Cascades reports second quarter results



    KINGSEY FALLS, QC, Aug. 5 /CNW Telbec/ - Cascades Inc. ("Cascades") (CAS
on the Toronto stock exchange) reports a net loss excluding specific items(1)
of $11 million ($0.11 per share) compared to net earnings of $7 million ($0.07
per share) for the same quarter in 2007. When including specific items(1), the
net loss for the second quarter of 2008 amounted to $25 million ($0.25 per
share) compared to net earnings of $45 million ($0.45 per share) for the same
period in 2007.


    
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    Financial Highlights

    Selected consolidated information
    (in millions of Canadian dollars,            ----------------------------
     except amounts per share)                   Q2/2008   Q2/2007   Q1/2008
    -------------------------------------------  ----------------------------
    Sales                                            999     1,008       959
    Operating income before depreciation and
     amortization (OIBD)(1)                           61        81        45
    Operating income (loss) from continuing
     operations                                        8        30        (6)
    Net earnings (loss)                              (25)       45        (4)
      per common share                            $(0.25)    $0.45    $(0.04)
    Cash flow from operations (adjusted) from
     continuing operations(1)                         36        46        17
      per common share(1)                          $0.37     $0.46     $0.17
    Excluding specific items(1)
      Operating income before depreciation and
       amortization (OIBD)                            63        87        59
      Operating income from continuing operations     10        36         8
      Net earnings (loss)                            (11)        7        (9)
        per common share                          $(0.11)    $0.07    $(0.09)
      Cash flow from operations (adjusted) from
       continuing operations                          42        48        26
        per common share                           $0.43     $0.48     $0.26
    -------------------------------------------  ----------------------------
    -------------------------------------------  ----------------------------
    Note 1 - see the supplemental information on non-GAAP measures note.
    -------------------------------------------  ----------------------------
    -------------------------------------------  ----------------------------

    Additional highlights

    - Decrease in profitability compared to last year largely explained by
      the fact selling price increases and cost cutting measures were not
      sufficient to offset cost inflation experienced since the beginning of
      the year and the stronger Canadian dollar;

    - Stable operating profits compared to Q1 2008 due to:
      - Increased selling prices and higher shipments of converted products;
      - Improved results in tissue and specialty products more than
        offsetting significantly lower profitability in boxboard;

    - Net income negatively impacted by the non cash net variation of
      $13 million in the fair market value of hedging instruments on our US$
      denominated debt;

    - Norampac management acting proactively to implement major restructuring
      and cost-cutting measures in the North American boxboard and folding
      carton operations:

    - Indefinite closure of the Toronto coated recycled boxboard mill,
      effective at the latest by mid-September;

    - Headcount reduction of more than 200 people by the end of 2008; and

    - Cascades named amongst the best 50 corporate citizens in Canada by
      Corporate Knights magazine for the second year in a row.
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Commenting on the quarterly results, Mr. Alain Lemaire, President and
Chief Executive Officer stated: "The business environment during the second
quarter deteriorated significantly in comparison to the same period last year.
Aggressive cost-cutting and restructuring throughout our business groups
together with increased selling prices were not sufficient to offset the
negative impact of sharply higher costs and difficult market conditions in our
boxboard operations. On a positive note we were encouraged by the second
quarter improvement of the tissue group as well as improving demand observed
late in the quarter in most of our business sectors. Moreover, during the
quarter Norampac moved quickly to initiate action plans aimed at returning the
boxboard group to higher profitability before the end of the year."

    Three-month period ended June 30, 2008
    --------------------------------------

    In comparison with the same period last year, sales remained relatively
flat reflecting generally higher prices offset by lower shipments and the
impact of the appreciation of the CAN$.
    Operating income from continuing operations amounted to $8 million
compared to $30 million achieved for the same period last year. When excluding
specific items, operating income from continuing operations amounted to
$10 million in comparison to $36 million for the same quarter in 2007.
Specific items include $7 million of unrealized gain on financial instruments,
$5 million of closure and restructuring costs, $3 million of impairment loss
on property, plant and equipment and a $1 million inventory adjustment
resulting from a business acquisition. The net loss for the quarter includes a
pre-tax $15 million foreign exchange loss on U.S. denominated debt ($0.13 per
share after-tax); The $0.45 net earnings per share for the second quarter of
2007 mainly included a foreign exchange gain on long-term debt of $0.21 per
share as well as a $0.15 per share gain reflecting the dilution of an equity
investment in Boralex (BLX on the Toronto stock exchange).

