Cascades Inc
TSX:CAS
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Cascades Inc
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[Foreign Language]Good morning. My name is Dequan and I will be your conference operator today. At this time, I would like to welcome everyone to the Cascades Third Quarter 2020 Financial Results Conference Call. [Operator Instructions]I will now pass the call to Jennifer Aitken, Director of Investor Relations for Cascades. Ms. Aitken, you may begin your conference.
Thank you, operator. Good morning, everyone, and thank you for joining our third quarter 2020 conference call. We will begin with an overview of our operational and financial results, followed by some concluding remarks, after which we will begin the question period.The speakers on today's call will be Mario Plourde, President and CEO; and Allan Hogg, CFO. Also joining us on today's call are the presidents of Cascades' business segments, namely Charles Malo, President and COO of the Containerboard Packaging Group; Luc Langevin, President and COO of the Specialty Products Group; and Jean-David Tardif, President and COO of the Tissue Papers Group. They will all be available for the question-and-answer period at the end of the call.Before I turn the call over to my colleagues, I would like to highlight that Reno de Medici's interim report released on November 4 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 Q3 2020 Investor Presentation for details. This presentation, along with our third quarter press release, can be found in the Investors section of our website. 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.Overall, we are pleased with our third quarter results and the resilience and flexibility that our employees and our operations demonstrate through what are best described as ever-changing business conditions.Within this context, demand level for Containerboard, specialty packaging and retail tissue product all remained robust in the quarter. In contrast, the away-from-home tissue business has seen demand notably impacted as COVID-related closure has reduced tissue needs for businesses, restaurants and office buildings. In Europe, quarterly result primarily reflects the usual seasonal volume decrease related to the annual August production stops.Net earnings were $49 million or $0.51 per share. This compared to earnings of $0.45 per share last year and $0.57 per share in Q2. On an adjusted basis, we generated $0.50 per share in Q3. This was a notable increase from the $0.30 per share generated in the same period last year, but is below the $0.61 per share recorded in Q2.On an adjusted basis, OIBD of $162 million was 13% below the quarterly record level generated in Q2 but was stable with the $161 million generated in the same period last year. This speaks to the benefits being realized from our improvement initiative across our platforms. On a consolidated basis, our adjusted OIBD margin reached 12.7% in Q2 (sic) [ Q3 ].Slide 4 and 5 provide details for each of our business segments. On the raw material side, highlighted on Slide 6, the Q3 average index price for OCC was up significantly year-over-year. The price was down notably compared to Q2, during which OCC pricing level temporarily jumped in what we have previously noted was an unwarranted response to COVID.White recycled paper grade remained stable year-over-year in Q3 and decreased both 30% compared to Q2. On the virgin pulp side, hardwood and softwood pulp prices decreased both year-over-year and sequentially in Q3.Moving now to some brief comments on the performance of each of our business segment highlighted on Page 8 through 11 of the presentation. The Containerboard segment generated an 11% increase in sales sequentially. This was driven by a 14% increase in manufacturing shipments, partially offset by a less favorable exchange rate. Q3 adjusted OIBD of $100 million or 20% on a margin basis increased 6% from Q2 levels. This was driven by higher volumes and additional R&D credit -- tax credit, partially offset by a less favorable exchange rate and higher energy, raw material and production costs in the current period.Our quarterly OIBD margin was impacted by the destocking effect that occurred in Q3 after inventory build-up at the end of Q2, resulting in higher costs of production sold due to the rapid increase in OCC costs at the end of the second quarter. Note that the Q3 result