Pulp and Paper Canada

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Domtar sees some rebound in Q1 2021, posts net loss of $29M


May 6, 2021
By P&PC Staff/Domtar

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Domtar Corporation has reported a net loss of $29 million ($0.54 per share) for the first quarter of 2021.

This is compared to a net loss of $59 million ($1.07 per share) for the fourth quarter of 2020 and net earnings of $5 million ($0.09 per share) for the first quarter of 2020.

Sales for the first quarter of 2021 were $944 million.

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“While COVID-19 continued to remain the dominant challenge in the first quarter, severe winter weather affected our production and our supply chains across North America, notably at our Ashdown, Ark. market pulp mill,” says John D. Williams, president and CEO of Domtar, in a statement.

“Nevertheless, we got off to a reasonably good start to the year and we expect strong second-half results driven by price momentum and strong volume in paper and pulp.

“The Kingsport conversion is progressing well. The project is on schedule, and the crews on site are currently completing demolition and preparing the site for the new buildings and warehouse. We are also making good progress with our commercial strategy and the customer response continues to be extremely positive.”

The first-quarter 2021 results include an after-tax loss of $22 million ($0.41 per share) from discontinued operations related to the sale of the personal care business, compared to an after-tax loss of $43 million ($0.78 per share) for the fourth quarter of 2020 and an after-tax earnings of $20 million ($0.36 per share) for the first quarter of 2020.

Excluding discontinued operations and certain items, the company had earnings from continuing operations before items of $5 million ($0.09 per share) for the first quarter of 2021 compared to earnings from continuing operations before items of $19 million ($0.34 per share) for the fourth quarter of 2020 and a loss from continuing operations before items of $15 million ($0.27 per share) for the first quarter of 2020.

Operating income was $2 million in the first quarter of 2021 compared to an operating loss of $20 million in the fourth quarter of 2020. Depreciation and amortization totalled $54 million in the first quarter of 2021.

The increase in operating income in the first quarter of 2021, compared to the prior quarter, was the result of lower long-lived asset impairment and closure and restructuring charges related to the cost savings program, higher average selling prices in pulp, lower maintenance costs and favourable exchange rates, the company says.

These factors were partially offset by higher raw material and freight costs, asset conversion costs, unfavourable productivity, higher selling, general and administrative expenses and higher fixed costs.

The company closed the sale of its personal care business during this quarter.

When compared to the fourth quarter of 2020, manufactured paper shipments were up one per cent and pulp shipments were flat. The shipment-to-production ratio for paper was 102 per cent in the first quarter of 2021, compared to 98 per cent in the fourth quarter of 2020.

Paper inventories decreased by 13,000 tons, and pulp inventories decreased by 38,000 metric tons when compared to the fourth quarter of 2020.

The company says paper demand will remain dependent upon recovery from COVID-19, but demand is expected to continue to rebound through the year as people return to schools and offices. Near-term pulp markets should remain balanced due to steady demand growth and limited new supply.

Recently announced price increases in both pulp and paper will positively impact results. The second quarter will be affected by seasonally higher maintenance costs in the pulp and paper business as the company moves into the planned outages at some of its major facilities.

For the full Domtar Q1 2021 financial report, click here.