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

Sean Steuart - TD Securities Paul Quinn - RBC Capital Markets Hamir Patel - CIBC World Markets

[Foreign Language] Good morning. My name is Sully and I will be your conference operator today. At this time, I would like to welcome everyone to the Cascades' First Quarter 2018 Financial Results Conference Call. All lines are currently in 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 first quarter 2018 financial results conference call. Our speakers on this morning's call are Mario Plourde, President and CEO; Allan Hogg, 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 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 first quarter financial report released on May 2nd, 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 our accompanying Q1 2018 Investor Presentation for details. This presentation along with our first 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 the session. I will now turn the call over to our CEO. Mario?

Thank you, Jennifer and good morning everyone. Earlier this morning, we published first quarter 2018 results. On a consolidated basis, we improved sales levels, shipment, and operating incomes both year-over-year and sequentially. Driven result was a strong performance from our European Boxboard segment that was itself driven by lower raw material costs, higher sales, and good market fundamentals. Containerboard also contributed to improve year-over-year results, reflecting the consolidation of Greenpac in Q2 of last year, higher average selling prices and good industry dynamics. Touching briefly on our specialty product segment, quarterly results were below last year due to the lower contribution from the recovery subsegment as a result of the lower recycle material prices, mostly -- most notably OCC. Finally, our tissue segment increased shipment year-over-year in spite of challenging market conditions and market related downtime taking during the quarter. Higher raw material prices competitively driven lower average selling prices and negative operating margins from Oregon converting facility impacted result. Touching briefly on sequential performance. Results were again driven by a strong performance from European Boxboard division and a slight progress in tissue. Higher selling prices and lower raw material cost translated into improved operating income and adjusted OIBD in containerboard, counterbalancing the seasonality softness volume and downtime. Lastly, the sequential decrease from the specialty product segment reflect the impact of lower recycle paper pricing on the performance of recovery activity. On the KPI front, first quarter shipment increased by 1% from Q4. This reflected higher shipment levels in Europe Boxboard, driven by good demand and a slight improvement in tissue within the challenging market context. These were offset by lower levels in Containerboard reflecting seasonality and plan and unscheduled downtime. On a year-over-year basis, Q1 shipment increased 11%, driven primarily by consolidation of Greenpac and slightly higher shipment than European Boxboard and tissue. Our Q4 capacity utilization rate of 94 was 3% above Q4 and was largely driven by our Boxboard Europe. On the raw material side, the average Q1 index price for OCC Brown paper grade fell by a significant 35% year-over-year and decreased 7% compared to Q4. The average price of white recycled grade decreased by 2% year-over-year by -- and by -- increased 4% compared to Q4. Finally, Virgin Pulp price increased both sequentially and compared to the prior year's level. Hardwood Pulp was up 2% from Q4 and 26% year-over-year, while Softwood Pulp increased 4% and 19%, respectively. Looking more specifically at OCC, prices we're unchanged in the Northeast in January and February and then decrease by $10 in March. Price have since fallen by an additional $10 to $15 in April and May to reach an index level of $68 in the Northeast U.S. However, white recycled grades are showing $15 to $20 increase in the most recent publication. I will now pass the call to Allan, who will provide more details regarding our financial results. Allan?

