Archive for the ‘Banknote Production’ Category

Financial Post Q and A with Fortress Paper CEO

Posted: Tuesday, November 22nd, 2011

Fortress Paper CEO looks for opportunity where others see problems, “Paper Profit”. The Canadian forest and paper products sector is far away from it’s peak. Companies have been hit hard by the financial crisis, penalized by the strong Canadian dollar, and crippled by balance sheets that are over leveraged. However, out of challenging times, emerges opportunity for Canadian business. Chad Wasilenkoff, CEO of Fortress Paper Ltd. — which operates a banknote business, a wallpaper business and a pulp mill and Financial Post reporter Jonathan Ratner sat down for lunch to discuss how he is capitalizing the market.

Q The economy is on everyone’s mind these days. Are your businesses equally sensitive to growth?
A Our banknote business generally could be considered recession-proof. Banknotes are growing at 4% per year and they’ve done that for decades. Even in a financial crisis there is a little bit of noise, but not very much. Countries used to change over their banknotes every 14 or 15 years, but with the advent of colour photocopiers, scanners and digital processing equipment, they are changing their series every seven or eight years. There is also quite a bit of growth globally in emerging economies. They are all moving up in income status, but they still buy their fruits, vegetables and sandals off street vendors. That means more and more ATM machines on street corners, which is actually a driver for our business.

Q What about the wallpaper business?
A We had a few bad months, but we found it was just our customers reducing inventory. They were uncertain, but once they ran out of product, they quickly came back and had to order more. Historical data show that wallpaper also happens to be somewhat recession-proof. During the recession, people were forced to stay in their existing homes a little bit longer. But they still want to improve their surroundings, so they are do more renovations.

Q What’s the status of your third business?
A We’re going through a major conversion to make dissolving pulp at the mill we bought in Quebec. It will be shipped over to China, go through more conversion processes, then ultimately be made into rayon. The finished product is a substitute for cotton. Typically, rayon trades at a premium to cotton because it is a better product. However, the cost structure is significantly lower than cotton, so there is always going to be some margin whether it is for us, or the rayon producers. We’ve actually pre-sold about 80% of our production — half on dissolving pulp spot prices and the other half on the rayon price. So wherever the margin goes, we’ll be sharing in it fairly consistently.

Q How do you deal with fluctuating commodity prices?
A While there are no synergies between the businesses, we end up with some natural hedges, which helps. For example, when cotton prices take off, it hurts our banknote business. But at the same time, our dissolving pulp — being a replacement for cotton — does exceptionally well. Similarly, as prices go up it’s great for our paper pulp mill, but it hurts margins at our wallpaper division. When cotton spiked at the start of the year, the specialized cotton we use in banknotes was up 350% in the course of four months. It is very, very difficult to try to maintain any margins when you’re bidding on a deal today, and you’re underwater by the time you get the cotton.

Q When you make a pitch to investors, how do you characterize Fortress?
A We’re a growth story and we’re very opportunistic. There are very few synergies between our different segments and businesses, but the similarities are that they have very high barriers to entry, a good macro environment in terms of the growth profile, and supply and demand drivers. I always look at the industry first, then I go and try to find the best assets available in the world. I’m always interested is growing out each of those divisions individually, but at the same time they are also for sale at all times.

Q What is your experience doing business in China?
A I have a strong focus on China. I have been doing business there for about eight years and go there at least once a quarter. But I learned some hard lessons during the first couple of trips. I went over with a Western business style, but never got those return calls. So I’ve since hired cultural coaches to help understand how the Chinese do business. It’s all about developing relationships and trust.

Q How did you break into the ultra-exclusive banknote business?
A It was by far the most challenging investment I’ve ever had to make. It is a very secretive industry. They obviously don’t want a lot of publicity or press in terms of people knowing what is going on with security features and things like that. You have to have clearance. Once we owned a mill and we were part of this closed group, people still didn’t like to talk. A lot of the companies have been around for decades and are still family-owned. The customers — national banks — are very slow, conservative and methodical. You may have a great product and the right price, but everything needs to be absolutely perfect and the timing must be right. Once we develop the relationship and help cultivate it, it is great business because it is very sticky. The national banks are reluctant to change once you’re their supplier.

Q What is the biggest misconception about this industry?
A Most of the forestry sector is going through tough times. They spent a lot of capital and they are high-cost producers, so it is difficult to compete. We get thrown in with forestry companies where everyone says nobody can make money. But we are one of these unique companies in that we are coming in late, picking up assets at next to nothing because nobody else is looking, then turning them around. We have a longer growth profile, so we are not in a hurry. We’re also always looking to be the lowest-cost producer in anything we get involved in, so we can ride out these trends. I don’t know when forestry is going to turn or come back in vogue — if it ever will — but in the meantime we have to be prepared for a long, hard slog through these different businesses.



