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

[Steady77]

A lot of positives in the report including:

 

1.  Adjusted net loss of 36 cents vs consensus estimate loss of 69 cents.

2.  Landqart is operating at full capacity now.  The most significant contract which was re-instated is expected to optimize the mill's operational efficiency over the next year.

3.  2013 Landqart volumes are expected to be significantly higher than 2012.

4.  Considerable interest in Durasafe.  Company is working on confirming additional orders.

5.  Dresden capacity upgrade was successful, order book is healthy and growth is strong.

6.  Dissolving pulp prices have increased from the December lows.

7.  Thurso operations are more stable which is allowing management to focus on driving out more costs to move toward the projected cost target.

8.  Co-gen is still expected to come online early in second quarter (another month or so).

9.  Cotton prices have been increasing recently.

10.  LSQ progess is continuing.

11.  Significant improvement over Q3 results.

 

Others?

[Steady77]

Conference call info (usually very informative and worth the listen):

---------------------------------------------------------------------------------------------------------

Conference Call

 

A conference call to discuss the financial results for the fourth quarter 2012 will be held on March 12, 2013 at 9:00 a.m. (PDT). To participate in the conference call, please dial one of the following numbers:

 

North America: 1-855-353-9183

Vancouver: 604-681-8564

Calgary and international: 403-532-5601

Edmonton: 780-429-5820

Toronto: 416-623-0333

Ottawa: 613-212-0171

Montreal: 514-687-4017

 

Participant pass code: 15086#

 

Conference Reference Number: 953348#

 

A replay of the conference call will be available for 30 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 953348# and the participant pass code to access the replay is 15086 #.

 

 

[Steady77]

I guess Chad will be on BNN tomorrow. 

[Liberty]

Unless I'm reading this wrong, they shipped 46,909 tons of DP in Q4. On an annualized run-rate, that's 187,636 tons, or 93.8%.

 

Now, it's possible that some of these tons were produced in Q3 and held back and shipped in Q4, so the actual number of tons produced might be lower, but still, it's starting to look good.

[jeffmori7]

So finally some good news, but still a loss. But to see good DP numbers and Lanquart operating at full capacity in the same quarter is achievement in itself!!  Still a deception for me to see the cogen not up and running now, but finally supposed to run next quarter...

 

Do you think it will open up tomorrow a lot, or Mr. Market will just look at the overall loss? We already know that analyst will all tweaked again their target price!

[Liberty]

No idea how the market will react, but we have to remember that this is for Sept-December, and it's already almost mid-March. We won't have to wait as long for the next quarter, and it should look better thanks to higher DP prices since then. But it's really Q2 and Q3 that will be interesting because of the co-gen and any improvements that Pelletier can make (hopefully).

[triedtestedand]

Liberty:

 

1. Thurso:

 

Regarding Thurso operating rates ... remember that the 47K tons of DP shipped in Q4 includes 4.5K tons that was produced in Q3, but not shipped.  So effective operating rate is 42.5 tons (47-4.5) ... or 85% in the quarter.  Considering that October was at ~80% (per Q3 report), this implies November and December averaged out at 87.5%.  Lower than the "95% over 3 weeks" which is probably their best stretch, but perhaps better than expected.  One remaining worry here is the January statement (and latest press release as well) that "Despite promising operating results in November and December 2012, the mill has encountered challenging conversion issues which are intrinsic to a dissolving pulp mill ramp-up."  What does that mean ... !#$!#$

 

Regarding Thurso costs/results ...  they had -3.5M EBITDA on $36M of revenue vs 47K tons of shipments.  Am not sure how to account for the 4.5tons produced previous quarter but not shipped, but assuming it's a wash (unlikely as that is) cash costs (excluding shipping and commissions) would be ~$840/tonne (i.e. (36+3.5)/47), and revenue (excluding shipping and commissions) would be ~$765 (=36/47).  Add in, say,  ~$120 in shipping and commissions and they probably averaged ~$885/ton in Q4.  Given that prices in October were already below $1000/ton, and bottomed at ~840/ton for a good stretch, that sounds about right.

 

With the bump back up in prices, I'm guessing that pricing this quarter will average out about ~$930/ton ... so if they can maintain same operating rate as Q4, then they should be close to breakeven EBITDA ... especially given that the CDN $ has depreciated a couple of cents against the Yankee buck.  They have obviously not had issue selling all product ... now just need the cogen to kick in in Q2 and EBITDA goes to $5M per quarter in what is likely a bottom-of-the-cycle model.

