An arial view of the Landqart Mill in Switzerland.

Fortress Paper owns and operates two paper mills in Europe – the Dresden Mill and the Landqart Mill. Each with a specific task, the mills are responsible for Fortress’ output of paper products including wallpaper, banknotes, security paper, and more. This article takes a closer look at the Landqart Mill in Landqart, Switzerland.

For over 100 years, the Landqart Mill has been responsible for the production of security and specialty papers. Encompassing products such as banknotes, visa papers, tickets, passport paper, watermarked paper, bristol board and more, the Landqart Mill has developed a strong reputation for being a leader within the security paper industry. The mill has also become a global player in the growing market for trademark protection.

LANDQART, A SHORT HISTORY
The Landqart Mill was originally constructed in 1872 with one paper machine, with a second one being added almost 25 years later. By the twentieth century, the Landqart Mill saw a steady increase in business, adding yet another paper machine to maximize output.

With Europe thriving under a technology boom in the 1960s, Landqart was able to confront the world market more efficiently. The existing mill merged with other paper factories on the Sihl River and switched their focus from a manufacturer of graphic paper to a reputed supplier of security paper. The production of banknotes was key to the new developments at Landqart – so much so that the mill became the sole provider for the Swiss currency in 1979.

In 2003, the Landqart Mill opened a high performance heat embossment plant for the application of film in strips or as patches onto security paper. This technology was implemented into banknote production, allowing the mill to produce high-tech, anti-counterfeit bills.

In 2007, Fortress Paper – a Vancouver-based security and specialty paper company – purchased the Landqart Mill and has been developing, testing, and producing new innovative security products on site ever since.

LANDQART TODAY
The Landqart Mill produces banknotes of over 100 currency denominations for more than 25 countries around the globe. In addition to still being the sole provider of the Swiss currency, the mill is one of only nine suppliers of banknote paper for the Euro currency.

Using its extensive knowledge of security papers and features, the mill also develops products for more commercial purposes, such as electronic passports. This January, Fortress Paper announced the signing of a contract that will see the mill produce approximately 2,500,000 e-passports over the next five years (read “Fortress Paper Announces EPassport Contract”).

On top of that, Fortress also announced in February that it had received funding to rebuild one of its primary paper machines at Landqart, the PM1. Currently used for lower margin specialty papers and low to medium security papers, the rebuild of the machine will increase the mill’s production capacity four times over – from 2,500 tonnes per year to 10,000 tonnes per year (read “Fortress Paper Announces Signing of EUR18.5 Million Loan for PM1 Rebuild”).

USING STEAM TO GO GREEN
Producing security papers and banknotes aren’t the only innovations with which the Landqart Mill engages. The mill has also developed a unique strategy to combat its environmental emissions with the use of steam.

Steam is an important component of creating paper. It’s used as a primary source of heat in the process of converting pulp to paper and while many paper mills would burn fossil fuels on-site to generate this steam, Landqart actually re-uses steam that comes from a nearby refuse incinerating plant.

The steam has to travel nearly 7km through a pipeline that connects the plant to the mill. Landqart agrees that the pipeline is perhaps “unconventional,” but is going a long way – literally – to protect “natural resources and reduce CO2 emissions into the environment” in the production of paper which they are using to create – among other things – banknotes.

SOURCES:
Landqart: Swiss Special Paper
Fortress Paper Ltd.
Landqart: “Responsibility for Nature and Environment”

This week, The Globe and Mail selected Fortress Paper as a microcap company poised to do big things in the coming months:

Fortress Paper Ltd., which has mills in Germany and Switzerland, makes security (such as currency notes) and specialty papers as well as wallpaper.

“It definitely has above-average profitability compared to other businesses that operate in the pulp-and-paper segment,” said Ralph Lindenblatt of Bissett Investment Management, a unit of Franklin Templeton Investments Corp.

The stock is “very attractively valued,” trading at 11 times trailing earnings, he added.

SOURCE:
The Globe and Mail: “Microcap growth at a reasonable price”

#1 – Metallic Stripe (holographic stripe): Numbers and two-tone maple leaves in the metallic stripe change colour and light up when the bill is tilted. The numbers on the stripe match the bill’s value.

