Domtar Corporation Reports Preliminary Fourth Quarter and Fiscal Year 2019 Financial Results
Monday, February 10, 2020
Press release from the issuing company
Earnings affected by lower pulp and paper prices and market related downtime in paper
Fort Mill, S.C. – Domtar Corporation today reported a net loss of $34 million ($0.59 per share) for the fourth quarter of 2019 compared to net earnings of $20 million ($0.32 per share) for the third quarter of 2019 and net earnings of $87 million ($1.38 per share) for the fourth quarter of 2018. Sales for the fourth quarter of 2019 were $1.2 billion.
Excluding items listed below, the Company had earnings before items1 of $2 million ($0.03 per share) for the fourth quarter of 2019 compared to earnings before items1 of $55 million ($0.89 per share) for the third quarter of 2019 and earnings before items1 of $103 million ($1.63 per share) for the fourth quarter of 2018.
FISCAL YEAR 2019 HIGHLIGHTS
For fiscal year 2019, net earnings amounted to $84 million ($1.37 per share) compared to net earnings of $283 million ($4.48 per share) for fiscal year 2018. The Company had earnings before items1 of $184 million ($3.00 per share) for fiscal year 2019 compared to earnings before items1 of $291 million ($4.61 per share) for fiscal year 2018. Sales amounted to $5.2 billion for fiscal year 2019.
Commenting on the full-year results, John D. Williams, President and Chief Executive Officer said, “Our teams were agile in adjusting to market changes and executed well on things under our control in a challenging market environment. We had strong cash flow generation and our solid financial position allowed us to continue to reward shareholders with a high free cash flow payout ratio, while strategically investing in our assets.”
“Our results in the paper business fell short of our expectations. Shipments remained weak in the quarter due to seasonally slower demand and some customer destocking. As a result, we increased market-related downtime to better balance our supply with our customer demand and reduce our inventory to more optimal levels,” said John D. Williams, President and Chief Executive Officer.
Commenting on Personal Care, Mr. Williams added, “We had a strong finish to a good year. EBITDA1 significantly improved when compared to last year and we reached 12% EBITDA1 margins, which is the highest level since 2017. We expect to build on the momentum from this past year by continuing to focus on the execution of our margin improvement plan and restore and grow the profitability of the business.”
Operating loss was $15 million in the fourth quarter of 2019 compared to operating income of $29 million in the third quarter of 2019. Depreciation and amortization totaled $74 million in the fourth quarter of 2019.
Operating income before items1 was $4 million in the fourth quarter of 2019 compared to an operating income before items1 of $73 million in the third quarter of 2019.
The operating loss in the fourth quarter of 2019 was the result of lower average selling prices and unfavorable productivity in pulp and paper, higher selling, general and administrative expenses, and higher maintenance, freight and raw material costs.
When compared to the third quarter of 2019, manufactured paper shipments were down 2% and pulp shipments decreased 3%. The shipment-to-production ratio for paper was 106% in the fourth quarter of 2019, compared to 103% in the third quarter of 2019. Paper inventories decreased by 36,000 tons, and pulp inventories decreased by 15,000 metric tons when compared to the third quarter of 2019.
LIQUIDITY AND CAPITAL
Cash flow from operating activities amounted to $160 million and capital expenditures were $98 million, resulting in free cash flow1 of $62 million for the fourth quarter of 2019. Domtar’s net debt-to-total capitalization ratio1 stood at 27% at December 31, 2019 compared to 26% at September 30, 2019.
For fiscal year 2019, cash flow from operating activities amounted to $442 million and capital expenditures were $255 million, resulting in free cash flow1 of $187 million. Domtar returned a total of $329 million to its shareholders through a combination of dividend and stock buybacks in 2019. Under its stock repurchase program, Domtar repurchased 6,220,658 shares of common stock at an average price of $35.29 throughout 2019. At the end of the year, Domtar had $403 million remaining under the program.
In 2020, our paper volumes are expected to trend with market demand while pulp volumes will increase due to higher pulp productivity at our Espanola and Ashdown mills. The Pulp and Paper business will benefit from lower planned maintenance costs. Personal Care is expected to benefit from their margin improvement plan and higher sales following new customer wins. Overall, we anticipate costs, including freight, labor and raw materials, to marginally increase.
EARNINGS CONFERENCE CALL
The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its fourth quarter and fiscal year 2019 financial results. Financial analysts are invited to participate in the call by dialing 1 (800) 367-2403 at least 10 minutes before start time, 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 first quarter 2020 earnings results on April 30, 2020 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.
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