable income in future years. The future tax benefit of $240 million resulting from the deferral of these losses
has been recognized in the accounts as a deferred income tax asset. Deferred income tax assets are recognized for tax loss carry
forward to the extent that the realization of the related tax benefits through future taxable profits is probable.
NOTE 19
CAPITAL STOCK
A. CAPITAL MANAGEMENT
Capital is defined as long-term debt, bank loans and advances net of cash and cash equivalents and Shareholders’ equity, which includes
capital stock.
(in millions of Canadian dollars)
Cash and cash equivalents
Bank loans and advances
Long-term debt, including current portion
Net debt
Total equity
Total capital
2023
(54)
—
1,936
1,882
1,781
3,663
2022
(102)
3
2,065
1,966
1,928
3,894
The Corporation’s objectives when managing capital are:
•
•
•
•
•
to safeguard the Corporation’s ability to continue as a going concern in order to provide returns to Shareholders;
to maintain an optimal capital structure and reduce the cost of capital;
to make proper capital investments that are significant to ensure that the Corporation remains competitive;
to maintain annual dividend payments, and
to redeem common shares based on an annual redemption program.
The Corporation sets the amount of capital in proportion to risk. The Corporation manages its capital structure and makes adjustments to it
in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Corporation may adjust the amount of dividends paid to Shareholders, return capital to Shareholders, issue new shares and
acquire or sell assets to improve its financial performance and flexibility.
2023 Annual Report
101
The Corporation monitors capital on a monthly and quarterly basis based on different financial ratios and non-financial performance
indicators. Also, the Corporation must conform to certain financial ratios under its various credit agreements. These ratios are calculated on
an adjusted consolidated basis of restricted subsidiaries only. These are a maximum ratio of funded debt to capitalization of 65% and a
minimum interest coverage ratio of 2.25x. The Corporation must also comply with a consolidated interest coverage ratio to incur additional
debt. Funded debt is defined as liabilities as per the consolidated balance sheet, including guarantees and liens granted in respect of
funded debt of another person but excluding other long-term liabilities, trade accounts payable, obligations under operating leases and
other accrued obligations (2023 - $1,796 million; 2022 - $1,933 million). The capitalization ratio is calculated as “Shareholders’ equity” as
shown in the consolidated balance sheet plus the funded debt. Shareholders’ equity is adjusted to add back the effect of IFRS Accounting
Standards adjustments as of December 31, 2010 in the amount of $208 million. The interest coverage ratio is defined as earnings before
interest, taxes, depreciation and amortization (EBITDA) to financing expense. The EBITDA is defined as net earnings of the last four
quarters plus financing expense, income taxes, amortization and depreciation, expense for stock options and dividends received from a
person who is not a credit party (2023 - $584 million; 2022 - $279 million). Excluded from net earnings are the share of results of equity
investments and gains or losses from non-recurring items. Financing expense is calculated as interest and financial charges determined in
accordance with IFRS Accounting Standards plus any capitalized interest, but excluding the amortization of deferred financing costs, up-
front and financing costs, and unrealized gains or losses arising from hedging agreements. It also excludes any gains or losses on the
translation of long-term debt denominated in a foreign currency. The consolidated interest coverage ratio to incur additional debt is
calculated as defined in the Senior notes indentures dated November 26, 2019.
As of December 31, 2023, the funded debt-to-capitalization ratio stood at 47.98% and the interest coverage ratio was 4.57x. The
Corporation is in compliance with the ratio requirements of its lenders.
The Corporation’s credit facility is subject to terms and conditions for loans of this nature, including limits on incurring additional
indebtedness and granting liens or selling assets without the consent of the lenders.
The unsecured senior notes are subject to customary covenants restricting the Corporation’s ability to, among other things, incur additional
debt, pay dividends, and make other restricted payments as defined in the Indentures dated November 26, 2019.
On a yearly basis, the Corporation has invested between $125 million and $200 million on purchases of property, plant and equipment,
excluding major strategic projects. These amounts are carefully reviewed during the course of the year in relation to operating results and
strategic actions approved by the Board of Directors. These investments, combined with annual maintenance, enhance the stability of the
Corporation’s business units and improve cost competitiveness through new technology and improved process procedures.
The Corporation can elect to enter into an annual share redemption program to redeem its outstanding common shares when the market
price is judged appropriate by Management. In addition to limitations on the normal course issuer bid, the Corporation’s ability to redeem
common shares is limited by its senior notes indenture.
ISSUED AND OUTSTANDING
B.
