Posts Tagged ‘pulp and paper’

“Entrepreneurial paper chief explains contrarian investing strategy” in the Globe & Mail’s Small Business Week Interview. (Part 3)

Posted: Thursday, October 20th, 2011

The Globe & Mail three part series called ‘Talking to Entrepreneurs’ featured Chad Wasilenkoff, CEO Fortress Paper. In part three of the Globe and Mail’s Small Business Editor Katherine Scarrow’s feature video interview with Fortress Paper CEO Chad Wasilenkoff, where she called Chad Wasilenkoff, Fortress Paper a “born entrepreneur”.

Fortress Paper CEO Chad Wasilenkoff discusses growing up an entrepreneur, and why he’s always looking for a good deal in part 3 of Talking to Entrepreneurs

To watch part three of ‘Talking to Entrepreneurs’ please click HERE.

Part 1: ‘Fortress Paper chief turns tired mill into major venture.’ Watch video HERE

Part 3: ‘Entrepreneurial paper chief explains contrarian investing strategy’. Watch video HERE

The Globe & Mail three part series called ‘Talking to Entrepreneurs’ featured Chad Wasilenkoff, CEO Fortress Paper.

In part three of the Globe and Mail’s Small Business Editor Katherine Scarrow’s feature video interview with Fortress Paper CEO Chad Wasilenkoff, where she called Chad Wasilenkoff, Fortress Paper a “born entrepreneur”.

Fortress Paper CEO Chad Wasilenkoff discusses growing up an entrepreneur, and why he’s always looking for a good deal in part 3 of Talking to Entrepreneurs

To watch part three of ‘Talking to Entrepreneurs’ please click HERE.

Watch Other Videos In The Series:

Part 1: ‘Fortress Paper chief turns tired mill into major venture.’ Watch video HERE

Part 3: ‘Entrepreneurial paper chief explains contrarian investing strategy’. Watch video HERE

SOURCE:

The Globe and Mail: “Fortress Paper’s big money business”

Globe & Mail Small Business Week Interview Featuring Fortress Paper (Part 2)

Posted: Wednesday, October 19th, 2011

Globe & Mail Small Business Week Interview Featuring Fortress Paper (Part 2)

In part two of the Globe and Mail’s Small Business Editor Katherine Scarrow’s feature interview with Fortress Paper CEO Chad Wasilenkoff, they discuss how printing and protecting money is big business for Fortress Paper.

 Mr. Wasilenkoff discusses Fortress Paper being the ‘sole maker’ of the Swiss Franc for thirty years and how Fortress Paper is in the final stages of the next series Swiss Franc that will come out next year and “be the most state of the art and have more counterfeit features than any other banknote in the world”.

 To watch Part 2 of Fortress Paper in their three-part video series entitled Talking To Entrepreneurs, please click HERE.

 Part 1: Printing and protecting money big business for Fortress Paper.  Watch video HERE

 Part 3: Entrepreneurial paper chief explains contrarian investing strategy. Watch video HERE

SOURCE:

 The Globe & Mail: “Printing and Protecting Money Big Business for Fortress Paper

 

Fortress Paper Featured In Globe & Mail Small Business Week Video Series (Part 1)

Posted: Tuesday, October 18th, 2011

As part of their coverage on Small Business Week, The Globe and Mail launched a three-part video series entitled Talking To Entrepreneurs focused on Fortress Paper Ltd.

In the series the Globe and Mail’s Small Business Editor Katherine Scarrow sits down with Fortress Paper CEO Chad Wasilenkoff to discuss various aspects of his company.

Speaking about his nature as a self-proclaimed “contrarian investor,” Wasilenkoff presents a snapshot of
Fortress Paper’s inception in a time of unprecedented decline in the forestry sector.

“In troubling times like that, there’s always going to be some interesting mill, some interesting product, and somebody has to have something unique, so you just have to pick out those hidden gems,” he says in the interview.

Watch the entire Part 1 video HERE.

Part 2 : Printing and protecting money big business for Fortress Paper.  Watch the Part 2 video HERE.

