Cascades Issues Second Earnings Warning in Six Weeks Due to Omicron’s ‘Rapid Rise’

A Cascades plant is seen in Laval, Quebec. on Wednesday, November 25, 2020. Cascades inc. announces that it will be closing its towel factory in Laval at the end of June next year. Paul Chiasson/The Canadian Press

Cascades Inc. warns its latest quarterly profit will fall below expectations due to a “rapid escalation” of COVID-19, the packaging and fabric maker’s second warning in six weeks.

Adjusted operating profit before depreciation and amortization will be $62 million, the company said in a statement before markets open Monday. That’s about 30% less than the $87 million profit it had forecast in a separate downward revision on Dec. 22.

The Kingsey Falls, Quebec-based company blamed a “rapid escalation” of the Omicron variant in the last two weeks of December, which it said exacerbated existing worker availability issues as well as labor issues. transportation and supply chain. The difficulties triggered an immediate increase in costs, unplanned production breaks and “unprecedented challenges with product deliveries,” the company said.

“The ramifications of the ongoing pandemic-related disruptions and ongoing challenges in product delivery have resulted in significant, often unpredictable, direct and indirect impacts and costs to our businesses,” said the CEO of Cascades, Mario Plourde, in a press release. “With current trends suggesting that the Omicron variant is moderating, we expect the pressures to begin to ease in the first quarter.”

Dozens of businesses in different sectors are experiencing labor and supply chain issues linked to a lack of workers, with some restaurants in Quebec saying they will not be able to keep their regular hours when they reopen this week due to a lack of staff. Cascades said its delivery issues were felt primarily in Canada, where impacts from flooding in British Columbia continued to disrupt rail and trucking during the quarter.

Frédéric Tremblay, an equity analyst at Desjardins, downgraded his rating on Cascades shares from “hold” to “buy” on Monday, saying in a note that he thinks supply chain and inflation will continue to put pressure on the company’s results in the short term. term. In a separate note just days ago, he spoke of “encouraging signs that momentum may be building” for the company as the year progresses.

Cascades shares fell 6% from their previous close on the Toronto Stock Exchange on Monday, trading at $12.95 a share as of noon. A company spokesperson did not respond to a request for additional information about the difficulties encountered.

Cascades, which is expected to present a new three-year strategic plan next month alongside fourth-quarter results, employs about 10,000 people in a network of 80 facilities in North America. The company reported earnings of $198 million or $2.04 per share for fiscal 2020 on sales of $5.1 billion.

Your time is valuable. Receive the Top Business Headlines newsletter in your inbox morning or evening. register today.

Comments are closed.