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Domtar profit drops but still beats forecasts

Domtar paper machine


Domtar Corp. is managing to hold its own in a still-sluggish market for its pulp and paper products.

The Montreal-based company posted a steep drop in third-quarter net profit – to $66-million (U.S.), or $1.84 per share, from $117-million or $2.95 per share in the year-earlier period – but its results nonetheless beat the street's expectations.

And revenue fell only slightly, to a little below $1.4-billion from $1.42-billion in the third quarter for the previous year.

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On an adjusted basis, the third quarter profit came in at $67-million or $1.87 per share, compared with $123-million or $3.10 per share.

Analysts' consensus forecast was for adjusted profit of $1.62 per share and $1.4-billion in revenue and non-adjusted profit of $1.59 per share.

Domtar is turning out a decent performance thanks to judicious management of machine and mill downtime in order to deal with demand declines in its products, says the president and chief executive officer.

"The third quarter was marked by weak paper demand and by cyclically low pulp prices," John Williams said in a statement included in the third-quarter results.

"Nevertheless, shipments for our pulp were sequentially higher, our paper pricing remained firm and paper inventories decreased by 10 per cent."

The strategy is to continue making production adjustments to changes in demand by taking downtime, he said.

To offset the vagaries of the mature pulp and paper market, Domtar has entered the personal-care products business, including adult diapers and raw material for baby diapers and feminine hygiene products.

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Meanwhile, wood-based panels producer Norbord Inc. posted encouraging third-quarter results, the best since the second quarter of 2006, according to president and CEO Barrie Shineton.

The company reported net profit of $28-million or 64 cents per share, compared with a loss of $1-million or 2 cents per share in the year-earlier period.

"This positive trend is due entirely to stronger demand from U.S. new home construction that pushed North American [oriented strand board, or OSB] prices sharply higher this quarter. While prices have declined recently, they are still at very robust levels," he said in the company's Q3 report.

"The housing recovery is accelerating, consumer spending is picking up and both are key to a U.S. economic recovery. All of this suggests that OSB demand will continue to improve over the next several years."

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More


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