Part 3: Entrepreneurial paper chief explains contrarian investing strategy.  Watch the Part 3 video HERE.

 

 

SOURCE:
The Globe And Mail: “Fortress Paper Chief Turns Turns Tired Mill Into Major Venture”

THE OTTAWA CITIZEN: “The Future Looks Fluffy”

Posted: Wednesday, September 1st, 2010

Driven by the imperatives of globalized economics and digital technology, Ottawa’s pulp-and-paper heritage has been reduced to a remnant.

The forestry industry that built the Ottawa-Gatineau economy appears to be on its last legs.

Hammered by the Internet’s growing grip on personal communications, the rich Canadian dollar and intense competition, the forestry industry continues to slash operations in the hopes of finding a smaller, profitable core.

The industry, which employed 5,000 people just 20 years ago, today has dwindled as Domtar-Eddy mills in Ottawa, an AbitibiBowater mill in Gatineau, a Smurfit-Stone mill at Portage, and Domtar mills in Cornwall slashed staff and finally closed. Fewer than 1,200 jobs remain, focused on a few niche markets far removed from the newsprint and lumber products that drove the industry for 150 years.

Next to go could be 200 jobs at Papier Masson, a newsprint operation in the east end of Gatineau, which was founded James Maclaren, a pulp and paper pioneer, and later owned by Noranda.

White Birch Paper of Connecticut, Papier Masson’s current owner, has hired Lazard Freres, the New York private banker that helped sell Nortel assets, to find new owners for three mills in Quebec and one in the U.S.

White Birch, operating under bankruptcy protection since February, opened the doors to prospective bidders last month.

The threat is there will be no bidders and that some mills will close in a major restructuring, adding to the thousands of lost jobs in the industry.

Certainly, the relentless march of the Internet into every corner of human communications is destroying demand for newsprint, telephone directories, copying paper, books, magazines and glossy printed advertising across the Western world.

The result is that mills that employed thousands and drove the industry for more than 80 years are being sold for less than $3 million each.

One huge AbitibiBowater mill in Thunder Bay sold for just $100,000 because of environmental cleanup issues.

The recently upgraded machinery in four former AbitibiBowater mills sold for just $5 million — not much more than scrap value.

The real value now is in the land, including about 40 acres controlled by Domtar in the heart of Hull across the Chaudière Bridge and Chaudière Island into Ottawa.

However, while the Ottawa regional industry is in deep trouble, new profitable product lines are emerging and demand for older products is rebounding, at least temporarily.

The trouble is that most of the Ottawa regional mills are too big or too old to be revived. With governments taking a hands-off approach — after spending billions bailing out GM and Chrysler — bankruptcy courts will decide the fate of underfunded pension plans, unpaid severance and struggling suppliers.

The federal government finally rolled out a $170-million investment program this week, too late for most Ottawa companies.

“The forestry industry employs more people in more places across Canada than the auto industry, but governments have turned their backs,” said Kim Ginter, a vice-president of the Communications, Energy and Paperworkers union.

“Many mills are competitive, but need investment. We still have the best source of fibre in Canada, but, once the mills go, it will be very hard to get them back.”

For the few survivors, there could be light at the end of the tunnel.

After years of declining sales and heavy losses, sales of many forestry products companies rebounded in the last six months.

It wasn’t much, just two per cent in the case of Domtar and other companies, but it surprised analysts and had business leaders and bankruptcy monitors scratching their heads. They had expected declines of at least two per cent.

Sales of AbitibiBowater rose 2.6 per cent between April and May, though the wounded newsprint giant is mired in bankruptcy.

Even before it shut the huge Gatineau mill this spring, AbitibiBowater had slashed newsprint production by 3.4 million metric tonnes or 32 per cent since 2007. It also sold off $940 million in assets, including $615 million in a Quebec power company.

A surprised bankruptcy monitor reported last month that White Birch sales were not significantly hurt despite the stigma of defaulting on loans and pension obligations and seeking court protection from creditors.

