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Domtar Announces Measures to Mitigate Weak U.S. Dollar

Press release from the issuing company

MONTREAL, Dec. 9 - Domtar Inc. announced today that it will close indefinitely part of its operations at its Cornwall mill. More specifically, the company will shut down the pulp mill, a paper machine, and a sheeter at this location. The closure will take effect on March 8, 2005 and will last until such time as economic and market conditions allow these assets to operate profitably. In so doing, Domtar will be curtailing production by 150,000 tons of pulp and 85,000 tons of paper. This measure will impact approximately 390 jobs. Domtar also announced that it will eliminate a further 400 jobs across the company's operations in Canada and the United States, including management and staff functions, by the end of 2005. "Our Cornwall mill is significantly exposed to the difficult market conditions facing the Canadian pulp and paper industry. By using lower cost pulp manufactured at other company facilities as well as closing down one paper machine in Cornwall and redirecting products to more cost effective paper machines in our system, Domtar will improve its overall performance while at the same time continue to serve customers," stated Raymond Royer, President and Chief Executive Officer of Domtar Inc. "Domtar must take the necessary steps to face world-wide competition. The Cornwall decision as well as the reduction of a further 400 positions will contribute to our previously announced objective of improving our profitability by $200 million. This workforce reduction will mainly result from the sharing of best practices between manufacturing facilities and staff functions, the completed deployment of a single Enterprise Resource Planning information technology system as well as a concerted effort by all to reduce spending," noted Domtar's President and CEO. "I am saddened, however, that Domtar employees will lose their jobs. I can assure them that we will do our utmost to support them during the transition," concluded Mr. Royer. In keeping with its corporate values, Domtar will help employees affected by today's announcement. In fact, when possible, affected personnel will be re- deployed. Workforce reductions will also be achieved through attrition. Finally, employees that lose their jobs will receive financial assistance and be given access to outplacement services.

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