Yes. Thank you Mario and good morning. I will begin with sales as detailed on slide 10 and 11 of our first quarter conference call presentation, which can be found in the Investor section of our website. Please note that all reconciliation of non-IFRS measures are also available on our website. On a year-over-year basis, first quarter sales increased by $92 million 9%. This reflects the consolidation of Greenpac, improvements in pricing and sales mix in all of our segments with the exception of tissue. Mitigating this was lower year-over-year volumes, most notably in Containerboard which was partially offset by the improvement in tissue. Finally, a less favorable exchange rate for our North American operations was offset by a more favorable exchange rate for European Boxboard division. Sequentially, Q1 sales increased by $60 million or 1%. Net beneficial foreign exchange rates and acquisitions in our Containerboard and European Boxboard divisions were the main positive contributor to sales. These were partially offset by lower volumes on a consolidated basis, driven by a decrease in Containerboard and a lower contribution from our recovery and recycling activities. Moving now to operating income and adjusted EBITDA as highlighted on slide 12. Q1 operating income was $81 million above last year and included $62 million of positive specific items. Adjusted EBITDA of $105 million increased $30 million from prior year levels. The President of each of our segments will provide more details regarding performances of their respective groups. On a consolidated basis, results benefited from the consolidated of Greenpac results as of Q2 and a positive contribution from our European Boxboard activities. These were partially offset by lower contribution from the tissue and specialty product segments and transportation costs were also a factor impacting all of our North American activities. Depreciation expense was also higher due to the Greenpac consolidation and capital investments start-up over the last 12 months. Sequentially, Q1 adjusted EBITDA was unchanged. The improved performance driven both Boxboard Europe and Containerboard and a slight sequential increase generated in tissue were offset by a lower contribution from the recovery operations amid the lower recycled pricing environment. Corporate activities volumes was negative following and NFX gain recorded in Q4 that did not repeated in Q1. Slide 14 and 15 of the presentation illustrate that we're year-over-year and sequential volumes of our Q1 earnings per share and the details of the specific items that affected our quarterly results. As reported, earnings per share total $0.65 in the first quarter compared to reporting earnings per share of $1.70 last year. Both periods included specific items which I will detail in a moment. Our first quarter adjusted EPS was unchanged year-over-year at $0.13. As we have noted in recent quarters, the mix of contributors to our results has changed compared to last year. This is due to the fact that Greenpac and Boxboard Europe segment represents a higher proportion of operating income. Consequently, despite high operating income, net earnings attributable to non-controlling interest in Greenpac and Reno was higher compared to last year, thus reducing our share of the net results. On a sequential basis, first quarter adjusted earnings per share decreased by $0.01 to $0.13. Slide 16 and 17 of the presentation illustrate specific items recorded during the quarter, impacting operating income and net earnings. The main item included $66 million gain related to the sale of our New York Containerboard facility. Cash flow from operations increased by $35 million year-over-year to $69 million. Adjusted free cash flow increased to $56 million including the proceeds from the New York plan disposal. This compares to last year negative $34 million adjusted free cash flow. Moving now to our debt reconsolidation on slide 19, our net debt increased marginally in Q1 as a stronger cash flow from operation and the proceeds from the sales of our New York facility were offset by capital investments. Higher working capital requirements and a less favorable FX rate on our U.S. denominated debt. The main cutbacks realized in the first quarter is related to the construction of the Piscataway converting planning New Jersey. Our net debt leverage stood -- ratio stood at 3.6 at the end of the first quarter, unchanged from the end of the fourth quarter on a pro forma basis to include our recent business acquisitions. For additional details regarding our first quarter performance on a segmented basis, please refer to slides 21 through 26 of the presentation, while our near-term outlook is detailed on slide 28. Thank you and I will now ask Charles to discuss the first quarter results of our Containerboard Packaging Group.

Thank you. Good morning everyone and thank you Allan. On a sequential basis, first quarter 2018 Containerboard Group shipments reach 350,000 short tons, which represent a 5% decrease. Paper shipments to external customers decreased by 18,000 tons from the previous quarter, which reflects a 2% decrease in operating rate during Q1. Combined with 4% increase in our integration rate, to this end, when including paper sold to our associated companies, our Q1 integration rate totaled 73% up from 64% in the previous quarter. As well indicated during our fourth quarter call, we experienced some mechanical issues during the first two months of the quarter which resulted in the production shortfall. On a global basis, planned and unplanned downtime during the quarter subtracted 15,000 tons of production compared to the previous quarter. On the converting side, shipments decreased by 2% sequentially in MSF in line with a 2% decrease reported for the Canadian market and 3% decrease experienced in the U.S. market. On the pricing front, our average selling price increase by 1% on the sequential basis, reflecting a more favorable professional sales mix between boxes and paper rolls product. The benefits of which were partially offset by appreciation of the Canadian dollar. On a segmented basis, our average Canadian selling price for Containerboard decreased by $2 per short ton, while our corrugated product average selling price increase by $3 per short tons compared to the previous period. During the first quarter, the Containerboard Group an EBITDA of $77 million, representing a margin sales of 18%. This margin compares to 17% on a sequential basis and 13% for the same quarter of last year. Our moderately improved sequentially results were mostly driven by reduction in raw material cost, and more specifically, lower OCC prices, which added $17 million to profitability. This more than offset the impact of our lower volume during that period, which subtracted $11 million from profitability. Also, as a result of the ongoing widespread drug shortages, which in our cases was practically impactful in the Northeast, our outbound freight cost increase by $3 million compared to the prior quarter. Before discussing our short-term outlook, let me touch on the progress of the new corrugated plant in Piscataway, New Jersey. I am pleased to report that the construction is almost completed. The corrugated and three [Indiscernible] presses will be started before the end of May as planned and we continue to expect to complete the project within the $80 million U.S. budgeted. Finally, our short-term outlook is positive. We expect them in level to pick-up in line with historical seasonal trends and our result should continue to benefit from the more favorable OCC pricing. In addition, our results will benefit from the $50 price increase and for both the linerboard and the medium, which expect to be fully implemented in our manufacturing segment by the end of May. The current spotting 8% [Indiscernible] price increase will be fully implemented by the end of Q3 in our converting segment. Thank you for the attention. I will now ask Mario to provide you in an overview of Boxboard activity in Europe. Mario?

