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

[Liberty]

todays volume is 50k, 300k dollars worth.

i am not too worry about tax loss selling, people buying today wont tax loss next week and i suspect many wont risk not having this crap after all these years. plus, this is selling close to liquidation price.

 

for sure have someone liquidating its position, when that stops, it will do fine.

 

are u selling urs?

 

Maybe you are right about tax loss selling, but I think that many have probably been holding for more than a year and, with the market in general being so high, will want to sell some losers against their winners before the year is over. Even YTD it's down 25%, and 1y it's 55%.

 

I haven't sold any of mine. I'm in 'being patient' mode.

[Liberty]

The shift to a swing mill seems like a good idea if they can really pull it off with "no down-time to modify operations into a swing mill" and "minor modifications and no capital expenditure", especially if they can do specialty NBHK pulp that gets a premium (we can assume) over the baseline commodity kind.

 

Will be curious to see what their cost per ton of NBHK will be. Should be lower than in Thurso's former life thanks to the cogen, and possibly because of some de-bottlenecking that has been done for DP.

[OptsyEagle]

I don't want to be a skeptic but when I read these two quotes from the news release the question of why they didn't do this sooner certainly pops into my mind.

 

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

 

"With minor modifications and no capital expenditure, the FSC Mill will be capable of swinging production from dissolving pulp to northern bleached hardwood kraft (NBHK) pulp."

 

"the Company anticipates the FSC Mill will require no down-time to modify operations into a swing mill."

 

[Liberty]

I don't want to be a skeptic but when I read these two quotes from the news release the question of why they didn't do this sooner certainly pops into my mind.

 

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

 

"With minor modifications and no capital expenditure, the FSC Mill will be capable of swinging production from dissolving pulp to northern bleached hardwood kraft (NBHK) pulp."

 

"the Company anticipates the FSC Mill will require no down-time to modify operations into a swing mill."

 

I don't think it's a good idea to even consider this when you're still ramping up and tweaking things. But once you have stable DP ops, you can probably start swinging because you know what to swing back to.

 

It probably also takes a while of not turning the corner before you look at certain options. I'm sure they originally thought they'd be in a different place by now...

 

But skepticism is definitely warranted.

[Guest Quebec]

Nice PR. Now we are a versatile producer of various pulp products and thus a more palatable buyout target. The rundown stock price would make any offer look like a huge premium. I feel like the board sentiment is very much influenced by the downward stock price movement (which could easily be on purpose). Any way you slice it, thats lotta assets in this package deal. No special info, just my feeling. Patiently holding. Quebec

[prunes]

I don't want to be a skeptic but when I read these two quotes from the news release the question of why they didn't do this sooner certainly pops into my mind.

 

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

 

"With minor modifications and no capital expenditure, the FSC Mill will be capable of swinging production from dissolving pulp to northern bleached hardwood kraft (NBHK) pulp."

 

"the Company anticipates the FSC Mill will require no down-time to modify operations into a swing mill."

similarly for me, my first reaction was, well then why isn't every DP mill a swing mill?

[triedtestedand]

Theoretically ... it's a no-brainer ... 25% more tonnes, at lower cost per tonne, to closer potential customers (at lower shipping costs), with current NBHK and DP prices roughly similar ... so the wording such as "minor modifications", "no capital expenditures", "quickly shifting production", "low-cost high-quality pulp products", "improved production flexibility" all basically just reinforce such. That said, would still like to know:

 

- What constituted the "initial testing" that was actually done.

- Why "this opportunity is unique" to FSC (mention made of configuration of mill, but what's special about it vs others, if that is indeed the case)

- What effect their re-entry back into NBHK market will do for prices there

- If they have NBHK customers lined up (where, at what price, in what volume, with what commitment) ... or just going to put it all on spot market

- When they will pull trigger on executing strategy

- What current spot prices are for NBHK and DP

 

Similarly ... keen to know

- where operating efficiency is at

- what they would do with existing DP contracts (fulfill via 3rd party spot to ensure ongoing access ... void one or more ... other) in scenario where anti-dumping doesn't affect them

 

We all know though that this is driven by:

- low ongoing price of DP

- anti-dumping threat

[prunes]

Didn't they sign a contract with Mercer that would constrain their ability to produce NBSK at Thurso? I recall there being a production cap of some sort.

