FGE.to - Fortress Paper (formerly FTP.to)

[DCG]

>>> FTP should get at least 1200 as per their long term contracts.

 

Long term contracts don't mean a thing if its the Chinese. Remember those iron ore contracts the chinese signed, when the ore prices dropped, they didn't honour them.

 

What you said is racism and show your ignorance. There are many trustworthy Chinese companies and people.

And there are companies in NA that won't honor underwater contracts.

 

I'm not racist, but there are very few Chinese companies that I trust. The country's govt is so concerned with filtering out information to it's citizens, yet has very little regulation in place for businesses.

[alertmeipp]

>>> FTP should get at least 1200 as per their long term contracts.

 

Long term contracts don't mean a thing if its the Chinese. Remember those iron ore contracts the chinese signed, when the ore prices dropped, they didn't honour them.

 

What you said is racism and show your ignorance. There are many trustworthy Chinese companies and people.

And there are companies in NA that won't honor underwater contracts.

 

I'm not racist, but there are very few Chinese companies that I trust. The country's govt is so concerned with filtering out information to it's citizens, yet has very little regulation in place for businesses.

 

I agree, we will have more frauds in Chinese companies than in US. NA's legal system is more advanced and such. Hey, I got burned by Sino-forest as well. But to say "Long term contracts don't mean a thing if its the Chinese." is a generalized statement across Chinese.

 

Li Ka Shing is Chinese too and so is BYD's boss.

 

 

[alertmeipp]

>>> FTP should get at least 1200 as per their long term contracts.

 

Long term contracts don't mean a thing if its the Chinese. Remember those iron ore contracts the chinese signed, when the ore prices dropped, they didn't honour them.

 

What you said is racism and show your ignorance. There are many trustworthy Chinese companies and people.

And there are companies in NA that won't honor underwater contracts.

 

In North America you have legal options to pursue someone who breaches a contract.  Can a North American company be successful with legal remedies in China?  If so, I am unaware of this.  I don't believe the writer was being racist or ignorant.  I think he was stating that when there are virtually no consequences due to the inability of  our legal system in reaching across the Chinese border, than the party on the other side of a contract is much more likely to default versus a similar party in North America.  It has nothing to do with them being chinese or that Chinese people/companies are untrustworthy. It has to do with living within the Chinese border and operating within their legal system and not North America's.

 

I for one, got burned on a chinese fraud.  Company is still active, has great operations but the executive transferred all the shares to himself and others.  Shareholders seem to have no recourse in China.  Hundreds of millions were lost and the value is still there.  How can we use our legal system to seize property in China?  Are non-chinese allowed to use the chinese legal system? 

 

What court does Chad file papers in if they default?  Have any North American investors/compaies been successful at litigation within the chinese borders against a chinese company?

 

Me too. That's why I don't want to go heavy into FTP. Otherwise, those long term contracts alone make FTP market cap looks very cheap.

[Liberty]

Worse case scenario, It's not like DP is something exotic with few potential buyers. They can sell to others, including eventually in the specialty market.

 

But if you believe the overall thesis that cotton production is pressured and that most people in emerging countries are going to start buying more clothes as they get a bit richer, and that FTP can achieve low cost production, then any drop much below 1200 can only be temporary, and FTP's chinese counterparties probably will be more attached to the long term contracts than even FTP itself...

[FFHWatcher]

Worse case scenario, It's not like DP is something exotic with few potential buyers. They can sell to others, including eventually in the specialty market.

 

But if you believe the overall thesis that cotton production is pressured and that most people in emerging countries are going to start buying more clothes as they get a bit richer, and that FTP can achieve low cost production, then any drop much below 1200 can only be temporary, and FTP's chinese counterparties probably will be more attached to the long term contracts than even FTP itself...

 

I agree on the basic thesis of emerging economies buying more clothes.  As far as FTP as a low cost producer goes, that is still just words on a powerpoint slide at this point.  Show investors the numbers on a financial statement and shareholders will see their valuation estimates for FTP come to fruition. 