also included an approximate $3 million impact related to the operational stop at our Niagara Falls complex due to maintenance and a disruption from the mill off-site steam supplier.Additional manufacturing downtime related to planned maintenance and capital investment of 11,400 short ton were also taken in the quarter. Year-over-year containerboard sales increased 7%. This was driven by a 9% increase in shipment that reflect growth of 12% in manufacturing side and 6% on the converting side.Q3 adjusted OIBD decreased 15% from the prior year levels. This reflect higher raw material costs and less favorable selling price and sales mix, the effect of which were only partially offset by higher volume and R&D tax credit recorded in the quarter.The third quarter result in the Tissue Paper segment are a direct reflection of the impact that COVID-related closure of businesses, office building, restaurant and school is having on demand for away-from-home products. It is important to highlight that sales of retail tissue product remains solid and we have taken important steps to reduce our operational costs and adjust capacity to meet the change in demand patterns with the temporary closure of 2 facilities.Third quarter sales decreased 14% sequentially, reflecting demand contraction that resulted in converted product shipment decrease, 11%, and manufacturing shipments decreased 23%. Following elevated Q2 levels, retail volumes were down 11% sequentially, while away-from-home volume were down 8%.Adjusted Q3 OIBD decreased $18 million sequentially due largely to lower shipments in addition to higher transportation and maintenance costs and less favorable exchange rate. Despite these challenging market condition, tissue Q3 adjusted OIBD of $36 million represent a margin of 10%.Tissue sales were down 6% year-over-year, reflecting 11% decrease in shipment levels. Retail shipment increased 4% while away-from-home shipments were down 27% compared to the prior year period, the effect of which were partially offset by a higher average selling price and favorable exchange rate.Conversely, Q3 adjusted OIBD levels increased $12 million or 6% compared to the prior year levels. This is a testament to the step we have taken to reduce expense level and control costs, which include the plant closed in Q1 of this year. Lower raw material, energy and transportation costs; R&D tax credit recorded in the current period; and improved selling price and customer and product mix similarly contributed to the strong result year-over-year.The European Boxboard operation generated solid Q3 result, in line with expectations. Sales decreased 2% sequentially, reflecting lower shipments in Western Europe and the usual seasonal production stops in August.Adjusted OIBD decreased $14 million for Q2 levels due to the same factor and higher maintenance costs. Year-over-year sales levels increased by 2% or $5 million as the benefit of more favorable exchange rate offset slightly lower volume and average selling price in the current period. Q3 adjusted OIBD increased 16% over the prior year levels, the result of lower energy, raw material and production costs, the benefit of which more than offset the impact of a lower average selling price.The Q3 results for the Specialty Products segment were stable sequentially and year-over-year. When compared to the prior quarter, sales decreased by $3 million as stronger volume in consumer and industrial packaging were offset by the sales mix impact in this segment and less favorable exchange rate. Year-over-year, sales decreased $6 million or 5%, a reflection of the combined impact of the divestiture of European activity and closure of a mill in the second half of 2019.Sales volume increased in all sub-segment year-over-year. Adjusted OIBD level decreased by $1 million sequentially, but were stable year-over-year. Compared to the prior quarter, Q3 result reflect higher sales in industrial and consumer food packaging, the benefit of which were offset by a less favorable sales mix and exchange rate and slightly higher raw material costs. Year-over-year stable result benefited from higher volume and beneficial raw material costs. These benefits were offset by a less favorable sales mix and selling price and the previously mentioned business divestiture and closure.I will now pass the call to Allan, who will discuss the main highlights of our financial performance. Allan?
