For the second time in three months, Cascades management is issuing a warning to investors. Management is warning this time around that its year-end performance will be around 20% lower than it previously anticipated.
Cascades explains that adjusted operating profit for the months of October, November and December will be around 20 million dollars lower than expected due to “persistent” inflationary pressure on costs, in particular logistics, l energy and manpower.
Management notes that pressures on global supply chains, including transportation and labor availability, remain difficult, with consequences disrupting product delivery times.
Demand levels in the tissue paper segment also remain “uncertain”.
“The pandemic still has vast repercussions on all our sectors of activity,” said CEO Mario Plourde, in a press release.
Cascades will present its year-end results on February 24. On that day, management will also unveil an update to its strategic plan for the next three years.
In September, Cascades also revised its quarterly forecasts downwards, but because of a temporary production reduction affecting the containerboard sector. A warning is therefore issued for a second quarter in a row.
” Not yet ! RBC analyst Paul Quinn said when he heard the news.
“Is this a trend or is it just transitory?” “, he asks.
“It’s certainly disappointing for investors,” he said, hoping that the recent price increases announced will be enough to cover the continued pressure on costs.
Disappointed, his colleague Sean Steuart, of TD, withdrew his buy recommendation Thursday morning. “The other companies in the sector are facing similar obstacles, but this is still the fourth consecutive time that Cascades has lowered its forecasts or missed the target when presenting its results. ”
Paul Quinn continues to offer to buy the share. He says Cascades has done a good job of allocating capital recently and believes the pressure on costs may start to ease, but that it will take a few quarters of consistent performance for Cascades to regain investor confidence.
If he maintains his recommendation to buy, Paul Quinn says he understands that it remains difficult at present to “like” Cascades. He underlines, however, that the relative valuation of the stock compared to its comparables is very attractive. “In addition, I like the team of managers despite their current problems. Super Mario & Cie will deliver the goods, ”he said.