Fortress Paper (TSE:FTP) shares were volatile on Tuesday after the company approved a plan to cut approximately 16% of its staff in its dissolving pulp unit, including senior and middle management, as well as clerical employees.
The company said the move is expected to result in cost savings of about $2.2 million per year. Shares traded in a range of C$2.82 to C$3.00 in Toronto today, and were lately down at C$2.83, off by more than 2%.
The layoffs are the result of a management directive to immediately reduce labour costs as part of a comprehensive cost reduction strategy implemented in response to challenging market conditions.
"Fortress Paper is facing extremely difficult market conditions for dissolving pulp and we firmly believe in the need to be proactive to control our future," said CEO Chadwick Wasilenkoff.
"The reduction in labour costs announced today is anticipated to save the company over $2 million per year and is representative of management's efforts to improve the efficiency of the company.
"While layoffs are unfortunate, they are a necessary and prudent measure in these difficult times."
In April, China's Ministry of Commerce stuck with its initial decision to impose a 13% duty on dissolving pulp imports, the result of claims that dumping was harming the country's pulp sector following an investigation China launched in February last year on the importing to China of cellulose pulp originating from Canada, the U.S. and Brazil.
The wood-pulp producer with mills in Quebec operates its dissolving pulp business at the Fortress Specialty Cellulose Mill. It is also evaluating expanding its dissolving pulp capacity by converting the Fortress Global Cellulose Mill located at Lebel-sur-Quévillon, Québec into a dissolving pulp mill and re-starting the cogeneration facility.
The company also operates a security paper products business at the Landqart Mill located in Switzerland, where it produces banknote, passport, visa and other brand protection and security papers.