Higher prices drive solid results for Domtar
By Cindy Macdonald
Domtar reported net earnings of US$18 million for the second quarter of 2016 compared to net earnings of US$4 million for the first quarter of 2016 and net earnings of US$38 million for the second quarter of 2015. Sales for the second quarter of 2016 were US$1.3 billion.
“We had a solid performance given the extensive scheduled maintenance outages and the Ashdown conversion. Our focus on costs and execution resulted in below-plan maintenance spending, and we benefited from higher pulp and paper prices with the implementation of recently announced price increases,” said John D. Williams, president and CEO.
The conversion of the Ashdown paper machine was expected to take place in late July or early August.
Williams added, “In Personal Care, our sales momentum continues to build, with sales increasing six per cent year-over-year as a result of new customer wins. During the quarter, we continued to reinvest in growth, mostly to complete our product assortment, enhance consumer and category insights and deliver innovation to secure additional sales expansion.”
Domtar reported operating income of US$39 million in the second quarter of 2016 compared to operating income of US$18 million in the first quarter of 2016. The increase in operating income in the second quarter of 2016 was the result of lower impairment of property, plant and equipment charge, higher average selling prices, lower raw material costs, lower freight costs and lower maintenance and other costs. These factors were partially offset by higher closure and restructuring costs, lower volumes, unfavorable exchange rates and a litigation settlement.
When compared to the first quarter of 2016, manufactured paper shipments were down 4.3 per cent and pulp shipments decreased 2.4 per cent, the company said. The shipments-to-production ratio for paper was 105 per cent in the second quarter of 2016, compared to 100 per cent in the first quarter of 2016. Paper inventories decreased by 37,000 tons and pulp inventories decreased by 16,000 metric tons when compared to the first quarter of 2016.
Looking ahead, Domtar’s quarterly results statement reads: “Our paper business should continue to benefit from recently announced price increases while we expect some short-term pricing volatility in pulp. Lower maintenance activity and better productivity should positively impact results in pulp and paper.”