Cascades Inc. - Annual Report 2022

MANAGEMENT'S DISCUSSION & ANALYSIS FINANCIAL SNAPSHOT

MANAGEMENT'S DISCUSSION & ANALYSIS FINANCIAL SNAPSHOT
(in millions of Canadian dollars, unless otherwise noted) (unaudited) 2022	2021	2020
Sales 4,466 Operating income 33 EBITDA (A) (Adjusted earnings before interest, taxes, depreciation and amortization)1 376 EBITDA (A) as a percentage of sales1 8.4% Net earnings (loss) As reported (34) Adjusted1 37 Net earnings (loss) per common share (basic) (in Canadian dollars) As reported ($0.34) Adjusted1 $0.37 Dividends declaredper common share(in Canadian dollars) $0.48	3,956	4,105 292 546 13.3% 198 187 $2.04 $1.95 $0.32
	50
	389
	9.8%

	162
	27
	$1.60
	$0.26
	$0.48
FINANCIAL POSITION (as of December 31) Total assets 5,053 Net debt1 1,966 Net debt / EBITDA (A) ratio1 5.2x Equity attributable to Shareholders 1,871 per common share (in Canadian dollars) $18.64 Workingcapital as apercentage of sales1, 4 10.5%	4,566 1,351 3.5x 1,879 $18.63 8.6%	5,412 1,679 2.5x 1,753 $17.14 8.8%
KEY INDICATORS Total shipments (in '000 of s.t.)2 2,027 Manufacturing capacity utilization rate3 89% US$/CAN$ - Average rate $0.77	2,075 90% $0.80	2,189 92% $0.75

FORWARD-LOOKING

The following document is the annual financial report and Management’s Discussion and Analysis (“MD&A”) of the operating results and financial position of Cascades Inc. (“Cascades” or “the Corporation”) and should be read in conjunction with the Corporation’s Audited Consolidated Financial Statements and accompanying notes for the years ended December 31, 2022 and 2021. Information contained herein includes any significant developments as of February 22, 2023, the date on which the MD&A was approved by the Corporation’s Board of Directors. For additional information, readers are referred to the Corporation’s Annual Information Form (“AIF”), which is published separately. Additional information relating to the Corporation is also available on the SEDAR website at www.sedar.com.

The financial information contained herein, including tabular amounts, is expressed in Canadian dollars, unless otherwise specified, and is prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise specified. Unless otherwise specified or if required by context, the terms “we”, “our” and “us” refer to Cascades Inc. and all of its subsidiaries, joint ventures and associates.

This MD&A is intended to provide readers with information that Management believes is necessary for an understanding of Cascades' current results and to assess the Corporation's future prospects. Consequently, certain statements herein, including statements regarding future results and performance, are forward-looking statements within the meaning of securities legislation, based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of general economic conditions, decreases in demand for the Corporation's products, prices and availability of raw materials, changes in relative values of certain currencies, fluctuations in selling prices and adverse changes in general market and industry conditions. Cascades disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable securities regulations. This MD&A also includes price indices, as well as variance and sensitivity analysis that are intended to provide the reader with a better understanding of the trends with respect to our business activities. These items are based on the best estimates available to the Corporation.

Some information represents Non-IFRS financial measures, other financial measures or Non-IFRS ratios which are not standardized under IFRS and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

Shipments do not take into account the elimination of business sector inter-segment shipments. Shipments from our Specialty Products segment are not presented, as different units of measure are used.

Defined as: Manufacturing internal and external shipments/practical capacity. Excluding Specialty Products segment manufacturing activities.

Percentage of sales = Average quarterly last twelve months (LTM) working capital / LTM sales (Not adjusted for retrospective reclassification of discontinued operations).

2022 Annual Report

OUR BUSINESS

Cascades Inc. is a paper and packaging company that produces, converts and sells packaging and tissue products composed primarily of recycled fibres. Established in 1964 in Kingsey Falls, Québec, Canada, the Corporation was founded by the Lemaire brothers, who saw the economic and social potential of building a company focused primarily on the sustainable development principles of reusing, recovering and recycling. More than 55 years later, Cascades is a multinational business with close to 80 operating facilities[1] and approximately 10,000 employees[1] across Canada and the United States. The Corporation currently operates three business segments:

(Business segments) (unaudited) Number of Facilities1	2022 Sales2 (in $M)	% of sales	2022 Operating income (loss) (in $M)	2022 EBITDA (A)2, 3 (in $M)	2022 EBITDA (A) Margin2, 3 (%)	% of EBITDA(A)
PACKAGING PRODUCTS Containerboard 25 Specialty Products 20 TISSUE PAPERS 14
	2,265	52.2%	266	401	17.7%	83.5% 19.2% (2.7%)
	654 1,422	15.1% 32.7%	86	92	14.1% (0.9%)
			(175)	(13)

The locations of our facilities[4] and employees by geographic segments in North America are as follows:

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Our facilities Our employees
928
13 9%
17% 20
26%
2,188 4,163
22% 42%
16
21%
28 2,575
36% 26%
Canada - Québec Canada - Québec
United States United States
Canada - Ontario Canada - Ontario
Canada - Other provinces Canada - Other provinces
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1 Including 50% owned joint ventures. The Corporation also has 18 Recovery and Recycling facilities which are included in Corporate Activities.

2 Excluding associates and joint ventures not included in consolidated results. Refer to Note 8 of the 2022 Audited Consolidated Financial Statements for more information on associates and joint ventures.

3 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

4 Excluding sales offices, distribution and transportation hubs and corporate offices. Including main joint ventures.

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2022 Annual Report

BUSINESS HIGHLIGHTS

STRATEGIC PLAN 2022-2024

As part of the annual review of its corporate strategy, the Corporation analyzes its overall business and the environment in which it competes, sets objectives for the following year and the years ahead and approves its budgets, all with a view to enhancing shareholder value. On February 24, 2022, Management and the Board of Directors disclosed its strategic plan update for the years 2022 to 2024. We will provide a comprehensive update of our 2022 to 2024 Strategic Plan in conjunction with our Q1 2023 results on May 11, 2023.

The following is an update on two of the major initiatives of the strategic plan:

TISSUE PAPERS SEGMENT PROFITABILITY PLAN

The plan is closely monitored by Management and is progressing with initiatives directed towards production efficiency, net revenue management and cost savings. We believe these initiatives will mitigate significant and unprecedented cost headwinds that this segment is facing while also solidifying the Corporation's foundation for future success.

On February 24, 2022, the following objectives were disclosed for our Tissue Papers segment:

On February 24, 2022, the following objectives were disclosed for our Tissue Papers segment:
(in millions of Canadian dollars, unless otherwise noted) (unaudited) 2022 Target	2024 Target
Volume (in millions of cases) 65 - 70 Sales ~$1.5B EBITDA(A)1 ~$60M - $80M	75 - 80 ~$1.7B ~$150M

In 2022, the Tissue Papers segment recorded sales of $1,422 million and a negative EBITDA (A)[1] of $13 million. The combination of persistent cost escalation and lower than anticipated sales volumes, largely due to lower productivity and delays in the implementation of industry announced price increases, resulted in this segment lower than expected EBITDA (A)[1] performance for the year. The unplanned and temporary closure of one paper machine at our St. Helens, Oregon paper mill in September also affected performance for the year. Production of the St. Helens paper machine resumed in mid-February 2023. These impacts were partially offset by profitability initiatives, which have begun to generate positive results, the cadence of which will continue throughout 2023.

The impacts of cost headwinds in 2022 reflect the following:

Raw materials – virgin pulp price index (NBHK) increased by approximately 23%, or US$285/ton;
Raw materials – white grades recycled fibre index increased by approximately 75%, or US$100/ton;
Energy – natural gas increased by approximately 73%, or US$2.80/mmBtu;
Higher costs for transportation, including fuel surcharges, chemical products and production supplies;
Converted product sales volumes of 59 million cases in 2022 were more than 10% lower than our targeted range of 65 to 70 million cases for the year.

The benefits realized in 2022 from ongoing profitability initiatives are summarized as follows:

Price increases (Retail/Away-from-Home tissue) – May 2022 and July 2022: ~$115 million;
Logistics and other cost savings: ~$15 million.

While selling price increases take longer to be realized in our Tissue Papers segment, we are encouraged by the progress being made and expect continued benefits to be generated from additional operational and profitability initiatives across our operations.

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2022 Annual Report

BEAR ISLAND PROJECT

The Bear Island strategic investment in the conversion of assets to recycled containerboard production is progressing well despite the current environment of important cost inflation and delays in the completion of certain construction milestones due to labour and material availability. The initial total investment of $475 million (US$380 million) was revised upward in the second quarter of 2022 to a range of $595 - $615 million (US$470 - US$485 million) following significant inflationary pressure on construction costs and supply chain constraints causing delays in the delivery of materials. The cost of the project is now revised to $675 - $690 million (US$515 - US$525 million) due to delays and additional work required to complete the project.

The announced start-up date of the facility was planned for December 14, 2022. However, these factors continued to persist in the third quarter and as a result, the start-up of the project is scheduled for the end of March 2023. The Corporation is working closely with contractors to mitigate further potential delay caused by these elements.

Since 2018 we have invested a total of $512 million ($335 million in 2022). The project incurred $12 million of operational costs in 2022 and $6 million in 2021.

The important capital investments for this project combined with our lower consolidated financial results in 2022 led to a notable increase in our net debt to EBITDA (A) ratio1. This course is expected to be reversed with improved business performance in the coming months and positive cash flows from the Bear Island project following the facility's start-up.

BUSINESS START-UP, ACQUISITION, DISPOSAL AND CLOSURE

The following transactions should be taken into consideration when reviewing the overall and segmented analysis of the Corporation’s 2022 and 2021 results.

BOXBOARD EUROPE

On October 26, 2021, the Corporation closed the sale transaction of its Boxboard Europe segment. The operations are presented as discontinued operations since the second quarter of 2021 with reclassification of the first quarter of 2021, as well as the comparative year 2020.

SIGNIFICANT FACTS AND DEVELOPMENTS

2022

•. On October 19, 2022, the Corporation entered into an agreement with its lenders for its existing credit agreement to increase its authorized term loan to US$260 million from US$160 million and to extend the maturity from December 2025 to December 2027. Concurrently, the Corporation extended its existing $750 million revolving credit facility maturity from July 2025 to July 2026. The financial conditions of both facilities remain unchanged. The Corporation incurred $2 million in capitalizable transaction fees related to the refinancing.

2021

On November 9, 2021, the Corporation completed the partial redemption of its unsecured senior notes. The transaction was settled on November 10, 2021 and the Corporation redeemed US$144 million ($180 million) and US$155 million ($192 million) of its 2026 and 2028 unsecured senior notes, respectively, and paid an early repurchase premium totaling US$18 million ($22 million).
On August 5, 2021, the Corporation announced an increase of its quarterly dividend from $0.08 to $0.12 per common share.

NEAR-TERM OUTLOOK

We are remaining prudent in our outlook, as macro-economic conditions continue to be challenging and unpredictable, and inflationary pressures on costs, while easing, continue. Despite this, we have started 2023 in a good position to drive growth throughout the year. We expect sequentially lower results in our Containerboard segment in Q1. This reflects the $5 million partial insurance settlement received in the current quarter and a continuation of slightly softer volume and selling prices, the impacts of which will not be offset by lower raw material cost tailwinds. The Specialty Products business is expected to generate moderately stronger results in the first quarter, as favourable trends in pricing and volume counter the persistently higher production cost environment. Lastly, we expect results in our Tissue Papers segment to slightly improve sequentially. While we anticipate continued positive momentum from operational and profitability initiatives, more favourable raw material prices, and good demand from retail tissue products, our tempered outlook for this segment reflects softer demand for Away-from-Home products, and the delayed restart of the machine at our St. Helens, Oregon facility that occurred on February 10.

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2022 Annual Report

BUSINESS DRIVERS

Cascades’ results may be impacted by fluctuations in the following areas:

EXCHANGE RATES

On a year-over-year basis, the average value of the Canadian dollar decreased by 4% compared to the US dollar in 2022.

ENERGY COSTS

On a year-over-year basis, the average price of natural gas increased by 73% in 2022. In the case of crude oil, the average price was 44% higher in 2022 than in 2021.

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0.85
9.00 120.00
7.50 100.00
0.80 6.00 80.00
4.50 60.00
0.75 3.00 40.00
1.50 20.00
0.70 — —
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
20 20 20 20 21 21 21 21 22 22 22 22 20 20 20 20 21 21 21 21 22 22 22 22
US$/CAN$ Natural gas (US$/mmBtu) Crude oil (US$/barrel)
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|||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|2020|2021|2022|
|(unaudited)|YEAR|Q1|Q2|Q3|Q4|YEAR|Q1|Q2|Q3|Q4|YEAR|
|US$/CAN$ - Average rate|$0.75 $0.79 $0.81 $0.79 $0.79 $0.80|$0.79 $0.78 $0.77 $0.74 $0.77|
|US$/CAN$ - End of the period rate|$0.79 $0.80 $0.81 $0.79 $0.79 $0.79|$0.80 $0.78 $0.72 $0.74 $0.74|
|Natural Gas Henry Hub - US$/mmBtu|$2.08 $2.69 $2.83 $4.01 $5.83 $3.84|$4.95 $7.17 $8.20 $6.26 $6.64|
|Crude oil (US$/barrel)|$40.54 $54.16 $62.01 $67.60 $76.84 $65.15|$82.49 $109.25 $101.05 $83.39 $94.04|
|Source: Bloomberg|
|RAW MATERIALS|
|Reference prices - recycled fibre costs in North America|[1]|Reference prices - virgin pulp in North America|[1]|
|The brown grade recycled paper No. 11 (old corrugated containers, OCC)|In 2022, the reference price for NBSK and NBHK increased by 15% and|
|annual index price decreased by 17% while the recycled paper No. 56|23% respectively, compared to 2021, reflecting global demand supply|
|(sorted residential papers, SRP) increased by 1%, in 2022 compared to|dynamics.|
|2021. The white grade recycled paper No. 37 (sorted office papers, SOP)|
|annual index price increased by 75% in 2022 compared to 2021.|
|280|1,800|
|240|
|200|1,600|
|160|1,400|
|120|
|80|1,200|
|40|
|0|1,000|
|Q1|Q2|Q3|Q4|Q1|Q2|Q3|Q4|Q1|Q2|Q3|Q4|800|
|20|20|20|20|21|21|21|21|22|22|22|22|Q1|Q2|Q3|Q4|Q1|Q2|Q3|Q4|Q1|Q2|Q3|Q4|
|20|20|20|20|21|21|21|21|22|22|22|22|
|Recycled paper No. 37 (SOP) (Northeast) (US$/s.t.)|
|Recycled paper No. 11 (OCC) (Northeast) (US$/s.t.)|Bleached hardwood kraft, mixed, Canada / US (US$/m.t.)|
|Recycled paper No. 56 (SRP) (Northeast) (US$/s.t.)|Northern bleached softwood kraft, Canada (US$/m.t.)|

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In 2022, the reference price for NBSK and NBHK increased by 15% and 23% respectively, compared to 2021, reflecting global demand supply dynamics.

1 Source: RISI, excluding mixed papers

2022 Annual Report

OPERATIONAL PERFORMANCE INDICATORS

We use several operational performance indicators to monitor our action plan and analyze the progress we are making toward achieving our long-term objectives. These include the following:

(unaudited)	2020	2021	2021		2022	2022
	YEAR	Q1 Q2 Q3 Q4	YEAR	Q1	Q2 Q3 Q4	YEAR
OPERATIONAL Total shipments (in ’000 s.t.)1 Packaging Products Containerboard Tissue Papers
	1,544 645	391 385 377 368 123 138 148 145	1,521 554
				372 131	379 391 364 133 134 123	1,506
						521
Total	2,189	514 523 525 513	2,075	503	512 525 487	2,027
Integration rate2 Containerboard Tissue Papers Manufacturing capacity utilization rate3 Containerboard Tissue Papers	56% 75% 96% 83%	57% 57% 58% 58% 79% 69% 71% 76%	58% 74%
				57%	57% 52% 53% 82% 85% 87%	55%
				79%		83%

		97% 96% 94% 89%	94%	93%	96% 93% 83%	91%
		80% 78% 84% 85%	82%	84%	81% 88% 81%	83%
Consolidated total	92%	92% 90% 91% 88%	90%	90%	92% 91% 83%	89%
FINANCIAL Working capital In millions of CAN$, at the end of period4 As apercentage of sales4, 5
	367 8.8%	376 377 410 297 8.4% 8.4% 8.5% 8.6%	297 8.6%
				424	493 561 397	397
				9.3%	9.6% 10.2% 10.5%	10.5%

1 Shipments do not take into account the elimination of business sector inter-segment shipments. Shipments from our Specialty Products segment are not presented, as different units of measure are used.

2 Defined as: Percentage of manufacturing shipments transferred to our converting operations.

3 Defined as: Manufacturing internal and external shipments/practical capacity. Excluding Specialty Products segment manufacturing activities.

4 Some information represents Non-IFRS financial measures, other financial measures or Non-IFRS ratios which are not standardized under IFRS and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

5 Percentage of sales = Average quarterly last twelve months (LTM) working capital / LTM sales (Not adjusted for retrospective reclassification of discontinued operations).