Sales at Papier Masson were 18 per cent higher than the monitor predicted for the June quarter, and the White Birch cash burn was 70 per cent lower than forecast.

The reason is basic economics: Deep, permanent cuts to production mean that prices jump with the smallest improvement in sales. While demand for newsprint continues to fall, the deep production cuts of the 2008-2009 recession were deeper than immediately necessary.

The result is the price of pulp was more than 50 per cent higher in the June quarter from a year earlier, and Domtar is running hard in a bid to keep up.

Domtar chief executive John Williams told an industry conference: “If you look at tissue, if you look at toweling, if you look at printing and writing, in the geographies where we are selling, those markets are actually growing. So we see a long-term pretty positive trend for pulp.”

His company converted a Massachusetts mill from newsprint pulp to fluff pulp.

“We currently sell 150,000 tons of fluff pulp, (and) we’ll move up to 444,000 tons (by December 2010.)

“If you take fluff pulp, it’s largely used in diaper markets and in the incontinence marketplace. That’s a very fast-growing market both in developed economies and developing countries because of the demographic.”

Fluff pulp doesn’t have the brawny feel of the traditional products like lumber and newsprint that defined the industry and Stompin’ Tom Connors is unlikely to add a new verse about fluff pulp or air-laid superabsorbent paper to Big Joe Mufferaw, his ballad celebrating the Ottawa Valley logger and raftsman, but fluff pulp is immune to the Internet.

Glatfelter, a Pennsylvania specialty paper producer that makes tea bags and labels, bought the Concert Industries plant near the Gatineau airport in January for $246.5 million. It employs 285 people making super-absorbent paper sold to companies like Procter & Gamble and Johnson&Johnson.

It is primarily used in feminine hygiene products, a market that is growing about five per cent annually as the combination of growing prosperity and a huge young population opens new markets.

Farther east in Thurso, the moribund Fraser Pulp mill, once owned by James Maclaren, is being revived after it was closed a year ago. Fortress Paper is converting the mill to produce cellulose used in rayon, a cheaper, more environmentally-sound alternative to cotton.

“The forest products industry will continue to decline and there will be more pain,” Fortess founder Chad Wasilenkoff said.

“But there are still specialty niche production operations available at attractive prices which can yield good profits.”

While buying the Thurso pulp mill makes sense, he said that buying newsprint mills in North America did not. “This is still an industry that is profitable only about one year in 10.”

The share price of his company has quadrupled in the last year in part because of two profitable mills in Europe that produce paper for the banknote and wallpaper industry.

Better still is the Kruger Products mill on Rue Laurier next to the Museum of Civilization. For much of its 70-year history, it had a water tower with a White Swan logo that made it a landmark.

Today it is the sole survivor of the E.B. Eddy-Domtar mills, which, for 160 years, stretched from the Museum of Civilization site to the Chaudière Bridge and onto Lebreton Flats.

Three Kruger papermaking machines roar around the clock, turning out Spongetowels, Scotties and White Swan industrial towels.

Kruger employs 475 people at the mill and another plant in Hull that processes and packages the material.

It is spending $4.8 million with Quebec government assistance to capture lost steam, reduce operating expenses and reduce the carbon footprint of machines that have been running for 60 years.

With backing from governments, companies like Domtar are investing in new technology to make operations cleaner, greener and more efficient.

Domtar is investing $32 million in new technology to create nanocrystaline cellulose used in optically-reflective films, high-durability varnishes and bioplastics.

The biggest problem for the North American newsprint mills is they are situated in the wrong places.

There is growing demand in developing countries, but newsprint is heavy and expensive to ship. This spring, Canadian newsprint sales to Asia tripled, with two-thirds of the business in India, as buyers stepped aggressively into markets to rebuild inventories depleted during the recession.

No one expects this trend to continue, however. The newsprint industry is still bracing for reductions averaging four per cent annually in demand.

“The paper industry is not going to die,” says Martine Hamel of the Pulp and Paper Products Council. “It faces major challenges, which will mean it will continue to get smaller and focused on different products.