Thank you, Mario, and good morning, everyone.So I will begin with an overview of our key KPIs on Slide 13. Our third quarter shipments increased by 18,000 short tons or 2% from Q2, driven mainly by an increase of 14% in Containerboard. The third quarter capacity utilization rate of 91% decreased 2% compared to the prior year and 1% from the second quarter levels. Working capital came in at 9.8% of sales, while consolidated return on assets stood at 12.8%.Moving now to sales, as detailed on Slides 14 and 15. Year-over-year, Q3 sales increased by $11 million or 1%, driven largely by volume increases in Containerboard and Specialty Products segments and a beneficial foreign exchange rate for all of our business segments. Less favorable pricing and sales mix impacted sales level in all segments except for Tissue.Sales performance in the Specialty Products segment was impacted year-over-year following a mill closure and a business divestiture completed in 2019. On a sequential basis, third quarter sales decreased by $10 million or 1%, largely driven by less favorable FX in all segment apart from European Boxboard.Moving now to operating income and adjusted OIBD, as highlighted on Slide 16. Q3 adjusted OIBD of $162 million, increased $1 million from the prior year level. Stronger results in the Tissue Paper and Boxboard Europe segments, coupled with favorable year-over-year corporate activities results offset the lower Containerboard performance.Sequentially, Q3 adjusted OIBD decreased by $24 million or 13%, as shown on Slide 17. This was driven by weaker performance in Tissue and European Boxboard.Slide 18 and 19 illustrate the specific items recorded during the quarter. The main items worth mentioning are $13 million of impairment charges recorded in Tissue related to the revaluation of certain assets in light of the current away-from-home market conditions; $7 million of gains recorded in Containerboard and Tissue related to the sale of previously closed assets; and $3 million of restructuring charges that were recorded in the Containerboard segment following the announced closure of a facility in Ontario by August of next year.Slide 20 and 21 illustrate the year-over-year and sequential variance of our Q3 adjusted earnings per share and the reconciliation with the specific items that affected our quarterly results. As reported, earnings per share were $0.51 in the third quarter as compared to earnings per share of $0.45 last year. Both periods included specific items. On an adjusted basis, earnings per share increased by $0.20 compared to last year's results.Slightly higher operating results, lower financing expenses and lower income tax were offset by higher depreciation expenses, reflecting business acquisition and operational capital projects. On an adjusted basis, sequential third quarter earnings per share decreased $0.11 per share from Q2 2020 levels, largely a reflection of lower operating results.As highlighted on Slide 22, third quarter adjusted cash flow from operation increased by $7 million year-over-year to $115 million. This reflected slightly higher cash flows from operation due to improved operating results and lower income tax paid, offset by higher net financing expense paid in the third quarter, reflecting the impact of the refinancing at the end of 2019. Adjusted free cash flow levels increased by $6 million year-over-year.Moving now to our net debt reconciliation on Slide 23. Our net debt decreased by $95 million in the quarter. This reflects strong cash flow from operations, a positive foreign exchange impact of $32 million and a favorable $30 million benefit in change -- in non-cash working capital, partially offset by dividends and CapEx payments.Our net debt leverage ratio stood at 3x at the end of the third quarter, down from 3.1x at the end of the second quarter and 3.25x at the end of 2019. The equity offering concluded on October 22 will further improve our debt profile in Q4. This along with other financial ratios and information about maturities are detailed on Slide 24.On Slide 25, we provide details about our capital investment plans for the full year. We expect to invest approximately $240 million in 2020, which includes estimated investments associated with our Bear Island project. We remain focused on prudently managing cash flow and managing our debt profile. Currently, including our recently completed equity offering, we have cash and revolver availability of approximately $1 billion.Mario will give you more details, and we'll wrap up the call with a brief conclusion before we begin the question period. Mario?
Thank you, Allan. We have provided details regarding our near-term operational outlook on Slide 27 of the presentation. Please note that this outlook is based on what we are seeing today, and given the current unusual circumstances, may change in the coming months.On the demand side, we remain optimistic for our retail tissue and packaging solution in North America. Demand for consumer food packaging and corrugated products used in the food and personal care industry remains solid. Similarly, demands for at-home tissue product also remain good as people are spending more time at home. That said, predicting what the potential impact that the ongoing pandemic will have on both demand levels and demand pattern remain challenging. Given this caution and usual softer seasonal demand in the fourth quarter, we are expecting the Containerboard and Specialty Products segment to generate stable results sequentially.In the near term, performance in the European Boxboard is expected to reflect continued uncertainty regarding the economic impact of COVID-19 with volumes and pricing expected to remain under pressure. That said, we remain cautiously optimistic in terms of outlook based on the essential nature of the products, steady volume performance year-to-date and the good operational execution and management throughout what has been an unpredictable environment.In the Tissue segment, seasonality and lower demand for away-from-home products are expected to largely offset the benefit from stable demand in the retail tissue, pricing improvement and our ongoing improvement initiative