Archive for the ‘Fortress Specialty Cellulose Inc’ Category

Fortress Paper Announces Fourth Quarter 2010 Results

Posted: Monday, March 14th, 2011

Fortress Paper Ltd. (TSX:FTP) (“Fortress Paper” or the “Company”) reported 2010 fourth quarter EBITDA of $3.2 million. For the three months ended December 31, 2009 EBITDA was $7.9 million and for the third quarter of 2010 EBITDA was $8.9 million.

The fourth quarter of 2010 reflects continued strong profitability at our Dresden operations. At Landqart, the Company completed the successful transformation of paper-machine number 1 (“PM1″) to a high security paper-machine. This comprehensive project had a negative impact on fourth quarter earnings as there was no commercial production on the PM1 for two months. The results at Fortress Specialty Cellulose reflect weakening NBHK prices that have come off their peaks from earlier in the year. The conversion of the Fortress Specialty Cellulose mill to a dissolving pulp producer remains on target for production in the third quarter of 2011. The underlying markets for dissolving pulp remain strong which continues to provide management with conviction in our attempts to expand further in this business segment.

Overall 2010 was another successful year for Fortress Paper Ltd. with the following significant accomplishments:

  • The acquisition by Fortress Specialty Cellulose of the Thurso mill from Fraser Papers and its successful start-up as a NBHK pulp producer.
  • Significant advancements with the conversion project of Fortress Specialty Cellulose to a dissolving mill scheduled for completion in the third quarter of 2011.
  • Substantial completion of the rebuild of PM1 at Landqart by the end of 2010.
  • Continued market share growth in the non-woven wallpaper market at the Dresden mill.

Fortress reported adjusted net loss of $0.8 million for the fourth quarter of 2010 on sales of $83.5 million or diluted loss per share of $0.06. For the fourth quarter of 2009 the Company report adjusted net income of $4.8 million or diluted adjusted earnings per share of $0.46 on sales of $51.0 million. In the third quarter of 2010 the Company reported adjusted net income of $3.9 million on sales of $87.0 million or diluted adjusted earnings per share of $0.29. The primary reason for the decline, relative to the prior quarter, is attributed to weaker NBHK pulp prices which remained below their June peak prices throughout the fourth quarter of 2010. In addition our Landqart mill underwent a significant portion of the PM1 upgrade. The acceptance and production of lower margin banknote orders in preparation for increased capacity in 2011 also contributed to the decrease in net income compared to prior periods. Effective October 31, 2010 the last order of specialty papers was produced at Landqart. By the end of December, the full conversion was substantially complete and production of saleable security paper on the transformed PM1 began in early January 2011. Both the NBHK pulp price impact at Fortress Specialty Cellulose and the conversion at Landqart overshadowed an excellent fourth quarter at Dresden.

EBITDA was $26.1 million for the year ended December 31, 2010 compared to $25.6 million for the year ended December 31, 2009. Excluding corporate costs, Dresden, Landqart and Fortress Specialty Cellulose combined mill EBITDA was $31.7 million and $29.1 million in the years ended December 31, 2010 and 2009, respectively. Despite significant EUR depreciation in the year the Dresden mill was able to contribute $21.9 million EBITDA which was in line with the previous year at $21.6 million. The Landqart mill produced significantly lower results ($0.5 million EBITDA) than the prior year ($7.5 million EBITDA) in large part due to the conversion of PM1 as previously stated. The Fortress Specialty Cellulose mill, purchased April 30, 2010, provided approximately $9.3 million of EBITDA.

Adjusted net income for the year ended December 31, 2010 was $10.4 million or $0.84 per share (diluted). Adjusted net income for the previous year comparative period was $13.8 million or $1.35 per share (diluted).

