New FBK

[SharperDingaan]

 

T&T: We're on the same page for 2010, but the razor is 2011. Do nothing & you`ll probably net out ahead. Bet the wrong way, & you could get whiplashed.

 

SD

[FFHWatcher]

 

Fibrek has yet to negotiate a contract with their workers.  They have been without a contract since sometime in spring/summer 2009, if I recall.  THe August 2010 MD&A suggests that they were no negotiations yet.

 

Does anybody know what's going on here?   

 

 

There's a fair bit of pulp production coming on line, some of it coming from companies who are emerging from BK with lower labour costs.

Apparently the CEP union (under which most, or all, pulp workers operate) has decided that Abitibi is their "pattern setter" for contracts in Eastern Canada.  The Abitibi workers ended up taking a 10% wage cut in their first year of contract.  They *may* also have taken a 10% cut in their second year, but it was unclear from the contract I read.  After that, wage increases start up again.   It's a 5 year contract, and one would expect Fibrek's agreement to be similar. (?)

 

Does anybody know what percentage of cost/ton is attributable to labour?

 

My fear is that if they don't reduce production costs then they'll have a lot of trouble making money with the high Can $ once pulp prices invariably soften.  If the C$ were back at $0.85 we'd be making money hand over fist, but the great prognosticators suggest a level above par is more likely in the coming months.

 

 

 

 

 

Management team has been very busy working on getting the new website up and running.  Perhaps, once they finish off the website project, they can negotiate paying the Cdn employees in US Currency :-)  That would hedge some risk.  I have a hard time giving employees significantly better compensation and benefits when the company was on the brink 12-18 months ago, when owners are looking at an 80% loss to capital, when they are not the low cost producer and when many companies in their industry (such as Norkraft) are simply gone/mothballed.  Hopefully they can settle on something fair to all parties.

 

About Norkraft

The Norkraft Domtar pulp mill in Lebel-Sur-Quevillon (QC). Stopped since November 2005 for a lock out, the Domtar mill permanently closed its door December 18 2008. The pulp mill and the sawmill, also closed, where responsible for 70% of the job in this mono industrial town of 3000 citizens located 600km north of Montreal.

 

Below is an old newspaper clipping. ...  (I inserted some comments in brackets that compare Fibrek's Saint-Félicien NBSK to Domtar's Norkraft - pretty similar numbers for comparison purposes understanding that in the late 90's Domtar spent $245M just modernizing the Norkraft plant...and they still couldn't make it a viable business.  In some respects the $245M investment by Domtar highlights the potential underlying value to Fibrek's Saint-Félicien Mill, as they are similar but it also emphasizes how cyclical the entire industry is, Feast or Famine by the looks of things).

 

LEBEL-SUR-QUEVILLON, QUEBEC--(BUSINESS WIRE)--Sept. 9, 1997--DOMTAR(ME, TSE, NYSE DTC ) It was a time for celebration today at the Norkraft Quevillon Inc. pulp mill, in which Domtar Inc. holds a majority interest. A major $245-million modernization program, initiated in 1994 and financed with Domtar working capital, has been successfully completed, just in time for the mill's 30th anniversary celebrations. The mill is located in Lebel-sur- Quevillon, Quebec, some 150 kilometres north of Val-d'Or.

 

The modernization project, carried out by a consortium involving the firms Babcock & Wilcox, B.G. Checo and H.A. Simons, included the following components :

 

- a new recovery boiler which, in addition to meeting stringent air emission standards, will boost mill capacity from 740 to 815 metric tonnes per day, providing annual capacity of 280,000 metric tonnes (note from FFHWatcher - Fibrek's Cdn Saint-Félicien's Mill has an annual capacity of around 360,000 tonnes, and in 2010 they are running pretty close to 100%)

 

- a 45-megawatt turbo-generator that converts steam generated by manufacturing processes into electric power (note from FFHWater : Fibrek's new deal is to produce 42.5 megawatt);

 

- a secondary-effluent treatment system completed in September 1995; and,

 

- new sludge and pulp washers as well as improvements to the digester.

 

"The modernization project at Norkraft's Lebel-sur-Quevillon mill reflects Domtar's commitment to its employees, namely that it would invest in the mill to make it competitive on a North American scale," said Raymond Royer, Domtar's President and Chief Executive Officer. "This has been achieved. Now, it is up to us to work together as a team to deliver the desired results.

 

"And there's even more good news," added Mr. Royer. "In addition to the employees having made a financial investment in the project, a work reorganization agreement has been signed earlier this year that significantly increases job flexibility. So doing, mill employees have clearly confirmed their desire to be stakeholders in the mill's success. I sincerely thank them for their contribution, of which they can be extremely proud."

