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

[Liberty]

I never remember exactly what the pre-earnings blackout periods are, but could it be that they can't talk about anything material before Q2?

[Liberty]

Big volume on the debentures today.. Almost looks like someone sold their dbs and bought the common with the proceeds.

[Steady77]

Chinese government has ordered the chemical fibre industry in China to cut overcapacity.  They must stop production by the end of September with an elimination deadline by the end of the year.

 

http://www.ccfgroup.com/newscenter/newsview.php?Class_ID=800000&Info_ID=20130801088

 

 

[Liberty]

Chinese government has ordered the chemical fibre industry in China to cut overcapacity.  They must stop production by the end of September with an elimination deadline by the end of the year.

 

http://www.ccfgroup.com/newscenter/newsview.php?Class_ID=800000&Info_ID=20130801088

 

The way I'm seeing this, you get a reduction of viscose supply but demand stays the same, so ceteris paribus this should be good for viscose prices, and thus good for dissolving pulp prices. As long as FTP isn't getting its orders cut, that should be good for the company (though what effect it'll have on viscose/DP prices we'll have to see -- it could be very marginal).

 

Is this how others see it? Am I missing something?

[alertmeipp]

agree, hoping this should balance out the cotton de-stocking in China.

[Steady77]

This will eliminate some of the higher cost dissolving pulp capacity that was operating at a loss with a $900 price.  Approx one third of the supply was at a loss which is not sustainable.  $1,100 to $1,200 seems to be a more sustainable price in the longer term.  If ftp can get their cost around $750 which they believe they will make good margins.

 

[OptsyEagle]

This should be an interesting earnings quarter.  When Dresden is factored in, the company should earn profits in the area of $10 per share.  Even though it will be all from discontinued operations, that has to get a few more investors looking into the situation when the companies stock currently trades in the $7 range.  I don't think the current DP prices are going to be overwhelming but lets hope they have some progress on production rates.  Would also be nice to have a working Co-gen for that news release.

 

Anyway, I will be away on vacation so hopefully someone will listen in on the CC and report back with highlights.

[Liberty]

I haven't seen DP spot prices lately, but cotton prices seem to be getting a big stronger:

 

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

 

https://www.google.ca/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1375992000000&chddm=97750&chls=IntervalBasedLine&q=NYSEARCA:BAL&ntsp=0&ei=GaADUqm5LsarqAGbIw

 

I think reaction to the quarter could go either way. Will Mr. Market focus on the big Dresden gain? Or will it only see what is sure to be another ugly operational quarter at Thurso?

 

Will we start to get some news about what they want to do with LSQ?

 

The swiss franc has risen a bit vs the Euro, which should help Landquart a bit. With some luck they'll be in the black or close, which would be a nice change.

 

Debentures are back to 75 (up 5.12%).

[Steady77]

The World Trade Organization recently ruled against China in the US chicken products anti-dumping case:

 

http://www.ecns.cn/business/2013/08-04/75873.shtml

 

 

This headline suggests they may take a cautious approach re: imported pulp:

 

http://www.ccfgroup.com/newscenter/newsview.php?Class_ID=D00000&Info_ID=20130808084

 

 

[prunes]

Fortress Paper Provides Cogeneration Facility Update

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 13, 2013) -

 

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

 

Fortress Paper Ltd. (TSX:FTP) ("Fortress Paper" or the "Company") reports that the high pressure water pump at its Fortress Specialty Cellulose Mill (the "FSC Mill") was re-installed on July 12, 2013 and the cogeneration facility operated for 20 days before being shut-down due to pump failure. The back-up high pressure water pump was then installed on August 5, 2013 and its operation was again unsustainable due to inadequate repairs. The Company has already placed an order with another supplier for a high pressure water pump which is expected to arrive in approximately four weeks for installation.

 

Despite these setbacks, the Company completed all major testing of equipment during the operating period. The facility successfully completed 18 and 24 MWH output testing. The Company anticipates completing the final 100 hour test as soon as the new pump is installed and tested. Fortress expects the cogeneration facility will be delivering power to the Hydro Quebec grid at the contractual rate within 24 hours of completing the test.

