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SFK Pulp Earnings out


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SFK Pulp just put out numbers for the 4th quarter and the year. Looks like the currency change and falling input costs have offset the lower sales (tonnes) and falling pulp prices for the time being. The reserve has now improved to $29.6M or about $.32/share. They are shutting down the mills for about a month including the spring maintenance shutdown to remove production capacity of 45,000 tonnes of NBSK and 25,000 tonnes of RBK. No intent to restate distributions at this time. Thanks in large part to the reduced input costs and falling C$ they were able to net $17M in 2008 ($.19/share). If SFK can survive the present pulp market turmoil, the stock is cheap. Market Cap today is about $39M.






SFK Pulp Fund earns $17.12-million in 2008



2009-02-25 17:10 EST - News Release


Mr. Pierre Cote reports




SFK Pulp Fund has released results for the fourth quarter and year ended Dec. 31, 2008. Fourth quarter sales rose 0.6 per cent to $125.1-million, while earnings before amortization, financial charges and income taxes (EBITDA) reached $14.9-million, up from $8.9-million. Net earnings for the quarter totalled $4.0-million, compared with a net loss of $400,000 for the corresponding period of 2007. For the year, sales grew 4.3 per cent to $532.0-million, EBITDA remained relatively stable at $60.4-million and net earnings totalled $17.1-million, compared with a loss of $9.4-million in 2007.


Fourth quarter highlights:



EBITDA of $14.9-million, up from $8.9-million in the fourth quarter a year ago;

Net earnings of $4.0-million, or four cents per unit, versus a loss of $400,000 last year;

Reserve further increased to $29.6-million.


Year-end highlights:



EBITDA of $60.4-million, stable in comparison with $61.5-million a year ago;

Net earnings of $17.1-million, or 19 cents per unit, versus year ago loss of $9.4-million;

Solid financial position with debt-to-total capitalization ratio of 0.22 as at Dec. 31, 2008.


"We have completed 2008 with a healthy balance sheet, a particularly noteworthy accomplishment in view of the industry's current market conditions and the global slowdown. While sales volume for the fourth quarter was down by some 28,000 tonnes compared to last year, reflecting lower demand, sales remained stable at $125-million, due in large part to the weakened Canadian dollar, and profitability improved following a reduction in input costs. SFK Pulp has been highly proactive in managing its balance sheet during the second half of the year. This has positioned us to better face the severe headwinds the entire industry is currently facing," stated Pierre Gabriel Cote, president and chief executive officer.


Planned downtime


In order to proactively align production with current market demand, SFK Pulp is also announcing today that it will be halting production at its Saint-Felicien, Que., mill for a six-week period and for a one-month period at its Fairmont, W.V., mill. These measures include the scheduled spring maintenance shutdowns that will immediately follow the respective downtime periods.


These actions will take effect in March and will result in the temporary layoff of up to 225 workers at the Saint-Felicien mill. The measures will remove approximately an additional 45,000 tonnes of NBSK pulp and 25,000 tonnes of RBK pulp.


Operating results


Fourth quarter 2008


Consolidated sales rose to $125.1-million, an increase of 0.6 per cent when compared with sales of $124.4-million in the fourth quarter of 2007. This increase comprises a $10.5-million sales increase in RBK pulp sales, partially offset by a $9.8-million sales decrease in NBSK pulp. While pulp sales volume and pricing were both down during the quarter, the decrease in the value of the Canadian dollar in comparison with the United States currency had a favourable effect of $24-million on sales.


EBITDA totalled $14.9-million, or 11.9 per cent of sales, an increase of $6.0 million over EBITDA of $8.9-million, or 7.1 per cent of sales, in the corresponding period of 2007. RBK pulp operations contributed $9.8-million to EBITDA, while NBSK pulp accounted for $5.1-million.


Net earnings were $4.0-million, or four cents per basic unit (three cents diluted), compared with a net loss of $400,000, or nil per unit, both basic and diluted, for the corresponding period of 2007.


Adjusted distributable cash


SFK Pulp generated adjusted distributable cash of $5.3-million. Including the $27.1-million reserve at the end of the third quarter of 2008, total adjusted distributable cash available for the period amounted to $32.4-million. Of this amount, SFK Pulp declared distributions of $2.7-million (three cents per unit), compared with $3.6-million (four cents per unit) in the corresponding quarter a year ago and retained $29.6-million as its reserve.


