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Domtar to Close Three Paper Machines

Press release from the issuing company

MONTREAL, March 27 - Domtar Inc. announced today that it will permanently close three paper machines: two in St. Catharines, Ontario and one in Nekoosa, Wisconsin. These closures will reduce paper manufacturing capacity by 80,000 tons and will affect 335 employees. "The market for the types of papers manufactured in St. Catharines and on machine No. 1 in Nekoosa has declined steadily and significantly over the last five years. In spite of efforts on the part of employees to improve efficiency, the hard reality is that Domtar is faced with low demand for products manufactured on three high cost and not very flexible paper machines. Consequently, Domtar has decided to close this capacity,'' said Raymond Royer, President and Chief Executive Officer of Domtar Inc. Paper machines No. 2 and No. 3 in St. Catharines manufacture printing and specialty papers. The mill has a capacity of 50,000 tons per year. Some of the papers manufactured in St. Catharines will be re-deployed to Domtar facilities in Espanola, Ottawa-Hull and Wisconsin, while others will be discontinued. St. Catharines will cease operations at the end of September. This decision will affect 210 employees. Paper machine No. 1 at the Nekoosa mill in Wisconsin produces approximately 30,000 tons per year of specialty products, including publishing papers and forms. Sales of products manufactured on this machine have declined in recent years. Approximately 125 employees will be affected by this decision. The decision to close the three paper machines is based on the recommendations of a working group, which was set up after Domtar acquired four pulp and paper mills in the United States in 2001. This working group was tasked to study market trends, propose changes to product lines and find ways to maximize the efficiency of Domtar's pool of paper machines. A provision of $45 million has been established to cover costs related to these closures. This decision does not call into question Domtar's commitments to achieve $US65 million worth of synergies related to its recent acquisition, nor will affect its ability to meet its stated objective of increasing profitability by $100 million before the end of 2003 through its Quality and Productivity program. Domtar is also still on track to honor its commitment to reduce its debt-to-total-capitalization ratio to 50% by the end of this year. In the case of St. Catharines, Domtar consistent with its corporate values, will do its best to relocate to other Domtar facilities employees who wish to do so. Employees who are losing their employment permanently will be given financial assistance to facilitate their transition to other employment. Domtar also indicated to community leaders in St. Catharines that it is willing to support efforts to find a non-competitive purpose for the mill.

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