#2 – Ghost Image (watermark): When held to the light, the ghost image that appears matches the portrait. The number above the ghost image’s shoulder also matches the bill’s value, and the dashes form a continuous line.

#3 – Dashes (security thread): The dashes change from gold to green when the bill is tilted, and tiny numbers next to “CAN” match the bill’s value.

#4 – Puzzle Number (see-through number): When held to the light, a seemingly “broken” number matching the bill’s value is filled in by stripes making the number “whole.”

#5 – Raised Ink (intaglio): The large denomination number, the portrait, the coat of arms, and the text “Bank of Canada – Banque du Canada” are all printed with raised ink that makes those parts of the bill feel thicker.

#6 – UV (fluorescence): Under a UV light, “Bank of Canada – Banque du Canada” text and a number matching the bill’s value glow in red and yellow. Scattered red and yellow fibres on both sides of the bill also appear.

SOURCE:
Bank of Canada: “Bank Notes”

Analyst Brian Pow predicted continued growth in Fortress Paper

Last week, Patt Bolland – host of BNN’s Trading Day – talked to Brian Pow, vice president of research and equity analyst for Acumen Capital, about Fortress Paper’s new PM1 upgrade and discussed how this change will have a positive effect on the company’s future.

Watch the clip HERE (the Fortress Paper segment begins around 3:10).

SOURCE:
BNN: Trading Day

Though credit cards, online banking and debit cards seem to be maintaining an edge over cold hard cash, many agree this is a common misconception.

A trial-run move to debit only in Uzbekistan has demonstrated major problems in a digital-only scenario (read “Uzbekistan debit woes highlight continual need for banknotes”) and late last year British business leaders issued a public demand for more banknotes to be printed (read “British business leaders demand more ten dollar banknotes”).

Chad Wasilenkoff, President and CEO of Fortress Paper, agrees that the global demand for banknotes is always increasing.

“Banknotes continue, in all countries that we know of, to require more banknotes on an annual basis,” he says in this video.

The upgrades to their PM1 printing machine will allow Fortress Paper to print more banknotes at their European facilities. The upgraded machine will increase production capacity from the current 2,500 tonnes per year to approximately 10,000 tonnes per year.

In addition to printing banknotes, Fortress Paper also prints various other security and specialty papers for items such as visas and passports.

SOURCES:
YouTube: “Fortress Paper CEO Chad Wasilenkoff Speaks about the Solid Demand for Banknotes”
“Fortress Paper announces approval of initial financing facility for PM1 rebuild”

The Dresden loan in conjunction with the previously announced Dresden factoring agreement for up to EUR 12 million, the Landqart factoring agreement to be finalized together with cash on hand will provide the necessary financing and cashflow for the rebuild of the PM1 machine. The rebuild increases Fortress’ banknote production capacity from the current 2,500 tonnes per annum to approximately 10,000 tonnes per annum.

PM1 is currently utilized for lower margin specialty papers and low to medium security papers. The rebuild is expected to be completed by the end of 2010, with banknote papers production from this rebuilt machine scheduled to begin in the first quarter of 2011.

SOURCE:
MarketWire: Fortress Paper Announces Signing of EUR 18.5 Million Loan for PM1 Rebuild

Irisafe is a modern security device developed that cannot be copied by scanners or photocopiers

*This article is the last in a three-part series on counterfeiting. Read the first two articles in the series: Part 1, Part 2

Anti-counterfeiting technology in and on banknotes has been evolved more over the past 30 years than it has in the entire history of money.

Today’s banknotes are not just used as currency; they are also becoming high-tech anti-counterfeiting devices.

Because copying technology like scanners, colour photocopiers and digital imaging software not only increased in popularity but also dropped in price, the act of counterfeiting banknotes became easier in the late twentieth century. In the United States alone, it is estimated that nearly $10 billion in counterfeit bills were circulated between 1990 and 1995.

In the face of this surplus of bogus bills, the US government began improving their designs and embedding security devices in their banknotes. The US Department of Treasury’s Bureau of Engraving and Printing, the division of the US government that is responsible for the actual design and printing of money crafted new 10, 20, 50 and 100 dollar bills with bigger faces, multi-coloured paper, holograms and reflective inks that change color depending on the lighting.

