Jennifer Egan - Director of IR Mario Plourde - President & CEO Allan Hogg - VP & CFO Charles Malo - President & COO, Cascades Containerboard Packaging Group Luc Langevin - President & COO, Cascades Specialty Products Group Jean Jobin - President & COO, Cascades Tissue Group

Hamir Patel - CIBC Capital Markets Paul Quinn - RBC Capital Markets Benoit Laprade - Scotiabank

Good morning. My name is Julian and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cascades' Third Quarter 2017 Financial Results Conference Call. All lines are currently in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. I will now pass the call to Jennifer Egan, Director of Investor Relations for Cascades. Ms. Egan, you may begin your conference.

Thank you, operator. Good morning, everyone, and thank you for joining our third quarter 2017 financial results conference call. Our speakers on this morning's call, will be Mario Plourde, our President and CEO; Allan Hogg, our CFO; Charles Malo, President and COO of our Containerboard Packaging Group; Luc Langevin, President and COO of our Specialty Products Group; and Jean Jobin, President and COO of our Tissue Papers Group. After discussion surrounding our North American operations, Mario will then discuss results from our Boxboard Europe, followed by some concluding remarks, after which we will begin the question period. Before I turn the call over to my colleagues, I would like to highlight that Reno De Medici’s third quarter financial report released on November 3, can be viewed on Reno’s website. I would also note that certain statements made during this call will discuss historical and forward-looking matters. The accuracy of these statements is subject to risk factors that can have a material impact on actual results. These risks are listed in our public filings. These statements, the Investor Presentation, and the press release also include data that are not measures of performance under IFRS. Please refer to Slide 2 in our accompanying Q3 2017 Investor Presentation for details. This presentation along with our third quarter press release can be found on the Investor section of our website. I would like to remind the media and Internet users that they are in listen-only mode, and can therefore only listen to the call. If you have any questions, please feel free to call us after this session. I will now turn the call over to our CEO, Mario.

Thank you, Jennifer, and good afternoon, everyone. We reported third-quarter results earlier this morning that were below expectations. While both operating income and EBITDA increased on a consolidated basis year-over-year, our tissue segment generated disappointing results within the context of a challenging environment of higher raw material prices and increased capacity in the market. Jean will provide you with greater details later during the call. Looking briefly at the performance of our other operations, our Containerboard segment increased third quarter sales and EBITDA year-over-year, mainly reflecting the consolidation of Greenpac. Our European Boxboard segment delivered another good performance during the quarter. As overall business condition and internal optimization projects are positive, lastly lower third quarter EBITDA results from this specialty products segment reflected a lower contribution from recovery and recycling activity related to the stronger Canadian dollars. Looking at our financial performance, third quarter sales totaled $1.1 billion down 2% sequentially and up 8% year-over-year. On an adjusted basis Q3 EBITDA of $106 million was essentially unchanged from Q2 level and was $3 million above prior year third quarter results. On a KPI front, third quarter shipments increased by 11% year-over-year, driven primarily by consolidation of Greenpac. On a sequential basis, future shipments decreased by a slight 1% due mainly to European seasonality. Our capacity utilization rate of 92% in the quarter decreased by 1% year-over-year, reflecting decrease in both Containerboard and Tissue offset by a 4% increase in European Boxboard that was driven by positive demand trends. Sequentially, capacity utilization decreased by 3%. This reflects a lower utilization rate in Containerboard, related to challenge with transport and logistic following weather disruption during the quarter. On a 4% decrease in European Boxboard due to unusual down time in August. The Tissue segment increased capacity utilization by 1% sequentially. On the raw material side, the average Q3 price index of OCC Brown Paper grades was up 9% from Q2 and 60% year-over-year. Virgin Pulp price also increased. Hardwood Virgin Pulp was up 17% year-over-year and 5% from Q2 and softwood Virgin Pulp by 11% and 2% respectively. After registering a recent high of 175 in March, OCC prices fluctuated quite substantially over the next several months. Most recently, price failed by a total of $65 from September through November ending at the new index level of $100. Moving briefly on our financial position, we are pleased to know that our total net debt decreased 17% from Q2 level following the sales of our stake in Boralex. I will now pass the call over to Allan Hogg, who will provide more detail regarding the quarterly result and I will come back for the European operations and the near-term outlook, Allan?

