Cascades Inc Stock

Thank you.

Ladies and gentlemen, welcome to the first conference of the results of the second quarter of the Cascade. My name is Sylvie and I will be your caller today. All the lines are currently in listening mode. Following the comments from the speakers, there will be a question Good morning, my name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to Cascade's second quarter 2026 results conference call. All lines are currently in a listen-only mode. After the speaker's remarks, there will be a question and answer session.

We'll now pass the call to Alan Hogg, CFO for Cascade. Please go ahead so you may begin.

Thank you, operator. Good morning, everyone, and thank you for joining our second quarter 2026 conference call. We will begin with an overview of our operational and financial results, followed by some concluding remarks, after which we will begin the question period. Today's speakers will be Hugues Simon, President and CEO, and myself, Alan Hogg, CFO. Before turning over the call, I would like to highlight that certain statements made during this call will discuss historical and forward-looking matters. The accuracy of these statements is subject to risk factors that can have a material impact on actual results. These risks are listed in our public filings. The statements, the investor presentation, and the press release also include data that are not measures of performance under IFRS.

Please refer to our Q2 2026 investor presentation for details. This presentation, along with our second quarter press release, can be found in the Investors section of our website. If you have any questions, please feel free to contact us after the session. I will now turn the call over to our CEO, Hugues Simon, who will begin with a review of our Q2 performance. Hugues?.

Thank you, Alan, and good morning, everyone. Our second quarter exceeded expectations, driven by stronger execution across our operations and lower than anticipated volume risk. We continue to focus on the areas within our control, strengthening the resilience of our platform in an environment that remains impacted by both macroeconomic and geopolitical uncertainty. Considering these challenges, I'm pleased with our performance in the second quarter, which reflects the disciplined execution of our strategy and the commitment of our teams across the organization. Both packaging and tissue delivered improved sequential performance in the second quarter, reflecting improved operational execution, stronger volumes, and the benefit of actions implemented earlier in the year. Our packaging segment profitability rebounded significantly, with EBITDA increasing 16% sequentially and margins returning above 15%, reflecting continued solid production and demand levels across our paper mill network, meaningful progress in onboarding new customers, and a more favorable economic environment than initially anticipated. Volumes tracked ahead of our forecasted assumptions contributed to stronger profitability in the quarter.

We had record production levels in the quarter at GreenPak and at Bear Island, which operated at 95% of its total production capacity during the quarter. Our tissue segment also posted higher sales, stronger shipment volumes, and improved EBITDA despite ongoing cost inflation. Performance benefited from improved productivity and sales volume. At our prior facility, we continued to improve, achieving record production this quarter. We remain on track with our improvement plan discussed in Q3 2025. global market conditions remain mixed in both segments. The progress achieved during the quarter reinforces our confidence in the operational and commercial initiatives on the way across the organization. Raw material index prices for recycled fiber is increased by more than 10% sequentially, but remains slightly below the level seen in the same period last year.

Hardwood pulp and eucalyptus costs also increase, rising by as much as 15% both sequentially and year over year. Delivered raw material costs to our mills were further impacted by recent transportation disruptions and higher fuel costs. We provided an overview of average quarterly costs and key trends on Sites 6 and 7. Moving now to the results of our business segments, which are highlighted on slide 8 through 13 of the presentation. Our packaging segment delivered a strong improvement in the second quarter as operational execution and market condition improved relative to the beginning of the year. increased to $772 million, up 8% sequentially, while adjusted EBITDA increased 16% to $120 million. As a result, EBITDA margin improved to 15.5% compared to 14.4% in the first quarter. Despite higher raw material and transportation costs, these results were driven by higher volumes and selling prices, improved manufacturing performance, and the benefit of commercial initiatives implemented across our packaging platform.

Volume performance was encouraging. Total shipments increased 9% sequentially to 426,000 tons, with box shipment increasing 6% and external paper shipments increasing 11%. Including the box plan on the West Coast that was sold in the first quarter, box shipment increased 8.4% versus the industry increase of 5.5%. On a year-over-year basis, packaging demonstrated resilience despite a still uncertain macroeconomic environment. Sales increased 1% compared to the second quarter of 2025, while adjusted EBITDA remained essentially unchanged at $120 million. The over-year EBITDA margin remains stable at 15.5%, enlightening the strength of the business despite ongoing cost pressure and a competitive market environment. Total shipment increased modestly with stronger external paper volumes, offsetting slightly lower container board shipments, which include the impact of the sale of our West Coast box plant in Q1 2026. On a comparable asset basis, year-over-year box shipment increased 5.8%, surpassing the industry's top-notch. 2.4% increase.

Results in tissue improved sequentially during the second quarter as volume growth, operational improvements, and a favorable business mix more than offset continued inflation in several operating cost categories. Sales increased to $409 million, up 7.6% from the first quarter, while adjusted EBITDA improved 6% to $35 million. The bid-down margin remains stable at 8.6%, reflecting higher sales volume contribution, which was offset by higher raw material and transportation costs. Shipment performance improved meaningfully during the quarter. Total shipments increased 7% sequentially to 121,000 tons. Retail volume increased 2%, while away-from-home volume increased 16%, benefiting from stronger demand and ongoing commercial initiatives. Compared with the second quarter of 2025, sales increased 4% while total shipments remained stable, supported by growth in both retail and away-from-home categories, which was offset by no external pay-per-haul sales in 2026.

The over-year adjusted EBITDA declined by $3 million, with higher logistic costs, offsetting the positive impacts of volume, pricing, and cost initiatives. I'll now pass the call over to Alan, who will briefly discuss some of the financial highlights. Alan?.

Let's start with the specific items recorded during the quarter which impacted operating income by $5 million on slide 14 and 15. The main items consisted of gains from the sale of assets, restructuring costs related to cost-saving initiatives, and lastly, a loss of $6 million on financial instruments. Slide 16 and 17 illustrate the year-over-year and sequential variance of our Q2 adjusted earnings per share and the reconciliation with the specific items that affected our quarterly results. As reported, Q2 net earnings per share were $0.21. This compared to a net loss per share of $0.03 in December. period last year, and net earnings per share of 38 cents in the previous quarter. On an adjusted basis, net earnings per share were 24 cents in the current quarter. This compared to net earnings per share of 19 cents last year and 7 cents in the first quarter of 2026.

The sequential and year-over-year increases were driven by higher adjusted EBITDA and lower financing expenses. offset by a higher depreciation expense. As highlighted on slide 18, second quarter adjusted cash flow farm operations was $123 million, up 22% from $101 million for the same period last year. Slide 19 provides detail of our capital investments, which for the first half of the year total $67 million. For 2026, our expected capex remains unchanged in the range of $150 to $175 million. Moving now to our net debt reconciliation as detailed on slide 20. Sequentially, net debt decreased modestly by $22 million in the second quarter, mainly due to higher operating cash flows from operations. The exchange rate impact increased our net debt by $36 million.

Proceeds from business and asset disposal reduced debt by $5 million. Our leverage ratio was unchanged at 3.3 times, and our available liquidity under our credit facility stood at $737 million at the end of June. As part of our asset monetization strategy, on July 28, we completed the sale of the real estate at the closed recycling plant in Lachine, Quebec, for an amount of $9 million, bringing our total proceeds from business and asset disposal to $105 million in 2026. We are also updating the expected delivery timing of our objective from the end of the third quarter to early 2027. Although interest in the assets remains healthy, prevailing market conditions and the terms available for certain transactions have not align with our value expectations. In July 2026, we extended the maturities of the GreenPak and Cascades credit facilities by one year to 2029 and 2030, respectively. We also extended the maturity of our $260 million U.S. term loan, originally maturing in December 2027, to July 2031.

These transactions were completed on the same financial terms. Financial ratios and information regarding maturities are detailed on slide 21. Additional information and analysis can be found on slides 25 through 33 of the presentation. With that, I will turn the call back to Hugues for a few closing remarks before we open the line for questions. Hugues?.

Thank you, Alan. Provide our outlook for Q3 on slide 22. Including the potential impact of the announced tariffs, we expect sequential improvement in our consolidated results. This is driven by seasonally higher volume and ongoing selling price increase initiatives in both packaging and tissue. Supported by our ongoing profitability improvement program, we now expect annual run rate adjusted EBITDA to exceed 600 million during the second half of 2026. The implementation of previously announced selling price increases in both packaging and tissue is progressing as planned. In packaging, demand for paper rolls remains very strong. this week we announced additional price increases of $110 per ton on liner board and white paper grades and $140 per ton on medium. These new prices will become effective on September 8th.

We expect to begin seeing a positive impact from these increases in the fourth quarter of 2026. On July 20th, the US administration announced new tariffs on a number of products imported into the United States. are conducting an assessment of the potential impact on our operations. Based on information currently available, certain tissue and packaging products exported to the United States could be subject to the announced 50% tariff. While this represents a notable development, we believe the potential impact is manageable. As Assuming the tariff remains in effect as announced, and considering the benefits of our current mitigation plans, the financial impact will not represent more than 5% of our adjusted EBITDA run rate. In addition to the direct effect of this announcement, some customers whose products are subject to these tariffs may experience weaker demand or reduced production levels, which could affect volumes in certain segments. Based on current assessment and the mitigation actions underway, we remain confident in our ability to successfully manage these challenges.

Confidence reflects the significant work completed over the past several quarters to make CASCAD a more resilient and agile organization. As we indicated last quarter, our focus has been on navigating near-term market pressures while advancing the initiatives that will strengthen our performance over time. During the quarter, we continue to make progress in improving operational and commercial execution and enhancing customer service levels. Our profitability improvement initiative continues to deliver results. Following the $30 million of benefits realized in 2025, we estimate that a further $25 million has been captured thus far in 2026. Our asset monetization objective is also progressing well, with $163 million realized against our $230 million target. Although some transactions are taking longer than anticipated, this reflects our disciplined approach to ensuring we maximize value from these asset sales.

Finally, we continue to prioritize debt reduction to reinforce financial flexibility and position Cascade for future growth. With that, we'll now open the floor to questions. the line for questions. Operator?.

If you have a question, please ask the star followed by 1 on your phone. And if you want to remove your question, ask the star followed by 2. Thank you. If you would like to ask a question, simply press star then number 1 on your telephone keypad. If you would like to withdraw from the queue, please press star followed by 2. And if you have a question, please, again, if you have a question, please press star then 1 on your telephone keypad. One moment, please, while we compile the Q&A roster. And your first question will be from Hamed Abdallah at National Bank of Canada.

Please go ahead.

Yes, good morning and thanks for taking my question. First thing would be the comment around the 3Q packaging EBITDA guidance of $135 to $140 million implies another sequential improvement here. Can you help us bridge what's going to be driving that in terms of volumes, volume of and the realization of the March-April price increases and how you're planning to offset some of the cost inflation that you're seeing?.

Yes, Ahmed, thank you for your question. So basically when you look at the third quarter for packaging, from a seasonality standpoint, I'll give you an example, like harvesting season in some of the regions where we have operation. We have a busier season in the third quarter. We are doing the price increases previously announced. If you remember, we had two and we had a minus 20 earlier in the year. So the net impact of that is going to help support supply. some of the additional profitability. And then we have some inflation costs.

If you look even this week, we had the OCC prices moving up $5 in all of the regions where we operate. So when we take the global of that, we also take into account a slight volume risk from the economy. I mean, we're still in a... pretty unstable environment. But we feel that the second half of the year, so in the third quarter being a very strong one, will give us like a run rate that's going to support overall the company on over $600 million.

Okay, that's helpful. And you were clear in noting your expected impact from the tariffs if they stand at no more than 5% of adjusted EBITDA. Can you help us parse out how you get to that level? What's the actual full gross impact? How much netting you're expecting to do for mitigation? And what are some kind of the mitigation efforts that you've kind of considered against these.

Yes, great question. If you recall, last year we had a similar situation where there were tariffs on basically all of the products going from Canada to the United States. So back then we shared with the market that we were putting a task force together to make sure that we have a great understanding on the potential risk. Back then it was tariffs and it was counter-tariff. So this time our teams were pretty ready. We have a good plan on these things now. The devil is in the details on this potential tariff implementation later this month. Some of the tissue products, most of the products don't have tariffs on the 50% percent recent announcement.

But they really went with tariff codes. So we really went back to all of the details and the products we ship. I'll give you an example for clarity. In URB, the small rows have tariffs, the big rows don't. So we really went in depth. in depth to see what the potential impact was. And then we looked at how we can switch production, you know, Canada to Canada, US to US. So the mitigation plan that we have is not something that's going to take six to 12 months to implement.

It doesn't get implemented all the first week. But it's a rather quick implementation. As far as the growth versus the net, we're not sharing that information yet. But we're tracking really the details and what the U.S. administration wants to include, exclude, understanding that this is a couple of weeks from now and that may evolve over time.

AND IF I MAY ADD, IF IT DRAGS ON A LONGER TIME PERIOD, THERE'S A There's other initiatives that will certainly review and take action.

Okay, that's helpful. I'll pass the line. Thank you. Thank you.

Next question will be from Amir Patel at CIBC Capital Markets. Please go ahead.

Hi, good morning and congrats on a strong quarter. Hugo, it looked like you gained market share in Container Board in the quarter with the strong close to 6% shipment growth year over year. Can you comment on what you've been seeing in Q3 so far? And I know it sounded like you said you've announced 110 on Liner, 140 on Medium. Is there any reason why most of the pricing uplift would not drop to your bottom line? I know we had two earlier price increases. The first one was eaten up by cost inflation, but it seemed like the second one largely will benefit you. And it's looking like the third one will fully drop down to the bottom line, but any clarity you can provide there.

