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The Globe and Mail

Cascades loses $19-million in third quarter

Tissue being rolled at Cascades Tissue Group plant, in Candiac on March 3, 2011.

Christinne Muschi for The Globe and Mail/christinne muschi The Globe and Mail

Tissue and cardboard maker Cascades Inc. says it lost $19-million in the third quarter as the company booked special charges for restructuring investment losses and other things.

The Quebec-based company reported Thursday it lost 20 cents per share for the three months ended Sept. 30. That compared to a profit of $24-million, or 25 cents per share, in the same quarter last year.

Sales for the three months rose 14 per cent to $947-million from $832-million.

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The company said it benefited from higher selling prices and the consolidation of Reno De Medici, the second largest European producer of coated recycled boxboard.

Cascades said its bottom line was hurt by a $14-million impairment loss related to restructuring as well as an $11-million unrealized loss on financial instruments.

The Montreal company also booked $1-million in closure and restructuring costs, a $5-million foreign exchange gain on long-term debt and a $4-million after-tax loss related to a divestiture.

Despite the loss, Cascades said the third quarter was better than the second despite an increase in average raw material costs and a production interruption caused by a flood at one of its tissue mills.

Excluding the one time items, Cascades lost about $5-million or five cents per share in the latest quarter.

President and CEO Alain Lemaire said that while the company wants stronger results, it did move in a positive direction for a second quarter in a row.

"Three of our four segments posted an improvement in their quarterly sequential financial performance, and the several proactive measures taken to address our lesser-performing units have continued to pay off."

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Looking ahead, Mr. Lemaire said the company is "encouraged by the recent substantial drop in recycled fibre costs and the depreciation of the Canadian dollar."

"This should help to offset the traditional seasonal decrease in demand in most of our sectors, and the negative impact of the economic instability on our European operations. We anticipate that our results will be positively impacted by the implementation of selling price increases in our tissue paper segment and the realization of our restructuring actions."

Cascades is a leader in the recovery of recyclable materials and the manufacturing of green packaging and tissue paper products. Mr. Lemaire says faced with volatile markets and economic conditions, the company will pursue initiatives aimed at improving its competitive position in coming quarter.

Cascades was expected to earn 2 cents per share in the third quarter, compared to 29 cents per share a year earlier, according to analysts polled by Thomson Reuters.

No revenue forecasts were available, compared to $1-billion of sales last year.

Founded in 1964, Cascades produces, converts and markets packaging and tissue products composed mainly of recycled fibres.

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It employs nearly 11,000 people in more than 100 operating units in North America and Europe.

Cascades said it plans to take full control of Quebec-based Papersource Converting Mill Corp. for $85-million including debt.

The company will pay $60-million in cash for the 50 per cent of Papersource it does not already own. The transaction values Papersource at $145-million.

The move is designed to strengthen its position as a seller of bathroom tissue, paper towels and facial tissue to non-residential markets – ranging from schools and offices to hospitals and other users in Canada and the United States.

It also announced plans for its Norampac division to close a plant in Le Gardeur, Que., before the end of the year in a move that will displace almost 50 workers.

In June, it announced plans to expand its U.S. operations by partnering to build a new $430-million mill in Niagara Falls, N.Y., that will make lightweight linerboard, a packaging material craved by retailers.

Cascades' Norampac division and its partners, including the pension fund manager Caisse de depot et placement du Quebec, will build the Greenpac mill next door to an existing Norampac operation in the U.S. border city.

The plant's single machine will be one of the widest of its kind. The 328 inch-wide machine (833 centimetres) will be able to produce three rolls of corrugated product, making it profitable to run in all market cycles.

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