Yes, thank you, Mario and good morning, everyone. So, I will begin with sales as detailed on Slides 12 and 13 of our third quarter conference call presentation, which can be found in the Investor section of our website. On a year-over-year basis, third quarter sales increased by $82 million or 8%. This reflects the consolidation of Greenpac, improvements in pricing and sales mix in all of our segments and a stronger contribution from our recovery and recycling activities. Lower volumes and the appreciation of the Canadian dollar were offsetting factors in all segments, with the exception of European Boxboard. Sequentially Q3 sales decreased by $27 million or 2%, lower volumes in all segments except tissue and a negative FX impact were the driving factors for this decrease. Improvement in selling prices and sales mix in Containerboard was the main positive contributor to sales sequentially. Moving now to operating income and adjusted EBITDA, as highlighted on Slide 14, our Q3 operating income was $1 million above last year while adjusted EBITDA of $106 million increased $3 million from prior year levels. The president of each of our segments will provide more details regarding their respective performance. On a consolidated basis, the benefit derived from the addition of Greenpac results in higher selling prices in Containerboard, a stronger performance in Europe and lower stock-based compensation expense in the corporate segment were offset by higher raw material cost in Containerboard and a weaker performance from the tissue segment. Depreciation expense was also higher due to the Greenpac consolidation. Sequentially, Q3 adjusted EBITDA decreased by a marginal $1 million. This reflects higher raw material costs, weaker performance from the tissue segment and a lower contribution from our European Boxboard operations, related to usual summer downtime. Offsetting these, were a stronger Containerboard performance driven by higher selling prices and a more favorable sales mix and lower stock-based compensation at corporate level. Slide 16 and 17 of the presentation illustrate the sequential and year-over-year volumes of our Q3 earnings per share and the details of the specific items that affected our quarterly results. As reported, earnings per share totaled $0.35 in the third quarter, which included specific items which I will detail in a moment. This compared to reported earnings per share of $0.21 last year. Our third quarter adjusted EPS decreased to $0.20 from $0.32 last year, reflecting stable EBITDA and higher depreciation expense due to Greenpac. However, while EBITDA was stable, the mix of contributors changed as Greenpac and Boxboard Europe segment represented a higher proportion of operating income. Consequently, net earnings attributable to noncontrolling interest in Greenpac and [indiscernible 9:48] was higher compared to last year, thus reducing our share of the net results. In the third quarter of 2017, we also recorded an income tax charge of $3 million related to prior years reassessment. On a sequential basis, third quarter adjusted earnings per share decreased $0.05 from the adjusted earnings per share of $0.25 in the second quarter of 2017, mainly due to volumes in the effective income tax rates. Slide 18 and 19 of the presentation illustrate the specific items recorded during the quarter. We recorded a net amount of $2 million of specific items in Q3 that negatively impacted our operating income. These included a decrease in the value of certain unused assets, a restructuring charge following the announcement of the closure of our New York fine in Containerboard and unrealized gain on derivative financial instruments. With regards to net earnings, we also recorded an $18 million gain on the sale of our equity investment in Boralex and the related deferred tax asset reversal of $8 million, as well as an $8 million foreign exchange gain on long-term debt and financial instruments. As illustrated on Slide 20, cash flow from operations decreased by $5 million year-over-year to $63 million. Free cash flow defined as well compared to last year, reflecting higher capital investments during the period. Moving now to our debt reconciliation, in addition to the cash flow from operations and the $288 million of proceeds from the sale of our equity stake in Boralex, the appreciation of the Canadian dollar positively impacted our debt level during the quarter. These were offset by working capital, liquidity requirements of $43 million in addition to $42 million of investments. Our net debt leverage ratio now stands at 3.6 down from 4.2 at the end of the second quarter on a pro forma basis to include Greenpac. Slide 23 through 28 provide details on our third quarter performance on a segment basis and our near-term outlook is detailed on Slide 30. Thank you for your attention. I'll now pass the call to Charles, who will discuss the third quarter results from our Containerboard Packaging Group, Charles?

