Fortress Paper Ltd. (“Fortress Paper” or the “Company”) today announced results for the third quarter ended September 30, 2015. The Company reported operating EBITDA of $5.5 million, an increase of $1.4 million and $7.0 million over the previous quarter and prior year comparative period, respectively. The Dissolving Pulp Segment (“Dissolving Pulp”) generated operating EBITDA of $5.4 million and the Security Paper Products Segment (“Security Paper”) generated operating EBITDA of $2.2 million. Corporate costs included in operating EBITDA were $2.1 million.
“We were pleased to report another quarter of positive momentum and overall improvement in our operating EBITDA, led by Dissolving Pulp,” stated Yvon Pelletier, Chief Executive Officer. “In Dissolving Pulp, our ongoing efforts to diversify our end market exposure are gaining traction while market dynamics continue to show signs of improvement. In Security Paper, we had lower shipments compared to the prior quarter largely due to product mix and timing of sales. That said, the underlying improvement in Security Paper is encouraging and we continue to implement new initiatives to improve profitability. We are committed to building on the progress we have made during 2015 to expand our business and actively manage our cost base.”
Dissolving Pulp operating EBITDA was $5.4 million for the third quarter of 2015, representing an improvement of $3.3 million over the second quarter of 2015. The results for the quarter were impacted mainly by improved pricing, increased power generation under the additional power supply agreement with Hydro Québec, and favourable exchange rates. Dissolving Pulp operating EBITDA improved by $6.6 million compared to the third quarter of 2014.
The Company sold 45,377 air dried metric tonnes (“ADMT”) of dissolving pulp in the third quarter of 2015 compared to 39,664 ADMT in the previous quarter of 2015. Pricing and industry conditions continued to improve. The Company is on target to reduce its dissolving pulp shipments to China by approximately 20% over the second half of the year as compared to the first six months of 2015.
Security Paper operating EBITDA was $2.2 million for the third quarter of 2015, which was $1.2 million lower when compared to the previous quarter, and $1.1 million higher when compared to results in the third quarter of 2014. The Landqart mill sold 2,456 tonnes of security paper in the third quarter of 2015, compared to 2,745 tonnes in the second quarter of 2015. Security Paper operating EBITDA was primarily impacted by the timing of sales, product mix and fluctuations in foreign exchange rates; however, more efficient production and improved waste rates positively impacted Security Paper results relative to the prior year comparative period.
The Landqart mill is exposed to foreign currency exchange fluctuations, as a material amount of its sales are denominated in euros and its major costs, excluding raw materials, are denominated in Swiss francs, as compared to competitors whose manufacturing costs are primarily denominated in euros. In response to the significant appreciation of the Swiss franc against the euro in the first quarter of 2015, management continues to implement the foreign exchange counter measure program, which includes mitigating foreign exchange impacts and reducing other costs in areas such as procurement and logistics.