By: The Globe and Mail
Not so long ago, Chad Wasilenkoff was a darling of the stock market, having found a way to transform money-losing old paper mills into low-cost producers of rayon that sent shares of his Fortress Paper Ltd. soaring on the TSX. But Fortress fell out of favour, done in by steep import duties in key markets, a global supply glut and ramp-up problems. Now Mr. Wasilenkoff is stepping down as president and chief executive.
While the company said Mr. Wasilenkoff will focus on “strategic initiatives” in his new role as executive chairman, the move is a stunning turnaround for Mr. Wasilenkoff and the company he started in 2006.
Mr. Wasilenkoff, 43, said in an interview late Monday the timing was right for him to step back from day-to-day decision-making and turn full-time to finding new growth opportunities and ways to strengthen Fortress’ balance sheet.
“I felt I put in my time [as CEO] and was pleased with the way everything was going,” he said about the decision.
Vancouver-based Fortress said Mr. Wasilenkoff will hand the president and CEO titles to Yvon Pelletier on Oct. 1. He is currently president of subsidiary Fortress Specialty Cellulose Inc.
The corner-office shuffle is a turning point in Mr. Wasilenkoff’s troubled efforts to cash in on what was once viewed as a lucrative market for dissolving pulp, the raw material in the production of rayon fibre. Four years ago, investors flocked to the stock based on a promising story about a big global shift to rayon as a substitute for high-priced cotton in the clothing industry in places like China and India.
But demand for specialized pulp fell dramatically as new entrants glutted the markets, China slapped stiff duties on imports of dissolving pulp, and Fortress’s converted mill at Thurso, Que., ran into operating and cost-overrun difficulties.
Fortress shares soared to the $63 range in 2011. In March of this year, the stock was at about $2.15, and is now trading at the $4 level. The company is also a manufacturer of banknote paper at a mill in Switzerland that makes high-security paper for passports and other items; a third business, non-woven wallpaper produced at a mill in Germany, has been sold.
Fortress said on Monday that Mr. Pelletier, who came over from Tembec Inc. in 2013, did much to improve performance at the Thurso mill and it was decided that the company and shareholders “could benefit from expanding his role.” He is to continue his focus on the dissolving pulp business, “while also assuming greater responsibility to grow revenues and improve margins across the company,” Fortress lead director Joe Nemeth said.
The move comes after a “robust, nearly year-long succession planning process,” Fortress said. As part of the transition, Mr. Wasilenkoff has signed a five-year “services agreement” under which he commits “the majority of his working time to fulfilling his responsibilities as executive chairman,” the company said. “In recognition of his reduced time commitment, the company may earlier terminate the services agreement, by paying all of the remaining deferred amounts owing to Mr. Wasilenkoff in connection with his change in title.”
Building a profitable dissolving pulp business has been challenging but Mr. Wasilenkoff said Monday that he believed Fortress was finally on the right track, with the Thurso mill now making money. “We’re getting some tailwind with improving dissolving pulp prices and the [low] Canadian dollar and oil prices are helping us,” he said.
Asked if the company’s other main line of business – banknotes and security papers – might be for sale, he replied that it might be if the price is right.
Other options are acquisitions, in non-core areas such as technology, and sale-leaseback deals related to Fortress’ land and buildings at the banknote operations in Switzerland, he added.
There must be disappointment with the way his dissolving pulp-rayon project has turned out? “There is, for sure. It’s been very, very unfortunate. But we roll with the punches.”