EBITDA is defined as net income before interest, income taxes, depreciation, amortization, non-operating income and expenses and stock based compensation which the Company considers to be a key performance indicator. Adjusted Net Income (Loss) is calculated as Net Income (Loss) less specific items affecting comparability with prior periods and Adjusted Net Income (Loss) per Share is calculated as Adjusted Net Income (Loss) divided by the weighted average number of shares outstanding in the period. EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share are not generally accepted earnings measures and should not be considered as an alternative to net income or cash flows as determined in accordance with Canadian GAAP. As there is no standardized method of calculating these measures, the Company’s EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Share may not be directly comparable with similarly titled measures used by other companies.

Subsequent to December 31, 2010:

  • Fortress completed the acquisition of the assets of the Bank of Canada’s Optical Security Material (OSM) division (the “OSM Assets”), which produces the optically variable material for the security threads contained in various banknotes, including application in the Canadian banknotes. The Company paid a purchase price of $0.75 million for the OSM assets and granted the Bank of Canada a royalty-free license to use the intellectual property sold to the Company for Canadian banknote applications.
  • Fortress completed a public offering of 967,000 common shares of the Company and the underwriters exercised their over-allotment option and purchased an additional 145,050 common shares at a price of $51.75 per share, resulting in aggregate gross proceeds under the offering of $57.5 million. Proceeds of the offering will be used to finance certain capital expenditures relating to its Fortress Specialty Cellulose Mill in Thurso, Quebec and the construction of a high security facility adjacent to the Fortress Specialty Cellulose Mill which will house the Company’s OSM Assets recently acquired from the Bank of Canada, and for working capital and general corporate purposes.
  • Fortress‘ wholly-owned subsidiary Dresden Papier GmbH (“Dresden”) increased the current credit facility amounting to EUR18.5 million to EUR 22.15 million for the rebuild of Landqart’s PM1 into a banknote paper-machine.
  • The remaining $7 million principal amount of the Company’s $15 million unsecured convertible debenture that was issued on April 30, 2010 has been converted. The Company has issued 350,000 common shares with this redemption.

Selected Financial Information

The selected financial information presented herein is qualified in its entirety by, and should be read in conjunction with, our audited consolidated financial statements as at and for the year ended December 31, 2010 and the related notes thereon and our Management’s Discussion and Analysis filed on SEDAR.

Three Months Ended December 31, 2010
(thousands of dollars, except shipments, unaudited) Q4 2010 Q3 2010 Q4 2009
Sales 83,467 86,971 51,049
EBITDA1 3,237 8,930 7,885
Operating (loss) income (10,775 ) 6,159 6,292
Net (loss) income (10,953 ) 5,148 3,720
Adjusted net (loss) income (751 ) 3,854 4,793
Paper Shipments (tonnes) 15,406 16,452 15,291
Pulp Shipments (tonnes) 62,038 60,469 -
1 See net income to EBITDA reconciliation.
Net income to EBITDA reconciliation:
(thousands of dollars, unaudited) Q4 2010 Q3 2010 Q4 2009
Net (loss) income $ (10,953 ) $ 5,148 $ 3,720
Income tax 1,305 2,243 1,199
Foreign exchange (gain) loss (1,099 ) (1,294 ) 1,073
Interest expense (29 ) 62 300
Amortization 3,029 2,192 1,441
Stock based compensation 5,983 579 152
Executive Cash Award 5,000 - -
EBITDA

The Company

Fortress Paper is a leading international producer of security and other specialty papers and products. Fortress operates three mills, the Landqart Mill located in Switzerland, the Dresden Mill located in Germany and the Fortress Specialty Cellulose Mill located in Quebec, Canada. Fortress Paper’s security papers include banknote, passport and visa papers and its specialty papers include non-woven wallpaper base products, and graphic and technical papers. Fortress Paper’s pulp business includes NBHK produced at the Fortress Specialty Cellulose Mill with plans to convert this capacity into dissolving pulp production along with the construction of a biomass based cogeneration plant.

Conference Call

A conference call to discuss the financial results for the fourth quarter 2010 will be held on March 15, 2011 at 9:30 a.m. (PST). To attend the conference call, please dial one of the following numbers:

North America: 1-877-353-9586

International: 1-403-532-8075

Participant pass code: 98030#

A replay of the conference call will be available for 7 days. To access the replay, listeners may dial 1-877-353-9587 from North America or 403-699-1055 International. The pass code to access the replay is 537274#.

