Fortress Paper announces Q3 2013 results

Fortress Paper Ltd reported 2013 third quarter EBITDA loss of $7.3 million. The Dissolving Pulp Segment generated EBITDA loss of $6.6 million and the Security Paper Products Segment generated EBITDA of $1.6 million. Corporate costs contributed $2.3 million to EBITDA loss.

Fortress reported adjusted net loss from continuing operations of $15.6 million, or diluted loss per share of $1.07 for the third quarter of 2013 on sales of $53.2 million. In the second quarter of 2013, the Company reported adjusted net loss from continuing operations of $20.6 million or diluted loss per share of $1.42 on sales of $59.9 million, and for the third quarter of 2012, adjusted net loss from continuing operations of $23.2 million or diluted loss per share of $1.61 on sales of $38.3 million. Adjusted net loss in the second quarter of 2013 was impacted by an expense of approximately $3.5 million recorded as a deferred tax accrual.

Fortress reported a net loss from continuing operations of $13.4 million, or diluted loss per share of $0.92 for the third quarter of 2013. In the second quarter of 2013, the Company reported a net loss from continuing operations of $20.9 million or diluted loss per share of $1.43, and for the third quarter of 2012, net loss from continuing operations of $24.1 million or diluted loss per share of $1.67.

Fortress reported a net loss, including discontinued operations, of $12.4 million, or diluted loss per share of $0.85 for the third quarter of 2013. In the second quarter of 2013, the Company reported a net income, including discontinued operations of $134.1 million or diluted earnings per share of $9.23. Included in discontinued operations was a $153.3 million gain on the sale of the Dresden mill. In the third quarter of 2012, the Company reported a net loss of $19.1 million or diluted loss per share of $1.32, including discontinued operations.

The Dissolving Pulp Segment has experienced another difficult quarter due to depressed market prices, delays in the cogeneration facility completion and operational and maintenance issues. The Fortress Specialty Cellulose ("FSC") mill cogeneration facility project was successfully completed on October 2, 2013 and began delivering power to the Hydro Québec grid at the contracted commercial rate. This is a significant milestone for the reduction of the overall cost structure at the mill.

As a result of a strategic assessment and testing of alternatives for the FSC mill, the Company has been pursuing a strategy of modifying the mill to be capable of swinging production from dissolving pulp to northern bleached hardwood kraft (NBHK) pulp. This redesign is expected to enable the Company to maximize margins in response to changing market conditions.

The Security Paper Products Segment has experienced a third consecutive quarter with sales, volumes and revenues significantly higher relative to any comparative period in 2012 and 2011. The Landqart mill continues to implement new programs to improve efficiencies and profitability. EBITDA for the Security Paper Products Segment for the quarter ended September 30, 2013 was $7.4 million higher when compared to the third quarter of 2012, and $1.1 million higher compared to the previous quarter. However, less than favourable conditions, including the strength of the Swiss franc against the Euro, overcapacity in the banknote paper industry and increased competition for orders, continue to adversely impact the results of the Security Paper Products Segment.