    Six-month period ended June 30, 2008
    ------------------------------------

    Sales decreased 2.5% during the first half of 2008 amounting to
$1.96 billion in comparison to the $2 billion achieved last year.
    Operating income from continued operations amounted to $2 million compared
to $87 million achieved for the same period last year. Operating income from
continuing operations excluding specific items amounted to $18 million. This
amount compares to $69 million achieved in the first half of 2007. Specific
items mainly include $13 million of closure and restructuring costs, $3
million of impairment loss on property, plant and equipment, a $7 million loss
resulting from the transaction with Reno de Medici S.p.A. and a $7 million
unrealized gain on financial instruments.

    Near term outlook
    -----------------

    Mr. Alain Lemaire, President and Chief Executive Officer added:
"Notwithstanding the general economic uncertainty, the gradual implementation
of previously announced price increases combined with the seasonal pick up in
demand allow us to be cautiously optimistic for the third quarter. The
successful turnaround of our North American boxboard operations is key to
improved future profitability and continues to be our top priority. The
management team at Norampac has a solid track record when it comes to
restructuring and we have every confidence that they will deliver on this
important objective. However, if improved results cannot be achieved rapidly
through restructuring, other strategic alternatives will be considered."

    Dividend on Common Shares and normal course issuer bid
    ------------------------------------------------------

    The Board of Cascades declared a quarterly dividend of $0.04 per share to
be paid September 19, 2008 to shareholders of record at the close of business
on September 5, 2008. This dividend paid by Cascades is an "eligible dividend"
as per the proposed changes to the Income Tax Act (Bill C-28, Canada). In
addition, in the first six months of the year, in accordance with its normal
course issuer bid, Cascades has purchased for cancellation 336,500 common
shares at an average price of $7.68 per share representing an aggregate amount
of approximately $2.6 million.

    Supplemental information on non-GAAP measures
    ---------------------------------------------

    Operating income, cash flow from operations and cash flow from operations
per share are not measures of performance under Canadian GAAP. The Company
includes operating income, cash flow from operations and cash flow from
operations per share because they are measures used by management to assess
the operating and financial performance of the Company's operating segments.
Additionally, the Company believes that these items provide additional
measures often used by investors to assess a company's operating performance
and its ability to meet debt service requirements. However, operating income,
cash flow from operations and cash flow from operations per share does not
represent, and should not be used as a substitute for net earnings or cash
flows from operating activities as determined in accordance with Canadian
GAAP, and they are not necessarily an indication of whether cash flow will be
sufficient to fund our cash requirements. In addition, our definition of
operating income, cash flow from operations and cash flow from operations per
share may differ from those of other companies. Cash flow from operations is
defined as cash flow from operating activities as determined in accordance
with Canadian GAAP excluding the change in working capital components and cash
flow from operations per share is determined by dividing cash flow from
operations by the weighted average number of common shares of the period.
    Operating income excluding specific items, net earnings excluding specific
items, net earnings per common share excluding specific items, cash flow from
operations excluding specific items and cash flow from operations per share
excluding specific items are non-GAAP measures. The Company believes that it
is useful for investors to be aware of specific items that have adversely or
positively affected its GAAP measures, and that the above mentioned non-GAAP
measures provide investors with a measure of performance with which to compare
its results between periods without regard to these specific items. The
Company's measures excluding specific items have no standardized meaning
prescribed by GAAP and are not necessarily comparable to similar measures
presented by other companies and therefore should not be considered in
isolation.
    Specific items are defined to include charges for impairment of assets,
charges for facility or machine closures, debt restructuring charges, gains or
losses on sale of business unit, unrealized gains or losses on derivative
financial instruments that do not qualify for hedge accounting, foreign
exchange gains or losses on long-term debt and other significant items of an
unusual or non-recurring nature.
    Net earnings (loss), which is a performance measure defined by Canadian
GAAP is reconciled below to operating income (loss), operating income
excluding specific items and operating income before depreciation excluding
specific items:

