Thursday, 13 August 2015 07:05

Fortress Paper announces improvements in second quarter of 2015

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Fortress Paper Ltd. reported 2015 second quarter EBITDA of $4.1 million, an increase of $6.6 million and $10.1 million over the previous quarter and prior year comparative period, respectively. The Dissolving Pulp Segment generated EBITDA of $2.1 million and the Security Paper Products Segment generated EBITDA of $3.4 million. Corporate costs contributed EBITDA loss of $1.4 million to EBITDA.

EBITDA of $2.1 million for the Dissolving Pulp Segment for the quarter ended June 30, 2015 was an improvement of $5.4 million when compared to the first quarter of 2015 EBITDA loss of $3.3 million. The operational challenges in the chemical preparation area and limited capacity of the turbine experienced during the fourth quarter of 2014 impacted the results of the first quarter of 2015. The results for the quarter ended June 30, 2015 were favorably impacted mainly by improved productivity and cash production cost over the prior quarter, increased power generation under the additional power supply agreement with Hydro Québec, and improved pricing. EBITDA results for the second quarter of 2015 improved by $6.3 million compared to the second quarter of 2014.  The results of the second quarter of 2014 reflect restart procedures in early March 2014 and  the  mill  producing  northern  bleached  hardwood  kraft  pulp  through  late  April  when production was switched back to dissolving pulp.

The Company sold 39,664 air dried metric tonnes (“ADMT”) of dissolving pulp in the second quarter of 2015 compared to 38,957 ADMT of dissolving pulp in the first quarter of 2015. Although market conditions remain challenging, the second quarter of 2015 saw slightly improved pricing and industry conditions. However, the Dissolving Pulp Segment continues to be affected by the antidumping duty imposed by China’s Ministry of Commerce in April 2014. The Company continues to have success in diversifying its geographic sales mix and intends to further reduce its dissolving pulp shipments to China by approximately 20% over the balance of the year.

The Landqart mill continues to implement new initiatives to improve efficiencies and profitability. EBITDA of $3.4 million for the Security Paper Products Segment for the quarter ended June 30, 2015 was $1.1 million higher when compared to the first quarter of 2015, and $3.8 million higher when compared to results in the second quarter of 2014. The Landqart mill sold 2,745 tonnes of security paper in the second quarter of 2015, compared to 2,715 tonnes of security paper in the first quarter of 2015. More efficient production and better waste rates positively impacted the results relative to the prior year comparative period.

The Landqart mill is exposed to foreign currency exchange fluctuations, as a material amount of its sales are denominated in euros and its major costs, excluding raw materials, are denominated in Swiss francs as compared to some competitors whose manufacturing costs are primarily denominated in euros.  In response to the significant appreciation of the Swiss franc against the euro in the first quarter of 2015, management continues to  implement their foreign exchange counter measure program (“FECM”), which includes mitigating foreign exchange and reducing other costs in areas such as procurement and logistics, to mitigate the negative financial impact in the short and mid-term.

For a summary of significant developments please refer to the Management’s Discussion and Analysis for the three and six month periods ended June 30, 2015 available on SEDAR at www.sedar.com

A presentation to complement our second quarter earnings conference call is available under the “Investor Relations” section at www.fortresspaper.com

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