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Domtar posts $59M loss for Q4 2020, sales down from prior year

Domtar Corporation has reported a net loss of $59 million ($1.07 per share) for the fourth quarter of 2020.

This is compared to a net loss of $92 million ($1.67 per share) for the third quarter of 2020, and a net loss of $34 million ($0.59 per share) for the fourth quarter of 2019.

Sales for the fourth quarter of 2020 were $0.9 billion.

The fourth quarter 2020 results include an after-tax loss of $43 million ($0.78 per share) from discontinued operations related to the announced sale of the personal care business, compared to earnings of $19 million ($0.34 per share) for the third quarter of 2020 and earnings of $10 million ($0.17 per share) for the fourth quarter of 2019.

Excluding discontinued operations and certain items, the company had earnings from continuing operations before items of $19 million ($0.34 per share) for the fourth quarter of 2020, compared to loss from continuing operations before items of $1 million ($0.02 per share) for the third quarter of 2020 and loss from continuing operations before items of $9 million ($0.16 per share) for the fourth quarter of 2019.

“Despite the challenges from the COVID-19 pandemic, our teams demonstrated resiliency by continuously adapting to changing market conditions which led us to achieve solid results,” says Daniel Buron, senior vice-president, chief financial officer and acting chief executive officer.

“I’m proud of the teamwork that allowed us to not just stand up in the face of adversity, but to move forward during such a challenging time and in accordance with our strategy. We met many goals last year; we prioritized maximizing cash, reducing costs, and remaining an agile, reliable partner to our customers. We believe these changes will improve this company for the long-term.”

2020 fiscal year highlights

For fiscal year 2020, net loss amounted to $127 million ($2.29 per share), compared to net earnings of $84 million ($1.37 per share) for fiscal year 2019.

Domtar had earnings from continuing operations before items of $1 million ($0.02 per share) for fiscal year 2020, compared to earnings from continuing operations before items of $149 million ($2.43 per share) for fiscal year 2019. Sales were $3.7 billion for fiscal year 2020.

Quarterly review

“Our paper shipments were in line with the third quarter and order activity remained stable across all channels, while paper pricing was consistent with the year-to-date average. In pulp, we improved our cost performance, which is attributable to lower maintenance costs, our cost reduction program and favourable wood costs. Market fundamentals continue to improve, and we announced several pulp price increases in the first quarter of 2021,” Buron says.

“In personal care, we had a strong finish to the year with improved fourth quarter performance driven by strong sales of adult incontinence products in North America and a good performance in Europe following the seasonality impact of the softer summer period. We announced the sale of the personal care business to American Industrial Partners for $920 million, and we expect the transaction to close in the first quarter of 2021.”

Operating loss was $20 million in the fourth quarter of 2020, compared to an operating loss of $152 million in the third quarter of 2020. Depreciation and amortization totaled $53 million in the fourth quarter of 2020.

Operating income before items was $35 million in the fourth quarter of 2020, compared to an operating income before items of $27 million in the third quarter of 2020.

The decrease in operating loss in the fourth quarter of 2020, compared to the prior quarter, was the result of lower long-lived asset impairment and closure and restructuring charges related to the cost savings program, lower maintenance costs, favourable productivity and lower selling, general and administrative expenses.

These factors were partially offset by lower volume in pulp and paper, lower average selling prices for pulp, higher freight and other costs and unfavourable exchange rates.

When compared to the third quarter of 2020, manufactured paper shipments were down one per cent and pulp shipments increased 14 per cent.

The shipment-to-production ratio for paper was 98 per cent in the fourth quarter of 2020, compared to 105 per cent in the third quarter of 2020. Paper inventories increased by 10,000 tons and pulp inventories decreased by 3,000 metric tons when compared to the third quarter of 2020.

Outlook

In 2021, paper demand remains uncertain and dependent upon the COVID-19 recovery, in particular quarantine measures impacting the return to office and school.

The company expects near-term pulp markets to gradually improve driven by better demand, maintenance outages and restocking in China. Overall raw material costs are expected to moderately increase and freight costs are also expected to be higher.

Read the full Q4 and year-end 2020 financial report at Domtar.