Cascades (TSE:CAS) executives said the company’s fourth-quarter 2025 performance was “in line with our projections,” pointing to stable results in packaging, a weaker-than-expected quarter in tissue due to operational disruptions, and continued progress on debt reduction and asset sales.
Consolidated results and margin performance
President and CEO Hugues Simon said consolidated sales and adjusted EBITDA both “decreased marginally from Q3 levels,” which he attributed to seasonally softer volumes and the broader geopolitical environment. On a year-over-year basis, consolidated sales declined 1%, which management said was driven by lower packaging volumes that offset pricing and favorable mix benefits across both segments.
For the full year 2025, Cascades reported sales of CAD 4.8 billion and adjusted EBITDA of CAD 576 million, up 15% versus the prior year. Management attributed the improvement to stronger packaging performance. Simon added that raw material cost trends remained favorable in the fourth quarter.
Packaging: volume softness, margin stability, and Bear Island progress
In packaging, fourth-quarter sales fell 5% sequentially. Simon cited typical seasonal softness as well as lower average selling prices, driven by changes in customer and sales mix for converted products. Despite that, the company’s box shipments rose 1.5% in the quarter, outperforming an industry decline of 2.4% that management referenced on the call.
Packaging adjusted EBITDA declined 3% sequentially to CAD 132 million, which management said was in line with expectations. Lower volumes and selling prices were partially offset by lower operating and raw material costs. Packaging EBITDA margin improved sequentially to 17.4% from 17.1% in Q3, and improved year over year to 17.4% from 16.9%.
Simon highlighted operational progress at the Bear Island facility, which averaged 88% of total production capacity during the quarter while running lower basis weight paper. The company also reached capacity speed targets across all grades, and it increased production of lower basis weight paper by 7% sequentially. Management said it continued to see a positive operating pace at Bear Island early in 2026.
Year over year, packaging sales decreased 3%, which management attributed to lower volumes reflecting permanent facility closures and/or sales and a decline in corrugated shipments following strong demand in the year-ago period. Simon said higher selling prices and favorable mix partially offset the declines, while adjusted EBITDA was stable as pricing and raw material cost tailwinds offset volume impacts.
Tissue: outage and execution issues pressure results, Pryor improves
Tissue results “were below expectations,” Simon said, citing efficiency and logistics execution that fell short of targets as well as a “major electrical outage” at the company’s Wagram, North Carolina facility. Management said these factors reduced output, increased operational support needs, and forced the company to redirect volumes to other plants, increasing logistics costs.
Tissue sales decreased 1% sequentially, driven by a 3% decline in away-from-home volumes from expected seasonality, partially offset by a slight increase in the retail market. Segment adjusted EBITDA was CAD 42 million, down 9% sequentially. While lower raw material costs helped, management said the benefit was more than offset by higher operating costs and lower volume, including the impact of the Wagram outage.
Year over year, tissue sales increased 3% on an 8% increase in retail and stable away-from-home volumes. Adjusted EBITDA declined 7% from the prior year as raw material, volume, and selling price benefits were offset by higher operating costs.
Management said the Wagram disruption should not overshadow progress elsewhere, including the Pryor, Oklahoma facility, where converting production rose 11% sequentially in Q4. Simon also said recent investments at Kingsey Falls and Grand Bay were delivering good results. In the Q&A, Simon described the Wagram issue as stemming from an external power provider switchgear failure, with additional costs incurred from running generators to support customer service. He said the main switchgear restart occurred “yesterday” and that the facility was progressing toward full production, with expectations to return to full capacity before the end of Q1.
Cash flow, leverage, and asset sales
CFO Allan Hogg said specific items recorded in the quarter impacted operating income by CAD 7 million. Those items included CAD 25 million of impairment charges related to facilities closed in Canada and the U.S. and CAD 4 million of restructuring costs, partially offset by gains totaling CAD 22 million from the sale of Flexible Packaging activities and on derivative financial instruments.
