Domtar Posts Second Quarter 2014 Profit Despite Planned Downtime and Maintenance Costs

""While paper productivity improved from the first quarter, we took fifty-one thousand tons of lack of order downtime, which resulted in higher unit costs." –John D. Williams, President and CEO, Domtar.

July 24, 2014 /CNW Telbec/ - Domtar Corporation (UFS) (UFS.TO) today reported net earnings of $40 million ( $0.61 per share) for the second quarter of 2014 compared to net earnings of $39 million ( $0.60 per share) for the first quarter of 2014 and net loss of $46 million ( $0.69 per share) for the second quarter of 2013.

Sales for the second quarter of 2014 were $1,385 million.

Excluding items listed below, the Company had earnings before items1 of $40 million ( $0.61 per share) for the second quarter of 2014 compared to earnings before items1 of $42 million ( $0.65 per share) for the first quarter of 2014 and earnings before items1 of $16 million ( $0.24 per share) for the second quarter of 2013.

Second quarter 2014 items:

  • None

First quarter 2014 items:

  • Closure and restructuring costs of $1 million ( $1 million after tax); and
  • Negative impact of purchase accounting of $3 million ( $2 million after tax).

Second quarter 2013 items:

  • Litigation settlement of $49 million ( $46 million after tax);
  • Closure and restructuring charges of $18 million ( $13 million after tax); and
  • Charge of $5 million ( $3 million after tax) related to the impairment and write-down of property, plant and equipment.

Commenting on the second quarter results, John D. Williams , President and Chief Executive Officer, said, "While paper productivity improved from the first quarter, we took fifty-one thousand tons of lack of order downtime, which resulted in higher unit costs. Our pulp business benefited from good price momentum and we shipped over ten thousand tonnes from inventory. However, these benefits were more than offset by seasonally higher maintenance activity in our pulp mills."

Mr. Williams added, "In our Personal Care segment, results during the quarter were negatively impacted by higher raw material costs. Nevertheless, the integration of Indas is progressing well and it is performing in line with our expectations. In addition, our capacity expansion plan continues to ramp up and we are currently in the process of launching new products for strategic customers."

QUARTERLY REVIEW

Operating income before items1 was $79 million in the second quarter of 2014 compared to an operating income before items1 of $83 million in the first quarter of 2014. Depreciation and amortization totaled $96 million in the second quarter of 2014.

The decrease in operating income before items1 in the second quarter of 2014 was the result of higher costs for planned maintenance, lack-of-order downtime in papers, lower paper shipments and overall unfavorable exchange rates. These factors were partially offset by lower energy costs, lower selling, general and administrative expenses, and higher average selling prices for paper and pulp.

When compared to the first quarter of 2014, manufactured paper shipments decreased 3.1% and pulp shipments increased 5.7%. The shipments-to-production ratio for paper was 99% in the second quarter of 2014, compared to 100% in the first quarter of 2014. Paper inventories increased by 9,000 tons while pulp inventories decreased by 10,000 metric tons at the end of June when compared to March levels.

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $104 million and capital expenditures were $56 million , resulting in free cash flow1 of $48 million for the second quarter of 2014. Domtar's net debt-to-total capitalization ratio1 stood at 32% at June 30, 2014 compared to 33% at March 31, 2014.

OUTLOOK

Our paper volumes are expected to decline with market demand while global softwood pulp markets are expected to remain balanced. Domtar will continue to closely monitor its inventory levels and balance its production with its customers' demand. The ramp-up of the new production lines are expected to positively impact the Personal Care business results towards the end of the year. Input costs are expected to stay relatively stable for the second half of 2014.

1 Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.

Domtar Corporation (UFS) (UFS.TO) designs, manufactures, markets and distributes a wide variety of fiber-based products including communication papers, specialty and packaging papers and absorbent hygiene products. The company is the largest integrated marketer of uncoated freesheet paper in North America.

Domtar is also a leading marketer and producer of a broad line of incontinence care products marketed primarily under the AttendsŪ, IncoPack and IndasecŪ brand names as well as baby diapers. To learn more, visit www.domtar.com.

SOURCE: Domtar Corp.