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

[OptsyEagle]

Thanks <IV.  That was a good presentation.

 

I am also surprised that a lot of that supply has not left the market.  I guess we need a report on how much money a company will lose with todays prices versus how much they would lose by idling their plants and waiting for better times.  I doubt many, including FTP, want to shut down their plant completely, just before the price recovers, due to all this cellulose gap theories.

 

In any event, new supply will not always be deterred by low commodity prices.  Only the supply of high cost producers will be adjusted.  For the low cost producers, they will be happy to expand and bring on new supply, until the cows come home.  In their minds, their new supply will only displace a higher cost competitor.  I am sure they never liked those guys anyways.

 

I agree that the price of Fortress Papers stock will not determine whether a buyer will want to take over the company.  It's outstanding debt, combined with its most important factor, its production rates and cost per tonne, will be the real determinants.

[alertmeipp]

Thanks, lessThanIV.

 

OptsyEagle -

>> I agree that the price of Fortress Papers stock will not determine whether a buyer will want to take over the company.  It's outstanding debt, combined with its most important factor, its production rates and cost per tonne, will be the real determinants.

 

I agree stock price alone will not determine that but it will be one of the factor. You can rest assured that if FTP is trading at $1000, no one will consider taking over the company. An extreme example for sure. The other factors you listed are important for sure.

 

Also from voting perspective, if someone offer to take FTP over for 15 bucks tmw, I bet majority of shareholders will say say Yes.

[bonechip1]

For any FTP shareholders, Chad is speaking at a conference on Sunday in Calgary.  I think his presentation, and panel discussion are free to attend

 

http://moneytalks.net/agenda-surviving-and-thriving.html

[lessthaniv]

bonechip, this was interesting too - interview with Bill Good

 

http://beedie.sfu.ca/blog/2013/10/fortress-paper-boss-on-potential-in-challenging-sectors-ceo-series/

 

 

[bonechip1]

Thanks.  Nice find.

[tripleoptician]

Revealing interview. The last 3rd of the interview talks about work/life balance and Chad's thoughts on an imminent retirement. He really gives the flavour of a CEO who is burning out. His background shows the innate passion for business and deal-making that makes him an ideal owner-operator, but he seems very conflicted about continuing at the expense of his family. He seemed to talk alot about his regrets of not being able to enjoy life as both a child and currently because of his unrelenting drive in business. He seems to almost be wanting to talk these business students out of going into business or at minimum focus on work-life balance. He even mentions how he wouldn't want to nurture his own children's entrepreurial spirit.

 

When he stated they are looking to move to Bermuda for a lower tax domiciled region to retire that strikes me as someone who is very seriously creating a planned exit versus a fleeting thought in a stressful time.

This business relies on his business acumen and capital allocation skills fairly heavily so i can't see the appeal in investing in this business without him at the helm

[Liberty]

True, though these guys constantly daydream about retiring but few ever do. Even Buffett told Suzy he was retiring after the partnership closed, iirc.

 

IMO if he steps out, it'll only be at the top of a cycle or if he's forced to by a hostile takeover. It doesn't seem in his nature to exit at the bottom...

[OptsyEagle]

I imagine he is no different then many of us.  When my portfolio is doing well, I enjoy managing it and spend a lot of time looking for the next great stock.  When it is struggling I think about simply moving it all to index funds and forgetting about it for a while.  Take a vacation.

 

I would imagine if the business for Fortress Paper was booming, that interview would have spent a lot more time talking about all the new opportunities Chad sees...but it didn't.  All human nature I guess.

[tripleoptician]

Good points. In regards to when he may step away, he commented that he needed a few years to straighten some things out with the business which may lead to the perpetual "sometime soon".

Some differences from Buffett though - he never once mentioned the nature of the current business as the reason to step away. It always came back to family and work/life balance. He showed a degree of optimism based on most areas being at a cyclical low and the cotton/DP macro drivers have remained unchanged. Warren ended the Partnership mainly because he felt the business environment would not allow him to succeed any longer, not because of personal reasons.

 

I don't think Chad's situation is like ours simply because he has the means to retire currently and the motivations don't seem monetary or business based.

 

End of the day, IMHO there is always a business risk in owner operators that the jockey walks away. This interview made me appreciate that risk may be higher than I anticipated, as I initially felt Chad is young and ambitious with many years to ride on his back.

[OptsyEagle]

Some differences from Buffett though - he never once mentioned the nature of the current business as the reason to step away. It always came back to family and work/life balance.

 

Yes, but keep in mind that missing out on all that family stuff seems to be easier to accept when your business work is producing success.  In Chad's case,  not only did he miss out on a lot of family activities, but managed to lose about $130 million dollars of family wealth while he was doing it.  That is a much tougher pill to swallow and one that his wife probably reminds him of more often then she should.  Poor guy.  Hope he turns it around.

 

 

[alertmeipp]

is it just me or there seems to be a magnetic field in the 5 dollar range.

