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

[OptsyEagle]

Can anyone explain to me what the supply/demand info on slide 16 is saying.  I have seen this many times but fail to understand what it means or how to read it.

[FrankArabia]

this is the only investor presentation for investors i have ever seen that didn't have financial performance included

[gokou3]

Can anyone explain to me what the supply/demand info on slide 16 is saying.  I have seen this many times but fail to understand what it means or how to read it.

The bottom areas show the cumulative supply of various suppliers over time (left axis, in kiloton).  The blue line on the top shows the overall utilizations of the total supply (right-axis).  The red dotted line shows the theoretical utilizations without the chinese suppliers.  As you can see, without the high-cost chinese suppliers, util> 100% meaning there is not enough supply to meet the demand.  Since commodities are priced at the margin, the slide shows that the equilibrium DP price should be higher than the marginal supplier cost, which are the chinese at cash cost of >$1k/ton, to meet the marginal demand.

[OptsyEagle]

Thank you for that, however, I am still a little confused at what part of this is the demand.  I see the supply of all the producers and then I see utilization percentages, which I am guessing is the % of their capacity (perhaps I am wrong), but where on this chart is the demand.  Or is the utilization the demand?  This is where I am confused.

[gokou3]

Thank you for that, however, I am still a little confused at what part of this is the demand.  I see the supply of all the producers and then I see utilization percentages, which I am guessing is the % of their capacity (perhaps I am wrong), but where on this chart is the demand.  Or is the utilization the demand?  This is where I am confused.

 

Demand is not shown explicitly on the chart but you can infer it by using demand = supply capacity * util

 

Util = industry utilization.

[FrankArabia]

inferring demand = supply*capacity is a recipe for disaster...just cause you build it doesn't mean they'll come.

[gokou3]

inferring demand = supply*capacity is a recipe for disaster...just cause you build it doesn't mean they'll come.

 

You took it out of context

[tombgrt]

inferring demand = supply*capacity is a recipe for disaster...just cause you build it doesn't mean they'll come.

 

Not quite what he meant... It seems that you assume and speculate plenty yourself btw. From the Jim Chanos / DELL topic:

 

businesses will continue buying PCs and INTC and PC makers will see a lift in demand when businesses eventually do an IT refresh....imagine doing financial modelling on a tablet? that's like eating with your feet.

 

or INTC topic:

 

your thoughts on this?

 

I got in at $24.75 and $24.00.

 

I think we're in for some pain in the near term but overtime they should gain momentum on the mobile side as the PC side takes off from IT refresh.

 

Can you put some numbers behind the claim that an IT refresh is due? Don't tell it's just because of Win 8 coming out? It's possible but hardly certain. Even if the IT refresh occurs in force in the next couple of years, how sure are you that INTC and current PC makers will be the one having the demanded technology? Maybe the shift has (partly) taken place to other devices. Too many variables... And will INTC gain momentum on the mobile side or are you just guessing that? Actually I know for a fact that you are at least partially guessing. But no judgement, I have made the same mistake in the past. ;) Just trying to making a point here because... :

 

In the same way, people here have a thesis on future demand for DP and other alternatives because cotton (and food) prices will experience increased pressure because of loss of acreage, increase in demand because of population growth (and wealth!), environmental issues, ... Grantham and others support this theory and it's unlikely that enough alternatives will be found to avoid future crises. Yet, it's hardly a given.

 

The fact is that there is always some speculation involved in such theories. You can't be sure. The trick is to get that speculative aspect for free when buying a stock. For FTP that seems to be the fact lately, at least to some.

 

In the end, a lot depends on trust in management when you are looking at companies with major acquisitions in the works. And in that regard, I have a lot more trust in Chad that in Michael Dell. Not saying Dell isn't a bargain, it's damn cheap!

 

You called Mega Brands a cigarette butt as well. Maybe it is, maybe not. LUK's investment in JEF seemed odd as well to you considering it is only 'second tier'. You seem to have a natural tendency to run away from any possible deficiency. Just an observation, no judgement. Most value investors like dirty work where it looks like the shitstorm won't end.  That's is where you get the best bargains. I have been buying FTP again lately, we'll see whether it's toast in a couple of years.

[FrankArabia]

we should move the discussion of INTC to INTC thread. I think your points have been addressed by myself and other posters there. INTC is a bit different in at least one basic sense, it has a decent dividend that has gone up over time by quite a bit.

 

on FTP, just take a look at the numbers. take a look at the industry. the company is not yet profitable and in fact has been bleeding cash and raising money. what type of cash you expect them to rein in when it does? what ROE figures you think are coming in? do you have a company/peer that is performing at levels you're expecting FTP to perform at.

 

If i had to take something in the sector, i think I would go with Domtar for now.

 

 

[jeffmori7]

Thanks Tom for your post!

 

Frank, I won't go into this debate again, the investment thesis has been exposed here, if you don't agree, fine. But the questions you keep asking have all been adressed in this thread, so...anyway, let's watch and see!