Good morning, everyone and thank you Allan. We're pleased to report a significant sequential improvement in results during the third quarter despite the existence of some logistical challenges within the U.S. Containerboard segment. Accordingly, the third quarter shipments reached 369,000 short ton, which represents a 2% sequential decrease. This lower Q3 volume is largely due to a 10,000-short ton decrease in external paper shipments that were the direct results of these logistical challenges. Therefore, the balanced production level with our shipping capacity which slowed down Containerboard production in August and September. Accordingly, our reporting rates decreased to 91% in Q3, which was 3% below the previous quarter. Our Q3 integration rate increased to 55% which represents a 4% increase compared to the previous quarter when including shipments to Greenpac Partners. Including paper sold to our associated companies, our Q3 integration rate totaled 67% compared to 64% in the previous quarter. On the converting slide, shipment increased sequentially by 5,000 short ton or 3%. This outperformed the 2% increase reported for the Canadian market and the 1% decrease for U.S. On the pricing front, our average selling price increased by $42 per ton or 4% on a sequential basis. This is the result of the full impact of the $50 per short ton price increase we started to implement during the second quarter. On a segmented basis, our average Canadian selling price for Containerboard increased by $12 per short ton or 2%, while our corrugated product average selling price in Canadian dollar increased by $36 per short ton or 2%. A favorable product sales mix also positively impacted our average selling price. During the third quarter, the Containerboard Group generated an EBITDA of $72 million, which translates into a margin of sales of 16%. This represents a 3% improvement on a sequential basis and is stable compared to the same quarter last year. Our sequentially higher results were mostly driven by higher average selling price, denominated in Canadian dollars, which added $33 million to cost derivative. Also, lower SG&A cost add $4 million to profitability. Unfortunately, the raw material cost continued to negatively impact our results, mainly due to higher OCC prices substracting $15 million. Appreciation of the Canadian dollar and lower volume also reviews quarterly results by $2 million each. With regards to the short-term outlook, we expect the fourth quarter demand to follow the usual lower seasonal trend. Despite these lower anticipated demand levels, we expect results to benefit from improved operating rates at the overproduction in our Containerboard mills was greatly strong and logistically performing as normalized. Combined with this will be an expected beneficial effect from the recent OCC price reduction and the full beneficial impact from the medium price increase that was implemented in the third quarter. Finally, a word on the construction of our new corrugated plant in Piscataway, the construction is underway and we expect to start the operation in the second quarter of 2018 within the budget and on time. Thank you for your attention and I'll now ask Mario to provide you with an overview of the boxboard activities in Europe, Mario?

Thank you, Charles. The European boxboard segment generated improved sales and EBITDA results year-over-year in the third quarter, driven by increases in both shipments and average selling prices, which reflect continued strengthening of market fundamentals and a more favorable geographical sales mix. On a year-over-year basis, recycled Boxboard shipment increased by 8% during the third quarter, primarily driven by stronger demand in Western Europe while shipments of Virgin Boxboard decreased by 5,000 short ton or 14% during the period. The average selling price increased by 1% in euro and increased by 2% in Canadian dollar, driven by a €14 or 3% increase in the average selling price in recycled boxboard. This was partially offset by a €14 or 2% decrease in the average selling price in Virgin Boxboard during the period due to unfavorable exchange rate with the U.K. market. A 7% increase in the sales in Canadian dollar reflect higher volume, higher recycled boxboard average selling prices and a 1% average depreciation in the Canadian dollar, against the euro. The third quarter EBITDA increased by $5 million year-over-year, largely due to lower energy cost and higher sales. Similarly, a shorter seasonal downtime led to a lower labor and repair and maintenance cost during the period. Higher raw material costs primarily for recycled material, partially offset these benefits during the quarter. Sequentially, shipment declined by 4% after a strong second quarter, which translated into a 5% decrease in the sales during the period. This reflect the usual summer downtime in Europe and a three weeks planned shutdown of the La Rochette mill to complete an important rebuild of the boiler. Average selling prices were unchanged sequentially as higher recycled boxboard pricing was offset by a less favorable sales mix. Adjusted EBITDA decreased by 33% sequentially to $14 million in the third quarter, reflecting the already mentioned factors and higher raw material costs. The near-term outlook continue to be positive in Europe with order inflow and order backlog level both stronger than prior year levels. In a similar vein, macroeconomic forecast also remained positive. However, raw material pricing, most notably recycled fiber is expected to remain under pressure in the longer term, but show some relief in the fourth quarter. On the pricing from the €20 June increase, the €40 September increase on recycled board and a subsequent €70 Virgin Board increase announced in November support a positive outlook in terms of future expectations. I will now pass the call to Luc who will provide you with an overview of the performance of our specialty product groups, Luc?