[triedtestedand]

prunes ... with FTP, there's a contract cap of 100K of NBSK for LSQ, and that is with Domtar, who had shut it down, but still owned it, so wanted to restrict re-entry (similar issue in Prince Albert SK with a mill there ) ... no issue though for FTP with Thurso, which they basically bought out of bankruptcy

[prunes]

ah right, thanks :)

[Liberty]

similarly for me, my first reaction was, well then why isn't every DP mill a swing mill?

 

My guess is it's because most DP mills were built for DP from the start and weren't NBHK before (only very few conversions worldwide), so might not be that easy to swing those because of how the mills are designed.

 

While if you build a DP mill on top of a NBHK mill, you still have that layer underneath.

[alertmeipp]

todays volume is 50k, 300k dollars worth.

i am not too worry about tax loss selling, people buying today wont tax loss next week and i suspect many wont risk not having this crap after all these years. plus, this is selling close to liquidation price.

 

for sure have someone liquidating its position, when that stops, it will do fine.

 

are u selling urs?

 

 

Maybe you are right about tax loss selling, but I think that many have probably been holding for more than a year and, with the market in general being so high, will want to sell some losers against their winners before the year is over. Even YTD it's down 25%, and 1y it's 55%.

 

I haven't sold any of mine. I'm in 'being patient' mode.

 

also, it might get difficult to rebuild position back given the volume.

[alertmeipp]

I don't want to be a skeptic but when I read these two quotes from the news release the question of why they didn't do this sooner certainly pops into my mind.

 

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

 

"With minor modifications and no capital expenditure, the FSC Mill will be capable of swinging production from dissolving pulp to northern bleached hardwood kraft (NBHK) pulp."

 

"the Company anticipates the FSC Mill will require no down-time to modify operations into a swing mill."

 

maybe the new guy is good or Chad didn't want people to see FTP as a typical pulp producer before as DP used to demand premium over NBHK.

 

 

And, remember how he talked about his DP pricing theory, those long term contracts with the Chinese, agriculture theory, etc... pretty much all went wrong, his ego probably prevented him to go this route before but now with the import tax knife over his head, he had to admit his vision was wrong (at least for now). Anyone notice Chad's name is not in the PR.  ;)

[alertmeipp]

Latest NBSK pricing is $948.38, better than DP. Last I heard, DP is $880.

If net cost is $700, we are talking about 50+ millions. Pretty good return if the price stays.

[alertmeipp]

Btw, I am wonder if this means they will go solo on this or seeking partners still? Swing mill is not cheaper so they still need more $ unless Thurso goes cash flow+, more debt or equity.

 

At current market cap of 90 millions, secondary won't help. Debt will be 10%+ which is not feasible as well. Puzzling.

 

 

 

 

[Liberty]

Btw, I am wonder if this means they will go solo on this or seeking partners still? Swing mill is not cheaper so they still need more $ unless Thurso goes cash flow+, more debt or equity.

 

At current market cap of 90 millions, secondary won't help. Debt will be 10%+ which is not feasible as well. Puzzling.

 

The announcement was for thurso, not LSQ.

 

Thurso is 'Specialty cellulose', LSQ is 'Global cellulose'.

[alertmeipp]

Btw, I am wonder if this means they will go solo on this or seeking partners still? Swing mill is not cheaper so they still need more $ unless Thurso goes cash flow+, more debt or equity.

 

At current market cap of 90 millions, secondary won't help. Debt will be 10%+ which is not feasible as well. Puzzling.

 

The announcement was for thurso, not LSQ.

 

Thurso is 'Specialty cellulose', LSQ is 'Global cellulose'.

 

Duh, awesome news if it works then.

[OptsyEagle]

I suppose the reason that FTP did not go swing immediately was because the market for DP was so robust, when their plans were being formulated, and the market for NBHK was still in the muck.  Add to that the fact that Chad was positive that Thurso would be in the lowest quartile of costs for DP but probably the highest for NBHK, he probably felt that long term this swing would not happen very often and last for very long, and Thurso would have protection against price declines via it's projected cost structure.

 

I believe the new NBHK plants produce their pulp in a continuous production line, where Thurso and most DP plants, use a batch process.  This advancement has put the continuous plants in the lowest ring of production costs and the batch guys in the highest.  I suspect Chad knows that the long term benefits of this swing production must have a very low probability of permanent benefit and may again, be just another direction this company goes, that doesn't work out.