[triedtestedand]

http://www.frequency.com/video/fortress-paper-ceo-provides-company/127120646/-/5-5815271

[alertmeipp]

http://www.frequency.com/video/fortress-paper-ceo-provides-company/127120646/-/5-5815271

 

Thanks. Nice short interview.

[Steady77]

Does anyone have access to the following statement from the Chinese viscose producers in their objection to the levying of anti-dumping duties on dissolving pulp?

 

http://www.ccfgroup.com/newscenter/newsview.php?Class_ID=600000&Info_ID=20131031116

 

 

 

 

[triedtestedand]

No ... but maybe ask FTP investor relations if they can dig up the detail.

[triedtestedand]

http://www.mofcom.gov.cn/article/b/e/201311/20131100379318.shtml

 

Translation courtesy of google Chrome from following website:

 

 

 

 

Ministry of Commerce Notice No. 75 of 2013 on originating in the United States, Canada and Brazil imported pulp anti-dumping preliminary determination



2013-11-06 09:27 Source: Ministry of Commerce of Import and Export Fair Trade Bureau of Article type: Original content Category: Policy

【Unit】 Ministry of Commerce 

issued 【Number】 Notice 2013 No. 75 

【Date】 2013-11-06

 

　　Under the "anti-dumping regulations," the provisions of 6 February 2013, the Ministry of Commerce (hereinafter referred to investigating authorities) issued Notice No. 10 of 2013, decided to originating in the United States, Canada and Brazil imported pulp (less said the investigated products) anti-dumping investigation.

 

　　Investigating authorities were investigating whether the product dumping and dumping margin, is investigating whether the product on Chinese pulp industry caused damage and its extent were investigated. According to the survey results and the "Anti-dumping Regulations of the PRC," the provisions of Article 24, the investigating authorities to make a preliminary ruling (see Annex). The relevant matters are announced as follows:

 

　　A preliminary ruling

 

　　Investigating authorities initially ruled that, in case the survey period, the existence of dumping the product under investigation, Chinese pulp industry has been substantial damage, dumping and material injury and causal relationship between.

 

　　Second, the imposition of security

 

　　Under the "Anti-dumping Regulations" eighteen and twenty-ninth of the Ordinance, the investigating authorities decided to adopt a deposit in the form of the provisional anti-dumping measures. Since November 7, 2013, the import operator imports the product under investigation should be based on this preliminary decision identified in the company's margin ratio to the corresponding margin of Customs of the People.

 

　　For a detailed description of the product under investigation are as follows:

 

　　Scope of the investigation: originating in the United States, Canada and Brazil imported pulp.

 

　　The investigated product name: pulp, English name: cellulose pulp, or dissolving pulp, or dissolving wood pulp, or cotton linter pulp, or bamboo pulp and so on.

 

　　Specific description: refers to the plant fiber pulp as raw material, processed and prepared primarily for the production of viscose fiber and other chemical fibers (excluding acetate) of a cellulose material.

 

　　Main purposes: mainly used in the production of viscose pulp fibers (such as viscose staple fiber, viscose filament yarn) and other chemical fibers (excluding acetate).

 

　　The product is classified in the "Republic of China Import and Export Tariff": 47020000,47032100,47061000 and 47063000, is required to meet the following three indicators: first, the viscosity requirements: Viscosity ≧ 3.7 dl / g, and <6.4 dl / g, or viscosity of ≧ 350 ml / g, and <700 ml / g; Second, α cellulose content requirement: α cellulose content (R18, sulphate) ≧ 88%, and <95.5%, or α cellulose content (R18 , sulfite) ≧ 87%, and <94%; Third, ash requirements: Ash (725 ℃) ≦ 0.15%.

 

　　Margin levied on companies rates are as follows:

 

　　U.S. companies

 

　　(1) U.S. Cosmo Special Fibers 18.7%

　　(Cosmo Specialty Fibers, Inc..)

 

　　(2) American Ryan functional fiber limited liability company 21.7%

　　(Rayonier Performance Fibers, LLC)

 

　　(3) United States Weyerhaeuser 20.2%

　　(Weyerhaeuser NR Company)

 

　　(4) U.S. GP Fiber Co., Ltd. 20.2%

　　(GP Cellulose LLC)

 

　　(5) U.S. Boke technology companies 20.2%

　　(Buckeye Technologies Inc..)

 

　　(6) Other U.S. companies 29.8%

　　(All Others)

 

　　Canadian companies

 

　　(1) Niuxi Er Specialty Cellulose Ltd. 0%

　　(Neucel Specialty Cellulose Ltd..)

 

　　(2) Fortes Fiber Co., Ltd. 13.0%

　　(Fortress Specialty Cellulose Inc..)

 

　　(3) AV Nackawic Inc. And AV Cell Inc. Company 13.0%

　　(AV Nackawic Inc..)

　　(AV Cell Inc..)

 

　　(4) Tembec 13.0%

　　(Tembec)

 

　　(5) Other Canadian companies 50.9%

　　(All Others)

 

　　After investigation, the Canadian Niuxi Er Specialty Cellulose Ltd. (Neucel Specialty Cellulose Ltd.) Dumping margin was 0.7%, according to "The People's Republic of China Anti-Dumping Regulations," Article 27, are de minimis dumping margin, not to impose provisional deposit.