Around the same time, Europe was developing its single currency – the euro. Given the history of counterfeiting, and the increase in counterfeit bills in the US, officials involved in the creation of the euro to great lengths to protect the currency. Detailed images of the new banknotes weren’t publicized until almost the last moment.

The euro featured four layers of security. The first layer, watermarks and security threads, was announced to the general public. The second layer was a set of seven or eight measures that were announced to about five million professional money handlers. The third layer was another set of features to help machines spot bogus banknotes. The fourth layer still remains a secret.

Creating banknotes with multiple layers is now a common strategy to prevent counterfeiting. Fortress Paper, a leading international supplier of security and specialty papers, recently announced the launch of their multi-layered banknote paper called Durasafe, for example.

Durasafe is a hybrid banknote substrate that consists of a polymer core sandwiched between two 100 per cent cotton paper layers. The outer layers also contain “traditional” security features such as a watermark, security fibres and security threads. In addition to all that, Durasafe banknote paper also features a transparent window through all three layers maximizing the paper’s security potential.

Fortress Paper has also developed a feature called Irisafe, an iridescent striped coating that is integrated into security papers and is characterized by brilliant and changing colours when you change the angle of view. A colour copier cannot reproduce either the brilliancy or the change of colour present in this feature. At best, a photocopied forgery will show spotty stripes instead of the trademarked Irisafe qualities.

Many other security features have been introduced to banknotes around the world. Microtext (tiny repetitive letters or numbers), intaglio printing (raised lettering), holograms, and protection ornaments (markers next to the note’s denomination) are just some examples.

Intricate re-designs of banknotes every few decades, and consistent development of new security measures also provides surety that counterfeiting, while it may still exist, is definitely by no means an easy task these days.

SOURCES:
Banknotes of the Modern World: “Security Features”
“A Short History of Money”
“History of Counterfeiting”
Fortress Paper Ltd.
Global Paper Security: “The Launch of Durasafe Banknote Paper”
Global Paper Security: “Fortress Paper’s Irisafe”

New biometric gates at London's Stansted Airport scan your facial features before allowing you to cross the border. Photo courtesy Passenger Terminal Today.

London’s Stansted Airport has begun using biometric e-passport gates that use facial recognition technology to process incoming passengers.

Passengers with new e-passports traveling to the UK via Stansted can use the Autogates, which scan their face and check their passport photo in seconds – both helping to save time in line and provide a more secure and efficient check-in.

A live image of the passenger standing at the gate is captured and biometric technology then compares this with the image stored on the chip embedded within the passport by measuring specific facial points. If there is a match and they clear security, the automatic gates allow the traveler across the border.

Though many countries have not introduced biometrics (fingerprint, facial, DNA and/or iris recognition) into the equation, simple electronic passports – passports that contain a Radio-Frequency Identification (RFID) chip – are increasing in popularity around the world.

These chips embedded in the passport contain all the same information as non-electronic passports such as the passengers name, date of birth, sex, place of birth and nationality.

Biometric passports contain the same chip and the same information, but go a step further to include scans of a passenger’s physical characteristics.

As of October 2009, over 79 countries had introduced biometric passports and over 100 million ePassports had been issued globally. With over 70 million new ePassports being issued every year, it is estimated that over the next ten years, most of the 750 million passports currently in use will be replaced by electronic passports.

And with the demand for e-passports increasing, security paper manufacturers are seeing an increase in business.

In January, Vancouver-based Fortress Paper was awarded a contract to make 2.5 million e-passports which will be enabled with RFID chips and have the capability of storing biometric data (read “Fortress Paper gets electronic passport contract”).

SOURCES:
Fingerprint Sri Lanka: “UK’s Stansted Airport deploys biometric e-passport gates”
Passenger Terminal Today: “Stansted deploys 3M biometric passport gates”
Fortress Paper: “What are ePassports?”

Adjusted net income for the fourth quarter of 2009 was $0.47 per share. Adjusted net income for the previous year comparative period and prior quarter was $0.28 per share and $0.38 per share, respectively.

EBITDA was $7.9 million or 15.4% of sales for the three months ended December 31, 2009. For the three months ended December 31, 2008 EBITDA was $6.0 million or 13.2% of sales. EBITDA for the third quarter of 2009 was $7.0 million or 13.7% of sales. In the fourth quarter of 2009 both mills experienced strong sales and earnings throughout the quarter. The increase in EBITDA relative to the prior year comparative period was partially due to the global financial and economic crisis which impacted sales late in 2008.