“But the decline will eventually level off and we will still have an important industry and significant employer.”

By Bert Hill for The Ottawa Citizen. September 1st, 2010.

SOURCE:
The Ottawa Citizen: “The Future Looks Fluffy”

The Ottawa Citizen: “Sniffing Out Hidden Value”

Posted: Wednesday, August 18th, 2010

For contrarian Chad Wasilenkoff, a nose for overlooked potential led him to a pulp mill in Thurso. Bert Hill reports for The Ottawa Citizen.

OTTAWA — From golf courses to art auctions and old mill towns, value can hide in unexpected places.

Just ask Chad Wasilenkoff, the 38-year-old chief executive officer of Fortress Paper Ltd.

When he was a child in Calgary he built a savings account fishing golf balls out of ponds and buying and selling video games, BMX bikes and other popular products he found in want ads.

He learned market timing. He and a friend snapped up Robert Bateman prints for a few hundred dollars each at a deserted auction in the middle of a Calgary snowstorm and sold them for more than $1,000.

That might seem a long jump from Fortress’ latest coup — a mothballed pulp plant in Thurso that, for generations, was the bane of the capital region because of its smelly rotten-egg emissions.

The mill, which stood empty for a year because of the forest industry collapse, is now back in production. The 300 employees are producing hardwood pulp, suddenly profitable because of a strong — but likely temporary — increase in demand in Asia.

Early next year, it will start producing dissolving pulp to feed the developing world’s demand for rayon used in clothing.

Though Thurso has yet to produce the new pulp, Wasilenkoff said he got “multiple overtures” during a recent business trip to China from investors who wanted to buy the whole mill or a minority stake.

He said textile industry customers are lining up to negotiate for the specialized pulp with starting offers he considers surprisingly high.

With all the production likely to be committed soon, he is looking to convert other mills. There are no other suitable mills in the Ottawa area, but “we are searching the planet for more of these opportunities,” he said.

Wasilenkoff said he plans to stay in dissolving pulp, unless an attractive offer comes along.

“We are in this for the long haul. But money talks and at the right price, everything is for sale.”

Fortress shares have quadrupled this year as investors discovered the magic of a tiny profitable player in an industry still covered with red ink. The firm just snapped up $44 million in a new stock offering.

Trading at $28 this week, the company now has a market capitalization approaching $400 million.

Wasilenkoff owns 23 per cent of the Vancouver-based company.

The rapid acceleration of the stock from below $10 in January has some analysts worrying.

TD Newcrest analyst Sean Steuart downgraded the stock to “hold” from “buy” this week, although Fortress beat his sales and profit forecasts for the June quarter.

With the price up 31 per cent in less than a month since he put on the buy recommendation, Steuart took action because of concern that the stock valuation is running ahead of underlying business.

“Management has earned our benefit of the doubt, but there are several major projects on the go right now.

“We would prefer the company deliver on current capital expenditure plans before looking at additional expansion opportunities.”

Wasilenkoff says he is a contrarian. When the investing public is chasing the latest hot stocks and investment ideas, he looks elsewhere.

It was a philosophy he learned the hard way: He read weighty analyst reports during the technology boom and lost heavily when prices collapsed.

It is a philosophy that has allowed him to benefit from buying gold, copper and other assets when prices were deeply depressed. It takes nerve and patience to stay away from the herd.

He also learned never to fall in love with an asset. If his analysis said the prices had passed sustainable levels, as it did with uranium and a stake in Cameco, he sold and the market eventually followed.

Now he has embraced the pulp and paper industry, a business loved today only by bankruptcy lawyers.

Canada is rapidly shedding a world-class industry that for 90 years supported tens of thousands of jobs and billions of dollars in global sales.

Governments, which rushed to bail out the auto industry, are taking a hands-off attitude to the forestry industry, its unemployed workers and underfunded pension funds.

