Cascades (TSE:CAS) said third-quarter results met its expectations despite tariff and cost pressures, as price increases and operational improvements helped offset higher expenses. The company expects a slight sequential decline in fourth-quarter results but is targeting stronger earnings in 2027.
President and CEO Hugues Simon said packaging results fell slightly short of expectations, while tissue performance exceeded them. He also said CFO Allan Hogg plans to retire in the second half of 2027 after 36 years with the company, including 16 years in his current role. No official retirement date has been set.
Reported net earnings were $0.30 per share in the third quarter, compared with $0.21 in the preceding quarter and $0.29 a year earlier. Adjusted earnings were $0.33 per share, up from $0.24 in the second quarter but down from $0.38 in the third quarter of 2025.
Packaging and tissue results
Packaging sales rose 5% sequentially to $807 million, while adjusted EBITDA also increased 5%, to $126 million. The segment’s adjusted EBITDA margin remained stable at 15.6%.
Higher average selling prices more than offset substantially higher recycled fibre costs during the quarter, Simon said. Total packaging shipments were stable at 426,000 short tons, with box shipments up 2% from the preceding quarter.
Compared with a year earlier, packaging adjusted EBITDA fell from $136 million as higher raw material and transportation costs outweighed the benefits of improved pricing and profitability initiatives. On a comparable asset basis, box shipments rose 5% year over year, ahead of the adjusted industry increase of 1.6%.
Tissue sales increased 1.5% sequentially to $415 million, and adjusted EBITDA rose 34% to $47 million. The segment’s margin improved to 11.4% from 8.6% in the second quarter, reflecting price increases and lower production costs.
Total tissue shipments fell to 118,000 tons from 121,000 tons in the preceding quarter. Retail shipments increased 2%, while Away-from-Home volumes declined 10%, primarily because a customer ceased operations.
Simon said the customer’s private brand was sold to a new company with which Cascades has an agreement. He expects the company to recover the reduction in cash flow in less than a year, although volume recovery will take longer.
Tariffs and outlook
Simon said the direct third-quarter impact of U.S. tariffs and Canadian counter-tariffs, net of mitigation measures, was approximately CAD 4 million, primarily in packaging. He said the U.S. administration’s Oct. 23 exclusion of corrugated boxes, plastic packaging and molded pulp packaging from tariffs substantially reduced the expected impact.
Although certain laminated board products were added to the Section 232 list, Cascades estimates the ongoing annual direct impact on adjusted EBITDA will be less than CAD 10 million, Simon said.
The company expects fourth-quarter consolidated results to be slightly lower sequentially, while maintaining its expectation for an adjusted EBITDA run rate above CAD 600 million for the second half of 2026. Simon cited continued price increases and operational initiatives as supports, but said raw material, transportation and tariff-related pressures remain.
For 2027, Cascades is targeting adjusted EBITDA above CAD 650 million. Simon said recent pricing initiatives should provide further benefits next year as their full effect is reflected in results.
During the question-and-answer session, Simon said October was a busy month, but the company was cautious about December because demand typically weakens after Thanksgiving and shipments can slow in the final week of the year. Cascades plans to run most operations at full pace in December to build inventory for 2027, he said.
Debt, investment and operational priorities
Adjusted cash flow from operations totaled $119 million in the third quarter, down 13% from a year earlier. Hogg attributed the decline primarily to higher financing costs and lower dividends from joint ventures.
Net debt fell by $16 million sequentially, and the leverage ratio declined to 3.2 times. Cascades had CAD 708 million of available credit-facility liquidity at the end of September, Hogg said. The company partially redeemed $100 million of its 2028 senior notes in September, leaving $345 million outstanding.
Cascades maintained its 2026 capital expenditure forecast of $150 million to $175 million. Asked about 2027, Hogg said cash usage would likely be similar to this year, although the company could begin projects aimed at strengthening the business.
Simon said the company had realized CAD 165 million in proceeds toward its CAD 230 million asset-monetization target. It is also reviewing its recovery and recycling operations, with a focus on securing fibre supply at competitive prices and improving integration with its paper mills.
At the Bear Island mill, production operated above 90% of total capacity during the third quarter. Simon said he expects the facility to run above 93% capacity in 2027 while increasing production of lighter-weight grades.
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.
