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

[kai99]

I am new so hopefully this comment is of value! I am really wondering the future of operations for any money-note printing operation. A lot of countries are shifting to polymer notes, even mine back here in Singapore. Will this essentially take a big part of business operations away in the future?

[triedtestedand]

Hi Kai:

 

Not sure if your question is whether money-note printing in general is on the decline (owing to electronic transactions), or if money-note printing will shift from legacy cotton based substrates to all-polymer.

 

As relates the first question ... despite what one might presume, banknotes are actually increasing, even in first world countries if the article below about Australia is extrapolated to other jurisdictions.  A couple of data points from following:

 

http://www.rba.gov.au/publications/bulletin/2014/mar/pdf/bu-0314-1.pdf

http://www.bloomberg.com/video/fortress-paper-ceo-says-banknote-use-still-growing-zbfOWJx_Q2uhWYHL4dJZJA.html

 

As relates the second question ... it's a good point (Canada, UK, Singapore, etc. all going polymer) ... but that's where Landqart's strategy with Durasafe (hybrid polymer/cotton mix) looks to tap into highest end of polymer market, positioning both durability aspects of polymer, "feel factor" of cotton, and a schwack of security features to minimize fraud.  Will see how that plays out ... Landqart needs to get the Swiss to get Durasafe into production there first to really showcase it.

[alertmeipp]

also, another critical factor is CHF exchane rate.

Swiss is still trading strong as a safe heaven currently. We really need euro zone to start growing again.

[alertmeipp]

I would be interested in their reasons why, a company that has never ever produced dissolving pulp, requires an anti-dumping duty of 23.7%.  Pretty exact number for a company that has no numbers.

 

Probably because $880/mt + 23.7% is a proxy for the costs of the average Chinese producer. In other words, no new supply to China unless it's at a price that keeps the Chinese mills in the black.

 

That's how I see it too. for LSQ to be profitable, its all in cost has to be below ~730m.

Given that LSQ is supposed to be lower cost than Thurso, it might be doable. But no one in their right mind will put in 300m to break even. Government might, as it will create/keep those jobs.

[Guest Quebec]

Article in french with comments from Pelletier following mofcom final duty:

 

http://www.lapresse.ca/le-droit/economie/201404/05/01-4754855-taxe-chinoise-sur-la-pate-pas-de-mise-a-pied-chez-fortress.php

[lessthaniv]

Article in french with comments from Pelletier following mofcom final duty:

 

http://www.lapresse.ca/le-droit/economie/201404/05/01-4754855-taxe-chinoise-sur-la-pate-pas-de-mise-a-pied-chez-fortress.php

 

English:

 

http://www.microsofttranslator.com/BV.aspx?ref=IE8Activity&a=http%3A%2F%2Fwww.lapresse.ca%2Fle-droit%2Feconomie%2F201404%2F05%2F01-4754855-taxe-chinoise-sur-la-pate-pas-de-mise-a-pied-chez-fortress.php

 

 

[OptsyEagle]

Mr. Pelletier is not a very good strategist. 

 

If he wants our governments to do something he needs to show that the pain willl spread from just the shareholders, like he described, to the entire province of Quebec and Canada via the threat of layoffs and possible plant closures or shutdowns.

[alertmeipp]

will be interesting to see if the new gov will be more helpful to the business.

[OptsyEagle]

Does anyone know that if a company is successful with a complaint to the WTO about unfair duties like the Chinese are using, would the affected company get a full refund of all the duties paid?

 

 

[lessthaniv]

no I'm not sure how that works; but I did read it's a multi year process with an extremely low success rate. in 98 actions, China succeeded 93 times so unfortunately I think its a done deal.

[alertmeipp]

Yeah, it's done deal for now. China can revisit it anytime.  They could lower it half a year later or can do whatever they want is my understanding.

[alertmeipp]

looks like someone is trying to get rid of some shares and not getting enough liquidity. Sad.

[BargainValueHunter]

Anybody buying down here?

 

I can't tell if this is an incredible bargain or if they are about to turn the lights out and mail back the keys.

[alertmeipp]

check with the IR, they are really good in getting back. It is challenging environment but Thurso is here to stay.

 

Dp price is down to 850usd. Analysts price target around 2 bucks. At least a couple quarters of Thurso break even at best.

 

it looks so bad that i added today. A bargain if DP turns.

 

 

[finetrader]

Remember that they have to make at least 25M$ EBITDA for the company to stop burning cash. And with the 13% anti-dumping tax that is pretty a very level to reach

[alertmeipp]

finetrader, how u get your 25m number?

[alertmeipp]

i have

capex 3m, interest 15m, corp 8m, total 26m

landquart, i have 11 inflow.

 

net 15m.

 

to make 15m, thurso cost for dp will need to be about 740cdn. Possible?