Well, I mean, there's a lot of moving parts in your question. First of all, when we look at the second quarter versus the first, if you recall in the first quarter, we had discussions on onboarding new customers. We really put lots of focus and the teams did a great job in making sure that we were able to do that. contracts that we already had in hands were well executed. So that's a good uplift on our box volume. So it's something that we'll continue to see. Then we depend on seasonality, which the third quarter is a good quarter for a cascade in the regions where we have open operations and customers. So we see so far a market that continues to show what we saw in Q2.

That being said, I think we all know that these geopolitical might evolve from the cost inflation standpoint to your comment on inflation we're seeing a tailwind on fuel costs right now, which we didn't see during the whole second quarter. But that may change. So we're reviewing our strategy on delivering to our customers to make sure that we have more resilience and that we minimize the impact on that. on transportation costs as much as we can. Then I separate rolls versus boxes. We're extremely, extremely tight in rolls. The demand on rolls exceeds what we can ship. So that drove the latest price increase that we announced earlier this week. And as far as that, you know, do we see the full benefit or not the full benefit? We continue to push on our costs to go down.

We saw this week OCC price going up $5. So that has an impact. But we also see fuel costs. So the net of that... that fourth quarter will be really a spread between, you know, what OCC price is doing. And OCC is not behaving the same way in all regions. So we don't expect like a big push on cost, on fiber and on fuel. Well, I will depend on the geopolitical situation around the globe.

Okay, no, fair enough, but I mean it seems like if this price hike goes through, it's a very significant tailwind for Cascade. So if you are then generating significantly higher free cash flow. next year, when you think about in that sort of environment, Are there other larger growth CapEx projects that might then advance? Just thinking about whether you need to increase your integration rate and container board or start to plan for more advanced tissue technology, just given some of the industry developments. Yes.

Yes, so what we've been sharing is we're really building a plan for optionality. What you just mentioned are a few of the options that we have. The focus remains on getting that debt level down to the 2.5 to 3. From the uplift on the cash flow generation that you talk about, I agree. I agree with your statement where there's more tailwinds with us right now than what we saw earlier this year. And, you know, if we go back to the first quarter, we had a pretty low cash flow generation in the first. We were confident to get back to the 600 million run rate in the second half.

And now we're confident to exceed that. that and obviously that's before the implementation of the price increase that we announced this week.

Great. And Hugo, it looks like, I mean, Bear Island seems like it's basically running full from a volume standpoint now at 95%. Where is it on the profitability ramp up if it's 95% of production in terms of production? terms of sort of steady-steady, but how far along is it?.

Yes, I mean, a few comments on Bear Island, and there are probably a few employees on this call from Bear Island. First of all, great job from the Bear Island team. They went through significant changes in work and their great commitment. We ran at 95% for the full quarter, and our month of July was better than the average of the second quarter. Sorry, our month of July was even better. The focus is on cost. As you know, we don't share profitability per mil, but I can tell you that we're very pleased with the financial results of Bear Island right now.

Okay. That's helpful. Just a final question, Hugo, on the tissue side. I know there was an announcement of some new NTT technology coming to market. I know there's a bunch of older school TADs being built, and I think Kimberly Clark is doing some work on that. on some novel fiber technology. How do you think longer term about how you position your tissue business, especially.

especially in retail, to stay competitive? Yes. I mean, the work that's been done on Tissue for the last few years is really to position ourselves as a supplier of choice for the private brands. And it's working really well. We have a good reputation, good growth. That really gives us options in the future if we want to increase our capacity. Demand on these projects go with population growth. In North America, clearly, there's a break here on population growth, but we don't see that as being a long-term trend. You look at the age of assets within the industry versus the new projects, there's room for new projects in tissue. one of the options that we have as our death level goes down.

Okay and just thinking about I know when you the the orchids, you know,.

when you think about technology-wise to compete with TAD, what would be your approach longer term?.

We think there's room for conventional tissue. And you look at the value proposition for the consumer, there's room for TAD for some specific products, but there's also room for conventional. So we are a conventional producer of tissue. We're good at it, so we'll continue to optimize that to remain the superfood. supplier of choice. We don't have in our cars right now 10 machines of equivalent technology.

Fair enough. That's all I had. I'll turn it over. Thanks. Next question will be from Sean Stewart at TD Cowan. Please go ahead.

Thanks, good morning. A few questions. I want to follow up on that last question that Hamir asked around CapEx optionality. I guess between tissue expansion projects longer term or converting capacity on the packaging side, would one rank over the other in terms of priority for Cascade? Yes.

I mean, we're going to go for best value. Right now, the focus, you know, we have a clear side of view with getting to the 2.5, three times debt ratio on debt to EBITDA. We are looking at those options. It's not options that we've decided that we will publicly. share, but we're not waiting to be there to start looking at our options. So we have clear view, but it's really at the end of the day, it's going to be on a return for our shareholders, what makes the most sense. The thing that we have going for us is both segments are delivering good improvements. Both segments have a good reputation with our customers, and both segments also have a positive growth trend in the products that we do.

And our sustainability story, both in tissue and packaging, are well above the industry average from an offering that we have for customers. consumer. So we have choice and we'll take the time to make sure what makes the most sense for our shareholders, understanding that we don't have to say or decide today whether it's going to be one, the other, or both.

Thanks for that detail. The non-core assets sale program, you're sticking with the total dollar value, you're extending the timeframe a little bit into early next year. And I'm wondering if you can square that up. I mean, it feels like there might be some friction on value, your perceived value versus what might be out there in the market. How do you square up holding the overall dollar figure and just pushing at the timeframe if potentially some buyers are... resisting a little bit. Maybe I'm over reading into it, but if you can give us some additional context there, it would be appreciated.

Yes, no, great, great question. I reinforce the 2.30. It's a question of timing. we will reach the 230, but sometimes you have to play time to see what you want to do. As I shared with our shareholders before, when you focus on the number, you need to be working on a bigger number. So I'm very comfortable with the 230. Now, we'll play with the timing to make sure that we get the fair value for the assets that we feel are not strategic and they're not moving the needle for a cascade. That being said, we still have a good line of sight to achieving the 230, and sometimes it's just a matter of time. of a bit more time. Our initial target was end of the year of 2026.

And then we said, well, we'll be more aggressive, push a bit the envelope to the third quarter. But now it's a question of cost benefit. We think a bit more time will give us more cash and And in the macro economy like today, cash is king. So we really want to get the debt level down and we want to get the fair value. And we're not being overly optimistic on the fair value. So, you know, it's not a question of that. That's what we think it's worth.

And then we're just kind of, you know, way overestimating this.

we're very comfortable with the two-turn. Thanks for that. One last one for me. You had very good volume momentum in the second quarter, year over year. You touched on that. The industry also grew year over year. I'm trying to gauge how much of that might have been Buyers getting ahead of proposed price increases versus sustained demand pull. Are you continuing to see good momentum? I know seasonally Q3 is always strong, but even on a year-over-year basis, is that momentum continuing into the third quarter?.

Yes, so I mean, you know, like, let me split tissue and packaging here on that question. In tissue, we don't think that's happening. I mean, we go with on the retail business where we have a continuous deal with our customers. There might be a bit of a deal. that, but that would not be a material number on the way from home, let's say. And then on packaging, on rolls, it's so tight that even if people wanted to get ahead of that, we wouldn't be able to overship versus what we see in the ongoing order files that we have. And on the box, You know, it's more a seasonal thing that this quarter will have more volume than the previous just from its seasonality. So it becomes, you know, from a materiality, it becomes small numbers when people are doing that.

So it's not an area of concerns for us.

That's great. Thanks very much for the context. I'll pass it on.

Ladies and gentlemen, again, if you would like to ask a question, please press star the number 1 on your telephone keypad. Next question will be from Matthew McKellar at RBC Capital Markets. Please go ahead.

Good morning. Thanks for taking my questions. First, Sermit, slide 7 in your materials notes the continued strategic conversion toward greater use of eucalyptus over MBSK. Could you tell us just a bit more about this initiative? How far along are you in the process, and how do you think about the cost savings and any of their impacts from the.

the continued conversion. Thank you. Yes. So, you know, if you go, if you were to step back a few years today, we made significant progress. And our strategy is really to have flexibility over the type of pulp we use, understanding that the spread between the different pulp production moves quite a bit. And so we want to have flexibility. We have flexibility within what our customers are asking us. So it's a clear understanding between us and our customers on what we can and cannot do. We feel there's more flexibility that we can get.

We may have to do some smaller investments in some of the facilities, but nothing that will bring us over the capex amount that we've had, you know, the 150 to 175 over time. It's really like tactical investment to make sure that we provide ourselves for more flexibility. And we still have upside on more. On the cost-saving initiatives, that really depends on what the spread is. Our strategy is really to be up to speed to what the prices are, our options. We have strategic agreements for some volume of fibre that we use, and we want to stay ahead of the game there all the time. moves fast and there's more capacity in Asia today. So we don't see like from a eucalyptus standpoint, the supply is there, it's available.

On the softwood, it's a bit more restricted where new capacity is not something that we feel is going to happen. There's a few projects in Canada on trying to restart some asset, but over time we feel that we really need to get more and more flexibility to use all kinds of fiber to make sure that we optimize the spread between the different options.

Great. Thanks for all that detail. I'll follow up with sort of a related question here in that you've called out mixed paper as being or becoming a viable alternative to reduce production costs with how costs have trended here. I know that's something you've discussed during the Bear Island, but can you remind us how far you can flex your overall mill systems inputs as it relates to using mixed paper in place in OCC? Thank you.

We've been on and off at Baranon on mixed paper as we were focusing on getting the uptime, speed and quality with the priorities of the operation. We can get quite a bit of mixed paper. We're not using it all the time. Again, it depends on the spread. It's more an opportunity right now that's something that's already in our cost structure. We've been focusing on using better grades to get the machine to the 95 to 100 percent. So the upside we could probably use between 15 and 25 percent, but we're not at these numbers today.

And these targets may evolve depending on the cost spread between the different types of fiber and also the difference in actual quality that we see between mix and the other number 11 components.

great WCC. Great. Thanks very much. I'll turn it back.

Next question comes from Ryan Fox at Bloomberg. Please go ahead.

Good morning and congratulations on a good quarter. I'm wondering if you can remind us what percentage of your customers are contractually tied to liner board prices? It's approximately 75% on the back side in Continental. Yes. And I know you can't comment about what competition is doing as far as this price increase, but can you give us any color about how you got to $100 a ton or what this next increase is going to be? A third increase in one year is kind of, I'll say, unprecedented. We've only seen it a few times. And just curious how you are portraying that to customers.

Yes, I mean, we're not going to provide much detail on the strategy and how we get to a number. What I can say on unprecedented tree price increases in the same year, I have a list of unprecedented things that happened over the last 12 months. When you look at the profitability of Cascade with the... the cost of having assets like we have. I mean, we're getting into a trend that's acceptable for a shareholder. So, you know, there were tremendous cost inflation, unprecedented cost inflation in many of the categories of items that we use. So our responsibility is that I mean, it's to our employees and to our customer, is to have a sustainable product offering to them. So in order to do that, you need to have profitability within your business so that they can rely on you for the long term.

And you look at the margins, like we just got above the 15% mark on packaging. below 9% on tissue. So we're really adjusting our pricing to the reality of the economy. And maybe for the first time, Instead of being behind, we're getting on pace. We're not even getting ahead of pace, as far as I'm concerned. We're just getting on pace from a profitability standpoint.

Okay. And if I'm seeing this properly in the slide deck, your integration, vertical integration rate is around 51%. Is that what I saw?.

Yes, it's 50%, 50% something on a consolidated basis, but we have a partnership as well, so then it increases with partnership to the 70% mark.

I got you. Those vertical alignments are great. All right, that's all I got. Thank you.

Thank you. Thank you. There are no further questions at this time. Monsieur Simon, please continue.

Thank you, operator. Before we end the call, I'd like to thank all of the Cascade employees for their hard work and commitment. Their efforts continue to drive our progress that we're making, and you've seen that from our second quarter results. Healthy and safety in execution, they will remain our highest priorities, and we're pleased with the progress we've achieved this year. And lastly, I want to reinforce the fact that high-quality execution is critical in a fast-moving economy.

Thank you. Thank you. Thank you, ladies and gentlemen. This concludes today's conference call.

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[Call has ended.]

The form of proxy and the confirmation of the mailing for these documents and to please file them in the record of this meeting.

The documents have been filed.

Thank you, Michael. Representatives from Computershare Investor Services, the company's transfer agents and registrars are serving as scrutineers for this meeting. They are counting the proxy votes and the votes cast online today. I'm informed that their report is now ready, and I would like to invite Mr. Steve Gilbert to read us the report.

Hello, Mr. Chairman. The scrutineers from Computershare Investor Services would like to confirm that there's at least 3 shareholders representing in person or by proxy, 70,247,352 common shares, 69.34% of the 101,310,210 common shares. And I have the report signed by myself and [ a colleague ] that we can provide.

Thank you, Mr. Gilbert. I hereby declare that the meeting is duly called and validly constituted to consider the items on the agenda. Once voting rights have been exercised on all items on the meeting agenda, the scrutineers will tally the votes for each item. The next item on the agenda is the receipt of the company's audited consolidated financial statement for the fiscal year ended December 31, 2025, as well as the independent auditor's report.