Fortress Paper Provides Update on Dissolving Pulp Conversion Project

Posted: Friday, September 2nd, 2011

c. (“Fortress” or the “Company”) (TSX:FTP) wishes to report that the construction relating to the conversion of the Fortress Specialty Cellulose Mill from a NBHK pulp to a dissolving pulp operation is proceeding substantially on schedule. However, due to rescheduling of the delivery and installation of specialized equipment, the enhancement of certain processes, and other ancillary matters, the Company has decided to marginally delay the necessary shut down of the mill required to make tie-ins and upgrades on existing equipment. Accordingly, the production of dissolving pulp is now scheduled to commence in early November 2011. The Company believes that the enhancements to certain processes will provide for a smoother start up and ramp up to full production capacity.

The deferment in the production of dissolving pulp is partially mitigated by the mill’s existing production of specialty pulp which yields a higher margin as compared to NBHK pulp. This specialty pulp is manufactured in strict accordance with certain technical specifications requested by the Company’s customers. The Company believes that, as a result of the extensive development and training experience derived from achieving the tolerances required for this unique specialty pulp, the mill will be positioned for a more efficient transition to dissolving pulp production later this year.

SOURCE: Marketwire

VIDEO: BNN discusses Fortress Paper’s PM1 upgrade

Posted: Saturday, February 20th, 2010
bnn 300x221 VIDEO: BNN discusses Fortress Paper’s PM1 upgrade

Analyst Brian Pow predicted continued growth in Fortress Paper

Last week, Patt Bolland – host of BNN’s Trading Day – talked to Brian Pow, vice president of research and equity analyst for Acumen Capital, about Fortress Paper’s new PM1 upgrade and discussed how this change will have a positive effect on the company’s future.

Watch the clip HERE (the Fortress Paper segment begins around 3:10).

BNN: Trading Day

Fortress Paper featured on CRN Digital Talk Radio

Posted: Friday, February 12th, 2010

crn Fortress Paper featured on CRN Digital Talk Radio

On CRN Digital Talk Radio, Erik Hines & Jack Roberts host The Erik & Jack Attack, where they share sixty minutes of exciting discussion, pop culture, politics, news, and anything else that may be on their minds. On Tuesday, February 9th the Boston bred conservative and the left coast liberal talked about Fortress Paper.

From their blog:

Did you know that there’s only one company in the world authorized to produce the Swiss franc banknotes, which are widely considered to be the most secure currency in the world?

Meet Fortress Paper, (TSX: FTP), an international provider of security and other specialty papers, which is the sole manufacturer of the banknote paper for the Swiss franc. They have also produced banknote papers for over 100 currency denominations for over 25 countries and are one of only nine authorized suppliers of banknote paper for the Euro currency.

New security realities in the 21st century have driven the need for ever-improving security features to be included in banknotes, passports, identification cards, checks and certification papers. The proliferation of color copying, scanning and printing technologies require that producers must continue to develop increasingly sophisticated anti-counterfeit solutions.

While governments continue to improve the quality of banknote paper, overall banknote circulation has continued to grow as a result of economic activity in developing countries and the introduction of the Euro in Europe. “Counterfeit money printing activity continues in several global hot-spots,” reports CSO Magazine.

CRN Digital Talk Radio: Erik & Jack Attack – “Chad Wasilenkoff, CEO of banknote-maker Fortress Paper”

REPORT ON BUSINESS: “Turning Paper Into Cash”

Posted: Thursday, January 28th, 2010

Fortress Paper was covered today in the Globe and Mail’s Report on Business. Dave Morris reports on Fortress Paper:

At a 125-year-old factory in the shadow of the Swiss Alps, veteran watchmakers, trusted for their keen attention to detail, pore over the drums that will embed detailed watermarks into pristine sheets of paper stock. But not just any paper stock. Fortress Paper’s Landqart mill manufactures the security paper used to print passports, banknotes, bonds and even the certificates of authenticity that ship with each shiny new Rolex watch.

For Fortress Paper, the Vancouver-based company that owns and operates Landqart, the business is about as different from Canada’s beleaguered pulp and paper industry as a company can get. “With those traditional commodity papers, raw material goes in—pulp, water, chemicals—and when the finished product comes out the end, you package it and sell it,” says Chad Wasilenkoff, Fortress’s 37-year-old CEO, on the phone from his office in Vancouver.

“With banknote printing, it starts in the design phase.” Among the complex procedures that go into the creation of a future euro, Swiss franc or passport are treatments to bolster the paper’s resistance to wear and tear, as well as the application of watermarks and OVI (optically variable ink) strips, which cause the notes to change colour when tilted. “We view ourselves as a technology company on a paper platform,” says Wasilenkoff. Orders are booked solid through 2010.