 

 

2. Landqart

 

Still need to apply the tourniquet much tighter. Swiss franc is up about 2 to 3 percent this quarter, and perhaps they will get some more operating efficiencies / better product mix, along with running at capacity ... but the cold hard truth is that they have a combined operating loss of $60M over the past 2 years.  That's a lot of Durasafe (and non-core real estate) to sell. 

 

 

3. Dresden

 

Keeping the lights running and a whole lot more ... we should give them more respect for doing so well with it.  Euro has strengthened a bit this quarter (vs CDN dollar), so that should help a bit as well.

 

 

4. Balance Sheet

 

Cash down to $31M ... spent more on CAPEX in Q4 than I envisioned, but on flip side have less remaining commitments remaining than expected ... and did negotiate $20M in credit lines from Dresden just this month ... so with cogen coming online and no more commitments for Thurso, then should be more than adequate working capital.

 

 

5. LSQ

 

Ahh ... what to do ... even with $130M in loans available at the sub level, they may yet want to adopt a go slower than anticipated approach ... or perhaps they can pull a rabbit out of a hat of and negotiate to produce more than 100K of NBSK or similar.  Selling Landqart or Dresden would obviously free up some/a lot of cash.

 

 

 

 

 

[jeffmori7]

So was Chad finally on BNN or not?

[lessthaniv]

EBITDA Neutral in Q1 at Landquart.

 

That's good news, perhaps the bleeding has stopped barring any unforeseen events.

[Steady77]

EBITDA Neutral in Q1 at Landquart.

 

That's good news, perhaps the bleeding has stopped barring any unforeseen events.

 

Yes, that is great news.  Also, they are comfortable with their liquidity and don't expect to be raising more funds (even without the sale of the Dresden mill).

[jose]

The dial-in recording cuts me off after the first Q&A.

 

Did anyone get to listen to the full Q&A session? Any juicy bits of info?

 

Thanks, J.

 

[OptsyEagle]

EBITDA Neutral in Q1 at Landquart.

 

That's good news, perhaps the bleeding has stopped barring any unforeseen events.

 

Not sure I heard that.  I heard something like:  "Won't be too material off of break-even" on Landqart.

 

Thurso Q1 is going to be a little worse then Q4 due to timing of sales and a few more production issues.  The low in DP pricees observed in December are going to hit us in Q1.  If would appear we forward sell to some degree.  January and February had digester issues and it has only been about the last 2 or 3 weeks that they have been operating at satifactory production rates.  They never said what those rates were.

 

So I would say we have another ugly quarter to deal with.

 

They never really addressed the issue of whether they are going to stall LSQ or go full steam ahead.  Right now it is all ahead, but I suspect they are discussing a delay.  At least I hope they are.

[Steady77]

Article in Ottawa Citizen:

 

http://www.ottawacitizen.com/business/Fortress+Paper+says+Thurso+conversion+ramping+after+recent/8085522/story.html

[triedtestedand]

Here's my take on the call:

 

a) Landqart

 

sales

- margins impacted by over-capacity (and Swiss franc), but ...

- winning new customers (to complement existing), including Africa & S. America

- 70% order book fully confirmed into 2013

- 2nd Durasafe customer confirmed (in Africa)

- good visibility into rest of year

 

ops

- now running close/at 100% utilitization ... more confidence that can sustain thru rest of year

- waste rates trending down from 35% to target of 15%

- PM1 machine getting better utilization

- based on above, close to breakeven EBITDA in Q1 (and beyond)?

 

strategy

- not looking to actively sell until can turn ship around

 

-> My take ... bleeding seems to actually being slowed to trickle ... go figure (need Q1 to "show me") ... and as long as can keep the presses running, it shouldn't be a drain.  The angle, as fairly apparent, then is to try and get more higher-margin product (ie Durasafe) and see if Swiss franc can bounce back.  Paul Quinn from RBC wasn't pulling punches (i.e. 60+M in losses over past 3 years, after 50M in investment ... asked if/when pull the plug) ... but if they can get back to neutralizing it, which they actually seem to be accomplishing, then they can start to shop it without giving it away for a good cigar.

