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

[rjstc]

+1  It would also be nice for management to confirm this by buying a large chunk of stock on the open market.

[triedtestedand]

As of a few days ago (thanks to A Dhandho for the update), over 1M shares are short (unless yesterday included some covering).

 

As of Jan31st, besides Chad's 2.5M shares, of the 14.3M shares outstanding (non-diluted), institutional holdings look like the following:

 

http://investors.morningstar.com/ownership/shareholders-major.html?region=CAN&t=FTP

 

Company                                                            #shares          reporting date

 

Invesco Canada Ltd.                                           2,634,131 11/30/2012  (NB: They have to report every month if their position changes, as they own >10%)

Mawer Investment Management Ltd.                   1,119,224      12/31/2012

I.A. Michael Investment Counsel Ltd.                   800,000 01/31/2013

AGF Investments Inc.                                   247,354 01/31/2013

London Capital Management Ltd                   123,493 01/31/2013

 

Pembroke Management Ltd.                           1,359,700 10/31/2011  (Not sure if they still hold - or what amount - as reporting date is quite old)

 

 

Excluding Pembroke, that's 7.4M shares (52%) across 6 players, or 7M (49%) across 4 players.

 

That's getting concentrated, and can't yet figure out who sold the 192K share block in late January, or those who sold yesterday.  If not a fund/investment co (e.g foreign firm, hedge fund, etc.) that needs to report, Mawer would be the only one (and they have been reducing their position).

 

(Note to rjstc ... Management is blocked from market before earnings period.)

 

[jeffmori7]

Vinall out :

 

http://www.marketwire.com/press-release/fortress-paper-announces-appointment-yvon-pelletier-as-president-dissolving-pulp-business-tsx-ftp-1757759.htm

[OptsyEagle]

Thank you.  What a waste of money that guy was. 

 

I wanted him out since his insider trading of stock, just before the 3rd quarter report.  I would have made a formal complaint but we needed the bad press like we needed a hole in our heads.  I am sure Chad saw where 100% of his loyalty resided, after that trade, as well.  Failure on every other point, especially the co-gen timeline, didn't do much to build my confidence in him, either.

 

Let's hope this guy has some actual experience.

[Liberty]

Seems like good news. He does seem to have lots of experience, including with specialty DP. The proof will be in the pudding...er... DP.

 

From the outside, it's hard to know if Vinall was competent and diligent and just had bad luck, or if he was to blame to some extent for some of the problems we've been having, but I guess we'll see if things start going much better operationally from now on. The hardest part is over for Thurso, though, but if they go forward with LSQ, that'll be an interesting comparison.

[alertmeipp]

I think it's good news as well, I see it as a confirmation that FTP is not going away.. He will probably get some boat load of cheap shares.

[OptsyEagle]

When I read the last update for Thurso, I remembered vividly an answer to a question that was asked on the Q3 conference call, about whether there was a ramp up for the co-gen or if it all goes online at once and Peter Vinall's answer was that it goes online all at once and added "it is just a matter of hitting a switch".

 

You wonder where Chad's false confidence came from.  Look no further.  Everyday, as the stock fell from $10.80 to where it is now, I kept hearing that answer, "it is just a matter of hitting a switch".

 

Needless to say, I am glad he is gone.

[Liberty]

When I read the last update for Thurso, I remembered vividly an answer to a question that was asked on the Q3 conference call, about whether there was a ramp up for the co-gen or if it all goes online at once and Peter Vinall's answer was that it goes online all at once and added "it is just a matter of hitting a switch".

 

You wonder where Chad's false confidence came from.  Look no further.  Everyday, as the stock fell from $10.80 to where it is now, I kept hearing that answer, "it is just a matter of hitting a switch".

 

Needless to say, I am glad he is gone.

 

I'm not sure I understand what you mean here. Didn't he mean that once it's all built, you hit a switch and go from zero megawatt to full production? The problem so far seems to be that they can't finish contruction (tubing and worker problems and all that), not that it's done and that there's a ramp up to full production.

 

Or am I misunderstanding what you and he said?

[triedtestedand]

From afar, it appears that:

 

- he's got (good?) track record at Tembec ... not just with commodity DP, but specialty DP

- he's local, french speaking, knows Quebec biz/politics

 

That in itself should lend confidence.  Job one will be to square away Thurso, and generate some value from LSQ. Presuming he has aspirations of such, he may likely have a crack at the top job at a more DP-focused FTP ... but Chad will need to get Landqart sorted, and Dresden sold for a pretty penny.

 

PS -> After Chinese new year, VSF is up about 400yuan/mt, and now close to 15000yuan/mt ... which it hasn't been at since the summer.  Presumably DP contract prices for FTP trending up similarly.

 

 

[Liberty]

PS -> After Chinese new year, VSF is up about 400yuan/mt, and now close to 15000yuan/mt ... which it hasn't been at since the summer.  Presumably DP contract prices for FTP trending up similarly.

