ANNUAL GENERAL MEETING OF SHAREHOLDERS. January 28, 2016

Transcription

1 ANNUAL GENERAL MEETING OF SHAREHOLDERS January 28, 2016

2 James V. Continenza Executive Chairman of the Board 2

3 James M. Lopez President and Chief Executive Officer 3

4 Disclaimer This presentation includes forward-looking statements within the meaning of securities laws. Such statements relate, without limitation, to the Company s or management s objectives, projections, estimates, expectations or predictions of the future and can be identified by words such as may, will, could, anticipate, estimate, expect and project, the negative or variations thereof, and expressions of similar nature. Forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience, information available to it and its perception of future developments. Such statements are subject to a number of risks and uncertainties, including, but not limited to, changes in foreign exchange rates, product selling prices, raw material and operating costs and other factors identified in the Company s periodic filings with securities regulatory authorities. Many of these risks are beyond the control of the Company and, therefore, may cause actual actions or results to materially differ from those expressed or implied herein. The forward-looking statements contained herein reflect the Company s expectations as of the date hereof and are subject to change after such date. The Company disclaims any intention to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable securities legislation. The Company`s financial results have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). All financial references are stated in Canadian dollars, unless otherwise noted. All references to quarterly information relate to Tembec s fiscal quarters. Adjusted EBITDA and certain other financial measures utilized in the presentation are non-ifrs financial measures. As they have no standardized meaning prescribed by IFRS, they may not be comparable to similar measures presented by other companies. Non-IFRS financial measures are described in the Definitions section on the last page of the interim Management Discussion and Analysis (MD&A) and on the last two pages of this presentation. The information contained in this presentation is current only as of its date and has not been, and unless required pursuant to applicable securities laws, will not be, updated to reflect any changes or facts or circumstances that occurred after such date that may make such information inaccurate or incomplete. In addition, the market data included in this presentation, including information related to the Company s relative position in the industry, is based on internal studies, market research and publicly available information and industry publications. Although the Company believes that such studies, research, information and publications are reliable as of the date of this presentation, they may prove to be inaccurate because of the method by which the Company obtained some of the data for its estimates or because this information cannot always be verified with certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, the Company has not independently verified any of the data from third-party sources nor has it ascertained the underlying economic assumptions relied upon therein. As a result, market, ranking and other similar industry data included in this presentation, and estimates and beliefs based on the data, may not be accurate and complete. 4

5 Safety OSHA Incident Rate

6 Safety Total Severity Rate

7 Market Conditions Specialty cellulose prices have stabilized focus on increasing volume Viscose grade prices bottomed in early 2015 recent improvement Coated bleached board markets seeing increased European competition margins remain strong Newsprint price decline has ceased increases being implemented 7

8 Market Conditions High-yield pulp prices reached low levels in December 2015 quarter prices expected to improve in 2016 Lumber demand is good but prices are volatile Softwood Lumber Agreement with U.S. expired in October 2015 Lower Canadian $ will benefit all Canadian operations 8

9 Key Internal Items Focus on health and safety is yielding positive results The improvement in mill operating performance in the second half of 2015 should continue into 2016 Performance Excellence initiative (Tembec Performance System) contributing to the better operating results Balance sheet is leveraged austerity measures to improve cash flow More modest CAPEX no large projects Temiscaming Cogen meeting financial objectives significant contributor to future earnings 9

10 Temiscaming Cogen Performance Quarterly Electricity Generation MWs/hour Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Average MWs/hour 10

11 Temiscaming Cogen Performance Quarterly Electricity Revenues Less Purchased Nat Gas $/day 60,000 45,000 30,000 15, ,000-30,000 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 $/day Old Run Rate - Neg $17K/day 11

12 Temiscaming and Tartas Cogen Performance Quarterly Adjusted EBITDA (1) $ Millions Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 (2) Tartas Temiscaming (1) Non-IFRS financial measure. See appendix. (2) June quarter results impacted by annual maintenance shutdown at both mills. 12

13 Michel J. Dumas Executive Vice President, Finance and Chief Financial Officer 13

14 Financial Review 14

15 Financial Review 2015 Sales Sales of $1.42B 5% decrease Consolidated Sales $ Millions Consolidated Sales - $ Millions Sales declined by $73M lower $1,800 volumes and selling prices of specialty cellulose $1,500 $1,200 1,534 1,491 1,418 All business segments benefited from weaker C$ down 11.6% on average versus US$ $900 $600 $300 $