 

Normand Lecours, Senior Vice-President of Domtar's Kraft Pulp and Forest Products Division and President of Norkraft, noted that the start-up, given the size of the project, has proceeded as expected and that the division is beginning to reap some rewards. "The recovery boiler is working almost at its planned production level, and the installation of a co-generation plant will help substantially reduce energy costs while minimizing our vulnerability to costly power failures.

 

"Today, we are celebrating not the end but the beginning of a new phase at the Norkraft mill. I encourage all employees to redouble their efforts to ensure that we achieve, or even surpass, the objectives set out when the project was announced," concluded Mr. Lecours.

 

The Norkraft mill in Lebel-sur-Quevillon is 90 percent owned by Domtar Inc. and 10 percent by mill employees.

 

Domtar is a major North American manufacturer of fine papers, packaging, pulp and forest products that fosters sustainable development through the rigorous application of its integrated forest management policy. A leading manufacturer and marketer of printing and writing papers, Domtar is also a significant Canadian producer of containerboard and corrugated containers and a major Eastern Canadian lumber producer.

 

[woodstove]

Ha! Interesting about the Norkraft mill. Thanks for posting that. All who were asking about who's the next Warren Buffett may have been asking the wrong question ... Fibrek might be the next Berkshire Hathaway!  Seriously, I have a great deal of trouble reconciling the book value of the mill assets, vs the amount being spent to maintain them in semi-competitive operational status.  Clarification most welcome.

[finetrader]

'If they pay off the debenture, how do you get debt at $150M?  Here is my math/thinking'

 

I think we are on the same page when looking beginning 2011/2010 year end where (debt minus cash) should be about 100M$

 

 

[Uccmal]

Pulp prices have stayed firm at 990 into this week so far.  I am trying hard to make myself wait a few weeks before buying any more stock in this company.  It is back to being in my 4 largest holdings below FFH.

[triedtestedand]

Uccmal:

 

Canfor has dropped prices to $970/tonne (or is that ton?!!) from Oct. 1 ... you can practice your Swedish reading skills at the following site:

 

http://di.se/Default.aspx?pid=1124559__TelegramPageProvider

 

 

 

There's also another swedish article this morning which translates (thanks to Google) as follows:

 

http://di.se/Default.aspx?pid=1125296__TelegramPageProvider

 

 

FOREST: PRICE NBSK PULP 5.1% LOWER THAN 2011 2010 - SME-DIREKT2010 09-28 12:08

 

    LONDON (Reuters) Following a sharp rise in prices in 2010, analysts expect that the price of NBSK pulp (long-fiber pulp) generally keeps a presence on the continuing high price levels in 2011.

 

    It shows a survey of eight analysts forest SME Direkt have done.

 

    The survey shows that analysts expect the average price of NBSK pulp will be 5.1 percent lower in 2011 than 2010.

 

    The price of NBSK pulp has risen sharply in 2010. Since January, prices have risen by $ 174 to $ 973 per tonne which is a recent quotation from Finnish Foex, 28 September.

 

    Fears of price adjustment downward in the autumn has not yet materialized, and analysts point to a continued limited supply of the pulp market in the fall and into next year.

 

    "While it would be a small price downward correction during the autumn, it is wrong to mass market will remain strong ahead, especially in the wake of the general economy improves," said Claes Rasmuson, analyst at Swedbank.

 

    He is backed by an analyst colleague who had expected a weaker market development in the autumn.

 

    "If you look at the progress to date in the autumn so I can only conclude that the mass market did not feel as weak as I had anticipated," said Michael Jåfs, forestry analyst at Cheuvreux.

 

    A look at the producers' stocks of pulp reinforces the picture of the situation on the mass market looked like in the fall.

 

    "At the end of summer, we saw a slight increase in producer inventories of pulp, but it was only a rise of two days and it will be no more, it's still a tight market," said Claes Rasmuson.

 

    Judging by one of the big mass producers, the South, so there are not any indications that the mass market would weaken during autumn or early winter.

 

    "Our inventory levels are very low and there is therefore correct to say that the economy of long-fiber pulp remains strong," said Södra CEO Leif brother in an interview with the News Agency Directly in the middle of September.

 

    Analysts also expect the market situation, and the high price of pulp, largely composed in 2011. One overarching reason is the general economic situation and demand for paper products along with the continued limited supply of pulp globally.

 

    "As I see it, the price of NBSK pulp to remain at relatively high levels even in 2011. Indeed, the global market is such that access is limited and there will be no new capacity by 2012," said an analyst and continues:

 

    "If the demand for pulp will remain at about the same as now in Europe and North America and the Asia market continues to grow, so will the supply of pulp to be even more limited."

 

    The fact that no new capacity is expected to come on the global mass market until 2012-2013 is another factor which, together with the behavior of strong Chinese buyers will steer the development of pulp prices ahead.

 

    Södra CEO Leif Brodén testified in mid-September about a situation where the mass of buyers from China are now active in the European market, after an absence in the first half of this year.