As reported, fourth-quarter earnings were CAD 0.37 per share, compared to a net loss of CAD 0.13 per share a year earlier and earnings of CAD 0.29 per share in Q3. On an adjusted basis, earnings were CAD 0.40 per share, up from CAD 0.25 last year and CAD 0.38 in the prior quarter. Hogg said the year-over-year improvement reflected stronger adjusted EBITDA, while the sequential improvement reflected lower depreciation and financing expense.
Adjusted cash flow from operations was CAD 165 million, up from CAD 129 million in the year-ago quarter and CAD 137 million in Q3. Hogg attributed the increase to stronger operating results, higher dividends from joint venture partners, and lower financing expense paid. Fourth-quarter capital investments totaled CAD 42 million, bringing full-year capex to CAD 152 million. For 2026, Cascades expects capex of approximately CAD 175 million.
Net debt fell by CAD 127 million during the quarter, driven by stronger operating cash flow, a reversal in working capital requirements, proceeds from business disposals, and a favorable exchange rate on U.S.-denominated debt. Leverage declined to 3.3x from 3.6x at the end of Q3. For the full year, net debt decreased by CAD 200 million and leverage improved to 3.3x from 4.2x at the end of 2024. Liquidity under the credit facility was CAD 737 million at year-end 2025.
In early 2026, management said it completed the sale of its Richmond, B.C., packaging plant and exited the Honeycomb packaging and partition segments, receiving CAD 69 million in cash proceeds that were used for debt repayment in Q1. Hogg said the company achieved its objective of generating CAD 120 million in asset sale proceeds ahead of its mid-2026 schedule.
Outlook: Q1 seasonality, maintenance downtime, and 2026 EBITDA target
For Q1, Simon said Cascades expects consolidated results to decline sequentially but improve year over year for a sixth consecutive quarter. In packaging, the company expects softer sequential results due to seasonality and plans maintenance downtime totaling approximately 16,000 tons in Q1, including at Bear Island and at the uncoated recycled paperboard mill in Kingsey Falls, where an upgrade is being completed to increase capacity. Management expects raw material and selling price trends to remain largely stable, while energy and logistics costs are expected to be headwinds following challenging early-2026 weather.
In tissue, the company expects a sequential decline due to seasonal demand—primarily in away-from-home—and weather impacts in the U.S. Management said Wagram’s ramp-up was progressing well and reiterated expectations for a return to full production capacity before the end of Q1, while also noting stable raw material prices and higher energy and logistics costs.
Looking ahead, Simon said Cascades’ internal objective is to generate adjusted EBITDA above CAD 600 million in 2026, before factoring any net effect of selling price increases. Management said the target is tied to an effort to increase baseline annualized profitability by CAD 100 million, noting progress of CAD 30 million in 2025 and a plan to accelerate momentum in 2026. The company also said it is targeting an additional CAD 100 million in proceeds from divesting redundant assets in 2026, bringing the two-year total to approximately CAD 230 million.
During the Q&A, Simon said management has identified the full CAD 100 million in additional targeted asset sales and does not anticipate “any EBITDA erosion overall” from those transactions, while reaffirming the CAD 600 million EBITDA objective. Executives also discussed pricing dynamics in containerboard, with Simon saying the company was surprised by a CAD 20 benchmark decrease referenced by analysts, while emphasizing its focus on implementing previously announced increases and pointing to what he described as a tight rolls market following capacity reductions in North America.
About Cascades (TSE:CAS)
Cascades Inc, along with its subsidiaries, produces, converts and markets packaging and tissue products composed mainly of recycled fibres. The company is organized into four main business segments: Containerboard, Boxboard Europe, Specialty Products (which constitutes packaging products), and Tissue Papers. The business activity of the company functions in Canada, the United States, Italy, and other countries. Its customer base includes food processing companies, the maintenance industry, accommodations, and housing industry, micro-businesses, and boutiques.