 

Frankly, I wish we would all just stop talking and writing about it and wait to see how this pans out in a year or so, maybe even less if all goes well.  More if you want to include potential value in  LSQ.  For many years there will just be the drag of expenses at LSQ similar to building a mine and waiting for production and revenue to start.  It can feel like an eternity to (most) investors.

[augustabound]

I'm just curious, what industry papers/websites if any, have you read to understand FTP's business? Or has it been mostly from their annual reports and the handful of industry presentations they show on their website?

 

I can see the capital allocations made by Chad, but I'm wondering about some of the aspects of their business in general.

[Liberty]

I agree on the basic thesis of emerging economies buying more clothes.  As far as FTP as a low cost producer goes, that is still just words on a powerpoint slide at this point.  Show investors the numbers on a financial statement and shareholders will see their valuation estimates for FTP come to fruition. 

 

Frankly, I wish we would all just stop talking and writing about it and wait to see how this pans out in a year or so, maybe even less if all goes well.  More if you want to include potential value in  LSQ.  For many years there will just be the drag of expenses at LSQ similar to building a mine and waiting for production and revenue to start.  It can feel like an eternity to (most) investors.

 

I agree, though if the low cost status was already confirmed, FTP probably wouldn't be an opportunity for value investors. A lot of it is looking at this team's track record and having trust in Chad, which is inherently not guaranteed, unfortunately.

 

Personally, I'm also just waiting and watching.. We should know a bit more next week, but it'll really be after co-gen is done at Thurso that we'll know what is what.

[roundball100]

"Fortress Paper Announces Sale of Non-Core Assets at Landqart Mill"

 

http://finance.yahoo.com/news/fortress-paper-announces-sale-non-231157234.html

 

[Liberty]

"Fortress Paper Announces Sale of Non-Core Assets at Landqart Mill"

 

http://finance.yahoo.com/news/fortress-paper-announces-sale-non-231157234.html

 

As long as they get a decent price on the electricity, seems like a winner. It'll help them fund the rest of Thurso's co-gen, which was the biggest challenge on the short-term.

[lessthaniv]

http://www.andrewjohns.ca/sites/default/files/u17/Forestry_20120410%20Forest%20Products%201Q12%20Preview%3B%20Downgrading%20the%20Lumber%20Names.pdf

 

Have a look on pages 6 & 7 for discussion on dissolving pulp.

 

Dissolving Pulp – Currently at US$1,050/mt, dissolving pulp prices are down 16% from

Apr-2012 highs of US$1,250/mt (see Exhibit 6). We believe the current pressure on DP

pricing is the result of falling rayon prices which are now currently at US$2,510/mt down

11% from an early Feb-2012 high of US$2,825/mt. We understand with rayon prices in

this range producers of the textile are experiencing substantial margin pressure –

something we believe portends poorly for the near term dissolving pulp outlook. 

Nevertheless, we estimate marginal DP  producers delivered cash costs exceed

US$1,250/mt – which we expect to prevent spot prolonged periods of pricing below this

level. Hence, we maintain  our US$1,100/mt and US$1,150/mt DP price forecasts for

2012 and 2013 respectively.

 

Raymond James target:  $52/share

 

[tombgrt]

Great find lessthaniv.

 

--

 

Fortress Paper Provides Dresden Operational Update

 

VANCOUVER, BRITISH COLUMBIA, May 09, 2012 (MARKETWIRE via COMTEX) -- Fortress Paper Ltd. ("Fortress Paper" or the "Corporation") CA:FTP -1.32%  , is pleased to announce that its wholly-owned subsidiary, Dresden Papier GmbH, a leading manufacturer of wallpaper base, has operated 24 hours per day (100% utilization) without stoppage for 20 consecutive days compared to an annual average utilization rate of 93% in 2011. As a result, waste has been reduced to approximately 5% from an annual average waste rate of 9.35% in 2011.