in the fourth quarter. We are focused on optimizing production and our cost structure, which include the closure of 2 tissue facilities in Pennsylvania in December and January. These closures will not impact our capacity as these tons will be moved to other assets where production capacity has been optimized with our investment in modern equipment.Moving now to raw material. The recovered paper market remains stable in the third quarter with robust generation providing ample material to meet demands level. We expect OCC dynamic to continue providing a solid tailwind for our paper mills with material remaining abundant and actual prices anticipated to continue. We're maintaining relatively high inventory levels as a precaution given the less predictable market dynamic caused by the pandemic. That said, we expect market condition to remain relatively stable for the remainder of the year.Conditions for the white grade were also favorable for our mills. The SOP publish index lost another USD 60 per short ton in the last 3 months. Availability of material and reduced demand both contributed to this variation. Material remained readily available, and we continue to maintain solid inventory levels. Solid clean use and solid residential paper both saw tighter market condition in Q3, which impacted pricing and average quality of material for our molded pulp mills.Finally, conditions were stable in the virgin pulp market. We will continue to monitor global dynamic, planned downtime announced by pulp mills and the evolving demands in printing and writing industries. We expect no significant variation from this market for the rest of the year.Before opening the call to questions, let me finish by saying that we are pleased with our performance in Q3 within the context of the challenging environment. I would like to thank every one of our employee for their continued hard work and resilience during these unusual times. As always, their health and safety remain our top priority, and we applaud their diligence through the safety measures that have been put in place in all of our facility.Looking ahead, we expect our ongoing modernization initiative investment completed over the recent year to continue to benefit performance. Added to this, we began a margin improvement initiative across our North American operation earlier this year, targeted area such as revenue enhancement, production and supply chain efficiency in our organizational structure. These initiatives are expected to generate a 1% annual increase in our consolidated OIBD margin in each of the next 2 years. Similarly, we expect to begin realizing benefit from the USD 50 per short ton increase announced in the Containerboard at the end of Q4.With that, we will now be happy to answer your question. Operator?
[Foreign Language][Operator Instructions] Your first question comes from Hamir Patel.
Mario, could you speak to what sort of maybe OIBD margins on a consolidated basis you'd be expecting for Cascade next year given some of the initiatives you highlighted?
Well, the target we are looking at right now will be around we'd say 14%. We're trending close to 13% now. With the initiative we just talked about, we are looking to increase the OIBD at least at the level of 14% next year.
Hamir, remember that our stated target is at 15%. So we're trending towards that.
Okay. Great. And Allan, could you speak to -- for the CapEx next year, other than Bear Island, what are the larger projects in the envelope?
Well, we have not completed yet our budget process, but what we can say right now, there is a few lines that are still to be installed in Tissue, as we stated before during the course of the first quarter. So that would be one of the major -- the major projects for this year. And also, in Ontario, in the Containerboard -- and maybe Charles can expand on this -- there is a -- following the reorganization in Ontario, we will transfer some capacity to the other facilities and some investment will be needed, but that's nothing major compared to Bear Island, obviously, so.
Okay. And Charles, another question I have for you is, since you announced Bear Island, there have been some additional capacity announcements from Atlantic Packaging and it looks like Domtar is now looking at a potential second project. So have those developments changed how you prioritize the internal integration plans for Bear Island? And can you just remind us what are you targeting at -- in kind of the first year production? How much of that is going to be sourced -- sold internally and how much is already committed with offtake agreements?
Okay. So Hamir, just maybe to complete on Allan's first -- yes, we do have a project in Ontario that will be in line with what we're talking about. We announced the closure of one of our facility, which is based in Etobicoke. And we're going to do about what we did with our project in Piscataway as we are going to be selling the building, which we are reinvesting to create and install better lines, better equipment and give us more capacity that will come in towards the end of Q4 next year and also in the year after, which will be in line also with the goal that we had in our [indiscernible] to continue to increase our converting capacity in our group. So this project is well in line and will be good for Cascade like the Piscataway.Regarding the project in the Bear Island, the addition capacity, some of which are happening, some of which probably are not going to happen, I don't know. But the ones have been announced and started, this is reinforcing the fact that we need a project like Bear Island to be better prepared to compete. The line of product that we have, we feel that it's niche. It will be in the lowest basis weight. So we are very confident that the demand is there for this product.Now when we start, we announced that about 50,000 tons of the product will be used internally. We are continuing to discuss with our current customers to increase the wallet share with them. So this is going in the right direction. In the first year of production, this is going to be about 150,000 tons that we will try to find a way to develop the customer base for our product.
