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

[triedtestedand]

Sculpin:

 

Thx for tidbit.

 

IMHO, it definitely was Michael Irwin in January, as confirmed by following site (as well as acknowledged in their own website posts):

 

http://investors.morningstar.com/ownership/shareholders-major.html?t=FTP&region=can&culture=en-US&ownerCountry=USA

 

Given the volumes since Feb1 (including today's >300K shares, 250K shares on Feb5, and another 150K on Feb3), and the large block size trades each of those days, that would account for the 500K shares they had still as of Jan31. Other than Invesco and Franklin, both of whom have >10% and thus need to report any changes monthly to SEDAR, Irwin was only other large cdn institutional holder.

 

I wonder as much who bought ... there were 360K short as of mid-January ... easy cover for them in such circumstances.

 

 

[sculpin]

Apparently there has been an appraisal of the land & building in Switzerland by an outside real estate appraiser. Their appraisal estimate came in at $69MM Swiss Francs which is over $90MM Cdn.

 

There is the possibility that Chad will look into the merits of a sale/leaseback transaction much like many companies do with their real estate in Canada. This could represent a significant liquidity option and value above and beyond the ongoing business value of the currency operation.

 

The Landqart Mill is located in the town of Landquart, approximately 100 kilometres east of Zurich and is well located to

serve its major customers in Europe and the rest of the world. The Landqart Mill site comprises approximately 14.8 acres

and houses two paper machines, fibre storage area, finished goods warehousing, a two stage wastewater treatment plant and

a twin turbine hydroelectric power plant. The buildings on site are approximately 260,000 square feet in size

[alertmeipp]

So I assume the estimate is based on the property like land and building but not necessarily the business. Correct?

 

 

[sculpin]

Yes just an estimate of the land & building value.

[OptsyEagle]

Sculpin, where did you hear this about the appraisal of land for Landqart?

[sculpin]

Optsy Eagle - will send you a message

[sculpin]

Also the following is from a write-up by Irwin Michael in 2010 giving some idea of the value of the Landquart bldg which he sourced from the FTP IPO prospectus...

 

We believe that Fortress Paper is a net asset value story, where the replacement value of the two mills and the related equipment is well above the Company’s current market capitalization. The Landqart Mill is situated in the town of Landquart, 100 kilometres east of Zurich in the scenic Swiss Alps. After poring through the initial public offering prospectus we discovered that the fire insurance value of the property was CHF (Swiss Francs) 66.5 million for the building and CHF 163 million for the inventory and equipment. At the current exchange rate this totals approximately CAD $200 million.

 

http://valueinvestigator.com/value-favorites/tsx-ftp/

[lessthaniv]

Fortress Paper supports fed move on China's pulp claims

 

2015-02-12 17:57 ET - News Release

 

 

Mr. Chadwick Wasilenkoff reports

 

FORTRESS PAPER SUPPORTS CANADIAN GOVERNMENT REQUEST FOR WTO PANEL ON CHINESE ANTI-DUMPING MEASURES

 

Fortress Paper Ltd. is pleased the government of Canada today announced that it is requesting the establishment of a World Trade Organization (WTO) panel on China's imposition of discriminatory and unfounded anti-dumping measures on Canada's dissolving pulp industry.

 

Today's announcement escalates Canada's initial request in October, 2014, for consultations with China, which to date does not appear to have resolved the dispute.

 

Chadwick Wasilenkoff, chief executive officer of Fortress Paper, commented that: "Fortress Paper fully supports the government of Canada's decision to advance this trade dispute with China to the WTO and defend the interests of Canadians in the dissolving pulp industry. We will continue to co-operate with the government as this matter progresses."

 

© 2015 Canjex Publishing Ltd. All rights reserved.

 

[sculpin]

Forest industry welcomes trade action against China

 

Pulp & Paper Canada staff

OTTAWA2015-02-18

 

The trade dispute with China over the country’s imposition of import duties on dissolving pulp moved ahead another step in early February, as the federal government requested a panel at the World Trade Organization (WTO) to resolve the issue.