 

"We are delighted with Dresden's operating consistency and efficiency. We believe that these production milestones will provide a meaningful impact to our financial results in the second quarter", said Chadwick Wasilenkoff, Chairman, Chief Executive Officer and President of Fortress Paper.

 

http://www.marketwatch.com/story/fortress-paper-provides-dresden-operational-update-2012-05-09-92420

 

Once again increased operational efficiency.

 

Btw, doesn't look like that asset sale is anything of importance. Just some spare cash and less to worry about?

[OptsyEagle]

Btw, doesn't look like that asset sale is anything of importance. Just some spare cash and less to worry about?

 

Still a little dissappointing that we didn't get details.  Makes a big difference if it was sold for $15 million as opposed to $1.5 million, etc.  Fortress can use the money and I suspect some are concerned about the dilution that might come about if they need to issue stock. Chad has already indicated that an equity issue would be a very, very, very last resort, since he has more at stake (2.4 million shares) then anyone else.  This sale would go a long way to showing the market that he can accomplish the capital requirements without issuing stock.

 

When I ask myself why no details, it is difficult to come up with any reasons.  Sometimes there are no details because the purchaser or seller is concerned about the news.  This usually comes from the buyer paying too much for the asset and not wanting their shareholders to find out or the seller, selling it too low and not wanting their shareholders to find out.  With Chad I like to think it is the former, but again, we may never know.  The other reason might be that Chad is in discussions with a purchaser for Landqart.  If they were at some price negotiated for the whole company, and Chad sold the power assets for a big number, the buyer would want that big number subtracted from what they pay.  So don't say anything and tell the buyer it was insignificantly small.  I doubt this is the case since selling part of a company when negotiating the sale of it in its entirety would be complicated.

 

Anyway, I am sure they got something for it and since it is definitely non-core, I am glad to see it sold.

[keerthiprasad]

Q1 results:

 

http://www.marketwire.com/press-release/fortress-paper-announces-first-quarter-2012-results-tsx-ftp-1656965.htm

 

Not too much here really, wallpaper is doing great, currency poor (for the time being), and pulp is still ramping up (slower than desired). 

[OptsyEagle]

It would have been a positive $3.5 million EBITDA if we had of shut down Landqart last year. $5.2 million loss again this quarter from that division.  Better then the $7 million or so it lost last quarter but still significant.  Always nice to know that if Fortress Paper ever wants to earn a quick $1.25 EPS per share, all it has to do is buy a big padlock and snap it on the front door of that plant.

 

In any event, $18 million for Landqarts hydro assets.  Wonderful.  Should shore up any liquidity concerns for the remainder of the year and Thurso should be spewing serious positive cash before we end this year to take care of 2013 and beyond.

[Liberty]

Not good, but not a surprise. Now the next few quarters should become really interesting :)

 

Nice price they got for the hydro at Landquart. I don't see the downside of not owning that anymore, so good deal.

[Liberty]

CC starting now:

 

A conference call to discuss the financial results for the first quarter 2012 will be held on May

15, 2012 at 9:30 a.m. (PST). To attend the conference call, please dial one of the following

numbers:

North America: 1-855-353-9183

International: 1-403-532-5601

Participant pass code: 15086#

Conference Reference Number: 770462

A replay of the conference call will be available for 7 days. To access the replay, listeners may

dial 1-855-201-2300 from North America or 403-255-0697 International.  The conference

reference number is 770462 and the participant pass code to access the replay is 15086 #.

[OptsyEagle]

Conference Call Highlights:

 

- Continued delays of orders at Landqart should continue into Q2.  New orders received should start production in 2nd half of 2012 and take up a considerable amount of excess capacity.  Chad indicated that he is fully confident of an immanent turnaround for this division.

 

- Demand for non-woven wallpaper, higher then expected.  Q1 results were from a ramping up of production and therefore going forward, would expect Q1 results to be repeated or surpassed.  Waste reduced to only 5% as opposed to above 9% industry average.  Current order log is very healthy.  Asia is also opening up as a new and very large market.