The authorized capital stock of the Corporation consists of an unlimited number of common shares without nominal value and an unlimited
number of Class A and B shares issuable in series without nominal value. Over the past two years, the common shares have fluctuated
as follows:
Balance at beginning of year
Common shares issued on exercise of stock options
Redemption of common shares
Balance at end of year
NOTE
19 D
19 C
NUMBER OF
COMMON SHARES
100,361,627
333,743
—
100,695,370
2023
IN MILLIONS OF
CANADIAN DOLLARS
611
2
—
613
NUMBER OF
COMMON SHARES
100,860,362
355,686
(854,421)
100,361,627
2022
IN MILLIONS OF
CANADIAN DOLLARS
614
2
(5)
611
C. REDEMPTION OF COMMON SHARES
In 2023, the Corporation did not renew its normal course issuer bid program. In 2023, the Corporation redeemed no common shares under
this program (2022 - $9 million for 854,421 common shares).
102
2023 Annual Report
D. COMMON SHARE ISSUANCE
The Corporation issued 333,743 common shares upon the exercise of options for an amount of $2 million (2022 - $1 million for
355,686 common shares issued).
E. NET LOSS PER COMMON SHARE
The basic and diluted net loss per common share are calculated as follows:
Net loss attributable to Shareholders (in millions of Canadian dollars)
Weighted average number of basic common shares outstanding (in millions)
Weighted average number of diluted common shares outstanding (in millions)
Basic net loss per common share (in Canadian dollars)
Diluted net loss per common share (in Canadian dollars)
2023
(76)
101
101
($0.76)
($0.76)
2022
(34)
101
101
($0.34)
($0.34)
As of December 31, 2023, 549,582 stocks options have an antidilutive effect (2022 - 1,922,125 stocks options).
F. DETAILS OF DIVIDENDS DECLARED PER COMMON SHARE ARE AS FOLLOWS:
Dividends declared per common share (in Canadian dollars)
NOTE 20
STOCK-BASED COMPENSATION
2023
$0.48
2022
$0.48
A. OPTIONS
Under the terms of a share option plan adopted on December 15, 1998, amended on February 22, 2023, and approved by Shareholders
on May 11, 2023, a remaining balance of 8,966,257 common shares is specifically reserved for issuance to officers and key employees of
the Corporation. Each option will expire at a date not to exceed 10 years following the grant date of the option. The exercise price of an
option shall not be lower than the market value of the share at the date of grant, determined as the average of the closing price of the
share on the Toronto Stock Exchange on the five trading days preceding the date of grant. The terms for exercising the options are 25% of
the number of shares under option within twelve months after the first anniversary date of grant and up to an additional 25% every twelve
months after the second, third and fourth anniversaries of the grant date. Options cannot be exercised if the market value of the share at
the exercise date is lower than the book value at the grant date. Options exercised are settled in shares. The stock-based compensation
cost related to these options amounted to $1 million in 2023 (2022 - $1 million).
Changes in the number of options outstanding as of December 31, 2023 and 2022 are as follows:
NUMBER OF OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE ($)
NUMBER OF OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE ($)
2023
2022
Balance at beginning of year
Granted
Exercised
Forfeited
Balance at end of year
Options exercisable - at end of year
2,794,344
730,876
(333,743)
(18,950)
3,172,527
1,724,381
10.01
11.20
5.40
12.92
10.75
10.43
2,373,416
785,532
(355,686)
(8,918)
2,794,344
1,740,282
The weighted average share price at the time of exercise of the options was $11.58 (2022 - $10.15).
2023 Annual Report
9.10
10.26
4.47
11.21
10.01
9.27
103
The following options were outstanding as of December 31, 2023:
YEAR GRANTED
NUMBER OF OPTIONS
OPTIONS OUTSTANDING
WEIGHTED AVERAGE
EXERCISE PRICE ($)
NUMBER OF OPTIONS
OPTIONS EXERCISABLE
WEIGHTED AVERAGE
EXERCISE PRICE ($)
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
284,963
262,408
236,711
187,032
147,682
186,736
176,824
185,726
773,569
730,876
3,172,527
6.10
7.66
9.75
14.28
12.39
11.97
13.95
14.67
10.26
11.20
284,963
262,408
236,711
187,032
147,682
186,736
132,604
92,864
193,381
—
1,724,381
6.10
7.66
9.75
14.28
12.39
11.97
13.95
14.67
10.26
11.20
EXPIRATION DATE
2024
2025
2026
2027
2024 - 2028
2024 - 2029
2030
2030 - 2031
2030 - 2032
2030 - 2033
FAIR VALUE OF THE SHARE OPTIONS GRANTED
Options were priced using the Black-Scholes option pricing model. Expected volatility is based on the historical share price volatility over
the past six years. The following weighted average assumptions were used to estimate the fair value of $2.50 (2022 - $2.37) as of the
grant date of each option issued to employees:
Grant date share price
Exercise price
Risk-free interest rate
Expected dividend yield
Expected life of options
Expected volatility
2023
$10.87
$11.20
2.83%
4.42%
6.25 years
35%
2022
$10.29
$10.26
2.86%
4.66%
6.25 years
36%
B. SHARE PURCHASE PLAN
The Corporation offers its Canadian employees a share purchase plan for its common shares. Employees can voluntarily contribute up to a
maximum of 5% of their salary and, if certain conditions are met, the Corporation will contribute 25% of the employee’s contribution to
the plan.
