Domtar Reports Preliminary First Quarter 2015 Results
"Results were impacted by anticipated price declines in pulp and paper. Nonetheless, our paper volumes were strong with good demand across most product groups." – John Williams, President and CEO, Domtar.
April 30, 2015 - Domtar Corporation (UFS) today reported net earnings of $36 million ( $0.56 per share) for the first quarter of 2015 compared to net earnings of $71 million ( $1.10 per share) for the fourth quarter of 2014 and net earnings of $39 million ( $0.60 per share) for the first quarter of 2014. Sales for the first quarter of 2015 were $1.3 billion.
Excluding items listed below, the Company had earnings before items1 of $48 million ( $0.75 per share) for the first quarter of 2015 compared to earnings before items1 of $91 million ( $1.41 per share) for the fourth quarter of 2014 and earnings before items1 of $42 million ( $0.65 per share) for the first quarter of 2014.
First quarter 2015 items :
- Closure and restructuring costs of $1 million ( $1 million after tax);
- Gain on disposal of property, plant and equipment of $1 million ($1 million after tax); and
- Impairment of property, plant & equipment of $19 million ( $12 million after tax).
Fourth quarter 2014 items:
- Closure and restructuring costs of $25 million ( $18 million after tax); and
- Impairment of property, plant & equipment of $4 million ($2 million after tax).
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).
Commenting on the first quarter results, John D. Williams, President and Chief Executive Officer, said, "Results were impacted by anticipated price declines in pulp and paper. Nonetheless, our paper volumes were strong with good demand across most product groups; we operated at near capacity resulting in strong productivity which offset the impact of some weather related costs. During the quarter, we announced an increase to our share repurchase program and dividend which reflects our confidence in the execution of our growth strategy and continuing ability to generate cash flow."
Mr. Williams added, "In Personal Care, we delivered another quarter of steady progress despite a $3 million currency headwind. Same currency sales increased 3% year over year while adult incontinence volumes grew mid-single digits. We also further advanced on production and in-source savings from our new manufacturing platform. I am pleased with our overall progress but we have more work to do to deliver the sales growth and cash productivity the business is capable of delivering."
As a result of changes in the Company's organization structure, we have changed the way we allocate certain Corporate general and administrative costs to the segments. Further, certain Corporate costs not related to segment activities, as well as the mark-to-market impact on stock-based compensation awards, will be presented on the Corporate line. As a result, we have revised our 2014 segment disclosures to conform to our 2015 presentation.
Operating income before items1 was $90 million in the first quarter of 2015 compared to an operating income before items1 of $115 million in the fourth quarter of 2014. Depreciation and amortization totaled $90 million in the first quarter of 2015.
The decrease in operating income before items1 in the first quarter of 2015 was the result of lower average selling prices for paper and pulp, higher raw materials costs and higher other costs. In addition, the fourth quarter of 2014 benefited from an insurance recovery of $11 million. These factors were partially offset by overall favorable exchange rates, better productivity in paper and lower costs for planned maintenance.
When compared to the fourth quarter of 2014, manufactured paper shipments were up 2.3% and pulp shipments decreased 5.4%. The shipments-to-production ratio for paper was 100% in the first quarter of 2015, compared to 101% in the fourth quarter of 2014. Paper inventories increased by 5,000 tons while pulp inventories increased by 14,000 metric tons in the first quarter of 2015 when compared to the fourth quarter of 2014.
LIQUIDITY AND CAPITAL
Cash flow provided from operating activities amounted to $127 million and capital expenditures were $70 million, resulting in free cash flow1 of $57 million for the first quarter of 2015. Domtar's net debt-to-total capitalization ratio1 stood at 30% at March 31, 2015 compared to 29% at December 31, 2014.
During the quarter, Domtar repurchased $13 million of common stock under its stock repurchase program.
Domtar paper shipments are expected to trend with market demand but our paper shipments should benefit from lower import volumes in North America. The second quarter is expected to be affected by seasonally higher maintenance activity in our pulp business and most input costs should return to more normal levels for the remainder of the year. Personal Care results are expected to benefit from market growth, cost savings from the new manufacturing platform and favorable oil-based input costs.
1 Non-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.
SOURCE: Domtar Corporation