Although the year-end reserve is above the $20-million target set by the board of directors, management remains committed to prudently administer the level of the reserve through the difficult times currently being faced by the industry and SFK Pulp, and, as such, does not intend to reinstate the monthly distributions which were suspended in January, 2009, until market conditions substantially improve. Moreover, management believes it should continue improving its financial flexibility to protect and potentially further improve SFK Pulp's balance sheet.


2008 year-end


Consolidated sales reached $532.0-million, an increase of $21.9-million, or 4.3 per cent, over sales of $510.1-million in 2007. This increase reflects an increase of nearly $26.9-million in RBK pulp sales, partially offset by a $5.0-million reduction in NBSK pulp sales.


EBITDA amounted to $60.4-million, or 11.4 per cent of sales, compared with $61.5-million, or 12.1 per cent of sales, in 2007. EBITDA of NBSK pulp operations increased $300,000 to $39.5-million, while EBITDA for RBK pulp decreased $1.4-million to $20.9-million.


Net earnings were $17.1-million, or 19 cents per basic unit (17 cents diluted), compared with a net loss of $9.4-million, or 11 cents per unit, both basic and diluted, in 2007.


As at Dec. 31, 2008, SFK Pulp's balance sheet remained strong with a debt-to-total-capitalization ratio of 0.22, as per the fund's credit facility covenant.


Adjusted distributable cash


SFK Pulp generated adjusted distributable cash of $26.6-million. Including the $13.9-million reserve at the end of 2007, total adjusted distributable cash available for the period amounted to $40.5-million. Of this amount, SFK Pulp declared distributions of $10.9-million (12 cents per unit), compared with $39.8-million (44 cents per unit) last year and retained $29.6-million as its reserve.


Segment review




Fourth quarter sales totalled $50.2-million, compared with $60.0-million for the corresponding period of 2007. Sales volume was 64,895 tonnes, a decrease of 14,744 tonnes from 79,639 tonnes a year ago. This decrease is attributable to customers taking market-related downtime, which resulted in a three-week production shutdown at the Saint-Felicien mill that began on Dec. 19, 2008.


NBSK market pulp prices (for pulp delivered in northern Europe) decreased by $152 (U.S.) per tonne or 18 per cent on average, compared with the fourth quarter of 2007. However, the year-over-year decline in the value of the Canadian currency versus the U.S. dollar (partly offset by an unfavourable market mix) resulted in an average sales price of $773 (Canadian) in the fourth quarter of 2008, compared with $753 (Canadian) in the fourth quarter of 2007.


Sales for the year ended Dec. 31, 2008, were $251.4-million, compared with $256.4-million last year. Sales volume reached 321,501 tonnes, down 2,344 tonnes from 323,845 tonnes in 2007.


NBSK market pulp prices (for pulp delivered in northern Europe) increased 4.9 per cent on average or $39 (U.S.) per tonne. This increase, combined with a slightly stronger Canadian dollar, on average, in 2008 and an unfavourable market mix, yielded an average sales price of $782 (Canadian) per tonne, $10 (Canadian) below the average sales price of $792 (Canadian) per tonne of 2007.


RBK Pulp


Sales of RBK pulp amounted to $75.0-million in the fourth quarter of 2008, compared with $64.4-million a year earlier. This increase is mainly attributable to higher sales prices, further supplemented by the decline in the value of the Canadian dollar, as sales volume was down between the two comparable periods. Fourth quarter sales volume was 86,073 tonnes, compared with 99,030 tonnes last year, a decrease related to a major equipment failure at the Fairmont mill on Oct. 16, 2008, that prematurely stopped production ahead of a scheduled shutdown, followed by resumption at a reduced operating rate for most of November.


Two thousand eight sales were $280.7-million, compared with $253.7-million a year ago. This $27.0-million increase is attributable to higher sales prices, partially offset by a lower sales volume. Sales volume of RBK pulp in 2008 reached 358,674 tonnes, compared with 378,895 tonnes for 2007, and average sales price increased by 17 per cent compared with 2007.




The difficult market conditions have resulted in a collapse of global pulp demand, an increase in world pulp inventories and, therefore, a reduction in pulp prices. SFK Pulp's practice is to balance its order book with manageable inventory levels and, accordingly, has taken market related downtime at all locations in December, 2008, and January, 2009, totalling approximately 32,000 tonnes (22,000 tonnes of NBSK pulp and 10,000 tonnes of RBK pulp). As noted above, further market-related downtimes will be taken during the first and second quarters this year. Management will continue taking appropriate actions as market conditions evolve.