                                                 ----------------------------
    (in millions of Canadian dollars)            Q2/2008   Q2/2007   Q1/2008
    -------------------------------------------  ----------------------------
    Net earnings (loss)                              (25)       45        (4)
    Net earnings (loss) from discontinued
     operations                                        1         -       (19)
    Non-controlling interest                           -         -         1
    Share of results of significantly influenced
     companies                                         -       (17)       (4)
    Provision for (recovery of) income taxes          (9)        1        (9)
    Foreign exchange loss (gain) on long-term debt    15       (25)        5
    Interest expense                                  26        26        24
                                                 ----------------------------
    Operating income (loss)                            8        30        (6)
    Specific items :
    Inventory adjustment resulting from business
     acquisition                                       1         -         1
    Loss (gain) on disposals and other                 -         1         5
    Impairment loss on property, plant and equipment   3         1         -
    Closure and restructuring costs                    5         -         8
    Unrealized loss (gain) on financial instruments   (7)        4         -
                                                 ----------------------------
                                                       2         6        14
                                                 ----------------------------
    Operating income - excluding specific items       10        36         8
    Depreciation and amortization                     53        51        51
                                                 ----------------------------
    Operating income before depreciation and
     amortization - excluding specific items          63        87        59
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental information on non-GAAP measures (cont'd)

    The following table reconciles net earnings and net earnings per share to
net earnings excluding specific items and net earnings per share excluding
specific items:

    (in millions of Canadian   --------------------  ------------------------
     dollars, except amounts                              Net earnings (loss)
     per share                 Net earnings (loss)              per share (1)
    -----------------------------------------------  ------------------------
                                Q2/     Q2/     Q1/      Q2/     Q2/      Q1/
                              2008    2007    2008     2008    2007     2008
                              ---------------------  ------------------------
    As per GAAP                (25)     45      (4)  $(0.25)  $0.45   $(0.04)
    Specific items :
    Inventory adjustment
     resulting from business
     acquisition                 1       -       1   $    -   $   -   $ 0.01
    Loss (gain) on disposals
     and other                   -       1       5   $    -   $   -   $ 0.05
    Impairment loss on
     property, plant and
     equipment                   3       1       -   $ 0.02   $ 0.01  $    -
    Closure and restructuring
     costs                       5       -       8   $ 0.04   $    -  $ 0.05
    Unrealized loss (gain) on
     financial instruments      (7)      4       -   $(0.06)  $ 0.03  $    -
    Foreign exchange loss
    (gain) on long-term debt    15     (25)      5   $ 0.13   $(0.21) $ 0.04
    Share of results of
     significantly influenced
     companies                   -     (15)      -   $    -   $(0.15) $    -
    Loss (gain) included in
     discontinued operations     1      (4)    (24)  $ 0.01   $(0.03) $(0.20)
    Adjustment of statutory
     tax rate                    -      (3)      -   $    -   $(0.03) $    -
    Tax effect on specific
     items                      (4)      3       -
                              ---------------------  ------------------------
                                14     (38)     (5)  $ 0.14   $(0.38) $(0.05)
                              ---------------------  ------------------------
    Excluding specific items   (11)      7      (9)  $(0.11)  $0.07   $(0.09)
    -----------------------------------------------  ------------------------
    -----------------------------------------------  ------------------------
    Note 1 - specific amounts per share are calculated on an after-tax basis.


    The following table reconciles cash flow from operations and cash flow
from operations per share to cash flow from operations excluding specific
items and cash flow from operations per share excluding specific items:

    -----------------------------------------------  ------------------------
    (in millions of dollars,        Cash flow from            Cash flow from
     except amounts per share)       operations         operations per share
                              ---------------------  ------------------------
                                Q2/     Q2/     Q1/      Q2/     Q2/      Q1/
                              2008    2007    2008     2008    2007     2008
    -----------------------------------------------  ------------------------
    Cash flow provided by
     (used for) operating
     activities                 48       1     (31)
    Changes in non-cash
     working capital
     components                (12)     45      48
                              ---------------------  ------------------------
    Cash flow (adjusted) from
     operations                 36      46      17    $0.37   $0.46    $0.17
    Specific items :
    Inventory adjustment
     resulting from business
     acquisition                 1       -       1    $0.01       -    $0.01
    Loss (gain) on disposals
     and other                   -       2       -        -   $0.02        -
    Closure and restructuring
     costs, net of current
     income tax                  5       -       8    $0.05       -    $0.08
                              ---------------------  ------------------------
    Excluding specific items    42      48      26    $0.43   $0.48    $0.26
    -----------------------------------------------  ------------------------


    Founded in 1964, Cascades produces, converts and markets packaging and
tissue products composed mainly of recycled fibres. Cascades employs close to
14,000 employees who work in more than 100 modern and flexible production
units located in North America and Europe. Cascades' management philosophy,
its more than 40 years of experience in recycling, its continued efforts in
research and development are strengths which enable the company to create new
products for its customers. The Cascades shares trade on the Toronto stock
exchange under the ticker symbol CAS.

