Mining & Metals
Cascades Q1 Earnings and Sales Below Its Initial Forecast; Sees FY26 Results Below FY25, But Says "Countermeasures" Underway
Cascades (CAS.TO) reported a decrease in earnings and sales in the first quarter of fiscal year 2026, below its initial forecast, and said while annual results are currently expected to be below 2025 levels, "countermeasures, including selling price initiatives, are currently underway".For the three months ended March 31, 2026, the company reported net earnings of $7 million or adjusted earnings per common share of $0.07 compared with $13 million or adjusted EPS of $0.13, a year earlier. The result was in-line with consensus estimate compiled by FactSet of $0.07 EPS.Sales decreased to $1.12 billion in the quarter, compared with $1.15 billion, a year-ago, missing a consensus estimate compiled by FactSet of $1.14 billion. This decrease reflects consolidated net benefits of $18 million from higher selling prices and a favourable sales mix of $21 million, it said.The company added, however, that these factors were more than offset by an unfavourable foreign exchange rate of $33 million and by a $35 million impact from lower volumes, mainly in the Packaging Products segment, reflecting impact of business closures and dispositions.Hugues Simon, President and CEO, said: "First quarter results came in below our initial forecast, reflecting equally weighted external and operational factors. As disclosed in our revised outlook on April 10, weather related disruptions across the U.S., combined with heightened volatility in transportation and fuel costs, drove operating costs above plan. Additionally, recent geopolitical developments weighed on consumer confidence and spending, resulting in packaging volumes below our original assumptions. Performance was further impacted by temporary execution inefficiencies in the second half of the quarter. Despite this, net debt remained stable sequentially, and the leverage ratio was unchanged at 3.3x."Simon added: "We expect results in the second quarter to be modestly lower sequentially. This outlook reflects a cautious packaging volume outlook amid restrained consumer spending levels, as well as continued volatility and upward pressure on input costs. The implementation of announced price increases in both segments is expected to fully offset these headwinds, with pricing actions taking effect in packaging beginning in the second quarter and during the second half of the year in tissue."Amid the dynamic macro-economic environment we have strengthened our execution discipline to achieve our objective of generating $100 million of profitability improvements by the end of 2026. Key drivers include ongoing cost reduction initiatives, logistics optimization, productivity efficiency enhancements and targeted pricing actions to mitigate significant cost headwinds. We expect to achieve our target of proceeds from the sale of non-core assets by the end of the third quarter, and continue to actively review our portfolio of assets to ensure strong alignment with the company's long-term strategic objectives. Given persistent cost pressures in the first half of 2026, annual results are currently expected to be below 2025 levels; however countermeasures, including selling price initiatives, that are currently underway are projected to restore annual run rate adjusted EBITDA to a level of approximately $600 million in the second half of the year. In this context, achieving our targeted leverage ratio of 2.5x-3.0x by year-end may be challenging, though the target remains unchanged."Its board declared a quarterly dividend of $0.12 per common share, unchanged from the prior quarter, to be paid on June 4, to shareholders of record at the close of business on May 21.Shares closed up 0.6% to $10.95 on Wednesday on the Toronto Stock Exchange.
$CAS.TO