Pulp and Paper Canada

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Domtar reports net loss of $34M for Q4 2019


February 7, 2020
By P&PC Staff

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Domtar Corporation has reported a net loss of $34 million ($0.59 per share) for the fourth quarter of 2019 compared to net earnings of $20 million ($0.32 per share) for the third quarter of 2019 and net earnings of $87 million ($1.38 per share) for the fourth quarter of 2018.

Sales for the fourth quarter of 2019 were $1.2 billion.

The company had earnings before items of $2 million ($0.03 per share) for the fourth quarter of 2019 compared to earnings before items of $55 million ($0.89 per share) for the third quarter of 2019 and earnings before items1 of $103 million ($1.63 per share) for the fourth quarter of 2018.

“Our results in the paper business fell short of our expectations,” says John D. Williams, Domtar president and chief executive officer.

“Shipments remained weak in the quarter due to seasonally slower demand and some customer de-stocking. As a result, we increased market-related downtime to better balance our supply with our customer demand and reduce our inventory to more optimal levels.”

Fourth-quarter 2019

Operating loss was $15 million in the fourth quarter of 2019 compared to operating income of $29 million in the third quarter of 2019. Depreciation and amortization totalled $74 million in the fourth quarter of 2019.

Operating income before items was $4 million in the fourth quarter of 2019 compared to an operating income before items of $73 million in the third quarter of 2019.

The operating loss in the fourth quarter of 2019 was the result of lower average selling prices and unfavourable productivity in pulp and paper, higher selling, general and administrative expenses, and higher maintenance, freight and raw material costs.

When compared to the third quarter of 2019, manufactured paper shipments were down two per cent and pulp shipments decreased three per cent. The shipment-to-production ratio for paper was 106 per cent in the fourth quarter of 2019, compared to 103 per cent in the third quarter of 2019. Paper inventories decreased by 36,000 tons, and pulp inventories decreased by 15,000 metric tons when compared to the third quarter of 2019.

Fiscal year 2019

For fiscal year 2019, net earnings amounted to $84 million ($1.37 per share) compared to net earnings of $283 million ($4.48 per share) for fiscal year 2018. Domtar had earnings before items of $184 million ($3.00 per share) for fiscal year 2019 compared to earnings before items of $291 million ($4.61 per share) for fiscal year 2018.

Sales amounted to $5.2 billion for fiscal year 2019.

“Our teams were agile in adjusting to market changes and executed well on things under our control in a challenging market environment,” says Williams on the full-year results.

“We had strong cash flow generation and our solid financial position allowed us to continue to reward shareholders with a high free cash flow payout ratio, while strategically investing in our assets.”

2020 outlook

In 2020, Domtar expects paper volumes to trend with market demand while pulp volumes will increase due to higher pulp productivity at our Espanola and Ashdown mills. The pulp and paper business will benefit from lower planned maintenance costs.

Personal care is expected to benefit from their margin improvement plan and higher sales following new customer wins. Overall, the company anticipates costs, including freight, labour and raw materials, to marginally increase.

Read the full Q4 2019 and fiscal year 2019 financial report from Domtar.