Your next question comes from Sean Steuart.
A couple of questions. On Tissue, with respect to the retail side, there was clearly some pull-forward of demand in the initial wake of the pandemic. You're guiding to further volume pressure in Q4 which I guess is mostly seasonal. And Mario, you positioned retail demand trends as solid. I'm wondering if you can give us some context on your expectations into 2021 as economies presumably start to reopen with the vaccine and thoughts on the away-from-home volume trends as that happens as well.
Well, I will let Jean-David explain the dynamic between the demands of the 2 product. But if ever a vaccine would be coming, obviously, there would be a shift in demand for our product because of the school, the restaurants, the hotels will reopen, and this is largely what is affecting our volume right now. It is compensated to a certain degree on the retail side, but -- so if ever the vaccine would be there, I think the normal business will probably take a year or 2 to get back to where it was prior to COVID. But obviously, there will be a shift because people are looking to go out and come out of their house.So maybe Jean-David, you want to give a little more detail about the volume between the 2 dynamics -- the 2 markets.
Yes, Mario. Good morning. So no, you're right. And to your question, Sean, the retail volume is really solid. Right now we're booked 100%. It's -- the results of Q3 were limited by lower inventory and our capacity. Now in Q4, the thing is, we're putting our customer on allocation as well because the demand is strong. So it's -- right now, we're trying to rebuild the inventory to get the right or the appropriate service level to our customers. So we're limiting the retail sales.On the away-from-home, Mario was right. I think that -- we still have customers that are doing really well. So we have about 40% of our customers that are at budget. So there is -- there are some channels or market segment that are doing good. There are some customer also doing good on e-commerce. So we believe that by focusing on the right customer, we can offset the market condition. Right now, we're doing slightly better than the AF&PA number on the away-from-home side.So the problem is what we are over-exposed on the away-from-home market as opposed to some of our peers. So -- but we're working really hard to bring more volume toward the retail market and develop new product as well for the PRO line or the away-from-home line.
Second question is on recycled fiber, OCC specifically. It looks like those costs are bumping along the floor. At what point do you expect inflation for OCC given all the recycled containerboard capacity that's going to be coming on to the market, yours included, in the next few years? How do you expect that to feed into OCC inflation, if at all?
Well, this is Luc. Maybe I can try to answer your question. I would be very cautious to predict what the market is going to be in the long term. What I can see is that since late spring, we've seen quite a lot of stability in the market despite the strong domestic demand. As you know, the containerboard mills now are running flat out. And despite this, this hasn't created any specific pressure on the OCC market. Export outside of China also been -- has been also present in the last few weeks, but on the other side, generation has been very good. So we don't see, for the moment, any challenge with the OCC price.So what's going to be in a few years from now for me is -- I wouldn't get there, but what I can say is that the duration in demand seems to -- we don't see -- I don't see short term -- with what I have on the radar screen, that there is going to be significant change in the market conditions. What is going to be in 2 years from now, I think it would be too dangerous to make a statement on that. But for the time being, market seems very stable.
Your next question comes from Mark Wilde.
I have a few questions. A couple on Containerboard first. Can you just talk with us a little bit about the cadence that you expect on the roll-through of this containerboard price hike?
Okay, Mark. First, I can say that the -- we're still in line with our price -- announced price increase. Our team are working with our customers to implement that. We anticipate that the impact will start gradually towards the end of Q4, but really in mid-Q1 next year will be about 80% in place.
Okay. All right. That's helpful.
And the delay is, as you know, we have contractual that takes in consideration timing of the price increase, and that's why the spread. So we always keep saying that to be fully implemented, it takes about 4 to 5 months, to deploy 100%.
Okay. All right. It actually seemed a little bit shorter than some of your other kind of publicly traded peers. So that's good.Also on the Containerboard side, can you talk with us about pre-selling some of that incremental capacity at Bear Island? I mean I just -- I think for a lot of us on the outside, we have Bear Island and then not too far away at the same time we have Kingsport. So in total, it's a little over 1 million tons of capacity, and we all know that the open market has shrunk. So I'm just curious about what you can do to really try to derisk that project by pre-selling volume right now.