 

Thanks for the update. Cotton seems to be doing a little bit better too.

 

http://www.indexmundi.com/commodities/?commodity=cotton&months=12

[OptsyEagle]

When I read the last update for Thurso, I remembered vividly an answer to a question that was asked on the Q3 conference call, about whether there was a ramp up for the co-gen or if it all goes online at once and Peter Vinall's answer was that it goes online all at once and added "it is just a matter of hitting a switch".

 

You wonder where Chad's false confidence came from.  Look no further.  Everyday, as the stock fell from $10.80 to where it is now, I kept hearing that answer, "it is just a matter of hitting a switch".

 

Needless to say, I am glad he is gone.

 

I'm not sure I understand what you mean here. Didn't he mean that once it's all built, you hit a switch and go from zero megawatt to full production? The problem so far seems to be that they can't finish contruction (tubing and worker problems and all that), not that it's done and that there's a ramp up to full production.

 

Or am I misunderstanding what you and he said?

 

No, I understand what you mean and you are right.  It's just that he gave the impression to me and the rest of the callers that it was simply a matter of adding a couple building blocks and then hitting a switch.  Basically, nothing could go wrong, is what I took away from his answer.

 

In any event, it is not important and will be a distant memory in a few months.  I guess I just felt like griping and I will stop now.  It was his insider trading that really turned me on him.  He deserves a couple years in jail for that, but since it appears to be legal in the country he did it,  I will settle on him being gone from Fortress Paper

[Liberty]

Ok. I do sympathize with your frustration, but I just wanted to make sure I hadn't misunderstood some technical detail.

[OptsyEagle]

What do you think about Fortress Paper making an announcement that they intend to start focusing on the Specialty DP market?  The benefits would be obvious.  The last quote I saw for specialty DP was $1,700 per tonne, back in June 2012, so they would address the current issue of profitability and they would sidestep this rediculous issue around dumping, since it pertains to commodity DP only.

 

The obvious issue is what would their production numbers be if they had to produce a more specialized version of DP.  They are not perfect now with the commodity stuff.

 

Anyway, do you think this adjustment in strategy would be too early or just in time?

 

By the way, this announcement may be a prelude to my suggestion earlier about Fortress Paper entering the specialty pulp business.  Even if they simply mention this as an option, on the next conference call, I believe it should help considerably.  Currently Fortess Paper stock is trading like future Chinese tariffs are a given and at that time Fortress Paper will have no options, but to exit the dissolving pulp market.  I think this option is not one that the investment community is currently pondering.

[lessthaniv]

and, don't forget ....

 

http://www.canada.com/business/all/Fortress+foresees+becoming+Canadian+dissolving+pulp+powerhouse/7566684/story.html

 

 

[Liberty]

What do you think about Fortress Paper making an announcement that they intend to start focusing on the Specialty DP market?  The benefits would be obvious.  The last quote I saw for specialty DP was $1,700 per tonne, back in June 2012, so they would address the current issue of profitability and they would sidestep this rediculous issue around dumping, since it pertains to commodity DP only.

 

The obvious issue is what would their production numbers be if they had to produce a more specialized version of DP.  They are not perfect now with the commodity stuff.

 

Anyway, do you think this adjustment in strategy would be too early or just in time?

 

By the way, this announcement may be a prelude to my suggestion earlier about Fortress Paper entering the specialty pulp business.  Even if they simply mention this as an option, on the next conference call, I believe it should help considerably.  Currently Fortess Paper stock is trading like future Chinese tariffs are a given and at that time Fortress Paper will have no options, but to exit the dissolving pulp market.  I think this option is not one that the investment community is currently pondering.

 

That's an interesting possibility. They've mentioned that they want to do specialty DP in the past, but I think it might have been at conferences and not necessarily in places where a lot of investors would find out about it (I could be wrong about that, though -- anyone here remembers FTP mentioning it clearly on a CC or in a presentation on the official website?). Maybe stating that intention, even if it then takes a while to get certified and fine tune everything, would give some clarity and reassure some investors.

 

I'm not sure if they could sell their whole production on the specialty market, though, especially if they add LSQ. At least maybe not all at once. But even some fraction of the total would be positive, and once they have relationships in that industry, they could build on them.

 

Biorefining is another interesting possibility, though that's probably a few years off.

[lessthaniv]

http://tembec.com/en/products/specialty-cellulose

 

 

[OptsyEagle]

I think it was around the 1st conference call after Thurso started up production. Probably about this time last year.  Their production was probably at about 50% to 60% of capacity, at that time, but what they really were impressed with was the quality of the product that they were producing.  Not only did it meet all of their customers requirements for DP, but they indicated that they felt they could easily transition into the specialty pulp market, at a later date, if they ever decided they wanted to do that.

