Domtar's Fourth Quarter Earnings Up On Productivity, Strong Pulp Markets
"Lower planned maintenance shutdowns and the continued momentum in pulp markets drove quarter over quarter earnings improvement." – John D. Williams, President and CEO, Domtar.
Feb. 7, 2014 - Domtar Corporation today reported net earnings of $65 million ($2.00 per share) for the fourth quarter of 2013 compared to net earnings of $27 million ($0.82 per share) for the third quarter of 2013 and net earnings of $19 million ($0.54 per share) for the fourth quarter of 2012. Sales for the fourth quarter of 2013 were $1,359 million.
Excluding items listed below, the Company had earnings before items1 of $68 million ($2.09 per share) for the fourth quarter of 2013 compared to earnings before items1 of $41 million ($1.25 per share) for the third quarter of 2013 and earnings before items1 of $46 million ($1.31 per share) for the fourth quarter of 2012.
Fourth quarter 2013 items:
- Net gain on sale of property, plant and equipment and business for $5 million ($4 million after tax); and
- Charge of $7 million ($7 million after tax) for impairment of property, plant and equipment.
Third quarter 2013 items:
- Loss on sale of business of $19 million ($12 million after tax); and
- Negative impact of purchase accounting of $2 million ($2 million after tax).
Fourth quarter 2012 items:
- Closure and restructuring costs of $27 million ($18 million after tax),
- Charge of $12 million ($8 million after tax) related to the impairment and write-down of property, plant and equipment and intangible assets; and
- Net losses on the sale of property, plant and equipment of $2 million ($1 million after tax).
Commenting on the fourth quarter results, John D. Williams, President and Chief Executive Officer, said, "Our solid results in the fourth quarter were mostly in line with our expectations in all of our businesses. Lower planned maintenance shutdowns and the continued momentum in pulp markets drove quarter over quarter earnings improvement."
FISCAL YEAR 2013 HIGHLIGHTS
For fiscal year 2013, net earnings amounted to $91 million ($2.72 per share) compared to net earnings of $172 million ($4.76 per share) for fiscal year 2012. The Company had earnings before items1 of $158 million ($4.73 per share) for fiscal 2013 compared to earnings before items1 of $233 million ($6.45 per share) for fiscal 2012. Sales amounted to $5.4 billion for fiscal year 2013.
"In 2013, we continued to transform the earnings profile of our company through further acquisitions in personal care, strategic investments in the pulp and paper business and the disposal of non-core assets. The recent acquisition of Indas represents a significant step in building out our personal care business, and will further help us achieve our goal of $300-$500 million of EBITDA from growing business by 2017. We have made meaningful progress towards this goal and the businesses we have acquired so far bring us closer to the lower end of our target. The continued execution of our strategy will drive earnings and cash flow growth in 2014 and beyond," added Mr. Williams.
Operating income before items1 was $95 million in the fourth quarter of 2013 compared to an operating income before items1 of $70 million in the third quarter of 2013. Depreciation and amortization totaled $95 million in the fourth quarter of 2013.
(The increase in operating income before items1 in the fourth quarter of 2013 was the result of lower costs for maintenance, higher average selling prices for paper and pulp, favorable exchange rates, higher productivity in pulp, and higher paper shipments. These factors were partially offset by higher raw material costs and an unfavorable mix of paper sold.
When compared to the third quarter of 2013, manufactured paper shipments increased 0.4% and pulp shipments increased 7.1%. The shipments-to-production ratio for paper was 100% in the fourth quarter of 2013, compared to 98% in the third quarter of 2013. Lack-of-order downtime and machine slowdowns in pulp and paper totaled 20,000 short tons in the fourth quarter of 2013. Paper inventories remained unchanged when compared to the end of September.
LIQUIDITY AND CAPITAL
In 2013, cash flow provided from operating activities amounted to $411 million and capital expenditures were $242 million, resulting in free cash flow1 of $169 million for fiscal 2013. Domtar's net debt-to-total capitalization ratio1 stood at 24% at December 31, 2013 compared to 16% at December 31, 2012.
Domtar returned a total of $250 million to its shareholders through a combination of dividends and share buybacks in fiscal 2013. Domtar repurchased a total of 11,170,506 shares of common stock at an average price of $78.48 since the implementation of its stock repurchase program in May 2010. At the end of the fourth quarter of 2013, Domtar had $121 million remaining under this program.
In 2014, we expect our paper shipments to be in-line with 2013 while we expect the market demand for uncoated free sheet to decline with long-term secular trends. Our paper prices will benefit from the implementation of recently announced price increases. We expect softwood pulp markets to maintain positive momentum but new scheduled industry hardwood pulp capacity makes the latter part of the year more uncertain. Personal care will continue to see earnings growth with the recent acquisition of Indas and with the addition of the new production lines towards the end of the year.
1Non-GAAP financial measure.
Domtar Corporation designs, manufactures, markets and distributes a wide variety of fiber-based products including communication papers, specialty and packaging papers and absorbent hygiene products. Domtar is the largest integrated marketer of uncoated freesheet paper in North America. Domtar is also a leading marketer and producer of a complete line of incontinence care products marketed primarily under the AttendsŪ brand name as well as baby diapers. To learn more, visit www.domtar.com.