Pulp prices have been under significant pressure over the past number of months and declined rapidly in the fourth quarter of 2008. The current market conditions affected the carrying value of finished products and required a writedown of $3.5-million during the fourth quarter of 2008 to reflect their lower realizable value.


"As part of our proactive management strategy, SFK Pulp has implemented additional cost-reduction measures in 2009 to further tighten the existing stringent cost controls at all sites, and to optimize margins and liquidity. Furthermore, we are already seeing that current economic conditions have resulted in cost reductions for commodities used in our production such as fuel, certain chemicals and wastepaper.


"We expect 2009 will pose unprecedented difficulties. As such, we will continue to take all necessary measures to face these challenges by further protecting our strong balance sheet, as well as prudently managing our working capital and inventory levels," commented Mr. Cote.


Conference call


SFK Pulp will hold a conference call Thursday, Feb. 26, 2009, at 10 a.m. (Eastern Time), to discuss its results. President and chief executive officer, Mr. Cote, and Patsie Ducharme, vice-president and chief financial officer, will host the conference call, and a question-and-answer session to discuss earnings. To participate in the conference call, investment professionals and business media may dial 416-644-3428 (for all Toronto and overseas participants), or 1-800-587-1893 (for all other North American calls). Participants not able to listen to the live call can access a replay of the archived call by calling 1-877-289-8525, access code 21298334 (followed by the pound key). The replay will be available until 23:59 p.m. on Thursday, March 5, 2009.



                    SFK PULP -- FINANCIAL HIGHLIGHTS

                  (in thousands of Canadian dollars)


                              Three months ended        Year ended

                            Dec. 31,    Dec. 31,    Dec. 31,    Dec. 31,

                                2008        2007        2008        2007


Sales                      $ 125,132  $ 124,354  $ 532,033  $ 510,143

                            ---------  ---------  ---------  ---------

Cost of sales                114,164    111,110    468,163    424,692

Selling and administrative

expenses                        4,776      3,729      16,869      14,531

(Gain) loss on derivative

instruments                      (149)        13      (1,351)        56

(Loss) on disposal of

capital  assets                  (14)          -          4        624

(Gain) loss on foreign

currency translation          (8,537)        636    (12,026)      8,713

                            ---------  ---------  ---------  ---------

EBITDA                        14,892      8,866      60,374      61,527

Amortization of

capital assets                10,300      9,585      39,585      38,713

Financial charges              4,243      4,024      15,114      19,028

(Recovery of) provision

for income taxes              (3,615)    (4,361)    (11,445)    13,139

                            ---------  ---------  ---------  ---------

Net earnings (loss)        $  3,964  $    (382)  $  17,120  $  (9,353)

                            =========  =========  =========  =========

Net earnings (loss) per unit

Basic                      $    0.04  $  (0.00)  $    0.19  $  (0.11)

Diluted                    $    0.03  $  (0.00)  $    0.17  $  (0.11)


We seek Safe Harbor.


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Ok so they had 16 m in cash and inventories are up to $108,955,000


1Q downtime can take them back down to 80m-90m which should hopefully free up some cash. 


There is downtime being taken industry wide and it seems mills set to restart are staying off line longer than planned.  It wouldn't hurt if other companies start acting more "proactively"

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Lot going on in this release.


Q4 were actually a lot better than advertized.

- Cash reserve increased 2.5M, & net earnings would have been 5.8M were it not for the 3.5M impairment writedown (1.9M net of 45% tax). RBK profitability was up as expected ($CAD depreciation offset NBSK price declines, & allowed the input savings to flow up undiminished). Solid execution in what was a really bad climate


Look at where this release quietly directs you, & the outlook commentary.

- 2008 & 2007 are the only directly comparable years (acquisition was oct-2006), EBITDA is stable (therefore the years are directly comparable), and the good year following a bad year is pretty typical performance. Average the net earnings, divide by your cap rate, & you essentially have IV. We think about 61c/share.

- .22 debt/capitalization is about the same as 2007, & improved because of debt repayment & +ve net earnings. 2009 has essentially the same current portion due .... but 2010 has 15M due, & that's not really doable unless the capital structure changes. If the debs were to become convertibles you'd get roughly .16 debt/capitalization, the 15M becomes easily refinanceable, & there would be interest savings in the financial charges line. IV would dramatically increase. We think about 1.19/share.