2022 Annual Report

HISTORICAL MARKET PRICES OF MAIN PRODUCTS AND RAW MATERIALS

These indexes should only be used as trend indicators. They may differ from our actual selling prices and purchasing costs. (unaudited)	2020	2021	2021	2022	2022	2022 vs. 2021	2022 vs. 2021
	YEAR	Q1 Q2 Q3 Q4	YEAR	Q1 Q2 Q3 Q4	YEAR	Change	%
Selling prices(average)
PACKAGING PRODUCTS Containerboard (US$/short ton) Linerboard 42-lb. unbleached kraft, Eastern US (open market) Corrugating medium 26-lb. semichemical, Eastern US (open market) Specialty Products (US$/short ton) Uncoated recycled boxboard - bending chip, 20-pt. (series B) TISSUE PAPERS (US$/short ton) Parent rolls, recycled fibres (transaction) Parent rolls, virgin fibres(transaction)						87 100	10% 13% 27% 10% 5%
	723 623 708 1,120 1,428	772 825 858 875 675 735 775 795	833 745	895 935 935 915 818 865 865 832	920 845
		740 793 867 980 1,115 1,159 1,170 1,178 1,453 1,550 1,544 1,511	845 1,156 1,515	1,027 1,067 1,100 1,100 1,213 1,271 1,291 1,290 1,504 1,597 1,644 1,631	1,073 1,266 1,594	228 110 79
Raw materialsprices(average)
RECYCLED PAPER North America (US$/short ton) Sorted residential papers, No. 56 (SRP - Northeast average) Old corrugated containers, No. 11 (OCC - Northeast average) Sorted office papers, No. 37 (SOP - Northeast average) VIRGIN PULP (US$/metric ton) Northern bleached softwood kraft, Canada Bleached hardwood kraft, mixed, Canada/US		44 59 108 108 79 102 162 167 94 117 153 173	80 127 134	98 107 98 23 140 137 109 35 205 235 252 248	81 105 235	1 (22) 101	1% (17%) 75% 15% 23%
	24 61 109 1,141 883
		1,302 1,598 1,542 1,472 1,037 1,297 1,320 1,262	1,478 1,229	1,527 1,743 1,800 1,745 1,312 1,517 1,620 1,608	1,704 1,514	226 285

Sources: RISI and Cascades

2022 Annual Report

SENSITIVITY TABLE[1]

The following table provides a quantitative estimate of the impact that potential changes in the prices of our main products, the costs of certain raw materials, energy and the exchange rates may have on Cascades’ annual operating income, assuming, for each price change, that all other variables remain constant. Estimates are based on Cascades’ 2022 manufacturing and converting external shipments and consumption quantities. It is important to note that this table does not consider the Corporation's use of hedging instruments for risk management. These hedging policies and portfolios (see the “Risk Factors” section) should also be considered in order to fully analyze the Corporation’s sensitivity to the highlighted factors.

Potential indirect sensitivity to the CAN$/US$ exchange rate is not considered in this table. Some of Cascades’ selling prices and raw material costs in Canada are based on US dollar reference prices and costs that are then converted into Canadian dollars. Consequently, fluctuations in the exchange rate may have a direct impact on the value of sales and purchases of Canadian facilities in Canada. However, because it is difficult to measure the precise impact of this fluctuation, we do not take it into consideration in the following table. The impact of the exchange rate on the working capital items and cash positions denominated in currencies other than CAN$ at the Corporation's Canadian units is also excluded. Fluctuations in foreign exchange rates may also impact the translation of the results of our non-Canadian units into CAN$.

(unaudited) SHIPMENTS/ CONSUMPTION ('000 SHORT TONS, '000 MMBTU FOR NATURAL GAS)	INCREASE	OPERATING INCOME IMPACT (IN MILLIONS OF CAN$)
*SELLING PRICE (MANUFACTURING AND CONVERTING)2 Packaging* Linerboard 42-lb. unbleached kraft, Eastern US 390 Corrugating medium 26-lb. semichemical, Eastern US 310 Uncoated recycled boxboard - bending chip, 20-pt., Eastern US 130 Converting products(cartonboard based only) 820	US$25/s.t. US$25/s.t.	13 10
	US$25/s.t.	4
	US$25/s.t.	28
1,650		55
Tissue Papers 520	US$25/s.t.	18
2,170		73
*RAW MATERIALS2 Packaging* Brown grades (OCC and others) 1,480 Groundwoodgrades(SRP and others) 80	US$25/s.t.	(50)
	US$25/s.t.	(3)
1,560 Tissue Papers Virgin pulp 190 Brown grades (OCC and others) 180 Whitegrades(SOP and others) 290		(53)

	US$25/s.t.	(6)
	US$25/s.t. US$25/s.t.	(6) (10)
660 *NATURAL GAS* Packaging 3,700 Tissue Papers 4,300		(22)


	US$1.00/mmBtu US$1.00/mmBtu	(5) (6)
8,000 *EXCHANGE RATE*3 U.S. subsidiaries translation		(11)

	CAN$/US$ 0.01 change	1

1 Sensitivity calculated according to 2022 volumes or consumption with year-end closing exchange rate of CAN$/US$ 1.35, excluding hedging programs and the impact of related expenses such as discounts, commissions on sales and profit-sharing.

2 Based on 2022 external manufacturing and converting shipments, as well as fibre and pulp consumption. Including purchases sourced internally from our recovery and recycling operations. Adjusted to reflect acquisitions, disposals and closures, if needed.

3 As an example, from CAN$/US$ 1.35 to CAN$/US$ 1.36.

2022 Annual Report

FINANCIAL OVERVIEW - 2022

SALES

For the year ended December 31, 2022, consolidated sales totaled $4,466 million, an increase of $510 million, or 13%, compared to $3,956 million in 2021. This reflects higher selling prices and mix and the positive impact of the foreign exchange rate. This was partially offset by lower volume in all segments.

Sales by geographic segments are as follows:

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Sales from (in %)
44% 56%
United States Canada
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Sales to (in %)
52% 48%
United States Canada
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The main variances in sales in 2022, compared to 2021, are shown below: (in millions of Canadian dollars)

SALES ($M)

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53
108
467 4,466
(2)
(116)
3,956
2021 Sales Price F/X CAN$ Mix Recovery & Recycling and Other items Volume 2022 Sales
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2022 Annual Report

OPERATING INCOME AND EBITDA (A)[1]

For the year ended December 31, 2022, the Corporation recorded an operating income of $33 million, compared to $50 million in 2021. The Corporation recorded an EBITDA (A)[1] of $376 million in 2022, compared to $389 million in 2021. The decrease largely reflects the significant inflationary pressure on all costs and lower volume for all segments, which were counterbalanced by higher selling prices in all segments.

The main variances in operating income and in EBITDA (A)[1] in 2022, compared to 2021, are shown below: (in millions of Canadian dollars)

OPERATING INCOME AND EBITDA (A) ($M)

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467 14
(18)
(51)
(84)
(170)
87 389 376
252
(171)
(91)
50
33
(252)
Raw materials The impacts of these estimated costs are based on production costs per unit shipped externally or inter-segment, which are affected by yield, product
(EBITDA (A) [1] ) mix changes, inbound freight costs and purchase and transfer prices. In addition to market pulp and recycled fibre, these costs include purchases of
external boards and parent rolls for the converting sector, and other raw materials such as plastic and wood chips.
F/X CAN$ The estimated impact of the exchange rate is based on the Corporation’s Canadian export sales less purchases, denominated in US$, that are
(EBITDA (A) [1] ) impacted by exchange rate fluctuations and by the translation of our non-Canadian subsidiaries EBITDA (A) [1] into CAN$. It also includes the impact of
exchange rate fluctuations on the Corporation’s Canadian units in currency other than the CAN$ on working capital items and cash positions, as well
as our hedging transactions. It excludes indirect sensitivity (please refer to the “Sensitivity Table” section for further details).
Other production costs These costs include the impact of variable and fixed costs based on production costs per unit shipped externally, which are affected by downtime and
(EBITDA (A) [1] ) efficiency.
Recovery and Recycling activities While this sub-segment is integrated within the other segments of the Corporation, all variations in the results of Recovery and Recycling activities
(Sales and EBITDA (A) [1] ) are presented separately and on a global basis in the charts.
2021 Operating income Depreciation and amortization Specific items 2021 EBITDA (A) Price Other variations Recovery & Recycling Energy Freight Prod. costs Raw materials 2022 EBITDA (A) Specific items Depreciation and amortization 2022 Operating income
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The sales and EBITDA (A)[1] variances analysis by segment is shown in each business segment review (please refer to “Business Segment Review” for more details).

DEPRECIATION AND AMORTIZATION

The depreciation and amortization expense was stable at $252 million in 2022. This reflects the depreciation of the Canadian dollar which increased the depreciation cost in 2022 by $6 million ($4 million in 2021). While the impairment recorded over the year offset this impact.

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2022 Annual Report

FINANCING EXPENSE

The financing expense amounted to $88 million in 2022, compared to $106 million in 2021, a decrease of $18 million. Higher capitalized interests on major investment projects and lower level of debt at the beginning of the year partially offset by a higher interest rate and the increasing level of debt throughout the year, resulted in a variance of $10 million. The average interest rate on our revolving credit facility increased to 6.18% in 2022 from 3.95% in 2021. As of December 31, 2022, 37% of the Corporation's total long-term debt was at a variable rate and 63% was at a fixed rate. The remaining variance of $8 million resulted from various financial costs, mainly a higher loss on foreign exchange on long-term debt and financial instruments of $12 million in 2022 compared to 2021, offset by a positive variance on loss on repurchase of long-term debt of $20 million in 2021 and nil in 2022.

SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES

Share of results of associates and joint ventures amounted to $19 million in 2022, compared to $18 million in 2021. Please refer to Note 8 of the 2022 Audited Consolidated Financial Statements for more information on associates and joint ventures.

PROVISION FOR (RECOVERY OF) INCOME TAXES

In 2022, the Corporation recorded a recovery of income taxes of $22 million, which compares to a provision for income taxes of $9 million in 2021.

in 2021.
(in millions of Canadian dollars) (unaudited) 2022	2021
Recoveryof income taxes based on the combined basic Canadian andprovincial income tax rate (10)	(10)
Adjustment for income taxes arising from the following: Prior years reassessment (6) Reversal of deferred income tax assets related to prior year losses — Permanent differences (6) Other —
	4 18 (2) (1)
(12)	19
Provision for(recoveryof)income taxes (22)	9

In 2022, the Corporation recorded a $3 million deferred tax benefit as a result of a tax election related to the discontinued operations realized in 2021.

In 2021, the Corporation recorded the reversal of $18 million in tax assets related to prior-year loss of one of its subsidiaries as it does not expect to be able to use them before they expire.

Greenpac is a limited liability company (LLC) and partners agreed to account for it as a disregarded entity for tax purposes. Consequently, income taxes associated with Greenpac net earnings are proportionately recorded by each partner based on its respective share in the LLC and no income tax provision is included in Greenpac’s net earnings. As such, although Greenpac is fully consolidated in the Corporation’s results, only 92% of pre-tax book income is considered for tax provision purposes.

The effective tax rate and income taxes are affected by the results of certain subsidiaries and joint ventures located in countries where the income tax rates are different from those in Canada, notably the United States. The normal effective tax rate is expected to be in the range of 21% to 27%. The weighted-average applicable tax rate was 24.3% in 2022.

RESULTS FROM DISCONTINUED OPERATIONS

Results from discontinued operations amounted to $234 million in 2021. Results from discontinued operations attributable to Shareholders amounted to $221 million in 2021. Please refer to the “Discontinued Operations” section and Note 5 of the 2022 Audited Consolidated Financial Statements for all details on results from discontinued operations.

NET EARNINGS (LOSS)

For the year ended December 31, 2022, the Corporation posted a net loss of $(34) million, or ($0.34) per common share, compared to net earnings of $162 million, or $1.60 per common share, in 2021. On an adjusted basis[1] , the Corporation generated net earnings of $37 million in 2022, or $0.37 per common share, compared to net earnings of $27 million, or $0.26 per common share, in 2021.

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2022 Annual Report

BUSINESS SEGMENT REVIEW

PACKAGING PRODUCTS - CONTAINERBOARD

Our Industry

U.S. containerboard industry production and capacity utilization rate[1]

Total U.S. containerboard production amounted to 37.8 million short tons in 2022, a decrease of 6% compared to 2021, reflecting lower demand related to the post-COVID-19 pandemic. As a result, the industry's capacity utilization rate decreased to 89% in 2022 from 95% in 2021.

U.S. containerboard inventories at box plants and mills[2]

The average inventory level increased by 12% year-over-year in 2022, reflecting lower demand related to the post-COVID-19 pandemic. The number of weeks of supply in inventory averaged 4.4x for the year, up from 3.8x in 2021.

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----- Start of picture text -----

45,000 100%
40,092
40,000 38,064 37,797 95%
35,000 94% 95% 90%
30,000
89% 85%
25,000
20,000 80%
2020 2021 2022
Total production ('000 s.t.) Capacity utilization rate
----- End of picture text -----

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----- Start of picture text -----

2,838
3,000 2,470 2,528 5.0
2,500
4.5
2,000
1,500 4.4 4.0
1,000
500 3.8 3.8 3.5
— 3.0
2020 2021 2022
Average inventory level ('000 s.t.) Weeks of supply
----- End of picture text -----

Canadian corrugated box industry shipments[3]

U.S corrugated box industry shipments[2]

Total U.S. corrugated box shipments decreased by 4% in 2022 compared to 2021. This reflects lower demand related to the post-COVID-19 pandemic destocking by end users and high price inflation in the U.S. for general goods and merchandise.

Canadian corrugated box shipments decreased by 2% in 2022 compared to 2021.

==> picture [252 x 113] intentionally omitted <==

----- Start of picture text -----

450.0
416.2
406.8 400.5
400.0
350.0
300.0
2020 2021 2022
Total shipments (Billion sq. ft.)
----- End of picture text -----

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----- Start of picture text -----

40.0
35.2 36.5 35.6
35.0
30.0
25.0
2020 2021 2022
Total shipments (Billion sq. ft.)
----- End of picture text -----

Reference prices - recovered papers (brown grade)[1]

Reference prices - containerboard[1]

The average reference price of old corrugated containers no.11 (“OCC”) decreased by 17% in 2022 compared to 2021.

2022 reference prices for linerboard and corrugating medium increased by 10% and 13%, respectively, compared to 2021.

==> picture [252 x 113] intentionally omitted <==

----- Start of picture text -----

1,000 920
900 833 845
800 723 745
700 623
600
2020 2021 2022
Corrugating medium 26-lb. semichemical, Eastern U.S. (open market) (US$/s.t.)
Linerboard 42-lb. unbleached kraft, Eastern U.S. (open market) (US$/s.t.)
----- End of picture text -----

==> picture [252 x 113] intentionally omitted <==

----- Start of picture text -----

140 127
120 105
100
80 61
60
40
20
—
2020 2021 2022
Old corrugated containers, no. 11 (OCC - Northeast average) (US$/s.t.)
----- End of picture text -----

2 Source: Fibre Box Association

3 Source: Canadian Corrugated and Containerboard Association

1 Source: RISI

2022 Annual Report

EBITDA (A)[1] ($M)

Sales ($M) and EBITDA (A) margin[1]

Our Performance

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----- Start of picture text -----

595
150 600 569 567 30%
534
119 503 497 507 502
100 108 100 94 99 103 500 25%
80
70 400 20%
50
300 15%
0 200 10%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
21 21 21 21 22 22 22 22 21 21 21 21 22 22 22 22
EBITDA (A) ($M) SALES ($M) EBITDA (A) margin (% of sales)
----- End of picture text -----

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----- Start of picture text -----

Shipments and manufacturing capacity Average selling price
utilization rate
1,600 1,200
400 100% 1,500
1,100
350 391 385 377 368 372 379 391 364 95%90% 1,400 1,000
300 85% 1,300
250 80% 1,200 900
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
21 21 21 21 22 22 22 22 21 21 21 21 22 22 22 22
Shipments ('000 s.t.) Utilization rate (CAN$/s.t.) (US$/s.t.)
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The main variances[2] in sales and EBITDA (A)[1] for the Containerboard Packaging segment in 2022, compared to 2021, are shown below: (in millions of Canadian dollars)

==> picture [491 x 188] intentionally omitted <==

----- Start of picture text -----

SALES ($M) EBITDA (A) ($M)
14
239
54
239 2,265 (15)
(17) (29)
(20)
(34)
(47)
2,009 401
372
(99)
2021 Price F/X CAN$ Raw Energy Freight Prod. costs 2022
2021 Sales Price F/X CAN$ Mix 2022 Sales EBITDA (A) materials EBITDA (A)
Volume Volume & Mix
----- End of picture text -----

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation. 2 For definitions of certain sales and EBITDA (A)[1] variation categories, please refer to the "Financial Overview” section for more details.

2022 Annual Report

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----- Start of picture text -----

2021 2022 Change in %
Shipments [2] (’000 s.t.)
1,521 1,506 -1%
Average Selling Price
(CAN$/unit)
1,321 1,504 14%
Sales ($M)
2,009 2,265 13%
EBITDA (A) [1]
372 401 8%
% of sales
19% 18%
----- End of picture text -----

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2 Shipments do not take into account the elimination of business sector inter-segment shipments.

Total shipments decreased by 15,000 s.t., or 1%, in 2022 compared to 2021.

