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

[triedtestedand]

a) A power generating only option for LSQ?

 

  http://www.vancouversun.com/business/resources/Power+plants+fuelled+sawmill+logging+waste+produce/9886043/story.html

 

b) Fortress Optical is hiring?

 

  http://ca.indeed.com/job/production-specialist-004-8bd019e13bfb8782

 

c) 99K of DP capacity being removed in India

 

  http://www.risiinfo.com/pulp-paper/news/BILT-shuts-down-dissolving-pulp-mill-in-India.html?source=rss&utm_source=twitterfeed&utm_medium=twitter

 

According to conf call transcript from late February, it was at that time running at negative EBITDA even with pricing of ~$850+/tonne USD (while supplying to local VSF - Grasim - so no big shipping costs) and rupee has only strengthened since then.

 

  http://www.emkayglobal.com/Uploads/EmkayResearch/Ballarpur%20Industries%20Q2FY14%20Concall%20Transcript.pdf

 

 

d) De La Rue reported today

 

http://investors.delarue.com/~/media/Files/D/DeLaRue-IR/fininfo/presentations/2014pres/preliminary-results-2014-presentation.pdf

http://uk.reuters.com/article/2014/05/28/uk-de-la-rue-results-profit-idUKKBN0E80FA20140528

 

 

e) various sellers ... but most buying via CIBC the past few days ...

 

http://web.tmxmoney.com/quote.php?qm_symbol=FTP

 

 

[obtuse_investor]

TO: The Shareholders of Fortress Paper Ltd.

 

NOTICE IS HEREBY GIVEN that the annual general and special meeting of shareholders of Fortress Paper

Ltd. (the "Corporation") will be held at 1000 - 925 West Georgia Street, Vancouver, British Columbia, Canada,

on Friday, June 13, 2014, at 3:00 p.m. (Vancouver time)

 

Anyone from here planning to attend?

[Parsad]

TO: The Shareholders of Fortress Paper Ltd.

 

NOTICE IS HEREBY GIVEN that the annual general and special meeting of shareholders of Fortress Paper

Ltd. (the "Corporation") will be held at 1000 - 925 West Georgia Street, Vancouver, British Columbia, Canada,

on Friday, June 13, 2014, at 3:00 p.m. (Vancouver time)

 

Anyone from here planning to attend?

 

I planned on going originally, but that was before they announced the actual date.  I had already booked my flight and hotel to Palm Springs, so I can't go now, since I leave that morning.  I really wanted to attend to give them a piece of my mind and was going to ask a bunch of questions.  Cheers!

[lessthaniv]

I might get there. Will share notes if I do. Q?'s

 

AGM on Friday the 13th ... fitting this year.

[alertmeipp]

http://finance.yahoo.com/news/fortress-announces-labour-cost-reduction-224238357.html

 

Some layoff:

 

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Jun 2, 2014) - Fortress Paper Ltd. ("Fortress Paper" or the "Company") (TSX:FTP) announces today that it has approved an employee reduction plan that will result in a reduction of approximately 16% of the salaried staff in the Company's dissolving pulp segment, including senior management, middle management and clerical staff. The impact in cost savings is estimated at approximately $2.2 million per annum. These layoffs resulted from a management directive to immediately reduce labour costs as part of a comprehensive cost reduction initiative undertaken in response to the challenging dissolving pulp market.

 

"Fortress Paper is facing extremely difficult market conditions for dissolving pulp and we firmly believe in the need to be proactive to control our future," stated Chadwick Wasilenkoff, Chief Executive Officer of Fortress Paper. "The reduction in labour costs announced today is anticipated to save the Company over $2 million per year and is representative of management's efforts to improve the efficiency of the Company. While layoffs are unfortunate, they are a necessary and prudent measure in these difficult times."

[lessthaniv]

I was expecting this... On the CC Chad made a reference to a number of cost cutting initiatives and I believe he asked Yvon to comment on the cost per tonne once the cost cutting was complete. As I recall Kurt Loewen cut him off which I quite liked.. But it was a hint that cuts were coming ...

[triedtestedand]

For those with access to translate.google.com

 

a) This affects mgmt/admin (salaried) vs line (union) employees, so presumably shouldn't affect operations.

 

    http://www.lapresse.ca/le-droit/economie/201406/02/01-4772193-des-mises-a-pied-chez-fortress-a-thurso.php

    http://gatineau.rougefm.ca/info-gatineau-ottawa/2014/06/03/reduction-des-effectifs-a-lusine-fortress-de-thurso

 

b) At the same time, Yvon Pelletier noted in an article on friday that they progressing w diversification plan outside Quebec.

 

    http://www.lesaffaires.com/classements/les-500/cellulose--le-nouvel-eldorado-/569299

 

 

As relates "b" ... presuming Yvon's statement during conf call that they'd be "close" to EBITDA neutral this quarter still holds, it also implies they are selling all current production into China.  At $850 USD/ton for recent CCF pricing, 13% duty, and Cdn dollar at .92 USD ... this would imply they are actually moving towards $800 CDN/tonne as their cost base (which includes the generally offsetting costs of shipping against the benefit of cogen).

