Domtar Announces Net Earnings of $152 Million for 2001
Friday, February 01, 2002
MONTREAL, Jan. 31 - Domtar Inc. announced today net earnings of $152 million or $0.78 per common share for the year ended December 31, 2001, compared to $275 million or $1.49 per common share in 2000. Operating profit was $313 million for 2001 compared to $476 million in 2000. Annual net sales were almost $4.4 billion, compared to $3.6 billion in 2000. Results for 2001 include earnings from a reduction in enacted income tax rates and a revaluation of future income tax assets, representing $0.20 per common share compared to $0.16 per common share for 2000. "Given the difficult economic context marked by an approximate 6% decline in prices for all our products compared to last year, our 8% return on shareholders' equity again demonstrates our commitment to making Domtar a leader in our industry. But 2001 was above all a year of geographic expansion into Domtar's main market, the United States, where we acquired four mills that have further increased our expertise in the design and manufacturing of fine papers and doubled Domtar's production capacity. In fact, the impact of our greater operations and revenues in the United States have transformed our company,'' said Raymond Royer, President and Chief Executive Officer. "It is our firm intention to continue to provide superior returns to our shareholders. We will pursue the implementation of our program of synergies related to the acquisition, which we targeted at US$65 million. In addition, as a result of our company's transformation, we are starting 2002 on a new basis, notably by implementing a new profitability program that will allow us to attain our objective of $100 million of improvements by the end of 2003'', added Mr Royer. REVIEW OF OPERATIONS FOR 2001 The operating profit in the PAPERS segment reached $263 million in 2001, compared to $408 million in 2000. Net sales, including five months of results for the four new mills and twelve months of Ris Paper, were up 32% to $3.4 billion, compared to $2.6 billion in 2000. The segment's performance was affected by significant price decreases, lower shipments from the pre- acquisition mills, and also by higher energy and other production costs. For example, transaction prices for market pulp dropped an average of US$164 per tonne, or 26%, while prices for uncoated freesheet dropped an average of US$36 per ton, or 5%. However, the impact of these factors was partially offset by the results from the four new mills. Also, due to market conditions and lower demand, downtime was taken in a number of mills, including those recently acquired. The WOOD segment reported an operating loss of $46 million compared to a loss of $33 million in 2000. This result is mainly due to the establishment of a $20 million reserve for countervailing and antidumping duties on exports of softwood lumber to the United States. Net sales totalled $410 million compared to $476 million in 2000. The decrease in shipments, temporary downtime and the strike at the Nairn Centre sawmill, which resumed its regular activities in October 2001, also affected the segment's performance. In the PACKAGING segment, Domtar's share of the operating profit of Norampac Inc. stood at $82 million, compared to $100 million in 2000. This result is due to the decrease in prices and temporary downtime related to market conditions. These factors were partially offset by higher shipments related to recent acquisitions. LIQUIDITY AND CAPITAL RESOURCES In 2001, free cash flow (cash flow provided from operating activities, less net additions to property, plant and equipment) stood at $441 million compared to $345 million in 2000. Free cash flow included $190 million related to the sale of receivables (securitization) in 2001 compared to $60 million in 2000. At December 31, 2001, the ratio of net debt to total capital was 54% compared to a ratio of approximately 65% as at the date of acquisition of the four new mills. FOURTH QUARTER 2001 RESULTS In the fourth quarter, net sales rose to $1.3 billion compared to $945 million in the corresponding quarter in 2000. This 38% increase is mainly due to the inclusion of results for the four mills acquired on August 7, 2001. Net earnings reached $20 million, or $0.09 per common share, compared to $82 million for the same period in 2000, or $0.45 per common share. Results for the fourth quarter of 2001 include earnings from a reduction in enacted income tax rates and a revaluation of future income tax assets, representing $0.03 per common share compared to $0.16 per common share for the same period last year. Operating profit for the fourth quarter of 2001 totalled $64 million compared to $97 million for the fourth quarter in 2000. These results are principally due to the significant decrease in prices. To minimize the impact of market conditions, downtime was taken in all of our business segments. OUTLOOK The uncertain economic conditions will continue to present some challenges to all the Corporation's segments. Despite this, Domtar remains confident in the long-term fundamentals of the uncoated freesheet market. The Corporation will continue to strengthen its customer relationships in order to maintain shipments, and will pursue its synergies and profitability programs. It will also continue to monitor inventories closely in order to maintain optimal levels and meet the needs of customers. These measures should allow Domtar to take prompt advantage of any upswing in the economy.