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modulexon Aug 21, 2015 7:35am
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TEMBEC DOWNGRADED ON THREAT FROM ICE BEAR
TEMBEC DOWNGRADED ON THREAT FROM ICE BEAR
Tembec Inc downgraded on threat from ICE BEAR
Jonathan Ratner | May 6, 2015 (GLOBE AND MAIL)
Tembec Inc.’s largest competitor in the ethers market is developing an ultra-high purity specialty dissolving pulp — dubbed Ice Bear — that could take a bite out of the Montreal-based forest products maker’s business.
Norway-based Borregaard ASA hinted at the project for cellulose-based polymers at its March 2014 investor day, initially saying they would target “niches within niches.”
Now the company has provided more details, noting that customer testing has begun. Regular commercial volumes are expected in mid-2016, but the new products are currently only offered by a few suppliers.
Paul Quinn, a paper and packaging analyst at RBC Capital Markets, expects a slow ramp-up of the specialty pulp grades Borregaard is creating. However, he believes the company is targeting some of Tembec’s market share, while Rayonier Advanced Materials Inc. continues to aggressively seek a home for its excess capacity in the ethers market.
As a result, Quinn downgraded Tembec to sector perform from outperform and cut his price target on the stock to $3 from $3.25.
The analyst also cited the company’s disappointing second-quarter results and a discouraging outlook for its specialty pulp volumes.
“As a relatively higher-cost producer across most of its products, we see a more challenging outlook for the company in 2015/16 given the volatile pricing environment for many of its commodities,” he said in a research note.
Tembec’s recently completed Temiscaming project is expected to significantly improve its cost position, but Quinn sees more competition in the specialty dissolving pulp market due to displaced acetate pulp capacity and new innovation out of Norway.