New FBK

[EdWatchesBoxing]

EV is a term thrown all over in poker, gambling, etc.

applying this concept to poker may make it easier to understand.

[cwericb]

Uccmal   That was what I thought was the problem with the US mills. However, I am optimistic that this may not be permanent problem or at least there could be some improvement.

 

Here is the way I see it.

 

The economy had created a climate where industries were forced to make sudden cutbacks and recycling was not seen as a priority but more as a PR issue. But there is absolutely no way the green and recycle movement is going to go away, in fact it will only increase. As the economy gets back on the rails more focus put back on recycling and hopefully that will help improve the US mills situation - but it could take some time. However, there is an outside chance that some company may agree with this line of thought and make a move to pick up these mills in anticipation of a turnaround.    

[biaggio]

http://adventuresincapitalism.com/post/2011/01/09/What-Happens-When-4-Billion-People-Decide-To-Wipe-Their-Ass.aspx

 

Kuppy likes FBK.

 

At least read first paragraph:

"When I was in China this summer, I was a bit disturbed by the bathroom facilities in the rural areas—the communal poo rag had not yet been replaced by toilet paper. Even in tourist locations like the Great Wall, the restrooms had a rag attached to the wall to be used for wiping your ass. I had to ask our tour guide for confirmation that I wasn’t just imagining this—unfortunately I wasn’t. At the time, I just shrugged my shoulders and thought about it as little as possible. That was until I was alerted to the investment implications of this. Put simply, the average westerner uses over 25 lbs of tissue and toilet paper a year (hereafter simply called tissue). In most of the undeveloped world, the usage is a tiny fraction of that number, but it is growing rapidly."

 

(Boy I take a lot of things for granted)

[Myth465]

http://adventuresincapitalism.com/post/2011/01/09/What-Happens-When-4-Billion-People-Decide-To-Wipe-Their-Ass.aspx

 

Kuppy likes FBK.

 

At least read first paragraph:

"When I was in China this summer, I was a bit disturbed by the bathroom facilities in the rural areas—the communal poo rag had not yet been replaced by toilet paper. Even in tourist locations like the Great Wall, the restrooms had a rag attached to the wall to be used for wiping your ass. I had to ask our tour guide for confirmation that I wasn’t just imagining this—unfortunately I wasn’t. At the time, I just shrugged my shoulders and thought about it as little as possible. That was until I was alerted to the investment implications of this. Put simply, the average westerner uses over 25 lbs of tissue and toilet paper a year (hereafter simply called tissue). In most of the undeveloped world, the usage is a tiny fraction of that number, but it is growing rapidly."

 

(Boy I take a lot of things for granted)

 

biaggio I thought the same thing.

[Uccmal]

(Boy I take a lot of things for granted)

 

 

No kidding, eh?

[alertmeipp]

The case the author mentioned is a pretty unique in China actually, especially in Beijing.

But the general concept is right, more paper and thus pulp will be consumed as the world get developed.

 

RBK is a tough business to understand and forecast - management is helping on that neither.

[SharperDingaan]

 

Re: RBK Mills

 

They are a good business, but the structure of the industry ensures that margins will almost always be low. Add in the FX volatility they generate because of Cdn parent ownership, & you get poor quality earnings. The good news is that they are effectively recycling utilities - so over the long term they should generate at least a modest positive return on investment.

 

More valuable to a US parent, which will not have the FX risk. Additional value if they can find a market for some of their byproduct (heat, electricity co-generation, etc.)

 

SD 

[cwericb]

Agreed 100%. I find it hard to be as pessimistic as some are about a side of the operation that could be a large potential asset. Might these mills not be quite attractive to a US company who wanted to be a large player in the recycling industry. There is a certain PR aspect in saying "We are saving trees and efficiently recycling industry's waste paper".  The plants are new and long term, RBK is not going to fade away. Also this is a segment that is in line with the times. Never underestimate the power of the green/recycle movement. If the production of RBK was a losing proposition where mills might be closed, I would think tax incentives and subsidies would be demanded to keep them in operation.

[FFHWatcher]

Interesting.  http://www.newswire.ca/en/releases/archive/January2011/13/c2417.html

 

236,226 x $25 = $5.9M or 4.5 cents per Fibrek share.  Distribute to shareholders or sell and use proceeds for convertible repayment or perhaps this is the start of the story of how a child comes home to live with their parents after leaving home in 2002 (ie. SFK spin off in 2002 only to come back to Abitibi in 2011?).

