Mr. John Williams reports
DOMTAR CORPORATION REPORTS PRELIMINARY FOURTH QUARTER AND FISCAL YEAR 2012 FINANCIAL RESULTS
Domtar Corp. had net earnings of $19-million (54 cents per share)
for the fourth quarter of 2012 compared with net earnings of $66-million
($1.84 per share) for the third quarter of 2012 and net earnings of
$61-million ($1.63 per share) for the fourth quarter of 2011. Sales for
the fourth quarter of 2012 amounted to $1.3-billion.
Excluding items listed below, the company had earnings before items of $46-million ($1.31 per share) for the fourth quarter of 2012
compared with earnings before items (1) of $67-million ($1.87 per share) for the third quarter of 2012 and
earnings before items of $93-million ($2.49 per share) for the fourth quarter of 2011.
Fourth quarter 2012 items:
Closure and restructuring costs of $27-million ($18-million after tax);
Charge of $12-million ($8-million after tax) related to the impairment
and writedown of property, plant and equipment and intangible assets;
Net losses on the sale of property, plant and equipment of $2-million
($1-million after tax).
Third quarter 2012 items:
Closure and restructuring costs of $2-million ($1-million after tax).
Fourth quarter 2011 items:
Closure and restructuring costs of $38-million ($23-million after tax);
Charge of $12-million ($9-million after tax) related to the impairment
and writedown of property, plant and equipment.
"Our paper and pulp businesses performed largely in line with
expectations from a sales standpoint in the fourth quarter," said John D. Williams, president and chief executive officer. "Higher costs for fibre and energy and unexpected costs incurred at a
pulp mill following a planned maintenance outage affected results."
Fiscal year 2012 highlights
For fiscal year 2012, net earnings amounted to $172-million ($4.76 per
share) compared with net earnings of $365-million ($9.08 per share) for
fiscal year 2011. The company had earnings before items of $233-million ($6.45 per share) for fiscal 2012 compared with earnings
before items of $452-million ($11.24 per share) for fiscal 2011. Sales amounted to
$5.5-billion for fiscal year 2012.
Commenting on the year, Mr. Williams said: "The down cycle in pulp prices contributed to the majority of the
decline in Domtar's earnings. We accomplished a great deal again in
2012 nevertheless. We completed two acquisitions in our personal care
business, we announced the conversion of a world-class commodity paper
mill to manufacture specialty papers and launched several innovative
projects that provide alternative uses for our wood fibre and the
byproducts of our manufacturing process. Our journey to build a
growing fibre-based business is well underway," added Mr. Williams.
Operating income before items was $84-million in the fourth quarter of 2012 compared with an operating
income before items of $111-million in the third quarter of 2012. Depreciation and
amortization totalled $96-million in the fourth quarter of 2012.
(In millions of dollars) Q4 2012 Q3 2012
Sales $1,327 $1,389
Operating income (loss)
Pulp and paper segment 40 103
Distribution segment (8) (5)
Personal care segment 13 12
Corporate (2) (1)
Total 43 109
Operating income before items 84 111
Depreciation and amortization 96 96
The decrease in operating income before items in the fourth quarter of 2012 was the result of lower average selling
prices for pulp and paper, higher unit costs for fibre and energy,
higher selling, general and administrative, freight, and maintenance costs and lower volumes for pulp
and paper. These factors were partially offset by high productivity and
lower costs for lack-of-order downtime in paper.
When compared with the third quarter of 2012, paper shipments decreased
2.5 per cent and pulp shipments decreased 7.2 per cent. Paper deliveries of Ariva decreased 10.4 per cent when compared with the third quarter of 2012. The
shipments-to-production ratio for paper was 97 per cent in the fourth quarter
of 2012, compared with 105 per cent in the third quarter of 2012. Lack-of-order
downtime and machine slowdowns in papers totalled 23,000 short tons in
the fourth quarter of 2012. Paper inventories increased by 27,000 tons
while pulp inventories increased by 3,000 metric tons as at the end of
December, compared with September levels.
Liquidity and capital
Cash flow provided from operating activities amounted to $551-million
and capital expenditures amounted to $236-million, resulting in free
cash flow of $315-million for fiscal year 2012. Domtar's net debt-to-total
capitalization ratio stood at 16 per cent at Dec. 31, 2012, compared with 12 per cent at Dec. 31, 2011.
Domtar returned a total of $215-million to its shareholders through a
combination of dividends and share buybacks in 2012. Under its stock
repurchase program, Domtar repurchased 2,000,925 shares of common stock
throughout 2012 and a total of 8,660,703 shares of common stock at an
average price of $80.04 since the implementation of the program in May,
2010. At the end of the year, Domtar had $304-million remaining under
In 2013, the company expects market demand for uncoated freesheet paper to decline
at a 3- to 4-per-cent rate in North America, but the company's shipments are expected to
trend slightly better than market due to an exposure to stable
specialty and packaging papers and the incremental volume from the
supply agreement signed with Appleton. Paper prices are expected to
trend at levels similar to year-end while the company expects a slow and steady
recovery in pulp prices. The implementation of the company's growth plans in the
personal care segment are expected to yield incremental earnings
beginning in the fourth quarter of 2013.
Earnings conference call
The company will hold a conference call today at 11 a.m. (ET) to
discuss its fourth quarter 2012 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
The company will release its first quarter 2013 earnings on April 25,
2013, 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.
CONSOLIDATED STATEMENTS OF EARNINGS
(In millions of dollars, unless otherwise noted)
Three months ended 12 months ended
Dec. 31, Dec. 31,
2012 2011 2012 2011
Sales $1,327 $1,369 $5,482 $5,612
Cost of sales, excluding depreciation and amortization 1,058 1,039 4,321 4,171
Depreciation and amortization 96 95 385 376
Selling, general and administrative 90 87 358 340
Impairment and write-down of property, plant and equipment and
intangible assets 12 12 14 85
Closure and restructuring costs 27 38 30 52
Other operating loss (income), net 1 (1) 7 (4)
1,284 1,270 5,115 5,020
Operating income 43 99 367 592
Interest expense, net 22 20 131 87
Earnings before income taxes and equity earnings 21 79 236 505
Income tax expense 1 11 58 133
Equity loss, net of taxes 1 7 6 7
Net earnings 19 61 172 365
Per common share (in dollars)
Basic 0.54 1.64 4.78 9.15
Diluted 0.54 1.63 4.76 9.08