Domtar Corp.’s fourth-quarter profit fell sharply on weak pulp and paper prices and higher energy and fibre costs.
But the company says it’s encouraged by the performance of its personal care products division and is on the hunt for more acquisitions in the segment.
“There’s no doubt we’re out looking for compelling, value-added acquisitions in that personal care space,” Domtar president and chief executive officer John Williams said on a conference call for analysts Friday.
To offset the vagaries of the mature pulp and paper market, Mr. Williams has over the past two years spearheaded a strategy of diversification into adult incontinence products.
Domtar completed two acquisitions in personal care last year.
The Montreal-based forestry products company reported net profit of $19-million, or 54 cents per share, for the three months ended Dec. 31, 2012, down from $61-million, or $1.63 per share, in the year-earlier period.
Fourth-quarter sales came in at $1.32-billion, down from $1.36-billion in the year-earlier period.
“Our paper and pulp businesses performed largely in line with expectations from a sales standpoint in the fourth quarter. Higher costs for fibre and energy and unexpected costs incurred at a pulp mill following a planned maintenance outage affected results,” Mr. Williams said in a news release Friday.
For the full year, net profit was $172-million, or $4.76 per share, compared with $$365-million, or $9.08 per share.
“The down cycle in pulp prices contributed to the majority of the decline in Domtar’s earnings” for the full year, he said.
Excluding one-time items, fourth-quarter net profit was $46-million, or $1.31 per share, compared with $67-million, or $1.87 a share, in the three months ended Dec. 31, 2011.
Analysts’ consensus estimate for the fourth-quarter was net profit per share of $1.42.
Domtar booked $27-million (after tax) in extraordinary items in the fourth quarter, including $27-million in closure and restructuring costs and a $12-million charge related to the impairment and writedown of property, plant and equipment and intangible assets.
The outlook for this year is mixed, the producer of office papers and specialty pulps said.
Market demand for uncoated freesheet paper is expected to decline at the rate of 3 per cent to 4 per cent in North America, but shipments are expected to fare slightly better thanks to the more stable specialty and packaging papers market and the incremental volume from a supply agreement with carbonless paper company Appleton, Domtar said.
Domtar anticipates a “slow and steady recovery” in pulp prices.
The company also sees incremental earnings from its personal-care products business starting in the fourth quarter of 2013.