 

Last fall, Canada made a request of the WTO for consultations with China. Since that action was not effective within its 60-day time frame, this request to have WTO adjudicate is the next step.

 

The Forest Products Association of Canada (FPAC) and two producers affected by the import duties, Tembec and Fortress, are supportive of the federal government’s trade action against China regarding duties on Canadian dissolving pulp.

 

China had imposed anti-dumping duties of up to 23.7% on Canadian dissolving pulp in 2013 saying the imports were negatively impacting China's domestic pulp market. The Chinese duties have resulted in significant loss of market for Canadian dissolving pulp producers and put a chill on future investment.

 

“It is unfortunate that Canada has been forced to take this step but certainly the Chinese trade action was not in accordance with WTO rules on anti-dumping," says David Lindsay, the president and CEO of FPAC. “The discriminatory duties on Canadian dissolving pulp have hurt Canadian exports and resulted in a number of investments being cancelled for new production facilities. This impacted jobs and economic opportunity."

 

Forest products are Canada's largest export to China at $4.8 billion, and China remains a critical future market. However exports of dissolving pulp to China dropped 20% last year to $255 million.

 

“Certainly the forest products industry wants to maintain positive relations with China and build on our existing trading relationship," says Lindsay. “However it is essential that we all act in accordance with international trade rules and regulations."

 

A statement from Tembec says the company supports rules-based trade of forest products. “National governments should not invoke international trade remedies in an attempt to solve competitiveness issues of their domestic industry," commented Tembec president and CEO James Lopez.

 

Tembec manufactures lumber, pulp, paper and specialty cellulose, including viscose dissolving pulp.

 

Chadwick Wasilenkoff, CEO of Fortress Paper, said: “Fortress Paper fully supports the Government of Canada's decision to advance this trade dispute with China to the WTO and defend the interests of Canadians in the dissolving pulp industry.”

 

Fortress Paper produces dissolving pulp at a mill in Thurso, Que.

[sculpin]

Good to see that Canada is going to try to fight the Chinese over the pulp tariff. According to Chad, Fortress has been pretty effective at offsetting much of the 13% duty with sales to other countries and with sales of higher value pulp. This has resulted in them effectively receiving about a $20mt discount to pricing averaged on all of their production as opposed to the expected $100+ amount based on the 13% duty on the benchmark price of around $800 mt.

[colinwalt]

http://www.marketwired.com/press-release/fortress-paper-provides-corporate-update-tsx-ftp-1997825.htm

 

Landqart Mill

 

"In response to the significant change in the Swiss franc exchange rate, management commenced a foreign exchange counter measure program to mitigate the negative financial impact in the short and mid-term. As a result of this program, management anticipates positive EBITDA at the Landqart Mill for the first quarter and is forecasting EBITDA growth for 2015 over 2014 results."

 

Fortress Specialty Cellulose Mill

 

"Management anticipates that the negative impact of the problems in the lime kiln and recaust areas, which resulted in increased downtime and costs at the FSC Mill, and cold weather conditions in the Thurso region, which resulted in 6% reduced capacity at the digester, will be partially mitigated by the financial benefits derived during the first quarter of 2015 from favourable foreign currency exchange fluctuations and the fall in the price of oil."

[OptsyEagle]

 

http://www.fortresspaper.com/images/pdfs/releases/Fortress%20Paper%20News%20Release%20March%205%202015.pdf

 

I was curious as to how many litres are in a barrel of oil.  Never knew this, but now I can just google it:

 

158.987295 litres in one barrel of oil.  So if WTI drops $1 US, then my math say's Fortress Paper saves:

 

$1 per barrel = 125 Cdn cents per 158.987 Litres = 0.79 cents per Litre or 0.79 x $35,000 (Savings per cent) = $27,700 savings per $1 US drop in WTI per quarter.

 

So with oil dropping from $90 to $50 we are talking about $1.1 million of savings per quarter.

 

Why do I feel like I forgot to carry a 1, or use a multiplier for a denominator, or some other simple mistake.  Does my math look right on the oil issue?