 

　　Brazilian companies

 

　　(A) cellulose plant species of Pakistan by 6.8% in Yate

 

　　(Bahia Specialty Cellulose SA)

 

　　(2) 49.4%, other Brazilian companies

 

　　(All Others)

 

　　Third, the collection method of deposit

 

　　Since November 7, 2013, the import operator imports the product under investigation should be based on this preliminary decision identified in the company's margin ratio to the corresponding margin of Customs of the People. Margin to the Customs dutiable value validation ad valorem, calculated as follows: Margin = (Customs dutiable value validation × margin percentage charge) × (1 + import VAT rate).

 

　　Fourth, Comments

 

　　Various stakeholders in this announcement within 10 days, may submit written comments to the investigating authorities together with relevant evidence, the investigating authorities will be considered in accordance with the law.

 

Attachment : Ministry of Commerce of origin in the United States, Canada and Brazil anti-dumping investigation of imports of pulp preliminary ruling. doc

 

 

 

Ministry of Commerce,

November 6, 2013

 

 

 

 

 

 

[BRK7]

Nice find, TTT. 

 

Some thoughts:

 

1) 13% for Fortress may not be good news, but it could’ve been a lot worse.  I believe the dumping margin alleged back in February was just over 50% (for all Canadian producers as a group).  A few weeks ago, I believe RBC was saying they expected 25%-40%.  Don't know what the consensus expectation is, though.

2) Neucell was spared.  Perhaps because they are owned by Fulida, a Chinese entity?  Or are they really a low-cost producer?

3) Acetate appears to have been excluded.  I presume this is great news for the acetate players, but probably irrelevant for Fortress.

 

EDIT:  As of Aug 18, CIBC was assuming a nominal 2% duty.

[bonechip1]

Yes nice find.  13% is better than I expected.  Chinese Viscose producers must be pissed as it will most likely increase their cost structure.  I have more questions than answers.  Could this serve as the catalyst to remove DP capacity to reverse the downward trend in DP pricing - in a weird way could this benefit the remaining players in the industry in the medium term.  Wonder if the 13% applies to LSQ as well, or if they would fall under the 50.9% levy.  Also, maybe the slow ramp of Thurso mill to 1st quartile cost structure played into FTP's favor in being handed one of the least severe margins. Will be interesting to hear what Chad has to say about this decision on the earnings call next week. 

[OptsyEagle]

13% is about 13% more then I expected.  These MOFCOM people must be on the take to decide to give the Pakistani's and Indian's a Xmas gift like the future Viscose industry.  Too bad it will take them too many years to start buying DP from Fortress Paper.

 

This is about as ugly as ugly gets.  Now break even for FTP is a DP price over $1,200 per tonne, when you factor in this new duty and of course ongoing maintenance and bank interest costs.  I am not too pumped on this new swing strategy.  The math for NBHK production sounds like it might work now but remember Thurso went bankrupt producing that stuff in the past.  There is no way we are a low cost producer in that business, so any benefit from it, will be very temporary.  Once NBHK prices swing back down to their normal equilibrium, that benefit will be over.

[alertmeipp]

doesnt ftp get one of the lower duties, many in the list get much higher duties which should drive them out

[lessthaniv]

https://www.dropbox.com/s/af8q47r0l81x66j/China%27s%20Antidumping%20Investigations.Master.3%20%28Oct%2024%202013%29%20%2800011329%40xD4D....doc

 

Michael Stone's paper on the Antidumping investigations.

 

In February 2013, the Chinese government announced that it would be conducting an antidumping duty investigation of dissolving pulp producers in Canada, the United States and Brazil. This article examines the structure of the dissolving pulp market, the factors that have negatively affected China’s domestic producers and the likely effect of a duty on China’s domestic price. We conclude that the imports from the countries being investigated are not the root cause of the problems faced by China’s domestic producers, that any duty imposed can at best provide only short-term relief to the domestic producers and that any duty imposed may have significant negative impacts for Chinese industries that consume dissolving pulp. 

[Liberty]

This company sure never gets it easy.

 

First question that comes to mind is, did China just kill a lot of DP supply? If so, wouldn't that make DP prices rise? If they rise by more than 13% because of this, it could compensate for the tariff..

 

Still, any way you look at it, this sucks.

 

I wonder if they've had any luck finding non-Chinese buyers?

 

It looks like cotton is up 3% today. Might be unrelated, but maybe this is a reaction to the expected drop in DP supply...

[alertmeipp]

below five, they may as well turn the key in and move on, we will get more that way

[triedtestedand]

And yet

 

a) the FTP debs are actually up ... if fractionally

b) the other public companies (WY, RYN, HK:1768, ca:TMB) affected are up ... if fractionally

[triedtestedand]

BTW ... no shares or debs have been repurchased so far via the NCIB (now in lock-down until Q3 financials released next week)  ... at $5/share, and at 70 cents on the debenture dollar ...  they could almost now buy back the max in each without having to revise the 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.