I would ask the secretary to file the company's audited consolidated financial statements for the fiscal year ended December 31, 2025, along with the related independent auditor's report and the mailing affidavit certifying that a copy of these documents was sent on April 13, 2026, to shareholders who requested them.

I am filing the documents.

Thank you, Michael. The next item on the agenda is the election of the 11 candidates proposed by the company and the Board to serve as directors of the company, the corporation. Can an authorized person make a nomination for each of these 11 persons?

My name is Michael Guerra, shareholder. Mr. Chairman, I move that each of the following individuals be nominated as directors of the company: Mr. Patrick Lemaire, Mr. Alain Lemaire, Ms. Sylvie Lemaire, Ms. Sylvie Vachon, Ms. Michelle Cormier, Mr. Hubert T. Lacroix, Mr. Nelson Gentiletti, Ms. Melanie Dunn, Ms. Elif Levesque, Mr. Alex N. Blanco and Mr. Hugues Simon.

Thank you, Michael. Are there any other candidates to propose? Since there are no other candidates, may an authorized person make a motion to elect each of these 11 persons?

My name is Allan Hogg. I'm a shareholder. Mr. Chair, I move that each of the 11 candidates be elected as members of the company's Board of Directors to serve until the next Annual General Meeting or until their successor is elected.

Thank you, Allan. This motion be seconded.

I'm Michael Guerra. I'm a shareholder, and I second this motion.

Thank you, Michael. The motion has been made and seconded. We remind you that for all motions, voting rights are exercised using a single electronic ballot. Click on the button for or abstain next to the name of each candidate for the position of Director. The next item on the agenda is the appointment of the independent auditor for fiscal year 2026 to the Board of Directors on the recommendations of the Audit and Finance Committee recommends that PricewaterhouseCoopers, chartered professional accounting firm, be appointed as the company's independent auditor and that the directors be authorized to set its compensation. I see that Michael Guerra would like to make a motion to that effect.

Mr. Chair, I would move that PricewaterhouseCoopers, chartered professional accountants, be appointed as the company's independent auditor for the coming fiscal year and that the Board of Directors be authorized to set its remuneration.

Thank you, Michael. Would anyone like to second the motion?

My name is Allan Hogg. I'm a shareholder, Mr. Chairman, I second this motion.

Thank you, Allan. The motion has been made and seconded. Please click on the for or abstain button next to the resolution regarding the appointment of PricewaterhouseCoopers as the company's independent auditor. The next item on the agenda is the approval of the advisory resolution accepting the corporation's approach to executive compensation. And this as described in the proxy circular. I see that Michael Guerra would like to present a proposal to this effect.

Mr. Chair, I move that the advisory resolution accepting the corporation's approach to executive compensation be adopted.

Thank you, Michael. Would Allan Hogg like to second the motion?

Mr. Chair, I second this motion.

Well, thank you, Allan. The motion has been duly moved and seconded. Click on the for or against button next to the advisory resolution accepting the company's approach to executive compensation. The next item on the agenda are the proposals submitted by MEDAC and described in Appendix A of the proxy circular. After discussing the matter with the company, MEDAC has agreed to withdraw 1 of its 3 proposals. It will, therefore, be presented, but no vote will be held on it, whereas a vote will be held on the other 2. I will now ask the MEDAC representative to present the 2 proposals. Mr. Willie Gagnon, you have the floor.

Hello, Mr. Chair. Can you hear me? I'm on the phone.

Yes, we can hear you.

I'm Willie Gagnon from MEDAC. I will reduce my volume if you'll allow me because there is an echo that we can hear. Willie Gagnon from MEDAC, the Movement of Education and Defense shareholders since 2014, we submitted 3 proposals. One has been withdrawn, will not be put to a vote. The first one is entitled Strengthening Shareholder participation in Annual General Meetings. Last year, there is a problem in terms of the quorum of 1 AGM of a company that we are shareholders of. And we have never seen that since we've been created.

So we ask ourselves some different questions about why this topic, for example, virtual meetings, the pandemic and many sources that if were through could be systemic causes. And we've asked all corporations that we are shareholders of to implement a process to help strengthen shareholder participation. So you have here most of the things that are already in place, but the third one, which was to publish a small chart that would enable us to see if the participation rate of shareholders increases or decreases.

And the corporation decided not to do that. You have a chart, and this was produced by Broadridge. And the corporation also has some data available. So this little chart will not be easy to produce by the corporation. But it's very difficult to produce one when you are a shareholder since data comes from documents over several years. So it would be very useful, for example, if the participation rate is going up or down and to compare the participation rate of individual shareholders compared to institutional shareholders.

We know that it is not the same. So if the company had accepted to produce such a chart, we would not be asking or proposing this today. So we're also asking in-person annual meetings, many corporations hold in-person meetings. I see that you actually are in a room that you could certainly welcome shareholders. This is in a Lumi room. And also you've opened a new building on the South Shore. So it would have been a good idea for us to be able to visit it, and you probably have meeting rooms in that building.

So we obtained over 36% support last year for this proposal. So we're asking shareholders to support this. And also the Board to review the idea of holding in-person annual meetings. So we did not obtain 50%, but 36% is a high percentage. As for the other proposal that we agreed on, this was on advisory vote on executive compensation. And after last year, the company decided to do so without us having to send a proposal such as this one.

So I hope you can still hear me, Mr. Chair, because I needed to lower the volume for technical issues, but we are happy of the time that you will spend talking with MEDAC about these proposals and the time you've granted today, so we can discuss these proposals.

Yes, Mr. Gagnon, we've heard you. As you know, the Board of Directors has stated its position on the proposal in the proxy statement and recommends voting against both proposals. If you haven't already done so, we invite you to vote on all items on the agenda. Please note that shareholders who have already cast their votes in advance do not need to vote again and may simply ignore the online ballot.

Once the electronic voting has ended, the voting page will disappear and your votes will be automatically recorded. We're giving registered shareholders and proxies 1 more minute to complete the electronic ballot. Once voting is complete, I will ask the scrutineers to compile a report on the voting results for all items on the agenda. We will be back shortly for the announcement.

Thank you for your patience. I would now like to invite Mr. Steve Gilbert from Computershare to read the scrutineers' report on the preliminary voting results.

Thank you, Mr. Lemaire. Can you hear me clearly? I've turned down the volume. Thank you. So thank you, Mr. Lemaire. Once again, regarding the election of directors, I confirm that all 11 candidates have been duly elected as directors of the company.

I'm also able to announce that the resolution regarding the appointment of PricewaterhouseCoopers as the corporation's independent auditor as well as the advisory resolution accepting Cascades' approach to executive compensation have been adopted. And finally, I would like to inform that -- the 2 proposals submitted by MEDAC were rejected. That is all, and I will, of course, provide a report, Mr. Chair.

Thank you, Mr. Gilbert. I confirm that the final voting results will be available on SEDAR later on today. And now I invite Hugues Simon, President and CEO, to take the floor.

Thank you, Mr. Lemaire. Good morning, everyone. Thank you for joining us today. On behalf of the management team, the Board of Directors and myself, I would like to thank our shareholders, our customers and our partners for their continued support throughout the past year. I would also like to thank our employees for their hard work and dedication during these times that have been to say the least turbulent -- their resilience and commitment has been at the heart of the company's evolution over the years and will continue to be a driving force for value creation, ensuring our future growth.

Against the backdrop of rapid geopolitical changes, the determination of the Cascaders is undoubtedly one of the highlights of the past year. Revenues for 2025 amounted to $4.8 billion, representing a 2% increase compared to 2024. These results reflect higher selling prices in our packaging operations, a more favorable exchange rate and a more profitable product mix across all our sectors. These positive factors were partially offset by lower volumes in the packaging products sector.

Adjusted earnings before interest, taxes and amortization or EBITDA reached $576 million in 2025, up 15% from the previous fiscal year. In terms of margin, this represents 12.1% of sales in 2025 compared to 10.7% in 2024. As we have indicated in our annual report, this improvement in performance is due to higher selling prices and a decline in raw material costs, these factors more than offset lower volumes and higher operating costs.

Throughout 2025, we continued to make measured investments across all our operations. In this regard, capital expenditures totaled $137 million, a 7% decrease compared to the previous fiscal year. Our investments in 2025 focused primarily on smaller scale projects aimed at improving operational efficiency as well as on maintenance initiatives for our assets. Broken down by business segment, approximately 60% of these investments were made in the Packaging Products segment, 31% in the Tissue Paper segment with the remainder allocated to corporate activities as well as recovery and recycling operations.

The higher levels of operating cash flow generated by our operation in 2025, combined with lower capital expenditures, asset disposals and a favorable exchange rate resulted in a decrease in the company's net debt of $200 million year-over-year. The reduction in our debt level and the improvement in our profitability have led to a decrease in the company's debt-to-equity ratio from 4.2x at the end of 2024 to 3.3x. We remain committed to achieving our target debt ratio with a range of 2.5x to 3x within the next 12 months.

Let's now move on to a brief overview of the performance of each of our business segments in 2025. Our Packaging Products segment generated revenue of $3.1 billion last year, an increase of 2%. This growth is attributable to higher selling prices as well as the more favorable exchange rate and sales mix. However, these positive factors were offset by a decline in volumes for both paper rolls and processed products. We're pleased with the progress made at our Bear Island mill in 2025. Production volumes increased by 8% year-over-year, and the mill operated at 88% of its usual capacity in both the third and fourth quarters.

We successfully increased production of lower basis weight papers at this mill, which is a key competitive differentiator and broadens the company's product offering. Against a backdrop of rising selling prices and favorable raw material costs, our packaging operations generated adjusted EBITDA up 21% compared to 2024.

Let's now turn to the Tissue Paper segment. Sales in this segment also increased by 2%, reflecting a more favorable exchange rate and sales mix. However, adjusted EBITDA level decreased by 15% compared to the previous fiscal year. This decline is due to an increase in operating costs attributable to inflationary pressures as well as significant planned equipment maintenance carried out to increase capacity. In the fourth quarter, one of our plants also experienced an unexpected power outage, which disrupted operations and resulted in additional operating costs.

Despite these factors, we are satisfied with the strategic realignment and repositioning of the sector's operational platform, which we believe bodes well for future growth. I'll now turn the floor over to Allan, who will present the highlights of our first quarter 2026 results released yesterday. Allan?

Thank you, Hugues. Good morning, everyone, and thank you for joining us today. Since Hugues has presented the highlights of our operation and financial results for 2025, I will focus on the results for the first quarter of 2026, which were released yesterday morning. Sales for the first quarter of 2026 totaled $1.1 billion. They were slightly lower than the $1.2 billion recorded in the fourth quarter of 2024 and remained stable compared to the same period in the previous fiscal year.

Compared to the first quarter of 2025, sales were supported by higher average selling prices as well as a more favorable product mix. These factors were, however, offset by lower volumes by the impact of divestitures and business closures in the packaging product sector as well as by a less favorable exchange rate. If we have a quick look at raw material prices, it shows that the average prices for all corrugated containers increased by 7% compared to the fourth quarter, while those for white recycled fiber rose by 3%.

Softwood pulp prices remained relatively stable while hardwood pulp prices rose by 12% and eucalyptus pulp prices increased by 11% compared to fourth quarter levels. Compared to 2025, OCC prices decreased by 19%, while prices for white recycled fiber fell by 5%. Softwood pulp prices decreased by 11% compared to the same period last year, while hardwood and eucalyptus pulp prices increased by 6% and 7%, respectively, on the same basis.

Let's now turn to the consolidated first quarter results for operating income and adjusted EBITDA. The company generated operating income of $81 million during the quarter compared to $15 million for the same period in the previous fiscal year. Excluding certain specific items, consolidated adjusted EBITDA decreased by 6% or $7 million on a year-over-year basis, reflecting higher costs related to logistics, production and energy as well as lower volumes in our packaging operations. These impacts were, however, partially offset by higher selling prices and lower raw material costs.

On a quarter-over-quarter basis, the decline in adjusted EBITDA is attributable to higher production, transportation and energy costs as well as lower volumes. These impacts were partially mitigated by lower raw material costs. Let's now turn to the trend in net debt during the first quarter. Higher cash flows from operating activities as well as proceeds from the disposal of assets were offset by a negative impact from exchange rates, our capital expenditures, seasonal working capital requirements and the renewal of leases during the period.

These various factors resulted in net debt remaining unchanged from December 31 level and our debt-to-equity ratio remaining stable at 3.3x. The company's capital expenditures will range between $150 million and $175 million in 2026. Since my comments on our first quarter 2026 results were brief, we invite you to review our investor presentation, our press release and our quarterly management report for full details. Additionally, the webcast of our quarterly conference call, which was held yesterday morning, is available on our website. Thank you for your attention. I will now turn the floor over to Hugues, who will briefly present our strategic priorities for 2026.

Thank you, Allan. Well, this comes as no surprise to -- surprise to anyone. The results for the first quarter of 2026 fell short of our expectations. Events as unpredictable as they were significant, notably the conflict in Iran and the blockade of the Strait of Hormuz have severely shrinkened consumer confidence, slowed economic activity and exacerbated inflationary pressures on a global scale. This challenging environment serves as a stark reminder of the importance of exercising rigorous control over the levers within our reach in order to weather adversity while preserving our profitability.

This crisis has, amongst other things, allowed us to confirm the relevance of our goal to generate $100 million in profitability improvements by the end of 2026 through targeted initiatives in productivity and efficiency, logistics optimization, pricing strategy and cost reduction as well and allowed to reaffirm the importance of strict discipline in capital allocation and debt reduction. In this regard, annual capital expenditures will range between $150 million and $175 million.