 

 

b) LSQ

 

- have put $21M into it so far (including some long-lead time orders related getti

- $800K/mo in refurbishing (32 full time staff now)

- once have $25M into it, can draw down on their IQ loans

- also need to start drawing down before end of June ... but confident that can defer if needed

- decision on workplan/etc by late Q2/early Q3

- decided to go slower (e.g. missed a shipping window via James Bay), esp. given current DP market

- don't need a Dresden/Landqart sale to fund project

 

-> My take ... they are going slowly ... as they should

 

c) Dresden

 

- running fine ... order book strong ... few questions

- 5M Euros in 2013 CAPEX planned to get to 65K tons

- another 4.5M Euros in 2014 CAPEX planned (incl mtnc) to get to 70K tons capacity

- $20M loan facility can be used by parent co ... using some of it to finish paying for Thurso cogen ... could have borrowed more

- Not looking to actively sell ... or so they say

 

 

d) Thurso

 

- problems w digester in late Q4/Jan/early Feb ... long-term fix to be deployed in two weeks from now?

- expect Q1 to be worse (lower utilization rate, higher OPEX, lower price) than Q4

- cogen nearing completion ... likely have ramp up in Q2 (so implication was don't model $5M/qrtr in Q2)

- CCF pricing shows up in FTP income statements w lag of 2mo

- CCF pricing based on weighted avg of 50% from brazilian producer (sateri?), and 25% from each of two others (including an american one ... rayonier?)

- shipping/commissions still above $120 (did they say $125 to $130??) ... want to get down to $115

- customers taking their volumes (and if you look at the AR, FTP is getting paid)

- seeing progress in OPEX costs (excluding digester issue)

- only 1 unplanned shutdown in Q4 (vs 4 in each of Q3 and Q2)

- finished quarter with 1500 tons of inventory (low)

- digester issues resulted in ~5% to 10% of product being of off-spec (and thus lower realizations)

- 17M to finish cogen

- complying with Chinese anti-dumping investigation ... facts might indicate low risk, politics can always dictate otherwise

 

-> My take ... still need a solid two quarters ...

 

 

Overall ... kind of as expected ... better at Landqart than expected ... but digester issue makes Thurso lower (question everyone no doubt has iis ... what will be the next thing? ... i.e. in a prove it to me mode)

[BRK7]

Excellent summary, TriedTested.  A few thoughts/clarifications to add:

 

Landqart:

Regarding Durasafe, I think management said that it had a second order “outside of Europe.” I did not hear them say the second order was in Africa, but maybe I missed that...or perhaps this was disclosed elsewhere?

 

Dresden:

Regarding possible sale of Dresden, Chad did not give a timeline, although he indicated that “at some point in time, we would look to monetize this asset”.  Given the turnaround effort at Landqart, my read was that Dresden would be the first to be sold (or marketed, anyway.)

 

Thurso:

On the digester issue, Andre Boucher stated that, over the next couple of weeks, they’ll be fixing what they believe was the problem.  To me, this is different than saying the problem has been definitely identified.  I hope I’m reading too much into this, but I worry that they’ve perhaps “found the problem” in the digester several times already.

 

Shipping + commission is close to $120 currently.  They are targeting $115 longer-term.  I didn’t hear them mention $125 or $130.

 

The CIBC analyst asked if Thurso would generate positive EBITDA in 2Q.  Yvon answered that co-gen would be online in early April, but that there would be a ramp-up curve.    So, Yvon indicated that Q3 and Q4 would be in a “better position” from a cash flow standpoint.

 

[nestorius]

*TRADING HALTED: FTP@CN (TORONTO)-NEWS PENDING

 

We'll see soon enough...

[jeffmori7]

Was there any hint in the CC annoucing a pending news for the next day? Strange not to annouce any material news during the call, no?

[nestorius]

Wire: Business Wire (BUS) Date: Mar 13 2013  9:38:00

Glatfelter to Acquire Specialty Nonwovens Manufacturer Dresden Papier for €160 Million (Approximately U.S.$209 Million)

 

********************************************************************************

BFW 03/13 09:38 *GLATFELTER TO ACQUIRE DRESDEN PAPIER FOR $209M

BN 03/13 09:38 *GLATFELTER SAYS DEAL TO BE FINANCED WITH CASH, DEBT    :GLT US

BN 03/13 09:38 *GLATFELTER SEES DEAL ADDING TO EARNINGS IMMEDIATELY 25C/SHR

BN 03/13 09:38 *GLATFELTER TO PAY ABOUT $209M                          :GLT US

BN 03/13 09:38 *GLATFELTER TO ACQUIRE SPECIALTY NONWOVENS MANUFACTURER DRESDEN

BN 03/13 09:38 *GLATFELTER TO BUY SPECIALTY NONWOVENS MAKER DRESDEN PAPIER FOR

********************************************************************************

 

  Glatfelter to Acquire Specialty Nonwovens Manufacturer Dresden Papier for

  €160 Million (Approximately U.S.$209 Million)

 