 

i assume nothing from the optical and lsq burn stopped

 

[triedtestedand]

Presuming they produce NBHK instead (which they are now, since the restart, correct?):

 

On revenue side:

-> saw $870USD or so as list price for NBHK these days

http://www.risiinfo.com/pulp-paper/news/Alberta-Pacific-announces-Jan-1-price-increases-on-NBHK-NBSK-pulp-in-North-America.html

 

-> Factor in .91 CDN/USD, and 25% discount-to-list for transactions (range is 20% to 25%) ... get ~$715 as price (delivered) for NBHK

 

-> Take away - say $40 in NE America - as shipping, and get $675 as net price. 

 

-> If I look at their Q4 results, it looks like they yielded ~$620/tonne (excluding delivery) based on the 6.7 tonnes of NBHK sold, and the $4.1M in net revenue (excluding $3M in power sales) ... and that was with dollar trading at around .95 ... so the above sounds reasonable

 

-> This assumes of course they can continue to get $870 list prices ... obviously softening potential w S. American hardwood production coming onstream, offset a bit if price differential w NBSK remains high (and therefore substitution) ... and that Cdn dollar doesn't strengthen.

 

 

On cost side:

 

If (and "if" is THE issue), they have been guiding that they can get all-in cost target achieved around $830CDN for DP, then:

 

-> back out the transport (say $100) and you get to $730CDN for DP

-> factor in that NBHK get's better yields (theoretically 250K tonnes/yr vs 200K tonnes) and cost goes to $585 (excluding delivery) for NBHK

 

In above worldview, presuming above price/currency/cost constant ... then can get $90/tonne EBITDA (or >$20M/yr EBITDA)

 

If so, then better in the immediate term to see if they can't build up a book of business in N. America w NBHK, try and get some steady customers, focus on maple NBHK which has better quality (and better pricing), try and reduce the discounts offered ... because DP at present $850/tonne pricing is a $0 EBITDA game at best ...

 

 

 

 

[finetrader]

3m$ in capex for both mills is pretty low in my opinion.

 

As for the cash cost for Thurso, I will believe when I'll see it in a 10Q report

[alertmeipp]

3m$ in capex for both mills is pretty low in my opinion.

 

As for the cash cost for Thurso, I will believe when I'll see it in a 10Q report

 

I think that's about what left for this and next.

[triedtestedand]

 

As for the cash cost for Thurso, I will believe when I'll see it in a 10Q report

 

Agreed. 

 

Irrespective of that, assuming cash cost ratio for DP vs NBHK is valid, NBHK has better economics right now (which of course can change fairly quickly).

[alertmeipp]

triedtestedand,

 

Nice work.

 

Yes, they are doing straight NBHK for now as it has better margin. But I assume they will have to switch to DP to satisfy customer's need.

 

When did they guide 830CDN all in cost? Is it because they said they can break even with 880USD and 13% duties?

 

That's before the shut, right?

 

 

 

 

 

 

 

 

[alertmeipp]

anyone know what would be the capex to increase the cogen to max?

 

 

[triedtestedand]

Alertmeipp: 

 

There's no capex to increase it ... the cogen is rated to produce something like 24Mw + ... but contract is for <19Mw ... so if they get contract from Hydro Quebec to extend, then the revenue is all upside ... however I did ask IR, and the rates they would get for the incremental wouldn't be as good as the initial contract, so can't strictly linearly extrapolate ... that said, it would be a bonus.

 

They applied for this in December, so I would anticipate them getting some feedback soon, no?  Maybe things put on hold during provincial election period?  I thought that was more related to going to IQ and seeing if can't get their loan conditions changed longer term (i.e. more than waivers as they have secured for Q1 and Q2).  If they can modify to reduce/avoid/back-end paying current interim annual principal payments ... reduce interest rate ... other ... could do a lot for their cash balance projections.

[alertmeipp]

Alertmeipp: 

 

There's no capex to increase it ... the cogen is rated to produce something like 24Mw + ... but contract is for <19Mw ... so if they get contract from Hydro Quebec to extend, then the revenue is all upside ... however I did ask IR, and the rates they would get for the incremental wouldn't be as good as the initial contract, so can't strictly linearly extrapolate ... that said, it would be a bonus.

 

They applied for this in December, so I would anticipate them getting some feedback soon, no?  Maybe things put on hold during provincial election period?  I thought that was more related to going to IQ and seeing if can't get their loan conditions changed longer term (i.e. more than waivers as they have secured for Q1 and Q2).  If they can modify to reduce/avoid/back-end paying current interim annual principal payments ... reduce interest rate ... other ... could do a lot for their cash balance projections.

 

I can't remember off top of my head. How much they are getting for 19Mw? $20m per year?