    Certain statements in this release, including statements regarding future
results and performance, are forward-looking statements (as such term is
defined under the Private Securities Litigation Reform Act of 1995) based on
current expectations. The accuracy of such statements is subject to a number
of risks, uncertainties and assumptions that may cause actual results to
differ materially from those projected, including, but not limited to, the
effect of general economic conditions, decreases in demand for the Company's
products, increases in raw material costs, fluctuations in selling prices and
adverse changes in general market and industry conditions and other factors
listed in the Company's Securities and Exchange Commission filings.


    Consolidated Balance Sheets
    (in millions of Canadian dollars)
                                                           As at       As at
                                                            June    December
                                                              30,         31,
                                                            2008        2007
                                          -----------------------------------
    Assets                                            (unaudited)

    Current assets
    Cash and cash equivalents                                 21          25
    Accounts receivable                                      685         624
    Inventories                                              548         555
    -------------------------------------------------------------------------
                                                           1,254       1,204
    Property, plant and equipment                          1,939       1,886
    Intangible assets                                        127         130
    Other assets                                             261         237
    Goodwill                                                 316         312
    -------------------------------------------------------------------------
                                                           3,897       3,769
                                          -----------------------------------
                                          -----------------------------------

    Liabilities and Shareholders' Equity

    Current liabilities
    Bank loans and advances                                   70          47
    Accounts payable and accrued liabilities                 593         572
    Current portion of long-term debt                          9           4
    -------------------------------------------------------------------------
                                                             672         623
    Long-term debt                                         1,662       1,570
    Other liabilities                                        352         377
                                          -----------------------------------
                                                           2,686       2,570

    Shareholders' Equity
    Capital stock                                            516         517
    Retained earnings                                        690         725
    Accumulated other comprehensive income (loss)              5         (43)
                                          -----------------------------------
                                                           1,211       1,199
    -------------------------------------------------------------------------
                                                           3,897       3,769
                                          -----------------------------------
                                          -----------------------------------


    Consolidated Statements of Earnings (Loss)
    (in millions of Canadian dollars,
     except per share amounts)
    (unaudited)
                                     For the 3-month         For the 6-month
                               periods ended June 30,  periods ended June 30,
                                    2008        2007        2008        2007
                              -----------------------------------------------
    Sales                            999       1,008       1,958       2,008
    Cost of sales and expenses
    Cost of sales                    843         821       1,648       1,642
    Depreciation and amortization     53          51         104         104
    Selling and administrative
     expenses                         94         101         191         203
    Losses (gains) on disposal         -           1           5         (24)
    Impairment and other
     restructuring costs               8           1          16           3
    Loss (gain) on financial
     instruments                      (7)          3          (8)         (7)
    -------------------------------------------------------------------------
                                     991         978       1,956       1,921
    -------------------------------------------------------------------------
    Operating income from
     continuing operations             8          30           2          87
    Interest expense                  26          26          50          52
    Foreign exchange loss (gain)
     on long-term debt                15         (25)         20         (29)
    -------------------------------------------------------------------------
                                     (33)         29         (68)         64
    Provision for (recovery of)
     income taxes                     (9)          1         (18)         15
    Share of results of
     significantly influenced
     companies and dilution gain       -         (17)         (4)        (21)
    Non-controlling interest           -           -           1           1
    -------------------------------------------------------------------------
    Net earnings (loss) from
     continuing operations           (24)         45         (47)         69
    Net earnings (loss) from
     discontinued operations          (1)          -          18          (2)
    -------------------------------------------------------------------------
    Net earnings (loss) for the
     period                          (25)         45         (29)         67
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic and diluted net earnings
     (loss) from continuing
     operations
      per common share            ($0.24)      $0.45      ($0.47)      $0.69
                              -----------------------------------------------
                              -----------------------------------------------
    Basic and diluted net
     earnings (loss) per
     common share                 ($0.25)      $0.45      ($0.29)      $0.67
                              -----------------------------------------------
                              -----------------------------------------------
    Weighted average number
     of common shares
     outstanding              98,851,585  99,291,649  98,946,693  99,379,774
                              -----------------------------------------------
                              -----------------------------------------------