Forward-Looking Statements

Some information in this news release contains forward-looking statements that reflect the current views and/or expectations of the Company with respect to its performance, business and future events. The reader is cautioned that forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements including, without limitation, those relating to damage to our reputation, competition, maintaining our market position, marketability and price of our products, technology and protection of our intellectual property, dependence on our major customers, fluctuations in the price and supply of raw materials, fluctuations in foreign exchange and other risk factors detailed in our filings with Canadian securities regulatory authorities. These risks, as well as others, could cause actual results and events to vary significantly. Fortress Paper Ltd. does not undertake any obligation to release publicly any revisions for updating any voluntary forward-looking statements.

Source: Marketwire

 

Fortress Paper Enters Into Dissolving Pulp Supply Agreements

Posted: Monday, October 4th, 2010

Fortress Paper Ltd. (“Fortress Paper” or the “Company”) (TSX:FTP) is pleased to announce that it has, through a wholly-owned subsidiary, entered into dissolving pulp supply agreements with two producers of viscose fibre (rayon) products located in China, for the delivery of an aggregate of approximately 84,000 air dried metric tonnes (“ADMT”) of dissolving pulp per annum at a purchase price based on prevailing market prices in China, subject to a minimum price of US$1,200 per ADMT and a maximum price of US$1,600 per ADMT. The pulp supply agreements are each for a term of five years, with Fortress commencing the supply of dissolving pulp in the third quarter of 2011.

Dissolving pulp will be supplied by the Fortress Specialty Cellulose Mill which is planned to have an annual production capacity of more than 200,000 ADMT upon its completion, which is expected to occur in mid-2011.

Chadwick Wasilenkoff, Chief Executive Officer of Fortress Paper, commented: “These dissolving pulp supply agreements will provide a hedge against potential volatility in future dissolving pulp prices which we believe should provide greater normalized operating results in this segment.”

About Fortress Paper

Fortress Paper is a leading international producer of security and other specialty papers and products. Fortress operates three mills, the Landqart Mill located in Switzerland, the Dresden Mill located in Germany and the Fortress Specialty Cellulose Mill located in Quebec, Canada. Fortress Paper’s security papers include banknote, passport and visa papers and its specialty papers include non-woven wallpaper base products, and graphic and technical papers. Fortress Paper’s pulp business includes NBHK produced at the Fortress Specialty Cellulose Mill with plans to convert this capacity into dissolving pulp production along with the construction of a biomass based cogeneration plant.
This press release contains certain forward-looking statements that reflect the current views and/or expectations of Fortress Paper with respect to its performance, business and future events, including statements regarding Fortress Paper’s planned conversion of the Fortress Specialty Cellulose Mill into a dissolving pulp production facility, the expected production capacity thereat, and expected financial results of the pulp supply agreements. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the business and the industry and markets in which the Company operates. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Investors are cautioned that all forward-looking statements involve risks and uncertainties including, without limitation, risks relating to the ability of Fortress to complete the conversion of the Fortress Specialty Cellulose Mill, that the specialty cellulose operation will not be successful or profitable and will not meet anticipated production capacities, that the purchasers will not fulfill their obligations under the pulp supply agreements, changes in the market, potential downturns in economic conditions, fluctuations in the price and supply of raw materials, foreign exchange fluctuations, labour relations, regulatory requirements, reputation, competition, dependence on major customers, and other risk factors listed from time to time in the Company’s public filings. These risks, as well as others, could cause actual results and events to vary significantly. Accordingly, readers should not place undue reliance on forward-looking statements, which are qualified in their entirety by this cautionary statement. Fortress Paper does not undertake any obligations to release publicly any revisions for updating any voluntary forward-looking statements, except as required by applicable securities law.