16 Financial Review 2015 Segment Sales Specialty Cellulose sales decreased by $67M (-13%) lower pulp and chemical volumes lower pulp prices Forest Products sales increased by $6M (+1%) higher C$ lumber prices due to weaker C$ Paper Pulp sales decreased by $8M (-3%) caused primarily by lower shipments Paper sales decreased by $2M (-1%) lower shipments largely offset by higher coated bleached board prices $600 $500 $400 $300 $200 $100 Segment Sales $ Millions Consolidated Sales - $ Millions $0 Specialty Cellulose Forest Products Paper Pulp Paper 16

17 Financial Review 2015 Adjusted EBITDA (1) Adjusted EBITDA of $70M compared to $90M in prior year Adjusted EBITDA margin of 4.9% compared to 6.0% in prior year All business segments remained profitable $125 $100 $75 $50 Adjusted EBITDA $ Millions 15% 12% 9% 6% Improved pricing generated $17M $25 3% Mill level costs increased by $15M $ % approximately 1% of cost of sales Adjusted EBITDA $ millions (left scale) Decline in sales volume and mix value at Adjusted EBITDA % sales (right scale) the two specialty pulp mills $16M (1) Non-IFRS financial measure. See appendix. 17

18 Financial Review 2015 Operating Results Operating earnings of $31M compared to $88M in prior year Operating margin of 2.2% compared to 5.9% in prior year Depreciation expense increased by $6M Temiscaming Cogen put in service Fiscal 2014 operating results included a gain of $49M related to the sale of BC lands Operating Earnings $ Millions Adjusted EBITDA (1) Depreciation & Amortization (37) (43) Gain on Sale of Lands 49 1 Other Operating Items (14) 3 Operating Earnings (1) Non-IFRS financial measure. See appendix. 18

19 Financial Review 2015 Net Earnings (Loss) Increase in interest expense due to cessation of interest capitalization on Temiscaming Cogen $18M $37M loss due to refinancing of Senior Notes in October 2014 reduced interest rate by 2% Non-cash US$ debt translation loss of $107M over the last 2 years weaker C$ beneficial over the longer term Net Earnings (Loss) $ Millions Operating Earnings Interest & Financial Expense (33) (54) Loss on Refinancing - (37) Loss on US$ Debt Translation (26) (81) Income Tax Expense (20) (9) Net Earnings (Loss) 9 (150) Lower income tax expense for French operations 19

20 Fiscal 2016 First Quarter December 2015 Quarterly Results Sales of $354M Adjusted EBITDA (1) of $29M and operating earnings of $16M Adjusted EBITDA margin of 8.2% highest December quarter since 2001 Results include non-cash loss of $24M on translation of US$ debt positive implications for upcoming quarters Net loss of $28M or $0.28 per share New ABL FILO loan in November Liquidity increased by $42M (1) Non-IFRS financial measure. See appendix. 20

21 James V. Continenza Executive Chairman of the Board 21

22 Questions? 22

23 Appendix Non-IFRS (1) Financial Measures The following summarizes non-ifrs financial measures utilized in this presentation. As there is no generally accepted method of calculating these financial measures, they may not be comparable to similar measures reported by other companies. Adjusted EBITDA refers to earnings before interest, income taxes, depreciation, amortization and other items. Since the Company excludes other items such as gains and losses on significant asset disposals, restructuring charges and custodial costs for permanently idled facilities, it differs from EBITDA. Adjusted EBITDA does not have any standardized meaning according to IFRS. The Company defines adjusted EBITDA as sales less cost of sales and selling, general and administrative expenses, meaning it represents operating earnings before depreciation, amortization and other items. The Company considers adjusted EBITDA to be a useful indicator of the financial performance of the Company, the business segments and the individual business units. The most comparable financial measure is operating earnings or loss. The following table is a reconciliation of operating earnings to the Company s definition of adjusted EBITDA: (in millions of dollars) Operating earnings Depreciation and amortization Other items (35) (4) Adjusted EBITDA (1) International Financial Reporting Standards 23

24 Appendix Non-IFRS (1) Financial Measures Net debt refers to debt less cash, cash equivalents and restricted cash. Total capitalization refers to net debt plus deferred tax liabilities, employee future benefit liabilities, provisions, other long-term liabilities, and shareholders equity. Net debt to total capitalization is used by the Company to measure its financial leverage. (in millions of dollars) Long-term debt Net unamortized financing costs Current portion of long-term debt Operating bank loans / Bank indebtedness Less: cash, cash equivalents and restricted cash (42) (23) Net debt Long-term liabilities Shareholders' equity Total capitalization Net debt to total capitalization ratio 59% 76% (1) International Financial Reporting Standards 24