    Consolidated Statements of Shareholders' Equity
    (in millions of Canadian dollars)
    (unaudited)
                                        For the 6-month period ended June 30,
                                                                        2008
                                ---------------------------------------------
                                                     Accumulated
                                                           other
                                                          compre-
                                                         hensive       Share-
                                 Capital    Retained      income     holders'
                                   stock    earnings       (loss)     Equity
                                ---------------------------------------------
    Balance - Beginning of period    517         725         (43)      1,199
    Cumulative impact of accounting
     changes                           -           3           -           3
                                ---------------------------------------------
    Restated balance - Beginning of
     period                          517         728         (43)      1,202
    Comprehensive income:
      Net loss for the period          -         (29)          -         (29)
      Change in foreign currency
       translation of self-
       sustaining foreign
       subsidiaries, net of
       related hedging activities      -           -          43          43
      Change in fair value of
       foreign exchange forward
       contracts designated as
       cash flow hedges                -           -          (2)         (2)
      Change in fair value of
       commodity derivative
       financial instruments
       designated as cash flow
       hedges                          -           -           7           7
                                                                 ------------
    Comprehensive income for the
     period                                                               19
                                                                 ------------
    Dividends                          -          (8)          -          (8)
    Redemption of common shares       (1)         (1)          -          (2)
                                ---------------------------------------------
    Balance - End of period          516         690           5       1,211
                                ---------------------------------------------
                                ---------------------------------------------


                                        For the 6-month period ended June 30,
                                                                        2007
                                ---------------------------------------------
                                                     Accumulated
                                                           other
                                                          compre-
                                                         hensive       Share-
                                 Capital    Retained      income     holders'
                                   stock    earnings       (loss)     Equity
                                ---------------------------------------------
    Balance - Beginning of period    517         649          (8)      1,158
    Comprehensive income:
      Net earnings for the period      -          67           -          67
      Change in foreign currency
       translation of self-
       sustaining foreign
       subsidiaries, net of
       related hedging activities      -           -         (39)        (39)
      Change in fair value of
       foreign exchange forward
       contracts designated as
       cash flow hedges                -           -           3           3
      Change in fair value of
       commodity derivative
       financial instruments
       designated as cash flow
       hedges                          -           -           1           1
                                                                 ------------
    Comprehensive income for the
     period                                                               32
                                                                 ------------
    Dividends                          -          (8)          -          (8)
    Adjustment related to stock
     options                           2           -           -           2
    Redemption of common shares       (2)         (2)          -          (4)
                                ---------------------------------------------
    Balance - End of period          517         706         (43)      1,180
                                ---------------------------------------------
                                ---------------------------------------------


    Consolidated Statements of Cash Flows
    (in millions of Canadian dollars)
    (unaudited)
                                     For the 3-month       For the 6-month
                                      periods ended         periods ended
                                         June 30,               June 30,
                                    2008        2007        2008        2007
                                ---------------------------------------------
    OPERATING ACTIVITIES FROM
     CONTINUING OPERATIONS
    Net earnings (loss) from
     continuing operations           (24)         45         (47)         69
    Adjustments for:
      Depreciation and amortization   53          51         104         104
      Losses (gains) on disposal       -          (1)          5         (26)
      Impairment and other
       restructuring costs             3           1           3           1
      Unrealized loss (gain) on
       financial instruments          (7)          4          (7)         (3)
      Foreign exchange loss (gain)
       on long-term debt              15         (25)         20         (29)
      Future income taxes            (13)         (7)        (33)         (3)
      Share of results of
       significantly influenced
       companies and dilution gain     -         (17)         (4)        (21)
      Non-controlling interest         -           -           1           1
      Others                          (6)         (5)         (4)         (6)
      Early settlement of natural
       gaz contracts                  15           -          15           -
    -------------------------------------------------------------------------
                                      36          46          53          87
    Change in non-cash working
     capital components               12         (45)        (36)       (123)
    -------------------------------------------------------------------------
                                      48           1          17         (36)
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES FROM
     CONTINUING OPERATIONS
    Purchases of property, plant
     and equipment                   (42)        (33)        (83)        (64)
    Proceed from disposal of
     property, plant and equipment     5           7           5           7
    Increase in other assets           3           1           2           -
    Cash of a joint venture            -           -           6           -
    Business disposal, net of
     cash disposed                     -           -           -          37
    -------------------------------------------------------------------------
                                     (34)        (25)        (70)        (20)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES FROM
     CONTINUING OPERATIONS
    Bank loans and advances          (20)          6          (5)         15
    Change in revolving credit
     facilities                       11          23          22          67
    Payments of other long-term
     debt                             (5)         (1)         (6)         (4)
    Net proceeds from issuance of
     common shares                     -           1           -           1
    Redemption of common shares        -          (1)         (2)         (4)
    Dividends                         (4)         (4)         (8)         (8)
    -------------------------------------------------------------------------
                                     (18)         24           1          67
    -------------------------------------------------------------------------
    Change in cash and cash
     equivalents during the period
     from continuing operations       (4)          -         (52)         11
    Change in cash and cash
     equivalents from discontinued
     operations, including proceeds
     on disposal                       8          (8)         43         (19)
    -------------------------------------------------------------------------
    Net change in cash and cash
     equivalents during the period     4          (8)         (9)         (8)
    Translation adjustments on cash
     and cash equivalents             (1)         (6)          5          (7)
    Cash and cash equivalents -
     Beginning of period              18          33          25          34
    -------------------------------------------------------------------------
    Cash and cash equivalents -
     End of period                    21          19          21          19
                                ---------------------------------------------
                                ---------------------------------------------


