Fortress Global Enterprises Inc. (“Fortress Global Enterprises” or the “Company”) (TSX:FGE) (OTCQX:FTPLF) reported 2018 first quarter operating EBITDA loss from continuing operations of $1.4 million compared to operating EBITDA loss from continuing operations of $5.7 million in the previous quarter and operating EBITDA from continuing operations of $6.0 million in the prior year comparative period. The Dissolving Pulp Segment generated operating EBITDA of $0.2 million and corporate costs were $1.6 million in the first quarter of 2018.
Chadwick Wasilenkoff, Chief Executive Officer of Fortress Global Enterprises, commented: “Management was pleased with the completion of the fifth digester, on time and on budget during the first quarter. Lower than expected production volumes at the Fortress Specialty Cellulose (“FSC”) mill in the first quarter was primarily due to issues encountered in January which were seasonal in nature. Progress was made throughout the first quarter of 2018 with production volumes and cost structure continuing to improve month by month and continuing into April 2018. In April, the FSC mill experienced an average daily production volume increase of approximately 40 ADMT per day or 10% as compared to the first quarter average of 2018 with improvements anticipated in the second and third quarters of 2018. We also finalized the acquisition of S2G Biochemicals Inc. which we believe will provide a variety of unique business opportunities. We are currently in the process of finalizing funding for the xylitol demonstration plant through various non-dilutive sources.”
The Dissolving Pulp Segment generated operating EBITDA of $0.2 million for the quarter ended March 31, 2018, compared to operating EBITDA loss of $4.4 million for the fourth quarter of 2017 and operating EBITDA of $8.3 million for the prior year comparative period. During the first quarter of 2018, the FSC mill was shut down for three days in order to complete the connections of the fifth digester. The results of the first quarter of 2018 were impacted by an increase in production costs and an 8% lower realized Canadian sales price when compared to the prior year comparative period. A total of 34,126 air dried metric tonnes (“ADMT”) of dissolving pulp were produced in the first quarter of 2018 and the FSC mill sold 33,144 ADMT of dissolving pulp in the same period, compared to sales of 24,798 ADMT and 37,833 ADMT of dissolving pulp in the previous quarter and prior year comparative period, respectively.
Dissolving pulp prices in 2018 have been increasing through the first quarter compared to the prior year average and the current price of US$932 per tonne is US$69 higher year over year. Typical market cycle peaks occur in the fall coinciding with downstream textile and viscose staple fibre (“VSF”) market cycles. Dissolving pulp prices are likely being supported by favorable paper pulp market pricing, which influences swing mill production toward paper pulp, and increases in Chinese VSF output. VSF prices historically trade at a premium to cotton and have been supported by a 32% increase in spot cotton pricing over the past two years. Sales of reserve cotton sales for 2018 began in April and are expected to further reduce the Chinese stockpile, which is expected to improve stability in the cotton market. Cotton ending stocks in China are projected to decline in 2018 more than 15.3% to 41.0 million bales, the lowest level in six years, and the supply of higher quality imported cotton remains limited. Growing population and middle class continue to drive the worldwide demand for fiber (103. million tonnes) as reported in “The Fiber Year 2018”. Increased demand for fiber has resulted in increased prices and demand for textile feedstocks, including manmade materials which continue to capture market share. VSF is expected to continue to grow by over 6% per year.
In March 2018, the Company announced that the FSC mill completed, on time and on budget, construction and began commissioning of the fifth digester that was announced in November 2016. The ramp up and optimization of the fifth digester continues in the second quarter of 2018 with successful cooks having been completed on a batch basis. The Company expects the fifth digester to incrementally increase production capacity by 8,500 ADMT in 2018 and 17,000 ADMT in 2019 compared to current production capacity.
more detail at: https://fortresspaper.com/wp-content/uploads/2018/05/Fortress_Global_Enterprises_Announces_First_Quarter_2018_Results.pdf