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Cascades investing $100M to accelerate productivity

Cascades is selling its less-efficient plants and accelerating the modernization of its other facilities with planned $100 million per year investments over three to four years.


May 13, 2011
by CANADIAN PRESS

MONTREAL: Cascades is continuing to adjust to persistently high recycled fibre costs by selling five less-efficient plants and accelerating the modernization of its other facilities with planned $100 million per year investments over three to four years in automation and other productivity improvements.

The Kingsey Falls, Que.-based company has suffered for several quarters from the stronger Canadian dollar and the soaring price of used paper, which increased more than 80% last year due to demand from China.

Cascades called its first-quarter net loss of $8 million “not acceptable” as it reported its latest financial results yesterday and promised to step up efforts to cut costs.

The packaging and tissue paper producer said the loss amounted to eight cents per share for the quarter ended March 31 compared with a profit of $1 million or a penny per share a year ago.

Sales totalled $774 million for the quarter, up from $759 million in the first quarter of 2010.

Excluding one-time items, Cascades said it earned $1 million or a penny per share in its latest quarter compared with $4 million or four cents per share a year ago.

Cascades was expected, on average, to lose a penny per share in the first quarter, according to analysts polled by Thomson Reuters.

During the quarter, the company also faced rising costs for pulp, energy, chemicals and transportation, along with $3 million in closing and restructuring charges.

President and CEO Alain Lemaire said the company has acted to stop the bleeding by selling the five unidentified plants and applying the $100 million proceeds to reducing its massive debt, which stood at $1.1 billion.

The company also plans to strengthen the management of other problem facilities.

“What we want is to give support to those plants with technically competent people in very specific areas to give them a real chance to get through,” said new chief operating officer Mario Plourde.

“If we see that we cannot rectify the situation, we’ll have to make more difficult decisions,” he added, alluding to possible closures.

Employees may have to agree to making additional efforts, warned Lemaire.

“We’re in a situation where we must together find all possible solutions to improve ourselves and it’s important to have them involved.”

Cascades will also be working hard to increase productivity and automation of its plants. It plans to invest $100 million per year over three to four years to ensure its facilities are among the best in the industry.

This is in addition between $150 million and $175 million in capital expenditures that the company already conducts annually.

In March, the company announced it would shrink its workforce by 10% as it sold Dopaco – North America’s largest fast-food packaging business – to global giant Reynolds Group for US$400 million.

The firm said it will use US$337 million in net proceeds from the sale to further reduce debt.

It hopes that higher selling products over the next few quarters won’t be offset by equally higher recycled fibre costs.
© 2011 The Canadian Press