August 11, 2009 / 10:45 AM / in 9 years

UPDATE 3-Canada's Cascades Q2 profit beats market, shares jump

* Q2 adj EPS C$0.28/shr vs Street view C$0.14/shr

* Says demand recovery to continue in Q3

* Revenue down 2 percent

* Shares rise 15 pct (Recasts; adds analyst comments, conference call details, updates share movement)

By Isheeta Sanghi

BANGALORE, Aug 11 (Reuters) - Packaging and paper-products company Cascades Inc (CAS.TO) posted a second-quarter profit that beat market estimates, and said it expects the demand recovery to continue in the third quarter, sending its shares up as much as 15 percent.

“Generally, the second quarter and third quarter are better shipment volumes than first quarter and fourth quarter for Cascades,” RBC Capital Markets analyst Paul Quinn said.

The most significant driver behind the improvement of operating income before depreciation and amortization, or EBITDA, in the second quarter was the rebound in shipments, Chief Executive Alain Lemaire said on a conference call with analysts.

Sequentially, Cascades’ EBITDA, excluding items, rose 13 percent to C$121 million, while total shipments rose 5 percent to 776,000 short tons.

Analyst Quinn expects third-quarter shipment levels to be similar to the second quarter, but sees cost pressure on recycled paper prices going forward.

“That said, earnings still should be strong in the third quarter,” said Quinn, who has a C$6 price target and an “outperform” rating on the stock.

CEO Lemaire said the company remains cautious about short-term business conditions, given the increase in recycled fiber costs since the beginning of the year, the volatility of the Canadian dollar and the scheduled downtime for maintenance.

“Our goal is to pursue our upward trend and exceed... our second-quarter results,” Lemaire said.


The company, which produces, converts and markets packaging and paper products composed mainly of recycled fibers, posted second-quarter net earnings of C$30 million, or 30 Canadian cents a share, compared with a loss of C$25 million, or 25 Canadian cents a share, in the year-ago quarter.

Excluding items, the Kingsey Falls, Quebec-based company earned C$28 million, or 28 Canadian cents a share.

Analysts on average expected the company to earn 14 Canadian cents a share, before items, according to Reuters Estimates.

Quarterly sales fell 2 percent to C$981 million.

Cascades operates three segments — the packaging segment, which includes boxboards and containerboards, the tissue group, and the specialty products group, which includes food packaging materials.

The company’s shares, which have risen more than three-fold since hitting a 52-week low on March 18, were up 58 Canadian cents at C$5.88 in Tuesday afternoon trade on the Toronto Stock Exchange. (Editing by Unnikrishnan Nair, Anne Pallivathuckal)

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