    Selected Segmented Information
    (in millions of Canadian dollars)
    (unaudited)
                                    For the 3-month         For the 6-month
                                     periods ended           periods ended
                                        June 30,                June 30,
                                    2008        2007        2008        2007
                                ---------------------------------------------
    Sales
    Packaging products
      Boxboard
        Manufacturing                184         206         379         407
        Converting                   170         177         328         346
        Eliminations and others      (23)        (31)        (47)        (57)
                                ---------------------------------------------
                                     331         352         660         696
      Containerboard
        Manufacturing                150         152         304         306
        Converting                   246         256         473         495
        Eliminations and others      (95)       (101)       (185)       (200)
                                ---------------------------------------------
                                     301         307         592         601
      Specialty products
        Manufacturing                 76          81         152         167
        Converting                    67          58         130         117
        Recovery, deinked pulp
         and eliminations             75          72         145         142
                                ---------------------------------------------
                                     218         211         427         426

      Eliminations                   (25)        (29)        (53)        (56)
                                ---------------------------------------------
                                     825         841       1,626       1,667
    Tissue papers
      Manufacturing and converting   184         180         354         366
    Eliminations                     (10)        (13)        (22)        (25)
    -------------------------------------------------------------------------
    Consolidated total               999       1,008       1,958       2,008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Selected Segmented Information
    (in millions of Canadian dollars)
    (unaudited)
                                    For the 3-month         For the 6-month
                                     periods ended           periods ended
                                        June 30,                June 30,
                                    2008        2007        2008        2007
                                ---------------------------------------------
    Operating income (loss) before
     depreciation and amortization
     from continuing operations
    Packaging products
      Boxboard
        Manufacturing                (10)         (1)        (16)         (5)
        Converting                    12          13          24          51
        Others                        (3)          -         (10)         (1)
                                ---------------------------------------------
                                      (1)         12          (2)         45
      Containerboard
        Manufacturing                 10          14          27          35
        Converting                    17          20          31          35
        Others                         -           3           3           6
                                ---------------------------------------------
                                      27          37          61          76

      Specialty products
        Manufacturing                  -          (1)         (1)          3
        Converting                     8           5          13          12
        Recovery, deinked pulp
         and others                    6           7          11          14
                                ---------------------------------------------
                                      14          11          23          29
                                ---------------------------------------------
                                      40          60          82         150
    Tissue papers
      Manufacturing and
       converting                     14          16          26          35

