Cascades Inc. - Company Profile, Information, Business Description, History, Background Information on Cascades Inc.



404 Marie-Victorin, P.O. Box 30
Kingsey Falls, Quebec J0A 1B0
Canada

Company Perspectives:

Of all the elements that have contributed to Cascades' history of success, the two that have undoubtedly done the most to differentiate Cascades from the rest of the pulp and paper industry are its approach to doing business and its corporate culture. This culture, based on workforce respect and commitment as well as social responsibility and preservation of resources, has been a constant source of innovation and advancement for the Cascades Group. In fact, in many ways Cascades has become a pioneer and leader, largely because of its innovative vision in terms of human resources management, but also because of its commitment to quality, technological development and environmental protection. The Cascades philosophy has also been an important engine for growth and financial performance. Indeed, Cascades has successfully channeled the energy and talent of its employees to build a world-class company, while maintaining the organizational flexibility required to adapt to changing markets.

History of Cascades Inc.

Cascades Inc., over its 40-year history, has grown from the operator of a single paper mill in a small Canadian town to a corporation with international presence. Owned approximately 40 percent by management, Cascades' main business segments are packaging products, tissue papers, and fine papers, primarily made from the two million tons of paper and board the company recycles annually. The company had nearly 150 operating units in six countries--Canada, the United States, France, England, Germany, and Sweden--during 2004.

Family Plan Looking Good on Paper: 1960s-80s

A father and son team, Antonio and Bernard Lemaire, had a vision of reviving a paper mill in a small town to the northeast of Montreal. Cascades Paper Inc. was established in Kingsey Falls, Quebec, on March 26, 1964, and the pair went on to transform the single mill into a model for subsequent plants.

The Lemaire's concept was to use recycled pulp, a cheap source of material, to manufacture paper for industrial markets. Having limited resources, Cascades needed the support of the local financial institution to buy the mill. Finding success there, the company acquired other shuttered or declining mills. Diversification coincided with growth: Cascades moved into the manufacture of molded pulp, tissue paper, corrugated carton, and boxboard.

In December 1982, Cascades made its initial public offering. Common stock was listed on the Montreal Stock Exchange in January 1983, and then on the Toronto Stock Exchange in October 1984. The move to the public sector facilitated a new phase of expansion, allowing the operation to enter the ranks of the world-class papermakers.

In 1985, Cascades entered the European carton board market, establishing Cascades S.A. in France and taking over three businesses in that country. Exceeding their expectations in terms of output and market share, the company had by 1989 become France's largest cartonboard producer, according to Pulp & Paper International. During the year the company bought two additional firms, one in Belgium and one in Sweden. A sole sales organization represented all the European operations. Meanwhile, back in North America, Cascades had established control over more than 20 companies.

Successful Groupings: 1990s

The 1990s would be a decade marked by both acquisition and divestment of businesses. In 1992, Cascades acquired Paperboard Industries and created a subsidiary to combine those assets with Canadian and European boxboard mills. Cascades Paperboard International Inc. then embarked on an effort to reduce debt load and improve profitability through a range of activities including elimination of the Belgium mill, entering a joint venture for another French mill, and restructuring some of the debt of its North American operations.

By 1995, Cascades Paperboard International Inc.--held 63.4 percent by Cascades--was the leading producer of boxboard in Canada and France. Moreover, 43 percent of Cascades' consolidated sales came from its boxboard operations.

Fine papers was Cascades second largest business segment. The cornerstone of the group was Rolland Inc., a company in which Cascades acquired a 73.5 percent interest during 1992. Cascades ranked second among Canadian producers of fine papers and related products, according to Pulp & Paper.

The containerboard group made up the company's third largest division. Cascades was looking into North American investments and strategic alliances in central Europe and Asia to expand that market and the one for its packaging products division.

Overall, Cascades was producing more than 400 different products during the mid-1990s. They ranged from security papers for stocks, bonds, ballot paper, passports, and travelers checks, to plastics and building materials.

Activity continued into the last half of the decade. During 1997, Cascades agreed to buy a German boxboard mill and entered into a joint venture with a fellow Canadian paper product producer.

The acquisition of the German operation gave Cascades a strong foothold in that market and provided a gateway to others in the region. The 50:50 agreement with Domtar Inc., merging assets of Cascades' containerboard operations and Domtar's packaging division, created a new $1 billion company. As the tenth largest containerboard producer in the fragmented North America packaging market, the new entity would gain immediate market clout.