Thank you, Charles. The European Boxboard segment generated strong results in Q1 with sales up 17% and adjusted EBITDA double prior year's level, reflecting the more favorable market conditions. This performance was driven by increases in average selling prices, lower raw material cost, and a more favorable exchange rate, and the consolidation of the recently acquired PAC Service company. Recycled Boxboard shipments increased by 2% with strong demand in Italy and Europe, while shipments of Virgin Boxboard decreased by 5% during the period. The average selling price rose by 5% or €25 and by 16% in Canadian dollar when compared to Q1 last year. This was driven by a 9% or €42 increase in the average selling price of recycled Boxboard and €14 or 2% increase in the average selling price of Virgin Boxboard during the period. Sequentially, the 16% increase in sales in Canadian dollar reflect higher volume, higher average selling price, and addition of PAC Service in a more favorable exchange rate. First quarter adjusted EBITDA increased by $9 million compared to the fourth quarter, reflecting your sales just mentioned, lower raw material costs, and improve production efficiency and containment of increased energy costs. The near-term outlook for Europe remain good with order inflow in order backlog both healthy and the continued implementation of internal initiative focus on optimization, production efficiency, and the strategic geographic orientation our sales mix. Furthermore, on the pricing front, second quarter results are expected to benefit from recent price increases announced for [Virgin FBB] products. I will now pass the call to Luc who will provide you with the overview performance of their specialty product group. Luc?

Thank you, Mario. Good morning. First quarter sales total $159 million, slightly below the $161 million reported during the fourth quarter of 2017. The sales of our industrial packaging activities increased in North America and Europe, but this increase was not sufficient to counterbalance lower sales in the consumer products packaging subsegment and the impact of lower fiber prices on the results of the recovery activities. From an EBITDA perspective, the first quarter of 2018 was a difficult one for the Specialty Products Group, in large part due to the recovered paper market environment. At $7 million, our first quarter EBITDA is half of what we reported in Q4 2017 and a significant decrease compared to the $18 million reported for the same period last year. The decrease essentially comes from the lack of profitability in our recovered paper activities. The recent Chinese restrictions on imports significantly impacted the price we received for the material and our ability to move certain grades. In regions more dependent on exports, particularly, it is difficult to realize the profit. Margins should recover within the next few months as the market stabilize. On the packaging front, our industrial packaging subsegment's EBITDA increased. This reflects higher volume and improved spreads in our URB activities on recycle -- on total recycled board, thanks to the implementation of price increases on finished products during Q1 as well as lower OCC prices. Our consumer product packaging subsegment also generated sequentially higher results. EBITDA during the quarter was positively impacted by improved spreads, despite additional polyethylene and polystyrene resin price increases during the quarter. These factors were partially offset by the less favorable seasonality in our flexible plastic molded pulp activity. Finally, it should be noted that amongst the headwinds we face, the freight situation in North America was challenging during the quarter and resulted in increased transportation costs for the specialty products group. Regarding the near-term outlook, the visibility for recycled fibers remains blurry and difficult to predict. If even if we are seeing a general improvement in the flow of fibers, following the important initial disruption caused by the Chinese restriction on recovered material imports. For brown fibers, China has issued import licenses targeting very clean material, namely DS OCC China grade. License amounts are not currently being met and export levels remained lower than historical levels. Generation of OCC is expected to pick-up with the spring and the material is currently abundant. Prices continue to decrease in May. A few more months will be needed to fully understand the quality level accepted by China and its impact on the North American market over the mid and longer term. The decision last week by the Chinese authorities to inspect all U.S. recovered paper loads for the next 30 days as generated increased uncertainty and confusion for the short-term. The situation on mixed grades continues to be challenging. Pricing varies according to quality and region. That said, our exposure to this market is limited as we sell only small volumes of this grade. Market conditions for white grades with sustained demand levels on both the domestic and export markets is more challenging. We continue to manage our inventory to meet our fiber needs and are preparing for the typically lower generation season in late Q2. The tight Virgin Pulp market had an obvious impact on these high grades. Looking ahead to Q2, we expect the full benefit of the latest URB price increase and current reduced OCC prices to allow us to maintain our solid spread in the industrial packaging segment. Unfortunately, these improved market condition will be partly mitigated by a plant shutdown for equipment upgrade at our URB plant. Our converting plants continue to be busy and we expect demand for our products to remain solid. As for our consumer product packaging subsegment, we expect to benefit from favorable seasonality in Q2 as summer is finally around the corner. To conclude, first quarter was a difficult start to 2018. We expect to see improved results in Q2, but we are unlikely to replicate the $24 million EBITDA we realized last year given the current depressed market for recovered papers. Thank you for your attention and I will now pass the call to Jean who will present the results for our Tissue Group.

