Mr. John Williams reports
DOMTAR CORPORATION REPORTS PRELIMINARY FOURTH QUARTER AND FISCAL YEAR 2011 FINANCIAL RESULTS
Domtar Corp. had net earnings of $61-million ($1.63 per share)
for the fourth quarter of 2011 compared with net earnings of $117-million
($2.95 per share) for the third quarter of 2011 and net earnings of
$325-million ($7.59 per share) for the fourth quarter of 2010. Sales
for the fourth quarter of 2011 amounted to $1.4-billion. Excluding
items listed below, the company had earnings before items (1) of $93-million ($2.49 per share) for the fourth quarter of 2011
compared with earnings before items (1) of $123-million ($3.10 per share) for the third quarter of 2011 and
earnings before items (1) of $103-million ($2.41 per share) for the fourth quarter of 2010.
(All financial information is in U.S. dollars, and all earnings (loss)
per share results are diluted, unless otherwise noted.)
Fourth quarter 2011 items:
-
Closure and restructuring costs of $38-million ($23-million after tax)
mostly related to the restructuring of certain U.S. pension benefit
plans;
-
Charge of $12-million ($9-million after tax) related to the impairment
and writedown of property, plant and equipment.
Third quarter 2011 items:
-
Gains on the sale of property, plant and equipment of $4-million ($3-million after tax);
-
Charge of $8-million ($4-million after tax) related to the impairment
and writedown of property, plant and equipment;
-
Premium paid on debt repurchase of $4-million ($3-million after tax);
-
Closure and restructuring costs of $1-million ($1-million after tax);
-
Negative impact of purchase accounting of $1-million ($1-million after
tax).
Fourth quarter 2010 items:
-
Benefit from cellulosic biofuel producer income tax credit of $127-million;
-
Benefit from reversal of a valuation allowance on Canadian deferred
income tax assets of $100-million;
-
Costs for debt repurchase of $7-million ($4-million after tax);
- Closure and restructuring costs of $1-million ($1-million after tax).
"Our pulp earnings were affected by the rapid decline in global pulp
prices while earnings from our paper business were impacted by the
typical seasonal slowdown of the fourth quarter. Nevertheless, our
fourth quarter results are good results and I am pleased to see the
Attends business perform to expectations," said John D. Williams, president and chief executive officer.
Fiscal year 2011 highlights
For fiscal year 2011, net earnings amounted to $365-million ($9.08 per
share) compared with net earnings of $605-million ($14 per share) for
fiscal year 2010. The company had earnings before items (1) of $452-million ($11.24 per share) for fiscal 2011 compared with earnings
before items (1) of $471-million ($10.90 per share) for fiscal 2010. Sales amounted to
$5.6-billion for fiscal year 2011.
Commenting on the 2011 performance, Mr. Williams said: "Looking back at 2011, we delivered another strong performance. The
second half was slightly more challenging due to the decline in pulp
prices however we maintained our volumes. This solid performance
enabled us to pursue our commitment to returning a majority of free
cash flow to shareholders. In 2011, we returned over $543-million or
$13.50 per share, representing 73 per cent of total free cash flow (1), through a combination of share buyback and regular dividends."
Quarterly review
Operating income before items (1) was $148-million in the fourth quarter of 2011 compared with an operating
income before items (1) of $193-million in the third quarter of 2011. Depreciation and
amortization totalled $95-million in the fourth quarter of 2011.
In December, 2011, Domtar signed a four-year master agreement with the
United Steelworkers that covers approximately 3,000 hourly employees at
nine different locations in the United States. Per the agreement,
Domtar is restructuring the pension plans covering these negotiated
employees. This will result in Domtar's withdrawal from a
multiemployer pension plan and the transition of all covered employees
not grandfathered under the existing defined-benefit pension plans to a
defined-contribution pension plan for future service. As a result,
Domtar incurred a $41-million charge recorded under closure and
restructuring costs.
(In millions of dollars) Q4 2011 3Q 2011
Sales $1,369 $1,417
Operating income (loss)
Pulp and Paper segment 92 189
Distribution segment - (1)
Personal Care segment 7 -
Corporate - (1)
Total 99 187
Operating income before items (1) 148 193
Depreciation and amortization 95 93
The decrease in operating income before items (1) in the fourth quarter of 2011 was the result of lower average selling
prices for pulp, lower shipments for paper and higher energy costs.
These factors were partially offset by lower maintenance costs, lower
freight costs, the positive impact of a weaker Canadian dollar and the
inclusion of Attends' earnings for a full quarter.
When compared with the third quarter of 2011, paper shipments decreased
6.5 per cent and pulp shipments increased 12.6 per cent. Paper deliveries of Ariva decreased 8 per cent when compared with the third quarter of 2011. The
shipments-to-production ratio for paper was 95 per cent in the fourth quarter
of 2011, compared with 102 per cent in the third quarter of 2011. Paper
inventories increased by 40,000 tons while pulp inventories decreased
by 25,000 metric tonnes as at the end of December, compared with September
levels.
Liquidity and capital
Cash flow provided from operating activities amounted to $883-million
and capital expenditures amounted to $144-million, resulting in free
cash flow (1) of $739-million for fiscal 2011. Domtar's net debt-to-total
capitalization ratio (1) stood at 12 per cent at Dec. 31, 2011, compared with 9 per cent at Dec. 31, 2010.
Outlook
Prices for pulp are still expected to remain under pressure in certain
geographies while market dynamics in the Asian markets are stabilizing.
In fine papers, North American demand is expected to decline at a 2- to 4-per-cent
rate in 2012, consistent with long-term trends. Any acceleration in
employment growth may help mitigate the structural decline in paper
demand. Inflation on input costs is expected to be moderate in 2012.
Earnings conference call
The company will hold a conference call today at 11 a.m. (ET) to
discuss its fourth quarter 2011 financial results. Financial analysts
are invited to participate in the call by dialling at least 10 minutes
before start time 1-866-321-8231 (toll-free -- North America) or 1-416-642-5213 (international), while media and other interested
individuals are invited to listen to the live webcast on the Domtar
website.
The company will release its first quarter 2012 earnings on April 26,
2012, before markets open, followed by a conference call at 10 a.m.
(ET) to discuss results. The date is tentative and will be confirmed
approximately three weeks prior to the official earnings release date.
(1) A non-generally accepted accounting principles measure.
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions of dollars)
Three months ended 12 months ended
Dec. 31, Dec. 31,
2011 2010 2011 2010
Sales $1,369 $1,373 $5,612 $5,850
Operating expenses
Cost of sales, excluding depreciation and amortization 1,039 1,020 4,171 4,417
Depreciation and amortization 95 95 376 395
Selling, general and administrative 87 94 340 338
Impairment and writedown of property, plant and equipment 12 - 85 50
Closure and restructuring costs 38 1 52 27
Other operating loss (income), net (1) 8 (4) 20
------ ------ ------ ------
1,270 1,218 5,020 5,247
------ ------ ------ ------
Operating income 99 155 592 603
Interest expense, net 20 29 87 155
------ ------ ------ ------
Earnings before income taxes and equity earnings 79 126 505 448
Income tax expense (benefit) 11 (199) 133 (157)
Equity loss, net of taxes 7 - 7 -
------ ------ ------ ------
Net earnings $61 $325 $365 $605
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Per common share (in dollars)
Net earnings
Basic $1.64 $7.67 $9.15 $14.14
Diluted $1.63 $7.59 $9.08 $14.00
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