Domtar Misses Q1 Expectations
Friday, April 26, 2013
Press release from the issuing company
MONTREAL - Domtar Corporation today reported net earnings of $45 million ($1.29 per share) for the first quarter of 2013 compared to net earnings of $19 million ($0.54 per share) for the fourth quarter of 2012 and net earnings of $28 million ($0.76 per share) for the first quarter of 2012. Sales for the first quarter of 2013 amounted to $1,345 million.
Excluding items listed below, the Company had earnings before items1 of $33 million ($0.95 per share) for the first quarter of 2013 compared to earnings before items1 of $46 million ($1.31 per share) for the fourth quarter of 2012 and earnings before items1 of $61 million ($1.65 per share) for the first quarter of 2012.
First quarter 2013 items:
Fourth quarter 2012 items:
First quarter 2012 items:
"The first quarter results in our paper business were disappointing and this is due to low productivity, resulting in high costs," said John D. Williams, President and Chief Executive Officer. "While we benefited from better paper pricing than we expected, the reconfiguration of our Marlboro, South Carolina operations resulted in multiple paper grade transfers, upsetting productivity at several of our paper mills. We anticipate a return to a more normalized productivity in the quarters to come." John D. Williams added, "Our personal care business remains on track and the capital investments should start to deliver the expected benefits towards the end of 2013."
Operating income before items1 was $75 million in the first quarter of 2013 compared to an operating income before items1 of $84 million in the fourth quarter of 2012. Depreciation and amortization totaled $95 million in the first quarter of 2013.
The decrease in operating income before items1 in the first quarter of 2013 was the result of higher usage for energy and chemicals, higher unit costs for fiber, lower average selling prices for paper, higher general production costs and higher selling, general and administrative and other expenses. These factors were partially offset by higher volumes for paper, lower costs for planned maintenance, higher average selling prices for pulp and a favorable exchange rate.
When compared to the fourth quarter of 2012, paper shipments increased 2.9% and pulp shipments decreased 3.4%. Paper deliveries of Ariva® increased 9.8% when compared to the fourth quarter of 2012. The shipments-to-production ratio for paper was 104% in the first quarter of 2013, compared to 97% in the fourth quarter of 2012. Lack-of-order downtime and machine slowdowns in papers totaled 8,000 short tons in the first quarter of 2013. Paper inventories decreased by 34,000 tons while pulp inventories increased by 16,000 metric tons at the end of March, compared to December levels.
LIQUIDITY AND CAPITAL
Cash flow provided from operating activities amounted to $63 million and capital expenditures amounted to $56 million, resulting in free cash flow1 of $7 million for the first quarter of 2013. Domtar's net debt-to-total capitalization ratio1 stood at 18% at March 31, 2013 compared to 16% at December 31, 2012.
Domtar returned a total of $63 million to its shareholders through a combination of dividend and share buybacks in the first quarter of 2013. Under its stock repurchase program, Domtar repurchased a total of 9,266,503 shares of common stock at an average price of $79.87 since the implementation of the program in May 2010. At the end of the first quarter of 2013, Domtar had $258 million remaining under this program.
We expect continued momentum in pulp markets with moderate improvement in pricing and steady shipments. In papers, our volumes are expected to stay relatively similar to the first quarter in the near term. The second quarter will be affected by the usual seasonal higher maintenance activity in pulp, while input costs are expected to decline slightly, notably due to lower usage of energy.
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