The shares are purchased on the market on a predetermined date each month. For the year ended December 31, 2023, the Corporation’s
contribution to the plan amounted to $2 million (2022 - $2 million).
C. PERFORMANCE SHARE UNIT PLAN
The Corporation has a Performance Share Unit (PSU) Plan for the benefit of officers and key employees, allowing them to receive a
portion of their annual compensation in the form of PSUs. A PSU is a notional unit equivalent in value to the Corporation’s common share.
Periodically, the number of PSUs forming part of the award shall be adjusted depending upon the three-year average return on capital
employed (ROCE) of the Corporation and for 2023 grants and after, a greenhouse gas emissions indicator (the expected average on three
years of greenhouse gas emissions reduction in kg of CO2). Such adjusted number shall be obtained by multiplying the number of PSUs
forming part of the award by the applicable multiplier based on the ROCE level and by the applicable multiplier based on greenhouse gas
emission indicator level. Participants are entitled to receive the payment of their PSUs in the form of cash based on the average price of
the Corporation’s common shares as traded on the open market during the five days before the vesting date.
The PSUs vest over a period of two years starting on the award date. The expense and the related liability are recorded during the vesting
period. The liability is periodically adjusted to reflect any variation in the market value of the common shares, the expected average ROCE,
the expected average greenhouse gas emission indicator and the passage of time. As of December 31, 2023, the Corporation had a total
of 1,061,212 PSUs outstanding (2022 - 848,292 PSUs) for a fair value of $4 million (2022 - $1 million). In 2023, the Corporation made
payment of less than a million dollars in relation to PSUs (2022 - $1 million).
104
2023 Annual Report
D. DEFERRED SHARE UNIT PLAN
The Corporation has a Deferred Share Unit (DSU) Plan for the benefit of its external directors, officers and key employees, allowing them
to receive all or a portion of their annual compensation in the form of DSUs. A DSU is a notional unit equivalent in value to the
Corporation’s common share. Upon resignation from the Board of Directors or the Corporation, participants are entitled to receive the
payment of their cumulated DSUs in the form of cash based on the average price of the Corporation’s common shares as traded on the
open market during the five days before the date of the participant’s resignation.
The DSU expense and the related liability are recorded at the grant date. The liability is periodically adjusted to reflect any variation in the
market value of the common shares. As of December 31, 2023, the Corporation had a total of 1,344,392 DSUs outstanding (2022 -
1,033,303 DSUs). On January 15, 2024, the Corporation issued 109,281 DSUs related to prior year. As of December 31, 2023, the liability
amounts to $20 million (2022 - $11 million). In 2023, the Corporation made payment of less than a million dollars in relation to DSUs
(2022 - less than a million dollars).
E. RESTRICTED SHARE UNIT PLAN
The Corporation has a Restricted Share Unit (RSU) Plan for the benefit of officers and key employees, allowing them to receive a portion
of their annual compensation in the form of RSUs. A RSU is a notional unit equivalent in value to the Corporation’s common share.
Participants are entitled to receive the payment of their RSUs in the form of cash based on the average price of the Corporation’s common
shares as traded on the open market during the five days before the vesting date.
The RSUs vest over a period of three years starting on the award date. The expense and the related liability are recorded during the
vesting period. The liability is periodically adjusted to reflect any variation in the market value of the common shares and the passage of
time. As of December 31, 2023, the Corporation had a total of 68,694 RSUs outstanding (2022 - 23,605 RSUs) for a fair value of $1 million
(2022 - less than a million dollars).
