Presenting their first quarter results, Fortress Paper executives expressed confidence that the company’s dissolving pulp mill in Thurso, Que., can reach its operational targets, but there’s less confidence about the company’s…
Presenting their first quarter results, Fortress Paper executives expressed confidence that the company’s dissolving pulp mill in Thurso, Que., can reach its operational targets, but there’s less confidence about the company’s second mill conversion project. Engineering design for the Fortress Global Cellulose conversion project at Lebel-sur-Quevillon, Que., is almost complete, but Fortress CEO Chad Wasilenkoff said the company is reviewing its options for the mill and “due to changing economics and market conditions, there is no assurance that the FGC mill project will proceed to completion as previously planned.”
Wasilenkoff said the company is evaluating strategic options for the Fortress Global mill, such as joint ventures or partnership opportunities, and is comparing the Lebel-sur-Quevillon project with other options for shareholder value creation.
“The economics of LSQ make sense, but it’s going to be challenging for us taking this on 100%.” The current estimate of the cost for the conversion project is $250 million, plus an additional $70-$100 million for working capital.
A decision regarding the LSQ mill is expected early in the third quarter.
Yvon Pelletier, the new president of Fortress Specialty Cellulose, is confident the company’s mill at Thurso, Que., can achieve its operational target of 200,000 t/y and attractive cost levels within 18 months, despite ongoing production issues at the mill. The mill was converted from NBSK production at a cost of $232 million.
The Fortress Specialty Cellulose mill pulp production rates remained below expectations during the first quarter of 2013 as the mill faced on-going challenges with digester and evaporator capacity issues. The mill recently completed a ten-day maintenance shut down that began in late April.
The cogeneration project at the Thurso site continues in its commissioning and start-up phase. Power generation is expected by the end of the second quarter following the completion of testing and adjustments.
Fortress Paper Ltd. reported 2013 first quarter EBITDA loss of $2.6 million. The recently discontinued Specialty Papers Segment contributed $10.5 million EBITDA, while the Dissolving Pulp Segment and the Security Paper Products Segment generated EBITDA losses of $8.7 million and $2.1 million, respectively. Corporate costs contributed to EBITDA loss in the amount of $2.3 million.
Fortress reported a net loss (including discontinued operations) of $12.4 million for the first quarter of 2013 on sales of $99.7 million.
Dissolving pulp markets improved during the first quarter of 2013 but remain challenging due to continued excess supply, the company states. The market price of dissolving pulp in China, as reported by China Chemical Fibers & Textiles Consultancy Group (CCF), improved from December lows of US$830-840 per air dried metric tonne (ADMT) to approximately US$930 per ADMT in February and March.
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