Mills across Ontario and Quebec that would cost billions to replace are selling today for a few million dollars each. An empty Thunder Bay mill recently sold for just $100,000. Production machinery is being sold for scrap or shipped abroad.

“There are a lot of smaller mills that were considered too uncompetitive to survive against the big mills,” Wasilenkoff said.

“But markets have changed. Now there is opportunity and good profit margins in the small mills with the right products and technology.”

He doesn’t see the traditional newsprint, photocopying or related pulp markets recovering soon in North America.

But mills with profitable specialty products have a future.

He tried to buy the former Concert Industries mill in Gatineau, which makes air-laid paper used in diapers and incontinence and feminine hygiene pads. Glatfelter, a small specialty Pennsylvania producer of everything from labels to tea bags, won the asset.

Fortress owns a wallpaper plant in Germany and a bank-note plant in Switzerland, where it is investing to expand production.

Wallpaper must be due for a turnaround because it has been out of fashion so long, particularly in North America.

But in eastern Europe demand continues to grow though assets are depressed.

Fortress bought a mill in Germany that makes dry-strippable paper, a profitable niche.

“We spent less than $5 million but now it is generating $3 million a month in business.”

The latest coup was the former Fraser Pulp kraft mill in Thurso, originally a key part of the old James Maclaren and Noranda empires.

It makes hardwood pulp, a market commodity that has been losing ground steadily to softwood pulp.

The mill closed in June 2009 when Fraser Pulp tumbled into bankruptcy protection, laying off hundreds of employees.

It appeared headed for the scrap heap, like other older mills in Ottawa, Gatineau, Cornwall and Portage du Fort.

Fortress bought the old mill — with buildings, land and machinery worth $45 million — for just $3 million.

It embraced a plan, promoted in the local community,

to generate electricity from biomass for sale to Hydro-Québec.

Fortress will spend $153 million converting the mill to dissolving pulp production. Investissement-Québec is providing a $102.4-million loan, to be combined with

$25 million in federal tax credits and other incentives. When it opens, it will be second-largest of its kind in the world, behind only a plant in Brazil.

Wasilenkoff got a great deal on the enormous digester tubes and other sophisticated equipment needed to make dissolving pulp. They will arrive by barge next month.

Russia shut off exports of pulp logs in a move that stranded a Stora mill in Finland.

Fortress bought the machinery for $3 million, or less than 10 per cent of replacement costs.

The company is also enjoying the luck of a sudden pick up in pulp demand and prices. Global demand has snapped back from the 2008-2009 recession. With production permanently reduced by many permanent closings, prices have jumped 50 per cent in the last year.

When Fortress hired 300 former employees and started production in late May, it caught the new market demand.

Wasilenkoff does not expect the prices to hold because the global industry is only profitable one or two years every decade.

But he believes the prices will hold up until it completes the conversion next year.

With a strong push from the Thurso products, Fortress adjusted profits jumped almost 60 per cent to $4.3 million in the June quarter and sales rose 22 per cent to $60.5 million compared to a year earlier.

SOURCE:
The Ottawa Citizen: “Sniffing Out Hidden Value”

Leaders Magazine: “Making Money and Wallpaper”

Posted: Tuesday, June 29th, 2010

An interview with Chadwick Wasilenkoff, Chairman, Chief Executive Officer, and Director, Fortress Paper Ltd.

Editors’ Note: As Fortress Paper’s Chairman, Chief Executive Officer, and Director, Chad Wasilenkoff oversees the company’s production of security and other specialty papers. Most recently, Wasilenkoff was the Chief Executive Officer and Director of Titan Uranium Exploration Inc. from July 2004 to July 2006 and an independent private equity investor from October 2002 to January 2004. From 1997 to 2002, Wasilenkoff was an investment advisor and financial planner at Canaccord Capital Corp. He has a Bachelor of Arts degree from The University of British Columbia.