[tombgrt]

we should move the discussion of INTC to INTC thread. I think your points have been addressed by myself and other posters there. INTC is a bit different in at least one basic sense, it has a decent dividend that has gone up over time by quite a bit.

 

on FTP, just take a look at the numbers. take a look at the industry. the company is not yet profitable and in fact has been bleeding cash and raising money. what type of cash you expect them to rein in when it does? what ROE figures you think are coming in? do you have a company/peer that is performing at levels you're expecting FTP to perform at.

 

If i had to take something in the sector, i think I would go with Domtar for now.

 

 

 

I have been up for more than a full day so I'll keep this brief.

 

As Jeffmori7 said, it's all in this topic and it's not so hard to make some estimates and raw calculations. 2 of their 4 divisions are works on progress, another one was shut down for several months. What exactly do you think you are going to find in the current financial statements that is going to give you a complete and correct view? If more investors were like you, shunning away from anything that isn't profitable at this very moment, there would be some insane opportunities in the market all year long.  :P

 

Anyway, here is a new article on Chad and FTP, maybe it helps: http://www.vancouversun.com/business/industry/Fortress+Paper+creates+value+from+Canada+pulp+mills/7316897/story.html

 

In a Sept. 10 note to clients, Quinn said he has faith in the management team but is “frustrated that they over-promise and under-deliver.”

 

+1. But except the higher producing costs, cost overruns have little impact over the long turn. At least we get a 50%+ share price discount because of it. I do hope Chad learned his lesson on over-promising, no matter who made the original fault. In the end, he is responsible.

 

In 2006, Fortress made its first acquisitions, an orphaned wallpaper mill in Dresden, Germany, and banknote printing business in Landqart, Switzerland. The wallpaper mill, which former owner Mercer International was selling because it wasn’t a core asset, has been a cash cow. The Swiss banknote mill has been less so. Costs in the banknote business have been hit by the escalating Swiss currency, and a key order was delayed earlier this year, causing the plant to shut down temporarily. The order has been reinstated and the mill went into production in July. It is expected to be in positive territory in 2013, Wasilenkoff said.

 

Bold statement... We'll see. I actually believe that Landqart could be worth something over time (no silly $15-30m). It's a very interesting niche business with high barriers to entry. I disagree that they should sell it asap just to relieve management from it. If they get it to break-even, why would you want a few bucks after they just spend tens of millions on an upgrade? 

I'm actually more worried about Dresden. How long will they be able to attain current margins? What are competitors doing and how fast can they breach the little moat Dresden has?

[Liberty]

http://www.marketwatch.com/story/fortress-paper-announces-electricity-supply-agreement-with-hydro-quebec-2012-10-01-8173350

 

Fortress Paper Ltd. ("Fortress Paper" or the "Corporation")  announced today that it has signed, through its wholly-owned subsidiary, Fortress Global Cellulose Ltd. ("Fortress Global"), an electricity supply agreement with Hydro Quebec for the sale of green electricity to be produced at the Fortress Global Cellulose Mill's cogeneration facility upon its re-start. The agreement was entered into in connection with Hydro-Quebec Distribution's Power Purchase Program for electricity derived from forest biomass, which was launched on December 20, 2011.

 

Under the terms of the agreement, Fortress Global will provide up to 34 megawatts of green power to Hydro Quebec commencing no later than June 1, 2014, at a price of $106 per megawatt hour, indexed to the consumer price index over a 25 year term.

 

Chadwick Wasilenkoff, CEO of Fortress Paper, states, "The signing of the electricity supply agreement represents a key component in achieving our business plan at the Fortress Global Cellulose Mill, which includes the restart of the cogeneration facility to produce green electricity that in turn will reduce production costs. Generating green energy exemplifies our commitment to sustainable development and we believe that the results of this partnership with Hydro Quebec will be beneficial to the environment and the community, as well as to Fortress Paper."

[FrankArabia]

Tom, I think you should recognized that there is a bit of a "hope" here that FTP does what it sets out to do....just recognize that.

 

How much of your net worth do you have in this thing? For me, if i can't put 20% of my net worth into it (not saying I would in all cases) you shouldn't bother.

[tombgrt]

Of course there is hope that management does what it says it will. Isn't there hope in the same way in many technology companies facing problems, like Dell? FTP has one business that does great, another that has potential imo over the longer term and one division with two major assets (DP) that require a leap of faith and a certain macro view. I think it's all more than priced in and have over half my net worth into this. I could be wrong but I'm 23 and should turn out oke even if I lose everything. My current net worth is insignificant compared to my lifelong earnings.

[keerthiprasad]

Tom, I think you should recognized that there is a bit of a "hope" here that FTP does what it sets out to do....just recognize that.

 

How much of your net worth do you have in this thing? For me, if i can't put 20% of my net worth into it (not saying I would in all cases) you shouldn't bother.

 

I understand why that there is some element of speculation in this company, however it is important to realize that their first DP facility is almost completely operational.  Its not perfect, but pretty good.  There is a huge difference between missing a deadline and an inability to deliver.  I think to casual observers or critics this distinction may not be present. 