Thank you, Mario. Good morning. As reported today, the third quarter of 2017 was more difficult for us. Our sales totaled $180 million during this period, a decrease of 4% compared to Q2. This decrease was mostly due to unfavorable FX variations during the quarter and lower volume in the Consumer Packaging and recoveries segments. However, it's worth mentioning that this sales level represented 14% improvement over the same period last year. Consequently, our third quarter EBITDA decreased to $50 million from $20 million from Q2. Again, FX variations and to a less extent a lower volume explain most of this decrease. Looking at this performance on a segmented basis, the Industrial Packaging subsegment EBITDA decreased by $1 million due to lower spreads and a less favorable exchange rate. We expect our spreads to level back to normal or improve in Q4 as prices recently decreased. Our Consumer Product packaging subsegment also generated sequentially lower results. The exchange rate also contributed negatively to our performance, but lower volume in most of our markets and the ensuing impact on production cost also lowered our EBITDA. Fortunately, our supply management and price increases deployed on finished product mitigated the impact of hurricanes on recent price. Finally, after four consecutive strong quarters, our recovery subsegment results was lower, as the exchange rate has been significant and negative impacts during the third quarter. Volume decreased slightly by 3% compared to Q2, but the spread contribution remained favorable. Regarding the near-term outlook, our recovery subsegment Q4 performance will be negatively impacted by recent declines in recovered paper prices, which represented a historical drop for OCC. Visibility for recycled fiber pricing remained somewhat below reported long term. As the Chinese situation becomes clearer, we'll gain a better understanding of what we can expect next year. Until then, we do not expect major variation in OCC prices for the remainder of 2017. Domestic supply is more than sufficient at this moment. The white fiber market is valent in the region where we're active. On the Industrial Packaging front, we expect the business to benefit from recent recovered paper prices decrease. Our converted benefit continue to be busy and we expect the products to remain solid. As for our Consumer Product Packaging subsegment, besides lower seasonal demand typically observed during the fourth quarter, we expect market conditions to return to normal as the third quarter. To conclude despite the seasonality in the rest in the last quarter of the year, we expect the Specialty Products group to replicate it's solid 2016 performance. Thank you for your attention. I will now pass the call to Jean, who will present the results for our Tissue Papers group.