Thank you, Luc. Good morning everyone. Current market conditions remain challenging in tissue. A combination of market-related downtime, higher material prices, and higher freight cost impacted our overall performance. These effects and the usual seasonal softness in the first quarter resulted in an adjusted EBITDA of $13 million which translates into a margin of 4.2%. This compare to an adjusted EBITDA of $22 million and a margin of 7.5% in Q1 of last year. On a sequential basis, our overall performance improved slightly from the fourth quarter adjusted EBITDA of $12 million and a margin of 3.9%. Looking at our comparable performance on a year-over-year basis, our total shipments increase by 7%. Shipments of converted product increase by 2%, largely due to the West Coast market inroad, while shipments of parent roll was increased by 19%, which reflects our successful efforts to manage inventory levels and diversify our product offering to counter current overcapacity in the [Indiscernible] market. Sequentially, we increased our overall shipment by 1% and this, in spite, of the usual market seasonality. Shipments in our parent roll subsegment increased by 6%, while our converted product shipments decreased slightly by 1%. In terms of pricing, the average selling price decreased by 6% year-over-year. This was in part due to the higher proportion of parent rolls in our overall shipments and also reflects the strengthening of the Canadian dollar. On a sequential basis, our quarterly average selling price was stable. On an operational basis, the significant year-over-year price increases in Virgin Pulp price of 26% in our Hardwood and 19% in Softwood and a higher utilization negatively impacted our overall performance by $7 million year-over-year. Sequentially, the higher Virgin Pulp price negatively impacted us -- our result by $2 million. Our transportation costs have been steadily increasing over the past months and these rising costs are negatively impacting our overall results. The increase is mainly due to the current disruption within the North American transportation network, which has made it more challenging to get preferred carrier at a lower cost. As a result, our outbound transportation cost increased $4 million year-over-year and $3 million sequentially. Moving now to our West Coast converting plant. I'm pleased to know that our market development plan is progressing steadily and we are gaining market share. These volume gains benefited us -- our result by $2 million on a sequential basis. More specifically, we secure more than 1.5 million cases of additional volume on an annual basis in Q1, which will gradually contribute to our result during Q2 and Q3. The team remains focused on successfully achieving our market development plan. On the jumbo roll front, we have announced price increases of $35 dollar per share ton for recycled grades and $50 dollar per share ton for Virgin grades starting May 1st to counterpart of the additional cost absorbed over the last year. While this will not fully offset our higher cost base, it's a positive step. With our slowest season now behind us, we are now entering the peak season for many of our markets. Consequently, we expect to see corresponding important increase in our sales and volume in the second quarter. We are also anticipating higher volume in our CPE division beginning next quarter as we successfully secured important strategic customers. Finally, in terms of raw material, we expect white recycled grades and virgin fiber prices to continue to increase in Q2, while Brown recycled fiber prices should slightly decrease, both reflecting recent index pricing changes. We also expect the current challenging transportation situation to continue into the next quarter. To counter these challenging market conditions, we will continue to focus on execution and efficiency. On a good note, it is worth mentioning that our converting operations are performing very well, achieving performance records. We will also continue to manage our fixed cost base and continue to augment our West Coast market penetration. Thank you. And I will now turn the call back to Mario for the conclusion. Mario?