 

Chad Wasilenkoff, Chief Executive Officer of Fortress Paper commented, "Although the performance of the repair by the supplier of the pump has been disappointing, we are pleased that we were able to complete all major testing of equipment. The Company will proceed with an alternate pump supplier in order to complete the final 100 hour test before delivering power to the Hydro Quebec grid and ultimately reducing our production costs."

 

[tengen]

Pump failure once, shame on you. Pump failure twice, shame on me.

[Liberty]

http://www.fortresspaper.com/images/pdfs/FTP%20NR%20Q2%202013.pdf

 

Q2

 

CC tomorrow at noon EST.

 

Normal Course Issuer Bid

 

The Company announces that it intends to commence a normal course issuer bid to acquire outstanding common shares, 6.5% convertible unsecured subordinated debentures and 7.0% convertible unsecured subordinated debentures of the Company up to an aggregate maximum amount of $15 million, subject to receipt of TSX approval.

[alertmeipp]

seems not a bad quarter (not good neither obviously), buyback is nice.

[triedtestedand]

Full report via:

 

http://fortresspaper.com/images/pdfs/financials/Q2%20Combined%20Website%20Version.pdf

 

- balance sheet obviously way healthier w Dresden sale, especially with debt maturity profile

- Landqart actually almost EBITDA neutral ... even with Swiss Franc still sitting within 3% of the Euro floor

- Thurso still sucking wind

 

Because of pre-shutdown inefficiencies, late-April shutdown (10 days), and post-shutdown (improvements?), I can't figure out presumed Thurso operating rates going forward. 

 

38K tonnes were shipped, so based on 50K/quarter of notional capacity, they'd be at 76% overall for the quarter (which sucks), but need to factor in 10 days (11% of the quarter) shutdown, which am guessing would get them to a non-shutdown ~85.5% operating rate for the quarter (which would be similar to Q4-2012 rate, their best operating quarter to date) ... but then I have to remember that this is itself a blended rate of pre-shutdown (poorer rate) and post-shutdown (presumed higher rate), so depending on how bad the pre-shutdown rate was I might guess that maybe, just maybe, they're getting towards 90%?

 

We'll see if anything comes out of the conf call.

 

They do have a schwack of cash now ($136M+ other current assets), and normal course issuer bid size ($15M) is actually not too small in scope, especially given:

 

a) the daily volumes on the stock (and debs) are so low

b) about 6 players hold ~50% of the ~14.4M issued shares (Chad ~2.5M, Invesco ~2.5M, Irwin Michael ~800K, AGF ~500K, Std Life ~500K, Bissett ~350K)

 

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

 

[lessthaniv]

The trading in the stock this morning suggests to me that most of the ripened fruit has fallen from the tree.

[Liberty]

The trading in the stock this morning suggests to me that most of the ripened fruit has fallen from the tree.

 

Could you elaborate on what you mean by that?

 

Just that because the price didn't move around much, the market was already pricing what happened in Q2? Or something else. I'm not sure I'm interpreting your comment right.

[lessthaniv]

Yes, the trading volume moving the stock from $6 to $7.50,on average,  was probably half of what has already traded today yet the stock has held firm even though the company has more issues. In the beginnings of these types of transitions, I think larger volumes react to smaller long term issues but as they sell off over time the stock becomes held by more investors looking at the long term  big picture. Just an observation, that's all - nothing scientific.

[Liberty]

Yes, the trading volume moving the stock from $6 to $7.50,on average,  was probably half of what has already traded today yet the stock has held firm even though the company has more issues. In the beginnings of these types of transitions, I think larger volumes react to smaller long term issues but as they sell off over time the stock becomes held by more investors looking at the long term  big picture. Just an observation, that's all - nothing scientific.

 

That's a good theory.

 

My take on the flat trading so far today was that the market just doesn't know what to think. Probably likes the improved balance sheet and Landquart progress, doesn't like the cogen SNAFU, and who knows what to think about LSQ? I guess getting a partner would reduce risk so that's good, but if they mothball the project indefinitely is that good because it lowers uncertainty or bad because it lowers eventual earnings?...

