Cascades Q1 2025 slides: improved YoY results amid sequential challenges

Cascades Inc . (TSX:CAS) released its first quarter 2025 financial results on May 8, showing year-over-year improvements in profitability despite sequential declines from the previous quarter. The Canadian packaging and tissue products manufacturer reported net earnings of $7 million, a significant improvement from a $20 million loss in the same quarter last year, though down from the previous quarter.

Quarterly Performance Highlights

Cascades reported sales of $1,154 million for Q1 2025, representing a 4% increase from $1,109 million in Q1 2024, but a 5% decrease from $1,211 million in Q4 2024. Operating income reached $50 million, substantially higher than the $9 million reported in Q1 2024, and also improved from $16 million in Q4 2024.

Adjusted EBITDA came in at $125 million (10.8% margin), compared to $103 million (9.3% margin) in the same quarter last year and $146 million (12.1% margin) in the previous quarter. Adjusted net earnings were $13 million ($0.13 per share), compared to breakeven in Q1 2024 and $25 million ($0.25 per share) in Q4 2024.

As shown in the following summary of financial results:

"The year-over-year increase in Adjusted Cash Flow was driven by lower capital investments and higher cash flow from operations compared to the prior year," the company noted in its presentation, though Q1 typically sees higher working capital requirements.

Packaging (NYSE:PKG) Products Segment

The Packaging Products segment, which includes containerboard and specialty products, showed mixed results. Sales increased 7% year-over-year to $762 million but decreased 3% sequentially. Adjusted EBITDA for the segment improved 45% year-over-year to $109 million but declined 17% from Q4 2024.

The year-over-year improvement was primarily driven by higher selling prices (+12%), which contributed $50 million to EBITDA, partially offset by lower volumes and higher operating costs. The sequential decline was attributed to lower volumes (-5%), driven by the macro-environment and tariff uncertainty, as well as higher operating costs due to lower production levels, energy, and transportation.

The following chart illustrates the sequential performance of the Packaging Products segment:

Year-over-year performance shows the significant impact of higher selling prices:

Box shipments decreased 3.6% in Canada while remaining flat in the U.S., compared to industry growth of 2.5% year-over-year. The company noted that "lower converted products shipments reflect previous plant closures, and macro-environment and tariff uncertainty."

Tissue Papers Segment

The Tissue Papers segment faced challenges in Q1 2025, with sales of $364 million, down 1% year-over-year and 8% sequentially. Adjusted EBITDA for the segment decreased 26% year-over-year to $37 million and fell 18% from Q4 2024.

The sequential decline in the Tissue segment is illustrated in the following chart:

Year-over-year performance shows multiple headwinds affecting the segment:

Tissue shipments decreased 4% year-over-year in short tons, with Away-from-Home tissue down 3% and Retail tissue down 5%. The company cited lower average selling prices related to mix, higher raw material costs, and lower volumes as key factors impacting performance.

This represents a shift from the previous earnings report, which highlighted a strong turnaround in the tissue business with a robust EBITDA margin of 15.6% in Q4 2023.

Financial Position and Cash Flow

Cascades’ net debt increased to $2,216 million as of March 31, 2025, from $2,096 million at the end of 2024, primarily due to seasonal working capital requirements. The net debt to EBITDA ratio remained at 4.2x, unchanged from the previous quarter.

The following chart shows the reconciliation of net debt for Q1 2025:

Cash flow from operations was $45 million in Q1 2025, with adjusted cash flow from operations of $62 million. After capital expenditures and dividend payments, the company reported adjusted cash flow used of $6 million ($0.06 per share).

Capital investments for Q1 2025 were $24 million, with a forecast of approximately $175 million for the full year 2025, down from historical levels as the company prioritizes debt reduction.

Strategic Initiatives and Outlook

Cascades outlined its strategic priorities for 2025-2026, focusing on strengthening its culture of excellence to drive profitability, aligning operational and commercial structure, and prioritizing debt reduction in its capital deployment.

For Q2 2025, the company provided a positive outlook, expecting consolidated adjusted EBITDA to improve by 5-12% compared to Q1 2025. Both the Packaging and Tissue segments are expected to see improvements of 5-10%, while the Corporate segment is projected to remain stable or improve slightly.

The following chart shows the outlook for Q2 2025:

However, the company cautioned about potential risks: "Potential for continued tariff ambiguity, trade uncertainty and macro-environment factors to negatively impact consumer/business sentiment and demand levels for our products."

The adjusted net earnings reconciliation provides additional insight into the company’s performance:

Cascades continues to navigate a challenging market environment, with improved year-over-year results demonstrating progress in its strategic initiatives despite sequential pressures. Investors will be watching closely to see if the company can deliver on its positive Q2 outlook while managing ongoing market uncertainties and working toward its debt reduction goals.

Full presentation:

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