Thank you, Jean. Our near-term outlook is positive reinforced by additional $10 decrease in OCC with the index price published on May 4th. When combined with a rollout of the announced price increases and [LT] Box industry demand. These lower raw material prices provide a strong foundation for a near-term performance of our Containerboard segment. Favorable seasonality is also expected to provide a strong framework for our European Boxboard segment. On a more global scale, we are entering strong seasonal period for our business market, which should translate into stronger sales in the second quarter of our segment. While lower recycle fiber prices is a tailwind for our packaging operation, the reverse is true for our recovery operation. To this end, we would expect the performance of our specialty product group to continue to be impacted in Q2. As highlighted earlier, the packaging subsector in this segment are performing well and will themselves benefit from lower recycle fiber costs and favorable seasonal trends in Q2. As we have discussed throughout this call, the market conditions faced by our tissue division continue to be challenging. We expect profitability level to remain under pressure and as such, we will continue to be proactive in our management of these dynamic and additional impact of rising raw material prices and future performance. Before we open the call for questions, let me touch briefly on some of the area we're focused on going forward. At the top of this list is maximizing the efficiency and productivity of our operation. This is a daily focus for each member of our team and it is the heart of our commitment to deliver quality, innovative product to all our customers. On an equal footing, with this is managing raw material costs and higher transportation costs, which we do throughout our sourcing team and optimization of our transportation strategy. We are also looking forward to the start of our new converting plant in Piscataway, New Jersey, which will position us with a state-of-the-art facility and improved geographical footprint. Finally, from a broader strategic standpoint, we are committed to successfully position Cascade for the long-term. We will remain disciplined on our capital allocation while upgrading our platform when and where strategically needed, optimizing our geographical footprint, and increase our integration rates. As mentioned on the last conference call and supported by our positive outlook, our CapEx plans for this year is still in the range of $335 million to $385 million. An important part of our focus will be centered on our tissue segment where we are planning additional investment over the next several years to optimize and modernize both retail and away-from-home platforms and equip this division with a competitive asset base position for the long-term growth. I think it is important to underline that managing our leverage ratio and reducing our debt remain essential part of our strategy and are one that we will continue to pursue via disciplined use of our cash flow. On that, I will now open the line for question. Operator?

[Foreign Language] [Operator Instructions] Your first question comes from the line of Sean Steuart of TD Securities. Your line is open.

Thanks. Good morning. A few questions to get through. Let's start with Containerboard and I know you guys addressed the productivity problems in the Q4 call. Just wondering if you can go into a bit more detail on what those specific issues were and it sounds like none of that carried into Q2 and things are running well, hoping you can confirm that as well?

Thank you, Sean. Just to give you -- we had three of our seven paper machines that had some issue non-related. And you're right, and I can confirm that, we're back to normal in Q2.

Okay. And I wouldn’t bring it up because in your recent marketing deck, I think you guys were around visiting investors and early April, the indication was that Containerboard volumes would be flat quarter-over-quarter which seem counterintuitive given the guidance given before, but it certainly didn't end up that way. So, -- anyway that's neither here or there. CapEx plan you reiterated 2018 guidance, any thoughts on what 2019 could look like early on? It sounds like tissue spending is going to stay elevated for some time, will it be as high as 2018? Any initial thoughts on 2019 budgets at this point?

Sean it's a little early to talk about 2019 CapEx, but what we can expect is probably a lower envelope for 2019. The one thing that I can say though we know we have committed investment in the tissue so the envelope we give for tissue in 2018 could replicate in 2019, but we still are evaluating what can be done in 2019. So, you'll probably leave around during the year, we will be able to be more precise on where should we be with the CapEx, but we expect 2019 to be a little lower than 2018.

Okay. I'll get back in the queue. Thank you very much.

Your next question comes from the line of Paul Quinn of RBC Capital. Your line is open.

Good. Sorry, thanks very much. Just a question on price realizations on the Containerboard increases, just how you expect that to flow through? It sounds like it's been implemented and you'll have it fully implemented through the box side and by the end of Q3, but just what can we expect in terms of the pickup maybe as a percentage basis in Q2 versus Q3?

