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Forest products company Cascades Inc. reported flat a profit and lower revenue, saying the rising dollar and higher energy costs took a toll in the second quarter.

The Kingsey Falls, Que.-based company reported a profit of $40-million or 49 cents a share, compared with $40-million or 50 cents a year ago.

Cascades, which manufactures packaging products, tissue paper and fine paper, said its sales dropped 5 per cent to $813-million from $857-million a year ago.

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Earnings before interest, taxes, depreciation and amortization fell to $64-million from $109-million a year ago on weaker results from all of its segments.

"The rapid depreciation of the U.S. dollar and the continued poor performance of the American economy have had a direct impact on our overall sales and profitability," Alain Lemaire, Cascades CEO, said in a statement.

"However, our increased presence in the U.S. and the fact that we have refinanced most of our long-term debt in U.S. funds provide us with a natural hedge against fluctuations in the exchange rate."

Cascades said the quarterly average cost of natural gas rose 25 per cent from the 2002 second quarter. Its North American waste paper inventories hit all time highs.

The company also reported a foreign exchange after-tax gain from U.S. denominated debts of $43 million for the second quarter.

By segment, its packaging products bought in $236-million, down slightly from a year ago. The company's container board revenue fell to $150-million from $162-million.

Its tissue paper segment brought in $159-million, down from $166-million. And its fine papers unit recorded $182-million in revenue, down $9-million.

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