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VANCOUVER, BRITISH COLUMBIA--(Mar 20, 2017) - Fortress Paper Ltd. ("Fortress Paper" or the "Company") (FTP.TO) reported 2016 fourth quarter operating EBITDA of $6.4 million, an increase of $3.1 million versus the prior year period and a decrease of $1.2 million over the previous quarter. The Dissolving Pulp Segment generated operating EBITDA of $6.7 million and the Security Paper Products Segment generated operating EBITDA of $1.6 million. Corporate costs included in operating EBITDA were $1.9 million.

"Management is pleased to report an improved quarter of operating EBITDA compared to the prior year. As noted in our third quarter release, the fourth quarter is typically a seasonally slow period due to the annual maintenance shut and the winter conditions experienced at the FSC mill. We are very encouraged that the fourth quarter at the FSC mill represented the best fourth quarter for the mill since its restart after its conversion to a dissolving pulp mill. We produced 5% more tonnes versus the prior year period and quality improved significantly," stated CEO Yvon Pelletier. "The Company's first quarter is expected to result in a larger year over year improvement partly because management believes that the FSC mill has made significant progress in resolving issues related to digester productivity encountered during previous winters. Management anticipates Company operating EBITDA to materially improve in 2017 compared to 2016."

Fourth Quarter 2016 Segment Results

The Dissolving Pulp Segment generated operating EBITDA of $6.7 million for the quarter ended December 31, 2016, representing an increase of $5.2 million compared to the prior year period and a decrease of $5.2 million compared to the third quarter. The fourth quarter of 2016 was favourably impacted by improvements in sales and production volume, pricing and pulp quality, which resulted in a lower discount to list price relative to the prior year period, but were partially offset by lower revenues for the cogeneration facility. Operating EBITDA results for the fourth quarter compared to the third quarter were negatively impacted by higher costs associated with the planned maintenance shutdown, seasonality and investment in quality through longer production times and fibre management. Pulp quality improved significantly year over year in both the fourth quarter and full year. The discount to list price realized at the FSC mill was reduced by over 50% on average or approximately $25 per tonne for the year ended December 31, 2016 relative to the prior year in part due to quality improvement. During the quarter ended December 31, 2016, the Fortress Specialty Cellulose ("FSC") mill sold 30,962 ADMT of dissolving pulp compared to 40,992 ADMT in the previous quarter and 29,424 ADMT in the prior year comparative period.

The Security Paper Products Segment generated operating EBITDA of $1.6 million for the fourth quarter of 2016, an increase of $3.4 million when compared to the third quarter of 2016, and a $2.3 million decrease when compared to results in the fourth quarter of 2015. The Landqart mill sold 2,474 tonnes of security paper in the fourth quarter of 2016, compared to 2,431 and 2,523 tonnes of security paper sales in the third quarter of 2016 and fourth quarter of 2015, respectively. Security paper production includes banknotes and passports, which result in varying degrees of costs and margins depending on the complexity of the security features included.

Management's Outlook

Dissolving Pulp Segment

The FSC mill experienced its best fourth quarter operating EBITDA result since the mill conversion completed in 2011. In the fourth quarter of 2016, the FSC mill's production costs, including amortization of some of the shutdown costs and the positive impact of the cogeneration facility, averaged $926 per ADMT (excluding $77 per ADMT impact of the shutdown) of dissolving pulp produced, which was above trend. Production costs are expected to be lower in the first quarter of 2017, relative to the prior year comparative period, due, in part, to significant progress in resolving issues related to digester production encountered during previous winters. The outlook for the remainder of 2017 is also positive.

Management continues to focus on cost reductions, production improvement and power generation to improve margins at the FSC mill. The Lean Six Sigma program has continued to improve mill efficiencies and stabilize operations. In October 2016, the FSC mill appointed a new President of the Dissolving Pulp Segment with significant expertise in Lean Six Sigma which management expects will contribute to further improvements at the mill.

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