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Domtar reports good paper performance in Q1 2019 despite net earnings dip

May 1, 2019 – Domtar Corporation has reported its preliminary first-quarter 2019 results, citing solid performance in its paper segment despite a decrease in net earnings from Q4 2018.

Net earnings of $80 million ($1.27 per share) for the first quarter of 2019 compared to net earnings of $87 million ($1.38 per share) for the fourth quarter of 2018 and net earnings of $54 million ($0.86 per share) for the first quarter of 2018. Sales for the first quarter of 2019 were $1.4 billion.

The company had earnings before items of $91 million ($1.44 per share) for the first quarter of 2019 compared to earnings before items of $103 million ($1.63 per share) for the fourth quarter of 2018 and earnings before items of $55 million ($0.87 per share) for the first quarter of 2018.

“We had a solid performance from pulp and paper despite a wood fibre shortage that negatively impacted costs and output,” says John D. Williams, president and chief executive officer. “Price and volume momentum in paper continued in a favorable market environment, which led to strong productivity and a good cost performance. The pulp business was impacted by lower prices while higher internal pulp shipments due to wood fibre constraints negatively impacted our volumes. Nevertheless, we continued to improve and increase overall productivity and manage costs through saving initiatives.”

Williams adds, “In Personal Care, our margins improved driven by better productivity and operational efficiencies as our new customer ramp-up accelerates. We also successfully implemented price increases in both North America and Europe helping to partially offset raw material cost headwinds. Our teams continue to deliver on our margin improvement plan, which is expected to progress throughout the year.”

Operating income was $115 million in the first quarter of 2019 compared to operating income of $133 million in the fourth quarter of 2018. Depreciation and amortization totaled $73 million in the first quarter of 2019.

Operating income before items was $129 million in the first quarter of 2019 compared to an operating income before items of $148 million in the fourth quarter of 2018.

The decrease in operating income in the first quarter of 2019 was the result of higher selling, general and administrative expenses, higher raw material costs and lower volume in pulp. These factors were partially offset by higher average selling prices for paper, lower fixed and other costs and favorable exchange rates.

When compared to the fourth quarter of 2018, manufactured paper shipments were up two per cent and pulp shipments decreased 12 per cent. The shipments-to-production ratio for paper was 97 per cent in the first quarter of 2019, compared to 95 per cent in the fourth quarter of 2018. Paper inventories increased by 22,000 tons, and pulp inventories increased by 24,000 metric tons when compared to the fourth quarter of 2018.

Read the full Q1 2019 Domtar Corporation financial report.