By Ross Marowits, The Canadian Press

MONTREAL - Cascades Inc. (TSX:CAS) exceeded expectations in its latest quarter as lower energy and materials costs helped the recycled tissue paper and packaging producer earn $34 million, despite lower sales.

The Kingsey Falls, Que. company posted its sixth consecutive quarter of improved results Thursday, including net earnings of 35 cents per share for the quarter ended Sept. 30. That's up from a seven cent loss a year ago when the net loss totalled $7 million.

Excluding specific items, third-quarter net earnings were $35 million, up from $6 million in the year-ago period.

Sales decreased six per cent to $974 million, reflecting a drop in selling prices and shipments partly offset by the depreciation of the Canadian dollar.

"We delivered very strong third quarter results in a challenging environment," said chief executive Alain Lemaire.

The results beat analyst expectations. Analysts polled by Thomson Reuters had forecast EPS of 24 cents on revenues of $977 million.

"Very impressive," Paul Quinn of RBC Capital Markets said in an email.

The green products and tissue paper producer said it had the highest operating income before depreciation and amortization in the company's history. EBITDA increased 44 per cent to $127 million.

The company's profits were boosted by strong improvements in three of its fours products: Boxboard income increased to $22 million from $6 million for the same quarter last year. Containerboard nearly doubled to $42 million from $23 million. Tissue papers increased to $38 million from $22 million.

Lower energy and raw material costs caused operating results from continuing operations to more than quadruple to $76 million despite eight per cent lower sales volumes and reduced prices.

The overall results included specific items such as $5 million in closure and restructuring costs, a $1 million impairment charge and $8 million unrealized gain on commodity financial instruments. The net income also reflects a $3 million foreign exchange loss on long-term debt.

The company revamped its boxboard business in the last year, laying off nearly 1,000 temporary and permanent workers as plants were reorganized or closed.

Cascades reduced its net debt by $88 million during the quarter, and by $216 million since the same period of 2008.

While encouraged by the recent improvement in demand and relative stability of most prices, Cascades expects lower volumes in the fourth quarter due to normal seasonality and planned maintenance down time.

"We also remain cautious in regards to short term business conditions given the uncertain economic climate in North America," Lemaire said in a news release.

Cascades said it expects to receive $6.1 million by 2012 from Ottawa's subsidy for energy and environmental efficiency projects.

Founded in 1964, Cascades producers, converts and markets packaging and tissue products composed primarily of recycled fibres. It employs 13,000 people in North America and Europe.

On the Toronto Stock Exchange, Cascades shares closed at $7.74, up 43 cents, or 5.88 per cent.