 

By the way, where do they use all that oil?

[finetrader]

Article on Fortress:

 

 

http://business.financialpost.com/2015/03/09/long-road-back-from-disaster-how-one-bad-investment-nearly-destroyed-forest-paper-ltd/

[sculpin]

Interesting aricle on FTP. Never had thought about the problems of polyester fibre (micro plastic pollution) and the eco advantages of rayon (pulp material). Also like to see McClay positive….

 

Pulp analyst Brian McClay is cautiously optimistic about Fortress. He says: “Pulp is a simple business, but it’s never easy. They’ve got the product quality where it needs to be. It could become a good investment.” Mr. Wasilenkoff says, “We are on the verge of profitability.”

 

 

Laundry.Wastewater, collected after washing synthetic blankets, fleeces or shirts in a washing machine, contained more than 100 fibres per litre of water. Fleeces released 180% more fibres than blankets or shirts. On average, more than 1900 fibres of microplastic can be discarded by a synthetic item during one wash

[misterkrusty]

the rayon made from thurso DP is not only more "green" than oil-based fibers, it's also more green than the rayon made out of the DP from many other mills.  For example, there's a group called "Canopy" which says that 30% of DP is made from plant material sourced from endangered rain forests.  Also, a lot of the DP made in the southern hemisphere is made from eucalyptus, which is farmed as a monoculture ... lack of genetic diversity could wipe out these trees in a hurry if some disease came along.

 

unfortunately, Fortress might alienate other pulp producers if they were to really advertise these facts.  you never know when you might want to sell your pulp mills, i suppose.

 

[triedtestedand]

r.e. FP article ... Chad's travel patterns are encouraging ... Taiwan/Vietman highlight locations of VSF plants outside of China (i.e. to sell DP to firms where can avoid Chinese duties).

[sculpin]

Raymond James...

 

Fortress Paper March 10, 2015

 

FTP-TSX Company Comment

 

Daryl Swetlishoff CFA | 604.659.8246 | daryl.swetlishoff@raymondjames.ca

David Quezada CFA (Associate Analyst) | 604.659.8257 | david.quezada@raymondjames.ca

 

Forest Products | Pulp & Paper

4Q14 Results Beat Expectations; DP Markets Still Challenged

 

Recommendation

 

While we believe Fortress continues to take positive steps operationally, and see the

company benefitting from the weak C$ and an expected increase to energy output

at the Thurso mill, our neutral rating primarily reflects persistently depressed

dissolving pulp markets.

 

Analysis

 

 Fortress Paper reported 4Q14 EBITDA of ($1.4) mln, as compared to RJL and

consensus estimates at ($1.6) mln and ($2.3) mln respectively – at US$800/mt

dissolving pulp prices (less applicable anti-dumping duties on Chinese shipments) we

regard this quarter’s results as indicative of very difficult operating conditions for

FTP. On a positive note the company’s banknote operations generated EBITDA of

$3.2 mln, up from $1.1 mln in 3Q14 as improved sales were partially offset by an

appreciation in the Swiss Franc vs. the Euro as well high pressure on banknote

pricing due to competition.

 

At the Thurso dissolving pulp mill a scheduled

maintenance shut as well as problems with the lime kiln and recaust areas (which

resulted in downtime and additional costs and continued into 1Q15) and cold

weather in the Thurso area resulted in FTP’s DP segment generating EBITDA of

($3.7) mln vs. ($1.2) mln in 3Q14. FTP’s cash balance (including restricted cash)

ended the quarter at $58.9 mln, down from $71.7 mln at the end of 3Q14.

 

 WTO Panel could bring some relief but odds difficult to handicap – On February 12,

2015 Fortress Paper noted the Canadian Government had formally requested a WTO

panel on anti-dumping duties imposed on Canadian producers of dissolving pulp

shipping to China. This marks an escalation from the Canadian Government having

previously requested only consultations with the Chinese Government. While we

believe Fortress has a legitimate case we regard the outcome of the WTO panel as

uncertain. However, we note without the duty and with the currency tailwind at

Thurso we believe FTP would be cash flow positive.

