03/26/2013 03:24 EDT | Updated 05/26/2013 05:12 EDT

Cascades hopes non-family CEO will guide recycled paper company to better days

MONTREAL - The brothers who founded Cascades nearly 50 years ago hope a trusted long-time employee will breathe new life into the recycled paper company and gain more respect from investors.

Mario Plourde, 51, who was named chief operating officer two years ago, will become president and CEO at the company's annual meeting in May, replacing Alain Lemaire who, with brothers Bernard and Laurent, transformed a small operation in Kingsey Falls into one of Quebec's most recognized businesses.

"After nearly 10 years at the head of the company, my brothers and I feel it is time to pass on the torch and make room for the younger generation," Alain Lemaire said Tuesday during a news conference.

With no family members interested in taking Cascades, the brothers decided a couple of years ago to turn to an insider who has spent his entire career rising through the ranks and earning their respect.

"He is the fourth member of the three musketeers. I can even say he's also a bit like the fourth brother," added Laurent Lemaire.

Alain Lemaire, 65, will remain chairman, accompanied on the board by the older brothers.

Plourde said he plans to follow the three-year strategic plan unveiled last year which called for the company to continue closing underperforming assets to trim costs while expanding in the United States.

"The plan is in place. Every group is working on it as we speak today and our mandate is to deliver the plan and make Cascades a successful company," Plourde told reporters.

"There won't be a big difference in the management style of the Lemaires and myself because it's the only recipe that I have learned in my 28 years with the company."

Plourde also said he has no plans to change the division presidents who oversee the tissue and packaging operations in North America and Europe. He headed the specialty products group before being promoted in 2011.

While each of the brothers has taken a turn as CEO and helped to increase annual sales, which now total some $3.64 billion, Cascades faces high recycled paper prices and a strong Canadian dollar that have hurt profitability.

Cascades lost $11 million last year after earning $99 million in 2011. Excluding discontinued operations, Cascades had a loss of six cents per share — an improvement from the loss of 16 cents per share from continuing operations in the fourth quarter of 2011.

The company's share price has dropped by more than half over the past three years, reducing its market capitalization to just $423 million. That's less than the amount that Cascades' Norampac division and its partners, including the pension fund manager Caisse de depot et placement du Quebec, will spend to build the Greenpac mill in Niagara Fall, N.Y.

On the Toronto Stock Exchange, Cascades shares were up 15 cents, or 3.45 per cent, at $4.50 Tuesday afternoon.

The brothers say they are disappointed by the weak value of Cascades shares, which they say have lagged because of the company's heavy indebtedness.

"We hope (appointing Plourde) is a good decision that will bring a higher value to the shares," said Alain.

The Lemaire family and a foundation it operates will continue to own about a third of Cascades shares in a multiple voting composition designed to prevent a hostile takeover.

The company founders insist that Plourde will have the freedom to proceed with the changes he feels are required.

"I think he will have the manoeuvrability as much as he would like," added Alain Lemaire, noting that the number of operating units has dropped to 100 from 150 that existed when he became CEO in 2003.

While Cascades has no plans to reduce its position as Canada's leading recycled paper company or its standing in Quebec, Plourde acknowledged that its growth would likely come from opportunities in the United States.

Pierre Lacroix of Desjardins Capital Markets said the change in leadership won't like have much impact on Cascades shares because the appointment of an experienced internal candidate had been broadly anticipated.

"Given Mr. Plourde’s substantial experience with Cascades, especially with respect to the oversight of operations in recent years, we believe he represents an excellent internal appointment to the role of president and CEO," he wrote in a report.