External parent roll shipments increased by 6,000 s.t., or 1%, compared to 2021. This reflects lower volumes in 2021 as a result of an issue with the water effluent treatment system at our Niagara Falls, NY complex in the second quarter and transportation limitations towards the end of the year. The manufacturing utilization rate decreased by 3% to 91%, largely as a result of the medium production downtime taken to manage inventory during the last six months of the year. The mill integration rate decreased by 3% to 55%, due to higher parent roll shipments to external customers in preparation for the Bear Island start-up in 2023. Including sales to other partners[3] , the integration rate was 72% in 2022, slightly below the 73% level in 2021.

Annual shipments from converting activities decreased by 21,000 s.t., or 3%. In terms of square feet, our volume decreased by 3% to 13.8 billion in 2022 from 14.2 billion in 2021. This reflects a 5% decrease in our Canadian converted products shipments, compared to a 2% decline for the Canadian industry. This performance reflects a more difficult beginning of the year, following stronger demand in 2021, in addition to profitability initiatives that resulted in erosion of shipments and lower demand from some key customers. These were offset by a 4% year-over-year increase in our US converted product shipments in 2022, which outperformed the broader market decline of 4%.

3 Including sales to other partners in Greenpac.

The average selling price increased by 14% in 2022, reflecting a 19% increase for parent rolls and a 13% increase for converted products.

Sales increased by $256 million, or 13%, in 2022 compared to 2021. The higher average selling price added $239 million to sales while the 4% average depreciation of the Canadian dollar compared to the US dollar contributed $54 million to sales. These benefits were partly offset by negative impacts of $20 million related to lower volume and $17 million related to a less favourable sales mix.

EBITDA (A)[1] increased by $29 million, or 8%, reflecting the annualized benefit of the 2021 price increases and 2022 price increase realizations. Higher average selling price, lower volumes and a less favourable sales mix had a net positive impact of $224 million while the depreciation of the Canadian dollar added $14 million. These were offset by a negative raw material cost impact of $29 million and higher logistics and distribution costs that subtracted an additional $47 million. Inflationary pressure on other production costs, including chemicals, repair and maintenance, labour and other costs, had a combined negative impact of $99 million. This amount also includes operational costs of $12 million related to the Bear Island project in 2022 compared to $6 million for the same period in 2021. Higher energy prices impacted results by a further $34 million compared to last year.

2022 Annual Report

BUSINESS SEGMENT REVIEW

PACKAGING PRODUCTS - SPECIALTY PRODUCTS Our Performance

EBITDA (A)[1] ($M)

Sales ($M) and EBITDA (A) margin[1]

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----- Start of picture text -----

302520 18 18 17 21 22 25 25 20 200150 122 131 144 151 157 168 168 161 20%15%
15 100 10%
10
50 5%
5
0 0 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
21 21 21 21 22 22 22 22 21 21 21 21 22 22 22 22
EBITDA (A) ($M) SALES ($M) EBITDA (A) margin (% of sales)
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The main variances[2] in sales and EBITDA (A)[1] for the Specialty Products segment in 2022, compared to 2021, are shown below: (in millions of Canadian dollars)

SALES ($M)

EBITDA (A) ($M)

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----- Start of picture text -----

17 110 3
110 654
(3) (5) (8)
(21)
(34) 92
74
548
(45)
Sales increased by $106 million, or 19%, in 2022 compared to
2021 2022 Change in % 2021. Higher average selling prices for all sub-segments
increased sales levels by $110 million in the year. In addition,
Sales ($M)
the 4% average depreciation of the Canadian dollar compared
548 654 19% to the US dollar had a positive impact of $17 million on sales.
Volume was lower in the second half of the year for all of our
market sub-segments due to market softening, while the egg
packaging sub-segment was impacted throughout the year
EBITDA (A) [1]
primarily as a result of the avian flu outbreak.
74 92 24%
% of sales EBITDA (A) [[1]] increased by $18 million, or 24%. The solid
14% 14% performance reflects the beneficial impacts from higher realized
spreads (selling price less raw materials) and depreciation of the
2021 Price F/X CAN$ Energy Freight Prod. costs Raw 2022
F/X materials
2021 Sales Price CAN$ 2022 Sales EBITDA (A) EBITDA (A)
Volume Volume & Mix
----- End of picture text -----

Sales increased by $106 million, or 19%, in 2022 compared to 2021. Higher average selling prices for all sub-segments increased sales levels by $110 million in the year. In addition, the 4% average depreciation of the Canadian dollar compared to the US dollar had a positive impact of $17 million on sales. Volume was lower in the second half of the year for all of our market sub-segments due to market softening, while the egg packaging sub-segment was impacted throughout the year primarily as a result of the avian flu outbreak.

EBITDA (A)[[1]] increased by $18 million, or 24%. The solid performance reflects the beneficial impacts from higher realized spreads (selling price less raw materials) and depreciation of the Canadian dollar, which contributed $65 million and $3 million, respectively. These were partially offset by higher transportation, operating, energy, production supplies and other costs, which negatively impacted results by $45 million. In addition, lower volume decreased results by $5 million.

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2 For definitions of certain sales and EBITDA (A)[1] variation categories, please refer to the "Financial Overview” section for more details.

2022 Annual Report

BUSINESS SEGMENT REVIEW

TISSUE PAPERS

Our Industry

U.S. tissue paper industry production (parent rolls) and capacity utilization rate[1]

Total parent roll production increased by 1% in 2022. The average capacity utilization rate of 92% in 2021 increased by 1% compared to 93% in 2022.

U.S. tissue paper industry converted product shipments[1]

In 2022, shipments for the Retail and the Away-from-Home markets decreased by 2% and increased by 3%, respectively, compared to 2021.

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----- Start of picture text -----

11,000 100%
9,890 98%
10,000 9,401 9,484
96%
97%
9,000 94%
8,000 92%
93%
92% 90%
7,000
2020 2021 2022
Total parent roll production ('000 s.t.) Capacity utilization rate
----- End of picture text -----

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----- Start of picture text -----

8,000 7,013 6,483 6,383
6,000
4,000 2,719 2,879 2,976
2,000
—
2020 2021 2022
Shipments - Away-from-Home market ('000 s.t.)
Shipments - Retail market ('000 s.t.)
----- End of picture text -----

Reference prices - parent rolls[1]

Reference prices - recovered papers (white grade)[1]

The reference price of sorted office papers No.37 (“SOP”) increased by 75% in 2022 compared to 2021.

In 2022, the reference price for recycled and virgin parent rolls respectively increased by 10% and 5%, compared to 2021.

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----- Start of picture text -----

2,0001,500 1,120 1,428 1,156 1,515 1,266 1,594
1,000
500
—
2020 2021 2022
Recycled parent roll (average publication price) (US$/s.t.)
Virgin parent roll (average publication price) (US$/s.t.)
----- End of picture text -----

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----- Start of picture text -----

235
250
200
134
150 109
100
50
—
2020 2021 2022
----- End of picture text -----

Sorted office papers, no. 37 (SOP - Northeast average) (US$/s.t.)

Reference prices - market pulp[1]

In 2022, the reference price for NBSK and NBHK increased by 15% and 23%, respectively, compared to 2021, reflecting global demand supply dynamics.

==> picture [252 x 113] intentionally omitted <==

----- Start of picture text -----

2,000 1,704
1,478 1,514
1,500 1,141 1,229
883
1,000
500
—
2020 2021 2022
Bleached hardwood kraft, mixed, Canada / U.S. (US$/m.t.)
Northern bleached softwood kraft, Canada (US$/m.t.)
----- End of picture text -----

1 Source: RISI

2022 Annual Report

Our Performance

EBITDA (A)[1] ($M)

Sales ($M) and EBITDA (A) margin[1]

==> picture [503 x 177] intentionally omitted <==

----- Start of picture text -----

382 384
30 400
344 339 342
20 20 292 297 314 20%
12 300
10 4 8 10%
1 200
0
100 0%
-10
(6) (8)
-20 0 -10%
(17)
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
21 21 21 21 22 22 22 22 21 21 21 21 22 22 22 22
EBITDA (A) ($M) SALES ($M) EBITDA (A) margin (% of sales)
----- End of picture text -----

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----- Start of picture text -----

Shipments and manufacturing capacity Average selling price
utilization rate
3,200 2,400
200150 123 138 148 145 131 133 134 123 100%90% 3,0002,8002,600 2,2002,000
100 2,400 1,800
50 80% 2,200 1,600
0 70% 2,000 1,400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
21 21 21 21 22 22 22 22 21 21 21 21 22 22 22 22
Shipments ('000 s.t.) Utilization rate (CAN$/s.t.) (US$/s.t.)
----- End of picture text -----

The main variances[2] in sales and EBITDA (A)[1] for the Tissue Papers segment in 2022, compared to 2021, are shown below: (in millions of Canadian dollars)

SALES ($M)

EBITDA (A) ($M)

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----- Start of picture text -----

19
118
(6)
(13)
37 (29)
70
118 1,422 27 (32)
(75)
1,272
(97) (13)
Mix F/X 2021 Price Volume & Mix F/X CAN$ Energy Freight Prod. costs Raw 2022
2021 Sales Price CAN$ 2022 Sales materials
Volume EBITDA (A) EBITDA (A)
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2022 Annual Report

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----- Start of picture text -----

2021 2022 Change in %
Shipments [2] (’000 s.t.)
554 521 -6%
Average Selling Price
(CAN$/unit)
2,299 2,731 19%
Sales ($M)
1,272 1,422 12%
EBITDA (A) [1]
27 (13) -148%
% of sales
2% (1)%
----- End of picture text -----

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2 Shipments do not take into account the elimination of business sector inter-segment shipments.

Shipments decreased by 33,000 s.t., or 6%, in 2022 compared to 2021.

Converted product shipments increased by 17,000 s.t., or 4%, in 2022 compared to 2021. In terms of cases, shipments increased by 2.4 million cases, or 4%, to 58.8 million cases in 2022 compared to 2021. This is the result of higher demand in both Retail Consumer Products (+3%) and Away-from-Home (+6%) markets following lower production levels in 2021 that were driven by COVID-19 labour shortages and variable demand patterns. External manufacturing shipments of parent rolls decreased by 50,000 s.t., or 37%, in 2022 compared to 2021 mainly due to higher converted products demand and major repair and maintenance at our St. Helens mill in the fourth quarter of 2022 which had a negative impact of approximately 15,000 s.t.. The integration rate increased to 83% during the period, up from 74% in 2021.

The 19% increase in the average selling price was primarily due to price increase initiatives in both the Away-from-Home and Retail Consumer Products markets, the 4% average depreciation of the Canadian dollar compared to the US dollar and a favourable sales mix due to a higher proportion of converted products.

Sales increased by $150 million, or 12%, in 2022 compared to 2021. This was driven by beneficial impacts of $118 million from a higher average selling price, $70 million from a favourable mix as explained above, and $37 million related to the favourable exchange rate. These benefits were partially offset by lower volumes, which negatively impacted sales by $75 million.

EBITDA (A)[1] decreased by $40 million, or 148%, and was mainly due to a $97 million impact from higher raw material costs, a $29 million impact from higher transportation costs and a $32 million impact from higher production costs stemming in part from inflationary pressure. Higher energy prices also had a negative impact of $13 million yearover-year. The price increases were not sufficient to fully offset rapidly increasing costs during the year but will continue to have a positive impact going forward.

2022 Annual Report

CORPORATE ACTIVITIES

Corporate Activities recorded an EBITDA (A)[1] of $(104) million in 2022, compared to $(84) million in 2021. The EBITDA (A)[1] of our Recovery and Recycling activities was $18 million lower in 2022 due to lower volume and raw material index prices. Corporate Activities also incurred additional costs to support the profitability improvement initiatives in the Tissue Papers segment.

STOCK-BASED COMPENSATION EXPENSE

Stock-based compensation expense recognized in Corporate Activities amounted to $5 million in 2022, compared to $5 million in 2021. For more details on stock-based compensation, please refer to Note 21 of the 2022 Audited Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS

CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS Cash flows from operating activities from continuing operations, excluding changes in non-cash working capital components, stood at Cash flows from operating activities from continuing operations, excluding changes in non-cash working capital components, stood at $260 million in 2022, compared to $247 million in 2021. This cash flow measurement is relevant to the Corporation’s ability to pursue its $260 million in 2022, compared to $247 million in 2021. This cash flow measurement is relevant to the Corporation’s ability to pursue its capital expenditure program and reduce its indebtedness. capital expenditure program and reduce its indebtedness.

Cash flows from operating activities from continuing operations generated $144 million in liquidity in 2022, compared to $211 million generated in 2021. The decrease is driven by lower profitability and the significant increase in the non-cash working capital compared to Cash flows from operating activities from continuing operations generated $144 million in liquidity in 2022, compared to $211 million 2021. The Corporation paid $87 million of financing expense in 2022, compared to $96 million in 2021. The variance is mainly explained by generated in 2021. The decrease is driven by lower profitability and the significant increase in the non-cash working capital compared to the early payment of $6 million of interest paid in 2021 following the partial redemption of unsecured senior notes. On November 9, 2021, 2021. The Corporation paid $87 million of financing expense in 2022, compared to $96 million in 2021. The variance is mainly explained by the early payment of $6 million of interest paid in 2021 following the partial redemption of unsecured senior notes. On November 9, 2021, the Corporation completed the partial redemption of its unsecured senior notes and paid transaction fees of $2 million and an early the Corporation completed the partial redemption of its unsecured senior notes and paid transaction fees of $2 million and an early repurchase premium totaling US$18 million ($22 million) (see “Business Highlights” section for more details). The Corporation also paid $5 million of income taxes in 2022, compared to $2 million received in 2021. Other elements include payments totaling $12 million in 2022 repurchase premium totaling US$18 million ($22 million) (see “Business Highlights” section for more details). The Corporation also paid for severances and other restructuring costs related to closures and margin improvement initiatives, compared to $25 million in 2021.$5 million of income taxes in 2022, compared to $2 million received in 2021. Other elements include payments totaling $12 million in 2022 for severances and other restructuring costs related to closures and margin improvement initiatives, compared to $25 million in 2021.

Changes in non-cash working capital components used $116 million in liquidity in 2022, compared to $36 million used in 2021. General Changes in non-cash working capital components used $116 million in liquidity in 2022, compared to $36 million used in 2021. General supply chain challenges led to higher inventory levels to mitigate impacts on service level. Ongoing inflation also had a negative impact supply chain challenges led to higher inventory levels to mitigate impacts on service level. Ongoing inflation also had a negative impact through the cash converting cycle as it first hits accounts payable and inventory before going through selling price increases and accounts through the cash converting cycle as it first hits accounts payable and inventory before going through selling price increases and accounts receivable. As of December 31, 2022, average quarterly LTM working capital as a percentage of LTM sales[1] stood at 10.5%, which receivable. As of December 31, 2022, average quarterly LTM working capital as a percentage of LTM salescompares to 8.6% as of December 31, 2021.[1] stood at 10.5%, which compares to 8.6% as of December 31, 2021.

INVESTING ACTIVITIES FROM CONTINUING OPERATIONS

INVESTING ACTIVITIES FROM CONTINUING OPERATIONS Investing activities from continuing operations used $486 million in liquidity in 2022, compared to $247 million used in 2021. Investing activities from continuing operations used $486 million in liquidity in 2022, compared to $247 million used in 2021.

ASSOCIATES AND JOINT VENTURES

ASSOCIATES AND JOINT VENTURES In 2022, the Corporation received $1 million from an advance made to an associate. In 2022, the Corporation received $1 million from an advance made to an associate.

In 2021, the Corporation sold its participation in an associate for an amount of $1 million. In 2021, the Corporation sold its participation in an associate for an amount of $1 million.

PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT

PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT
(in millions of Canadian dollars) (unaudited) 2022 PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT	2021
~~Total acquisitions~~ ~~619~~ (in millions of Canadian dollars) (unaudited) 2022	~~373~~ 2021
Variation of acquisitions for property, plant and equipment included in “Trade and other payables” (31) Right-of-use assets acquisitions and ofproperty,plant and equipment included in other debts (87) Total acquisitions 619 Variation of acquisitions for property, plant and equipment included in “Trade and other payables” (31)	(44) 373
	(43) (44)
~~Payments for property, plant and equipment~~ ~~501~~ Right-of-use assets acquisitions and ofproperty,plant and equipment included in other debts (87)	~~286~~ (43)
Proceeds from disposals ofproperty, plant and equipment (19) Payments for property, plant and equipment 501	(53) 286
~~Payments forpropertyplant and equipment net ofproceeds from disposals~~ ~~482~~ Proceeds from disposals ofproperty, plant and equipment (19)	~~233~~ (53)
~~, ~~
Payments forproperty, plant and equipment net ofproceeds from disposals 482	233

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2022 Annual Report

New capital expenditure projects, including right-of-use assets, by segment in 2022 were as follows: (in millions of Canadian dollars)

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----- Start of picture text -----

87 41
29
36
426
----- End of picture text -----

Tissue Papers Containerboard Corporate Activities Specialty Products Right-of-use assets

The major capital projects that were initiated, are in progress or were completed in 2022 are as follows:

CONTAINERBOARD PACKAGING

Bear Island assets in Virginia, USA for site preparation and conversion of equipment to recycled containerboard manufacturing (see “Business Highlights” section for more details).

SPECIALTY PRODUCTS

Investment in equipment to increase recycled pulp production for internal usage and converting capacity in cardboard operations.

TISSUE PAPERS

Investment in equipment to optimize the capacity of our converting lines.

CORPORATE ACTIVITIES

Investment in the modernization of the water treatment system at the Kingsey Falls complex in Québec, Canada.