Company Brief: Fortress Paper is a leading international producer of security and other specialty papers and pulp. The company operates three mills: the Landqart Mill in Switzerland, the Dresden Mill in Germany, and the recently acquired Fortress Specialty Cellulose Mill in Thurso Quebec, Canada. Fortress Paper’s security paper includes banknotes, passport, and visa papers and its specialty papers include non-woven wallpaper base products and graphic and technical papers. Its specialty pulp business currently includes NBHK and the mill is undergoing a conversion to dissolving pulp for the textile industry in Asia. As an extension of its security papers business, the Landqart Mill has been actively developing and marketing innovative paper-based security products.

What did you see in the market that made you feel Fortress Paper would be successful?

My background is as more of a contrarian investor, so I always start from the bottom up. I was looking at the forestry sector – everything else was taking off, but this was still in a steady decline and had been for 12 to 15 years. So I evaluated pulp companies and commodity paper companies, and found these two niche paper mills that were world class in what they did. They had growth industries in both of their core products, but what they lacked was a strong and focused management team and growth capital. So that’s how we built the company.

What is produced at each of the mills?

Our German mill, located just outside Dresden, specializes in a non-woven wallpaper base. Most wallpapers are traditionally made from a regular kraft pulp, and that is what leads to the problem of trying to remove the paper. Because of that, the industry was going through challenging times. It had been in about a 10 to 12 decline, it has since steadied and been fairly stable and mature. The reason for that stability is because the industry got together and created this non-woven product where we put synthetic fibers into the paper. With those synthetic fibers, we get the strength characteristics and it becomes dry-stoppable. So now, once you’re able to pull a corner away, it comes off in one pull. While the overall wallpaper market is stable, this non-woven product is growing within it at about a 15 to 20 percent per annum growth rate, and we currently represent 50 percent of the world production of non-woven wallpaper.

The other mill is our Landqart mill, based in Switizerland, and it specializes in high-security paper. What we’re best known for is the banknote side of things. We’re the sole maker of the Swiss Franc, which is the industry standard – it is the currency by which all international banks measure themselves. It has more security features than any other currency in the world and one of the lowest counterfeit rates. It has never had a professional counterfeit attempt against it.

We also make the Euro for about 10 different countries, passports for dozens of countries, the entry visa sticker for India and China, and brand protection for companies like Rolex.

Our latest acquisition, Fortress Specialty Cellulose, was a shut down NBHK Mill in Thurso Quebec, Canada. We put together a plan to purchase the mill and convert it to a higher margin product, dissolving pulp, which is primarily used for producing rayon in Asia. Most of the financing for the $153 conversion was provided by the Quebec government.

What impact is new technology having on counterfeit issues?

Probably the biggest change in the global counterfeiting market has been the advancement of color photocopier standards. Now anybody can go onto eBay and buy regular home officer equipment and do a half decent job of counterfeiting. A lot of money goes into research and development and new technologies to try to make it as difficult as possible for these counterfeiters. Unfortunately some of these products are too successful and they get commercialized. For instance, the hologram that you typically find on a banknote, you can now buy holographic wrapping foil, and with a fairly rudimentary stamp, create your own hologram with that denomination on it. So while it was a spectacular feature when it began, it is slowly losing ground. They are now continuing to work on holograms to try to improve them, to make them a lot more complex and difficult.

What are your key priorities over the coming year to make sure the growth continues and the brand remains strong?

When I bought the company, I had a three-stage long-term plan: stage one was to change and focus on hiring and retaining good management; the second stage was dealing with internal or organic growth, and leveraging off our existing assets; the third stage was going external, so now it’s more of a focus on mergers and acquisitions.

In our industry, especially on the banknote side, cost is probably fifth or sixth on the list for national banks. It’s reputation first and foremost. It’s and industry that is not going to shift over to low-cost production regions. It’s just too important of a product worry about coming from a low-cost environment. So it’s about reputation, quality, new innovative products, high-security measures, and staying ahead of the counterfeiter. It’s such an important product that they’re willing to pay for a new world-class innovative technology and security feature. We’d like to find small companies that have these great products but can’t break into the banknote industry because it is so conservative. A lot of the printers or papermakers have been around for more than 300 years, so nobody wants to take a chance on a little supplier. We can take a small company that has a world-class product, and acquire it or do a joint venture or at least enable the security of that particular product, and we can launch it under our umbrella, giving it the reputation.

