Thursday, 25 April 2013 16:30

Domtar Corporation Reports Preliminary First Quarter 2013 Financial Results

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Benefits of higher paper volumes and pulp prices compared to fourth quarter offset by higher production costs
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted.)

First quarter 2013 net earnings of $1.29 per share, earnings before items1 of $0.95 per share

Inaugurated a commercial-scale lignin removal plant at the Plymouth, NC mill

Personal Care volumes up 7% when compared to pro forma first quarter 2012

Share buyback totaled $47 million in the first quarter of 2013

TICKER SYMBOL
(NYSE: UFS) (TSX: UFS)

Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $45 million ($1.29 per share) for the first quarter of 2013 compared to net earnings of $19 million ($0.54 per share) for the fourth quarter of 2012 and net earnings of $28 million ($0.76 per share) for the first quarter of 2012. Sales for the first quarter of 2013 amounted to $1,345 million.

Excluding items listed below, the Company had earnings before items1 of $33 million ($0.95 per share) for the first quarter of 2013 compared to earnings before items1 of $46 million ($1.31 per share) for the fourth quarter of 2012 and earnings before items1 of $61 million ($1.65 per share) for the first quarter of 2012.

First quarter 2013 items:

Conversion of $26 million ($18 million after tax) of alternative fuel tax credits into cellulosic biofuel producer income tax credits of $55 million ($33 million after tax) resulting in a net gain after tax of $15 million;

Charge of $10 million ($7 million after tax) related to the impairment and write-down of property, plant and equipment;

Gain on the sale of property, plant and equipment of $10 million ($6 million after tax); and

Premium paid and costs related to the debt repurchase of $3 million ($2 million after tax), included in interest expense.

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).

First quarter 2012 items:

Premium paid and costs related to the debt repurchase of $50 million ($30 million after tax), included in interest expense;

Closure and restructuring costs, including write-down of property, plant and equipment, of $3 million ($2 million after tax); and

Negative impact of purchase accounting of $1 million ($1 million after tax).

"The first quarter results in our paper business were disappointing and this is due to low productivity, resulting in high costs," said John D. Williams, President and Chief Executive Officer. "While we benefited from better paper pricing than we expected, the reconfiguration of our Marlboro, South Carolina operations resulted in multiple paper grade transfers, upsetting productivity at several of our paper mills. We anticipate a return to a more normalized productivity in the quarters to come." John D. Williams added, "Our personal care business remains on track and the capital investments should start to deliver the expected benefits towards the end of 2013."

QUARTERLY REVIEW

Operating income before items1 was $75 million in the first quarter of 2013 compared to an operating income before items1 of $84 million in the fourth quarter of 2012. Depreciation and amortization totaled $95 million in the first quarter of 2013.

(In millions of dollars)

 

1Q 2013

 

4Q 2012

Sales

 

$1,345

 

$1,327

Operating income (loss)

       

 

Pulp and Paper segment

 

39

 

40

 

Distribution segment

 

(1)

 

(8)

 

Personal Care segment

 

13

 

13

 

Corporate

 

(2)

 

(2)

 

Total

 

49

 

43

Operating income before items1

 

75

 

84

Depreciation and amortization

 

95

 

96

The decrease in operating income before items1 in the first quarter of 2013 was the result of higher usage for energy and chemicals, higher unit costs for fiber, lower average selling prices for paper, higher general production costs and higher selling, general and administrative and other expenses. These factors were partially offset by higher volumes for paper, lower costs for planned maintenance, higher average selling prices for pulp and a favorable exchange rate.

When compared to the fourth quarter of 2012, paper shipments increased 2.9% and pulp shipments decreased 3.4%. Paper deliveries of Ariva® increased 9.8% when compared to the fourth quarter of 2012. The shipments-to-production ratio for paper was 104% in the first quarter of 2013, compared to 97% in the fourth quarter of 2012. Lack-of-order downtime and machine slowdowns in papers totaled 8,000 short tons in the first quarter of 2013. Paper inventories decreased by 34,000 tons while pulp inventories increased by 16,000 metric tons at the end of March, compared to December levels.

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $63 million and capital expenditures amounted to $56 million, resulting in free cash flow1 of $7 million for the first quarter of 2013. Domtar's net debt-to-total capitalization ratio1 stood at 18% at March 31, 2013 compared to 16% at December 31, 2012.

Domtar returned a total of $63 million to its shareholders through a combination of dividend and share buybacks in the first quarter of 2013. Under its stock repurchase program, Domtar repurchased a total of 9,266,503 shares of common stock at an average price of $79.87 since the implementation of the program in May 2010. At the end of the first quarter of 2013, Domtar had $258 million remaining under this program.

OUTLOOK

We expect continued momentum in pulp markets with moderate improvement in pricing and steady shipments. In papers, our volumes are expected to stay relatively similar to the first quarter in the near term. The second quarter will be affected by the usual seasonal higher maintenance activity in pulp, while input costs are expected to decline slightly, notably due to lower usage of energy.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its first quarter 2013 financial results. Financial analysts are invited to participate in the call by dialing at least 10 minutes before start time 1 (866) 321-8231 (toll free - North America) or 1 (416) 642-5213 (International), while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

The Company will hold its 2013 Annual Meeting of Stockholders on Wednesday, May 1st, 2013 at 9:00 a.m. (ET) at the Montreal Museum of Fine Arts, Claire and Marc Bourgie Pavilion, 1339 Sherbrooke Street West, Montreal, Quebec. The Company will release its second quarter 2013 earnings on July 25, 2013 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.

For the full release with tables please follow this link.....

Additional Info

About Domtar
Domtar Corporation (NYSE: UFS) (TSX: UFS) designs, manufactures, markets and distributes a wide variety of fiber-based products including communication papers, specialty and packaging papers and adult incontinence products. The foundation of its business is a network of world class wood fiber converting assets that produce papergrade, fluff and specialty pulps. The majority of its pulp production is consumed internally to manufacture paper and consumer products. Domtar is the largest integrated marketer of uncoated freesheet paper in North America with recognized brands such as Cougar®, Lynx® Opaque Ultra, Husky® Opaque Offset, First Choice® and Domtar EarthChoice®. Domtar is also a leading marketer and producer of a complete line of incontinence care products marketed primarily under the Attends® brand name. Domtar owns and operates Ariva®, a network of strategically located paper and printing supplies distribution facilities. In 2012, Domtar had sales of US$5.5 billion from some 50 countries. The Company employs approximately 9,300 people. To learn more, visit www.domtar.com.

MEDIA AND INVESTOR RELATIONS
Pascal Bossé
Vice-President
Corporate Communications and Investor Relations
Tel.: 514-848-5938

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