We encouraged to redouble our efforts in order to achieve $100 million in monetization of excess assets in 2026, which would bring the total to $230 million for the 2025, 2026 period as well maintain our objective of reducing our debt-to-EBITDA ratio to between 2.5 and 3x. However, given the results recorded during the first half of 2026, achieving this objective will need to be postponed to 2027. We will need to address inefficiencies in execution and flexibility given the rapid changes in the environment in which we operate.

Despite the significant impact observed in the first quarter and that anticipated in the second quarter of 2026, we diligently implemented a rigorous tactical planning. This will enable us starting in the second half of the year to reposition ourselves on an annual trajectory of approximately $600 million in adjusted EBITDA. We will achieve all of this while remaining true to our values, continuing to place sustainable development and the circular economy at the heart of our business strategy.

Once again, in 2025, Cascades' achievements in this area were widely recognized, notably amongst other things, our inclusion for a seventh consecutive year in the prestigious Global 100 ranking of the world's most responsible companies compiled by Corporate Knights. And as well, Forbes Magazine ranks Cascades among the top 200 companies in terms of greenhouse gas emissions reduction. Our most recent sustainability plan concluded at the end of 2025.

Detailed results will be published in June, but allow me to share a few highlights with you right now. Since 2019, our mills have reduced their greenhouse gas emissions by 22.2%, decreased their energy consumption by 16.6% and lowered the intensity of the effluence by 34%. These results exceed the targets we had initially set for ourselves. These results demonstrate our tangible commitment to reducing our environmental footprint and by expansion that of our customers. The circular economy remains at the heart of our business model, and it remains at the heart of our business model.

Social responsibility, as you know, is deeply embedded in Cascades' DNA. In an uncertain geopolitical climate where many organizations have chosen to put certain sustainability priorities on the back burner, we've made a clear choice to stay the course. Starting next month, we will launch a new ambitious sustainability plan. We invite you to stay tuned. In conclusion, I want to remind our shareholders that for nearly 2 years now, we've implemented numerous changes that have increased our agility, our speed of execution and our profitability.

Over the past few quarters, we reported results that compare favorably to those of our main competitors. While the current quarter is disappointing, particularly due to external factors beyond our control, it nonetheless serves as a test of our increased resilience and our ability to bounce back despite an unstable geopolitical environment and persistent inflationary pressures, we remain fully confident in our ability to adapt and achieve our ambitious goals guided by our values, driven by the expertise of our team and aligned with a clear and consistent business strategy, we approach the coming years with confidence and determination.

We sincerely thank you for your support and your continued trust. We look forward to keeping you informed of our progress throughout the year, and we are now available to answer your questions.

We're now moving to the question-and-answer session, and we will answer a question from any registered shareholders or duly appointed proxy holders. So we want to remind you that to ask a question, we've explained the process by the Secretary at the beginning of the meeting. You still have a few seconds to do so. Michael, have we received any questions?

Mr. Chair, we have received no questions. Since we have not received any questions, we will now close the question period for the meeting. Having gone through all items on the agenda, I hereby adjourn the meeting. Journalists who would like to conduct individual interviews following the meeting are invited to contact Hugo D'Amours, Vice President of Communications, Public Affairs and Sustainable Development, whose contact information is displayed on your screens. Thank you for your attention, and please take care.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Foreign Language] Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cascades' First Quarter 2026 Financial Results Conference Call. [Operator Instructions]

I will now pass the call over to Jennifer Aitken, Director of Investor Relations for Cascades. Ms. Aitken, please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining our first quarter 2026 conference call. We will begin with an overview of our operational and financial results, followed by some concluding remarks, after which we will begin the question period. Today's speakers will be Hugues Simon, President and CEO; and Allan Hogg, CFO.

Before turning over the call, I would like to highlight that certain statements made during this call will discuss historical and forward-looking matters. The accuracy of these statements is subject to risk factors that can have a material impact on actual results. These risks are listed in our public filings. These statements, the investor presentation and the press release also include data that are not measures of performance under IFRS. Please refer to our Q1 2026 investor presentation for details.

This presentation, along with our first quarter press release, can be found in the Investors section of our website. If you have any questions, please feel free to contact us after the session. I will now turn the call over to our CEO, Hugues Simon, who will begin with the review of our Q1 performance. Hugues?

Thank you, Jennifer, and good morning, everyone. Overall, the first quarter was in line with our revised outlook, but was below the initial expectations we communicated with our Q4 results. As we discussed when we updated our outlook in mid-April, several factors outside initial assumptions contributed to this. The combination of severe weather disruptions across our platform, recent geopolitical events and a negative consumer confidence trend impacted our volumes and accelerated inflation.

We also made reference to some execution inefficiencies. These included delays in onboarding new volumes and longer-than-planned annual maintenance downtime in packaging. Complexity within our logistics network was further compounded by a tight transportation market in both of our segments. These inefficiencies are temporary and are being addressed. Our ambitious strategic initiatives are focused on areas we control. The objective is to have a more resilient platform given an environment that will continue to be impacted by geopolitical uncertainties and extreme weather events.

The speed with which we adapt to these type of macro changes is a priority, ensuring that our business is more agile will provide our customers with the best-in-class products and the best-in-class service. To this end, we're making significant progress from an operational standpoint, and I'm very pleased with what we've achieved so far.

We had a solid quarter at Bear Island. Excluding annual planned maintenance downtime, the mill operated at 92% of its total production capacity in the first 4 months of 2026, including a record month in April in terms of speed, uptime and overall tonnage. At our Greenpac facility, we gained 5 percentage points on availability in the quarter versus 2025, and the first quarter production level was equivalent to an annual output of 575,000 tons, 6% above its initial design capacity. At our Pryor tissue facility, we improved production output by 17% in Q1 2026 and 23% in the month of April when compared to Q3 2025 levels, which was the starting point of our improvement plan in this facility.

While these are just a few examples, my intent is to provide you with an idea of what we're doing in terms of things we can control. Aside from operation, strengthening our logistics network to be more efficient and agile, and accelerating onboarding of new volume gains we have secured with key customers in packaging, are other good examples. In Tissue, we are centered on improving productivity in our retail business to increase volume with our strategic customers.

We continue to remain focused on our balance sheet, and our objective of proceeds from asset monetization is progressing well as demonstrated by the $91 million realized in the quarter. Raw material index prices increased marginally on a sequential basis but remained lower than the prior year period. The exception to this were hardwood pulp and eucalyptus, which increased 6% and 7% from Q1 of last year. Delivered cost of raw materials to our mills were further impacted by recent transportation disruptions and fuel cost increases. We provide an overview of average quarterly costs and trends on Slide 6 and 7.

Moving now to the results of our business segments, which are highlighted on Slide 8 through 13 of the presentation. In Packaging, sales decreased 6% sequentially. This reflects lower volumes in corrugated and specialty products, driven by seasonality, macro volatility, business disposition and changes in customer mix and sales mix from our converted products. Excluding the box plant on the West Coast that was sold in the first quarter, box shipments decreased 5.7%, below the industry's comparable 3% decrease.

First quarter adjusted EBITDA decreased 22% sequentially to $103 million. This was driven by lower volume and by important increases in operating costs, including logistics, chemical and energy. Repair and maintenance costs were also higher sequentially, reflecting planned maintenance outages. Year-over-year sales in this business decreased by 6%. This was driven by lower volumes that reflects the sales of a facility and a decrease in corrugated shipments due to softer demand. Higher selling prices and favorable mix partially offset these impacts. On the same basis, box shipments decreased 1.9%, slightly below the industry's comparable of 1.6% decrease. Adjusted EBITDA also decreased 6% year-over-year for the same reason I just explained. These impacts more than offset selling price and raw material cost tailwinds.

Moving now to our Tissue segment. Sales decreased by 7% sequentially, reflecting usual seasonality. To this end, sequential shipments in the away-from-home market decreased 10%, while retail shipments decreased by 3%. Adjusted EBITDA of $33 million decreased 21% sequentially. This level was slightly below forecast due to higher operating costs following important cost pressure, most notably coming from transportation and fuel. Lower volumes were expected due to usual seasonality. These impacts were partially offset by benefits from lower raw material costs and higher selling prices.

Year-over-year sales increased 4%. This was driven by an 11% increase in retail product shipments and a 6% increase in shipments of away-from-home, underscoring the growing traction of our commercial initiatives. Adjusted EBITDA decreased 11% from last year with benefits from raw material costs, volume and higher selling prices more than offset by operating cost headwinds.

I'll now pass the call to Allan, who will briefly discuss some of the financial highlights. Allan?

Thank you, Hugues, and good morning, everyone. So let's start with the specific items recorded during the quarter, which impacted operating income by $34 million on Slides 14 and 15. The main items were gains totaling $49 million from the sale of assets in Canada, reflecting the company's ongoing optimization initiatives. There were also recorded in the first quarter, $8 million of impairment charges related to a previously closed facility in the U.S., $3 million of restructuring costs related to saving initiative, and lastly, a loss of $4 million on financial instruments.

Slide 16 and 17 illustrate the year-over-year and sequential variance of our Q1 adjusted earnings per share and the reconciliation with the specific items that affected our quarterly results. As reported, Q1 net earnings per share were $0.38. This compared to net earnings per share of $0.07 last year and $0.37 per share in the previous quarter. On an adjusted basis, net earnings per share were $0.07 in the current quarter. This compared to net earnings per share of $0.13 last year and $0.40 in the fourth quarter of 2025. The year-over-year decrease was driven primarily by lower adjusted EBITDA in the current quarter.

As highlighted on Slide 18, first quarter adjusted cash flow from operations was $59 million, slightly down from $62 million in the year ago period. This excludes cash flow proceeds from the sale of assets. Slide 19 provides detail about our capital investments, which for the first quarter totaled $28 million. For 2026, we expect CapEx to be in the range of approximately $150 million to $175 million.

Moving now to our net debt reconciliation as detailed on Slide 20. Sequentially, net debt increased marginally by $5 million in the first quarter, mainly due to usual working capital requirements, a less favorable exchange rate on our U.S. denominated debt and lease renewals. Proceeds from business and asset disposal reduced debt levels by $91 million. Our leverage ratio was unchanged at 3.3x, and our available liquidity under our credit facility stood at $738 million at the end of the quarter.

During the first quarter of 2026, we announced the sale of our Richmond facility, some equipment following the exit from the Honeycomb and Partition business segments and private forest lands. Total cash proceeds received of $91 million have gone towards debt repayment in the first quarter. Including this amount, we have generated total proceeds of $149 million from the sale of assets over the past 5 quarters. We continue to expect to achieve our $230 million targeted level by the end of the third quarter of 2026, slightly ahead of schedule. Financial ratios and information about maturities are detailed on Slide 21.

Additional information and analysis can be found on Slides 25 through 33 of the presentation. I will now pass the call back to Hugues, who will conclude with some brief comments before we begin the question period.

Thank you, Allan. We provide our outlook for Q2 on Slide 22. We're expecting our consolidated results to be slightly lower sequentially. This is driven by a cautious outlook for volumes in our Packaging segment, reflecting the continued macro uncertainty, cost pressure and lower consumer confidence. Volumes in Tissue are forecasted to be higher following usual seasonal softness in Q1 and new retail volume with strategic customers. On the cost side, we currently expect logistics, chemicals and raw material cost levels to be higher across our business segments.

Before opening the call to questions, I'd like to emphasize that while Q2 will be a period of margin pressure, we expect growing traction from ongoing initiatives to drive a stronger performance in the second half of the year. As the dynamic macroeconomic and geopolitical environment continues to put pressure on input costs and consumer sentiment, operational resiliency is paramount. Working in tandem with this is keeping the customer at the center of everything we do, from speed of execution to quality of service.

Commercially, we're winning in the markets where we want to grow. Our sales teams are aligned and are delivering on the strategy. Our product offering is best-in-class, and our focus is to ensure that our execution is also best-in-class. We expect these actions, combined with the rollout of the net $50 price increase published by RISI and other pricing initiatives to realign results in the second half of the year towards our targeted annualized run rate of $600 million of adjusted EBITDA. We are also on track to achieve our objective of generating a total of $230 million of proceeds from asset sales by the end of the third quarter, slightly ahead of schedule.

Our leverage ratio target of 2.5x to 3x remains unchanged, but may be difficult to achieve by year-end given expectation for the first half of 2026. We continue to prioritize debt reduction to reinforce financial flexibility and position the company for future growth opportunities.

With that, we can now open the call to questions. Operator?

[Foreign Language] [Operator Instructions] And your first question comes from Ahmed Abdullah from National Bank of Canada.

Based on your commentary around the $600 million EBITDA run rate in the back half of the year, can you give us a bit more color on that? Are you expecting that peak recovery step up to be evenly distributed between Q3 and Q4? And are pricing actions fully sufficient to restore margins here? Or do you still need cost deflation to kind of hit that $600 million run rate?

Yes. Thank you for your question. So basically, what we're looking right now in the second quarter is a period of adjustment where we're implementing the $50 net that we discussed on the call with RISI. We're looking at geopolitical and cost pressure to continue. But with the implementation going back to a run rate of $600 million in the back half of the year, includes the $50 that's already announced and implemented with the RISI publication. It does not include any further pricing announcement. We've announced to our customers additional pricing in the month of May effective in June. So that's not part of this -- the $600 million.