For the year ended December 31, 2009, Fortress Paper recorded net income of $12.7 million or $1.23 per share (diluted) on sales of $198.3 million. For the year ended December 31, 2008, the Company recorded net income of $12.7 million or $1.24 per share (diluted) on sales of $189.0 million.

Adjusted net income for the year ended December 31, 2009 was $13.8 million or $1.34 per share (diluted). Adjusted net income for the previous year comparative period was $13.3 million or $1.30 per share (diluted).

EBITDA was $25.6 million for the year ended December 31, 2009 compared to $25.0 million for the year ended December 31, 2008.

EBITDA relative to the prior year was slightly improved. Due to the global financial and economic crisis Fortress experienced a slow start to the year; however, this was more than compensated by a very strong second half. Order logs for both mills continue to show strength.

EBITDA is defined as net income before interest, income taxes, depreciation, amortization, non-operating income and expenses and stock based compensation which the Company considers to be a key performance indicator. EBITDA is not a generally accepted earnings measure and should not be considered as an alternative to earnings or cash flows as determined in accordance with Canadian generally accepted accounting principles. As there is no standardized method of calculating EBITDA, the Company’s use for the term may not be comparable with similarly titled measures used by other companies.

Combining strong results from both mills this quarter has resulted in consecutive record quarterly EBITDA for Fortress. As the year has progressed our mills have weathered the economic crisis and produced continually better results as the year progressed. Maintaining a strong balance sheet at a time the company is evaluating internal growth initiatives and accretive acquisition opportunities puts Fortress in an advantageous position.

The Dresden mill in particular has shown resilience through the economic crisis and progressively turned out improved results quarter over quarter. The Landqart mill has also performed well in the second half of the year coinciding with higher margin banknote paper production.

The market for security papers continues to show strength and the order book for wallpaper base has grown to its current level of eight weeks.

As news released October 14, 2009, Durasafe(R) banknote paper was officially launched at the Washington Banknote Conference held in December 2009. Currently several national banks are working on trials with Durasafe(R) banknote paper. Estimating the time to commercialization with prospective customers such as printers and national banks is dependent on a number of variables that are not within the Company’s control. Some variables consist of the integration of other new and innovative security features and the timing of a new banknote series launch.

Durasafe(R) is an innovative banknote substrate, which consists of two 100% cotton paper layers, which contain all the security features common to traditional banknote paper but with a polymer core. This three layer substrate dramatically increases the durability and design options as compared to conventional paper banknotes. Durasafe(R) adds the unique ability to implement security features consisting of semi and fully transparent windows of different shapes, sizes and positions.

Selected Financial Information AND the Operations Results click here

Source: Fortress Paper Corporate Website

On CRN Digital Talk Radio, Erik Hines & Jack Roberts host The Erik & Jack Attack, where they share sixty minutes of exciting discussion, pop culture, politics, news, and anything else that may be on their minds. On Tuesday, February 9th the Boston bred conservative and the left coast liberal talked about Fortress Paper.

From their blog:

Did you know that there’s only one company in the world authorized to produce the Swiss franc banknotes, which are widely considered to be the most secure currency in the world?

Meet Fortress Paper, (TSX: FTP), an international provider of security and other specialty papers, which is the sole manufacturer of the banknote paper for the Swiss franc. They have also produced banknote papers for over 100 currency denominations for over 25 countries and are one of only nine authorized suppliers of banknote paper for the Euro currency.

New security realities in the 21st century have driven the need for ever-improving security features to be included in banknotes, passports, identification cards, checks and certification papers. The proliferation of color copying, scanning and printing technologies require that producers must continue to develop increasingly sophisticated anti-counterfeit solutions.

While governments continue to improve the quality of banknote paper, overall banknote circulation has continued to grow as a result of economic activity in developing countries and the introduction of the Euro in Europe. “Counterfeit money printing activity continues in several global hot-spots,” reports CSO Magazine.

SOURCE:
CRN Digital Talk Radio: Erik & Jack Attack – “Chad Wasilenkoff, CEO of banknote-maker Fortress Paper”