Strong shipments and a solid operational performance drive fourth quarter earnings improvement         
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted). 

• Fourth quarter 2015 net earnings of $0.91 per share; earnings before items¹ of $1.11 per share 
• Paper shipments increased 2.3% when compared to the third quarter 2015 
• Personal Care EBITDA¹ 23% higher when compared to the fourth quarter 2014 

FORT MILL, SC - Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $57 million ($0.91 per share) for the fourth quarter of 2015 compared to net earnings of $11 million ($0.17 per share) for the third quarter of 2015 and net earnings of $71 million ($1.10 per share) for the fourth quarter of 2014. Sales for the fourth quarter of 2015 were $1.3 billion. 

Excluding items listed below, the Company had earnings before items¹ of $70 million ($1.11 per share) for the fourth quarter of 2015 compared to earnings before items¹ of $54 million ($0.86 per share) for the third quarter of 2015 and earnings before items¹ of $91 million ($1.41 per share) for the fourth quarter of 2014. 

Fourth quarter 2015 items: 

• Closure and restructuring costs of $1 million ($1 million after tax); and 
• Impairment of property, plant & equipment of $20 million ($12 million after tax). 

Third quarter 2015 items: 

• Closure and restructuring costs of $1 million ($1 million after tax); 
• Impairment of property, plant & equipment of $20 million ($12 million after tax); and 
• Debt refinancing costs of $42 million ($30 million after tax). 

Fourth quarter 2014 items: 

• Closure and restructuring costs of $25 million ($18 million after tax); and 
• Impairment of property, plant & equipment of $4 million ($2 million after tax). 

FISCAL YEAR 2015 HIGHLIGHTS

For fiscal year 2015, net earnings amounted to $142 million ($2.24 per share) compared to net earnings of $431 million ($6.64 per share) for fiscal year 2014. The Company had earnings before items¹ of $211 million ($3.33 per share) for fiscal 2015 compared to earnings before items¹ of $234 million ($3.61per share) for fiscal 2014. Sales amounted to $5.3 billion for fiscal year 2015. 

Commenting on the full-year results, John D. Williams, President and Chief Executive Officer, said, "I am pleased with our full-year performance. Our businesses generated strong free cash flow, and we further advanced on our Personal Care growth plan with a number of important customer wins. Our solid performance enabled us to return cash to shareholders, manage our balance sheet to preserve financial flexibility and better position Domtar for sustainable, long-term growth.  Our business transformation is still underway, but our financial results are starting to show the benefits of investments we are making in our facilities, in our people, and in our future." 

QUARTERLY REVIEW

"We had our best EBITDA performance of 2015 despite the impact of lower prices. Our pulp and paper shipments were strong, and our operations ran exceptionally well with productivity gains across the mill system," said John D. Williams, President and Chief Executive Officer. "Our average production costs continue to trend lower as we focus on taking measures to run our assets more efficiently and improve our manufacturing processes." 

Mr. Williams added, "In Personal Care, momentum continues to build. We had our best sales quarter to date on a same-currency basis, and we delivered strong year-over-year EBITDA growth. We have made solid progress on capturing the benefits of cost savings from our new manufacturing platform while executing on our growth commitments with top-line benefits expected in 2016." 

Operating income before items¹ was $115 million in the fourth quarter of 2015 compared to an operating income before items¹ of $82 million in the third quarter of 2015. Depreciation and amortization totaled $89 million in the fourth quarter of 2015. 

The increase in operating income before items¹ in the fourth quarter of 2015 was the result of lower costs for planned maintenance, higher volume, higher productivity, lower raw material costs, a favorable exchange rate and lower freight and other costs. These factors were partially offset by lower average selling prices and higher selling, general and administrative expense. 

When compared to the third quarter of 2015, manufactured paper shipments were up 2.3% and pulp shipments increased 15.9%. The shipments-to-production ratio for paper was 95% in the fourth quarter of 2015, compared to 98% in the third quarter of 2015. Paper inventories increased by 41,000 tons and pulp inventories decreased by 21,000 metric tons in December when compared to September levels. 

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $137 million and capital expenditures were $87 million, resulting in free cash flow¹ of $50 million for the fourth quarter of 2015. Domtar's net debt-to-total capitalization ratio¹ stood at 30% at December 31, 2015 and at September 30, 2015. 

OUTLOOK

In 2016, we expect our paper shipments to be in-line with market demand while pulp shipments should be higher due to the conversion of a paper machine to a fluff pulp line. We anticipate some volatility in softwood and fluff pulp markets due to the strengthening of the U.S. dollar and announced new capacity additions. Our 2016 results are expected to be negatively impacted by approximately $23 million, related to the fluff pulp conversion outage at our Ashdown mill. In Personal Care, new customer wins are expected to generate above-market revenue growth. Costs for raw materials are expected to marginally increase.