Thank you, Luc. Good morning, everyone. The Tissue group faced challenging market conditions during the third quarter. Despite positive market seasonality, our third quarter results came in below expectation as we generated an adjusted EBITDA of $24 million or a margin of 7.4%, which was below the $35 million and a margin of 10.3% in Q2. When compared to last year, which was the strongest Q3 in our history, this year's Q3 was a challenging quarter. Despite both operational efficiency and fixed cost level that were comparable sequentially and year-over-year, our overall performance was negatively impacted by higher raw material prices, slower than expected sales penetration achieved by our new Oregon converting facility, lower and converted product volumes and higher logistic cost. I will touch on each of these key drivers one by one. In terms of volume, favorable Q3 market seasonality positively impacted performance in the away from home segment and also benefited volumes on a sequential basis. This is reflected in the 4% increase in our overall shipments sequentially. However, on a year-over-year basis, shipments were down 4%. The primary challenge in this regard remains Parent Roll volume where shipment decreased 14% compared to last year, reflecting overcapacity in the hand towel market and a slower sales of converted hand towel products, which forced us to shut down during Q3 to manage inventory. We are really evaluating solution to manage the situation. These may include exporting to very select markets and planning targeted additional markets related shutdown to outmanage inventory levels going forward. Longer term, the increase in our integration rate at the new Oregon converting volume continues to be ramped up, will reduce our exposure to the external hand towel jumbo roll market as will strategy investment in modernizing income routine equipment to enhance product quality. The startup of our new Oregon facility is now behind us and the West Coast market development is progressing. While new market penetration always takes time, the quality of the product produced by this state-of-the-art makes us confident that we will succeed. In terms of pricing, our third quarter average selling price decreased by 8% on a sequential basis. This was mainly driven by the weakness of the Canadian dollar and the less favorable product mix due to the lower percentage of converted products. On the positive side, we announced price increase of up to 10.5% for the Canadian consumer product segment during the third quarter, which should start positively impacting our results in the fourth quarter. On the material side, the significant price increase is seen in both recycled fiber and Virgin Pulp coupled with our higher utilization of Virgin pulp in our products to enhance quality, also negatively impacted our performance. This 16% increase in our average raw material cost, negatively impacted our spread despite the increase in selling price that were announced in some markets over the last 12 months. I would also note that while the current competitive market condition makes it more challenging to implement price increases in full, we are seeing a positive impact. However, this benefits are not enough to offset the important negative impact of higher raw material prices. Lastly, I would note that our rolling use of Virgin Pulp supports the important role of one of our key Canadian consumer while also helping us to increase the quality of our products, making us more competitive. Touching briefly on transportation, overall cost had increased over the last 12 months. These increases reflect longer delivery distance for our customer and current disruption within the North American transportation network in part due to the recent weather episode. In addition, changes in our customer product mix has resulted in higher outsourcing cost. On a more positive note, we are seeing a very positive impact from our Fluff & Tuff brand relaunch, which has delivered results that are above expectations. On a year-over-year basis our branded product sales have increased by 50% in the connect market. We are very happy with the market response. Looking forward to Q4, which is typically a softer demand season for tissue, we expect lower volume, primarily in the away from home market and in the Parent Roll segment. As a result of the usual seasonality, we would also expect pressure on the Hand Towel segment to remain high. As already mentioned some year-over-year some year-end paper machine sorry, shutdown will be necessary to manage inventory levels. In terms of raw materials, we expect a reduction in OCC given recent index pricing changes, while Virgin Fiber prices are expected to remain high. During this challenging period, we will stay focused on execution, efficiency, managing our fixed cost base and continuing to augment our West Coast market penetration. Thank you. I will now turn the call back to Mario for the conclusion, Mario?

Thank you, Jean. To briefly review what has been discussed during today's call, we expect near-term Containerboard performance to benefit from solid industry trends within the context of the seasonally slower Q4, the addition of Greenpac and the recent price increases. While we anticipate fluctuation on OCC to continue, our Q4 average price is expected to be sequentially lower given the September and October decrease in the index price. Results from our European Boxboard activity are expected to benefit from continuing positive demand trends through the end of the year and better geographical sales mix and the rollout of announced price increases. Much like North America raw material prices will be favorable in Q4, but remain a potential headwind for the future. Specialty product performance will reflect raw material pricing variance and its recovery and recycling activities and continue positive momentum and its other packaging activity. Finally, we expect near-term tissue result to remain under pressure from higher raw material pricing, weakness in the Hand Towel jumbo roll market and seasonally weakness in the falls and the winter. The slower than expected sales ramp up of our new tissue converting operation in Oregon is also expected to dampen results over the upcoming quarters. Before turning the call over for questions, let me finish with the following. The North American landscape remained competitive and our recent results as reflected. Historical fluctuation in raw material prices, new capacity addition, channels with logistic following the recent hurricane and temporary additional demands of our internal transformation initiatives have also combined to dampen results. I will note however, that these and other shifting fundamental in our business segment are the reason why we are optimizing our internal business process, implementing an ERP platform and why we successfully restructure our operation and improve on our financial profile over the past several years. While these changes can be disruptive at the operational level, Cascades will be more agile once they are completed. It is for this reason that we remain both committed to and confident of the step we are taking to reinforce our platform and transform Cascade into a company that it is more competitive better equipped and well positioned for the long term. We will now open the line for the question, operator?

Thank you. [Operator instructions] Your first question comes from Hamir Patel from CIBC Capital Markets. Your line is open.

Hi. Good morning. I wanted to our start on the tissue side. Jean, historically your Q4 EBITDA has been a fair bit weaker than Q3, given the weakness in the third quarter, how should we think about the drop off in Q4 this year?

Well as you know Hamir, Q4 is a question of volume normally and we are very exposed to hand towel market. So, I would expect that it will follow usual pattern.

Okay. And Jean you mentioned something about looking at some potential export opportunities. So, I was just curious like where -- which markets were you looking at?

