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Domtar Announces Net Earnings of $22 Million

Friday, October 19, 2001

Press release from the issuing company

MONTREAL, Oct. 18 - Domtar Inc. today announced net earnings of $22 million or $0.12 per common share for the third quarter of 2001, compared to $60 million or $0.33 per common share for the corresponding period of 2000. The operating profit reached $83 million compared to $121 million for the third quarter of 2000. Net sales were almost $1.2 billion versus $954 million for the same period last year. "The enthusiastic response of the financial markets to our public offering of common shares and notes related to the acquisition of four paper mills in the United States in early October has enabled us to maintain a healthy balance sheet,'' said Mr. Raymond Royer, President and Chief Executive Officer. Commenting on the third quarter results, Mr. Royer added: "The commitment by employees in our new mills to achieve the quality and service standards of our distribution network is remarkable, and has enabled us to achieve satisfying results, despite a hesitant market in all areas.'' OPERATIONAL REVIEW The net sales of the PAPERS segment, including two months of the results from the four new mills, totalled $929 million compared to $712 million in the third quarter of 2000. The operating profit reached $62 million in the third quarter of 2001 compared to $112 million for the same period last year. The results of the segment were impacted by significant price decreases and lower shipments from the pre-acquisition mills. For example, transaction prices for market pulp dropped an average US$265 per tonne, or 40%, while prices for uncoated freesheet dropped an average US$40 per ton, or 5%. However, the performance of the four new mills helped offset these factors. Also, temporary shutdowns helped optimize the inventory turnover. The net sales of the WOOD segment totalled $106 million compared to $115 million for the corresponding quarter last year. However, the performance improved with an operating loss of $4 million rather than an operating loss of $20 million for the same period in 2000. This segment would have posted a profit had it not been for a $6 million reserve for a countervailing duty, set up as of August 17th, emanating from the current dispute between Canada and the United States over softwood lumber exports. Compared to the third quarter of 2000, transaction prices increased by an average of 26% but this improvement was partially offset by lower shipments. In the PACKAGING segment, Domtar's share of the operating profit of Norampac Inc. stood at $25 million compared to $28 million in the same quarter last year. This result is mainly due to the decrease in prices, partially offset by higher shipments related to recent acquisitions. LIQUIDITY AND CAPITAL Cash flows from operations for the current year are $291 million, compared to $368 million for the same period in 2000. At September 30, 2001, the ratio of net debt-to-total capitalization was 65%. Following the October 5th public offering of common shares, that ratio dropped to 58%. OUTLOOK Since early 2001, the economic slowdown has had an unfavourable impact on demand and prices for all of the Corporation's products. Despite this, Domtar remains confident in the long-term fundamentals of the uncoated freesheet market. The Corporation will continue taking steps to improve product quality and productivity and to obtain synergies as quickly as possible from the integration of the four new mills. It will also continue to monitor inventories closely in order to maintain optimum levels and meet the needs of customers. These measures should allow Domtar to take prompt advantage of any upswing in the economy.

 

 

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