And we do expect cost pressure to continue in the remaining of the year as well, not to the peak level they've reached, if you look at fuel at $110 earlier this week and below that level today. But we expect those cost pressure to continue, so not to go back to the 2025 levels. So we're being very cautious with the costs. We're trying to push our suppliers as much as we can with pricing index that would look like fuel surcharge. So when fuel goes back down, our cost structure goes back down. But we remain very, very cautious given, like, the ever-changing tone between the U.S. and the Middle East and consumer confidence is impacted. So we're also being cautious on volume as well.

Okay. And just on that kind of pricing initiative, can you give us some color on some of the customer pushback or volume elasticity that you're seeing on these recent price increases you've announced, particularly in Packaging where volumes seem soft? Additionally, you had mentioned that fuel surcharges were being considered. How successful has that been in the industry? And at Cascades as well.

Yes. So we're -- it's not equal depending on the type of customers and if we split the Tissue with Packaging. If we focus here, based on your question on Packaging, we're pushing more on the price increase versus fuel in the big scheme of things with the implementation of the $50 that we just announced. We're very tight in rolls. So the implementation of the $50 is not an issue for us. And it's tight enough with additional inflation that we've announced an additional price increase effective in June. I'm not going to comment on this one. It was announced earlier this week. So it's very -- it's very preliminary.

But when you look at the other files that we have in rolls, it's something that we feel is one necessary and that the market -- we're positive about the market reaction on that. From a box standpoint, you're right that, I mean, we've seen softness in box. We've had a difficult winter as far as extreme weather events here and there. We have a pretty late spring in many of the regions where we operate. If you remember, the -- most of the box making that we have is in Eastern Canada. So we are seeing some softness, but we are winning in the market, and we're gaining market share where we want to grow.

Our focus is on the execution on onboarding those new volumes. When we talked about some execution improvements that we needed, a big focus for us is to accelerate onboarding of new customers, given the fact that we've secured those volume, we are in a soft market, but our product offering is good and customers want to grow with us. So that we have to do better. And I mean, we're improving rather quickly. If I had to give you comments today versus 1.5 months ago, I'm very pleased with the improvements that we're doing.

Your next question comes from Sean Steuart from TD Cowen.

A question on OCC costs. We've seen prices pick up so far this year. Can you give some context on the strength, appreciating it's off a low base? And any visibility on further pressure as we head into the summer?

Yes, great question. Recently, we saw a $5 roughly across the board where we have operation of increase in OCC. It was slightly more in the Western U.S., which does not have an impact for Cascades. Obviously, when box demand is lower, the generation of OCC is lower as well. So it's putting some cost pressure on people that are recycling boxes, which we are a big player in. So we have a good idea of the flavor of the cost impact on that part.

But at the same time, the export of OCC in Asia is a lot lower as well. So more OCC remains into the U.S. We don't see a big push on additional pricing in OCC, although when we forecast the remaining of the year, we're being cautious. But what we're seeing now is that we had the low generation. That's not unusual early in the year, like the whole post-Christmas from end of January to April and May is soft.

But we are counting on some seasonal pickup for the month of May to December on volume. Nothing more than usual, probably a bit less. So to see maybe some small changes in some pockets of different geography is possible, but no significant pressure on volume availability.

Okay. And I want to follow up on your comments with respect to relative tightness in the board market and I guess, a more cautious outlook on the corrugated box piece of it. A number of your U.S. peers have indicated line of sight on year-over-year box volumes starting to rebound in the second half of the year, some seemingly more optimistic than others. Any sense on how your box order book is shaping up if there's any reason for optimism some of your U.S. peers seem to think that there is?

I mean, when I look at what we're doing with our sales strategy, as I mentioned before, we're winning in markets we want to grow. We're winning. We're trying to push on more resilient volume that have less of an impact. So yes, I'm optimistic. From a financial standpoint, we remain cautious just given all the geopolitical that's going on around the world. We also have the USMCA that is coming for more discussions later in June and will probably last for most of the summer. We're not worried about it, but we look at consumer sentiment with all of the inflation that the consumer is seeing.

We remain cautious, but we are ready and we'll be able to take any additional volume that the market will provide, if our assumptions are too pessimistic. So for us, really is we're making a plan so that the level of activity that we see in the economy today remains difficult, but we're ready for the uptick if and when that happens.

Okay. Understood. One last quick question for Allan. The debt maturity schedule, I guess, term loans expiring over the next year and then some senior notes in 2028. Can you give some perspective on how you're thinking about refinancing those maturities and what the current environment looks like for terms on that front?

Yes. The next maturity is in 2027, the term loan, which is part of our credit agreement. We are in discussion right now to defer that, to refinance that -- refinance the maturity. For now, there is no same condition, so we don't expect any negative condition. And the 2028, we'll look at our cash flow profile. We can call these bonds at par right now. We are not using our line of credit.

And there's also a sale of assets that we want to target in our objectives. So all of this, we can call a portion of the bonds and then we'll look at, do we refinance or do we do other alternatives. So I think we have a couple of scenarios. We have flexibility. That's what we want to have. And we'll address that in the -- until the end of this year, we'll look at that closely.

Your next question comes from Hamir Patel from CIBC Capital Markets.

Hugues, I just want to ask more about the sort of $600 million run rate that you're pointing to being back at in the back half. Just trying to reconcile that. I mean in 2025, you did, call it, $575 million. You have this $100 million profitability program where you're targeting $200 million, the formal target is $100 million, and I think there is $30 million was achieved in '25. So you've got, call it, $70 million to go from there added to the $575 million. We've had the $50 net price hike on your sensitivity table, that's approximately $105 million.

So that would seem to get you to around $750 million of EBITDA. And I know to an earlier question, you kind of pointed you're not assuming a material pickup in OCC prices. So just trying to bridge that $600 million to sort of $750 million delta. How much of that is weakness in Tissue versus 2025? And how much of it is some of these other cost buckets that you alluded to?

Yes. Thank you, Hamir. I mean when you look at headwinds versus tailwinds, we have a similar tracking of finance of the potential of the company when we execute everything well with some tailwinds. So definitely, the potential for us if we go back a year on productivity, we've made great improvement on productivity at Bear Island at Greenpac, and I talked about that in the call. The $100 million initiatives is progressing well. If you look at what we're doing today, various mills, we have 55 plants with over 280 initiatives on cost reduction. So what you're talking about on the $100 million, we're continuing to see some good traction on that.

Obviously, in the first and second quarter, there's a lot of new reality with the geopolitical, the quick inflation on logistics, fuel and everything. So for us, the back of the year, we don't expect that to have perfect situation on all of the tailwinds. We're not also talking about the $50 -- the $60 increase that we announced this week going into effect in June. Our intent is really to provide for, like, more visibility. You go back 2 quarters ago, as a company, we're guiding just 1 quarter ahead. We made the decision to guide for the remaining of the year and to provide more visibility to our shareholders because we are -- we do have a clear road to what our potential is, plus or minus the tailwinds and the headwinds.

So it's more to give like a perspective on the actions that we have, tactical actions short term that are happening right now and will continue to happen in the year, will get us back to basically where we were in the third and the fourth quarter of 2025. Looking back at Q3 and Q4 of '25, we were more on a pace of $615 million, $620 million with enough visibility to provide guidance for 12 months ahead or at least like for the remaining of the following year. We feel we're going to be back to that in a normal geopolitical context.

But we don't see all of the headwinds being gone in the second half of the year. Inflation on fuel, I think we're in uncharted water as far as not only Cascades, to be quite honest, but the whole world. Our objective is to focus on what we control, being more proactive and building different platforms that are more resilient to those events because our conclusion is extreme weather, geopolitical will continue to impact any business in North America. So we need to be more resilient on it.

But your math is not wrong. If we have tailwinds and everything else would go back to normal, our potential remains, and we're actually excited about that. But right now, we're focusing on the things we can control. And again, I know I'm repeating myself, but I want to bring people back to the great achievement that our Bear Island facility achieved. We're running at 92% for 4 months in average, and we're at 94% in the month of April alone. So we're making good progress. Greenpac is running at 106% rate capacity. So these things for us, when the market comes back to a more -- I don't like to call it normal, but let's call it, plus or minus normal, our potential remains great.

Okay, great, I agree. Hugues, just sort of 2 follow-ups there. One on that -- the $600 million plus. I appreciate that there could be additional tailwinds there. What is the sort of tissue EBITDA assumption that you see the Tissue business run rate being back to by year-end? And then just with respect to Bear Island, 94% looks like you're seeing some strong improvement there. But in terms of sort of the EBITDA potential of the mill, I'm guessing you don't think you're at 94% of the mill's potential. So maybe you could frame us where that is on its sort of expected full EBITDA contribution.

Yes. So 2 components, Hamir, to your question. If you look at -- go back 2 years with some of the great results that we've had in Tissue. This is there and better where we're going back. We've gained some significant market share in many of the customers that we deal with. We're really at the right place in Tissue as far as customer mix, the type of projects we have, the mix of retail versus away-from-home. We'll probably grow even more in retail because we can do some small investments that are within the $175 million of annual CapEx to even grow better.

Our product is well accepted. So excited. So when you look back at the numbers or the period I referenced, you're in the high 190s and you could be in the $200 million. That's like a longer-term perspective, but not something that is at the current level of the last 2 quarter.

As far as Bear Island, if you go back to our fourth quarter discussion and third quarter discussions, we're now turning to put some improvement initiatives on cost, chemical consumption, fiber loss. The type of fiber that we use, we went back to 100% OCC, not using mixed paper. We're still basically there. It's something we're looking at, looking at the cost benefit, I don't want to give back on any of the productivity. So from a profitability standpoint, we have quite a lot to go, but we're above the 50% mark. It will take time.

Look at Greenpac, it took 13 years to go over the 106% of capacity. But there's no sign. I had the question in previous quarters, like is there any additional CapEx that we need at Bear Island to get to where we want to be? The answer is there's no CapEx over and above the $175 million that we have every year. There's stuff here and there that we'll do. But I would say that we're caught up at Bear Island.

And what we're seeing today, we're in the improvements of -- we were making monthly shutdowns every 5 weeks. We're now up to every 6 weeks, and we're looking at ways to go at every 7 weeks. This will give us more production. We're at 100% of speed for all of the grades that we produce. The quality is accepted at all of our customers, we can actually displace between Greenpac and Bear Island. There's probably another $30, $40 a ton of cost improvement that we can do. So that gives you a perspective on additional profitability. And from a mix of linerboard and medium, it will depend on how we want to position ourselves with some of our key customers.

Yes. And Hugues, sorry, just on that $30 to $40 of cost improvement, that's -- I'm assuming that's without the mix -- without feedstock change, without running more mixed paper just on the current configuration.

Yes. Yes.

Okay. And when, like -- how long do you think it would take to get that $30 to $40? Is that 12 months or?

Yes. I mean I look at this as really continuous. We're turning the wheel. It should never stop. We pivoted one of our value to basically working hard to be better every day. So for us, the focus -- it's part of the 280 initiatives that we have. It's tracked by the mill on a continuous basis. For us, it's a never-ending process where the $30 to $40 will never get to 0.

We still have initiatives at Greenpac, and that's really the mindset that the people are doing is how do we improve every day, understanding that we're at the tail of the start-up in Bear Island. So it won't take 5 years to get to the $30 and $40, but don't expect the full benefit of it this year.

[Operator Instructions] Your next question comes from Matthew McKellar from RBC Capital Markets.

You talked a bit about winning the business that you want to win in Packaging. Can you talk a bit about what that looks like, what kind of business you're targeting, what kind of business you're onboarding? I think there was a mention of targeting more resilient business. Could you just speak a bit more to what you're alluding to there, please?

Yes. We're going back to the right product with the right machine to the right customers, growing with a bit fewer customers, but go deeper with them with more market share. We've always stated that we need the right mix depending on the box plant that we have. We have box plants that are good for small volumes. So I mean we're not going to put big volume in those type of facilities.

But where we have equipment in the customer base where we can go deeper with the relationship, we pushed on food and beverage, which given the state of the economy is more resilient than the things where the consumer has a decision to make and is really slowing down when there's extensive inflation in the market. So these are the type of example of what we're doing.

Pushing on service, being able to have the right box. We're producing more lightweight at our Bear Island facility. So we're able to provide some box solutions that take less fiber. It's a good sustainable alternative, but it's also a good economical alternative as well.

Okay. And then last for me, apologies if I missed it. I think you've opened the door to some downside versus the original CapEx estimate for '26. Can you speak to what the swing factor is here?

Yes. No, I mean we don't need $175 million a year to maintain our assets. We have some quick payback projects we will continue to do. We have some would say, strategic, I call them tactical projects to bring or position ourselves differently. There's a margin there. And to be quite honest, with all of the inflation based on fuel, based on tightness in logistics, some projects that we could do this year will push them into the future without affecting that $175 million mark in the future.

There's pressure on aluminum, there's pressure on steel with tariffs. So there are some of these things that pushing it 1 quarter, 2 quarters is not going to change what we do and it's not going to change the picture of how much cash we need in the future. So we're going to play with that. If you look at our results in Q1 and what we're looking at for Q2, managing our balance sheet is paramount for us. It's a priority. You look at a quarter like the first quarter, our debt level basically stayed the same. If you take out the variation of exchange rate, it actually went down.

