Dr. Alfonso Ciotola, President of Fortress Paper Ltd. was interviewed last week by German radio channel BörsenRadio Network AG.

Why did you decide to produce non-woven wallpaper?

The trend in the wallpaper industry is obviously going from traditional wallpaper to non-woven wallpaper, because non-woven wallpaper has specific technological characteristics: high dimensional stability, good dry strippability, abrasive resistance, and good colour retention.

How many tons of wallpaper per year do you produce in Dresden?

We produce 45,000 tons non-woven wallpaper annually.

How big is this market? And where are those wallpapers going?

We estimate the market somewhat between 85,000 and 90,000 tons annually, and it’s growing. Last year it was temporarily slack because of the recession, but the unequivocal trend in this market is that the use of traditional wallpaper is declining, which creates many opportunities to sell the new products.

Is the crisis over? Is it going upward again?

2009 might not have been a good year for the paper industry, but it was a good year for Dresden, because despite the worldwide recession we were able to open new markets in Russia, the Ukraine and China, where the demand for non-woven wallpaper has increased.

What commodities are you using?

To produce paper you need pulp. However, to produce non-woven wallpaper you also need important synthetic fibres, polyester fibres, what gives the material the characteristics I mentioned earlier.

Why have the commodity prices so considerably increased?

This year the pulp prices have risen because the demand of pulp has increased in Europe and in China. There has also been a shortage because several pulp mills were shut down over the past years, and there was the earthquake in Chile. Chile is a very important producer of eucalyptus pulp.

Is the price expected to remain high, and will your profit margin decrease?

The margin has not been sinking so far, but it might go down slightly in the second half of the year. We have been able to counterbalance the increased costs with a higher productivity, because we highly invested in Dresden over the past years. We converted our paper machine from 250 meters per minute up to 400 meters per minute, which means a 50% higher production capacity. This certainly is a good basis to keep cost under control.

How much of the business volume does Dresden make up across the group?

We generated €80 Mio. last year, which was 60% of the volume across the group. We just finalized a new acquisition in Canada over the past months, which doubled our revenue across the group, but I’m assuming Dresden will still contribute 30 to 35%.

How profitable is Dresden?

Because of the investments we have made, the increased productivity and the focus on high-end products for the wallpaper industry, we obtained an EBITDA of 18%, which is a good result for the paper industry.

Click here to listen to the interview in German.

On Friday, Michael Hainsworth, host of the BNN show The Close, conducted a feature interview with Fortress Paper President and CEO Chad Wasilenkoff.

Discussing topics like Fortress Paper’s new paper machine upgrades (read “Fortress Paper Announces…PM1 Rebuild”), the future demand for wallpaper, and innovative products to come off the Fortress Paper line by year’s end, this eight-minute interview is an in-depth look at what this Vancouver-based company has to offer.

Watch the interview:

Fortress Paper Ltd. (www.fortresspaper.com) announces the signing by its wholly‑owned subsidiary Dresden Papier GmbH (“Dresden”) of a factoring agreement of Dresden’s accounts receivables with GE Capital Bank AG (“GE”) in connection with the rebuild of PM1 into a banknote machine. The factoring facility is for up to EUR 12 Million (CDN $17.8M) commencing February 2, 2010 and extends over a three year period. The base rate for financing is 3 month Euribor (0.665% on Feb 2) + 2.25%.

The Dresden factoring facility and cash on hand, as well as proceeds from a factoring agreement to be entered into by Landqart AG and a new Dresden loan facility should provide the necessary financing and cash flow for the planned rebuild of PM1 to increase its production capacity from the current 2,500 tonnes per annum to approximately 10,000 tonnes per annum. Fortress Paper has signed a letter of intent which outlines the major terms for the Dresden loan facility and Landqart factoring facility and is currently in the process of negotiating the definitive agreements.

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 production from this rebuilt machine scheduled to begin in the first quarter of 2011. Initial orders relating to proposed capital expenditures have been planned and initiated, subject to final confirmation.