Cascades TSE: CAS reported second-quarter results that management said exceeded expectations, supported by stronger operational execution, higher volumes and commercial initiatives across its packaging and tissue businesses.
President and CEO Hugues Simon said the company continued to operate amid macroeconomic and geopolitical uncertainty, but both major segments delivered sequential improvement. “Our second quarter exceeded expectations, driven by stronger execution across our operations and lower-than-anticipated volume risk,” Simon said.
Packaging segment rebounds on volume and pricing
Cascades’ packaging segment recorded sales of CAD 772 million in the second quarter, an 8% sequential increase, while adjusted EBITDA rose 16% to CAD 120 million. The segment’s adjusted EBITDA margin increased to 15.5% from 14.4% in the first quarter.
The company attributed the improvement to higher volumes and selling prices, stronger manufacturing performance and commercial initiatives. Total packaging shipments increased 9% sequentially to 426,000 tons. Box shipments rose 6%, while external paper shipments increased 11%.
On a comparable-asset basis, box shipments increased 5.8% from the prior-year quarter, ahead of the industry’s 2.4% increase, according to the company. Including a West Coast box plant sold during the first quarter, sequential box shipments increased 8.4%, compared with an industry increase of 5.5%.
Simon said production levels reached records at both Greenpac and Bear Island. Bear Island operated at 95% of total production capacity during the quarter, and July production was above the second-quarter average. He said management was “very pleased” with Bear Island’s financial results, while declining to provide mill-specific profitability.
Demand for paper rolls remained very strong, Simon said, with demand exceeding the company’s available shipping capacity. Cascades announced additional price increases effective Sept. 8 of CAD 110 per ton for linerboard and white paper grades and CAD 140 per ton for medium. Management expects those increases to begin benefiting results in the fourth quarter.
About 75% of the company’s box customers are contractually tied to linerboard prices, Simon said during the question-and-answer session.
Tissue sales and shipments increase
The tissue segment reported sales of CAD 409 million, up 7.6% sequentially, while adjusted EBITDA increased 6% to CAD 35 million. The segment’s EBITDA margin remained at 8.6%, as higher volume and a more favorable business mix were offset by higher raw-material and transportation costs.
Total tissue shipments increased 7% sequentially to 121,000 tons. Retail volumes rose 2%, while away-from-home volumes increased 16%, supported by demand and commercial initiatives.
Compared with the second quarter of 2025, tissue sales rose 4% and total shipments were stable. Adjusted EBITDA declined CAD 3 million year over year, as increased logistics costs outweighed benefits from volume, pricing and cost initiatives.
Simon said Cascades remains focused on being a supplier of choice for private-brand tissue products and does not currently plan to add through-air-dried, or TAD, tissue machines or equivalent technology. The company said it continues to see a role for conventional tissue products and is focused on optimizing that manufacturing base.
Costs, earnings and cash flow
Recycled-fiber index prices increased more than 10% sequentially during the quarter, although they remained slightly below year-earlier levels. Hardwood pulp and eucalyptus costs rose by as much as 15% both sequentially and year over year. Transportation disruptions and higher fuel costs also affected delivered raw-material costs at the company’s mills.
Cascades reported net earnings per share of CAD 0.21, compared with a loss per share of CAD 0.03 in the prior-year period and earnings per share of CAD 0.38 in the first quarter. Adjusted earnings per share were CAD 0.24, compared with CAD 0.19 a year earlier and CAD 0.07 in the previous quarter.
Chief Financial Officer Allan Hogg said higher adjusted EBITDA and lower financing expenses drove the year-over-year and sequential improvement, partly offset by higher depreciation expense.
Adjusted cash flow from operations increased 22% year over year to CAD 123 million. Capital investments totaled CAD 67 million during the first half, and Cascades maintained its 2026 capital-expenditure outlook of CAD 150 million to CAD 175 million.
Net debt declined CAD 22 million sequentially, primarily due to stronger operating cash flow, though foreign-exchange effects increased net debt by CAD 36 million. The company’s leverage ratio remained at 3.3 times, and available liquidity under its credit facility was CAD 737 million at the end of June.
Outlook includes tariff assessment and EBITDA target
For the third quarter, Cascades expects sequential improvement in consolidated results, citing seasonally higher volumes and ongoing selling-price initiatives in packaging and tissue. Management expects its annual adjusted EBITDA run rate to exceed CAD 600 million during the second half of 2026, aided by its profitability-improvement program.
The company said it realized CAD 30 million of benefits from that program in 2025 and estimates it has captured an additional CAD 25 million so far in 2026.
Cascades is assessing the potential effects of newly announced U.S. tariffs. Simon said certain tissue and packaging products exported to the United States could be subject to a 50% tariff based on currently available information. Management estimates the impact would not exceed 5% of its adjusted EBITDA run rate if the tariff remains in place as announced and mitigation plans are implemented.
Those mitigation measures could include shifting production between Canadian and U.S. operations, Simon said. The company also noted that tariff-related effects on customers could weaken demand or reduce production in some segments.
Separately, Cascades completed the CAD 9 million sale of real estate at its closed Lachine, Quebec, recycling plant on July 28. The company said total proceeds from business and asset disposals reached CAD 105 million in 2026, while it has realized CAD 163 million toward its CAD 230 million asset-monetization objective. Management now expects to complete that objective in early 2027 rather than by the end of the third quarter, citing market conditions and a focus on achieving its value expectations.
In July, Cascades extended the maturities of its Greenpac and Cascades credit facilities by one year, to 2029 and 2030, respectively, and extended a CAD 260 million term loan from December 2027 to July 2031. Management said the transactions were completed on the same financial terms.
About Cascades (TSE:CAS)
Founded in 1964, Cascades offers sustainable, innovative and value-added solutions for packaging, hygiene and recovery needs. The company employs approximately 9,000 talented people across a network of 60 production units in North America. With its participative management, half a century of experience in recycling, and ongoing efforts in research and development as driving forces, Cascades continues to deliver the innovative products that customers have come to rely on, while contributing to the well-being of people, communities and the entire planet.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
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