The price increase will be fully implemented on the roll side and as we mentioned in the past it takes over four to five months to pass on the price increase on the converted product. So, it will be gradually increase towards Q2 and done at the end of Q3.

Okay. So, in percentage terms, my guess, 30% of the pickup in Q2 and the balance in Q3?

I'm not going to give you the exact percentage, but the higher percentage would be in Q2.

Higher percentage upfront?

Yes, in Q2 -- to work towards the end of Q2, yes.

Okay. And then just on specialty products, just with surprise at the drop off in EBITDA generated in the quarter, I thought you have a little bit of a lag before the contribution came down. Maybe you can just give me some more color on that and just help me understand the drop?

Yes. As we said, the drop came large part from the recovery part of our business. We should not also forget that Q1 is typically not a very strong month for packaging because of seasonality on top of that. But the biggest impact is definitely coming from the recovery operation. Beside the pricing decrease, we need to understand that the first impact we had was the movement of material which on top of price decrease impacted the efficiencies of our plants because the stock at the beginning was accumulating in our recovery centers and we had to deal as well in the first quarter with the -- I would call it the crisis in transportation and the ability of carriers which make things even more complicated in the first month of the year. Now, by the end of the quarter the movement was not the nice anymore and now we're dealing obviously with pricing. What we have to do when the price continue to decline month-after-month, it means that we are running a little bit after our tail to redefine the price agreement we have with our suppliers and that's a challenging thing. So, we are looking for stabilized price, so we could rebuild our margins with our supplier.

Okay and just on that outlook for recovery paper prices, it sounds like you expect OCC prices continue to fall a little bit and just curious what you think about the new inspection regulations in China and the effect on the North American market and also what you're thinking about as price is going forward?

I would say, like a lot of people, we were a bit surprised by the decision last Thursday to promote the Chinese authorities to request 1% of the loads coming from the states. And I found that we were not the only one. So, what's going to be the impact of this last decision? It's a little bit too early to fully understand what will be the impact on the pricing. So, I would rather look at the long-term, our perception of the situation is that the quality will go up and the pricing for higher quality OCC will eventually go up in our opinion, especially everything that is both industrial, commercial, institutional that is not contaminated with other containers will be more production more demand and we expect that there will be more pressure on price for these specific products. With regards to product that is past consumers, we do -- we think that it's going to remain more challenged market as long as the quality of that material will not improve and the demand for higher quality is not only from export eventually it's going to be from domestic mill as well and investment will be need in order to meet the quality expectations of the consumers. And with regards to SOP and high grade -- white grade obviously this is going to be remain a challenging market. As you know the pulp market is also Virgin Pulp market is also very tight. And as long as this market will remain under pressure, we don't expect any relief on the on the high grade.

All right. Thanks very much. Best of luck guys.

Your next question comes from the line of Hamir Patel of CIBC World Markets. Please go ahead.

Good morning. I had a couple of questions. Perhaps we could start on the specialty products side. Luc how should we think about annual EBITDA in that business going forward if OCC stays below 100. I look back at 2016, OCC prices that year were pretty close to Q1 and you did about $65 million that year. So, I know you mentioned you had some other logistics issues in Q1, but at these current recovered price levels, do you think you could kind of meet or exceed that $65 million from 2016 in specialty?

I will not speculate on future EBITDA for our group. I think our packaging sector is doing well and it's too difficult, too volatile, yet still in the recovery business to speculate. As I said earlier, as long as there will be price fluctuation on the market and uncertainty like this now, it's going to be more challenging -- it's going to be a bigger challenge for us to rebuild the margins on the short-term.

Okay, fair enough. And Charles a question on the Containerboard business, how should we think about the ramp-up of the new converting facility and is that a drag to EBITDA in Q2 and Q3?

Just -- thank you for the question. The ramping up in in Piscataway facility according to our plan right now, we're on time for all the steps that we had planned. We do have the advantage in that facility that with the volume that we have developed over the last year and the volume that we currently have the volume is -- it were in a very good position on the sell-side. So, on the operation, we planned that things will go very well on the ramping up and the plant will be up and running to -- not to capacity because as we explained that plant will be able to produce about 2.4 billion square feet of total capacity and we are starting within the first 12 months to produce about 1.5 billion square feet. So, towards the end of the year, we should be at that ongoing rate.