PROCEEDS FROM DISPOSALS OF PROPERTY, PLANT AND EQUIPMENT

The main disposals of property, plant and equipment are as follows:

2022

The Specialty Products segment received $15 million from the sale of lands and a building related to closed plants in Canada. An additional amount of $1 million deposited in escrow will be released under certain conditions.

2021

The Tissue Papers segment received $51 million from the sale of assets of closed plants in the USA and in Canada.

CHANGE IN INTANGIBLE AND OTHER ASSETS

In 2022, the Corporation invested $3 million, compared to $12 million in 2021, in its ERP information technology system and other software developments. In 2022, the Corporation invested an additional $2 million ($1 million in 2021) for other assets, including deposits related to a warehousing centralization initiative as part of the distribution network optimization.

FINANCING ACTIVITIES FROM CONTINUING OPERATIONS

Financing activities from continuing operations generated $272 million in 2022, compared to $529 million used in the same period of 2021, including $48 million ($41 million in 2021) in dividend payments to the Corporation's Shareholders.

INCREASE IN TERM LOAN

On October 19, 2022, the Corporation entered into an agreement with its lenders for its existing credit agreement to increase its authorized term loan to US$260 million from US$160 million and to extend the maturity from December 2025 to December 2027. The increase portion of the term loan was used to reduce the borrowings under the revolving credit facility.

2022 Annual Report

REDEMPTION OF UNSECURED SENIOR NOTES

On November 9, 2021, the Corporation completed the partial redemption of its unsecured senior notes. The transaction was settled on November 10, 2021 and the Corporation redeemed US$144 million ($180 million) and US$155 million ($192 million) of its 2026 and 2028 unsecured senior notes, respectively, and paid an early repurchase premium totaling US$18 million ($22 million). The Corporation incurred transaction fees of $2 million, wrote off $4 million of unamortized financing costs and $8 million of unamortized issuance premium related to these notes. The Corporation also paid US$5 million ($6 million) of interest accrued on these notes.

Partial redemption was used as follows:

(in millions of Canadian dollars) (unaudited)	2021
Transaction fees	(2)
Repurchase of 2026 and 2028 Notes	(372)
Premiumpaid on long-term debt redemption	(22)
Decrease of credit facility	(396)

ISSUANCE OF COMMON SHARES UPON EXERCISE OF STOCK OPTIONS AND REDEMPTION OF COMMON SHARES

The Corporation issued 355,686 common shares at an average price of $4.47 as a result of the exercise of stock options in 2022, representing an aggregate amount of $1 million (in 2021 - $2 million for 235,732 common shares issued at an average price of $6.50).

The Corporation purchased 854,421 common shares for cancellation at an average price of $11.07 for $9 million in 2022 (in 2021 - $26 million for 1,651,600 common shares for cancellation at an average price of $15.45).

DIVIDENDS PAID TO NON-CONTROLLING INTERESTS AND ACQUISITION OF NON-CONTROLLING INTERESTS

Dividends paid to non-controlling interests in Greenpac and Falcon Packaging (distributor in the Specialty Products segment) amounted to $13 million in 2022 ($14 million in 2021). In 2022, the Corporation also increased its participation in Falcon Packaging for a contribution of $3 million ($2 million in 2021).

CASH FLOWS FROM DISCONTINUED OPERATIONS

In 2021, the Boxboard Europe segment received $4 million from the sale of the land of a closed plant. The Boxboard Europe segment received €5 million ($7 million) from the sale of its French subsidiary that produced virgin based boxboard. The €7 million ($11 million) cash balance of this subsidiary was also disposed of, resulting in a net cash balance decrease of €2 million ($4 million). The Boxboard Europe segment completed two business acquisitions and paid a total of €141 million ($210 million).

Please refer to the “Discontinued Operations” section and Note 5 of the 2022 Audited Consolidated Financial Statements for all details on cash flows from discontinued operations.

CONSOLIDATED FINANCIAL POSITION

AS OF DECEMBER 31, 2022, 2021 AND 2020

The Corporation’s financial position and ratios are as follows:

CONSOLIDATED FINANCIAL POSITION AS OF DECEMBER 31, 2022, 2021 AND 2020 The Corporation’s financial position and ratios are as follows:
(in millions of Canadian dollars, unless otherwise noted) (unaudited) December 31, 2022	December 31, 2021	December 31, 20202
Cash and cash equivalents 102 Total assets 5,053 Total debt1 2,068 Net debt1 1,966 Equity attributable to Shareholders 1,871 Non-controlling interests 57 Total equity 1,928 Total equity and net debt1 3,894 Ratio of net debt/(total equityand net debt)1 50.5%	174	384
	4,566	5,412
	1,525 1,351	2,063 1,679
	1,879	1,753
	48 1,927	204 1,957
	3,278	3,636 46.2%
	41.2%
Shareholders' equity per common share(in Canadian dollars) $18.64	$18.63	$17.14

1 Some information represents Non-IFRS financial measures, other financial measures or Non-IFRS ratios which are not standardized under IFRS and therefore might not be comparable to similar financial measures disclosed by other corporations. Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2 Not adjusted for retrospective reclassification of discontinued operations.

2022 Annual Report

The following table reflects the Corporation’s secured debt rating/corporate rating/unsecured debt rating:

Credit rating (outlook) MOODY'S	STANDARD & POOR'S
December 31, 2021 Baa3/Ba2/Ba3 (stable) December 31, 2022 Baa3/Ba2/Ba3 (stable)	BB+/BB-/BB- (positive)
	BB+/BB-/BB- (stable)

During the first quarter of 2022, STANDARD & POOR'S revised the Corporation's outlook to stable from positive on cost headwinds and reaffirmed its 'BB-' rating.

NET DEBT[1] RECONCILIATION

The variances in the net debt[1] (total debt[1] less cash and cash equivalents) in 2022 are shown below, with the applicable financial ratios included:

(in millions of Canadian dollars)

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----- Start of picture text -----

501 1,966
116
1,351 111
87
72
7
(260) (19)
389 EBITDA (A) [1] (last twelve months) ($M) 376
3.5x Net debt / EBITDA (A) ratio [1] 5.2x
Net debt as of December 31, 2021 Cash flow from oper. activities Proceeds from disposals of property, plant and equipment Investments and others Dividends paid & change in capital stock Right-of-use assets and included in other debts F/X CAN$ Changes in non-cash working capital components Payments for property, plant and equipment Net debt as of December 31, 2022
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Liquidity available via the Corporation’s credit facilities, cash and cash equivalent balance and the anticipated cash flow generated by its operating activities are expected to provide sufficient funds to meet our financial obligations and to fulfill our capital expenditure program for at least the next twelve months. 2023 capital expenditures are forecasted to be approximately $325 million, encompassing $175 million for the Bear Island containerboard conversion project in Virginia, USA. As of December 31, 2022, the Corporation had $385 million (net of letters of credit in the amount of $15 million) available on its $750 million credit facility (excluding the credit facilities of our subsidiary Greenpac). Cash and cash equivalents as of December 31, 2022 are comprised as follows: $54 million in the parent company and restricted subsidiaries (as defined in the credit agreement) and $48 million in unrestricted subsidiaries, mainly Greenpac.

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2022 Annual Report

EMPLOYEE FUTURE BENEFITS

The Corporation’s employee future benefits assets and liabilities amounted to $399 million and $437 million, respectively, as of December 31, 2022, including an amount of $65 million for post-employment benefits other than pension plans. The pension plans include an amount of $27 million, which does not require any funding by the Corporation until it is paid to the employees. This amount is not expected to increase, as the Corporation has reviewed its benefits program to phase out some of them for future retirees.

With regard to pension plans, the Corporation’s risk is limited, since all defined benefit pension plans are closed to new employees and fewer than 10% of its active employees are subject to those pension plans, while the remaining employees are part of the Corporation’s defined contribution plans, such as group RRSPs or 401(k).

The measurement date of the employee future benefits plans is December 31 of each year. An actuarial evaluation is performed at least every three years. Based on their liabilities balances as of December 31, 2022, 19% of the Corporation plans have been evaluated on December 31, 2021 (20% in 2020). Plans with higher liability balances were last evaluated in 2019 and will be evaluated again in 2023 for the year ended December 31, 2022.

Considering the assumptions used and the asset ceiling limit, the surplus status for accounting purposes of its pension plans amounted to $10 million as of December 31, 2022, compared to a deficit of $10 million in 2021. The 2022 pension plan expense was $5 million and the cash outflow was $5 million. Due to the investment returns in 2022 and the change in the assumptions, the expected expense for these pension plans is $3 million in 2023. As for the cash flow requirements, these pension plans are expected to require a net contribution of approximately $3 million in 2023. Finally, on a consolidated basis, the solvency ratio of the Corporation’s funded pension plans has increased to approximately 105%.

COMMENTS ON THE FOURTH QUARTER OF 2022

SALES

Sales of $1,135 million increased by $107 million, or 10%, in the fourth quarter of 2022 compared to $1,028 million in the same period of 2021. Higher selling prices, better sales mix and a favourable foreign exchange rate had a positive impact on sales. These factors were partially offset by lower volume in all business segments and lower sales from our Recovery and Recycling activities.

OPERATING LOSS AND EBITDA (A)[1]

The Corporation generated an operating loss of $(20) million in the fourth quarter of 2022, compared to $(90) million in the same period of 2021. The Corporation recorded an EBITDA (A)[1] of $116 million in the fourth quarter of 2022, compared to $62 million in the same period of 2021, an increase of $54 million. The increase reflects higher selling prices, lower raw material costs in our Containerboard segment and a favourable foreign exchange rate which were offset by significant inflationary pressure on all operational costs.

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2022 Annual Report

The main variances[1] in sales, in operating loss and in EBITDA (A)[2] in the fourth quarter of 2022, compared to the same period of 2021, are shown below:

(in millions of Canadian dollars)

SALES ($M)

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22
54
117 (13)
1,135
(73)
1,028
Q4 2021 Sales Price F/X CAN Mix Recovery & Recycling and Other items Volume Q4 2022 Sales
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OPERATING LOSS AND EBITDA (A) ($M)

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117 5 2
(11) (11) 116
(11)
(11)
92 62 (26)
(74)
60
(62) (20)
(90)
Q4 2021 Operating loss Depreciation and amortization Specific items Q4 2021 EBITDA (A) Price F/X CAN$ Raw materials Recovery & Recycling Freight Energy Volume & Mix Prod. costs Q4 2022 EBITDA (A) Specific items Deprciation and amortization Q4 2022 Operating loss
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NET EARNINGS (LOSS)

For the 3-month period ended December 31, 2022, the Corporation posted a net loss of $(27) million, or $(0.27) per common share, compared to net earnings of $105 million, or $1.04 per common share, for the same period in 2021. On an adjusted basis[2] , the Corporation generated net earnings of $22 million in the fourth quarter of 2022, or $0.22 per common share, compared to a net loss of $(9) million, or $(0.09) per common share, in the same period in 2021.

1 For definitions of certain sales and EBITDA (A)[2] variation categories, please refer to the "Financial Overview” section for more details.

2 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2022 Annual Report

CAPITAL STOCK INFORMATION

COMMON SHARE TRADING

Cascades’ stock is traded on the Toronto Stock Exchange under the ticker symbol “CAS”. From January 1, 2022 to December 31, 2022, Cascades' common share price fluctuated between $7.77 and $14.14. During the same period, 68.7 million Cascades common shares were traded on the Toronto Stock Exchange. On December 31, 2022, Cascades' common shares closed at $8.46. This compares with a closing price of $13.97 on the same closing day last year.

COMMON SHARES OUTSTANDING

As of December 31, 2022, the Corporation’s issued and outstanding capital stock consisted of 100,361,627 common shares (100,860,362 as of December 31, 2021) and 2,794,344 issued and outstanding stock options (2,373,416 as of December 31, 2021). In 2022, the Corporation purchased 854,421 common shares for cancellation, while 355,686 stock options were exercised, 785,532 options were granted and 8,918 stock options were forfeited.

As of February 22, 2023, issued and outstanding capital stock consisted of 100,361,627 common shares and 2,791,041 stock options.

NORMAL COURSE ISSUER BID PROGRAM

The normal course issuer bid announced on March 17, 2021 enabled the Corporation to purchase for cancellation up to 2,045,621 common shares between March 19, 2021 and March 18, 2022. During that period, the Corporation purchased 2,045,621 common shares for cancellation at an average price of $14.98 for $31 million.

The current normal course issuer bid announced on March 17, 2022 enables the Corporation to purchase for cancellation up to 2,015,053 common shares between March 19, 2022 and March 18, 2023. During the period between March 19, 2022 and February 22, 2023, the Corporation purchased 460,400 common shares for cancellation at an average price of $9.38 for $4 million.

DIVIDEND POLICY

On February 22, 2023, Cascades’ Board of Directors declared a quarterly dividend of $0.12 per common share to be paid on March 24, 2023 to shareholders of record at the close of business on March 10, 2023. On February 22, 2023, dividend yield was 4.9%.

2020 TSX Ticker: CAS Q1 Q2 Q3 Q4	2021 2022
	Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Common shares outstanding (in millions)1 94.3 95.0 95.0 102.3 Closing price (in Canadian dollars)1 $12.57 $14.79 $16.84 $14.55 Average daily volume2 256,827 298,267 257,710 363,795 Dividendyield1 2.5% 2.2% 1.9% 2.2%	102.3 102.3 100.9 100.9 100.5 100.8 100.4 100.4 $15.73 $15.26 $15.67 $13.97 $12.82 $10.13 $8.04 $8.46 342,616 433,394 278,277 272,438250,944 299,332 293,260 259,071 2.0% 2.1% 3.1% 3.4% 3.7% 4.7% 6.0% 5.7%

1 On the last day of the quarter

2 Average daily volume on the Toronto Stock Exchange

CASCADES’ COMMON SHARE PRICE FOR THE PERIOD FROM JANUARY 1, 2020 TO DECEMBER 31, 2022

(in Canadian dollars)

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$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
20 20 20 20 21 21 21 21 22 22 22 22
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2022 Annual Report

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

The Corporation’s principal contractual obligations and commercial commitments relate to outstanding debt, capital expenditures, raw materials and supplies, intangible assets, service agreements, leases and obligations for its pension and post-employment benefit plans. The following table summarizes these obligations as of December 31, 2022:

CONTRACTUAL OBLIGATIONS

CONTRACTUAL OBLIGATIONS
Payment due byperiod(in millions of Canadian dollars) (unaudited) TOTAL	LESS THAN ONE YEAR	BETWEEN ONE AND FIVE YEARS	OVER FIVE YEARS
Long-term debt, including capital and interest 2,578 Commitments for capital expenditures, raw materials and supplies and intangible assets 153 Service agreements and exempted leases 38 Leases not yet commenced but already signed 2 Pensionplans and otherpost-employment benefits1 901	246 134 22	1,626 19 14	706 — 2
	—	1	1
	36	157	708
Total contractual obligations 3,672	438	1,817	1,417

1 These amounts represent all the benefits payable to current members during the following years and thereafter without limitations. The majority of benefit payments are payable from trusteeadministered funds. The difference will come from future investment returns expected on plan assets and future contributions that will be made by the Corporation for services rendered after December 31, 2022.

TRANSACTIONS WITH RELATED PARTIES

The Corporation has also entered into various agreements with its joint-venture partners, significantly influenced companies and entities that are affiliated with one or more of its directors for the supply of raw materials, including recycled paper, virgin pulp and energy, as well as the supply of unconverted and converted products and other agreements entered into in the normal course of business. Aggregate sales by the Corporation to its joint-venture partners and other affiliates totaled $367 million and $324 million for 2022 and 2021, respectively. Aggregate purchases to the Corporation from its joint-venture partners and other affiliates came to $146 million and $126 million for 2022 and 2021, respectively.

CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

A. NEW IFRS ADOPTED

Amendment to IAS 16

In May 2020, the IASB issued an amendment to IAS 16 Property, Plant and Equipment which seeks to clarify the way entities should account for the proceeds from the sale and related production costs, of items produced by an asset prior to it being available for its intended use. The modification requires that sales proceeds recognized before the related asset is available for use be recognized in profit or loss together with the costs associated with the items sold, rather than by adjusting the cost of the asset under construction.

The standard became effective on January 1, 2022 and had no impact on the Corporation's Consolidated Financial Statements.

B. RECENT IFRS STANDARD NOT YET ADOPTED

IFRS 17 Insurance Contracts was issued in May 2017 as replacement for IFRS 4 Insurance Contracts . The amendments deferred the application date of IFRS 17 to January 1, 2023. IFRS 17 Insurance Contracts, applies to insurance contracts regardless of the entity that issues them and so it does not apply only to traditional insurance entities. IFRS 17 Insurance Contracts defines an insurance contract as an agreement where one party, the insurer, accepts significant insurance risk from another party, the policy holder, by agreeing to compensate the policy holder if a specified uncertain future event adversely affects the policy holder. The Corporation is currently evaluating the impact of this standard on its Consolidated Financial Statements.

2022 Annual Report

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and disclosure of contingencies at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. On a regular basis and with the information available, Management reviews its estimates, including those related to environmental costs, employee future benefits, collectability of accounts receivable, financial instruments, contingencies, income taxes, useful life and residual value of property, plant and equipment and impairment of property, plant and equipment and intangible assets. Actual results could differ from those estimates. When adjustments become necessary, they are reported in earnings in the period in which they occur.

A. IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL

In determining the recoverable amount of an asset or CGU, based on the market approach, Management uses the value of comparable assets on the market. In determining the recoverable amount of an asset or CGU, based on the income approach, Management uses several key assumptions, including estimated shipment levels, foreign exchange rates, revenue growth rates, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) (A) margins, discount rates, capitalization rate and capital expenditures.

The Corporation believes its assumptions are reasonable. Based on available information at the assessment date, however, these assumptions involve a high degree of judgment and complexity. Management believes that the following assumptions are the most susceptible to change and therefore could impact the valuation of the assets in the next year.

DESCRIPTION OF SIGNIFICANT IMPAIRMENT TESTING ASSUMPTIONS

(see Note 23 of the 2022 Audited Consolidated Financial Statements)

REVENUES, ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA (A)) MARGINS, CASH FLOWS AND GROWTH RATES

The assumptions used for revenues were based on the segment's internal budget and were projected for a period of five years and a longterm growth rate of 2% was applied thereafter. The assumption used for EBITDA (A) margin was based on the segment's historical performance and was kept constant. In arriving at its forecasts, the Corporation considers past experience, economic trends such as gross domestic product growth and inflation, as well as industry and market trends.

DISCOUNT RATES

The Corporation assumed a discount rate in order to calculate the present value of its projected cash flows. The discount rate represents a weighted average cost of capital (WACC) for comparable companies operating in similar industries of the applicable CGU, group of CGUs or reportable segment based on publicly available information.

CAPITALIZATION RATES

The Corporation assumed a capitalization rate in order to calculate the present value of its property cash flows. The capitalization rate represents a real estate valuation measure used to compare different real estate investments. The capitalization rate is calculated as the ratio between the annual rental income produced by a real estate asset to its current market value.

FOREIGN EXCHANGE RATES

When estimating the fair value less cost of disposal, foreign exchange rates are determined using the financial institution's average forecast for the first two years of forecasting. For the following three years, the Corporation uses the last five years' historical average of the foreign exchange rate. Terminal rate is based on historical data of the last twenty years and adjusted to reflect Management's best estimate of market participants expectations.

SHIPMENTS

The assumptions used are based on the Corporation's internal budget for the next year and are usually held constant for the established capacity, for new capacity the ramp up is considered over the forecast period. In arriving at its budgeted shipments, the Corporation considers past experience, economic, industry and market trends.

Considering the sensitivity of the key assumptions used, there is measurement uncertainty since adverse changes in one or a combination of the Corporation's key assumptions could cause a significant change in the carrying amounts of these assets.

2022 Annual Report

B. INCOME TAXES

The Corporation is required to estimate the income taxes in each jurisdiction in which it operates. This includes estimating a value for existing tax losses based on the Corporation's assessment of its ability to use them against future taxable income before they expire. If the Corporation's assessment of its ability to use the tax losses proves inaccurate in the future, more or less of the tax losses might be recognized as assets, which would increase or decrease the income tax expense and, consequently, affect the Corporation's results in the relevant year.

C. EMPLOYEE BENEFITS

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability.

The cost of pensions and other retirement benefits earned by employees is determined by actuaries using the projected benefit method pro-rated on years of service and Management's best estimate of expected plan investment performance, salary escalations, retirement ages of employees and expected health care costs. The accrued benefit obligation is evaluated using the market interest rate at the evaluation date. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. All assumptions are reviewed annually.

D. GOODWILL, INTANGIBLE ASSETS AND BUSINESS COMBINATIONS

Goodwill and client lists have arisen as a result of business combinations. The acquisition method, which also requires significant estimates and judgments, is used to account for these business combinations. As part of the allocation process in a business combination, estimated fair values are assigned to the net assets acquired. These estimates are based on forecasts of future cash flows, estimates of economic fluctuations and an estimated discount rate. The excess of the purchase price over the estimated fair value of the net assets acquired is then assigned to goodwill. In the event that actual net assets fair values are different from estimates, the amounts allocated to the net assets could differ from what is currently reported. This would then have a direct impact on the carrying value of goodwill. Differences in estimated fair values would also have an impact on the amortization of definite life intangibles.

CONTROLS AND PROCEDURES

EVALUATION OF THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

The Corporation’s President and Chief Executive Officer and its Vice-President and Chief Financial Officer have designed, or caused to be designed under their supervision, disclosure controls and procedures (DC&P) and internal controls over financial reporting (ICFR), as defined in National Instrument 52-109, “Certification of Disclosure in Issuer’s Annual and Interim Filings”.

The purpose of internal controls over financial reporting (“ICFR”) is to provide reasonable assurance regarding the reliability of the Corporation's financial reporting and the preparation of financial statements in accordance with IFRS. The President and Chief Executive Officer and the Vice-President and Chief Financial Officer certify disclosures in annual and interim filings under Regulation 52-109 using the internal control framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

During the year ended December 31, 2022, there were no changes in the Corporation’s ICFR that materially affected or are reasonably likely to materially affect the Corporation’s ICFR.

2022 Annual Report

RISK FACTORS

As part of its ongoing business operations, the Corporation is exposed to certain market risks, including risks ensuing from changes in selling prices for its principal products, costs of raw materials, interest rates and foreign currency exchange rates, all of which impact the Corporation’s financial position, operating results and cash flows. The Corporation manages its exposure to these and other market risks through regular operating and financing activities and, on a limited basis, through the use of derivative financial instruments. We use these derivative financial instruments as risk management tools, not for speculative investment purposes. The following is a discussion of key areas of business risks and uncertainties that we have identified and our mitigating strategies. The risk areas below are listed in no particular order, as risks are evaluated based on both severity and probability. Readers are cautioned that the following is not an exhaustive list of all the risks we are exposed to, nor will our mitigation strategies eliminate all risks listed.

Risks relating to the Corporation’s business

Macroeconomic risks

Inflation surged during the year ending December 31, 2022 at levels unseen in the last decade, at least, and it represents a significant risk to macroeconomic stability. The inflation phenomenon results in rising energy and commodity costs, global equity and capital markets may experience significant volatility and weakness. The duration and impact are unknown at this time, nor is the impact on our operations and the market for our securities. Prolonged periods of inflation could increase our costs and impact our profitability, which could have a material adverse effect on our business and financial condition. High levels of inflation may subject us to significant cost pressures. As a result, governments may adopt initiatives to combat inflation (for example, raising the benchmark interest rate), thus increasing our cost of borrowing and decreasing the liquidity of capital markets. Our clients may have difficulty and may delay their payment for the acquired goods. High inflation can lead to increased costs of labour and our employee compensation expenses. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases and there is no assurance that our revenues will increase at the same rate to maintain the same level of profitability.

Although Cascades does not have direct activities in Russia or Ukraine, a prolonged armed conflict between the two countries or an expansion of the armed conflict to other countries could have a materially adverse effect on world economies and on the Corporation in a variety of ways, including: (i) a general decrease in consumer spending from lower confidence levels; (ii) severe price inflation; (iii) disruptions in capital and financial markets; and (iv) an increase in cyber security risk.

If the Corporation does not successfully manage the demand, supply and operational challenges associated with the effects of the pandemic or other similar widespread public health concerns, our results will be negatively impacted.

The Corporation’s business may be negatively impacted by the fear of exposure to, actual effects of, or government response to, the pandemic, such as travel restrictions, business shutdowns or limitations, shelter-in-place orders, recommendations or mandates from governmental authorities to avoid large gatherings or to self-quarantine as a result of the pandemic, or other shutdowns and restrictions. These impacts include, but are not limited to:

Significant reductions in demand or significant volatility in demand for one or more of the Corporation’s products, which may be caused by, among other things: quarantine or other travel restrictions, financial hardship, shifts in demand away from one or more of the Corporation’s products, including our Away-from-Home products or our industrial packaging products, or consumer stockpiling activity which may result in a decrease in demand for our products in one period as a result of excessive purchases of the Corporation’s products in another period. If prolonged, these events further increase the difficulty of planning for operations and may adversely impact the Corporation’s results;
Inability to meet the Corporation’s customers’ needs and achieve cost targets due to disruptions in the Corporation’s manufacturing and supply arrangements caused by constrained workforce capacity or the loss or disruption of other significant manufacturing or supply materials such as raw materials or other finished product components, transportation, or other manufacturing and distribution capability. While the Corporation has not been required to do so to date, in the future the Corporation may be required to limit or shutdown our manufacturing facilities to comply with any future, more stringent government mandates, which may adversely impact the Corporation’s results;
Failure of third parties on which the Corporation relies, including its suppliers, contract manufacturers, distributors and other contractors, to meet their obligations to the Corporation, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties or their inability to deliver goods or services based on governmental restrictions or other mandates and may adversely impact the Corporation’s operations;
Increased expenses related to the implementation of procedures to comply with governmental regulations and recommendations and maintain the health and safety of the Corporation’s employees such as remote working (which, in turn, creates additional cyber security risks), health screenings and enhanced cleaning and sanitation protocols. The Corporation could continue to incur costs related to its mitigation efforts and it may have to enact additional, more expensive measures to continue to comply with governmental regulations and recommendations, which may become more stringent in the future, in order to ensure the health and safety of its employees; or

2022 Annual Report

Government actions in one or more of the jurisdictions in which Cascades operates, resulting in Cascades no longer having the benefits of being deemed an “essential business” (or other government actions undertaken to restrict the business activities of businesses deemed essential) and, as a result, forcing the Corporation to scale back its operations or halt them entirely, or government action resulting in any of our suppliers, contract manufacturers, distributors and other contractors no longer being deemed essential and thus impacting the Corporation’s ability to deliver its products and services to its customers, which may adversely impact its operations and results.

Despite the Corporation’s efforts to manage and remedy these impacts to the Corporation, their ultimate impact also depends on factors beyond its control, including the duration and severity of the pandemic, as well as third-party actions taken to contain its spread and mitigate its public health effects. The adverse effects described above may also apply to other epidemics, pandemics and other public health emergencies.

To the extent the pandemic adversely affects the Corporation’s business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to the Corporation’s high level of indebtedness, its need to generate sufficient cash flows to service its indebtedness, and its ability to comply with the covenants contained in the agreements that govern its indebtedness.

The markets for some of the Corporation’s products tend to be cyclical in nature and prices for some of its products, as well as raw material and energy costs, may fluctuate significantly, which can adversely affect its business, operating results, profitability and financial position.

The markets for some of the Corporation’s products, particularly containerboard, are cyclical. As a result, prices for these types of products and for its two principal raw materials, recycled paper and virgin fibre, have fluctuated significantly in the past and will likely continue to fluctuate significantly in the future, principally due to market imbalances between supply and demand. Demand is heavily influenced by the strength of the global economy and the countries or regions in which Cascades does business, particularly Canada and the United States, the Corporation’s two primary markets. Demand is also influenced by fluctuations in inventory levels held by customers and consumer preferences. Supply depends primarily on industry capacity and capacity utilization rates. In periods of economic weakness, reduced spending by consumers and businesses results in decreased demand, which can potentially cause downward price pressure. Industry participants may also, at times, add new capacity or increase capacity utilization rates, potentially causing supply to exceed demand and exerting downward price pressure. In addition, in the event of depressed market prices for recycled paper, the availability of recycled paper may decrease.

Depending on market conditions and related demand, Cascades may have to take market-related downtime. In addition, the Corporation may not be able to maintain current prices or implement additional price increases in the future. If Cascades is unable to do so, its revenues, profitability and cash flows could be adversely affected. In addition, other participants may introduce new capacity or increase capacity utilization rates, which could also adversely affect the Corporation’s business, operating results and financial position.

Prices for recycled and virgin fibre also fluctuate considerably. The costs of these materials present a potential risk to the Corporation’s profit margins in the event that it is unable to pass along price increases to its customers on a timely basis. Although changes in the price of recycled fibre generally correlate with changes in the price of products made from recycled paper, this may not always be the case. If Cascades were unable to implement increases in the selling prices for its products to compensate for increases in the price of recycled or virgin fibre, the Corporation’s profitability and cash flows would be adversely affected.

In addition, Cascades uses energy, mainly natural gas and fuel oil, to generate steam, which it then uses in the production process and to operate machinery. Energy prices, particularly for natural gas and fuel oil, have continued to remain very volatile. Cascades continues to evaluate its energy costs and consider ways to factor energy costs into its pricing. However, should energy prices increase, the Corporation’s production costs, competitive position and operating results would be adversely affected. A substantial increase in energy costs would adversely affect the Corporation’s operating results and could have broader market implications that could further adversely affect the Corporation’s business or financial results.

Cascades faces significant competition and some of its competitors may have greater cost advantages, be able to achieve greater economies of scale or be able to better withstand periods of declining prices and adverse operating conditions, which could negatively affect the Corporation’s market share and profitability.

The markets for the Corporation’s products are highly competitive. In some of the markets in which Cascades competes, such as tissue papers, it competes with a small number of other producers. In some businesses, such as the containerboard industry, competition tends to be global. In others, such as the tissue industry, competition tends to be regional. In the Corporation’s packaging products segment, it also faces competition from alternative packaging materials, such as plastic and Styrofoam, which can lead to excess capacity, decreased demand and pricing pressures.

2022 Annual Report

Competition in the Corporation’s markets is primarily based on price, as well as customer service and the quality, breadth and performance characteristics of its products. The Corporation’s ability to compete successfully depends on a variety of factors, including:

the Corporation’s ability to maintain high plant efficiencies, operating rates and lower manufacturing costs;
the availability, quality and cost of raw materials, particularly recycled and virgin fibre, as well as labour; and
the cost of energy.

Some of the Corporation’s competitors may, at times, have lower fibre, energy and labour costs and less restrictive environmental and governmental regulations to comply with than Cascades. For example, fully integrated manufacturers or those whose requirements for pulp or other fibre are met fully from their internal sources, may have some competitive advantages over manufacturers that are not fully integrated, such as Cascades, in periods of relatively high raw material pricing, in that the former are able to ensure a steady source of these raw materials at costs that may be lower than prices in the prevailing market. In contrast, competitors that are less integrated than Cascades may have cost advantages in periods of relatively low pulp or fibre prices because they may be able to purchase pulp or fibre at prices lower than the costs the Corporation incurs in the production process. Other competitors may be larger in size or scope than Cascades, which may allow them to achieve greater economies of scale on a global basis or to better withstand periods of declining prices and adverse operating conditions.

In addition, there has been an increasing trend among the Corporation’s customers towards consolidation. With fewer customers in the market for the Corporation’s products, the strength of its negotiating position with these customers could be weakened, which could have an adverse effect on its pricing, margins and profitability.

Because of the Corporation’s international operations, it faces political, social and exchange rate risks that can negatively affect its supply chain, manufacturing capabilities, distribution activities, operating results, net earnings and financial condition.

The Corporation’s international operations present it with a number of risks and challenges, including:

effective marketing of its products in other countries;
tariffs and other trade barriers;
different regulatory schemes and political environments applicable to the Corporation’s operations in areas such as environmental and health and safety compliance; and
exposure to health epidemics and pandemics such as the ongoing coronavirus outbreak and other highly communicable diseases or viruses.

Cascades has customers and operations located outside Canada. In 2022, approximately 52% of the Corporation’s consolidated sales were in the United States. In 2022, 19% of sales from Canadian operations were made to the United States.

In addition, the Corporation’s consolidated financial statements are reported in Canadian dollars, while a portion of its sales is made in other currencies, primarily the U.S. dollar. A decrease of the Canadian dollar against the U.S. dollar could adversely affect the Corporation’s operating results and financial condition. As of December 31, 2022, the Corporation had, on a consolidated basis, total U.S. dollar-denominated debt of US$1,320 million.

Moreover, in some cases, the currency of the Corporation’s sales does not match the currency in which it incurs costs, which can negatively affect the Corporation’s profitability. Fluctuations in exchange rates can also affect the relative competitive position of a particular facility where the facility faces competition from non-local producers, as well as the Corporation’s ability to successfully market its products in export markets. As a result, if the Canadian dollar were to remain permanently strong compared to the US dollar, it could affect the profitability of the Corporation’s facilities, which could lead Cascades to shutdown facilities either temporarily or permanently, all of which could adversely affect its business or financial results.

The Corporation uses various foreign exchange forward contracts and related currency option instruments to anticipate sales net of purchases, interest expenses and debt repayment. These hedging instruments may not be effective in offsetting risks, may generate losses or otherwise may adversely affect the Corporation’s financial results as compared to what its results would have been had the hedges not been implemented.

2022 Annual Report

The Corporation’s operations are subject to comprehensive environmental regulations and involve expenditures which may be material in relation to its operating cash flow.

The Corporation is subject to environmental laws and regulations imposed by the various governments and regulatory authorities in all countries in which it operates. These environmental laws and regulations impose stringent standards on the Corporation regarding, among other things:

air emissions;
water discharges;
use and handling of hazardous materials;
use, handling and disposal of waste; and
• remediation of environmental contamination.

The Corporation is also subject to the U.S. Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), as well as to other applicable legislation in the United States and Canada that holds companies accountable for the investigation and remediation of hazardous substances. The Corporation, for some of our Québec plants, is also subject to an emissions market aimed at reducing worldwide CO2 emissions. Each unit has been allocated emission rights (“CO2 quota”). On a calendar year basis, the Corporation must buy the necessary credits to cover its deficit on the open market if its emissions are higher than quota.

