Cascades reports net earnings of $0 for 1Q 2005

Financial highlights

  Note 1 - the 2004 numbers were restated to exclude the discontinued

  operations related to the distribution activities of the Fine papers and

  Tissue papers segments. Refer to note 2 of the interim financial

  statements.

  Note 2 - see the supplemental information on non-GAAP measures note.

  Business highlights

    -  Improved net earnings per share compared to Q1 2004.The impact of

       higher prices and business acquisitions more than offset the 7%

       appreciation of $CA over the period;

    -  Divestiture, in accordance with our strategic plan, of non-core

       distribution assets within the tissue segment for a net

       consideration of $16 million. The net proceeds have been applied to

       debt reduction;

    -  The North-American boxboard group acquires and initiates the

       integration of the packaging division of Dover Industries Ltd; and

    -  The start-up of a new waste paper recovery plant in Gatineau

       (Western Quebec) will increase the volume of recycled fiber which is

       directly processed and under Cascades' control.

Commenting on the quarterly results, Mr. Alain Lemaire, President and Chief Executive Officer stated: "Cascades has managed to improve its results in comparison to the first quarter of 2004 as price increases and the contribution of our business acquisitions have more than offset the negative impact of the appreciation of the Canadian dollar. However, given challenging business conditions, results for the first quarter were relatively stable in comparison to the last quarter of 2004, reflecting seasonal weakness in most of our markets. These conditions were compounded by the rapid increase of energy, freight and fiber costs as well as by the impact of the ongoing labour disruption at our Fjordcell virgin pulp mill."

  Three-month period ended March 31, 2005

Sales increased by 10% during the first quarter of 2005, amounting to $843 million compared with $763 million for the same period last year. The increase was due mainly to business acquisitions realized over the course of the last twelve months. Higher prices were mitigated by higher energy, fibre and transportation costs and by the impact of an increase in the Canadian dollar exchange rate. Operating income amounted to $17 million for the period compared to $15 million achieved last year.

During the first quarter of 2005, we recorded a gain on disposal of assets of $5 million ($4 million after-tax) resulting from the sale of the distribution division of Wood Wyant Inc. and the sale of a building held through our joint-venture, Norampac Inc.

  Outlook

Mr. Alain Lemaire, President and Chief Executive Officer added: "There is no indication that there will be a significant improvement in the prevailing business conditions in the near future. However we expect that the seasonal pick up in activity in most of our business segments will positively impact demand in the second quarter. We intend to closely monitor the market conditions and we will adjust production levels to meet demand and avoid building excess inventory. We will also continue to focus on managing controllable costs, pursuing in our plans to divest certain non-core assets and turn around non performing assets throughout our organisation."

  Dividend on Common Shares

The Board of Cascades declared a quarterly dividend of $0.04 per share to be paid on June 14, 2005 to shareholders of record at the close of business on May 31, 2005.

Supplemental information on non-GAAP measures

Operating income, cash flow from operations and cash flow from operations per share are not measures of performance under Canadian GAAP. The Company includes operating income, cash flow from operations and cash flow from operations per share because they are measures used by management to assess the operating and financial performance of the Company's operating segments. Additionally, the Company believes that these items provide additional measures often used by investors to assess a company's operating performance and its ability to meet debt service requirements. However, operating income, cash flow from operations and cash flow from operations per share does not represent, and should not be used as a substitute for net earnings or cash flows from operating activities as determined in accordance with Canadian GAAP, and they are not necessarily an indication of whether cash flow will be sufficient to fund our cash requirements. In addition, our definition of operating income, cash flow from operations and cash flow from operations per share may differ from those of other companies. Cash flow from operations is defined as cash flow from operating activities as determined in accordance with Canadian GAAP excluding the change in working capital components and cash flow from operations per share is determined by dividing cash flow from operations by the weighted average number of common shares of the period.

Operating income excluding specific items, net earnings (loss) excluding specific items, and net earnings (loss) per common share excluding specific items are non-GAAP measures. The Company believes that it is useful for investors to be aware of specific items that have adversely or positively affected its GAAP measures, and that the above mentioned non-GAAP measures provide investors with a measure of performance with which to compare its results between periods without regard to these specific items. The Company's measures excluding specific items have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies and therefore should not be considered in isolation. Specific items are defined to include charges for impairment of assets, charges for facility or machine closures, debt restructuring charges, gains or losses on sale of business unit, unrealized gains or losses on derivative financial instruments that do not qualify for hedge accounting, foreign exchange gains or losses on long-term debt and other significant items of an unusual or non-recurring nature.