The Company is exposed to market risk, such as changes in currency exchange rates, commodity prices and interest rates. To the extent the Company decides to manage the volatility related to these exposures, the Company may enter into various financial derivatives that are accounted for under the derivatives and hedging guidance. These transactions are governed by the Company's hedging policies which provide direction on acceptable hedging activities, including instrument type and acceptable counterparty exposure.

Upon inception, the Company formally documents the relationship between hedging instruments and hedged items. At inception and quarterly thereafter, the Company formally assesses whether the financial instruments used in hedging transactions are effective at offsetting changes in either the cash flow or the fair value of the underlying exposures. The Company does not hold derivative financial instruments for trading purposes.

The Company is exposed to credit risk on accounts receivables from its customers. In order to reduce this risk, the Company reviews new customers’ credit history before granting credit and conducts regular reviews of existing customers’ credit performance. As of March 31, 2022, two customers located in the U.S. represented 28% or $138 million, of the Company’s receivables (December 31, 2021 – two customers located in the U.S. represented 28% or $130 million).

The Company is exposed to credit risk in the event of non-performance by counterparties to its financial instruments. The Company attempts to minimize this exposure by entering into contracts with counterparties that are believed to be of high credit quality. Collateral or other security to support financial instruments subject to credit risk is usually not obtained. The credit standing of counterparties is regularly monitored.

The Company is exposed to interest rate risk arising from fluctuations in interest rates on its cash and cash equivalents, bank indebtedness, revolving credit facility, term loan and long-term debt. The Company’s objective in managing exposure to interest rate changes is to minimize the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. The Company may manage this interest rate exposure through the use of derivative instruments such as interest rate swap contracts, whereby it agrees to exchange the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount.

The Company is exposed to price volatility for raw materials and energy used in its manufacturing process. The Company manages its exposure to cost risk primarily through the use of supplier contracts. The Company purchases natural gas at the prevailing market price at the time of delivery. To reduce the impact on cash flow and earnings due to pricing volatility, the Company may utilize derivatives to fix the price of forecasted natural gas purchases. The changes in the fair value on qualifying instruments are included in Accumulated other comprehensive income to the extent effective, and reclassified into Cost of sales in the period during which the hedged transaction affects earnings. Current contracts are used to hedge a portion of forecasted purchases over the next 21 months.

As of March 31, 2022, the Company hedged 25% and 10% of its forecasted purchases under derivative contracts for 2022 and 2023, respectively. The natural gas derivative contracts were effective as of March 31, 2022.

The Company has manufacturing operations in the United States and Canada. As a result, it is exposed to movements in foreign currency exchange rates in Canada. Moreover, certain assets and liabilities are denominated in Canadian dollars and are exposed to foreign currency movements. Accordingly, the Company’s earnings are affected by increases or decreases in the value of the Canadian dollar. The Company’s risk management policy allows it to hedge a significant portion of its exposure to fluctuations in foreign currency exchange rates for periods up to three years. The Company may use derivative financial instruments (currency options and foreign exchange forward contracts) to mitigate its exposure to fluctuations in foreign currency exchange rates.

Derivatives are used to hedge forecasted purchases in Canadian dollars by the Company’s Canadian subsidiary over the next 24 months. Such derivatives are designated as cash flow hedges. The changes in the fair value on qualifying instruments are included in Accumulated other comprehensive income to the extent effective, and reclassified into Sales or Cost of sales in the period during which the hedged transaction affects earnings.

As of March 31, 2022, the Company hedged 57%, 25% and 1% of its forecasted net cash exposures under contracts for 2022, 2023 and 2024, respectively. The foreign exchange derivative contracts were effective as of March 31, 2022.

The accounting standards for fair value measurements and disclosures establish a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is available and significant to the fair value measurement.

The following tables present information about the Company’s financial assets and financial liabilities measured at fair value on a recurring basis (except Long-term debt, see (b) and (c) below) at March 31, 2022 and December 31, 2021, in accordance with the accounting standards for fair value measurements and disclosures and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

Fair Value of financial instruments at:	March 31, 2022		Quoted prices in active markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)			Balance sheet classification
	$		$		$		$
Derivatives designated as hedging instruments:
Asset derivatives
Currency derivatives		17		—		17		—	(a)	Prepaid expenses
Natural gas swap contracts		16		—		16		—	(a)	Prepaid expenses
Natural gas swap contracts		3		—		3		—	(a)	Other assets
Total Assets		36		—		36		—

Liabilities derivatives
Currency derivatives		1		—		1		—	(a)	Trade and other payables
Total Liabilities		1		—		1		—

Other Instruments:
Long-term debt due within one year		7		—		7		—	(b)	Long-term debt due within one year
Long-term debt		1,643		—		1,643		—	(c)	Long-term debt

Fair Value of financial instruments at:	December 31, 2021		Quoted prices in active markets for identical assets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)			Balance sheet classification
	$		$		$		$
Derivatives designated as hedging instruments:
Asset derivatives
Currency derivatives		18		—		18		—	(a)	Prepaid expenses
Natural gas swap contracts		6		—		6		—	(a)	Prepaid expenses
Natural gas swap contracts		2		—		2		—	(a)	Other assets
Total Assets		26		—		26		—

Liabilities derivatives
Currency derivatives		1		—		1		—	(a)	Trade and other payables
Currency derivatives		1		—		1		—	(a)	Other liabilities and deferred credits
Total Liabilities		2		—		2		—

Other Instruments:
Long-term debt due within one year		259		—		259		—	(b)	Long-term debt due within one year
Long-term debt		1,682		—		1,682		—	(c)	Long-term debt

Due to their short-term maturity, the carrying amounts of cash and cash equivalents, receivables, bank indebtedness, trade and other payables and income and other taxes approximate their fair values.