- A guess, but assume that .22 is a 'magic' number. IV/share is being handicapped because there are so many common ...  but if there were 25% fewer common ? IV/share would be around 1.58. 22.5M shares @ 1.60/share + 15M refinancing = 51M = approx the diff between .22 & .16 of debt/capitalization. Then consider that if 2009 FX appreciates an average 7.5%, sales volume falls 10%, & COS increases to approx 90% (on reduced vol) we can expect EBITDA to fall to around 32M. Net earnings would be at least 15-20% better if the deb weren't there.


Most convertibles are set at roughly 30-35% above current market. Assuming 1.60 IV .. a price of roughly 2.15 ... or 24M shares. Approx the same number of shares that could potentially get bought in ?


Back in Dec we were expecting a dstbn increase to about 1.5c/month. The discount rate at the time was roughly 11%. Capitalize & you get 1.64 (.015x12/.11)


Interesting ?







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Agreed the 2010 repayment should be 25.7M, our source was the 2007 AR (Note 11).


Interestingly, a quick scan of the 2010 horizon estimate over last few AR's shows that it also grows quite  significantly every year. A rough estimate puts it at about 36.8M when it becomes due next year. More reason to get a convertible deb/pref swap done earlier rather than later.



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We’ve reposted this solely for continuity purposes, re the transition from the old board.

This is not a solicitation to purchase, & we would suggest that you do your own due diligence.


We know that SFK is one of the better run companies, their BS is far stronger than most, & that they currently have an above average cash balance. The shareholder base is long-term orientated & includes master capital allocators, but there have been exits by some institutions.  Management has repeatedly stressed the need to further strengthen the BS, cut distributions, shut down production, & initiated 250 person layoffs. Sometime in 2010 there is a long debt payment due, totalling $CAD 25-36M.


We know that the current Canadian pulp industry has effectively collapsed; producers are aggressively cutting back production, & many are permanently closing. One of SFK’s significant shareholders has been aggressively trying to raise cash, and the global price of NBSK and RBK continues to fall dramatically. While extraordinary global credit restrictions are severely restricting demand, SFK’s underlying business model is repeatedly proving to be sound.


For 2009, assume an average 7% CAD/USD appreciation (USD depreciation) and a 10% volume reduction. We think EBITDA would be around 32-40M, there will be significant losses, & those losses will tend to increase the debt/capitalization ratio just ahead of the 2010 debt repayment, making refinancing more costly/difficult. Were the convertible debt renegotiated into convertible prefs; the capital structure, & SFK’s IV, would materially improve for the better.


We have implied that were the capital structure so improved, SFK would concurrently buy in some of its own stock. As current security laws are effectively prohibiting any kind of significant rebalancing, SFK effectively has to act as intermediary, & finance via some kind of conversion issue that can push the shares out again. In effect; put a control block in a conversion wrapper, pay a cash yield on it, & set the conversion price low enough that conversion could be reasonably assured.


We have implied that a convertible debenture renegotiation would be mutually beneficial to all, & that sooner versus later is preferable. Friendly parties around the table make the process easier.


At this point while a warrant/rights issue will raise cash, it will not solve the shareholders rebalancing issue.


A very telling measure as to how well this coy is actually run is that it does not need cash at the present, but rather a better capital structure. And .... it is at times like this that quality shows.


We will look forward to hearing some more announcements!





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An interesting bit is the dilution calculation in note 10 of the Dec/08 financial stmts.  Instead of just saying the conv debs are anti-dilutive the calc of dilution assumes conversion price of 1.18 = weighted average trading price of units during 2008. So yeah I think the conv debs are being considered for conversion or repricing/replacement by another security.


What's your mention of problem re current securities laws about?  Are you referring to limitations on income trusts raising capital?

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What's your mention of problem re current securities laws about?


If your direct common holding exceeds 'X'% of the total common outstanding, you're required to make a bid for the entire company. In practical terms if one of the existing investors simply bought the other out, they would exceed the threshold & have to make an offer for the entire company.


However, if that investor had a convertible with a conversion price above todays price - they wouldn't have to make an offer, as theoretically the share price may never get to that conversion price. Hence the need for SFK itself to act as intermediary.


