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Domtar releases 1st quarter 2018 financial reports

May 3, 2018 – Domtar Corporation (NYSE: UFS) (TSX: UFS) has reported net earnings of $54 million ($0.86 per share) for the first quarter of 2018 compared to a net loss of $386 million ($6.16 per share) for the fourth quarter of 2017 and net earnings of $20 million ($0.32 per share) for the first quarter of 2017. Sales for the first quarter of 2018 were $1.3 billion.

The Company had earnings before items of $55 million ($0.87 per share) for the first quarter of 2018 compared to earnings before items of $40 million ($0.64 per share) for the fourth quarter of 2017 and earnings before items of $20 million ($0.32 per share) for the first quarter of 2017.

First quarter 2018 items:
• Litigation settlement of $2 million ($2 million after tax); and
• Gain on disposal of property, plant & equipment of $1 million ($1 million after tax).

Fourth quarter 2017 items:
• Non-cash goodwill impairment charge associated with Personal Care of $578 million ($573 million after tax);
• Closure and restructuring costs of $2 million ($1 million after tax);
• Net tax benefit of $140 million related to the U.S. Tax Cuts and Jobs Act of 2017 (U.S. Tax Reform); and
• Net gain on disposal of property, plant & equipment of $9 million ($8 million after tax).

First quarter 2017 items:
• None.

Quarterly review
“We continued to see strong price momentum for our products in the first quarter with higher price realizations in both of our pulp and paper businesses,” John D. Williams, president and chief executive officer, said. “Despite improved results, some of our operations were adversely affected by severe weather, notably in our pulp business, which impacted production and costs. Constrained availability of trucking options also contributed to higher than expected freight costs in the first quarter. Nevertheless, the short-term outlook for pulp and paper markets continues to be favourable.”

Commenting on personal care, Williams added, “Our results in personal care were in line with our expectations. While our margins were impacted by higher raw material prices and lower selling prices, we are taking actions to reduce costs in order to improve performance. We continue to mitigate headwinds, with a focus on continued cost savings and converting our sales pipeline into new wins.”

Operating income was $77 million in the first quarter of 2018 compared to an operating loss of $513 million in the fourth quarter of 2017.
Depreciation and amortization totaled $79 million in the first quarter of 2018.

Operating income before items1 was $78 million in the first quarter of 2018 compared to an operating income before items of $58 million in the fourth quarter of 2017.

The operating income in the first quarter of 2018 was primarily the result of higher average selling prices and lower maintenance costs, selling, general and administrative expenses and other costs, when compared to the operating loss in the fourth quarter of 2017, which included a goodwill impairment charge. These factors were partially offset by higher raw material and freight costs, lower volume in pulp, unfavourable exchange rates and lower productivity.

When compared to the fourth quarter of 2017, manufactured paper shipments were up six per cent and pulp shipments decreased 19 per cent. The shipments-to-production ratio for paper was 104 per cent in the first quarter of 2018, compared to 100 per cent in the fourth quarter of 2017. Paper inventories decreased by 28,000 tons, and pulp inventories increased by 17,000 metric tons when compared to the fourth quarter of 2017.