In 1999, Cascades was ranked second in Canada's paper industry by the Paper Industry Management Association, behind Abitibi-Consolidated Inc. and ahead of Domtar. In addition to its ownership in specialty products, containerboard, boxboard, and fine paper concerns, Cascades held a 73 percent interest in Perkins Papers Ltd., a tissue business, and a 45 percent interest in Boralex Inc., a hydroelectric operation.

Drive for Growth and Innovation: 2000-02

In 2000, Cascades achieved its goal of $3 billion in sales. The strong sales volume was driven by the performance of the packaging sector. But operating margins were hurt by the rising cost of waste papers and energy. During the year the company spent a combined $31 million to acquire Wyant Corporation, adding to its tissue paper business, and Amor Box Corporation, a containerboard company. Norampac Inc., the company formed through its alliance with Domtar, pulled in a record $1 billion in net sales.

Cascades Inc., through a stock exchange, gained sole ownership of Paperboard Industries International Inc., Perkins Papers Ltd., and Rolland Inc. as 2001 began. The restructuring reduced the Lemaire family's ownership from 46 percent to about 38 percent, according to Market News Publishing.

Cascades purchased two U.S. tissue mills during the second half of 2001. The acquisitions moved Cascades up the ranking among North American tissue producers, from seventh to fifth. The companies' products--bathroom tissue, paper towels, paper napkins, and facial tissue--were made from 100 percent recycled fibre and primarily marketed under private labels.

Norampac embarked on the building of a $30 million environmentally friendly steam reformer in 2001. The system would make Norampac's Trenton, Ontario, paper mill "the cleanest in North America," converting pulping liquor into hydrogen-rich fuel gas, steam, and soda ash, all of which would be reused in the papermaking process beginning in 2003. Norampac was the first commercial enterprise to embark on such an effort, according to Market News Publishing.

In April 2002, Cascades announced a name change: Paperboard Industries International Inc. was renamed Cascades Boxboard Group Inc. Other subsidiaries, including Rolland and Perkins, would follow suit, according to a Market News Publishing release. "We are proud of our past, and how far we have come, we are confident that our future is bright, and that the unification of the subsidiaries under one name will enable us to offer a much more complete package of products and services to our customers worldwide," said Laurent Lemaire, Cascades Inc.'s president and CEO.

Profits for 2002 climbed 55 percent, over 2001, to $169 million. Sales increased by 11.6 percent to $3.4 billion, according to the America's Intelligence Wire. Lemaire said, "During the year, we generated $196 million of free cash flow, which allowed us to pursue our acquisition-driven growth strategy while reducing our indebtedness ratio and increasing our dividend."

Meeting New Challenges: 2003-05

Shares of publicly traded Domtar and Cascades fell in April 2003, in response to news of an investigation by the Competition Bureau regarding alleged price fixing. Also under scrutiny were Coast Paper Ltd. and Unisource Canada Inc. Cascades said the allegations involved the carbonless paper and fine paper products segments of their business.

After recording its best year ever in 2002, Cascades saw sales drop by 4 percent and operating income slide 60 percent in 2003. The company attributed the declines to the strengthening Canadian dollar, the sluggish economy, rising energy prices, and intensified competition, all driving down pricing.

In response, the company implemented a campaign to control expenses, increase efficiency, and sharpen competitiveness. Cascades believed its decentralized structure, with mills and plants operating independently, helped during tumultuous times, allowing for rapid response to changes in their environment.

The management philosophy was recognized in both 2003 and 2004 when the company was named one of Canada's top employers by Mediacorp Canada Inc. in collaboration with Maclean's magazine. "In addition to being in the Top 100, Cascades also received the credit for being No. 1 in the Top 10 for financial benefits, amongst others, because of its important financial contribution to employees who want to settle in Kingsey Falls, where the head office and several of the company's paper plants are located," reported Canada NewsWire.

In addition to its employees, the company depended on its "leading edge de-inking technology, sustained research and development, and 40-plus years of experience in recycling" to help it continue to bring innovative product to the marketplace. All these attributes were put to the test as difficult conditions persisted during 2004. Cascades maintained profitability on the year, focusing on core business areas of packaging and tissue, but jobs were lost.

In January 2005, Cascades announced plans to open a sales office in Obninski, southwest of Moscow. "The Russian market hovers around 500,000 tonnes of board, which is not an insignificant market, is very promising and comparable to the size of certain markets in Western Europe," Cascades vice-president, Stephane Thiollier, said in Canadian Business. Cascades had sales offices in the Czech Republic, Poland, and Hungary. The global economic environment would dictate how things played out at home and abroad.

Principal Subsidiaries: Cascades Boxboard Group Inc.

Principal Competitors: Domtar Inc.; Georgia-Pacific Corporation; Weyerhaeuser Company.

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