HOME | EDITORIAL CALENDAR | SUBSCRIPTION SERVICES | EVENTS CALENDAR | PAPER INDUSTRY LINKS | CONTACT US

Domtar Posts Secomd Quarter Profit

Aug. 13, 2007 - Domtar Corp. announced today net income of $11 million ($0.02 per diluted share) in the second quarter of 2007 compared to a net loss of $12 million ($0.04 per diluted share) in the second quarter of 2006 and a net income of $49 million ($0.14 per diluted share) in the first quarter of 2007.

"Our company is moving on several fronts and the second quarter proved to be quite eventful. On synergies, the process is well underway and our people have shifted to the implementation mode in an effort to quickly deliver results. On integration, our new sales organization is now in place with their focus on providing our customers the service solutions they expect. We are also actively pursuing strategic initiatives with the sale of our Wood business expected to close by year-end and more recently with the announcement of the permanent closure of three paper machines as part of our review of overall production capacity, including some mill overlaps," said Raymond Royer, President and CEO.

Commenting on the second quarter, Mr. Royer added: "Adjusting for the seasonally high level of maintenance work at several of our operations, Domtar continues to strengthen its profitability despite soft demand for uncoated freesheet papers in North America and the strength of the Canadian dollar. In these circumstances, I am particularly proud of our cash flow generation in the quarter and with our progress toward debt reduction. This is a tribute to our employees who have joined forces from the very beginning in this venture. Their pride and good will are reshaping the look of our organization."

THE TRANSACTION

Domtar Corporation started its operations on March 7, 2007 following the combination of the Weyerhaeuser Fine Paper Business and Domtar Inc. Prior to the completion of the Transaction, the Weyerhaeuser Fine Paper Business was operated by Weyerhaeuser Company.

The financial results of Domtar Corporation cover certain periods prior to the Transaction. For accounting and financial reporting purposes, Weyerhaeuser Fine Paper Business is considered to be the "predecessor" to Domtar Corporation and as a result, its historical financial statements now constitute the historical financial statements of Domtar Corporation. Accordingly, the results reported for the second quarter of 2007 include the results of operations of the new Company for the entire period. The results reported for the second quarter of 2006 include only the results of operations of the Weyerhaeuser Fine Paper Business, on a carve-out basis. The results reported for the first quarter of 2007 include the results of operations of the Weyerhaeuser Fine Paper Business, on a carve-out basis, for the period from January 1, 2007 to March 6, 2007 and the results of operations of the new Company for the period from March 7, 2007 to April 1, 2007.

PAPERS

Operating income in our Papers business totaled $92 million in the second quarter of 2007, an increase of $108 million compared to an operating loss of $16 million in the second quarter of 2006. Net sales amounted to $1,315 million in the second quarter of 2007 compared to $774 million in the second quarter of 2006. Depreciation and amortization for the Papers segment totaled $125 million in the second quarter of 2007.

The results of Domtar Inc. contributed $49 million of the increase in operating income in the second quarter of 2007. The remaining increase is mainly attributable to higher average selling prices for paper and pulp, lower costs for energy and chemicals, and lower freight expenses, mostly due to freight optimization efforts. These factors were partially offset by lower shipments for paper mostly due to a lower demand for uncoated freesheet in North America, higher costs for purchased fiber and chips and lower shipments for pulp.

PAPER MERCHANTS

This business segment was acquired by means of the transaction and therefore was not one of Domtar Corporation's active businesses prior to March 7, 2007. Net sales amounted to $225 million in the second quarter of 2007. Depreciation and amortization for the Paper Merchants segment were nil for the same period.

WOOD

Operating loss in our Wood business totaled $20 million in the second quarter of 2007, an increase of $15 million compared to an operating loss of $5 million in the second quarter of 2006. Net sales amounted to $80 million in the second quarter of 2007 compared to $35 million in the second quarter 2006. Depreciation and amortization for the Wood segment totaled $6 million in the second quarter 2007.

The results of Domtar Inc. contributed $16 million of the increase in operating loss in the second quarter of 2007. Excluding operating loss attributable to Domtar Inc., operating loss amounted to $4 million, a decrease of $1 million compared to the second quarter of 2006, mainly due to savings resulting from sawmill closures partially offset by lower average selling prices.

OUTLOOK

Going into the second half of the year, fine paper volumes are expected to remain under pressure compared to last year while price realizations should improve compared to the second quarter as a result of the carry over from the price increases for copy paper and for pulp implemented late in the quarter. In light of the decline in North American demand for fine papers and the resulting excess capacity, notably in commercial printing paper grades, Domtar will continue to monitor its production and inventories to meet customer demand.

SOURCE: Domtar Corp.




PaperAge. Copyright © O'Brien Publications, Inc. All rights reserved.