Okay. Now, that's helpful. But is it positive or drag to EBITDA when it's starting up in Q2?

We will have a -- we will have before the end of the year a positive impact.

Before the end of the year. Okay, that's helpful. And Mario a question on Boxboard Europe, mix paper basically looks like it's free in most parts of Europe. How much of a tailwind is that for Reno heading into Q2 and given the record profitability you're seeing in Europe, how does that affect how you think about the timing and ability to potentially monetize that your ownership interest there?

Well, we haven’t changed our position with our equity position and Reno. We think there's still benefit to gain in Europe right now and all the positive movement we see in terms of order demands, raw material prices, we think will continue in Q2. The only questions we have now if the market get you know still tight in North America for wastepaper will that China go to Europe and source more from Europe and maybe have an impact. So, today we have difficulty to view that, but let's say it doesn't change. We think that Q2 will be positive. It remains very solid in terms of order intake and backlog and the pricing we saw in Q1 will be reflected also in Q2. So, we feel that you know we should also have a good Q2 in Europe.

Okay. But Mario, doesn’t European business use predominantly mix paper, so the Chinese even if they come back, probably wouldn't -- at least on the mix paper side, that shouldn't be a headwind, right?

Well, we use a different mix bag in Europe. We have more Boxboard. We have a little bit of mix paper so -- and OCC as well. So, not that much mix. So, yes you're right. But we'll see. It's too early to predict what China will do at this point.

Fair enough. And maybe just a final question for Jean, the tissue side, some of your U.S. peers had indicated, there's been some pricing movement either under the roll from de-sheeting or from price hikes -- some of the private label producers, what are you seeing in the retail market in the U.S.?

Well, that's a great question. On our side at this point, we're monitoring what's going on. I want to say that we have great volume for the future. But on the pricing side, we have not taken any decision on this product at this point. So, but we see we have the same vision on what the two are doing. We just need to make sure of everything at this point.

Yes, fair enough. That's all ahead. I'll turn it over. Thanks.

[Operator Instructions] Your next question comes from the line of [Indiscernible] of Desjardins Bank. Your line is open.

Hi, good morning. Its [Indiscernible] for Keith. Thanks for taking my questions. Just on your recovery business, would you say that the recycled fiber inventory levels are higher now than they have been under, I guess, relatively normal market conditions previously and how much higher? Thanks.

High grades?

No, in general.

Price raw material on to your--

Inventory level.

Inventory, yes there are definitely inaugurate upgrades and they are at the mills locations and as well as in the recovery facilities. There's abundant material now.

And could you give us any sense of the magnitude, how much higher they are.

You're talking for us about I would say 20%. We're trying obviously to manage and refuse loads that we don't need. So, -- but that's that's more the impact we see now is that we're refusing loads much more than we used to. Everything that is not contracted we will be refusing extra loads and -- so it's ending up at somewhere else in the market. And we're getting now into obviously higher generation period, so it's going to be even more challenging for the movement of material.

Thanks. And--

And it's hard to predict also what will be the impact. As I said earlier of last week, decision from the Chinese government a full inspection of all loads coming from the U.S., we need a few more days to really understand how the market will react to this.

Great. Thanks. And just on the comments in the presentation in the specialty packaging, could you give us more color on the favorable sales mix leading to higher average selling prices for recovery in recycling activities sequentially in the quarter?

The higher selling price on the URB, we -- it's -- an increase was -- it was published at $50 increase on URB in the first quarter and we have implemented our price increases already. So, we will have the full impact of that in Q2.

I see. And I guess just on--

Sorry, and on the higher price, we also had the increased material price in chemical prices in the first quarter in the consumer product and price increases will also be implemented. We typically need a quarter to fully recover the raw material price on our finished products.

I see. And just on the pricing dynamics in that recovery business, is it accurate to look at it more as a fixed EBITDA per short ton, that's the target or is it more of a percentage?

No, it's unfortunately not the case. Some of the business is -- part of our business is a fixed EBITDA or fixed spread, but a lot of the small players doesn't have that fixed EBITDA. So, if prices go up, it's going down, we have to rebuild the rebuild the margins.

Okay. Thank you.

Thank you. There are no further questions at this time. Mr. Plourde, please continue. A - Mario Plourde: Thank you very much everyone to being with us this morning and we look forward to seeing you on the next call. Have a good day.

[Foreign Language] Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.