Well we're still evaluating that right now, but it's going to be limited. This is not a game that we plan to play as only if it's profitable for us to do that versus shut down.

And then that will be Parent Rolls.

Yes.

Parent Rolls. Okay. And then could you speak to the timing of the customer bid processes that have sort of held back the filling out of the Oregon facility?

Well you know in our plan, this was kind of the three-year plan to fill the plant and honesty we were into bit everywhere, we have people there pushing hard to find volume. It's very tough to define when we're going to be full are not or not at this point, but I can tell you that we're pushing hard and are all of our attention is the fill that plant right now.

Okay. Great. Thanks. That's helpful. And I just wanted to turn to our Containerboard, Charles, I was curious to get your thoughts with it looks like China is on track to increase their domestic recycling rate. Curious what sort of reduction you think we'll see in there to import permits next year. What do you think that means for OCC prices and how does that influence, how you think about perhaps growing your own recycle Containerboard capacity?

Okay. So, I'll let Luc answer the first part of the question on the Chinese.

Good morning, Hamir, it's 40 each. The OCC we do expect that China will come back in the market, but nothing the same way that they did in the past. We see them looking for much higher quality OCC at this moment. So, with the typical OCC that you would find in the North American will be less impacted that it used to be in the past. So, we see the volume increasing in early 2018, but not the same it happened in the past.

And Hamir, your second fold of the question capacity to…

I was curious where you think what that means for OCC prices next year, do you think will be flat or down year-over-year in '18 and if we're in a trajectory suggests a lower OCC prices because China is not buying as much, does that perhaps accelerate how you think about growing the Containerboard?

Obviously, it will be presented talking about long-term pricing on the recycled, for the short time let's say until the end of the year, honestly, we don't expect anything significant movement, neither downward of upward and we'll see with early next year and the issuance of more permits to if how much of an impact it will have on prices. But we don't expect something like what happened last year. The environmental conditional was significantly different. The inventory level are high at mill levels at this moment. The supply is good, which is significantly different than what happened last year. So, there could be pressure on pricing early next year, but we don't expect to be close to what it was last year. So just to complete on that on for our mills, we have worked with our sourcing group to secure good relationship also with suppliers. So, depending on the movement of the market, losses to make sure that we are going to get supply to be able to continue our growth on the Containerboard. The second part also on this is the quality of the product that is coming in and we're well prepared for that. So, markets will move up and down, but the sourcing is what we have worked out really focused on to make sure that the supply will be there to support servicing our customers.

Great. Thanks for that Luc and Charles. That's all I had for now. I'll get back in the queue.

Our next question comes from Paul Quinn from RBC. Your line is open.

Yeah, thanks very much and good morning.

Good morning.

Relatively challenging quarter and when I take a look at your guidance provided last quarter, it seems like the misses were really in tissue and European Boxboard. What happened in the quarter that you didn't expect, what's your guidance?

Well in tissue for sure honestly the raw material prices hit us a lot more than what we thought we would be it drastically and also the price that we have in the market at this point in Jumbo roll but also in cases we have exchange, but the exchange rate also hit us very drastically in the sales price on our side for tissue. So that's very much it. We knew that Hand Towel was under pressure but normally, Q3 we are able to unload a lot of volume, which we were unable to this time. So that's what I would say for tissue and honestly the West Coast penetration is not going at this speed that we would like. So, this is where we're going to push extremely hard in the next quarters. But as you know in tissue and towel and away from home, the worst time of the year is Q4 and Q1. So, nothing will be very nice in the next two quarters on those two aspects. That's for tissue.

On Europe probably Q3 was quite positive overall because demands for our product was pretty good. We take less downtime than what expected except for levels where we had to do a major rebuild on the boilers. So that obviously had an impact. The price of Virgin Pulp had an impact on our result and the exchange rate with U.K. also has an impact, but other than that, the rest of the business is really positive. The order backlog, the order intake is remaining very strong and it looks the same for Q4. So those are the main thing that affected Q3.

Okay. Then when I take a look at some of the other your peers in the tissue side, everybody seems to have a very challenging Q3 and a lot of cost inflation that especially in the U.S. and nobody seems to have put back, have you heard any price increase announcement on the U.S. side? I note that you've moved up the Canadian price, but on the U.S. side have you seen any price increase announcement by others or do you see any?