So we still have some room on the sales of assets. I think Allan positioned it well. We're going to reach the $230 million roughly a quarter ahead of schedule, understanding that with all those headwinds, our objective and priority to bring our debt level down to a level where we can now be in a position to grow is a priority. If we can't do it for 1 quarter or 2 on cash flow generation, we look at other alternatives, like working capital is things that we're looking at. The selling of assets without impacting our EBITDA generation is another one. We're trying to accelerate that.

We've always said that when you want to sell for $230 million of these assets that are not providing additional EBITDA to the company, you need to work on more than that number. So that's -- we remain committed to look at every potential option. The forest land that we announced in the first quarter is a good example. If I went around and asked, a lot of people didn't even know we had forest land. It's -- it was a good investment back at the time, but do we need this to continue to generate EBITDA at our Cabano facility? The answer is no. Actually, we took the opportunity to partner with somebody that owns probably like many, many more land, much more land than what we had and to strengthen our access to fiber in that region. So we'll continue to do that, trying to partner with others to make us stronger.

Thank you. There are no further questions at this time. Mr. Simon, please continue.

Yes. Well, thank you all for the great question and the listening. I mean we are fully realized that Q1 is a tough quarter. I like our plan going into the second quarter. You always have a choice between trying to push price increases too fast to customers and lose market share. We're committed to our customers long term, and that's the way we're looking at this. And when we look at our plan, fully confident to go back on the $600 million more level for the second half of the year. Thank you very much.

[Foreign Language] Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect. Thank you.

Good morning. My name is Sylvie, and I will be your conference operator today. At this time, I would like to welcome everyone to Cascades Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] I will now pass the call over to Jennifer Aitken, Director of Investor Relations for Cascades. Ms. Aitken, you may begin.

Thank you, operator. Good morning, everyone, and thank you for joining our fourth quarter 2025 conference call. We will begin with an overview of our operational and financial results, followed by some concluding remarks, after which we will begin the question period. Today's speakers will be Hugues Simon, President and CEO; and Allan Hogg, CFO. Before turning over the call, I would like to highlight that certain statements made during this call will discuss historical and forward-looking matters.

The accuracy of these statements is subject to risk factors that can have a material impact on actual results. These risks are listed in our public filings. These statements, the investor presentation and the press release also include data that are not measures of performance under IFRS. Please refer to our Q4 2025 investor presentation for details. This presentation, along with our fourth quarter press release, can be found in the Investors section of our website. If you have any questions, please feel free to contact us after the session. I will now turn over the call to our CEO, Hugues Simon, who will begin with a review of our Q4 performance. Hugues?

Thank you, Jennifer, and good morning, everyone. Our fourth quarter consolidated performance was in line with our projections. Forecasted sales and adjusted EBITDA levels both decreased marginally from Q3 levels, reflecting usual softer volumes and the current geopolitical environment. Our key focus initiatives continue to deliver good results, our Bear Island facility averaging 88% total capacity during the quarter while running at a lower average basis weight. We have also successfully reached our capacity speed targets in all of our grades. Our Pryor, Oklahoma facility made significant progress during the quarter, increasing its total output by 11% from Q3 level. Globally, our overall margin improved to 12.9%, led by a 17.4% margin in our packaging sector. Year-over-year consolidated sales decreased 1%, it was driven by lower volumes in packaging, which fully offset pricing and favorable mix benefits in both segments.

Consolidated adjusted EBITDA of $155 million increased 9%, reflecting lower corporate costs. We continue to remain focused on our balance sheet, allocating free cash flow to reduce our debt. This end, net debt decreased by $127 million sequentially and leverage decreased to 3.3x from 3.6x at the end of Q2. The full year, sales increased to $4.8 billion and adjusted EBITDA increased 15% to $576 million on a consolidated basis, reflecting a solid improvement from our Packaging segment. EBITDA margins increased 140 basis points to 12.1% for the year. We provide a more detailed breakdown of factors that impacted results sequentially and year-over-year on Slide 5. Trends continue to be favorable for raw material costs in Q4, we provide an overview of average quarterly costs and trends on Slide 6 and 7. Moving now to the results of our business segments, which are highlighted on Slide 8 through 13. Beginning with Packaging, our fourth quarter sales decreased 5% sequentially.

In addition to usual softer seasonal volumes, this reflects lower average selling prices driven by changes in customer and sales mix for the converted products. Notwithstanding this, our box shipments increased 1.5%, outperforming the industry's 2.4% decrease. Fourth quarter adjusted EBITDA decreased 3% sequentially to $132 million, in line with expectations, driven by the volume and selling price factors that I just discussed, offset by benefits from lower operating and raw material costs. EBITDA margins improved sequentially to 17.4% from 17.1% in Q3. We had a solid quarter at our Bear Island facility. In addition to running the mill at 88% of its total production capacity, we increased production levels of lower basis white paper by 7% sequentially, a key differentiating factor from an industry perspective, while remaining focused on machine availability. We do continue to see this positive operational pace in early 2026.

Year-over-year sales in this business decreased by 3%, driven by lower volumes that reflect the permanent closure and/or sales of facilities and a decrease in corrugated shipments following strong demand in the year ago period. Higher selling prices and favorable mix partially offset these impacts. Adjusted EBITDA was stable year-over-year as selling price and raw material cost tailwinds fully offset volume-related impacts. Margins improved to 17.4% from 16.9% last year. Before moving to tissue, I'd like to say that we're pleased with the growing resiliency of profitability levels in this segment. Improvements made to our cost and organizational structures are being captured and are helping to offset cost inflation and other external headwinds. Initiatives we've put in place are gaining traction, key amongst which is ensuring that the right product is produced on the right equipment. This, along with other decisive actions we're taking, are positioning Cascades to be more resilient in an ever-changing business environment.

Moving now to our Tissue segment. Fourth quarter results were below expectations. In addition to efficiency and logistics execution falling short of our targets, our North Carolina Wagram facility experienced a major electrical outage. These factors reduced output, increased operational support requirements and required our network volume to be redirected to other plants, increasing logistics costs. Sales in this segment decreased by 1% sequentially, driven by a 3% decrease in the away-from-home market that reflects expected seasonality, partially offset by a slight increase in the retail market. Segment adjusted EBITDA of $42 million decreased 9% sequentially. Our lower raw material costs were a tailwind, benefits were more than offset by higher operating costs as well as negative volume, which includes effects related to the power outage at our Wagram plant.

Year-over-year sales increased 3%, driven by an 8% increase in retail and stable volume in away-from-home. Adjusted EBITDA decreased 7% from last year with benefits from raw material cost, volume and higher selling prices offset by higher operating costs. While we're disappointed with quarterly results in this business, countermeasures are already in place to strengthen our operation are gaining traction. Temporary challenge at the Wagram facility should also not overshadow the good progress being made at our Pryor, Oklahoma mill. Efficiency improvement initiatives at this facility are generating benefits and helped drive the 11% sequential increase in converting production in Q4. Similarly, our recent investments in our Kingsey Falls and Granby facilities are delivering good results. I'm confident that the actions we have taken will successfully strengthen this business, both from a profitability and cash flow generation standpoint. I'll now pass the call to Allan, who will briefly discuss some of the financial highlights. Allan?

Thank you, Hugues, and good morning, everyone. So let's start with the specific items recorded during the quarter, which impacted operating income by $7 million on Slide 14 and 15. Main items were $25 million of impairment charges related to facilities closed in Canada and the U.S. and $4 million of restructuring costs. Next, the company's ongoing optimization initiatives. Addition, there were gains totaling $22 million from the sale of our flexible packaging activities and on derivative financial instruments. Slides 16 and 17 illustrate the year-over-year and sequential variance of our Q4 adjusted earnings per share and the reconciliation with the specific items that affected our quarterly results. As reported, Q4 net earnings per share were $0.37. This compared to a net loss per share of $0.13 last year and net earnings of $0.29 per share in Q3.

On an adjusted basis, net earnings per share were $0.40 in the current quarter. This compared to net earnings per share of $0.25 last year and $0.38 in the third quarter of 2025. The year-over-year increase was driven by stronger adjusted EBITDA in the current quarter, while the sequential improvement reflects lower depreciation and financing expense. Also added the 2025 year-over-year earnings per share reconciliation on Page 18. As highlighted on Slide 19, fourth quarter adjusted cash flow from operations was $165 million, up from $129 million in the year ago period and $137 million in Q3. Adjusted cash flow generated in the fourth quarter improved year-over-year and sequentially, mainly reflecting stronger operating results, higher dividends received from our JV partners and lower financing expense paid. Capital investments and lease obligations payments increased slightly. Slide 20 provides detail about our capital investments.

Investment for the fourth quarter totaled $42 million, bringing the full year level to $152 million. For 2026, we expect CapEx to total approximately $175 million. Moving now to our net debt reconciliation as detailed on Slide 21 and 22. Sequentially, net debt decreased by $127 million in the fourth quarter, mainly due to stronger cash flow from operations, a reversal in working capital requirements, proceeds from business disposal and a more favorable exchange rate on our U.S.-denominated debt. Our leverage ratio decreased 3.3x from 3.6x at the end of the third quarter. The full year, net debt decreased by $200 million and our 3.3x leverage ratio decreased from 4.2x at the end of 2024. Our available liquidity under our credit facility stood at $737 million at the end of 2025.

In early 2026, we announced that we completed the sale of our Richmond BC packaging plant and the exit from the Honeycomb and Partition business segments. Cash proceeds received of $69 million have gone toward debt repayment in the first quarter. A additional closing adjustment may occur within the first quarter. Including this amount, we have achieved our objective of generating $120 million in proceeds from the sale of redundant and noncore assets ahead of our mid-2026 schedule. Financial ratios and information about maturities are detailed on Slide 23. Additional information and analysis can be found on Slides 27 through 36 of the presentation, including our updated sensitivity analysis based on our 2025 consumption and shipment levels on Slide 34. I'll now pass the call back to Hugues, who will conclude with some brief comments before we begin the question period. Hugues?

Thanks, Allan. We provide our outlook for Q1 on Slide 24. We're expecting our consolidated results to decrease sequentially, but to increase year-over-year for the sixth consecutive quarter. Packaging, we're expecting softer sequential results, as usual demand seasonality. Additionally, we're planning maintenance downtime totaling approximately 16,000 tons across our platform in Q1, including at Bear Island at our uncoated recycled board mill in Kingsey Falls, where we're completing an upgrade to increase capacity. Raw material and selling price trends are expected to remain largely stable, while energy and logistics costs will be headwinds following the challenging weather in early 2026. Sequential decrease we're forecasting in tissue is driven by lower seasonal demand, mainly in away-from-home and impact stemming from the severe weather in the U.S. early in 2026.

Ramp-up at the Wagram plant following the power outage is progressing well, and we expect the facility to return to full production capacity before the end of Q1. Raw material prices are expected to remain largely stable, while energy and logistics costs will be higher due to inflation and ongoing adjustments within our network due to weather-related impacts. Looking ahead, we're focused on executing our 2026 plan. We're centered on the key drivers we control to mitigate external headwinds. This end, our internal objective to generate adjusted EBITDA above $600 million in 2026 before factoring any net effect of selling price increases. Target is being driven by our strategic objectives, which are centered on increasing our baseline annualized profitability levels by $100 million. We made meaningful progress in 2025, generating $30 million and are focused on accelerating this momentum throughout 2026.

Similarly, we achieved our concurrent objective of generating $120 million in proceeds from asset sales ahead of schedule. We're now targeting an additional $100 million of proceeds from the divestiture of redundant assets this year, which will bring the total to approximately $230 million over 2 years. Our strategy is anchored on strengthening the company's resiliency, performance and competitiveness grounded by a customer-centric vision that includes best-in-class service. drive strong execution across our organization, we work within a focused 90-day cycle.

In each of these cycles, our teams commit to a set of clear measurable targets and ensure that we're aligned, disciplined and fully focused on delivering results. Targets are refined and recalibrated as needed to reflect evolving economic conditions. Our path forward remains very clear. successfully navigating this landscape requires agility, flexibility and resilience. Qualities are key elements of our strategy. Alongside these, we remain committed to reducing debt levels to strengthen the company's financial flexibility and unlock future growth opportunities. With that, we can now open the call to questions. Operator?

[Operator Instructions] And your first question comes from Ahmed Abdullah at National Bank of Canada.

You've achieved $120 million of proceeds or ahead of that as you're targeting asset sales, and now you're targeting another $100 million. Can you tell us what's the mix of what you've already identified that you want to sell versus what's still to be determined? And can we expect any EBITDA dis-synergies from such sales?

Yes. Thank you for your question. So basically, when we talk about the $120 million that we've achieved so far ahead of schedule, the number is more like $126 million, $127 million. So we are targeting another $100 million. We have identified all of the $100 million. And to be quite clear, we identified more, understanding that some of the things that we were looking to sell are likely not going to work. we do not anticipate any EBITDA erosion overall in the additional $100 million that we're targeting.

But to be clear, you still expect to have an EBITDA that's above $600 million at the end of 2026 despite all these sales?

Yes, sir, exactly. That's correct.

And just touching on the recent price hike announcements that have taken place in the industry, pressure -- including yourself, pressures seem to still be there as demand remains modest. And we saw last week that open market prices are highlighting some cracks there. How have discussions unfolded around price hikes that are actually expected to be implemented by next week?

Yes. So we were kind of surprised with the $20 decrease that was announced last week. That's not what we're seeing in our order file. If we go back to December, we made that decision to run our paper mills during the Christmas holidays because what we saw for us looking ahead was the right thing to do. If we had to make that decision again, we'd do the same decision. We have a good order file. We ship some of our rolls to our internal box plants. And when we look at what we ship externally, we feel confident with what we have. Clearly, in the first quarter, there's a typical seasonal slowdown. And that's one of the reasons why we try to take the opportunity as much as we can to make some annual outage.