    - Dresden Papier GmbH Holds Leading Position in Rapidly Growing Global

                        Nonwoven Wallpaper Segment -

 

      - Transaction Expected to be Immediately Accretive to Earnings by

            Approximately $0.25 Per Share on Annualized Basis -

 

  - Acquisition to be Financed by a Combination of Cash on Hand and Debt -

 

Business Wire

 

YORK, Pa. -- March 13, 2013

 

Glatfelter (NYSE: GLT), a global manufacturer of specialty papers and

fiber-based engineered materials, today announced it has signed a definitive

agreement to purchase Dresden Papier GmbH from Fortress Paper Ltd. (TSE: FTP)

for €160 million (approximately U.S.$209 million). Glatfelter expects the

acquisition to be immediately accretive to earnings per share by approximately

$0.25 on an annualized basis.

 

Dresden Papier, based in Heidenau (near Dresden), Germany, is the leading

global supplier of nonwoven wallpaper base materials, and is a major supplier

to most of the world’s largest wallpaper manufacturers. Nonwoven wallpaper

offers superior performance and characteristics such as dry strip-ability,

higher tear resistance, and no material shrinkage or expansion when wet. As a

result, nonwovens are increasingly the product of choice for wallpaper

installers and design professionals in Europe, with significant growth

potential in Asia.

 

“Glatfelter’s agreement to acquire Dresden Papier demonstrates our commitment

to building leading positions in niche global growth markets for specialty

papers and fiber-based engineered materials,” said Dante C. Parrini, Chairman

and Chief Executive Officer of Glatfelter. “Dresden Papier has built a

preeminent position in nonwoven wallpaper materials – as both the cost and

quality leader because of its innovative products, proprietary manufacturing

techniques, and long-standing customer relationships.

 

“The acquisition of Dresden Papier will add another industry-leading nonwovens

product line to our Composite Fibers business, and broaden our relationship

with leading producers of consumer and industrial products. Despite the

ongoing economic challenges in parts of Europe, we believe the global nonwoven

wallpaper business will continue to grow at a compound annual growth rate of

at least 10%. This acquisition will also provide additional operational

leverage and growth opportunities for Glatfelter globally, particularly in

large markets such as Russia and China, and other developing markets in

eastern Europe and Asia.”

 

In 2012, Dresden’s revenues were €117 million (approximately U.S.$151

million), and Earnings before Interest, Taxes, Depreciation and Amortization

(EBITDA) were €30 million (approximately U.S.$38 million). Dresden employs

approximately 146 people at its state-of-the-art, 60,000-metric-ton-capacity

manufacturing facility in Heidenau, Germany.

 

Glatfelter plans to finance the acquisition through a combination of cash on

hand and debt. As of December 31, 2012, Glatfelter had a cash balance of $98

million and $345 million available under its revolving credit facility.

 

The proposed transaction, which is subject to customary closing conditions,

including receipt of German and Ukrainian regulatory approvals, is expected to

close during the second quarter of 2013. Upon closing, the acquired business

will become part of Glatfelter’s Composite Fibers business unit, which

manufactures fiber-based products for growing global niche markets, including

filtration papers for tea and single serve coffee applications, metallized

papers, composite laminates, and technical specialties.

 

Conference Call

 

Glatfelter will hold a conference call at 2:00 p.m. (Eastern) today to discuss

the proposed acquisition of Dresden Papier. An investor slide presentation

providing supplemental material related to the acquisition will be available

on Glatfelter’s Investor Relations website at

http://www.glatfelter.com/about_us/investor_relations/default.aspx.

Information related to the conference call is as follows:

 

What:        Proposed acquisition of Dresden Papier GmbH

               

When:        Wednesday, March 13, 2013 - 2:00 p.m. Eastern Time

               

Number:      US dial 1-888-335-5539

              International dial 1-973-582-2857

               

Conference    22356074

ID:

               

Webcast:      http://www.glatfelter.com/about_us/investor_relations/default.aspx

               

Rebroadcast  Wednesday, March 13, 2013 - 8:00 p.m. to Wednesday, March 27, 2013

Dates:        – 11:59 p.m.

               

Rebroadcast  Within US dial 1-855-859-2056

Number:

              International dial 1-404-537-3406

               

Conference    22356074

ID:

 

Interested persons who wish to hear the live webcast should go to the website

prior to the starting time to register, download and install any necessary

audio software.

