Features Financial Reports & Markets Paper Pulp
Domtar announces plans to close Texas plant in Q3 report

November 1, 2018 – Domtar Corporation has reported its preliminary third-quarter results and simultaneously announced plans to cut back staff and close its Waco, Texas personal care plant by the end of 2019.

Commenting on personal care, John D. Williams, president and chief executive officer of Domtar, says, “Escalating raw material costs continue to compress our margins in adult incontinence and baby diapers. As a result, we are accelerating the pace of actions that will improve margins and EBITDA, with a plan that is expected to generate annual benefits of approximately $25 to 30 million, with full effect by the end of 2020. This will include headcount reductions, the permanent closure of our Waco, Texas facility, and commercial and operational initiatives. The sum of these actions will reduce our cost base and strengthen our long-term competitive position.”

Employees learned of the Texas plant closure today. The company announced the facility would be shut down in mid- to late 2019.

Elsewhere in the report, the company says net earnings were US$99 million ($1.57 per share) for the third quarter of 2018 compared to net earnings of US$43 million ($0.68 per share) for the second quarter of 2018 and net earnings of $70 million ($1.11 per share) for the third quarter of 2017. Sales for the third quarter of 2018 were $1.4 billion.

The company had earnings before special items of $92 million ($1.46 per share) for the third quarter of 2018 compared to earnings before items of $41 million ($0.65 per share) for the second quarter of 2018 and earnings before items of $65 million ($1.03 per share) for the third quarter of 2017.

“Our strong performance was driven by accelerating price realizations and margin expansion, particularly, within our pulp and paper businesses. Our operations also ran exceptionally well, despite some weather-related outages, with productivity gains across the mill system,” says Williams. “We have strong momentum to close the year on a high note, and the confidence that our pulp and paper businesses will enter 2019 in the best position in recent years.”

Operating income was $114 million in the third quarter of 2018 compared to operating income of $62 million in the second quarter of 2018. Depreciation and amortization totaled $75 million in the third quarter of 2018.

Operating income before special items was $114 million in the third quarter of 2018 compared to an operating income before items of $59 million in the second quarter of 2018.

The increase in operating income in the third quarter of 2018 was the result of higher average selling prices for pulp and paper, lower maintenance costs, favorable productivity, lower raw material costs and selling, general and administrative expenses. These factors were partially offset by lower volume, higher freight and other costs.

When compared to the second quarter of 2018, manufactured paper shipments were down four per cent and pulp shipments increased three per cent. The shipments-to-production ratio for paper was 98 per cent in the third quarter of 2018, compared to 102 per cent in the second quarter of 2018. Paper inventories increased by 17,000 tons, and pulp inventories increased by 17,000 metric tons when compared to the second quarter of 2018.

Read the full report here.