Cascades expects its fourth quarter results to be below its already downgraded expectations as Omicron-related labor shortages and supply chain issues worsened in the second half of December.
The manufacturer of packaging, sanitary paper and cardboard now expects its adjusted operating profit before depreciation and amortization to amount to 62 million for the fourth quarter. This would be a low for a fourth quarter since 2011, said Sean Stuart of TD Securities. “We believe Cascades has been hit harder than its peers. »
Cascades had already indicated, on December 22, that its adjusted operating profit before amortization for the fourth quarter would be lower by approximately 20 million than that of 107 million obtained in the third quarter.
The Kingsey Falls-based company explained that the new variant of the COVID-19 virus has compounded the strains that are already weighing on labor and transportation, particularly in the containerboard and sanitary paper segments and servants. “Without a doubt, we are very disappointed with our performance in the fourth quarter,” President and CEO Mario Plourde said in a statement released Monday.
The company said the shortages have resulted in higher costs and unplanned downtime in several business operations. Cascades has also observed significant inflation in logistics and energy costs.
Persistent pressure
The company says its Canadian operations were particularly hard hit after flooding in British Columbia disrupted rail and trucking.
In reaction to Cascades’ announcement, Frédéric Tremblay of Desjardins Capital Markets lowered his buy recommendation to “hold” and reduced his target price from $16 to $12.50. “We believe supply chain and inflation challenges will continue to pressure earnings in the near term. »