Domtar Corporation Reports Preliminary Fourth Quarter And Fiscal Year 2019 Financial Results

“Our results in the paper business fell short of our expectations. Shipments remained weak in the quarter due to seasonally slower demand and some customer destocking." — John Williams, President and CEO, Domtar.

Feb. 7, 2020 - Domtar's preliminary financial report for fourth-quarter and fiscal year 2019 is in. Highlights from this financial report include:

Quarterly Review

“Our results in the paper business fell short of our expectations. Shipments remained weak in the quarter due to seasonally slower demand and some customer destocking. As a result, we increased market-related downtime to better balance our supply with our customer demand and reduce our inventory to more optimal levels,” said John D. Williams, President and Chief Executive Officer.

Commenting on Personal Care, Mr. Williams added, “We had a strong finish to a good year. EBITDA significantly improved when compared to last year, and we reached 12 percent EBITDA margins, which is the highest level since 2017. We expect to build on the momentum from this past year by continuing to focus on the execution of our margin improvement plan and restore and grow the profitability of the business.”

Operating income was $4 million in the fourth quarter of 2019 compared to an operating income of $73 million in the third quarter of 2019. Depreciation and amortization totaled $74 million in the fourth quarter of 2019.

The operating loss in the fourth quarter of 2019 was the result of lower average selling prices and unfavorable productivity in pulp and paper; higher selling, general and administrative expenses; and higher maintenance, freight and raw material costs.

When compared to the third quarter of 2019, manufactured paper shipments were down 2 percent and pulp shipments decreased 3 percent. The shipment-to-production ratio for paper was 106 percent in the fourth quarter of 2019, compared to 103 percent in the third quarter of 2019. Paper inventories decreased by 36,000 tons, and pulp inventories decreased by 15,000 metric tons when compared to the third quarter of 2019.

Fiscal Year 2019 Highlights

For fiscal year 2019, cash flow from operating activities amounted to $442 million, and capital expenditures were $255 million, resulting in free cash flow of $187 million. Domtar returned a total of $329 million to its shareholders through a combination of dividend and stock buybacks in 2019. Under its stock repurchase program, Domtar repurchased 6,220,658 shares of common stock at an average price of $35.29 throughout 2019. At the end of the year, Domtar had $403 million remaining under the program.

Outlook

In 2020, our paper volumes are expected to trend with market demand while pulp volumes will increase due to higher pulp productivity at our Espanola and Ashdown mills. The Pulp and Paper business will benefit from lower planned maintenance costs. Personal Care is expected to benefit from their margin improvement plan and higher sales following new customer wins. Overall, we anticipate costs, including freight, labor and raw materials, to marginally increase.

For more information on this Domtar quarterly and fiscal year 2019 financial report, please read the full press release.

About Domtar

Domtar is a leading provider of a wide variety of fiber-based products including communication, specialty and packaging papers, market pulp and absorbent hygiene products. To learn more, please visit: www.domtar.com.