Pulp Growth Ain’t Pulp Fiction – Embracing New Opportunities

Posted: Monday, June 28th, 2010

While “pulp fiction” may resonate with the hearts and minds of people, the wood pulp business sector sometimes results in a “hollow” response. While readers would not be able to turn the pages of their pulp fiction books or enjoy their cotton and rayon clothing without their wood pulp brethren, the pulp sector is often looked upon as sleepy.

Yawning all the way to the bank

While the pulp sector may appear quiet, the market players are “yawning” all the way to the bank. “Between 2002 and 2006, world exports of wood, pulp and paper products grew at an average annual rate of 10.6%,” reports Global-production.com Inc., a business economics consultancy. Despite the volatile economy, the upward price trend in market pulp continues across the world.

“The fundamentals of the pulp market continue to be very strong,” reports PulpWatch, a leading provider of business information and consultancy services to the international pulp and paper industry. “Pulp prices increased by $30-50/t in May, and are set to reach new records in Europe and North America in June. Producer inventories reached record lows in April, and consumer warehouses are similarly bare. European paper demand and order books have improved and prices for most grades are moving upwards, albeit at a slower pace than fiber prices.” This is currently a temporary cyclical high, but we will be getting out of this old product in approximately one year.

As a contrarian investor, I keep focused on industries widely considered to be depressed with an eye on purchasing world class assets at deeply discounted prices. My company recently paid $1.2 million to Fraser Papers for a facility in Quebec with an insured replacement cost of $851 million in assets. We are converting this operation into a specialty dissolving pulp operation. Dissolving wood pulp is chemically refined bleached pulp composed of pure cellulose fibers extracted from trees. Dissolving pulp is the major source for the natural cellulose used in the production of rayon.

Rayon – a very promising future

I believe rayon demand is at a tipping point around the world. The declining global production of cotton is insufficient to meet global textile industry demand; particularly with the rapidly expanding middle class in China and India. Industry analysts indicate that the rayon market has grown at 7% globally and over 10% in China for the last 5 years. Rayon is typically blended with other fibers and can logically displace the cotton shortfall. Rayon has high uniformity which leads to significant improvements in productivity in spinning and textile plants.

Rayon demand has revealed a gap in supply. Total dissolving pulp capacity in late 2007 was 2.4 million tonnes according to the CCF Group (China Chemical Fibers & Textiles Consultancy). Expansions and conversions with plants in Brazil, South Africa and Canada added 0.6 million tonnes of dissolving pulp capacity in 2008, but closures of many higher cost dissolving mills resulted in limited capacity to fill the increasing demand.

A specialty producer

Driven by overall textile demand and increasing preference for rayon over cotton, over one million tonnes of additional rayon capacity (dissolving pulp customers) was built in China in 2009 and an additional 0.5 to 0.7 million tonnes in China is planned to start-up in 2010. There is a current shortfall of approximately 0.5 million tonnes in annual rayon supply which is expected to continue during the next several years.

Rayon, derived from wood pulp, is a textile made from cellulose whose future is looking very promising which is why we sought to invest in this sector. With our Quebec facility, we are transforming an asset which was previously underutilizing its potential by operating as a high cost producer into a specialty product producer which is low-cost and globally competitive. Over 90% of the existing mill equipment is ideally suited to produce high quality specialty cellulose for the rayon textile industry.

The consumer advantages of rayon are clear as it is woven into soft, absorbent and comfortable fabric which supports vibrant colors and wears well. Rayon is one of the most widely used fabrics in the world which can be blended with man-made or natural fabrics. For many centuries, people have relied on plants and animals, such as silkworms, sheep and buffalo, to provide the materials needed for clothing. In our 21st century world, we look to technology and chemistry to create our fabrics. Rayon, dubbed “laboratory’s first gift to the loom” is widely considered to be one of the most versatile and economical man-made fibers available.

–Chadwick Wasilenkoff, Chairman & CEO of Fortress Paper Ltd.

SOURCE:
RISI: “Pulp Growth Ain’t Pulp Fiction – Embracing New Opportunities”