 

    "The Chinese pulp buyers are now coming back even though prices have not fallen is an additional factor that may be supported by mass stay at these levels," said Claes Rasmuson.

 

    The analysts were asked how much they expected the dollar price would change on average in 2011 compared to 2010.

 

    Among the Nordic forestry companies are particularly Stora Enso, Billerud and Rottneros major players in terms of mass. Stora Enso expects, for example that this year net sell 900 000 tonnes of pulp on the market. Although SCA is a major player in mass market, the company net purchase about 1.1 million tons of pulp per year.

 

    Participants: CA Cheuvreux, Danske Market Equities, Deutsche Bank, Goldman Sachs, Morgan Stanley, Pohjola Bank, SEB Enskilda and Swedbank. Gunnar Vrang +46 8 5191 7920 Johan Eriksson, +46 8 5191 7910 Direkt

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[FFHWatcher]

Uccmal:

 

Canfor has dropped prices to $970/tonne (or is that ton?!!) from Oct. 1 ... you can practice your Swedish reading skills at the following site:

 

http://di.se/Default.aspx?pid=1124559__TelegramPageProvider

 

 

 

 

Pulp Market seems to use a metric ton, AKA : tonne.  A tonne is equivalent to 1000kg (2200 lbs).  A ton is 2000 lbs.  A tonne is approx. 10% larger than a ton.

[gordoffh]

2nd abnomally high trading day in the last 2 weeks - end of quarter - postioning for upturn? let's hope  - really long FBK

 

gordoffh

[gordoffh]

nice to finally see some price move to the upside - following the market or moving onit's own merit?

[doc75]

nice to finally see some price move to the upside - following the market or moving onit's own merit?

 

I think we can safely assume it wasn't because of a positive weekly pulp market update:  See www.foex.fi

 

Not an end-of-the-world report by any means, but it looks like prices continue to soften with new supply, as expected.

 

 

[alertmeipp]

the soaring loonie won't help the #s but with everything else flying, this one is very cheap. SIGH!

[FFHWatcher]

the soaring loonie won't help the #s but with everything else flying, this one is very cheap. SIGH!

 

Q3 is already closed and not reported.  Current flying loonie will affect Q4, if it continues.  

 

For every cent that the loonie increases, it has a $2.9M negative impact on Fibrek's net earnings.  

 

For Q3 2010, comparing to Q2 2010 (QOQ), there was a minimal, perhaps even positive impact by the loonie on their net earnings.  YOY is still an overall negative because in Q2 2010 they were comparing to an 85 cent dollar in Q2 2009.  In Q3 2010 we will be comparing to a 91 cent dollar, which is less worse to compare against.   Q2 2010 averaged 97.3 cents while Q3 2010 should average just under that in the mid 96 cent range by my estimates.  At most, that equates to a $2.9M per year improvement divided by 4 quarters = $0.725M or insignificant.

 

As for the price of NBSK and RBK, comparing Q2 to Q3, there should be minimal changes, if any.  NBSK started Q2 at $960 and finished at $1020 for an avg. price of $993.  For Q3, NBSK started at $1,020 and finished at $990 and therefore averaged somewhere around $1,000.  Not sure about RBK?  If I assume it has had similar characteristics as NBSK, then let's assume it hasn't changed significantly.

 

Overall, I estimate that Q2 and Q3 should be somewhat similar to each other.  There will likely be some one-time debt restructuring fees and perhaps some downtime over the summer that should result in lower volumes, lower revenues but also lower expenses/cost of production.

 

What are others thinking?  Maybe a similar EBITDA of $20M, perhaps lower at $16-18M?  And net earnings of $5-10M?  Going forward, interest expenses should be lower, hopefully operating margins continue to improve by their new efficiency initiatives, etc.  Perhaps a word regarding their labour negotiations? Are there any other moving parts here, such as website development costs that I am excluding? :-)

 

 

[Uccmal]

The loonie problem seems to have mitigated somewhat with the rise in the US dollar this week. 

[Vanshon]

NBSK spot price is back up $10 to $984 today

 

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

 

 

[lessthaniv]

NBSK spot price is back up $10 to $984 today

 

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

 

 

 

I think that could be a typo. Foex shows it unchanged and I believe paperage gets its data from Foex?

 

http://www.foex.fi/

[doc75]

 

Anyone have any idea when Fibrek will report? 

 

It fees like we've been bound in the .97-1.03 range for ages, with pretty average volume.  It'll be interesting to see if the Q3 report induces any movement.  I fear not, since I think everyone is expecting pretty solid numbers but has doubts they can keep up going forward.

 

I had expected a trend upward as we approached November.  I follow Catalyst, too... they're in much worse shape but rallied very hard with some other pulp/paper names over the past little bit.