 

What perplexes me, however is the NO capital cost to change over and especially the NO down time to switch production runs.  If this was the case, all conversions would be swing plants just to take advantage of this rare occurance.  More importantly, this swinging would make the DP price, quite elastic to changes in it's price.  This $950 NBHK price and low $800 DP price has been around for long enough to convince anyone to swing over.  Why has the price of DP not responded?  Why has the swinging not begun or been announced by others?  Or has it?

[triedtestedand]

Optsy:

 

DP price has not responded probably for two reasons ... a) a lot of new DP production capacity has come online in the interim, even with high-cost producers shutting/switching, so net capacity increases are still substantial, and b) end-customer pricing (viscose) has been in the dumps, so producers there are in same predicament, and pushing unsustainably higher DP costs on them that they can't recoup until viscose prices turn higher would kill their customer.

 

Also of note:

 

- NBHK is not NBSK ... NBSK currently fetches>= $950/ton ... NBHK fetches about $50 to $60 per ton less (and of course market dynamics are different)

- maple NBHK that is referenced in the release apparently commands a slight premium to standard (aspen and/or mixed) grade NBHK (or so I read via a google search!)

- NBHK apparently competes with S. American (low cost?) bleached eucalyptus kraft (BEK) ... not sure of details, but lots of BEK production coming onstream?

 

IMHO, swing production flexibility likely comes at expense of firm contracts ... likely have to sell into spot market more (or source your contracted volumes via spot?), and possibly at a discount?  And what does such affect existing DP contracts? Paul Quinn kinda references this in the Oct. 2 Gazette article:

 

http://www.montrealgazette.com/business/Fortress+Paper+begins+delivery+power+HydroQuebec+from+Thurso/8987090/story.html

 

Anyway, the economics are definitely way better for Thurso to produce NBHK right now ... so no real tactical downside ... and reason for not doing it earlier (absent of anti-dumping hangover) would likely primarily be DP pricing not being sub $900 for such a sustained period, combined with needing to establish production quality, operational efficiency, and developing Chinese customer contracts

 

[obtuse_investor]

I have been looking at fortress for the first time this weekend, and this forum has been incredibly enlightening.

 

To establish margin of safety, I am trying to establish an estimate of the liquidation value-- but find it hard to do because most of the wealth is trapped in PP&E. Would a good approach to arrive at an estimate?

 

 

This company has suffered such bad luck lately I think it couldn't stay so bad forever. However luck isn't a strategy. If I invest into Fortress, I'd like to make sure that I am not just playing for the occasional 20% swing, but rather a material return via this business returning back to profitability and trading at a premium to book. Is that a too much of a long shot for Fortress? I guess, I am asking, what is the current investment thesis?

[jose]

The thesis is that DP price is gonna be back above $1200 in a year or two.

 

Chad can buy time with moves such as the Dresden sale and NBHK switch capability, but then again we could see more bad luck like more plant hiccups and NBHK price drops.

 

I haven't done a liquidation estimate lately, but my guess is that there are better deals out there if you are looking on those terms.

 

It all comes down to DP price.  Binary situation. Not a long shot due to cost structure and cash holdings. Chad's a smart guy too.

 

 

 

 

 

[obtuse_investor]

The thesis is that DP price is gonna be back above $1200 in a year or two.

 

Chad can buy time with moves such as the Dresden sale and NBHK switch capability, but then again we could see more bad luck like more plant hiccups and NBHK price drops.

 

I haven't done a liquidation estimate lately, but my guess is that there are better deals out there if you are looking on those terms.

 

It all comes down to DP price.  Binary situation. Not a long shot due to cost structure and cash holdings. Chad's a smart guy too.

 

Chad and his team is certainly very resourceful and aren't the type to just sit and take it. I like seeing that.

 

If they didn't have so much debt, I wouldn't mind waiting for DP prices to turn around. Perhaps the best (read: safer) way to wait for that is by owning their debt rather than equity, even though the upside is limited.

[alertmeipp]

I don't think we need $1200 to do well on this.

The debt is trading strong, common still very weak.

[Liberty]

Anyone knows what's going on? Any news that I'm not seeing?

[lessthaniv]

volume is 10K shares. I think a small dump prior to financials.