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Domtar profit falls on lower prices, higher costs

Domtar paper machine


Domtar Corp. says its first-quarter profit fell sharply from the same time last year, missing analyst estimates, as it felt the impact of lower global prices for pulp and higher costs as well as special accounting items.

The Montreal-based paper and pulp producer had $28-million (U.S.) of net income or 76 cents per share. That's down from $133-million or $3.14 per share in the comparable period of 2011.

Special items played a role in both years, pushing down the profit for the first three months of 2012 and pushing up Domtar's profit in the first quarter of 2011.

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Domtar says its adjusted profit in the first three months of this year was $61-million or $1.65 per share — still only about half of the $138-million or $3.25 per share of adjusted earnings it had in the first quarter of 2011.

Analysts had expected $2.03 per share in adjusted earnings in the first quarter, according to a consensus estimate compiled by Thomson Reuters.

Domtar's revenue was down also down but only slightly, falling to $1.39-billion from $1.42-billion in the first quarter of 2011.

"Our businesses performed well in the quarter, but cyclically low prices in global pulp markets and higher costs affected results," said John Williams, Domtar's president and chief executive officer

Domtar, which primarily produces the free-sheet paper used in copiers and desktop printers, recently acquired the European operations of adult incontinence company Attends for $264-million.

Analysts say continued strong free cash flow generation allows the company to return capital to shareholders while making such strategic acquisitions to help offset declining paper demand.

Domtar is the largest integrated manufacturer of uncoated freesheet paper in North America and the second largest in the world based on production capacity.

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It operates 10 pulp and paper mills in North America, including two in Canada, with annual production capacity of 3.9 million tonnes.

It also manufactures papergrade, fluff and specialty pulp and employs 8,700 people.

Domtar earned $365-million on $5.6-billion of revenues last year.

The pulp and paper producer increased its share-buyback program by $400-million to about $1-billion in December.

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