Do you see yourself in this business for the long term?

We have a lot to accomplish with Fortress Paper and one of our biggest challenges today is our share price. While our stock is currently undervalued, we are working to ensure that our shares trade closer to the industry averages that will enable us to make creative acquisitions that increase our reach and technological acumen. At some point in the foreseeable future, I am likely to relinquish the CEO title but stay on Chairman and a happy shareholder.

From Leaders Magazine, Volume 33 Number 3.

BC Business: “Outside The Box Business Strategies”

Posted: Tuesday, June 29th, 2010

When life deals you pulp, you make cellulose. Learn how to recognize business opportunities, then reach out and grab them.

Any business needs a coherent strategy if it hopes to succeed. However, in a climate where marketplace and financial changes are becoming ever more rapid, clinging mindlessly to a strategy can be a recipe for disaster. Simply put, companies today must be more agile in their thinking to take advantage of business opportunities that may present themselves.


The Problem

North Vancouver’s Fortress Paper Ltd. has carved out a good and growing business niche since it began in 2006. That’s when CEO and chair Chadwick Wasilenkoff bought separate paper mills in Germany and Switzerland to produce specialty papers: security paper used in banknotes, passports and visas; and specialty papers such as non-woven wallpaper-base products and graphic and technical paper. But in 2009, the crushing downturn in the overall forestry industry threw an opportunity at Wasilenkoff that would move the company in a completely different direction. He had to decide: should Fortress stick with successful execution of a strategy or take advantage of an opportunity?


The Solution

Wasilenkoff has always approached business as an investor instead of as a manager, and so he applied solid investment principles in order to reach his decision. One of the primary ones, he believes, is that “it’s better to be lucky than good.” 


When Toronto’s Fraser Papers, which made printing and publishing papers, became a victim of the recession and filed for creditor protection in June 2009, Wasilenkoff started looking at its assets, especially Fraser’s shuttered hardwood pulp mill in Thurso, Quebec. The mill drew Wasilenkoff’s interest because it had the perfect technology for an idea he’d been playing with for some time: the conversion of hardwood pulp to dissolving cellulose, a commodity that was being sought by Asian textile producers. As the price of cotton soared, Asian textile companies wanted to replace it with rayon, which is derived from dissolving cellulose. 


Wasilenkoff decided the opportunity was too good to pass up and went for it. He formed a subsidiary that obtained the Thurso mill for the fire-sale price of $1.2 million. After a $153-million conversion, it will switch from producing northern bleached hardwood kraft (NBHK) pulp to dissolving cellulose. 


Wasilenkoff brought Quebec on board by providing jobs for union workers who had been laid off since the mill closed. The Quebec government was only too happy to lend him the funds needed for the conversion. Also, the Quebec and federal governments were willing to help fund a green 25-megawatt co-generation power plant fueled with wood waste and other biomass. 


The mill will begin turning out dissolving cellulose in 2011, but in the meantime Fortress also got lucky. The NBHK market, which was in a severe downturn, turned up because of factors such as the Chile earthquake and a strike in Sweden. Suddenly, the plant that was closed because of low NBHK prices was turning a profit that will continue during the conversion.


Lessons

• Get out of the groove. People tend to get caught up in groupthink. Wasilenkoff could see an opportunity because he takes a contrarian and long-term view of his and other industries. 


• Think like an investor. Fortress earlier moved into wallpaper because a new method had appeared that made it profitable. Wasilenkoff determined that the Thurso mill was low risk and high return. 


• Don’t drink the Kool-Aid. Look at everything around you from many angles. Wasilenkoff was able to make his decision because Fortress wasn’t a typical forest products company, which is usually concerned more with cost-cutting than its product mix.

By Tony Wanless for BC Business. July 7, 2010.

SOURCE:
BC Business: “Outside The Box Business Strategies”