The rule exists to stop creeping takeovers. While a takeover is not the intent here, there will however probably need to be a higher than average conversion premium because it converts to a control block.





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Ok thanks that clarifies it.  I'm still confused by lots of things though.  Let me just set them out, and any further clarification is most welcome!


Apr 18/08 mgmt info circular says Fairfax+subs held 17,443,300 units being 19+ pct of o/s units.  Fairfax's early warning report says they held 12,745,200 units plus $6.0m conv debs (=1,250,000 units if conv at 4.80).


Apr 18/08 mgmt info circ says Cundhill (via Mackenzie) held 17,228,400 units.  Mackenzie's most recent early warning report says they now hold only 10,404,400 units being 11.5 pct of o/s units.


So I'm not sure how those two sets of info reconcile.


Are the two significant shareholders you refer to, Fairfax and Cundhill/Mackenzie?  Or is there some other significant investor, ie with a large enough position or interest to be a participant in recapitalizing the company?


About positions greater than 20 pct, was there not an offer by Third Avenue for some less-than-full more-than-20 position in Catalyst Paper?  I'm not convinced that an offer for control position has to be for all shares.


Brookfield backstopped a rights offering by Norbord, and as a result of NBD selling off before conclusion of the offer, Brookfield's fractional interest in Norbord went to 75 pct as there were few other exercisers on the rights offering.


At present, Taiga Building Products has a rights offering at 14c, initiated when stock was trading 22c+, and it is being backstopped by the two parties who already hold 40pct and 20pct of the common, each party willing to exercise rights not taken up by others, so long as they do not either one end up with 50 pct of the company.


I guess the point you are making is that such arrangements (rights offerings) require cooperation of company's board of directors etc.


Considering SFK as a business, EDITDA down from $60m to $32m might put some stress on financial convenants, I suppose - though I've not attempted the calculations.  I'm imagining there will be enough cash freed up via sale of excess inventory to be able to retire the $25m revolving credit in 2010, but certainly agree that it would be desirable to reduce fixed costs for long term debt and conv debs.  The $15m-17m capex of 2007 and 2008 seems reasonable going forward, for maintenance (including some unplanned surprise breakdowns) and modest improvements of production assets.  For 2009 planned capex of $10m seems affordable within the scope of the $32m projected EBITDA, allowing rest of cash flow to just about exactly cover 2009 financial costs.


It would certainly be a good thing (Martha Stewart?) to get SFK's financial structure more "usual", eg 70 pct covered by common, 10 pct covered by preferred, 20 pct covered by debt.


There is a high value attributed to the fixed assets (production facilities), which is being depreciated about $40m/yr whereas it requires maybe $16m/year for upkeep.  Is the value of the fixed assets real?  Perhaps it is ... very expensive to rebuild, I imagine.  But that must be another consideration raising some uncertainty in mind of credit analysts.


One further question, about natgas pricing effects on SFK.  Have you looked into that?  With natgas futures so low, I imagine it might be possible to lock in 2010 and later costs beneficially.  Or, as an alternative, I wonder if there is merit is using biomass (excess inventory of wood chips, waste paper, or even pulp?) as fuel - Norbord did a nice conversion from natgas to biomass at one of their Texas plants.


Looking forward to your reply/perspective!



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Quick reply - you will need to go through the SEDAR records to get more accurate numbers. The debenture prospectus should give you some more names.


There are a number of parties with a just under a 10% holding. Significant as if you hold below 10% your name doesn`t have to be disclosed in the annual AR meeting notice.


The end of 2008 saw Cundill rebalancing. Don`t know where it went but its likely that other significant holders used the opportunity to average down.


Abitibi took 25% of the units when the trust was established in 2002. Assuming there were only nominal interim sales, they have roughly 9%. We would suggest that they would very much like to get rid of them now, & that there are currently no buyers.


Most of the debs are very likely held by the under 10% holders, & they are unlikely to convert before they mature. Deb to pref conversion & repricing will continue the status quo & improve certainty.


Debt to Total Capitalization is very likely the covenant ratio, & as such is a little `looser`(includes plant `valuation`). A wise banker would prefer the `tighter`Debt to Equity covenant & would likely insist on it come 2010 - in return for allowing the current portion of debt to roll-over.


I would expect that management is looking very closely at the P&L & inventory levels. Pulp swaps are probably very high on the list (ie: you run your plant flat out for X weeks, meet my new orders from it, & allow your workers to qualify for EI - then I do the same for you with my plants) followed by FX hedges, interest rate swaps, gas hedges, consolidated chemical purchases, & electricity. If they can burn waste oil or bio mass for energy (essentially free) I would expect they will.