No, I did not hear anything about that.

Okay. And then last question I had just on a high level, I view this Containerboard market across North America as probably one of the best markets I've seen in my career here. How would you assess that market and what do you expect going forward here?

We're very positive on the Containerboard. We see that the demand is there. We know what has been announced for new capacity on the market. We also predict the growth for the demand for the box. So, we're pretty confident that this is good market condition for us and also, we're well positioned also for to service the customer. So, demand is going up on the box and we have some capacity to supply and the OCC yes, right now is at a advantages level but even it does move up a bit still for us. These are the conditions for our Containerboard. So, we're optimistic on the overall -- in the market and what we see for the predictable future.

Great. That's all I had. Thanks guys.

Our next question come from Benoit Laprade from Scotiabank. Your line is open.

Thank you. Good morning, gentlemen. A few housekeeping questions. Have you changed your plans in terms of CapEx for this year?

No. Not at all. We stayed focused on the CapEx. We had determined at the beginning of the year.

So, should be around $200 million.

Yes.

And I know it's a bit early, but what about 2018?

We're in the budgets right now. We have not finalized all the CapEx, but it should be in the same area as 2017, but we need to finalize the revision of each business unit. So, while it's a little early to give you a good guidance. So probably in Q4 we'll be in a better position at the end of the year.

Okay. And Allan maybe if you quicker ones, in term of cash taxes, what should we expect for 2018?

Well cash tax, I think it will be remain on the low side for 2018. We don't expect having a big jump except that the field contribution of Greenpac if it becomes it might increase slightly the cash tax, but nothing significant compared to this year.

Okay. And lastly, in terms of corporate intimidation it was up $14 million year-over-year, $3 million quarter-over-quarter. Is there anything else there than the share based compensation you alluded to in your remarks?

On the EBITDA you mean?

No corporate level. Yes.

Last year there was -- if you look at our report last year, we had cost related to our higher than this mill. So that's a positive variance for this quarter and also, we are starting to run down the cost of the program as we say. So Q4 we should see a bit of that. So, if you compare to last year, it's share based on concession than the fire in Mississauga.

Okay. Thank you very much.

Our next question comes from [indiscernible] from Desjardins Securities. Your line is open.

Hi, this is [indiscernible] for Keith. Thanks for taking my questions and good morning. Could you just tell us what the current integration rate is in the tissue segment and how much you expect it to increase as you ramp up with the Scappoose plant, thanks?

The integration rate actually is around 70% and Scappoose plan to get that up by 7%.

Okay. Great. Thanks. And just a few quarters ago you guided to a targeted EBITDA margin in the tissue segment of 13% to 14%, just given the current market conditions, are you still maintaining that target and what is the timeframe you are thinking of achieving that, thanks?

Short term certainly not with the competitive landscape we have but this is our goal and this is what we're going to achieve, but this is going to be further away based on what we see at this point.

Okay. Thank you very much.

Our next question comes from [Kathy] from TD Securities. Your line is open.

Hi. Good morning, everyone. It's [Kathy] filling in for Sean. Really bidding in OCC recently that OCC export prices in China have picked up over the past month, just wondering if that's consistent with what you're seeing and also it sounds like there is some talk around potentially import licenses, new import licenses being issued in China this month, just wondering if you could comment on those two.

Okay. For export price we've seen in the last publications price going up on the West Coast, but when you look at the overall market it's pretty much in line with the rest of the country. When we look at the inland export prices now, it's also aligned with the domestic price. So, there is no pressure in the in-line OCC prices from export. And as I said earlier, we do see slowly increase of OCC, but the type of OCC is of a much higher quality than the typical OCC you find in the market.

Okay. Thanks for that. And just turning to Europe, your comments where you mentioned some pressure on Virgin Grades but you also mentioned there is a November Virgin Grade price hike on the table, if you could just comment on that and if I understand currently the June hike is probably full end at this point, just wondering how that September hike is expected to roll out throughout Q4?

It's pretty tough in Europe to pinpoint exactly what will be coming out of the price increase. We know that we've under pressure with the price of pulp all year along. So, I'm expected this to go through from now on till the end of the year, but at what level it would be I would be guessing to give you a good numbers. But in my opinion, the market, the way it is right now, a good or a substantial portion of this should go to, but it needs to be seen because in Europe the price increases tend to take longer to be implemented, but the context is positive at the moment.