NOTE 21
EMPLOYEE BENEFITS EXPENSES
(in millions of Canadian dollars)
Wages and employee benefits expenses
Share options granted to directors and employees
Pension costs - defined benefit plans
Pension costs - defined contribution plans
Post-employment benefits other than defined benefit pension plans
KEY MANAGEMENT COMPENSATION
NOTE
20 A
17
17
17
2023
1,039
1
3
35
4
1,082
2022
945
1
5
37
4
992
Key management includes the members of the Board of Directors, President and Vice Presidents of the Corporation. The compensation
paid or payable to key management for their services is shown below:
(in millions of Canadian dollars)
Salaries and other short-term benefits
Post-employment benefits
Share-based payments
2023
13
1
2
16
2022
12
2
3
17
2023 Annual Report
105
NOTE 22
IMPAIRMENT CHARGES
(in millions of Canadian dollars)
Spare parts
Property, plant and equipment
(in millions of Canadian dollars)
Spare parts
Property, plant and equipment
Goodwill
PACKAGING PRODUCTS
CONTAINER-
BOARD
SPECIALTY
PRODUCTS
SUB-TOTAL
TISSUE PAPERS
CORPORATE
ACTIVITIES
10
94
104
1
1
2
11
95
106
23
80
103
—
—
—
PACKAGING PRODUCTS
CONTAINER-
BOARD
SPECIALTY
PRODUCTS
SUB-TOTAL
TISSUE PAPERS
CORPORATE
ACTIVITIES
—
10
—
10
—
—
3
3
—
10
3
13
4
85
—
89
—
—
—
—
2023
TOTAL
34
175
209
2022
TOTAL
4
95
3
102
GOODWILL AND OTHER INDEFINITE USEFUL LIFE INTANGIBLE ASSETS IMPAIRMENT TEST
Allocation of goodwill and other indefinite useful life intangible assets is as follows:
• Containerboard Packaging segment goodwill of $481 million is allocated to the Containerboard segment.
Annually, the Corporation must test all of its goodwill for impairment.
The Corporation tested its Containerboard Packaging segment goodwill for impairment. As a result of this impairment test, the Corporation
concluded that the recoverable amount of the segment exceeded its carrying amount, thus no impairment charge was necessary. The key
assumptions used by the Corporation are the adjusted earnings before interest, taxes, depreciation and amortization margin (EBITDA (A)
margin), capital expenditures, the foreign exchange rate and shipments based on historical and expected levels.
The Corporation applied the income approach in determining fair value less cost of disposal (level 2 inputs).
With all other variables held constant, a rise reasonably possible in the discounting rate of 1.3% would reduce the excess to nil.
Discounting rate
CONTAINERBOARD
PACKAGING
11.5%
106
2023 Annual Report
NOTE 23
ADDITIONAL INFORMATION
A. CHANGES IN NON-CASH WORKING CAPITAL COMPONENTS ARE DETAILED AS FOLLOWS1:
(in millions of Canadian dollars)
Accounts receivable
Current income tax assets
Inventories
Trade and other payables
Current income tax liabilities
B. FINANCING EXPENSE
(in millions of Canadian dollars)
Interest on long-term debt (including lease obligations interest 2023 - $8 million; 2022 - $ 7 million)
Amortization of financing costs
Other interest and banking fees
Interest expense on employee future benefits
Unrealized loss on interest rate swaps
Foreign exchange loss on long-term debt and financial instruments
2023
95
(1)
(15)
35
(1)
113
2023
113
3
7
4
1
—
128
2022
(30)
9
(69)
(12)
(14)
(116)
2022
69
2
5
3
—
9
88
UNREALIZED LOSS ON INTEREST RATE SWAPS
In 2023, the Corporation recorded an unrealized loss on interest rate swaps of $1 million (nil in 2022).
FOREIGN EXCHANGE LOSS (GAIN) ON LONG-TERM DEBT AND FINANCIAL INSTRUMENTS
In 2023, the Corporation recorded a gain of less than a million dollars on its US$ denominated debt and related financial instruments,
compared to a loss of $9 million in 2022. The foreign exchange loss (gain) on long-term debt and financial instruments is composed of
foreign exchange forward contracts not designated for hedge accounting.
1 The monetization accounts receivable program described in Note 15.4 D had a positive impact on the changes in non-cash working capital of $73 million in 2023.
