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An analysis on Domtar Corporation reports third quarter 2008 financial results

By Amarendra Bhushan for CEOWORLD Magazine Updated:November 5, 2008

Domtar Corp. has booked third-quarter net earnings of $43 million or eight cents per share, compared with a year-ago profit of $36 million, seven cents per share.

The paper and lumber producer’s sales for the quarter were $1.6 billion.

Excluding one-time items, Domtar said it earned $51 million or 10 cents per share, up from $32 million a year earlier.

“I am encouraged by the results, which we achieved despite high input costs, weak fine paper demand and a worsening economic environment,” stated CEO Raymond Royer.

“Our earnings increased from last year’s third quarter, our free cash flow is strong, our balance sheet is sound with no upcoming debt maturities and we were recently upgraded by credit agencies in tough credit market conditions.”

“I am encouraged by the results, which we achieved despite high input costs, weak fine paper demand and a worsening economic environment. Our earnings increased from last year’s third quarter, our free cash flow is strong, our balance sheet is sound with no upcoming debt maturities and we were recently upgraded by credit agencies in tough credit market conditions,” said Raymond Royer, President and Chief Executive Officer. “Our team is executing well and our prudent approach to managing the business provides us with a measure of stability. I am pleased with the support we are getting from customers as we position ourselves as an efficient, stable, financially strong supplier of choice,” added Mr. Royer.

Domtar Corporation (NYSE/TSX: UFS) today reported net earnings of $43 million ($0.08 per diluted share) for the third quarter of 2008 compared to net earnings of $24 million ($0.05 per diluted share) for the second quarter of 2008 and $36 million ($0.07 per diluted share) for the third quarter of 2007. Sales for the third quarter amounted to $1.6 billion. Excluding the items listed below, the Company earned $51 million ($0.10 per diluted share) for the third quarter of 2008 compared to $32Â million ($0.06 per diluted share) for the second quarter of 2008 and $44Â million ($0.09 per diluted share) for the third quarter of 2007.

Net earnings of $0.08 per diluted share, earnings before items(1) of $0.10 per diluted share
Free cash flow(1) of $82 million in the third quarter
$127 million of cash at quarter end; net debt(1) reduced by $176 million year-to-date
No borrowings under the $750 million revolving credit facility
Company announced yesterday the closure of # 1 paper machine at Dryden, ON mill

OUTLOOK

For the remainder of the year, we expect paper prices to remain flat and pulp and lumber prices to decrease. Volumes should be down from the third quarter across all businesses due to the weaker economy and typical seasonality of our business. However, we expect a favorable foreign exchange rate, savings from our synergy program and lower energy prices to benefit Domtar’s profitability in the fourth quarter.

On the outlook for 2009, Mr. Royer said, “the depth and duration of the economic slowdown and the impact this may have on office employment and demand for our products are uncertain. Still, Domtar will continue to track its order books and balance supply with its customer demand in uncoated freesheet papers.”

About Domtar

Domtar Corporation (NYSE/TSX:UFS) is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on production capacity, and is also a manufacturer of papergrade, fluff and specialty pulp. The Company designs, manufactures, markets and distributes a wide range of business, commercial printing and publication as well as converting and specialty papers including recognized brands such as Cougar®, Lynx® Opaque, Husky® Offset, First Choice® and Domtar EarthChoice® Office Paper, part of a family of environmentally and socially responsible papers. Domtar owns and operates Domtar Distribution Group, an extensive network of strategically located paper distribution facilities. Domtar also produces lumber and other specialty and industrial wood products. The Company employs nearly 13,000 people. To learn more, visit www.domtar.com.

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