 

Those factors remaining constant ... this implies a >$20M EBITDA swing potential at the maximum if can sell all annual production outside of China.  Of course that'll be difficult to sell both the volumes, and at the price, as there would be competition from similarly affected tariff'd companies (and against incumbents who want to maintain relationships) ... but there was also mention in the Q1 press release, and on the conf call, of selling specialty grades to address specific customer specs.  It doesn't look like any possibility worked into CIBC's valuation analysis.

 

[OptsyEagle]

We also have to understand that even if they could find a customer, outside of China, willing to take their DP production, that customer is not going to let Fortress Paper keep the entire 13% duty.  There will be many competitors in the same situation as Fortress Paper for this customer to choose from and unless that customer has some aversion to making lots of money, they will at best split the duty savings with Fortress Paper, when they quote the price that they are willing to pay.

[triedtestedand]

Optsy -> agreed.

[sculpin]

Good to see cost cutting measures but the biggest salary drain on this Company is at the top. Here is Chad's annual compensation for 2013 and 2012:

 

$2,000,000

$2,914,631

 

Don't forget that he was paid about $15 million for the Thurso acquisition in 2010 as well (despite the disaster it has wrought on this Company). So he continues to take salary that is absolutely obscene for a CEO of a company this size and who contributes nothing to the operating performance and who has demonstrated disastrous results in his most recent capital allocation decisions. Withheld all votes for the Board that perpetuates such skewed decisions.

 

 

[tombgrt]

And he got most of his shares for free or at very low initial prices. Yet people still believe he has a lot at stake. It's simply not the same. For him, FTP was (is?) an easy call option on (even) extreme® wealth.

[lessthaniv]

Good to see cost cutting measures but the biggest salary drain on this Company is at the top. Here is Chad's annual compensation for 2013 and 2012:

 

$2,000,000

$2,914,631

 

Don't forget that he was paid about $15 million for the Thurso acquisition in 2010 as well (despite the disaster it has wrought on this Company). So he continues to take salary that is absolutely obscene for a CEO of a company this size and who contributes nothing to the operating performance and who has demonstrated disastrous results in his most recent capital allocation decisions. Withheld all votes for the Board that perpetuates such skewed decisions.

 

Sculpin,

 

I agree he is overpaid, but I think things are somewhat misunderstood:

 

The $15M you're quoting was not all a cash payment. $5M was.  $5M was in RSU which were tied to earnings performance and vested pro rata in annual tranches for the five fiscal periods commencing from January 1, 2010 and ending December 31, 2014, based on a formula that considers the fraction by which the cumulative amount of the consolidated EBITDA of the Corporation approaches $225 million during this period. Obviously with 6 months left in 2014 and no EBITDA to show the end value of the bonus is not $5M. Also, the remaining $5M was in DSU which are tied to stock price. I believe it was about 114,000 units he got which at today's market price do not reflect anything near $5M. And having these DSU's in his pocket is surely added incentive to stay employed and recover the share price.  Not justifying the package, as I believe the total package was excessive.

 

My beef more comes from the ongoing NEO cash bonuses that are being given out. Not just to him. Of the cummulative $5M in salary you're quotiong above , $1.5M was NEO in cash bonuses over the last two years. $1M tied to the sale of Dresden. And that actually only represents 50%. The other half  is payable upon the achievement by the Corporation of two consecutive EBITDA positive quarters.

 

But why are we paying this guy cash bonus to do this? He is not operating the plants. He's a capital allocator and deal maker. But that is what is salary and the RSU's are for ....

 

There should be a bare minimum level of corporate success that needs to be attained before NEO bonuses kick in.

 

Corporately they've paid $1.76M in NEO bonus in the last two years ... for horrible execution on ramping up Thurso.

 

 

[obtuse_investor]

Here's a question for the annual meeting: "Chad: would you be willing to take a voluntary cash salary cut, say 1.5mm, for the year 2014?"

 

I want him to do his job but he needs to show that he is watching out for the shareholders.

[alertmeipp]

Thanks tnt for the links. They have come a long way. If they were break even now on ebitda, the cut, co gen and gas line will turn them close to cash flow neutral. Hope they can negotiate a good deal with IQ.  DP price still weak. Some bounce back from there will be very helpful. Current is 840usd.

[alertmeipp]

So anyone here ends up going to the AGM? Any comments?

[alertmeipp]

Apparently, no one had asked any questions in the AGM. 

Well, hopefully, better attention next year.

[Sea Island]

http://www.valuewalk.com/2014/07/fortress-paper-convertible-debentures-valuation-analysis/

 

Thought you all would be interested in this link, very good analysis of the FTP debentures.

[peter1234]

Thanks. Short and good points.

:)

[alertmeipp]

So, anyone still holding this one?

Earning out tonight.

 

Hope we can hear something on the IQ loan soon.

 

 

[Guest Quebec]

I still hold

[obtuse_investor]

Still holding equity.

 

I am not expecting anything revolutionary tonight, but am expecting incremental improvement.