We're doing a major shutdown at the Bear Island facility. We just restarted from the one in the Kingsey Falls that restarted this morning and successful restart. So when we look at the spring, we look at the inventory that we have, we're focused on implementing the $70 increase that we've announced in linerboard and $60 in URB and the additional increase as well in the medium mill. So it's not -- we don't see any reduction in pace in the rolls. What is clear for us is that when we look at 2025, there was a significant reduction of capacity in North America. So we see the rolls market being tight. There is some capacity in box-making right now, and it's a seasonal low, but it's different than what we see in rolls clearly.

That's very appreciative color. And just finally on the tissue outage EBITDA impact, have you quantified how much or how much you expect as a spillover into the first quarter? I know you provided guidance, but yes, I just wanted to get the number perhaps.

So when we look at the first quarter, obviously, it is within our guidance. The the restart of the operation at our Wagram facility, we were able to run, but to run with slightly lower volume at the start, and then we pushed our volume back to be almost at pace. The additional cost was the thing that was significant where we had a switchgear failure that comes from the provider of power at the facility. And they had a replacement and it was not successful. So we took the decision to put some generator and the generator brought some additional cost. The restart of the main switchgear, that's the one that's going to be there for a long time, actually happened yesterday. So we had a good restart.

We're still looking at making sure that all the equipment have stable power and they have protection because the switchgear provides stability of power for some of the equipment to make sure it's safe. What we're seeing so far is very positive. We have sent our experts from our excellence teams in Canada into the U.S. to make sure that we do the proper tracking and that we're more preventive, although it's an external switchgear, it's a Cascades impact. So in the first quarter, we expect to be much lower than what we had in Q4, understanding that the restart happened yesterday, so roughly 2 out of the 3 months of the first quarter of the year. And, I can add the -- one of the key reasons why we decided to put some generators is that you look at the North American industry of tissue, and I'll give you the example of retail.

In Canada, the top 2 sellers -- so the top 2 retailers basically sell 50% of the tissue in Canada. And in the U.S., if you look at the top 3, they are basically 2/3 of the sales in the U.S. So customer first for us, we wanted to make sure that it was as transparent as possible for our customers because they're in the heart of everything we do, and we want to maintain those long-term trust and make sure that we supply and we continue to grow with them. So we did spend additional money in the fourth quarter. We see that as obviously a cost, and it does have an impact on our EBITDA in the fourth quarter, but also as an investment to show our dedication to our customers that we're there for the long term. And when things happen at the mill, it has to be as transparent as possible for them.

Next question will be from Hamir Patel at CIBC Capital Markets.

Hugues, just following up on the pricing moves. Obviously, RISI cut the benchmark by $20 a ton. So should we -- given -- I know you've got your ongoing hike, it's for March. historically, even when these hikes are recognized, it typically only follows a month later. So should we expect, just given the RISI move that your realized containerboard prices would decline sequentially in Q1? And I know you're also working on increasing the mix of lightweight. So is there a bit of a mix impact as well?

Yes. So good question. I mean, as I said, we were surprised by the $20 reduction, understanding that we're 2 months into Q1. We do have a mix impact as well. And you look at what we've announced for March 2, it's a $70 hike. So when you look at Q1, it's within the range of the guidance that we've provided.

Okay. Great. And Hugues, just thinking around USMCA, if you could just maybe update us on how you've been adjusting the business to prepare for different scenarios around potential future tariffs.

Yes. This is an ever-moving discussion on tariff. If you remember back in early 2025, we did position ourselves for tariffs that lasted for 3 days. Since then, we've done additional work, and I'll provide you an example with tissue, we were able to add some SKUs in the U.S. for U.S. sales, and those SKUs were produced in Canada before. We still have a good list of things that we can do to minimize any potential impacts. In some of the cases, like the recent potential 15% across the board for the next 150 days will not impact Canada, what will impact other countries, and some of them were already impacted. So there will be pockets of opportunities short term. The biggest thing for us, it provides for unstability and like customers want to keep in some cases, less inventory because they're unsure about the economy in the U.S. But we're looking at all alternatives to make sure that we minimize, and that will include like trading and swapping volumes with others.

Next question will be from Sean Steuart at TD Cowen.

One follow-up question on the containerboard price volatility. Can you remind us what percentage of your containerboard or corrugated box volume is officially tied to RISI in your contracts?

Yes. So roughly -- and I mean that varies depending on the period and the season with what customers are using. But we -- I think using a 2/3, 1/3, 2/3 being contracted, 1/3 noncontracted is a good like trend numbers to use. We did include that when we -- because obviously, in the first quarter, I mean, it doesn't have an impact understanding that we're basically in March right now. If you look at the guidance that we provided, I mean, our $600 million of EBITDA before any net impact of all this, like this minus 20% and the announcement for us remains and that's what we target, and we have a clear path to that with the current state of the economy.

Okay. Understood. And on the tissue results, I appreciate Wagram was a big part of this, but there were further comments around execution and efficiency headwinds that the company dealt with. And I'm just trying to understand, is that follow-on from the Wagram outage and having to shift your business around to other assets? Or is there broader issues across the platform? And if so, I guess, how concentrated were those issues in the fourth quarter? And what's the time frame to remedy that?

Yes. So great question. And I mean, all of what I'm going to share with you here is included in our guidance for Q1. Basically, when you look at our system given the concentration of where the consumer buys tissue needs. When you have one facility that's lagging in this case, in Q4, it was Wagram. We make sure that it's as transparent as possible for our customers. So we move stuff around. Then in January, we had this severe weather in the U.S. And when you look at the location of our facilities, I mean, we were impacted quite drastically by this cold front, including snow. So it delayed a bit more, and it also puts some pressure in freight costs.

So logistic costs, if -- to answer the second part of your question, it's really concentrated within the U.S. for U.S. deliveries where cold weather and extreme weather, they're not as used to it, and it takes a while to come back to normal. It has a small impact on sales if they close their distribution center, but it's just a time issue. It's really the cost to deliver. With the Wagram facility now back up, which -- I mean, it took like basically over 4.5 months for us to go back to normal, incurring some additional costs on the generators and also the movement of material. We feel that this is behind us.

The weather will continue to have some impact for us as long as we don't see like good weather for a while. I mean we're basically getting into March and April here. So it's not going to be an issue as much. We do have plans that we've put in place, including in execution of operation and logistics to be ahead of the game. So we want to be a couple of steps ahead. There will be snowstorms and cold weather next year. So we need as a group to be more prepared for that. That being said, the industry is running at close to full capacity. And every case we make is sold. So we have to operate in a tight market, which is something that we're -- overall, we're happy with that. We like that. But we want to maintain the level of service to our customers to continue to be their #1 choice.

[Operator Instructions] Next question will be from Matthew McKellar at RBC.

First, just reflecting on the Packaging segment results in Q4. I think in your outlook as of Q3, you expected favorable average selling prices, but your sequential bridge would suggest that selling prices and mix were a meaningful, I guess, drag on your results sequentially. I think you mentioned a change in customer mix for converted boxes in your prepared remarks. Can you help us understand, I guess, what happened and how the quarter developed against your expectations as of early November, please?

Yes. So I mean, when you look at the plan we have in packaging, we want to simplify the business, and we want to make sure that we sell the right product on the right machine to the right set of customers. So I mean, the selling price is one thing, but then you have the operating costs as well. So we're really looking at profitability per hour, making sure that we increase the level of resiliency that we have in volume, reduce a bit some of the seasonality as much as we can. And when you look at food and beverage, more stable business that doesn't swing as much between quarter. Sometimes from a percentage standpoint of profitability, it might be low.

But when you look at the overall for the year and the long term of Cascades, it's the right thing to do, reducing the number of SKUs have longer runs on our equipment, higher efficiencies. So the profitability by hour of operation will increase and in some cases, have already increased and also increasing the number of hours that we run our equipment. Something that we're pushing to do where box plant is not a given like paper machine that they run 24/7. So we want to take advantage at running more hours where the economy is giving us the opportunity.

That's helpful. And then just last for me. You talked about wanting to be between 2.5 and 3x levered, I think, and you exited '25 at 3.3x. You've got some further proceeds from asset monetization plans in the pipeline. Now that, that 3x marker is coming into clearer view, is there anything you could share with us today about potential priorities for capital allocation or strategic CapEx specifically beyond your current plans for '26?

Great question. I mean we have started a while ago to look at the alternative. And really, when you look back, we -- our ratio was above 4. So I mean, expansion, buying things or building things was not like a short-term thing that we had in mind. We wanted to provide for options for Cascades, and that's exactly what's happening. So we do have a road map internally on what are the options, what is best. What's driving this is a long-term view of supply-demand, return on capital for our projects and shareholders. So ROCE has a big thing to do. The nice thing here is that you look at both segments.

We have opportunities in both to expand. We have a good set of customers that also have good growth plans as well. So we're well positioned to choose. So we're -- internally, we're looking at what the options are, what's best for Cascades. But for now, the focus is really like let's make that 2.5 to 3 behind us so that it's not a -- we do have a clear path to it this year, but we want to say, check mark like the $120 million, it's done, and then we can move to other things, and we'll be ready for the options that we have.

There are no further questions at this time. Mr. Simon, please continue.

Yes. Thank you. I mean great question. We're very happy with the quarter in packaging. As you can feel, I mean, we have some work to do in tissue. We did the actions that we had to do, and we're looking forward for the 2026 quarters, which is going to bring its own share of interesting things given what the geopolitical is doing. Thank you very much.

Thank you. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your line.

Good morning. My name is Joelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cascades' Third Quarter 2025 Financial Results Conference Call. [Operator Instructions]

I will now pass the call to Jennifer Aitken, Director of Investor Relations for Cascades. Ms. Aitken, you may begin your conference.

Thank you, operator. Good morning, everyone, and thank you for joining our third quarter 2025 conference call. We will begin with an overview of our operational and financial results, followed by some concluding remarks, after which we will begin the question period.

Today's speakers will be Hugues Simon, President and CEO; and Allan Hogg, CFO. Before turning over the call, I would like to highlight that certain statements made during this call will discuss historical and forward-looking matters. The accuracy of these statements is subject to risk factors that can have a material impact on actual results.

These risks are listed in our public filings. These statements, the investor presentation and the press release also include data that are not measures of performance under IFRS. Please refer to our Q3 2025 investor presentation for details. This presentation, along with our third quarter press release, can be found in the Investors section of our website. If you have any questions, please feel free to contact us after the session.

I will now turn over the call to our CEO, Hugues Simon, who will begin with a review of our Q3 performance. Hugues?

Thank you, Jennifer, and good morning, everyone. Our third quarter performance was stronger than our projections. This was driven by improved volumes, higher average selling prices and lower production costs in both businesses. This reflects the growing momentum achieved by our profitability initiatives.

Volume showed steady positive momentum in the quarter. In Packaging, the flexibility of our operating platform enabled us to capture volume above our forecast. We continue to remain laser-focused on our balance sheet, allocating free cash flow to reduce our debt.

Consolidated EBITDA of $159 million increased 16% from Q2. As I mentioned, this was driven by a stronger performance in both of our businesses due to higher volume, higher selling price and lower production costs. Year-over-year consolidated EBITDA increased 14%. Results in both businesses benefited from stronger pricing and favorable raw material costs.

These offset higher operating costs and lower utilization rate in Packaging. We provide a breakdown of the impact of these factors sequentially and year-over-year on Slide 5. Trends continue to be favorable on raw material input costs. We provide an overview of raw material average quarterly costs and trends on Slide 6 and 7. Moving now to the results of our businesses, which are highlighted on Slide 8 through 13 of the presentation.

Beginning with Packaging, our second quarter sales increased 4% sequentially. This reflects stronger volume and improved average selling prices. Demand levels exceeded our cautious outlook with September, in particular, coming in stronger than expected.

We provide box shipments data for Cascades and the industry on Slide 8 and 9. Q3 EBITDA increased by 14% sequentially to $136 million. This was driven by higher volumes and selling prices. EBITDA margins improved to 17.1% from 15.6% in Q2.

Results in this business have begun capturing benefits from our improved operating cost structure and profitability initiatives. The closure of our Niagara Falls facility went well and production was transitioned to other operating units ahead of schedule.

Similarly, we had a strong quarter at Bear Island, and we are pleased with the sequential progress. Production increased 24% to just over 102,000 tons. The mill ran at 90% of our targeted ramp-up curve and 88% of its total production capacity in the quarter. We have continued to see this positive operational pace in October, and we are forecasting a strong end of 2025.

We remain committed to closing the gap by year-end. Our employees at Bear Island are driving this momentum and we would like to thank them for their hard work and incredible focus. Year-over-year sales increased by 3%. This reflected higher selling prices and favorable exchange rate, which offset lower volume due to plant closures and softer demand as a result of economic headwinds.

EBITDA increased 16% from last year, driven by higher selling prices and lower raw material costs. Margins improved to 17.1% from 15.1% last year. Moving now to our Tissue business. Third quarter sales increased 5% sequentially on stronger volumes. Converted product shipments increased 6% in both away-from-home and retail tissue markets.

EBITDA of $46 million increased 21% from Q2 as benefits from volume, mix and lower operating costs mitigated slightly higher raw material costs related to a higher proportion of virgin fiber. Sales increased 6% from last year. This reflected stronger volumes and higher average selling price. Shipments increased 5% year-over-year with a 7% increase in retail and a 1% increase in away-from-home. Year-over-year EBITDA increased by $3 million, reflecting higher volume, higher average selling price and lower material costs.