 

- Kurt seemed confident that liquidity needs will be met by existing cash, line of credit, amounts receivable and cash flow from Thurso in 2nd half.  Looking to sell land adjacent to Landqart for between $5M and 10M over the next 6 months and of course all assets are for sale to the right offer.  Of $19M in debt due within 1 year, about $10 million of it can be deferred at Fortresses option.

 

- Co-gen is about 80% done.  Still expect Q4 start up.

 

LSQ finalization is simply a matter of burocracy.  Many players.  Expect to close in next few days or weeks.

 

Landqart Hydro sale for $18 million swiss francs (about $18 million Cdn dollars).  Cash is now in the bank.  Ongoing costs for the sold hydro only about $400K. WOW.  What a deal.

 

- Thurso - Produced $25,000 tonnes of DP in Q1 on a ramping up basis.  Had good days and bad days.  On good days the production peaked at estimated design levels.  They see no reason why they should not be operating at design levels by 2nd half of 2012.

 

- Thurso costs fluctuated depending on whether they were having a good day or bad day but they see no reason why they will not achieve production costs as estimated.

 

- Thurso had no issues with quality.  All customers approved product and it has already gone through the Viscose production process at customer plants with excellent results.  Contract pricing has not changed and they see no problem with current long term contracts.  Current spot price at around $1100 per tonne.

 

[Liberty]

You beat me to it Optsy, my CC notes are pretty similar. Thanks for sharing.

[colinwalt]

Thanks from me too Optsy...

[OptsyEagle]

Ya gotta be quick Lib.

 

I can't believe some investors are selling this stock at these prices.  Did they not graduate even grade 6 math.  Fortress is earning $1.60 EPS from Dresden alone and it is growing rapidly, and by Q4 Fortress Paper will earn $0.75 EPS from the Co-gen with already signed long term contracts from Hydro Quebec.  That's $2.35 EPS without even factoring in Thurso, LSQ or Landqart.

 

Even if the worst case scenerio happened and Chad decided to issue another 1 million shares you could reduce the above number to $2.20 EPS. 

 

Anyway, Chad is scheduled to be on BNN at 3:10 pm EST today for anyone interested.

[tombgrt]

Nothing on estimated cash cost/ton on thurso? Or did I miss it?

[OptsyEagle]

Nothing on estimated cash cost/ton on thurso? Or did I miss it?

 

You missed it.

 

"- Thurso costs fluctuated depending on whether they were having a good day or bad day but they see no reason why they will not achieve production costs as estimated."

[lessthaniv]

Nothing on estimated cash cost/ton on thurso? Or did I miss it?

 

They suggested to date the cash costs are sporatic due to ramp up phase. When they are running at capacity the cash costs are expected to be in line with previous guidance.

 

One thing that was mentioned was the fact that Chinese Cotton Linters (with high cash costs) have been shutting the doors. This has caused a moved back up in DP to $1150/MT.

 

This is important as it validates our thesis and mitigates counter party risk on $1200/mt floor price.  The prices they sold for was mixed as it was off-spec sales and discounted as ramp up production.  We'll just have to be patient to see in the coming quarters what the cash cost will be. 

 

Today was largely as expected for me with an upside surprise on Dresden. Landquart / Thurso were pretty much what was expected.

[Liberty]

Some head in the clouds stuff:

 

Looking at the price of the stock, it almost makes me wish they would sell either Dresden or Landquart (or both) quickly and try to buy back something like half the outstanding shares in a tender offer. But it probably wouldn't work, in good part because price would probably rocket back up if they tried to do that, and they couldn't get these kinds of prices for a few million shares (volume has always been low and price volatile).

 

Too bad. Imagine if they could buy back half of Thurso and LSQ for something like 150 million.. That'd be so great, much better expected ROI than if they keep Dresden and Landquart.

[tombgrt]

Ok thanks guys. I can live with what has been reported but really want to see a change in Landqart soon, although the sell was ok. They don't have forever to ramp up Thurso as there are plenty of things to pay off.  The value is here but I don't want to see liquidity problems because Chad wants the last drop, better safe than sorry.