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Domtar Reports Preliminary Q1 2012 Net Earnings of $28 Million

Friday, April 27, 2012

Press release from the issuing company

Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $28 million ($0.76 per share) for the first quarter of 2012 compared to net earnings of $61 million ($1.63 per share) for the fourth quarter of 2011 and net earnings of $133 million ($3.14 per share) for the first quarter of 2011. Sales for the first quarter of 2012 amounted to $1.4 billion.

Excluding items listed below, the Company had earnings before items1 of $61 million ($1.65 per share) for the first quarter of 2012 compared to earnings before items1 of $93 million ($2.49 per share) for the fourth quarter of 2011 and earnings before items1 of $138 million ($3.25 per share) for the first quarter of 2011.

First quarter 2012 items:

  • Premium paid and costs related to the debt repurchase of $50 million ($30 million after tax);
  • Closure and restructuring costs, including write-down of property, plant and equipment, of $3 million ($2 million after tax); and
  • Negative impact of purchase accounting of $1 million ($1 million after tax).

Fourth quarter 2011 items:

  • Closure and restructuring costs of $38 million ($23 million after tax), mostly related to the restructuring of certain U.S. pension benefit plans; and
  • Charge of $12 million ($9 million after tax) related to the impairment and write-down of property, plant and equipment.

First quarter 2011 items:

  • Closure and restructuring costs of $11 million ($8 million after tax);
  • Gain on the sale of property, plant and equipment and business of $7 million ($5 million after tax); and
  • Charge of $3 million ($2 million after tax) related to the impairment and write-down of property, plant and equipment.

"Our businesses performed well in the quarter, but cyclically low prices in global pulp markets and higher costs affected results," said John D. Williams, President and Chief Executive Officer. "On strategy, we announced and completed the acquisition of Attends Europe further expanding our Personal Care segment and we announced an innovative 15-year supply agreement with Appleton Papers that will result in the conversion of high volume communication paper capacity to specialty paper grades, securing a growing business long-term."

QUARTERLY REVIEW

Operating income before items1 was $113 million in the first quarter of 2012 compared to an operating income before items1 of $148 million in the fourth quarter of 2011. Depreciation and amortization totaled $97 million in the first quarter of 2012.

The decrease in operating income before items1 in the first quarter of 2012 was the result of lower selling prices for paper and pulp, higher input costs, transaction costs and the negative impact of a stronger Canadian dollar. These factors were partially offset by higher shipments for papers and lower maintenance costs.

When compared to the fourth quarter of 2011, paper shipments increased 4.7% and pulp shipments decreased 3.5%. Paper deliveries of Ariva increased 5.1% when compared to the fourth quarter of 2011. The shipments-to-production ratio for paper was 100% in the first quarter of 2012, compared to 95% in the fourth quarter of 2011. Paper inventories decreased by 1,000 tons while pulp inventories decreased by 26,000 metric tons as at the end of March, compared to December levels.

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $30 million and capital expenditures amounted to $29 million, resulting in free cash flow1 of $1 million for the first quarter of 2012. Domtar's net debt-to-total capitalization ratio1 stood at 18% at March 31, 2012 compared to 12% at December 31, 2011.

In the first quarter of 2012, Domtar paid $47 million in premiums in relation to the completion of a tender offer for certain outstanding Notes.  Excluding these premiums, free cash flow was $48 million for the period ended March 31, 2012.

OUTLOOK

Price realizations in pulp are expected to improve from trough first quarter prices as a result of recently announced price increases. In paper, both volumes and prices are expected to positively impact results due to new business in specialty and packaging papers and price increases in the process of being implemented. The second quarter will be affected by the usual seasonal higher maintenance activity.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its first quarter 2012 financial results. Financial analysts are invited to participate in the call by dialing at least 10 minutes before start time 1 (866) 321-8231 (toll free - North America) or 1 (416) 642-5213 (International), while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

The Company will release its second quarter 2012 earnings on July 27, 2012 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.

 

1  Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.

 

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