These were partially offset by higher operating costs due to planned maintenance. We continue to focus on our Pryor, Oklahoma mill. We are building a strong foundation to accelerate efficiency improvements. We have started to see benefits in October and are confident that this trend will continue through Q4.

Also, our recent investments in Kingsey Falls and Granby facilities are delivering good results. I'll now pass the call over to Allan, who will briefly discuss some of the financial highlights. Allan?

Thank you, Hugues, and good morning, everyone. Let's start with the specific items recorded during the quarter, which impacted operating income by $12 million on Slide 14 and 15. The main items were $10 million for an environmental provision related to a closure in 2024 of a plant in Canada and $6 million of restructuring charges mainly related to the closure of the Niagara Falls mill. In addition, there was also a $4 million gain on derivative financial instruments.

Slide 16 and 17 illustrate the year-over-year and sequential variance of our Q3 adjusted earnings per share and the reconciliation with the specific items that affected our quarterly results. As reported, Q3 net earnings per share were $0.29. This compared to net earnings per share of $0.01 last year and a net loss of $0.03 per share in Q2.

On an adjusted basis, net earnings per share were $0.38 in the current quarter. This compared to net earnings per share of $0.27 last year and $0.19 in the second quarter of 2025. These increases were both driven by stronger adjusted EBITDA in the current quarter.

As highlighted on Slide 18, third quarter adjusted cash flow from operations was $137 million, up from $86 million in the year ago period and $101 million in Q2. Adjusted cash flow generated in the second quarter improved year-over-year, mainly reflecting stronger operating results and lower financing expense.

Capital investments and dividends paid to minority interests were largely unchanged. Sequentially, the increase in levels of adjusted cash flow generated reflects stronger operating results and lower amounts of dividends paid to minority interest, net of higher financing expense paid.

Slide 19 provides details about capital investments. New investments for the third quarter totaled $30 million, bringing the year-to-date level to $91 million. For 2025, we expect CapEx to total approximately $140 million, slightly lower than the $150 million stated at the end of Q2.

Moving now to our net debt reconciliation as detailed on Slide 20. Sequentially, net debt decreased by $81 million in the third quarter, mainly due to a stronger cash flow from operations and a reversal in working capital requirements. A less favorable exchange rate on our U.S.-denominated debt increased debt levels by $42 million.

Our leverage ratio decreased to 3.6x from 3.8x at the end of the second quarter. Our available liquidity under our credit facility stood at $630 million at the end of the third quarter. We also announced that we've completed the sale of the Flexible Packaging operation on October 8. The $31 million of cash proceeds have gone towards debt repayment in the fourth quarter. Including this amount, total proceeds from asset sales amount to $57 million this year.

Financial ratios and information about maturities are detailed on Slide 21, and other information and analysis can be found on Slides 26 through 34 of the deck. I will now pass the call back to Hugues, who will conclude with some brief comments before we begin the question period. Hugues?

Thank you, Allan. We provide our outlook for Q4 on Slide 22. In Packaging, raw material and selling price trends are anticipated to be favorable. However, we remain cautious regarding demand levels due to unusual post-Thanksgiving seasonality and continued macro uncertainty.

To this end, we are currently forecasting Packaging results to be in the range of stable to 10% below Q3 levels. This is driven by an expected 5% decrease in volumes, mainly in December. Tissue results are expected to strengthen sequentially with lower raw material and maintenance costs.

Corporate costs are expected to be stable. However, share-based compensation costs are expected to be higher given the recent increase in our share price. Before opening the call to questions, I would like to provide an update on our strategic priorities for 2025 and 2026.

First, our plan to monetize redundant assets is progressing well, and we are increasing our target to $120 million by June 2026 from the $80 million disclosed previously. Lastly, our culture of excellence focus is starting to show benefits and have helped mitigate the impact from headwinds.

On Slide 24, we provide a few examples of what has been done and our current areas of focus. Looking at our most recent quarter, our initiatives contributed approximately $10 million to our results sequentially. We are on track to achieve our $100 million objective of run rate profitability improvements by the end of 2026.

With that, we can now open the call to questions. Operator?

[Foreign Language] [Operator Instructions] Your first question comes from Hamir Patel with CIBC Capital Markets.

Congrats on a strong quarter. Hugues, I wanted to ask about the profitability improvement objectives there, the $100 million by the end of 2026. You mentioned you captured $10 million in Q3. How much have you captured cumulatively to date? And then the sort of longer-term goalpost of over $200 million, what do you see as the time line of achieving that?

Yes. Thank you for your question, Hamir. If you look at what we've done so far this year, the first 2 quarters of the year was mostly focused on building the foundation to drive improvements. And we really started to see some good benefits in the third quarter. So we're building momentum.

And as we stated on the second quarter, like we're really looking at a net run rate of $100 million by the end on the last quarter of 2026. So we expect the momentum to continue. I won't say on a straight curve. But most of it has to be achieved like before the fourth quarter, it's not all going to happen at the end of 2026.

So we expect some momentum to be building over the next 3 quarters. And we're focusing on twice of the amount because, obviously, there are some headwinds. You look at the uncertainty in the market today. There's a volume impact. We -- that drove some of our decisions in the third quarter to shut down our Niagara Falls facility.

We were able to redistribute the customer mix, focus on linerboard versus medium and look at profitability on a per hour basis, putting the right products on the right machine for the right customer. So that momentum is going to continue to build. And obviously, the focus is to get it as fast as we can.

Great. That's helpful. And Allan, with respect to the CapEx budget for 2026, $175 million, what are the sort of larger projects that drive the increase there?

Well, our team are just planning for that. But there's no, I would say, major strategic, but maybe a bit more investment in this year to continue to improve where we need to improve, improve quality, reduce our costs. So -- but there's nothing, I would say, like a major addition to what we have. That's what we have on the table right now.

Okay. Great. And just the last question I had, and maybe this is for Hugues. Just with respect to what you're seeing in the recovered paper market, do you feel OCC prices are bottoming here? And kind of what are you seeing in your local markets?

Yes. I mean we just had the latest publication going down $5 here and $10 in the Southeast yesterday. I mean we're getting to a point. It's a low number. We're really tracking the percentage of people that are doing the recycling.

We're also tracking the quality of the product that we're getting. Sometimes when pricing deteriorates, you see an impact on quality, and that's something that we pay very, very close attention. There's also more of a headwind for people to export out of North America.

But in the meantime, we're also seeing with the shutdown in the U.S., a lower recovery rate or a lower generation of OCC as well as consumers have reduced their spending. So we're -- per region, we're tracking the balance of all that, making sure that our strategy provides for like the low generation that we'll typically get as well after Christmas and match that with our operating rate.

But overall, for the next quarter, we see that as if you do the summation of everything I just mentioned, it's a positive trend for us, but paying close attention to the volume generated.

Your next question comes from Sean Steuart with TD Cowen.

Congrats on a solid result. Hugues, a number of the U.S. packaging comps have provided cautious 2026 guidance with respect to the volumes and margins. Do you have enough visibility in your order file maybe past the fourth quarter to really comment on expectations, I suppose, on the volume side to start with for your Packaging business in 2026?

Thank you for your question, Sean. I mean the visibility, I mean, we typically guide 1 quarter ahead. All the economic uncertainty right now gives a bit more of a -- it's a bit muddy out there for 2026.

If you look back over the last few quarters, we've been very cautious on the guidance, and we've also been cautious on volumes that we put in our operating plan. The key here for us is really we want to be able to capture any uptake in demand.

And we've been able to do that in the third quarter. We are able to do that right now in the fourth quarter. If you look at the fourth quarter, our -- the biggest uncertainty is post Thanksgiving, given the U.S. shutdown and how much money the U.S. consumer have to spend.

So it's going to be the same reality until we see more stability in the economy, but we'll be ready to capture any uptake. And we're really focusing right now on partnering with customers that are more resilient that don't see too much of a drop that are using basic products.

And then we have our mix in Canada and in the West that does behave differently than the U.S. It's very busy in our Western operation. It's very busy in Ontario as well. Quebec is probably the one that is the most difficult market given the type of businesses and the type of product that we produce.

So we're working on that as well on a per region basis to partner with the most resilient customers. But as far as visibility, I mean, we'll continue to be cautious. We're not going to be over optimistic, and we'll make sure that we have the quick turnaround time to capture any available business over and above our forecast.

Second question for Allan. The increase in the asset sales target to $120 million, is that incremental just exclusively the addition of the Flexible Packaging divestiture? And further to that, can you give us a sense of any associated EBITDA tied to these initiatives, i.e., how much are you giving up as you sell these assets down?

Well, it's not necessarily linked to the Flexible Packaging transaction. As we go, we continue to evaluate what we have, and we see that there may be new opportunities that are coming on the table. So that's why we feel comfortable to increase this target.

And there's -- in terms of EBITDA contribution, it's nothing -- I would say, nothing major. And as for Flexible, the approximately $5 million to $6 million a year. So that's no -- nothing significant, and we continue to progress, and we might have new opportunities in the future and some might just be not achievable. So that's why we are comfortable with the level we have right now.

Your next question comes from Matthew McKellar with RBC Capital Markets.

Just reflecting back on some of the presentation materials around the time you're constructing Bear Island would suggest there could still be pretty substantial incremental EBITDA to unlock as Bear Island ramps up from, I guess, 88% in Q3 to the full potential of the facility. So recognizing that price input cost spreads and operating costs have evolved over time, how do you think about the incremental EBITDA Bear Island running full to generate compared to what you did in Q3?

Yes. Thank you, Matt, for the question. The -- if you look at the last 6 months, we saw consistent improvement from an operating rate standpoint or operating efficiencies. We're now to a point where we're at 90% of our ramp-up curve, but also at 80% of the capacity of the mill.

So we'll continue to push on that to get to the 100%. And we've now started to look at usage, so cost components, whether it's chemical, all the materials that we use here. So this is going to be a main focus for the next 6 to 12 months is how do we get benefits from both operating efficiencies and usage, so cost structure. We don't disclose profitability per mill, but there's still enough benefits to capture between where we are today versus where we want to be, that remains our #1 priority on Packaging.

And would that 6 to 12 months' time line align with when you would expect to essentially hit the full run rate profitability of the mill?

From an efficiency standpoint, we expect Bear Island by the end of next year to be at the same. You're never at 100% of the capacity all the time, but we'll be running at the equivalent from an operating standpoint of our Greenpac operation. And our cost initiative, I want to say that it's going to take 24 months to get to a full where we are.

That being said, we always reassess that, right? So sometimes we're somewhere and then we feel we can get better. And that's a bit of the mindset that we've put in place with our excellence initiatives where we always want to have over $100 million in the pipeline of improvement so that we can take care of headwinds, inflation and other cost components that we have less controls on.

[Operator Instructions] Your next question comes from Nathan Po with National Bank Capital Markets.

Congrats on the quarter. So I want to ask about your Packaging segment because EBITDA came in above expectations this quarter. Were there any onetime incremental volumes that contributed to this? And can you describe whether those are more permanent volumes or temporary given you mentioned you're ready to capture any incremental uptake?

Yes. No. So there's no onetime incremental volume that we don't feel that are going to come back. We are going to have this normal seasonability, sorry, on the fourth quarter. And now, I mean, we have the economic uncertainties in both Canada and the U.S., could be quite honest, like mostly post Thanksgiving.

We saw good traction more than expected in September. That continued throughout the month of October. And we're not really seeing much of a slowdown to date right now in November. But we know that from a season standpoint, it is going to slow down. And you look at the accumulation of negative news for the North American consumers, we want to be cautious.

So if you look at our guidance, we took 5% off in volume for the fourth quarter, and it was not front-loaded, but I mean, backloaded in the second part of the quarter, given Thanksgiving and Christmas. That being said, we're continuing to work on customer mix, the right product at the right place on the right machine and improved mix of linerboard versus medium because there is a significant difference in the profitability between the 2 products. So really pushing to have a more resilient volume base, which will enable us to plan better and look long term ahead with more stable volumes.

Appreciate the color. And with the -- talk about the CapEx budget constraints and lowering that guidance and focus on debt repayments, I want to invert that a little. What needs to change in the environment in 2026 or even 2027 for you to revise that CapEx budget upwards or start investing for growth?

Well, we've said for many quarters, we want to be between the 2.5 and 3. We're at 3.6. So we're making good progress. We're not announcing any significant CapEx for 2026. We have options. Our strategy is to really build different options in both Packaging and Tissue to see what has the best return for Cascades. So I mean, we started looking at what are our alternatives, and we'll continue to do that. But for now, we're going to continue our focus on debt repayment.

We're making good progress. We're looking at our forecast at the end of Q4. We'll make additional progress in the third quarter results. That does not include the Flexible Packaging sale, which cash came in, in the fourth quarter, and we're pushing our $80 million to $120 million. So we're really focused on that 2.5 to 3.

We're not waiting to get there to assess our options, but we want to maintain a good ratio so that we maintain flexibility in an environment that it's ever changing. So a strong balance sheet will always give us more alternatives and put us more in the driver's seat versus like a 4x ratio on debt.

There are no further questions at this time. Mr. Hugues, please continue.

Well, thank you, everyone, for your time. We're very satisfied with the quarter. Looking forward for the fourth quarter, and we'll try to maintain the trend. Thank you.

[Foreign Language] Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.