annual general meeting...may 28, 2019 · • average selling price (2018): ~us$4,900/tonne •...
TRANSCRIPT
ANNUAL GENERAL MEETING
May 28th, 2019
1000 - 925 West Georgia Street Vancouver BC. Canada
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Forward Looking Information - Disclaimer This presentation contains certain forward-looking information that reflects the Company’s current views and/or expectations with
respect to, among other things, the markets the Company operates in; the impact of currency exchange rates and other market
factors on the results of the Company’s mills; expectations relating to capital expenditure spending; and the Company’s production,
biorefinery, and balance sheet initiatives. Persons reading this presentation are cautioned that statements comprising forward-
looking information are only predictions, and that the Company's actual future results or performance are subject to certain risks
and uncertainties including, without limitation: those relating to potential disruptions to production and delivery, including as a result
of equipment failures, labour issues, extreme weather, the complex integration of processes and equipment and other factors;
fluctuations in the market price for products sold; trade restrictions or import duties imposed by foreign governments; labour
relations; failure to meet regulatory requirements; changes in the market; potential downturns in economic conditions; fluctuations in
the price and supply of required materials; foreign exchange fluctuations; availability of financing (as necessary); ability to
restructure the Company’s existing debt on satisfactory terms; and other risk factors detailed in our Annual Information Form dated
March 29, 2019 available on SEDAR at www.sedar.com and other filings with the Canadian securities regulatory authorities. In
particular, financial forecasts and expectations are not indicators of future financial performance and there is no assurance that the
Company’s assumptions in support of such forecasts or expectations are correct, accurate, or complete. These risks, as well as
others, could cause actual results and events to vary significantly. The Company does not undertake any obligation to update any
forward-looking information, except as required by applicable securities law.
Unless otherwise noted, all references in this presentation to “$” are to Canadian dollars. The selected financial information
presented herein is qualified in its entirety by, and should be read in conjunction with, the Company’s unaudited condensed
consolidated financial statements for the quarter ended March 31, 2019 and the related notes thereto and Management’s
Discussion & Analysis, which are available on SEDAR. This presentation contains reference to “Operating EBITDA”, which is a
non-GAAP financial measure. For disclosure of the manner in which these measures are calculated and a reconciliation to net loss,
please refer to the MD&A for the quarter ended March 31, 2019, available on SEDAR.
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Year 2018 Recap
The Company created a new reporting segment, the Bioproducts Segment, as a result of
the acquisition of S2G Biochemicals Inc. (“S2G”)
Integrated S2G team and started front end engineering design for planned
demonstration plant
Secured Federal and Quebec Government commitments for up to $17.4 million and
initiated negotiations for an additional $12.5 million
Entered into a technology license and collaboration agreement with Mondelēz, one of
the world’s largest snacking companies, including commitments in principle relating to
the purchase of xylitol from the demonstration plant and a future commercial plant
Completed convertible debenture refinancing announced on Aug 28th 2018 by amending
and extending maturity to December 31, 2022 from December 31, 2019
Giovanni Iadeluca promoted to CEO of Fortress Global Enterprises
Progress was made in productivity, reliability and quality all while managing a baseline
capital expenditure program
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Improved Production Stability
200
600
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Sep
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Feb
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Liquor Cycle Volume (ADMT/day) ADMT
Launched leadership
Phase 1 - KBI/KPI Increase
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Production Volume Improvements
0.0
600.0
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Sep
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Feb
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ADMT Production ADMT/day
6
15
25
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18
Megawatts MW
Improved Monthly Average MW Production
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2019 Q1 Recap
Mill stability continued to improve, however, due to
a combination of factors the positive momentum
from the prior three quarters was temporarily
interrupted
Extreme weather conditions and unusual region-
wide electrical outages impacted operating results
in the first quarter and April of 2019*
Important cooking process knowledge was gained
which will ensure the winter issues are mitigated
and throughput increased under diverse conditions
Entering seasonably more productive months
*Operating EBITDA loss of $9.7 million, DP operating EBITDA loss of $8.8 million. The Company invested $0.8 million in the Bioproducts Segment which was
offset by grants and funding and corporate costs were $0.9 million in the first quarter of 2019.