Okay. So like I said, the type of product that we have is lightweight, high performance, lighter weight than most of the installed capacity and even the one that are going to be installed. So we -- our plan, like we did when we started the Greenpac, is exactly the same thing, is we are going to niche our product to be able to develop the customer base.Give you an example. Everybody talks about the e-commerce. E-commerce requires lighter packaging, and that can be done in 2 ways. First, design of the packaging, but also the weight of the paper. And we are going to focus on that. There is demand for this type of product to respond to that new trend.
Then just toggling over to the Tissue business. Can you talk with us about any ability to swing capacity from away-from-home Tissue over into retail-oriented Tissue? Maybe just shifting the fiber you're using or anything else you could do to just pivot a little bit?
Yes. Mark, it's Jean-David. So we're working hard. There is new product coming. So for example, we're partner with a major retailer to develop a new format which is something not available on the retail market for now, but that will be made on the bath tissue away-from-home line. So that will book that line because, as I said earlier, the demand for retail is pretty strong.So there is, what, probably 2.25 million cases that we will be able to sell for that product only. So it's difficult. Its -- most of the lines are dedicated. As you know, like multifold, single-fold [indiscernible]. Those are line that you cannot do anything other than away-from-home product. But definitely, there are some lines -- bath line, kitchen roll towel, those lines have been migrated to retail products. So those lines are fully booked.But all in all, right now we're up to about 10% of the capacity that was migrated from away-from-home to retail. So we're continuing in that manner, but most of the lines are away-from-home dedicated. That was it.
Okay. And then like the last area I want to understand is just inflation, and we've kind of -- we've already talked about OCC. And it is pretty striking that we've seen this tightening in the containerboard market and not really seeing any pressure on OCC at this point, but this lack of Chinese imports seemed to have shifted that market. The other issue on inflation, though, at the moment it seems to be transportation costs. So I wondered if you could talk a little bit about your exposure to kind of higher trucking rates.
Mark, it's Mario. Basically right now, we see a tightening in the transportation, and we see that it's more difficult to get trucks to service us. And we see a little price increase, but this dynamic in the market of the logistics is really fluctuating. So we feel it's temporary right now. It's probably related to the activities in the commerce business. So as we are busy in the containerboard, people are buying more. I think it's related to that.If markets slow down, I think then we could see a reduction in pricing of transportation. We do have a center of excellence. It's managing all our logistic throughout North America, and they're working really hard with asset owner to monitor and manage the pricing that we have and give them some volume to maintain good logistic pricing. So we're in fighting. We're working hard to reduce this inflation.
And maybe we can add also -- it's Allan speaking -- that to mitigate that, with the acquisition of Orchids and all the modernization and closure we're doing in Tissue, it's also related to this, and to optimize our network of product and so on to reduce these costs given what is happening on the open market.
Yes. Okay. And Allan, just any sense, just kind of across all of Cascades, how much of your trucking would be on a contractual basis, maybe an annual or multiyear contract versus how much is just indicative of the spot market prices we see?
Well, we've made a lot -- as Mario mentioned with our center of excellence, over the last few years, we've put everything together under 1 team. And now I believe, we are maybe, is it 90% contracted?
It's a little less than that, but we were in the high, let's say, 70s. So we still have some inroad to do, but we have a large portion of our trucking that's already contracted, some for 1 year and some for multi-year.
[Operator Instructions] Your next question comes from Zachary Evershed.
Quick follow-up for you on the potential to migrate from away-from-home Tissue into consumer. For those lines that could be converted, what intensity of CapEx would that require and what's involved in the transition?
