Author Topic: FGE.to - Fortress Paper (formerly FTP.to)  (Read 678214 times)

doc75

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Re: FTP.to - Fortress Paper
« Reply #2630 on: March 20, 2018, 09:17:26 AM »
I was afraid for a while that he would venture into some risky/non-related business. However, this is very positive IMO.

Agreed - I was also fearful of a far-flung venture.   

I don't trust management to get things done smoothly, but I really the idea and (as Cardboard says) it appears Chad has done a good job leveraging government/outside money.  The market is rightly skeptical and will remain so unless/until Thurso ops show some consistent earnings.

I think Q1 results will be lacklustre but fingers crossed for a Q2 without further issues.







doc75

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Re: FTP.to - Fortress Paper
« Reply #2631 on: May 16, 2018, 09:35:02 AM »
Q1 numbers are out.  Minor improvement in cost, but slow progress.  DP prices are doing quite well and the DP segment managed barely positive EBITDA. 

I just listened to the call.  The most interesting takeaway for me was a brief comment on the Chinese anti-dumping duty.  China lost the WTO case and was supposed to remove the duties by end of April, but has since said they have no intention of doing so. 

Cardboard

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Re: FTP.to - Fortress Paper
« Reply #2632 on: May 16, 2018, 10:18:12 AM »
"China lost the WTO case and was supposed to remove the duties by end of April, but has since said they have no intention of doing so."

Yes, but in turn, this opens the door to compensation for damage from Canada's trade department as Chad mentioned. This could really come handy to help with the debenture maturity in Dec 2019.

They have also cut their costs and increased capacity quite a bit in Q1 with the 5th digester. The tone was pretty upbeat for Q2 although, the CFO played it down indicating that cash flow would remain neutral for the rest of the year.

The elephant in the room IMO is this tightening in everything related to pulp and the oil price going up really pushing up polyester.

Some bull market in this is highly probable IMO and you are talking very few options for investors to go into. Just have a look at Canfor Pulp to give you a hint of what could happen:

https://www.stockwatch.com/Quote/Detail.aspx?symbol=CFX&region=C

However for FGE, the impact would be much more dramatic considering leverage operationally and its capital structure.

Bull markets in paper, wood, happen about once every 10 years. Some made a lot of money with lumber producers a few years ago and now it seems that it is pulp's turn.

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triedtestedand

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Re: FGE.to - Fortress Paper (formerly FTP.to)
« Reply #2633 on: May 17, 2018, 05:31:23 PM »
Very simply:

a) Prove to market they can keep costs below $900/ADMT for two quarters in a row (Q2 and Q3) to prove they can achieve reliable operations, while also combining favourable summer seasonal conditions AND no planned shutdown.   Midway thru Q2, they are 1/4 of the way through (although impacted by ice storm in Ottawa in mid-April).

b) Figure out the 2019 debs ... which they have 19mo to achieve.  The comment that cash balances would be neutral thru end of 2018 was a bit worrying, but I wonder if the ($5M of) cash/working capital commitments for S2G will offset cash creation thru the rest of this year, and what else there is.  Further, their accounts payables are coming off of highs (from $50M to $46M quarter over quarter), so it may be better to look at working capital vs strictly cash+restricted cash for visibility into progress.

c) Avoid any other new curses.


Cardboard

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Re: FGE.to - Fortress Paper (formerly FTP.to)
« Reply #2634 on: May 18, 2018, 06:38:51 AM »
My view is that issues are behind them and the call confirmed that relative to operations: capacity will keep moving up and costs down. 5th digester was implemented on time and on budget and no mention of any hiccups afterwards. Capex forward needs are also minimal with only $3-5 million for regular October maintenance shutdown.

Yes I agree that demonstrating stable, lower cost, higher capacity operation is needed. However, no one gets rich in a commodity business via cost savings. That is why pricing of DP is now the key factor and pretty much everything is now going up with Kraft pulp and oil being the largest drivers IMO: reduces DP production and increases prices of polyester respectively.

Moreover, unlike oil, gold, copper iron ore and other commodity producers, they do not have hedges nor have entered into long term sales contracts. So any improvement in pricing will flow immediately to the bottom line.

The market cap is essentially nothing or $46 million. There is no value for improved operations nor for their end market which has and is improving. A 5 bagger in this from today's price is not crazy at all.

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lessthaniv

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Re: FGE.to - Fortress Paper (formerly FTP.to)
« Reply #2635 on: May 18, 2018, 08:14:31 AM »
With Rayon being a substitute for Cotton a key driver is the price of cotton. High cotton prices drive substitution and blending and low cotton prices the opposite. The Chinese state inventories are still an overhang on world markets.

http://www.blackseagrain.net/novosti/cotton-prices-to-tumble-in-2018-19-despite-surge-in-chinese-imports

<IV

Cardboard

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Re: FGE.to - Fortress Paper (formerly FTP.to)
« Reply #2636 on: May 18, 2018, 08:56:31 AM »
Have you read your article?

Less inventory, less production, drought... This is all bullish and the price of cotton is going up:

http://markets.businessinsider.com/commodities/cotton-price

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lessthaniv

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Re: FGE.to - Fortress Paper (formerly FTP.to)
« Reply #2637 on: May 18, 2018, 09:41:32 AM »
The U.S. Department of Agriculture’s (USDA’s) first 2018/19 world cotton projections anticipate that consumption will exceed production, bringing world stocks down by 6 million bales, more than offsetting 2017/18’s 900,000-bale increase. World cotton production is expected to fall 3.6 percent with yields declining in some countries and area falling in a number of producing countries. Global consumption is expected to continue growing, but at a more moderate pace. It is expected that China will continue to pursue policies limiting imports in order to dispose of surplus government-held stocks. The A Index is forecast to decline about 10 cents to 73 cents per pound due to projected higher stocks outside of China.[/b]

https://www.usda.gov/oce/forum/2018/commodities/Cotton.pdf


Less inventory, less production, drought ... but Chinese stockpile overhang.  This is what I was looking at.

« Last Edit: May 18, 2018, 10:03:02 AM by lessthaniv »
<IV