 

Caution Concerning Forward-Looking Statements

 

Any statements included in this press release which pertain to future

financial and business matters are “forward-looking statements” within the

meaning of the safe harbor provisions of the United States Private Securities

Litigation Reform Act of 1995. The Company use words such as “anticipates”,

“believes”, “expects”, “future”, “intends” and similar expressions to identify

forward-looking statements. Any such statements are based on management’s

current expectations and are subject to numerous risks, uncertainties and

other unpredictable or uncontrollable factors that could cause future results

to differ materially from those expressed in the forward-looking statements

including, but not limited to: the time and costs required to consummate the

proposed acquisition; the satisfaction or waiver of conditions in the purchase

agreement; any material adverse changes in the business of Dresden Papier; the

ability to obtain required regulatory approvals, and consents and the

satisfaction or waiver of other customary closing conditions; the Company’s

ability to achieve the strategic and other objectives relating to the proposed

acquisition, including any expected synergies; the Company’s ability to

successfully integrate Dresden Papier and achieve the expected results of the

acquisition, including, without limitation, the acquisition being accretive;

changes in industry, business, market, political and economic conditions in

the U.S. and other countries in which it does business, demand for or pricing

of its products, changes in tax legislation, governmental laws, regulations

and policies, initiatives of regulatory authorities, technological changes and

innovations, market growth rates, cost reduction initiatives and acquisition

integration risks. In light of these risks, uncertainties and other factors,

the forward-looking matters discussed in this press release may not occur and

readers are cautioned not to place undue reliance on these forward-looking

statements. The forward-looking statements speak only as of the date of this

press release and Glatfelter undertakes no obligation, and does not intend, to

update these forward-looking statements to reflect events or circumstances

occurring after the date of this press release. More information about these

factors is contained in Glatfelter’s filings with the U.S. Securities and

Exchange Commission, which are available at www.glatfelter.com.

 

About Glatfelter

 

Headquartered in York, PA, Glatfelter is a global manufacturer of specialty

papers and fiber-based engineered materials, offering over a century of

experience, technical expertise and world-class service. U.S. operations

include facilities in Spring Grove, PA and Chillicothe and Fremont, OH.

International operations include facilities in Canada, Germany, France, the

United Kingdom and the Philippines, a representative office in China and a

sales and distribution office in Russia. Glatfelter’s sales approximate $1.6

billion annually and its common stock is traded on the New York Stock Exchange

under the ticker symbol GLT. Additional information may be found at

www.glatfelter.com.

 

Contact:

 

Glatfelter

Investors:

John P. Jacunski

(717) 225-2794

or

Media:

William T. Yanavitch

(717) 225-2747

 

-0- Mar/13/2013 13:38 GMT

 

-----------------------------====================------------------------------

                              Copyright © 2013

 

 

[Liberty]

Well, that was faster than I expected...

[triedtestedand]

http://www.marketwatch.com/story/glatfelter-to-acquire-specialty-nonwovens-manufacturer-dresden-papier-for-eur160-million-approximately-us209-million-2013-03-13

[Liberty]

So the question now is, what will they do with the money?

 

I wouldn't mind at least some buybacks.

[jeffmori7]

So the question now is, what will they do with the money?

 

I wouldn't mind at least some buybacks.

 

They could burn it all into Thurso as it seems really easy! :P

 

Serioulsly, it is sooner than expected as yesterday still, they were talking about upgrading it!

[triedtestedand]

Net Debt is ~$250M, as follows:

 

 

 

~$300M total

    ~$30M at Dresden

    ~$7.5M at Landqart

    ~$40M in 2016 convertible debs at parent (public)

    ~$105M at Thurso (non-recourse to parent)

    ~$25M in 2019 convertible debs at parent (private placement)

    ~$69M in 2019 convertible debs at parent (public)

    ~$20M at Dresden (new)

 

Less about 50M in cash (30M as of Q4 plus 20M from Dresden)

 

 

Principal repayments as follows:

 

2013 7,761

2014 25,071

2015 24,238

2016 63,572

2017 45,048

Thereafter 111,475

 

 

= Lots of flexibility ...

[Steady77]

I'd say they will still use the attractive financing for LSQ. I believe they will use the Dresden proceeds to buy back some shares &/or convertibles and sit the remainder on the balance sheet for future acquisitions.  Chad always talked about other attractive sectors he would like to invest in.  Now he has more capital to work with.

[triedtestedand]

I agree there should be balanced approach ... and as they develop LSQ (which could still be in slower mode) they should definitely use the $130M in financing, as it (like the ~$100M from Thurso), is non-recourse.

 

But they now have about $15/share at the parent ... and with $135M of the debt being convertible (and not due until 2016 or later) ... they could definitely buy back some shares.

 

As of last week, there were still 750K shares short.