It's limited. We're talking about $1 million, $1.5 million per line for ramping capacity usually. So when you talk about a few lines, it's probably less than $5 million overall. So it's not that much.But the thing is, we're trying also to limit CapEx because we've shut some facilities, as you know. So we have some retail bundling or wrapping equipment that we're moving right now. So for example, there are some wrappers from Arizona that are now being installed in Granby, where Granby used to be 100% away-from-home plant, and it's going to produce more and more retail plan.So as Allan mention as well, the fact that we're having less sites is also helping us to better manage costs and have facilities that are both for retail and away-from-home because in the past, Granby or Scappoose were 100% away-from-home plants, and now there is more retail in those plants.So on the West Coast, for example, it's going to be 50-50 retail and away-from-home next year, so -- as opposed to 100% away-from-home last year. So we're trying to move toward this with limited CapEx, with the existing equipment that we have.
That's really helpful. Could you give us a ballpark idea of how many away-from-home lines are dedicated and can be converted in the network?
And the number of lines -- that's a good question -- there is probably -- we'll see, 5, maybe 5 plus/minus one, 4 to 6, maybe. But most of them can be converted with really limited effort because it's already kitchen roll towel or single-roll, that lines. The one that required investment, there is probably 2 or 3 lines right now. But the thing is, by the consolidation, we're also stopping smaller or older lines by consolidated.So as you know, we've announced 4 closure -- we've done 4 closures so far, we announced 2 more for the next 2 months. So there's a lot of effort to consolidate and focus on the right product with the right margin with the right customers.
Your next question comes from Paul Quinn.
I guess, so starting Tissue with Jean-David. I think a couple of quarters ago when we talked about migrating some of this away-from-home to consumer, you thought you could do 10% to 15%. So it sounds like you're at 10% level now, sort of moving up there, which is great. What surprised me in the quarter was the drop in capacity utilization from 87% to 73%. Is that all on the away-from-home side?
Yes, but also on jumbo roll. So this sometime -- something -- we sometimes forget we used to sell a lot of jumbo rolls, so we've shut down Memphis facility, which was 35,000 tons sold in the open market, so -- globally, that's why the utilization rate went down. Same thing on the West Coast. Our integration level in the West Coast is limited. So we had to shut down or curtail both machines there for a few weeks.
Okay. So is it fair to say we're not going to see a big jump up in that capacity utilization until people are back working in the office and travel?
Yes, overall, but we're just shutting down 50,000 tons in PE over the next 2 months. So that will help the total percentage, if I can say. Also, the fact that we're installing new line -- so there's 4 new lines starting in first quarter of next year, all dedicated to retail. So we will be able to restart Memphis probably first quarter of next year, and with the forecast that we have, again, like Memphis, all those tons will be integrated into Wagram, North Carolina, or Pryor, Oklahoma, toward the mid or end of next year.So the focus of increasing integration is really a priority for us as well. So by having the right machine with the right trends to supply the new line that we're putting into the system, I believe it's going in the right direction for our integration but also for more retail product.
Okay. And then maybe just a question for Charles on Containerboard. I couldn't quite understand where the tons are going on Bear Island on start-up. It sounded like you've got 50,000 internal and then you're looking for partners for the other -- another 150,000 tons. So in the first year, it will run around 200,000 tons. Is that the way that sort of balances out?
About the first 12 months, yes, of operation. That's what we -- that we know today of what we're trying to secure, that's about the split, yes.
Okay. And then, I guess, Mario, just overall, I understand seasonality in Boxboard Europe will be down, but it's -- it feels like Boxboard Europe is a different business than it was a year or 2 years ago. Is that true? And what are you looking for in 2021?
I would say the same progression, Paul. We've done a lot of work in managing our accounts and managing our numbers of SKUs in Europe. And [ Michelli ] has done a fantastic job of making a multi-mill come. So now we can swing the product from the different mills. So I think the progression you see in Europe for the last 2 years will keep on for next year. And you're probably aware that we just made an acquisition in Spain. So this will have even consolidate our position in the south of Europe. And the synergies coming out of this acquisition with the Barcelona facility -- so I think that the improvement in OIBD and market penetration will keep on going.
Thank you. There are no further questions at this time. Mr. Plourde, please continue.
Thank you, everyone, for being on the line today. Looking forward to talk to you after Q4. And be safe in the meantime. So thank you, everyone. Have a good day.
[Foreign Language]Thank you. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.