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The only covenant that I saw was that if cash dips below 10 million, and they want to issue a dividend it has to be covered by 1.1x ebitda or something like that.  Hence the proactive action. 


I read an interesting article about a small pulp mill in Vancouver that was about to get shut down but was bought up in the last second by the workers.  Long story short, their efficiency improved tremendously and at least according to the article they are operating profitably in this market. 


Its an interesting model for a business where 45% of the finished product cost is in the labor.  I'd gladly dilute my stake by 15% if it got everyone in the same boat. 






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This may be the pulp mill oldye is referring to.  Harmac Pulp Mill in Nanaimo, BC.  The workers recently bought the mill with assistance from other investors. They have managed to cut their production costs by $100 per tonne.



In May, 2008, Pope & Talbot went bankrupt and closed Harmac, putting 530 people out of work.


In August, 2008 Nanaimo Forest Products, a coalition of former workers, managers and three private partners, bought Harmac for $13.2 million.


In October, 2008, a workforce of 230 re-started the mill on a reduced scale.


About 40km south of Harmac - Catalyst Paper shut down their Crofton pulp mill indefinitely last week.


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  • 9 months later...

For disclosure, I own both SFK.UN and CFX.UN.


I think that there is an investment lesson with this case. Common wisdom indicates that you should expect the low cost producer share price to significantly underperform the high cost producer in a commodity rebound. Currently, it is the opposite. CFX.UN is up 6.5 times from its low, while SFK.UN is up 3.2 times.


So with SFK.UN, you increase materially your risk of permanent loss with so far less reward. While I agree that SFK.UN could take-off if pulp prices go higher that is asking for a lot. Already, we are seeing some pulp mills restarting and we are not sure how long China will keep buying pulp at the rate they are now. Global inventories remain low, but if you look at the price of pulp, the rate of increase has slowed.


So is it possible that SFK.UN is now too far in the supply cost curve in an industry that has changed dramatically in terms of demand (likely permanent) over the last 12-18 months? Something has to change for them to earn good money again. How do you see this evolving? 



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Dec. 15, 2009 - Mercer International told customers worldwide today that it will increase northern bleached softwood kraft (NBSK) pulp prices, effective January 1 until further notice, market participants told RISI.


Mercer plans a $30/tonne price increase in its key markets. In North America, that would bring its January price to $860/tonne. It also plans a $830/tonne level in Europe, and $730/tonne in China. Its $30/tonne price increase is also effective in other Asian markets.


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A monkey would be making money at these prices...nat gas price is at historical lows, freight prices down and energy prices down...Pulp prices are up every week! If this managemnet can't do it in this environment sell it to Canfor...they know what they are doing.


we own the shares.



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So far management has done a great job managing the crisis, I'm pretty sure they're making boatloads of money at these prices at their Canadian plant.  The U.S plants have been hurt badly by the liquor subsidy, and I've read a few articles that the IRS may effectively double the subsidy for next year...potentially upping the subsidy from 200 to 400$ per ton.  Nothing they can do if the U.S government is trying to destroy demand for RBK.  They also won't be making any distributions in the first half of '10 due to the covenant violation last summer. 

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Keep in mind that this is not a traditional buy & hold business case.


SFK must exit their trust structure prior to 2011, the interest rate on their debt significantly increases on July 01, 2010, & they have 30MM+ (from memory) of debt maturing in 2010. They are well run, in a rising commodity cycle, have at most a one-year time horizon under the existing structure, & their investment case has always contemplated an eventual consolidation with some other entity.


As soon as they can show a positive quarterly earning, & a fat EBITDA; the current price discount will effectively disappear. A wise man would also expect a merger premium in anticipation of a trust sector consolidation.


As soon as they evidence a debt roll-over and/or repayment, pricing should essentially change to some % of BV. As if the bank was not confident that it would be fully repaid under the new structure, it would not roll; therefore SFK must have a solvent future.       


While SFK has many re-engineering options, whatever is chosen has to be in the interests of their (knowledgeable) investors, it will require at least a 2/3 majority, & it must be completed by Dec-31-2010; nobody is going to be stealing it.


Possible extension (REIT), or further FX erosion aside; a fairly straightforward case.




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