    Corporate                          7           5          (2)          6
    -------------------------------------------------------------------------
    Operating income before
     depreciation and amortization
     from continuing operations
                                      61          81         106         191
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Depreciation and
     amortization
      Boxboard                       (19)        (16)        (35)        (33)
      Containerboard                 (16)        (16)        (32)        (32)
      Specialty products              (8)         (8)        (16)        (16)
      Tissue papers                   (8)         (9)        (16)        (18)
      Corporate and eliminations      (2)         (2)         (5)         (5)
                                ---------------------------------------------
                                     (53)        (51)       (104)       (104)
                                ---------------------------------------------
     Operating income from
      continuing operations            8          30           2          87
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Selected Segmented Information
    (in millions of Canadian dollars)
    (unaudited)
                                    For the 3-month        For the 6-month
                                     periods ended          periods ended
                                        June 30,                June 30,
                                    2008        2007        2008        2007
                                ---------------------------------------------
    Purchases of property,
     plant and equipment
    Packaging products
      Boxboard
        Manufacturing                  3           4           7           7
        Converting                     7           9          16          18
                                ---------------------------------------------
                                      10          13          23          25
      Containerboard
        Manufacturing                  2           4           4           5
        Converting                     7           1          11           4
                                ---------------------------------------------
                                       9           5          15           9
      Specialty products
        Manufacturing                  2           2           3           5
        Converting                     2           2           3           4
        Recovery, deinked pulp
         and others                    9           -          10           1
                                ---------------------------------------------
                                      13           4          16          10
                                ---------------------------------------------
                                      32          22          54          44
    Tissue papers
      Manufacturing and converting     8           9          18          19

    Corporate                          2           2           4           4
    -------------------------------------------------------------------------
    Consolidated total                42          33          76          67
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Purchases of property, plant
     and equipment included in
     accounts payable
      Beginning of period             10          13          17          10
      End of period                  (10)        (13)        (10)        (13)
    -------------------------------------------------------------------------
    Total investing activities        42          33          83          64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Additional information
    (in millions of Canadian dollars, except shipments and share information)
    (unaudited)
                                    For the 3-month         For the 6-month
                                     periods ended           periods ended
                                        June 30,                June 30,
                                    2008        2007        2008        2007
                                ---------------------------------------------
    Common shares -
     Toronto Stock Exchange
      High                         $8.45      $13.05       $8.90      $15.80
      Low                          $6.59      $11.00       $6.59      $11.00
      Volume                   8,226,000  20,318,000  15,646,000  39,764,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Shipments of manufacturing
     and converting products
     (in thousands of short tons)
    Packaging products
      Boxboard                       277         313         569         614
      Containerboard                 342         366         690         717
      Specialty products             115         114         231         229
    Tissue papers                    116         112         228         221
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental information on non-GAAP measure

    Operating income before depreciation and amortization and operating income
are not measures of performance under Canadian generally accepted accounting
principles ("GAAP"). The Company includes operating income before depreciation
and amortization and operating income because they are the measures used by
management to assess the operating and financial performance of the Company's
operating segments. As well, the Company believes that operating income before
depreciation and amortization and operating income provides an additional
measure often used by investors to assess a company's operating performance
and its ability to meet debt service requirements. However, operating income
before depreciation and amortization and operating income do not represent,
and should not be used as a substitute for net earnings or cash flows from
operations as determined in accordance with Canadian GAAP and operating income
before depreciation and amortization and operating income are not necessarily
an indication of whether cash flow will be sufficient to fund our cash
requirements. In addition, our definition of operating income before
depreciation and amortization and operating income may differ from that of
other companies.
    Net earnings (loss), which is a performance measure defined by Canadian
GAAP is reconcilied below to operating income (loss) and to operating income
before depreciation and amortization:


                                    For the 3-month         For the 6-month
                                     periods ended           periods ended
                                        June 30,                June 30,
                                    2008        2007        2008        2007
                                ---------------------------------------------
    Net earnings (loss) for
     the period                      (25)         45         (29)         67
    Net earnings (loss) from
     discontinued operations           1           -         (18)          2
    Non-controlling interest           -           -           1           1
    Share of results of
     significantly influenced
     companies and dilution gain       -         (17)         (4)        (21)
    Provision for (recovery of)
     income taxes                     (9)          1         (18)         15
    Foreign exchange loss (gain)
     on long-term debt                15         (25)         20         (29)
    Interest expense                  26          26          50          52
                                ---------------------------------------------
    Operating income from
     continuing operations             8          30           2          87

    Depreciation and amortization     53          51         104         104
                                ---------------------------------------------
    Operating income before
     depreciation and amortization    61          81         106         191
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: MEDIA: Mr. Hubert Bolduc, Vice-President,
Communications and Public Affairs, (514) 912-3790; INVESTORS: Mr. Didier
Filion, M.Sc, CFA Director, Investor relations, (514) 282-2697; Source: Mr.
Christian Dubé, Vice-President and Chief Financial Officer


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