[alertmeipp]

Result out:

 

http://www.marketwired.com/press-release/fortress-paper-announces-second-quarter-2014-results-tsx-ftp-1936148.htm

 

 

http://www.fortresspaper.com/images/pdfs/financials/Financials%20and%20MDA%20with%20cover.pdf

 

Overall Performance

EBITDA loss of the Company was $6.0 million for the three months ended June 30, 2014. The Dissolving Pulp Segment

generated EBITDA loss of $4.2 million and the Security Paper Products Segment generated EBITDA loss of $0.4 million.

Corporate costs contributed $1.4 million to EBITDA loss. For the three months ended March 31, 2014, EBITDA loss was

$13.6 million and for the three months ended June 30, 2013, EBITDA loss from continuing operations was $8.4 million.

The Company is encouraged by the FSC mill results in the quarter ended June 30, 2014. Although the dissolving pulp

market conditions continue to be challenging, production efficiencies and cash costs have improved during the quarter and 3

relative to comparative periods. The Dissolving Pulp Segment continues to be affected by poor market conditions and the

anti-dumping duty imposed by China’s Ministry of Commerce (“MOFCOM”) in April 2014.

The FSC mill produced 31,039 air dried metric tonnes (“ADMT”) of dissolving pulp and 13,693 ADMT of NBHK pulp

during the second quarter of 2014. The Company sold 27,723 ADMT of dissolving pulp and 15,620 ADMT of NBHK

pulp in the second quarter of 2014.

 

The Landqart mill continues to implement new initiatives to improve efficiencies and profitability. EBITDA for the

Security Paper Products Segment for the quarter ended June 30, 2014 was $3.6 million lower when compared to the first

quarter of 2014, and $0.9 million lower compared to the second quarter of 2013. A large production run was shipped in

early July and therefore not included in second quarter results. Less than favourable conditions, including the strength of

the Swiss franc against the Euro and strong competition for orders putting pressure on pricing, continue to adversely

impact the results of the Security Paper Products Segment. The Landqart mill achieved 1,921 tonnes of security paper

sales in the second quarter of 2014, compared to 2,583 tonnes of security paper sales in the first quarter of 2014.

 

 

[obtuse_investor]

This is bound to get buried under the Q2 results posts... Franklin Templeton increased their equity exposure to Fortress to 13.01%. See screenshot from their filing.

 

 

 

[triedtestedand]

Pros:

-> Thurso reliability/production trending in right direction (~42K of "equivalent" DP tonnes of aggregate production in quarter)

-> costs are being contained ... without duty (or in absence of selling outside of China), and modelling in anticipated increased cogen and reduced employee costs, Thurso would be EBITDA positive this past quarter, even with cyclical $840/ton USD low prices (albeit benefiting from lower Cdn $).

-> IQ deferred principal and interest again in Q3

-> Sales/inventory ratio stabilized.

 

Cons (related to items they can control):

-> Need another quarter of corresponding incremental opex improvements to "prove" Thurso.

      -> need over 45K of equivalent DP tonnes (i.e. >90% utilization)

-> Still need to secure (material) sales outside of China/higher margin mixes to make money from Thurso at current low prices.

-> Still need a long-term solution w IQ.

-> Still need to a plan to monetize LSQ assets.

-> Still need to see Fortress Optical and Durasafe add to Landqart's run-rate EBITDA.

-> Still need a line-of-credit for Landqart (to free up restricted cash).

-> Still need to reduce inventory bloat.

 

Cons (outside of their control):

-> Cotton prices have tanked in past 30 days

-> Canada/China politics (e.g. Chinese rounding up a couple of coffee shop owners for spying??)

 

 

My Q's:

 

Landqart:

-> Is Landqart quarterly loss a one-off/timing issue?

      -> i.e. What was impact of big order shipping in Jul)?

      -> i.e. is $10M annualized EBITDA a viable average baseline to model model?

-> (When) will there be a uptick to product/margin mix associated with Durasafe?  Still Q4?

-> (When) will Fortress Optical start to add to mix?  Still Q4?

-> (When) can they get a credit facility at the sub level so can avoid tying up restricted cash?

 

Thurso:

-> Were there any quarterly charges associated with layoffs (and/or tests with non-Chinese prospects) that impacted quarterly EBITDA loss?

-> What is trigger for accelerating announced increased cogen sales to Q4/14 (vs 2015)?

-> What is status of gas conversion option (and timing/impact if a go)?

-> What are other cost reduction options?

-> What was July production?

-> Any progress with securing on-Chinese prospects?

 

Other:

-> What is status of long-term discussions w IQ?

-> What is status for monetizing LSQ assets?

 

 

OWNERSHIP:

- Obtuse ... thanks for the screenshot.  Based on that, 4 entities control majority (7.9M or 54%) of FTP's 14.6M shares:

  a) Chad @ ~2.6M

  b) Invesco @ ~2.6M

  c) Templeton @ ~1.9M

  d) Irwin Michael @ 0.8M

 

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

 

- That means that short interest of 600K shares as of July 16th, if still valid, represents ~9% of the rest of FTP's shares.

 

 

 

 

 

[alertmeipp]

re: inventory

 

I am hoping that are not selling it now because they are close to secure non Chinese customer.