2023 Annual Report
107
C. TOTAL NET DEBT FROM FINANCING ACTIVITIES
(in millions of Canadian dollars)
As of January 1, 2022
Cash flow
Change in cash and cash equivalents
Bank loans and advances
Change in credit facilities
Increase in term loan
Payments of term loan
Payments of other long-term debt, including lease
obligations (2022 - $55 million)
Non-cash changes
Foreign exchange translation on long-term debt and
financial instruments
Right-of-use assets acquisitions
Right-of-use assets disposals
Amortization of financing costs in long-term debt
Other
Exchange differences
As of December 31, 2022
Cash flow
Change in cash and cash equivalents
Bank loans and advances
Change in credit facilities
Increase in other long-term debt
Payments of other long-term debt, including lease
obligations (2023 - $59 million)
Non-cash changes
Foreign exchange translation on long-term debt and
financial instruments
Right-of-use assets acquisitions
Right-of-use assets disposals
Amortization of financing costs in long-term debt
Other
Exchange differences
As of December 31, 2023
NOTE
CASH AND
CASH EQUIVALENT
BANK LOANS
AND ADVANCES
12
12
12
12
(174)
70
—
—
—
—
—
—
—
—
—
—
2
(102)
47
—
—
—
—
—
—
—
—
—
1
(54)
1
—
2
—
—
—
—
—
—
—
—
—
—
3
—
(3)
—
—
—
—
—
—
—
—
—
—
LONG-TERM DEBT
1,524
NET DEBT
1,351
—
—
323
355
(219)
(117)
32
87
(2)
2
3
77
2,065
—
—
(92)
101
(144)
(11)
50
(5)
2
(1)
(29)
70
2
323
355
(219)
(117)
32
87
(2)
2
3
79
1,966
47
(3)
(92)
101
(144)
(11)
50
(5)
2
(1)
(28)
1,936
1,882
108
2023 Annual Report
NOTE 24
COMMITMENTS
CAPITAL EXPENDITURES, INTANGIBLE ASSETS, RAW MATERIALS AND SUPPLIES AND SERVICE AGREEMENTS
Capital expenditures, intangible assets, raw materials and supplies and service agreements contracted at the end of the reporting period
but not yet incurred are presented in the following table:
(in millions of Canadian dollars)
No later than one year
Later than one year but no later
than five years
More than five years
PROPERTY,
PLANT AND
EQUIPMENT
INTANGIBLE
ASSETS
RAW MATERIALS
AND SUPPLIES
21
—
—
21
10
—
—
10
17
13
—
30
2023
SERVICE
AGREEMENTS
AND EXEMPTED
LEASES
PROPERTY,
PLANT AND
EQUIPMENT
INTANGIBLE
ASSETS
RAW MATERIALS
AND SUPPLIES
30
27
1
58
107
—
—
107
9
—
—
9
18
19
—
37
2022
SERVICE
AGREEMENTS
AND EXEMPTED
LEASES
22
14
2
38
Raw materials and supplies commitments include an amount of $18 million in 2023 ($25 million in 2022) spread over four years with
an associate.
OTHER COMMITMENTS
The Corporation entered an agreement to acquire in 2024 an additional 5.25% participation in Falcon Packaging LLC for a contribution of
$3 million (US$2 million).
NOTE 25
RELATED PARTY TRANSACTIONS
The Corporation entered into the following transactions with related parties:
(in millions of Canadian dollars)
For the year ended December 31, 2023
Sales to related parties
Purchases from related parties
For the year ended December 31, 2022
Sales to related parties
Purchases from related parties
These transactions occurred in the normal course of operations and are measured at fair value.
The following balances were outstanding at the end of the reporting period:
(in millions of Canadian dollars)
Receivables from related parties
Joint ventures
Associates
Payables to related parties
Joint ventures
Associates
JOINT VENTURES
ASSOCIATES
237
120
284
120
80
41
83
34
December 31,
2023
December 31,
2022
7
12
1
2
12
15
4
2
The receivables from related parties arise mainly from sale transactions. The receivables are unsecured in nature and bear no interest.
There are no provisions held against receivables from related parties. The payables to related parties arise mainly from purchase
transactions. The payables bear no interest.
2023 Annual Report
109
NOTE 26
EVENTS AFTER THE REPORTING PERIOD
Extension of the maturity of the revolving credit facility
On February 9, 2024, the Corporation entered into an agreement with its lenders for its existing revolving credit facility to extend the
maturity from July 2026 to July 2027. The financial conditions remain unchanged.
Repositioning of Containerboard operation platform
On February 13, 2024, the Corporation announced an important repositioning of its Containerboard operating platform. The currently idled
Trenton (Ontario) corrugated medium mill will not restart operations, while the Belleville (Ontario) and Newtown (Connecticut) converting
plants will be permanently closed, in a progressive manner, by May 31, 2024. The production from these facilities will be moved to other
plants with available capacity and more modern equipment. Closure costs, including severance, are expected to total approximately $30 to
$35 million to be recorded in the coming periods.
Please refer to the “Segmented Information” section of the Consolidated Financial Statements for the years ended December 31, 2023 and
2022, for more information.
110
2023 Annual Report
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