 

TSX : FBK

www.fibrek.com

 

LONGUEUIL, QC, Jan. 13 /CNW Telbec/ - Fibrek Inc. (TSX: FBK), a leading producer and marketer of high-quality virgin and recycled kraft pulp, today announced that Fibrek General Partnership ("Fibrek GP"), its wholly-owned subsidiary, will receive 236,226 common shares (the "ABH Shares") of AbitibiBowater Inc. ("Abitibi") in connection with the initial distribution of ABH Shares pursuant to the procedures undertaken by Abitibi under the Companies' Creditors Arrangement Act.

 

As an unsecured creditor of Abitibi-Consolidated Company of Canada ("ACCC"), a subsidiary of Abitibi, Fibrek GP filed a claim in the amount of $45 million (the "Claim") as compensation for the repudiation by ACCC, on May 21, 2009, of the woodchip supply contract then in effect between ACCC and Fibrek GP. Pursuant to the plan of reorganization and compromise of Abitibi, a total of 20,498,391 ABH Shares will be issued to ACCC's unsecured creditors, of which 18,165,317 have been issued in connection with the initial distribution and 2,333,074 have been reserved for the benefit of holders of disputed claims and could be distributed subsequently to unsecured creditors in accordance with the terms of the plan of reorganization. 

 

The distribution of ABH Shares to Fibrek GP will be treated as a non-recurring item in the consolidated statements of earnings of Fibrek Inc.

[gaf63]

This just came across DJ news(follow the thread but dont own any FBK)

 

FIBREK WILL RECEIVE 236,226 SHARES OF ABITIBIBOWATER INC.

21 minutes ago - CNW

CNW Group

TSX : FBK www.fibrek.com

Fibrek Inc. (TSX: FBK), a leading producer and marketer of high-quality virgin and recycled kraft pulp, today announced that Fibrek General Partnership ("Fibrek GP"), its wholly-owned subsidiary, will receive 236,226 common shares (the "ABH Shares") of AbitibiBowater Inc. ("Abitibi") in connection with the initial distribution of ABH Shares pursuant to the procedures undertaken by Abitibi under the Companies' Creditors Arrangement Act.

As an unsecured creditor of Abitibi-Consolidated Company of Canada ("ACCC"), a subsidiary of Abitibi, Fibrek GP filed a claim in the amount of $45 million (the "Claim") as compensation for the repudiation by ACCC, on May 21, 2009, of the woodchip supply contract then in effect between ACCC and Fibrek GP. Pursuant to the plan of reorganization and compromise of Abitibi, a total of 20,498,391 ABH Shares will be issued to ACCC's unsecured creditors, of which 18,165,317 have been issued in connection with the initial distribution and 2,333,074 have been reserved for the benefit of holders of disputed claims and could be distributed subsequently to unsecured creditors in accordance with the terms of the plan of reorganization.   The distribution of ABH Shares to Fibrek GP will be treated as a non-recurring item in the consolidated statements of earnings of Fibrek Inc.

[Uccmal]

That will make up for the currency haircut......

[lessthaniv]

That will make up for the currency haircut......

 

For this quarter ...

 

Actually, what's nice is the TTM numbers will finally change and go positive. That awful Q4/09 will come off and be replaced by a much better Q4/10.

 

 

[alertmeipp]

nice to get more cash. :)

 

Wonder if FBK could be benefited from this:

 

http://www.canadianbusinessjournal.ca/business_news/canadian_business_news/06_01_harper_doles_out_millions_to_help_pulp_and_paper_11.html

 

 

[Uccmal]

I doubt it.  They already got their subsidy in the spring.

[tyska]

I'm guessing that the Q4 release will be around the same as last year, towards the end of Feb. Has there been any announcement on it or not.

[gordoffh]

Abitbi President from Globe

 

Expect more consolidation in newsprint market, Abitibi head says

BERTRAND MAROTTE

Montreal— Globe and Mail Update

Published Friday, Jan. 14, 2011 12:43PM EST

Last updated Friday, Jan. 14, 2011 12:46PM EST

0 comments Email  Print/License Decrease text size Increase text size  Expect more consolidation in the North American newsprint market as industry players try to deal with the impact of declining demand, says the new head of AbitibiBowater Inc. (ABH-T24.99-0.37-1.46%)

 

“I would not be surprised to see more consolidation and I certainly hope that it's going to happen,” new Abitibi chief executive officer Richard Garneau said on a post-restructuring conference call Friday.

 

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“Maybe another round of consolidation could be required.”

 

But he added that dwindling demand for newsprint in North America - spurred on by the shift to digital media - will be offset by increased consumption in emerging markets such as Asia and Latin America.

 

Montreal-based Abitibi, which recently emerged from a massive financial and operational restructuring under court-ordered bankruptcy protection, is well positioned to manage declining newsprint demand in North America as it moves to bolster exports to markets in Latin America and India as well as shifting production to higher value-added papers, said Mr. Garneau, an industry veteran who has just taken over as CEO from David Paterson.