The Corporation’s failure to comply with applicable environmental laws, regulations or permit requirements may result in civil or criminal fines, penalties or enforcement actions. These may include regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, the installation of pollution control equipment or remedial actions, any of which could entail significant expenditures. It is difficult to predict the future development of such laws and regulations or their impact on future earnings and operations, but these laws and regulations may require capital expenditures to ensure compliance. In addition, amendments to or more stringent implementation of, current laws and regulations governing the Corporation’s operations could have a material adverse effect on its business, operating results or financial position. Furthermore, although Cascades generally tries to plan for capital expenditures relating to environmental and health and safety compliance on an annual basis, actual capital expenditures may exceed those estimates. In such an event, Cascades may be forced to curtail other capital expenditures or other activities. In addition, the enforcement of existing environmental laws and regulations has become increasingly strict. The Corporation may discover currently unknown environmental problems or conditions in relation to its past or present operations or may face unforeseen environmental liabilities in the future.

These conditions and liabilities may:

require site remediation or other costs to maintain compliance or correct violations of environmental laws and regulations; or
result in governmental or private claims for damage to persons, property or the environment.

Either of these possibilities could have a material adverse effect on the Corporation’s financial condition or operating results.

Cascades may be subject to strict liability and, under specific circumstances, joint and several (solidary) liability for the investigation and remediation of soil, surface and groundwater contamination, including contamination caused by other parties on properties that it owns or operates and on properties where the Corporation or its predecessors have arranged for the disposal of regulated materials. As a result, the Corporation is involved from time to time in administrative and judicial proceedings and inquiries relating to environmental matters. The Corporation may become involved in additional proceedings in the future, the total amount of future costs and other environmental liabilities of which could be material.

To date, the Corporation is in compliance, in all material respects, with all applicable environmental legislation or regulations. However, the Corporation expects to incur ongoing capital and operating expenses in order to achieve and maintain compliance with applicable environmental requirements.

Cascades may be subject to losses that might not be covered in whole or in part by its insurance coverage.

Cascades carries comprehensive liability, fire and extended coverage insurance on all of its facilities, with policy specifications and insured limits customarily carried in its industry for similar properties. In addition, some types of losses, such as losses resulting from wars, acts of terrorism or natural disasters, are generally not insured because they are either uninsurable or not economically practical. Moreover, insurers have recently become more reluctant to insure against these types of events. Should an uninsured loss or a loss in excess of insured limits occur, Cascades could lose capital invested in that property, as well as the anticipated future revenues derived from the manufacturing activities conducted on that property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any such loss could adversely affect its business, operating results or financial condition.

2022 Annual Report

Labour disputes or shortages could have a material adverse effect on the Corporation’s cost structure and ability to run its mills and plants as it depends on attracting and retaining qualified personnel.

As of December 31, 2022, the Corporation had approximately 10,000 employees, with approximately 30% of its workforce unionized. The Corporation’s inability to negotiate acceptable contracts with its unions upon expiration of an existing contract could result in strikes or work stoppages by the affected workers and increased operating costs as a result of higher wages or benefits paid to union members. If the unionized workers were to engage in a strike or another form of work stoppage, Cascades could experience a significant disruption in operations or higher labour costs, which could have a material adverse effect on its business, financial condition, operating results and cash flows. Of the 29 collective bargaining agreements, 8 have expired and are currently under negotiation, 9 will expire in 2023 and 8 will expire in 2024.

The Corporation generally begins the negotiation process several months before agreements are due to expire and is currently in the process of negotiating with the unions where the agreements have expired or will soon expire. However, Cascades may not be successful in negotiating new agreements on satisfactory terms, if at all.

Cascades's success depends in part upon its ability to continue to attract and retain qualified management, regulatory, technical, and sales and marketing executives and personnel in various geographical locations. The failure to attract, integrate, motivate and retain skilled and qualified personnel could have a material adverse effect on the business. The Corporation competes for such personnel against numerous companies. There can be no assurance that it will be successful in attracting or retaining such personnel and the failure to do so could have a material adverse effect on our financial condition and results of operations.

Cascades may make investments in entities that it does not fully control and may not receive dividends or returns from those investments in a timely fashion or at all.

Cascades has established joint ventures, made investments in associates and acquired significant participation in subsidiaries in order to increase its vertical integration, enhance customer service and increase efficiency in its marketing and distribution in the United States and other markets. The Corporation’s principal joint ventures, associates and significant participation in subsidiaries are:

two 50%-owned joint ventures with Sonoco Products Corporation, of which one is in Canada (two plants) and one is in the United States (two plants), that produce specialty paper packaging products such as headers, rolls and wrappers; and
a 79.90%-owned subsidiary, Greenpac Holding LLC, a North American manufacturer of linerboard. The percentage including indirect ownership stands at 86.35% for consolidation and accounting purposes (see Note 8 of the 2022 Audited Consolidated Financial Statements for more details).

Apart from Greenpac Holding LLC, Cascades does not have control over these entities. The Corporation’s inability to control entities in which it invests may affect its ability to receive distributions from these entities or to fully implement its business plan. The incurrence of debt or entrance into other agreements by an entity not under the Corporation’s control may result in restrictions or prohibitions on that entity’s ability to pay distributions to the Corporation. Even where these entities are not restricted by contract or by law from paying dividends or making distributions to Cascades, the Corporation may not be able to influence the payout or timing of these dividends or distributions. In addition, if any of the other investors in a non-controlled entity fail to observe their commitments, the entity may not be able to operate according to its business plan or Cascades may be required to increase its level of commitment. If any of these events were to transpire, the Corporation’s business, operating results, financial condition and ability to make payments on indebtedness could be adversely affected.

In addition, the Corporation has entered into various shareholder agreements relating to its joint ventures and equity investments. Some of these agreements contain “shotgun” provisions, which provide that if one Shareholder offers to buy all the shares owned by the other parties to the agreement, the other parties must either accept the offer or purchase all the shares owned by the offering Shareholder at the same price and conditions. Some of the agreements also stipulate that, in the event that a Shareholder is subject to bankruptcy proceedings or otherwise defaults on any indebtedness, the non-defaulting parties to that agreement are entitled to invoke the “shotgun” provision or sell their shares to a third party. The Corporation’s ability to purchase the other Shareholders’ interests in these joint ventures if they were to exercise these “shotgun” provisions could be limited by the covenants in the Corporation’s credit facility and the indenture.

In addition, Cascades may not have sufficient funds to accept the offer or the ability to raise adequate financing should the need arise, which could result in the Corporation having to sell its interests in these entities or otherwise alter its business plan.

2022 Annual Report

Acquisitions have been and are expected to continue to be a substantial part of the Corporation’s growth strategy, which could expose the Corporation to difficulties in integrating the acquired operation, diversion of management time and resources, and unforeseen liabilities, among other business risks.

Acquisitions have been a significant part of the Corporation’s growth strategy. Cascades expects to continue to selectively seek strategic acquisitions in the future. The Corporation’s ability to consummate and to effectively integrate any future acquisitions on terms that are favourable to it may be limited by the number of attractive acquisition targets, internal demands on its resources and, to the extent necessary, its ability to obtain financing on satisfactory terms, if at all. Acquisitions may expose the Corporation to additional risks, including:

difficulties in integrating and managing newly acquired operations and improving their operating efficiency;
difficulties in maintaining uniform standards, controls, procedures and policies across all of the Corporation’s businesses;
entry into markets in which Cascades has little or no direct prior experience;
the Corporation’s ability to retain key employees of the acquired company;
disruptions to the Corporation’s ongoing business; and
diversion of management time and resources.

In addition, future acquisitions could result in Cascades' incurring additional debt to finance the acquisition or possibly assuming additional debt as part of it, as well as costs, contingent liabilities and amortization expenses. The Corporation may also incur costs and divert Management's attention for potential acquisitions that are never consummated. For acquisitions Cascades does consummate, expected synergies may not materialize. The Corporation’s failure to effectively address any of these issues could adversely affect its operating results, financial condition and ability to service debt, including its outstanding senior notes.

Although Cascades performs a due diligence investigation of the businesses or assets that it acquires and anticipates continuing to do so for future acquisitions, the acquired business or assets may have liabilities that Cascades fails or is unable to uncover during its due diligence investigation and for which the Corporation, as a successor owner, may be responsible. When feasible, the Corporation seeks to minimize the impact of these types of potential liabilities by obtaining indemnities and warranties from the seller, which may in some instances be supported by deferring payment of a portion of the purchase price. However, these indemnities and warranties, if obtained, may not fully cover the liabilities because of their limited scope, amount or duration, or the financial resources of the indemnitor or warrantor, or for other reasons.

The Corporation undertakes impairment tests, which could result in a write-down of the value of assets and, as a result, have a material adverse effect.

IFRS requires that Cascades undertakes impairment tests of long-lived assets and goodwill to determine whether a write-down of such assets is required. A write-down of asset value as a result of impairment tests would result in a non-cash charge that reduces the Corporation’s reported earnings. Furthermore, a reduction in the Corporation’s asset value could have a material adverse effect on the Corporation’s compliance with total debt-to-capitalization tests under its current credit facilities and, as a result, limit its ability to access further debt capital.

Messrs. Bernard, Laurent and Alain Lemaire and their families (the “Lemaires”) collectively own a significant percentage of the common shares.

The Lemaires collectively own a significant percentage of the common shares of the Corporation and there may be situations in which their interests and the interests of other holders of shares do not align. There is no formal agreement among the Lemaires with respect to the voting of their common shares and, over the past few years, the control of their shares has become more dispersed within their respective families. However, because the Corporation’s remaining shares are widely held, the Lemaires may still effectively be able to influence:

the election of all of the Corporation’s directors and, as a result, control matters requiring board approval;
matters submitted to a shareholder vote, including mergers, acquisitions and consolidations with third parties and the sale of all or substantially all of the Corporation’s assets; and
the Corporation’s business direction and policies.

If Cascades is not successful in retaining or replacing its key personnel, including its President and Chief Executive Officer, its Vice-President and Chief Financial Officer, its Chief of Strategy and Legal Affairs, and its Executive Chairman of the Board and co-founder Alain Lemaire, the Corporation's business, financial condition or operating results could be adversely affected.

Although Cascades believes that its key personnel will remain active in the business and that Cascades will continue to be able to attract and retain other talented personnel and replace key personnel should the need arise, competition in recruiting replacement personnel could be significant. Cascades does not carry key-man insurance on the members of its senior management.

2022 Annual Report

Cascades’ business activities, intellectual property, operating results and financial position could suffer if Cascades is unable to protect its information systems against, or effectively respond to, cyber-attacks or other cyber incidents.

The Corporation relies on information technology, other computer resources and its employees to process, transmit and store electronic data in its daily business activities and to carry out important operational and marketing activities. Despite the implementation of security measures, the Corporation’s technology systems and those of third parties on which it relies, are vulnerable to damage, disability or failure due to computer viruses, malware or other harmful circumstance, intentional penetration or disruption of the Corporation’s information technology resources by a third party, natural disasters, hardware or software corruption or failure or error (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions (including the failure to follow its security protocols), or lost connectivity to its networked resources. A significant and extended disruption in the functioning of these resources would result in an interruption of the Corporation’s operations and could damage its reputation and cause the Corporation to lose customers, sales and revenue.

In addition, security breaches involving the Corporation’s systems or third-party providers may occur, such as unauthorized access, denial of service, computer viruses and other disruptive problems caused by hackers. This could result in the unintended public disclosure or the misappropriation of proprietary, personal and confidential information or in the inability to access company data (including due to ransomware), and require the Corporation to incur significant expense to address and resolve these kinds of issues. The release of confidential information may also lead to identity theft and related fraud, litigation or other proceedings against the Corporation by affected individuals and/or business partners and/or by regulators and the outcome of such proceedings, which could include penalties or fines, could have a material and adverse effect on its business activities, intellectual property, operating results and financial condition. The occurrence of any of these incidents could result in adverse publicity, loss of consumer confidence or employees, and reduced sales and profits. In addition, the costs of maintaining adequate protection against such threats, including potentially higher insurance costs, as they develop rapidly in the future (or as legal requirements related to data security increase) could be material. Cyber security represents a company-wide challenge and the related risks are part of the enterprise risk management program that is presented to the Corporation’s audit and finance committee.

As a result of the foregoing, the Corporation may have to modify its business systems and practices with the goal of further improving data security, which would result in increased expenditures and operating complexity. Although the Corporation has to date not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that it will not incur such losses in the future. The Corporation’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As cyber threats continue to evolve, the Corporation may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.

Climate change could negatively affect Cascades’ business and operations.

There is concern that carbon dioxide and other greenhouse gases in the atmosphere have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. The Corporation operates plants and delivers products to clients in locations that may be subject to climate stress events such as sea-level rise and increased storm frequency or intensity. Caused by climate change or not, the occurrence of one or more natural disasters or extreme weather conditions, such as a hurricane, tornado, earthquake or flooding, may disrupt the productivity of the Corporation’s facilities or the operation of its supply chain and unfavourably impact the demand for or its consumers’ ability to purchase, its products. Further, climate changes could require higher remediation and insurance costs for the Corporation.

Concern over climate change may result in new or increased regional, federal and/or global legal and regulatory requirements to reduce or mitigate the effects of greenhouse gases or to limit or impose additional costs on commercial water use due to local water scarcity concerns. In the event that such regulation is more stringent than current regulatory obligations or the measures that the Corporation is currently undertaking to monitor and improve its energy efficiency and water conservation, the Corporation may experience disruptions in, or significant increases in its costs of, operation and delivery and the Corporation may be required to make additional investments in facilities and equipment or relocate its facilities. In particular, increasing regulation of fuel emissions could substantially increase the cost of energy, including fuel, required to operate the Corporation’s facilities or transport and distribute its products, thereby substantially increasing the distribution and supply chain costs associated with its products. As a result, the effects of climate change could negatively affect the Corporation’s business and operations.

There is also increased focus, including by governmental and non-governmental organizations, investors, customers and consumers on environmental sustainability matters, including deforestation, land use, climate impact, water use and recyclability or recoverability of packaging, including plastic. The Corporation’s reputation could be damaged if it or others in its industry do not act, or are perceived not to act, responsibly with respect to the Corporation’s impact on the environment.

2022 Annual Report

Risks relating to the Corporation’s indebtedness

The significant amount of the Corporation’s debt could adversely affect its financial health and prevent it from fulfilling its obligations under its outstanding indebtedness.

The Corporation has a significant amount of debt. As of December 31, 2022, it had $1,966 million of net debt[1] outstanding on a consolidated basis, including lease obligations of $208 million and net cash and cash equivalents of $102 million.

The Corporation’s leverage could have major consequences for holders of its shares. For example, it could:

make it more difficult for the Corporation to satisfy its obligations with respect to its indebtedness;
increase the Corporation’s vulnerability to competitive pressures and to general adverse economic or market conditions and require it to dedicate a substantial portion of its cash flow from operations to servicing debt, reducing the availability of its cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes;
limit its flexibility in planning for, or reacting to, changes in its business and industry; and
limit its ability to obtain additional sources of financing.

The Corporation’s ability to service its indebtedness will depend on its ability to generate cash in the future. The Corporation cannot provide assurance that its business will generate sufficient cash flow from operations or that future borrowings will be available in an amount sufficient to enable it to service its indebtedness or to fund other liquidity needs. Additionally, if the Corporation is not in compliance with the covenants and obligations under its debt instruments, it would be in default, and the lenders could call the debt, which would have a material adverse effect on its business.

Cascades may incur additional debt in the future, which would intensify the risks it now faces as a result of its leverage as described above.

Even though the Corporation is substantially leveraged, it and its subsidiaries will be able to incur substantial additional indebtedness in the future. Although its credit facility and the indentures governing the notes restrict the Corporation and its restricted subsidiaries from incurring additional debt, these restrictions are subject to important exceptions and qualifications. As of December 31, 2022, the Corporation had $385 million (net of letters of credit in the amount of $15 million) available on its $750 million revolving credit facility (excluding the credit facilities of our subsidiary Greenpac). If the Corporation or its subsidiaries incur additional debt, the risks that it and they now face as a result of its leverage could intensify.

The Corporation’s operations are substantially restricted by the terms of its debt, which could limit its ability to plan for or react to market conditions, or to meet its capital needs.

The Corporation’s credit facilities and the indenture governing its senior notes include a number of significant restrictive covenants. These covenants restrict, among other things, the Corporation’s ability to:

incur debt;
pay dividends on stock, repurchase stock or redeem subordinated debt;
make investments;
sell assets, including capital stock in subsidiaries;
• guarantee other indebtedness;
enter into agreements that restrict dividends or other distributions from restricted subsidiaries (solely in the case of the Corporation’s credit facility);
enter into transactions with affiliates;
create or assume liens securing debt;
sell or transfer lease back transactions;
engage in mergers or consolidations; and
enter into a sale of all or substantially all of our assets.

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2022 Annual Report

These covenants could limit the Corporation’s ability to plan for or react to market conditions or to meet its capital needs.

The Corporation’s current credit facility contains other, more restrictive covenants, including financial covenants that require it to achieve certain financial and operating results, and maintain compliance with specified financial ratios. The Corporation’s ability to comply with these covenants and requirements may be affected by events beyond its control and it may have to curtail some of its operations and growth plans to maintain compliance.

The restrictive covenants contained in the Corporation’s senior note indenture, along with the Corporation’s credit facility, do not apply to its joint ventures, minority investments and unrestricted subsidiaries.

The Corporation’s failure to comply with the covenants contained in its credit facility or its senior note indenture, including as a result of events beyond its control or due to other factors, could result in an event of default that could cause accelerated repayment of the debt.