Achieved important milestones in the
first quarter of 2019 by advancing
engineering for our bioproducts
demonstration plant, and ordering
equipment required for tie-in to the
FSC mill’s fifth digester
Signed definitive contribution
agreement with NRC for up to $10
million nonrefundable grant. This
funding from NRC is in addition to
previously announced Governments of
Canada and Quebec commitments for
up to $17.4 million
Milestones
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Strategy 2019
Production Improvements
Biorefinery Balance Sheet Improvements
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Annual planned shutdown in Q2 has been reduced by a
day as we were able to perform some maintenance during
the power outages in the first quarter
We intend to complete modifications to the fifth digester for
the extraction of prehydrolysis liquor, an important step for
the bioproducts demonstration plant project
Annual planned shutdown has been moved to Q2 to take
advantage of historically stronger seasonal pricing in the
second half of the year
Continued integration of the 5th digester through 2019 will
result in increased run rate throughput and reduced costs
Other Production initiatives such as online real-time
equipment monitoring system
Production Improvements
Strategy 2019 - Production Improvements
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Cellulose 43-45%
Inorganics/Organics
Waste water treatments
Lignin 20-28%
Water
100 t of Green Wood
17t of specialty cellulose grade
20t of rayon cellulose grade
25t of fluff pulp
27t of paper pulp grade
Black Liquor Organics - Energy Inorganics - Recovery
Hemicelluloses (PHK) 12-15%
INPUT COOKING PROCESS BLEACHING PROCESS OUTPUT
Bio-products Opportunity
Burned in recovery boiler for energy
Biorefinery - Pulp Processes and Yields
Source: Hawkins Wright
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Strategy 2019 – Biorefinery
Immediate Opportunities
•Existing waste streams
•Low-capital, quick wins
PHL Opportunities
•Animal feed
•Non-sulfonated lignin
•Furfural
•Organic acids
•Sugars for high-value bioproducts
Other Opportunities
•Sulfonated lignin
•Biofuels
•Bio-oil
•Hydrogen
•Power
•Biochemicals
•CO2-based products
High Value Bioproducts Products
•Xylitol
•Xylose
•Xylo-oligomers
•Other sugar alcohols
Strategic plan to become one of the world leaders in
demonstrating and commercializing leading technologies
for conversion of hemicellulose to advanced bioproducts
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Biorefinery - Xylitol Market
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
0
50
100
150
200
250
300
350
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Tonnes USD Millions
000s T
on
nes
US
$M
• Average selling price (2018): ~US$4,900/tonne
• Volumes expected to grow at CAGR of 6.5% (2017 – 2024)
• Market expected to exceed US$1B by 2022
Volume & Revenue Forecast to 2024
Source: Global Market Insights -Xylitol Market Report 2024, ICTS, EPA, FDA, EFSA, ADA, CCM
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Biorefinery – Value Added Products
Identify complimentary innovative value – added
processes/bioproduct opportunities
Assess business cases & required technology, priortize
and select
Identify additional strategic alliances
Finalize demonstration plant funding and commence
construction of demonstration plant in second half of
2019
Biorefinery
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Strategy 2019 - Balance Sheet Improvements
Agreement in principle with Investissement Québec for a
multi year interest and principal payment deferrals and
an extended term on the $105.2 million indebtedness,
subject to definitive documentation
Restricted cash: CHF 3.2 million (CDN $4.3) expected
to become available June 2019
Working capital should improve with operations in
second half of the year
Balance Sheet Improvements
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Dissolving Pulp - Market Outlook
Substantial recent increases in Viscose (VSF)
capacity has contributed to inventory build up
and softening of VSF pricing. Near term
dissolving pulp pricing will most likely continue
to be impacted by VSF market pricing and
paper pulp markets
Dissolving pulp (DP) and VSF markets remain
structurally sound – VSF demand should
eventually catch up to rapid increase in supply
Growing VSF market will increase pressure on
DP supply over the next few years
DP demand is projected to grow at ~ 6% per
annum for the foreseeable future
Source: RISI, CCF, Hawkins Wright
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Textile Market
World textile market is growing as a result of
favorable macro trends, expanding middle
classes and consumer spending in emerging
markets
VSF is gaining market share due to technical
advantages over competing products thus
dragging along dissolving pulp demand
Per capita fibre consumption has risen from ~
5kg in 1960 to almost 14kg in 2016
Textile fibre demand growth expected to
increase by over 60% through 2030
VSF growth has historically outpaced textile
fibre demand growth
Source: RISI, CCF, Hawkins Wright
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Global Fibre Markets - VSF Demand Growing Faster Than Other Fibres
Natural Fibers, 31.6mt , 30.6%
Cellulosic, 6.6mt, 6.4%
Synthetics, 64.9mt, 62.9%
-4.5% -4.2%
85.7%
68.8%
37.5%
-10.%
10.%
30.%
50.%
70.%
90.%
110.%
Cotton NaturalFibers
Cellulosic Synthetics Total FiberProduction
2006-2016 % Growth in Volume
Natural Fibers 32.9 mt 44.1%
Cellulosic 3.6 mt 4.8%
Synthetic 38.3 mt 51.1%
Source: “The Fiber Year 2017 ” and “Hawkins Wright, 2010 World Survey on Textiles & Nonwovens”
2017 World Fiber Production
103.1 Million tonnes (mt)
2006 World Fiber Production
74.8 mt
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THANK YOU
www.fortressge.com
@fortressge
t:888-820-3888
Quote from Canada’s Bioeconomy Strategy "Canada has a window now to become one of the world’s most successful modern bioeconomies. It is important that governments, financial institutions and large corporations hasten the pace of policies”