 

[Guest Quebec]

I own some FTP and currently pondering about averaging down while sentiment is negative, its tax loss season and many are giving up. Dwindling down on low volume. However, noticed a recent insider sale of 10,000 shares at 13.75 (Peter Vinall) and wonder how to read it? M. Vinall is likely our most important player with all things pulp.

 

http://ca.linkedin.com/pub/peter-vinall/48/a5b/754

 

Would it not make sense for RFP (Resolute) to take-over FTP (Fortress) ? Seems to me it's within their circle of competence and their reach financially, geographically and strategically. It would continue diversifying away from newsprint with a growing specialty product as well as meaningful electricity production. With the fund obtained to complete their projetcs, the second PPA just signed and the price where it is, that look just like Fibrek if not better!

 

(I own RFP too)

 

Edit: Large shareholders such as Chad and ABC Funds maybe pleased with undervalued and liquid RFP shares for their holdings

[Liberty]

I own some FTP and currently pondering about averaging down while sentiment is negative, its tax loss season and many are giving up. Dwindling down on low volume. However, noticed a recent insider sale of 10,000 shares at 13.75 (Peter Vinall) and wonder how to read it? M. Vinall is likely our most important player with all things pulp.

 

http://ca.linkedin.com/pub/peter-vinall/48/a5b/754

 

If I were you I'd look at when his restricted shares vest and I think you might get an answer :)

 

Would it not make sense for RFP (Resolute) to take-over FTP (Fortress) ? Seems to me it's within their circle of competence and their reach financially, geographically and strategically. It would continue diversifying away from newsprint with a growing specialty product as well as meaningful electricity production. With the fund obtained to complete their projetcs, the second PPA just signed and the price where it is, that look just like Fibrek if not better!

 

(I own RFP too)

 

Edit: Large shareholders such as Chad and ABC Funds maybe pleased with undervalued and liquid RFP shares for their holdings

 

It would be good for RFP but bad for FTP, IMO. I think Chad would take it private before that could happen...

[tombgrt]

Let's hope we can avoid all that next year by improved performance.

 

Call me crazy but I bought some more today.

[Liberty]

Let's hope we can avoid all that next year by improved performance.

 

Call me crazy but I bought some more today.

 

Either it's crazy or super smart, time will tell 8)

 

I would probably buy some more too if there wasn't another business that I really like selling very cheaply these days and if I didn't already own so much...

[BRK7]

Lenzing buys remaining stake in Czech pulp maker, continues to vertically integrate:

 

http://www.nonwovens-industry.com/issues/2012-11/view_breaking-news/lenzing-acquires-full-ownership-of-pulp-maker/

[jeffmori7]

Dissolving pulp market overview :

 

http://www.risiinfo.com/events/na_conf/presentations_2012/Young.pdf

[Liberty]

Dissolving pulp market overview :

 

http://www.risiinfo.com/events/na_conf/presentations_2012/Young.pdf

 

Thanks for posting!

[matts]

Hi, I've been following the thread for a while and just recently joined the board.

 

I'm interested in FTP but haven't bought in yet. Which brings me to my question/observation. I'm a bit surprised you guys are buying more right now. I would think this is a perfect candidate for tax loss selling in the next couple months. Do you see a catalyst before the end of the year that makes you prefer to not risk waiting to buy at the end of Dec or early Jan? Anyway that was my line of thinking. I'm planning to start my position next year so I would love to hear your thought process on the timing.

 

[tombgrt]

Stock halved in 2011 as well and that didn't trigger any additional selling in december. I think tax loss selling is something that occurs during the entire year.

If I could reduce taxes by selling losers, I would sell them before 'tax loss season' really starts, so before november at least. Especially given that you can't buy back the stock for 30 (or 60?) days.

Last year I was able to buy BAC at $5 because of additional tax loss selling and window dressing. I would welcome the selling here as well, it's irrelevant for me. Tax loss selling doesn't equal permanent loss of capital. If it does occur and the stock goes down, I'll just buy more.

[Liberty]

Hi, I've been following the thread for a while and just recently joined the board.

 

I'm interested in FTP but haven't bought in yet. Which brings me to my question/observation. I'm a bit surprised you guys are buying more right now. I would think this is a perfect candidate for tax loss selling in the next couple months. Do you see a catalyst before the end of the year that makes you prefer to not risk waiting to buy at the end of Dec or early Jan? Anyway that was my line of thinking. I'm planning to start my position next year so I would love to hear your thought process on the timing.

 

That's a good plan in theory, and I'd say that's the most plausible scenario.

 

But there's always a chance that there will be some good news that could move the stock a lot before then -- especially if it's unexpected good news. It's a small cap with low volume and a relatively high profile, so it doesn't take much.. A fairly expected piece of news about LSQ moved it up over 40% over 2 days a few months ago. That's the kind of thing that could happen pretty much anytime. The next expected catalysts are the cogen finishing and Thurso ramping up some more, but there could be other things that aren't as predictable (a sale of Landquart or Dresden? A new acquisition? faster ramp up than expected? etc).