If Cascades is not able to comply with the covenants and other requirements contained in the indenture, its credit facility or its other debt instruments, an event of default under the relevant debt instrument could occur. If an event of default does occur, it could trigger a default under its other debt instruments, Cascades could be prohibited from accessing additional borrowings and the holders of the defaulted debt could declare amounts outstanding with respect to that debt, which would then be immediately due and payable. The Corporation’s assets and cash flow may not be sufficient to fully repay borrowings under its outstanding debt instruments. In addition, the Corporation may not be able to refinance or restructure the payments on the applicable debt. Even if the Corporation were able to secure additional financing, it might not be available on favourable terms. A significant or prolonged downtime in general business and difficult economic conditions may affect the Corporation’s ability to comply with the covenants in its debt instruments and could require it to take actions to reduce its debt or to act in a manner contrary to its current business objectives.

Cascades is a holding corporation and depends on its subsidiaries to generate sufficient cash flow to meet its debt service obligations.

Cascades is structured as a holding corporation and its only significant assets are the capital stock or other equity interests in its subsidiaries, joint ventures and minority investments. As a holding corporation, Cascades conducts substantially all of its business through these entities. Consequently, the Corporation’s cash flow and ability to service its debt obligations are dependent on the earnings of its subsidiaries, joint ventures and minority investments, and the distribution of those earnings to Cascades, or on loans, advances or other payments made by these entities to Cascades. The ability of these entities to pay dividends or make other payments or advances to Cascades will depend on their operating results and will be subject to applicable laws and contractual restrictions contained in the instruments governing their debt. In the case of the Corporation’s joint ventures, associates and minority investments, Cascades may not exercise sufficient control to cause distributions to itself. Although its credit facility and the indenture, respectively, limit the ability of its restricted subsidiaries to enter into consensual restrictions on their ability to pay dividends and make other payments to the Corporation, these limitations do not apply to its joint ventures, associates, minority investments or unrestricted subsidiaries. The limitations are also subject to important exceptions and qualifications.

The ability of the Corporation’s subsidiaries to generate cash flow from operations that is sufficient to allow the Corporation to make scheduled payments on its debt obligations will depend on their future financial performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of the Corporation’s control. If the Corporation’s subsidiaries do not generate sufficient cash flow from operations to satisfy the Corporation’s debt obligations, Cascades may have to undertake alternative financing plans, such as refinancing or re-structuring its debt, selling assets, reducing or delaying capital investments, or seeking to raise additional capital. Refinancing may not be possible and assets may not be able to be sold, or, if they are sold, Cascades may not realize sufficient amounts from those sales. Additional financing may not be available on acceptable terms, if at all, or the Corporation may be prohibited from incurring it, if available, under the terms of its various debt instruments in effect at the time. The Corporation’s inability to generate sufficient cash flow to satisfy its debt obligations, or to refinance its obligations on commercially reasonable terms, would have an adverse effect on its business, financial condition and operating results. The earnings of the Corporation’s operating subsidiaries and the amount that they are able to distribute to the Corporation as dividends or otherwise may not be adequate for the Corporation to service its debt obligations.

2022 Annual Report

Variable rate indebtedness subjects Cascades to interest rate risk, which could cause its debt service obligations to increase significantly.

The Corporation’s borrowings under its credit facility bear interest at variable rates and, accordingly, expose the Corporation to interest rate risk. If interest rates increase, our debt service obligations on our variable rate indebtedness could increase even though the amount borrowed remained the same and our net income could decrease. The applicable margin with respect to the loans under the Corporation’s credit facility is a percentage per annum equal to a reference rate plus the applicable margin. In order to manage its exposure to interest rate risk, the Corporation may in the future enter into derivative financial instruments, typically interest rate swaps and caps, involving the exchange of floating for fixed rate interest payments. If the Corporation is unable to enter into interest rate swaps, it may adversely affect its cash flow and may impact its ability to make required principal and interest payments on its indebtedness.The LIBOR, as a benchmark for establishing the applicable interest rate, will be abandoned in July 2023 and is being replaced by the Secured Overnight Financing Rate (SOFR). For all the outstanding variable rate indebtedness agreements, except one, the Corporation adopted SOFR for establishing its interest rate, this did not have any significant impact on the cost of servicing the debt. The only agreement left to transition to SOFR from LIBOR, is the loan that matures on December 11, 2023 and bears interest at a rate determined by the leverage ratio of the subsidiary holding the debt as defined in its credit agreement.

Risks related to the common shares

The market price of the common shares may fluctuate and purchasers may not be able to resell the common shares at or above the Offering Price.

The market price of the common shares may fluctuate due to a variety of factors relative to the Corporation’s business, including announcements of new developments, fluctuations in the Corporation’s operating results, sales of the common shares in the marketplace, failure to meet analysts’ expectations, general conditions in all of our segments or the worldwide economy and related uncertainty, many of which are beyond the Corporation’s control. In recent years, the common shares, the stock of other companies operating in the same sectors and the stock market in general have experienced significant price fluctuations, which have been unrelated to the operating performance of the affected companies. There can be no assurance that the market price of the common shares will not continue to experience significant fluctuations in the future, including fluctuations that are unrelated to the Corporation’s performance.

Payments of dividends

Any decision to pay dividends on the common shares is subject to the discretion of the Board of Directors and based on, among other things, Cascades’ earnings and financial requirements for operations, the satisfaction of applicable solvency tests for the declaration and payment of dividends and other conditions existing from time to time. As a result, no assurance can be given as to whether Cascades will declare and pay any dividends in the future, or the frequency or amount of any such dividend.

Potential dilution

The Corporation’s articles permit the issuance of an unlimited number of common shares and an unlimited number of Class A and Class B preferred shares, issuable in series. In order to successfully complete targeted acquisitions or to fund its other activities, the Corporation may issue additional equity securities that could dilute share ownership. The dilutive effect of these issuances may adversely affect the Corporation’s ability to obtain additional capital or impair the Corporation’s share price.

CONTINGENCIES

ENVIRONMENTAL COSTS

The Corporation is currently working with representatives of the Ontario Ministry of the Environment (MOE) - Northern Region and Environment Canada - Great Lakes Sustainability Fund in Toronto regarding its potential responsibility for an environmental impact identified at its former Thunder Bay facility. Both authorities lead the working group and they are developing a site management plan relating to the sediment quality adjacent to Thunder Bay's lagoon. Several meetings have been held during the past years with the MOE and Environment Canada and a management plan based on sediment dredging has been proposed by a third-party consultant. Both governments are looking at this proposal with stakeholders to agree on this remediation action plan that would likely be implemented in the coming years.

The Corporation has recorded an environmental reserve to address its estimated exposure for this matter.

LEGAL CLAIMS

In the normal course of operations, the Corporation is party to various legal actions and contingencies, mostly related to contract disputes, environmental and product warranty claims, and labour issues. While the final outcome with respect to legal actions outstanding or pending as of December 31, 2022 cannot be predicted with certainty, it is Management's opinion that the outcome will not have a material adverse effect on the Corporation's consolidated financial position, the results of its operations or its cash flows.

2022 Annual Report

SUPPLEMENTAL INFORMATION ON NON-IFRS MEASURES AND OTHER FINANCIAL MEASURES

SPECIFIC ITEMS

The Corporation incurs some specific items that adversely or positively affect its operating results. We believe it is useful for readers to be aware of these items as they provide additional information to measure performance, compare the Corporation’s results between periods, and assess operating results and liquidity, notwithstanding these specific items. Management believes these specific items are not necessarily reflective of the Corporation’s underlying business operations in measuring and comparing its performance and analyzing future trends. Our definition of specific items may differ from that of other corporations and some of these items may arise in the future and may reduce the Corporation’s available cash.

They include, but are not limited to, charges for (reversals of) impairment of assets, restructuring gains or costs, loss on refinancing and repurchase of long-term debt, some deferred tax asset provisions or reversals, premiums paid on repurchase of long-term debt, gains or losses on the acquisition or sale of a business unit, gains or losses on the share of results of associates and joint ventures, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, unrealized gains or losses on interest rate swaps and option fair value revaluation, foreign exchange gains or losses on long-term debt and financial instruments, fair value revaluation gains or losses on investments, specific items of discontinued operations and other significant items of an unusual, non-cash or non-recurring nature.

RECONCILIATION AND USES OF NON-IFRS AND OTHER FINANCIAL MEASURES

To provide more information for evaluating the Corporation’s performance, the financial information included in this analysis contains certain data that are not performance measures under IFRS (“non-IFRS measures”), which are also calculated on an adjusted basis to exclude specific items. We believe that providing certain key performance and capital measures, as well as non-IFRS measures, is useful to both Management and investors, as they provide additional information to measure the performance and financial position of the Corporation. This also increases the transparency and clarity of the financial information. The following non-IFRS measures and other financial measures are used in our financial disclosures:

Non-IFRS measures

Adjusted earnings before interest, taxes, depreciation and amortization or EBITDA (A): Used to assess operating performance and the contribution of each segment on a comparable basis.
Adjusted net earnings: Used to assess the Corporation’s consolidated financial performance on a comparable basis.
Adjusted cash flow: Used to assess the Corporation’s capacity to generate cash flows to meet financial obligations and/or discretionary items such as share repurchase, dividend increase and strategic investments.
Free cash flow: Used to measure the excess cash the Corporation generates by subtracting capital expenditures (excluding strategic projects) from the EBITDA (A).
Working capital: Used to assess the short-term liquidity of the Corporation.

Other financial measures

Total debt: Used to calculate all the Corporation’s debt, including long-term debt and bank loans. Often put in relation to equity to calculate the debt-to-equity ratio.
Net debt: Used to calculate the Corporation’s total debt less cash and cash equivalents. Often put in relation to EBITDA (A) to calculate net debt to EBITDA (A) ratio.

Non-IFRS ratios

Net debt to EBITDA (A) ratio: Used to assess the Corporation’s ability to pay its debt and evaluate financial leverage.
EBITDA (A) margin: Used to assess operating performance and the contribution of each segment on a comparable basis calculated as a percentage of sales.
Adjusted net earnings per common share: Used to assess the Corporation’s consolidated financial performance on a comparable basis.
Net debt / Net debt + Shareholders’ equity: Used to evaluate the Corporation’s financial leverage and thus the risk to Shareholders.
Working capital as a percentage of sales: Used to assess the Corporation’s operating liquidity performance.
Adjusted cash flow per common share: Used to assess the Corporation’s financial flexibility.
Free cash flow ratio: Used to measure the liquidity and efficiency of how much more cash the Corporation generates than it uses to run the business by subtracting capital expenditures (excluding strategic projects) from the EBITDA (A) calculated as a percentage of sales.

2022 Annual Report

Non-IFRS and other financial measures are mainly derived from the consolidated financial statements, but do not have meanings prescribed by IFRS. These measures have limitations as an analytical tool and should not be considered on their own or as a substitute for an analysis of our results as reported under IFRS. In addition, our definitions of non-IFRS and other financial measures may differ from those of other corporations. Any such modification or reformulation may be significant.

During the year ended December 31, 2022, the CODM assesses the performance of each reportable segment based on sales and earnings before interest, taxes, depreciation and amortization, adjusted to exclude specific items (EBITDA (A)). The CODM considers EBITDA (A) to be the best performance measure of the Corporation's activities.

The reconciliation of operating income (loss) to EBITDA (A) by business segment is as follows:

	For the 3-monthperiod ended December 31, 2022	For the 3-monthperiod ended December 31, 2022	For the 3-monthperiod ended December 31, 2022	For the 3-monthperiod ended December 31, 2022	For the 3-monthperiod ended December 31, 2022
(in millions of Canadian dollars) (unaudited)	Containerboard	Specialty Products	Tissue Papers	Corporate Activities	Consolidated
Operating income(loss)	85	22	(86)	(41)	(20)
Depreciation and amortization Impairment charges Gain on acquisitions, disposals and others Restructuring costs Unrealizedgain on derivative financial instruments	30	5	17	10	62
	8	3	75	—	86
	—	(10)	—	—	(10)
	— (4)	— —	2 —	— —	2 (4)
EBITDA(A)	119	20	8	(31)	116

	For the 3-monthperiod ended December 31, 2021	For the 3-monthperiod ended December 31, 2021	For the 3-monthperiod ended December 31, 2021	For the 3-monthperiod ended December 31, 2021	For the 3-monthperiod ended December 31, 2021
(in millions of Canadian dollars) (unaudited)	Containerboard	Specialty Products	Tissue Papers	Corporate Activities	Consolidated
Operating income(loss)	43	17	(115)	(35)	(90)
Depreciation and amortization Impairment charges Gain on acquisitions, disposals and others Restructuring costs Unrealized loss(gain)on derivative financial instruments	28	4	17	11	60
	1	—	87	—	88
	—	—	(1)	—	(1)
	— (2)	— —	6 —	— 1	6 (1)
EBITDA(A)	70	21	(6)	(23)	62

2022

					2022
(in millions of Canadian dollars) (unaudited)	Containerboard	Specialty Products	Tissue Papers	Corporate Activities	Consolidated
Operating income(loss)	266	86	(175)	(144)	33
Depreciation and amortization Impairment charges Gain on acquisitions, disposals and others Restructuring costs Unrealized loss(gain)on derivative financial instruments	118	19	74	41	252
	10	3	89	—	102
	—	(16)	(4)	—	(20)
	— 7	— —	3 —	— (1)	3 6
EBITDA(A)	401	92	(13)	(104)	376

	2021	2021	2021	2021	2021
(in millions of Canadian dollars) (unaudited)	Containerboard	Specialty Products	Tissue Papers	Corporate Activities	Consolidated
Operating income(loss)	230	59	(108)	(131)	50
Depreciation and amortization Impairment charges Gain on acquisitions, disposals and others Restructuring costs Unrealized loss on derivative financial instruments	120	15	70	47	252
	1	—	88	—	89
	—	—	(40)	—	(40)
	4 17	— —	17 —	— —	21 17
EBITDA(A)	372	74	27	(84)	389

2022 Annual Report

The following table reconciles net earnings (loss) and net earnings (loss) per common share, as reported, with adjusted net earnings (loss) and adjusted net earnings (loss) per common share:

(in millions of Canadian dollars, except per common share amounts and number of common shares) (unaudited)	NET EARNINGS(LOSS)	NET EARNINGS(LOSS)	NET EARNINGS(LOSS)	NET EARNINGS(LOSS)	NET EARNINGS (LOSS) PER COMMON SHARE1	NET EARNINGS (LOSS) PER COMMON SHARE1	NET EARNINGS (LOSS) PER COMMON SHARE1	NET EARNINGS (LOSS) PER COMMON SHARE1
	For the 3-month periods ended December 31,		For the years ended December 31,		For the 3-month periods ended December 31,		For the years ended December 31,
	2022	2021	2022	2021	2022	2021	2022	2021
As reported Specific items: Impairment charges Gain on acquisitions, disposals and others Restructuring costs Unrealized loss (gain) on derivative financial instruments Loss on repurchase of long-term debt Unrealized loss on options fair value Foreign exchange loss (gain) on long-term debt and financial instruments	(27)	105	(34)	162	($0.27)	$1.04	($0.34)	$1.60

	86	88	102	89	$0.64	$0.74	$0.76	$0.75
	(10)	(1)	(20)	(40)	($0.09)	($0.01)	($0.17)	($0.32)
	2 (4) — — (3) — (22)	6 (1) 20 1 — (204) (23)	3 6 — — 9 — (29)	21 17 20 1 (3) (224) (16)	$0.02	$0.04 ($0.01) $0.13	$0.03 $0.04	$0.15 $0.11 $0.13
					($0.03)
					—		—
					—	—	—	—
					($0.02)	— ($2.02) —	$0.08	($0.02)
Included in discontinued operations, net of tax					—		—	($2.14)
Tax effect on specific items, other tax adjustments and attributable to non-controllinginterests1					($0.03)		($0.03)	—
	49	(114)	71	(135)	$0.49	($1.13)	$0.71	($1.34)
Adjusted	22	(9)	37	27	$0.22	($0.09)	$0.37	$0.26
Weighted average basic number of common shares outstanding					100,361,627	100,858,870	100,647,972	101,884,051

The following table reconciles cash flow from operating activities from continuing operations with EBITDA (A):

(in millions of Canadian dollars) (unaudited)	For the 3-month periods ended December 31,	For the 3-month periods ended December 31,	For the years ended December 31,	For the years ended December 31,
	2022	2021	2022	2021
Cash flow from operating activities from continuing operations Changes in non-cash working capital components Net income taxes paid (received) Net financing expense paid Premium and transaction fees paid on long-term debt redemption Provisions for contingencies and charges and other liabilities, net of dividends received	196 (96) — 15 —	69 (49)	144 116	211 36 (2) 96 24
		— 11 24	5 87 —
	1	7	24	24
EBITDA(A)	116	62	376	389

1 Specific amounts per common share are calculated on an after-tax basis and are net of the portion attributable to non-controlling interests. Per common share amounts in line item “Tax effect on specific items, other tax adjustments and attributable to non-controlling interests” only include the effect of tax adjustments. Please refer to “Provision for (recovery of) income taxes” section for more details.