The young CEO has made a career out of breathing new life into fragile companies in distressed sectors. After revitalizing Titan Uranium Exploration Inc., Wasilenkoff began looking for undervalued niches within the forestry industry. In 2007, Fortress purchased Landqart AG, a century-old security paper company with some old-world cred (Landqart is the exclusive manufacturer for the venerable Swiss franc, and has supplied euros to 10 of the 27 European Union member states—though, for security reasons, Wasilenkoff isn’t allowed to say which ones). Now, Wasilenkoff is banking on innovation to put Fortress Paper in as many wallets worldwide as he can.

In December, Fortress unveiled a new product called Durasafe at the Banknote 2009 conference in Washington, D.C. The new paper is more durable than most currencies in circulation, and allows banks to incorporate nifty—and difficult to counterfeit—features like transparent windows of varying size and shape. Fortress has invested almost $15 million over the past seven years perfecting the new notepaper.

“Unfortunately, in this industry, you can’t sell anything with a PowerPoint presentation,” says Wasilenkoff. “You have to have all the equipment, all the manufacturing, full-scale production samples for these national banks to review. Then they go and do their thing and, if it works, the orders start to roll in.”

Consider it the latest twist on the old adage that you need to have money to make money.

SOURCE: Dave Morris Report on Business / The Globe and Mail “The Dollar Bill Goes High-Tech”

Posted: Wednesday, December 16th, 2009
watermark in durasafe monster 397x224 300x168 The Dollar Bill Goes High Tech

A watermark in a Durasafe bill helps prevent counterfeiting. (Courtesy

Counterfeiting has never been easier. All it takes these days is a fairly inexpensive color printer, some graphic design software and a willingness to spend a few decades in jail if you get caught.

But desperate times call for desperate measures, so criminals struggling in a tough economy and savvy with advanced printing equipment have figured out how to replicate bank notes. Some bleach $1 bills and print $100 bills; others use holographic wrapping paper available at any dollar store. And it’s not just the little guy. The big guys — the major crime syndicates — have set up complex printing operations to print illegal tender in large quantities.

Fake bills look remarkably similar to the real McCoy, with intaglio (textured printing) and holographic markings.

“Internationally, we have seen a marked increase in counterfeiting in the last five years,” says Bonnie Schwab, a consultant who worked for the Bank of Canada and has advised the Central Bank Counterfeit Deterrence Group. “Causes are improvement in technology available to the general public and to the traditional counterfeiters. More and more people with little skill in design and printing are able to download images and print to desktop printers.”

Because your basic inkjet printer is constantly improving in output quality, the best way to combat counterfeiting is not to create increasingly intricate designs, but rather to improve the paper it’s printed on.

Security fibers like these are embedded in bills from Fortress Paper.

One approach is to make the printing process and substrate — the layer beneath the surface of the paper — more complex and difficult to replicate, even for the pros.

Polymer-based currency, first developed in Australia, has become common and is harder to counterfeit. In 2008, Crane Currency started using a “nano thread” for $100 bills that allows the Bureau of Engraving and Priting to embed new security features, including a strip that becomes visible only when you hold the C-note up to the light.

The U.S. Treasury has taken other measures, including the new $5 bill with its color-shifting ink, an embedded watermark, and a different color that glows for each bill when you hold it up to an ultraviolet light source. Yet according to Schwab, because U.S. bills are so popular all over the world, they are a prime target for counterfeiters, and given enough time and the right technology, criminals tend to learn even the most advanced techniques.

A new option — announced at the Bank Note 2009 Conference in Washington last week — is a hybrid paper called Durasafe, which uses a three-layer substrate made with a polymer core and a 100-percent cotton outer layer.

Made by from Fortress Paper, Durasafe’s major advancement is a transparent window that can be any shape and size. Criminals have a hard time replicating these windows because of the complex printing process involved.

“Durasafe uses two substrates with a window in between, so that rules out printers and advanced color copier machines,” says Russell Stanley, a financial analyst with Jennings Capital.

Chad Wasilenkoff, the CEO of Fortress Paper, says Durasafe is also designed to last twice as long as traditional banknote paper, which is an attractive option for national banks — especially in the U.S. where, he says, there are as many as 1 million fake bills in circulation. Durasafe-based currency will stay in circulation longer and, Wasilenkoff says, the printing costs will be similar to traditional banknotes.

“Durasafe acts like a sponge for the polymer and improves the tactility of the bank note,” says Wasilenkoff, who explained why the touch and feel of a banknote are important for the “level one” security concern, meaning the first point of contact that criminals make. In most cases, counterfeiters pass fake bills off at nightclubs and McDonald’s or Starbucks in a chaotic or low-light environment. When a bill just doesn’t feel right, the cashier might take the time to inspect the currency.

Vancouver-based Fortress would not comment on which countries may end up using the bills, due to security concerns. But the company says the first mass-produced banknotes that use Durasafe will appear in late 2010.

–By John Brandon,

SOURCE: “The Dollar Bill Goes High-Tech”