 

I suspect you are right about the shareholder base now having a longer time horizon. The announcement of the new cogen high-pressure water pump problems would have made big waves not so long ago, but now everybody's probably looking much farther out so they don't care as much if it takes an extra month to fix.

 

Hopefully we learn interesting things on the call.

[finetrader]

FTP's share price has increase like the other commodity stocks accross the board because there has been some good news coming from China lately.

[Liberty]

Short CC. From memory:

 

They expect to cut shipping costs by about 20%, which would be a bit more than $20/ton.

 

First IQ repayment in Q1 2014.

 

7-day shutdown in October, expecting to make further operating improvements then.

 

Expecting Thurso to reach planned cost structure in mid 2014.

 

Thurso will be cash flow positive when cogen is turned on.

 

Might have legal recourse against high-pressure water pump installer, but right now just focusing on fixing problem, will see about that later.

 

Hydro-Quebec penalty is $100k/month until cogen is turned on.

 

This is from memory so apologies if I misremembered something.

 

On a side note, 110k debentures traded so far today, up 5.4%.

[jeffmori7]

Thanks Liberty.

 

Anything about LSQ in the CC?

[Liberty]

Thanks Liberty.

 

Anything about LSQ in the CC?

 

Not much that wasn't in the release. I think Chad worded it slightly differently, though, saying something like "We're confident that we'll be able to do a deal in the next month(s?)" or something like that. Update: exact words from transcript are "we continue to work on new financing structures to our LSQ Mill. We remain cautiously optimistic that a package with additional equity partners and debt lenders can be concluded in the coming months".

 

So it sounds like they've got something brewing, but we'll have to wait Q3 to know how it turns out.

[alertmeipp]

transcript:

 

http://seekingalpha.com/article/1639422-fortress-papers-ceo-discusses-q2-2013-results-earnings-call-transcript?part=single

[Liberty]

Fortress Paper Announces Normal Course Issuer Bid

 

Fortress Paper Ltd. (TSX:FTP) ("Fortress Paper" or the "Company") announces that the Toronto Stock Exchange (the "Exchange") has accepted Fortress Paper's notice of intention to make a normal course issuer bid through the facilities of the Exchange. On August 21, 2013, Fortress Paper may commence making purchases, from time to time, up to a maximum of: (i) $4,025,000 aggregate principal amount of its outstanding 6.5% convertible unsecured subordinated debentures due December 31, 2016 (Trading Symbol: FTP.DB) (the "6.5% Debentures"); (ii) $6,900,000 aggregate principal amount of its outstanding 7.0% convertible unsecured subordinated debentures due December 31, 2019 (Trading Symbol: FTP.DB.A) (the "7.0% Debentures"); and (iii) 1,202,860 of its 14,561,417 outstanding common shares as at the date hereof (Trading Symbol: FTP) (the "Common Shares"), each of which represents 10% of the "public float" of such class of listed security within the meaning of the policies of the TSX, provided that the aggregate purchase price for all securities purchased under the bid does not exceed $15,000,000.

 

The bid will terminate on August 20, 2014 or earlier if Fortress Paper has completed its purchase of securities subject to the bid. Purchases may be suspended by Fortress Paper at any time and Fortress Paper reserves the right to terminate the bid earlier if it determines it is appropriate to do so.

 

Fortress Paper believes that the current market price of the Common Shares does not reflect the value of Fortress Paper's business and its future business prospects. Further, Fortress Paper believes that in view of the recent trading prices of the 6.5% Debentures and the 7.0% Debentures, and depending upon prices from time to time throughout the duration of the bid, the purchase of such debentures may represent an attractive use of funds to reduce the Company's ongoing interest expense and the overall outstanding debt at below face value, thereby enhancing shareholder value. Any securities acquired will be purchased at the market price up to a daily maximum of: (i) 11,073 Common Shares; (ii) $19,276 principal amount of 6.5% Debentures; and (iii) $32,362 principal amount of 7.0% Debentures, subject to the block purchase exemption, and will be cancelled following purchase.

 

Fortress Paper has not purchased any securities during the previous twelve months.

[prunes]

Kind of puts things in perspective when the company is authorized to buy per day ~30% of the stock's trailing 3 month volume.