2022 Annual Report

The following table reconciles cash flow from operating activities from continuing operations with cash flow from operating activities from continuing operations (excluding changes in non-cash working capital components) and adjusted cash flow from operating activities from continuing operations. It also reconciles adjusted cash flow from operating activities from continuing operations to adjusted cash flow used, which is also calculated on a per common share basis:

which is also calculated on a per common share basis:
(in millions of Canadian dollars, except per common share amounts or as otherwise noted) (unaudited)	For the 3-month periods ended December 31,		For the years ended December 31,
	2022	2021	2022	2021
Cash flow from operating activities from continuing operations Changes in non-cash workingcapital components	196 (96)	69 (49)	144 116	211 36
Cash flow from operating activities from continuing operations (excluding changes in non-cash working capital components) Restructuring costs paid Premium and transaction feespaid on long-term debt redemption	100 3	20	260 12	247
		7		25
	—	24	—	24
Specific itemspaid	3	31	12	49
Adjusted cash flow from operating activities from continuing operations Payments for property, plant and equipment Change in intangible and other assets Lease obligation payments Proceeds from disposals ofproperty,plant and equipment	103 (160) (2) (15) 11	51 (95) (1) (12) 2	272 (501) (5) (55) 19	296
				(286) (15) (47)
				53
Dividends paid to non-controlling interests Dividendspaid to the Corporation's Shareholders	(63)	(55)	(270) (13)	1
	(4)	(4)		(14)
	(12)	(12)	(48)	(41)
Adjusted cash flow used Adjusted cash flow usedper common share(in Canadian dollars)	(79) ($0.79)	(71) ($0.70)	(331)	(54) ($0.53)
			($3.29)
Weighted average basic number of common shares outstanding	100,361,627	100,858,870	100,647,972	101,884,051

The following table reconciles payments for property, plant and equipment, excluding strategic projects and free cash flow. It also provides these two metrics as a percentage of sales:

The following table reconciles payments for property, plant and equipment, excluding strategic projects and free cash these two metrics as a percentage of sales:	flow. It also provides
(in millions of Canadian dollars) (unaudited) 2022	2021
Sales 4,466 EBITDA (A) 376 Payments for property, plant and equipment 501 Less: strategicprojects included above1 (335)	3,956

	389
	286
	(101)
Payments forproperty,plant and equipment, excludingstrategicprojects 166	185
Free cash flow: EBITDA(A)lesspayments forproperty plant and equipment, excludingstrategicprojects 210	204
Free cash flow / Sales 4.7%
	5.2%
Payments forproperty,plant and equipment, excludingstrategicprojects / Sales 3.7%	4.7%

1 Strategic projects include the investment for the Bear Island construction project.

2022 Annual Report

The following table reconciles working capital as reported:

The following table reconciles working capital as reported:
(in millions of Canadian dollars) (unaudited) December 31, 2022	December 31, 2021	December 31, 20201
Accounts receivable 556 Inventories 587 Trade and otherpayables (746)	510 494 (707)	659 569 (861)
Working capital 397	297	367

The following table reconciles total debt and net debt with the ratio of net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA (A)):

amortization (EBITDA (A)):
(in millions of Canadian dollars, except ratios) (unaudited) December 31, 2022	December 31, 2021	December 31, 20201
Long-term debt 1,931 Current portion of other debts without recourse to the Corporation to be refinanced 67 Current portion of long-term debt 67 Bank loans and advances 3	1,450	1,949 — 102 12
	—
	74 1
Total debt 2,068 Less: Cash and cash equivalents (102)	1,525 (174)	2,063 (384)
Net debt as reported 1,966 Last twelve months EBITDA(A) (before discontinued operations for the year ended December 31, 2020) 376	1,351	1,679 675
	389
Net debt / EBITDA(A) ratio 5.2x	3.5x	2.5x

SPECIFIC ITEMS

The Corporation incurred the following specific items in 2022 and 2021:

IMPAIRMENT CHARGES

2022

The Containerboard Packaging segment recorded an impairment charge of $10 million ($8 million in the fourth quarter) on some property, plant and equipment related to the closure of a plant in Canada and to unused assets in Canada and the USA. The recoverable amount was determined using the market approach of comparable assets on the market.

The Specialty Products segment recorded an impairment charge of $3 million in the fourth quarter on goodwill, related to the closure of a plant in USA. The recoverable amount of goodwill was determined using an income approach.

The Tissue Papers segment recorded an impairment charge of $4 million on spare parts and $10 million on some property, plant and equipment related to the permanent closure of a plant in the USA. The recoverable amount was determined using the market approach of comparable assets on the market.

The Tissue Papers segment also recorded, in the fourth quarter, an impairment charge of $55 million on machinery and equipment related to assets acquired in 2019 in the USA due to slower ramp-up and lower efficiency than expected. The recoverable amount was determined using the market approach of comparable assets on the market. For the same plants, an impairment charge related to buildings of $20 million was recorded. The recoverable amount was established using the income method over a period of 20 years and a capitalization rate of 7.25%.

2021

The Containerboard Packaging segment recorded an impairment charge of $1 million in the fourth quarter on an asset that became idle following the introduction of a new technology. The recoverable amount was lower than its carrying amount, which was based on its fair value less cost of disposal determined using the market approach of comparable assets on the market.

The Tissue Papers segment recorded an impairment charge of $1 million on spare parts related to closed plants.

1 Not adjusted for retrospective reclassification of discontinued operations.

2022 Annual Report

The market dynamic led to lower than usual volumes in the Tissue Papers segment. Specifically, volume impacts in the Away-from-Home market began in the second quarter of 2020, while lower volumes in the Consumer Products market started in the second quarter of 2021 following higher than usual demand in the prior year. The current market dynamic led the Corporation to record an impairment charge totaling $71 million in the fourth quarter on goodwill and other intangible assets reflecting uncertainty about the recoverable amount of the segment compared to its carrying value. The Tissue Papers segment also recorded an impairment charge of $16 million in the fourth quarter on property, plant and equipment of one of its United States CGUs due to sustained difficult market conditions and assets underperformance. The recoverable amount of these assets was determined using the market approach of comparable assets on the market EBITDA multiple or an income approach.

GAIN ON ACQUISITIONS, DISPOSALS AND OTHERS

2022

The Specialty Products segment recorded a $16 million ($10 million in the fourth quarter) gain from the sale of lands and a building related to closed plants in Canada.

The Tissue Papers segment recorded a $4 million gain from the settlement of a supply agreement.

2021

The Tissue Papers segment recorded a $40 million ($1 million in the fourth quarter) gain from the sale of buildings related to closed plants in the USA and in Canada.

RESTRUCTURING COSTS

2022

The Tissue Papers segment recorded additional costs totaling $3 million ($2 million in the fourth quarter) related to asset relocation and severances.

2021

The Containerboard Packaging segment recorded severance charges totaling $3 million as part of the margin improvement program.

The Containerboard Packaging segment also recorded closure costs totaling $1 million related to the closure of plants in Ontario, Canada.

The Tissue Papers segment recorded additional costs totaling $17 million ($6 million in the fourth quarter) related to asset relocation and severances.

UNREALIZED LOSS ON DERIVATIVE FINANCIAL INSTRUMENTS

In 2022, the Corporation recorded an unrealized loss of $6 million ($4 million unrealized gain in the fourth quarter), compared to an unrealized loss of $17 million ($1 million unrealized gain in the fourth quarter) in 2021, on certain derivative financial instruments not designated for hedge accounting. The Containerboard Packaging segment recorded an unrealized loss of $7 million in 2022 and $17 million in 2021 is due to a steam contract embedded derivatives related to our Niagara Falls containerboard complex. Corporate Activities recorded an unrealized gain of $1 million in 2022 due to the financial hedging contracts for natural gas purchases.

LOSS ON REPURCHASE OF LONG-TERM DEBT

In the fourth quarter of 2021, the Corporation redeemed US$144 million ($180 million) and US$155 million ($192 million) of its 2026 and 2028 unsecured senior notes, respectively, and paid an early repurchase premium totaling US$18 million ($22 million) and wrote off $4 million of unamortized financing costs and $8 million of unamortized issuance premium related to these notes. The Corporation also paid transaction fees totaling $2 million.

UNREALIZED LOSS ON OPTIONS FAIR VALUE

In the fourth quarter of 2021, the Corporation recorded an unrealized loss of $1 million, pertaining to a call option granted to the Corporation by one of the minority shareholders of Falcon Packaging LLC.

FOREIGN EXCHANGE LOSS (GAIN) ON LONG-TERM DEBT AND FINANCIAL INSTRUMENTS

In 2022, the Corporation recorded a loss of $9 million ($3 million gain in the fourth quarter) on its US$ denominated debt and related financial instruments, compared to a gain of $3 million (nil in the fourth quarter) in 2021. This is composed of foreign exchange forward contracts not designated for hedge accounting.

SPECIFIC ITEMS INCLUDED IN RECOVERY OF INCOME TAXES

In the fourth quarter of 2022, the Corporation recorded a $3 million deferred tax benefit as a result of a tax election related to the discontinued operations realized in 2021.

2022 Annual Report

SPECIFIC ITEMS INCLUDED IN DISCONTINUED OPERATIONS 2021

The Boxboard Europe segment recorded a $2 million loss from the sale of all the shares of its French subsidiary which produces virgin fibre-based boxboard. The Boxboard Europe segment also recorded an $18 million gain from a business acquisition. The segment also recorded an unrealized gain on financial instruments of $6 million (before income tax of $2 million).

In the fourth quarter, the Corporate Activities recorded a gain of $228 million (before income tax of $24 million) from the sale of its 57.6% controlling equity interest in Reno de Medici S.p.A. (RDM).

Please refer to the “Discontinued Operations” section and Note 5 of the 2022 Audited Consolidated Financial Statements for more details.

DISCONTINUED OPERATIONS

On July 5, 2021, the Corporation announced the monetization of its 57.6% controlling equity interest in Reno de Medici S.p.A. (RDM) for an amount per share of €1.45, or $462 million including foreign exchange contracts and before related transaction fees of $12 million. The transaction closed on October 26, 2021. The Corporation recorded a gain of $228 million before income taxes of $24 million. The Corporation used tax assets to offset this tax expense, resulting in no income tax payable on this transaction. The operations are presented as discontinued operations since the second quarter of 2021 with reclassification of the first quarter of 2021, as well as the comparative years.

On February 15, 2021, the Boxboard Europe segment, via its ownership in Reno de Medici S.p.A., announced the sale of all the shares of its French subsidiary which produces virgin fibre-based boxboard. The transaction was closed on April 30, 2021 and resulted in a loss of $2 million, which is presented within the results from discontinued operations of the Boxboard Europe segment.

See the “Business Highlights” section and Note 5 of the 2022 Audited Consolidated Financial Statements for all details regarding the discontinued operations.

2022 Annual Report

HISTORICAL FINANCIAL INFORMATION

(in millions of Canadian dollars, unless otherwise noted) (unaudited)	2020	2021	2021	2022	2022
	YEAR	Q1 Q2 Q3 Q4	YEAR	Q1 Q2 Q3 Q4	YEAR
Sales Packaging Products Containerboard Specialty Products Inter-segment sales	1,918 473 (18)	503 497 507 502 122 131 144 151 (7) (7) (10) (8)	2,009 548 (32)
				534 569 595 567	2,265
				157 168 168 161 (8) (10) (11) (7)	654 (36)
Tissue Papers Inter-segment sales and Corporate Activities	2,373	618 621 641 645 292 297 344 339 32 38 45 44	2,525 1,272 159	683 727 752 721 314 342 382 384 41 50 40 30	2,883 1,422 161
	1,615 117
Total	4,105	942 956 1,030 1,028	3,956	1,038 1,119 1,174 1,135	4,466
Operating income (loss) EBITDA (A)1 Packaging Products Containerboard SpecialtyProducts	292	44 23 73 (90)	50	(4) 32 25 (20)	33
	403 60	108 100 94 70	372
				80 99 103 119	401 92
		18 18 17 21	74	22 25 25 20
Tissue Papers Corporate Activities	463	126 118 111 91 20 1 12 (6) (24) (21) (16) (23)	446 27 (84)	102 124 128 139 (17) (8) 4 8 (27) (25) (21) (31)	493 (13) (104)
	175 (92)
Total	546	122 98 107 62	389	58 91 111 116	376
Margin(EBITDA(A) / Sales) (%)1	13.3%	13.0% 10.3% 10.4% 6.0%	9.8%	5.6% 8.1% 9.5% 10.2%	8.4%
Net earnings (loss) Adjusted1 Net earnings (loss) from continuing operations per basic common share (in Canadian dollars) Net earnings (loss) from discontinued operations per basic common share(in Canadian dollars)	198 187 $1.74 $0.30	22 3 32 105 29 8 (1) (9) $0.17 $0.04 $0.18 ($0.98) $0.05 ($0.02) $0.14 $2.02	162 27 ($0.59) $2.19	(15) 10 (2) (27) (15) 10 20 22	(34) 37
				($0.15) $0.10 ($0.02) ($0.27)	($0.34)
				— — — —	—
Net earnings (loss) per common share (in Canadian dollars) Basic Diluted Basic, adjusted1	$2.04 $2.02 $1.95	$0.22 $0.02 $0.32 $1.04 $0.22 $0.02 $0.32 $1.03 $0.29 $0.07 ($0.01) ($0.09)	$1.60 $1.59 $0.26
				($0.15) $0.10 ($0.02) ($0.27) ($0.15) $0.10 ($0.02) ($0.27) ($0.15) $0.10 $0.20 $0.22	($0.34)
					($0.34)
					$0.37
Cash flow from operating activities (excluding changes in non-cash working capital components)	458	82 87 58 20	247	19 81 60 100	260
Net debt1 Net debt / EBITDA(A) (LTM) ratio1,2	1,679	1,654 1,707 1,760 1,351	1,351	1,549 1,712 2,011 1,966	1,966
	2.5x	2.5x 3.5x 3.8x 3.5x	3.5x	4.8x 5.4x 6.2x 5.2x	5.2x

1 Please refer to the “Supplemental Information on Non-IFRS Measures and Other Financial Measures” section for a complete reconciliation.

2 LTM (last twelve months) and before discontinued operations for the year ended December 31,2020.

2022 Annual Report

AI assistant

Cascades Inc. — Annual Report 2022

42612_rns_2023-02-23_b7fa3d67-da0e-402e-9e86-855296ec6340.pdf

MANAGEMENT'S DISCUSSION & ANALYSIS FINANCIAL SNAPSHOT

FORWARD-LOOKING

OUR BUSINESS

BUSINESS HIGHLIGHTS

STRATEGIC PLAN 2022-2024

TISSUE PAPERS SEGMENT PROFITABILITY PLAN

BEAR ISLAND PROJECT

BUSINESS START-UP, ACQUISITION, DISPOSAL AND CLOSURE

BOXBOARD EUROPE

SIGNIFICANT FACTS AND DEVELOPMENTS

2022

2021

NEAR-TERM OUTLOOK

BUSINESS DRIVERS

EXCHANGE RATES

ENERGY COSTS

OPERATIONAL PERFORMANCE INDICATORS

HISTORICAL MARKET PRICES OF MAIN PRODUCTS AND RAW MATERIALS

SENSITIVITY TABLE[1]

FINANCIAL OVERVIEW - 2022

SALES

SALES ($M)

OPERATING INCOME AND EBITDA (A)[1]

OPERATING INCOME AND EBITDA (A) ($M)

DEPRECIATION AND AMORTIZATION

FINANCING EXPENSE

SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES

PROVISION FOR (RECOVERY OF) INCOME TAXES

RESULTS FROM DISCONTINUED OPERATIONS

NET EARNINGS (LOSS)

BUSINESS SEGMENT REVIEW

PACKAGING PRODUCTS - CONTAINERBOARD

Our Industry

U.S. containerboard industry production and capacity utilization rate[1]

U.S. containerboard inventories at box plants and mills[2]

Canadian corrugated box industry shipments[3]

U.S corrugated box industry shipments[2]

Reference prices - recovered papers (brown grade)[1]

Reference prices - containerboard[1]

Our Performance

BUSINESS SEGMENT REVIEW

PACKAGING PRODUCTS - SPECIALTY PRODUCTS Our Performance

EBITDA (A)[1] ($M)

Sales ($M) and EBITDA (A) margin[1]

SALES ($M)

EBITDA (A) ($M)

BUSINESS SEGMENT REVIEW

TISSUE PAPERS

Our Industry

U.S. tissue paper industry production (parent rolls) and capacity utilization rate[1]

U.S. tissue paper industry converted product shipments[1]

Reference prices - parent rolls[1]

Reference prices - recovered papers (white grade)[1]

Reference prices - market pulp[1]

Our Performance

EBITDA (A)[1] ($M)

Sales ($M) and EBITDA (A) margin[1]

SALES ($M)

EBITDA (A) ($M)

CORPORATE ACTIVITIES

STOCK-BASED COMPENSATION EXPENSE

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS

INVESTING ACTIVITIES FROM CONTINUING OPERATIONS

ASSOCIATES AND JOINT VENTURES

PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT PAYMENTS FOR PROPERTY, PLANT AND EQUIPMENT

CONTAINERBOARD PACKAGING

SPECIALTY PRODUCTS

TISSUE PAPERS

CORPORATE ACTIVITIES

PROCEEDS FROM DISPOSALS OF PROPERTY, PLANT AND EQUIPMENT

2022

2021

CHANGE IN INTANGIBLE AND OTHER ASSETS

FINANCING ACTIVITIES FROM CONTINUING OPERATIONS

INCREASE IN TERM LOAN

REDEMPTION OF UNSECURED SENIOR NOTES

Cascades Inc. Annual Report 2022