Shifting from Commodity to Specialty Chad Wasilenkoff CEO Fortress Paper

Shifting from
Commodity to Specialty
Chad Wasilenkoff CEO Fortress Paper
PWC Changing Directions
May 11, 2011
Forestry - The Old World
Pulp
Lumber
Paper
Forestry - The New World
Textiles
Glass
Fiber
Pulp
Carbon
Fiber
Chiral
Drugs
Paper
Bio
Energy
Cosmetics
Resins
Tissue
Paint
Tire
Belts
Sweetener
Acetate
Lumber
Vitamin
Ethanol
Dispersants
Alcohol
Co-Gen
Composites
Bio
Plastic
Bio
Diesel
Laminates
Nano
Crystalline
Paclitaxel
Vanillin
Forestry - The New World
Volume
Value
The highest growth and most
profitable opportunities will come
from those industries that are more
specialized and that have higher
barriers to entry
Macro Decisions by Management Teams
 Cost cutting Initiatives
 Increasing Machine Speed
 Idling Capacity
 Consolidation
 Highly Levered
 Innovation
 Expansion
 Higher Value Added
Products
 Strong Balance Sheet
How Fortress Paper Implemented Their Strategy
Our Landqart Mill
Landqart Overview
• Sole Provider of Banknote Paper to Switzerland For over 30 Years
• Final Stages of Development for their Next Series
• One of only Nine Authorized Substrate Suppliers for the Euro
• Making the Euro for 10 Countries
• Passports, Visas, and other High Security Papers
9
Paper Machine Rebuild
One SUPER-INTAGLIO SHEET
SUPER-INTAGLIO FORMAT
82 cm
82 cm
154 cm
Current PM2
Three SHEETS
SUPER-INTAGLIO
82 cm
259 cm
PM1 Rebuild
Our Dresden Mill
Dresden’s Share of Non-Woven Wallpaper
Base Worldwide
t
80,000
70,000
60,000
50,000
40,000
59%
30,000
43%
20,000
10,000
27%
0
2006
2008
Dresdens Paper
Management Estimate
2010
Competitors
Estimated World Wide Demand –
Wallpaper Base and Non-Woven Wallpaper Base
t
*
* Excluding quantities used in Japan and
“special paper grade” (offset paper type) in Russia
13
Our Thurso Mill
Why Thurso Closed….High Cost Commodity Producer
600
Cash Costs
(US$/Tonne)
DeliveredCash
Costs- –Shanghai
(US$/Tonne)
Delivered
Shanghai
Thurso (NBHK)
500
400
300
200
100
-
0
5
10
15
20
25
CumulativeAnnual
Annual Capacity
Tonne/Yr)
Cumulative
Capacity(Million
(Million
Tonne/Yr)
Southern / Asia / Eucalyptus
Source: RISI (2009)
Northern Hardwood / Softwood
30
A Low Cost Producer of Dissolving Pulp
Estimated Dissolving Pulp Delivered Cash Costs
Delivered Cash Costs - Asia Port (US$/Tonne)
1,200
1,000
Tie in
800
Thurso (Dissolving Pulp)
600
400
200
-
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Cumulative Annual Capacity (Million Tonne/Yr)
Southern / Asia / Eucalyptus
Source:
Fisher International Inc., CCF and Internal analysis
Northern Hardwood / Softwood
3.5
4.0
Our View for
the Future
Market Drivers For The Future
Growing Middle Class
Increased Income = More demand for:
• Crops
• Meat
• Dairy
Source:
United Nations
All Putting Pressure on Land / Biomass / Fibre
Energy vs. Trees
Competition for Food Crops
 Ethanol currently accounts for just 8% of America’s fuel
for vehicles, but it consumes almost 40% of America’s
enormous maize crop.
 World ethanol production increased fivefold between
2000 and 2010 but would have to rise a lot further to
meet all the targets.
The Economist Feb 24, 2011
Competition
800 million
people with automobiles
The Worlds 2 billion
poorest people
VS
Excerpts from “Food vs. Fuel” - Bloomberg
Pressures on Arable Land and Forests
 Need to feed millions more people
 Energy requirements for growing economies
 Bio fuel / Ethanol turning into big business
 Loss of cropland to urbanization
FIBRE SECURITY WILL BE THE MOST CRITICAL
ISSUE IN OUR INDUSTRY GOING FORWARD !
Thank You