 

“We can manage the decline in North America by focusing more on the overseas market,” he said.

 

Even as newspaper publishers grapple with the fallout from the digital revolution and figure out the long-term impact - younger readers, for example, who are more comfortable getting their news off the web or social media - Mr. Garneau said he's confident that “print is not going to disappear.”

 

He also said Abitibi is keen to buy newsprint and coated paper assets, but “only if the right opportunity arises

 

perhaps  FBK

[Uccmal]

Pulp Prices have held this week, more or less.  Every week, another hack out of the debentures and the debt and lower service costs.

 

http://www.foex.fi/

 

 

[FFHWatcher]

Pulp & Paper News

 

Mercer International to increase Feb. 1 NBSK pulp prices $20/tonne in Asia

 

SAN FRANCISCO , Jan. 20,2011 (RISI) - Mercer International informed customers across Asia thatit will increase northern bleached softwood kraft (NBSK) pulp prices by$20/tonne, effective February 1 until further notice, industry contactstold RISI.

[alertmeipp]

yeah.. 15 - 20 million each Q, 2-3x cash flow and pulp price seems to be heading up again... Exchange rate sucks - that's the only -ve.

 

 

[finetrader]

^{yeah.. 15 - 20 million each Q, 2-3x cash flow and pulp price seems to be heading up again... Exchange rate sucks  - that's the only -ve.}

 

Share price sucks too...  go lower so we can buy more, or go higher so we can feel richer

[alertmeipp]

ha.. everything is relative. 1.3 is expensive compared to 20 cents.. but it's a bargain compared to 2 bucks.

All in all, it's a bargain if you forget about historical prices. ;)

[FFHWatcher]

I mentioned Mercer International a little earlier in this thread.  They have 3 NBSK pulp mills. 1 in British Columbia and 2 in Germany.  The biggest negative against Mercer is their enormous debt.  Essentially, it looks like they owned the 1 German mill and then borrowed $300M to buy their Cdn mill and then borrowed another $500M (80% is guaranteed by German Gov't and is non-recourse to the rest of Mercer) or so to build their 2nd German mill.  Their operations are very large and relatively new.  

 

What I find interesting is that even though they have an enormous debt load of about $800M (Euro) that costs approx. $65M (euro) per year, their energy revenue is approx. the same as their total annual interest costs.  

 

Is it unreasonable to look at the energy revenue at the pulp mills as a new revenue stream with little added costs (highly profitable) and in Mercer's case, remove a lot of their debt risk due to this new source of revenue?  What about Fibrek?  Not nearly as much energy revenue ($0 actually as it is still almost 2 years away!!!) but their is an opportunity there.  

 

While I agree that Fibrek seems cheaper and less risky than Mercer, I thought and continue to think that both companies are good ways to play the continued strong pricing (and strong demand) in NBSK Pulp which was widely (and so far, inaccurately) expected to decline after a large run up in late 2009 and early 2010.  It seems that emerging markets may be creating pulp demand as fast or faster than developed markets are reducing their pulp usage.

 

Aside from debt, there are lots of things to like at Mercer.  Investor relations and a website are two that quickly come to mind.

[FFHWatcher]

ha.. everything is relative. 1.3 is expensive compared to 20 cents.. but it's a bargain compared to 2 bucks.

All in all, it's a bargain if you forget about historical prices. ;)

 

$0.20 x 90M shares o/s = $18M (plus all their debt back in mid 2009).  But a market cap of $18M!!!  Wow.  Their operating cash flow was $18M last quarter.  They certainly came close.  Seems low risk now, compared to then.

[doc75]

$0.20 x 90M shares o/s = $18M (plus all their debt back in mid 2009).  But a market cap of $18M!!!  Wow.  Their operating cash flow was $18M last quarter.  They certainly came close.  Seems low risk now, compared to then.

 

Earlier this year Catalyst Paper was at a market cap of $40M with annual sales over $1B.  Debt really screws with valuations, doesn't it?  (Anyone here catch the Catalyst run from $0.10 to $0.40?  They should have another good quarter brewing.  Just payed back some notes early and paper prices have been improving.)

 

As for FBK:  Exchange rate is a known entity and it's relatively easy to approximate the effect.  The RBK ops are the wildcard.  Last I checked, waste paper prices were still riding very high.  The mills are nice to look at on the balance sheet but it's hard to see them making money anytime soon.  One possible positive:  It appears that Catalyst's Snowflake Mill (a recycled op)  was hiring like crazy a while back, so maybe demand for recycled paper is returning...

 

 

 

[Alekbaylee]

Pulp prices holding steady and FBK s/p has not moved.  ???

 

http://www.paperage.com/foex/pulp.html