 

[Liberty]

I think it was around the 1st conference call after Thurso started up production. Probably about this time last year.  Their production was probably at about 50% to 60% of capacity, at that time, but what they really were impressed with was the quality of the product that they were producing.  Not only did it meet all of their customers requirements for DP, but they indicated that they felt they could easily transition into the specialty pulp market, at a later date, if they ever decided they wanted to do that.

 

Ok, cool. Too bad the calls aren't all archived somewhere, but I'll check notes.

 

I know it was also mentioned in the St-Andrews (sp?) conference. Thurso seems to be able to produce very high quality DP, but from what they've been saying, LSQ might be even better (because of the type of plant and the wood supply).

[alertmeipp]

It will feel much better if they can break even on DP this quarter or next.

[triedtestedand]

Funny what happens when you google these days, it looks like Kazakhstan is checking out Durasafe as well:

 

  http://www.cross-conferences.com/europe/programme

 

  http://www.ebay.com/itm/KAZAKHSTAN-RARE-TEST-HYBRID-POLYMER-banknote-BLUE-BIRD-2012-UNC-SPARK-LANDQART-/380577282927?pt=Paper_Money&hash=item589c2c7b6f

 

 

15.15-15.40    Composite Substrate Technology for Banknotes - The Future is Now  |  Andrew Bonnell, Landqart

 

From paper to polymer to composite substrates, the conservative banknote industry is opening up to innovative technology-driven solutions that address longevity and security.  The presentation will review different substrate options and provide observations and experience from two of the banknote printing industry’s leaders - the Banknote Factory of the National Bank of Kazakhstan’s Bluebird Concept banknote and Dar As Sikkah’s 25 Dirham commemorative banknote – both printed on Landqart’s Durasafe® substrate.

 

[Liberty]

Looks like Mr. Market is pleased. Up 15% right now. What will really matters is operational performance, though.

[LongTerm]

Unfortunately, probably just the Raymond James upgrade to Outperform. But as you said we need some operational performance!

[Liberty]

Unfortunately, probably just the Raymond James upgrade to Outperform. But as you said we need some operational performance!

 

Do you have access to that report? Do you know his stated reasons for upgrading? Anything to do with Pelletier?

[LongTerm]

Do you have access to that report? Do you know his stated reasons for upgrading? Anything to do with Pelletier?

 

Sorry, no. Just saw it on the wires. They raised the target price from $11 to $16.

[Guest Quebec]

Unfortunately, probably just the Raymond James upgrade to Outperform. But as you said we need some operational performance!

 

Do you have access to that report? Do you know his stated reasons for upgrading? Anything to do with Pelletier?

 

Here's the summary I found in a stockhouse post:

 

"

Raymond James

February 19, 2013

Upgrading on Point of Maximum Pessimism

Event

Fortress Paper announced the hiring of Yvon Pelletier as the company’s new President of Dissolving Pulp (DP) operations – a positive development in our

view given the profound operational challenges at the Thurso mill.

Recommendation

We are upgrading Fortress to Outperform largely due to recent share price

weakness which we believe prices in recent negative news. We regard improved

expected 4Q12E results, DP commodity price strength, better DP segment

performance and potential asset sales as potential catalysts for the stock.

Analysis

Yvon Pelletier is a specialty cellulose industry veteran with 30 years pulp and

paper sector experience most recently as EVP and President of Specialty

Cellulose & Chemicals at Tembec (TMB-TSX). During Mr. Pelletier’s time at

Tembec he also acted as GM of various DP and kraft pulp mills and was

previously the SVP of the company’s Kraft Pulp Division. Given the history of

operational challenges at the Thurso mill, we regard the appointment of Mr.

Pelletier as a necessary step and are hopeful his operational expertise will

assist the company in achieving the design specifications at Thurso (and LSQ).

Our upgrade of Fortress is primarily based on our view that the stock reflects the

point of maximum pessimism with the negative news flow in recent weeks

(further setbacks and cost overruns at Thurso, the Chinese DP anti-dumping

probe and liquidity concerns) priced in. In addition, we expect 4Q12E results will

show a marked improvement with cash-neutral performance which, relative to

3Q12's negative $6.4 mln, could be a positive catalyst. Moreover, at

~US$925/mt, up from Jan-2013 lows of US$850/mt, dissolving pulp prices are

improving. We acknowledge the recent news of a Chinese anti-dumping probe

on specialty cellulose imports increases the risk profile, however, we now see this

as reflected in our valuation and FTP’s share price. Lastly, while timing is also

uncertain, we highlight the potential for legacy European asset sales (either

Dresden Wallpaper or Landqart Security Paper) representing another possible

upcoming catalyst.

Valuation

Our $11.00 target for Fortress Paper represents a 4.7x weighted average midcycle EV/EBITDA multiple – below the average of pulp producers in our

coverage universe due to ongoing operational issues.

"