 

 Positive signs from recent corporate update – In a recent corporate update Fortress

noted the Landqart banknote mill order book is strong for next couple quarters

while the Durasafe banknote is selling well. Unfortunately the stronger Swiss Franc

vs. Euro is a material headwind, however, FTP has a plan to mitigate the CHF

strength and therefore expects the Landqart mill to sequentially improve results in

2015 (vs. 2014’s $7 mln). FTP’s cogen facility at Thurso, which had been running at

~80% capacity due to a crack in one of its gears has now received the repair gear and

FTP is targeting getting to full capacity of 22–23 MW by the end of 2Q15.

 

Valuation

 

Our price target of $2.50/share is based on a 6.0x EV/EBITDA multiple, in-line with the

average of pulp and paper producers in our coverage universe

[sculpin]

New presentation

 

http://www.fortresspaper.com/images/pdfs/investor_relations/Q4%202014%20presentation%20March%2010.pdf

 

 

[sculpin]

M Partners wrote up the Fortress 2016 today. Have attached the pdf file.

FORTRESS PAPER 6.5% DEBENTURES (FTP.DB - TSX, $65.00)

 

NOT DISTRESSED, MISUNDERSTOOD, ATTRACTIVE 31% YTM ON DEBS

We believe FTP 6.5% debs due Dec 2016 with a 31.4% YTM are misunderstood. A 31.4% YTM would typically indicate distress, however, these debs benefit from structural advantages and asset optionality that should preserve FTP’s current $44.9M in cash to the debs maturity date, assuring principal repayment.

FTP.db_note.pdf

[TwoCitiesCapital]

M Partners wrote up the Fortress 2016 today. Have attached the pdf file.

FORTRESS PAPER 6.5% DEBENTURES (FTP.DB - TSX, $65.00)

 

NOT DISTRESSED, MISUNDERSTOOD, ATTRACTIVE 31% YTM ON DEBS

We believe FTP 6.5% debs due Dec 2016 with a 31.4% YTM are misunderstood. A 31.4% YTM would typically indicate distress, however, these debs benefit from structural advantages and asset optionality that should preserve FTP’s current $44.9M in cash to the debs maturity date, assuring principal repayment.

 

What brokers do you need to be able to purchase these? I've got IB and Scottrade and it doesn't appear to be available on either. Maybe Schwab? I doubt I'll open a separate account just to capitalize on this, though I've been intrigued with this bond opportunity for awhile.

[misterkrusty]

I have bought them thru Schwab.  Call Mike Magee at their foreign bond desk at 800-379-3931 ext 33620.  He's in Phoenix, AZ

 

If you have a prime broker, call GMP Securities in NYC

[jose]

any news today or just mr. market doing his thing?

[sculpin]

A very simplistic break up value of FTP based on the values estimated in the report issued by M Partners. Hinges on the +$300MM value to a private buyer of the FSC mill located in Thurso.

 

Fortress Paper - sum of the pieces

 

Cash position------------------------------$45 million

Thurso private sale estimate--------------$300 million

Landquart land & bldg---------------------$30 million

Landquart operations (mid-range)--------$77 million

FGC mill (low estimate)------------------$8 million

Total Asset Sale Potential----------------$460 million

[i]Less All Debt ----------------------------$246 million

Value to Shareholders--------------------$214 million

 

Value per Share------------------------- $14.65 - based on 14.6 million shares outstanding

Current Share Price--------------------------$2.60

 

 

[Moht]

The $300M valuation @ Thurso also assumes $1,500 ADMT for DP...

 

Seems a little aggressive.  Either way, agree the equity is cheap.  It'll look more compelling if/when the debentures are redeemed, ideally below par where they trade today.

[lessthaniv]

Yes, but even a more conservative view of say $1200/mt which puts the valuation at the high end of the global cost curve, implies a value on the equity north of $10/share. The equity is cheap, regardless.