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Domtar sees Q1 improvement, record sales in personal care

Domtar Corporation has reported net earnings of $5 million ($0.09 per share) for the first quarter of 2020 compared to a net loss of $34 million ($0.59 per share) for the fourth quarter of 2019 and net earnings of $80 million ($1.27 per share) for the first quarter of 2019.

Sales for the first quarter of 2020 were $1.3 billion.

The company had earnings before items of $5 million ($0.09 per share) for the first quarter of 2020 compared to earnings before items of $2 million ($0.03 per share) for the fourth quarter of 2019 and earnings before items of $91 million ($1.44 per share) for the first quarter of 2019.

“As the global community reacts to COVID-19 and the large-scale effort to contain it continues, we remain focused on navigating the crisis, keeping our employees and their families safe, serving our customers as an essential business, and protecting our financial stability. We are taking steps to reduce spending to further strengthen our balance sheet, liquidity and cash flow while seeking to ensure we are well positioned when the economy starts moving again,” says John D. Williams, president and chief executive officer, in a statement.

“Despite our paper volumes increasing in Q1, we experienced a significant reduction of orders in April due to the COVID crisis and the resulting lockdown of schools, offices, retailers and other business sectors. As a result, we are taking the appropriate steps to optimize our operations and to remain an agile, reliable partner to our customers.

“We continue to closely monitor customer orders and backlogs, and will adjust capacity accordingly, but we anticipate inventory to be at appropriate levels as a result of our recently-announced capacity reduction plan,” says Williams.

“Our pulp shipments were stable in Q1 despite some logistical challenges and a major shutdown of operations in China due to COVID-19. We did see good demand from our North American tissue customers, and we expect overall demand for pulp in the second quarter to remain strong, particularly in China as they continue to reopen their economy.”

Commenting on personal care, Williams adds, “We had a record sales and EBITDA quarter. Our sales line in Q1 benefited from consumer pantry loading in preparation for in-home quarantine and the scale-up of new customer wins. We continue to increase operating rates, and we have established rapid response teams to maximize productivity to support an uptick in demand, inventory replenishment and portfolio simplification.”

Operating income was $19 million in the first quarter of 2020 compared to an operating loss of $15 million in the fourth quarter of 2019. Depreciation and amortization totalled $72 million in the first quarter of 2020.

Operating income before items was $19 million in the first quarter of 2020 compared to operating income before items of $4 million in the fourth quarter of 2019.

The increase in operating income in the first quarter of 2020 was the result of favourable productivity, higher volume, lower selling, general and administrative expenses, lower raw material and freight costs and favourable exchange rates.

These factors were partially offset by lower average selling prices in pulp and paper and higher maintenance, fixed and other costs.

When compared to the fourth quarter of 2019, manufactured paper shipments were up four per cent and pulp shipments decreased four per cent. The shipment-to-production ratio for paper was 105 per cent in the first quarter of 2020, compared to 106 per cent in the fourth quarter of 2019.

Paper inventories decreased by 30,000 tons, and pulp inventories increased by 24,000 metric tons when compared to the fourth quarter of 2019.

Read the full Q1 2020 Domtar financial report.