 

[triedtestedand]

Last year FBK reported on Oct. 30th, so without any other info, might guess they announce on Oct. 29th ... Canfor reports on the 26th, so that should provide a corollary.  I wouldn't suspect a big move until the new year, as people wait to see where prices trend, if they do anything w/ debentures, if they institute dividend, etc.    If you are on the bull side, this is period to be opportunistic and (slowly) accumulate ...

[FFHWatcher]

Last year FBK reported on Oct. 30th, so without any other info, might guess they announce on Oct. 29th ... Canfor reports on the 26th, so that should provide a corollary.  I wouldn't suspect a big move until the new year, as people wait to see where prices trend, if they do anything w/ debentures, if they institute dividend, etc.    If you are on the bull side, this is period to be opportunistic and (slowly) accumulate ...

 

Just check their website.... ???

[FFHWatcher]

A bit of positiveness for NBSK.  Perhaps I am grasping at straws?  http://www.cisionwire.com/ext/rottneros/rottneros--interim-report-january-september-2010

 

...

Several leading pulp market observers consider that this price reduction is less than previously anticipated, which may be due to a combination of a weaker dollar rate, an increase in purchases from China and increased paper production in Europe. These observers expect that pulp prices rise again after the turn of the year, at least in dollars.

 

If the downward trend in NBSK pricing subsides, which it seems it may have, certainly the velocity of the decline has subsided and has been quite less than I expected, then FBK should be increasing their estimated fair value each month that NBSK stays over $900/tonne.  That also assumes the Cdn $ doesn't continue to appreciate (much) beyond par. 

[cwericb]

LONGUEUIL, QC, Oct. 22 /CNW Telbec/ - Fibrek (TSX: FBK) will release its 2010 third quarter results after market hours on Thursday, November 4, 2010.  President and Chief Executive Officer, Pierre Gabriel Côté, and Patsie Ducharme, Vice President and Chief Financial Officer, will host a conference call on Friday, November 5, 2010 at 10:00 a.m. (Eastern Time) to discuss financial results.  Members of the financial community will be able to access the conference call and ask questions.  Media representatives may attend as listeners only.

 

Participants not able to listen to the live call can access a replay of the archived call by calling 1-800-642-1687, access code 18790366#. The replay will be available on Friday, November 5 as of 1 p.m. until 11:59 p.m. on Friday, November 12, 2010.

 

Complete unaudited consolidated financial statements and Management's Discussion and Analysis will be available on the Company's temporary site at: www.fibrek.com and SEDAR web site at: www.sedar.com.  

 

Unh, y'all got that last sentence, right................

 

 

[alertmeipp]

But as discussed before, their two biggest costs for them are Eastern wood chip and waste paper. Anyone has a accurate source on their pricing?

 

I don't. Last I heard was wood chip is coming down but waste paper price is going up.

 

 

At current pricing, at least the company is making money - just not its owners YET. It COMPLETELY missed out the rally.

 

 

Compare to other cos in the same sector, FBK pps is lagging by 40%+ after the right offering announcement!

 

May-12 Current Percent

SFK 1.58 1 -36.71%

CFX 16.18 15.85 -2.04%

MERC 4.58 5.33 16.38%

TMB 2.35 2.35 0.00%

UFS 70.41 74.61 5.97%

 

Average PPS change: 5.08%

 

 

Disclosure: I have been adding.  ???

 

 

[doc75]

I think there *should* be great value here but I haven't been able to summon the courage to add at these prices.  I haven't been impressed with management.  The way the rights offering was handled didn't exactly inspire a lot of market confidence (more like a vicious cycle).  I generally find the numbers stated in their MD&A's to be a little misleading.  It's clear that they were not realizing the full effect of the pulp price increases, due to various discounts and long-term contracts.  But instead of addressing this they simply state that higher pulp prices were offset by FX.  In general, I'd like to see some acknowledgement that they are trailing their peers, and have some sense of what they play to do about it, rather than leave it to us to guess that they are being guided by the deft hands of FFH.

 

The website issue really peeves me, mostly because I just can't imagine how they rationalize the delay.  It seems incredibly unprofessional.    I contacted IR about this but didn't hear back.  I think a couple other people on here also asked what's up.... did anyone get a response?

 

Sorry to rant.  I'm a bit underwater but still hold my shares because there *should* be lots of value here. I just hope the Q3 report includes both the expected solid numbers and some evidence that management isn't just coasting.

 

 

[Myth465]

Im a bit underwater too but am quite happy. Pulp prices have held up and havent crashed, the company is recap., and we get results and hopefully a bit of direction fairly soon. Everything else is really just noise.

[SharperDingaan]

 

Keep in mind that to make a return on FBK you really need to trade & hedge; not buy & sell.

Worst case is that someone takes a run at them & your position is less than it usually is.

 

SD

 

[alertmeipp]

how do u hedge?