Okay. Got it and that's with respect to both the Virgin and the recycled grades correct?

Yes exactly, demand has been strong for the last I would say close to 18 months right now. The backlog is way above what it was last year. So, the dynamic in the market right now is positive in both recycled and Virgin.

Okay. Thanks for that and just finally turning back to tissue, you mentioned a three-year plan to fill the organ machine and I am just curious to what extent the recent weakness was anticipated on your part versus just being something that was little bit maybe more pronounced than you would expect? And if you could also comment on how much success you expect with the Canadian retail tissue price hike. I believe there is a away from home hike as well this thing implemented?

There is a CP announcement that we made in October. This is gradually implementing right now. Some was very successful. Some we're still negotiating first for this part. The first part of your question I am not sure that I got it very well, but I think what you're asking me is how much of that was planned to be postponed like on the sell side. So, we are behind our schedule of sales by approximately six months right now when I look at where we are, where we should have been, we're behind by six months at this point.

Okay. That's really helpful. Okay. Those are my questions. Thanks very much.

Thank you.

[Operator instructions] Our next question comes from Hamir Patel from CIBC Capital Markets. Your line is open.

Thanks. I just had a few follow-ups, Jean could you comment on what the tissue EBITDA and EBITDA margins would've been excluding the Oregon facility?

No, we don't want to go, as you know I am here, we never disclose mill by mill EBITDA. So, I cannot answer that, but we're still not making money. So, we aren’t going to get it at this point. So that's all I can say.

Okay. And when would you expect to hit that breakeven threshold?

Oh my God. I don't have that crystal ball at this point, but on nothing in the next six months for sure, because volume in the away from home is very slow in Q. It's going to be tough to get where we want to be but honestly, I stop sleeping at night because of this non-profitability at this point. So, all my attention is on that. So, we're going to work hard on this.

Okay. Very fair enough and just Charles just follow-up on the Containerboard side, I know you're looking at export opportunities on the tissue side, curious whether given the increase we've seen in export containerboard realizations whether they might be opportunities there on the containerboard side as well. I know you currently don't export but just curious if that's maybe an option for you to fill out the machine?

Yes, we're looking at the export and you mentioned that the conditions for exporting right now are a lot better than they were at the beginning of the year and again we see this as a very positive sign should we need to export for any reason like lack of orders or anything like that, which we don't see. But we would had another options to do. So, we keep valuating even if we're not exporting, we do have maintain our relationship to some customers and brokers also. So, should that become a need for us, we would use that.

Great, that's helpful. And Luc I was just curious to get your perspective on, there has been a lot of talk about China requiring recovered paper imports to meet the latest is a 1% contaminant threshold, just curious to understand how that compares to what you currently are able to deliver in your own recovered operations?

Well it depends on the different grades. When we look at the grades that's coming from the retail business if they come up picking directly from the stores or from the distribution center we're very close to that quality. When it's coming from serving line, obviously we're not there. We're closer to an 8%, 9%, 10% contaminant and when did think apart they speak very often about non-fiber contaminant. So, there is two things there, is the nature of the fibers and then non-fibers contaminant. So, with regards to non-fiber contaminant what we're picking up from other retail business we have is very close to that quality.

Great, thanks. That's all I had.

Our next question comes from [indiscernible] Desjardins Securities. Your line is open.

Hi. Thanks, my questions have been answered. Thank you.

And we have another question from Paul Quinn from RBC. Your line is open.

Hey thanks. Just want to sneak in a last one, just on ERP benefits expected in 2018.

As we stated before Paul, we expect about $50 million coming out of the implementation starting in 2018 and from 2018 and 2019. So, we're ramping down as we speak now. The program we will be ending at the end of the year. And as you heard from Allen, we already are ramping down in terms of cost. So, this will be beneficial for us. So yes, the $50 million is still there and it will be starting in 2018.

Great. Thanks very much.

Thank you. There are no further questions at this time. Mr. Plourde. Please continue.

Thank you very much everyone and I wish you a very good day and we'll talk to you on the Q4. Have a good day. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference call. You may all disconnect.