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Domtar reports Q3 results

“The third quarter was marked by weak paper demand and by cyclically low pulp prices,” said John Williams, President and CEO. “Nevertheless, shipments for our pulp were sequentially higher, our paper pricing remained firm and paper inventories decreased by 10%. Given the macro environment, we continue to manage the business prudently, adjusting our production to customer demand through market-related downtime. I am pleased with our performance overall despite a sluggish economy and a weak pulp price environment.”

Domtar Corporation reported net earnings of $66 million ($1.84 per share) for the third quarter of 2012 compared to net earnings of $59 million ($1.61 per share) for the second quarter of 2012 and net earnings of $117 million ($2.95 per share) for the third quarter of 2011. Sales for the third quarter of 2012 amounted to $1.4 billion.

Domtar had earnings of $67 million ($1.87 per share) for the third quarter of 2012 compared to earnings of $59 million ($1.61 per share) for the second quarter of 2012 and earnings of $123 million ($3.10 per share) for the third quarter of 2011.

Quarterly review
Operating income was $111 million in the third quarter of 2012 compared to an operating income of $106 million in the second quarter of 2012. Depreciation and amortization totaled $96 million in the third quarter of 2012.

The increase in operating income in the third quarter of 2012 was the result of higher shipments for pulp and paper, lower maintenance and raw material costs and lower SG&A costs. These factors were partially offset by lower average selling prices for pulp and paper and higher costs for lack-of-order downtime in papers.

When compared to the second quarter of 2012, paper shipments increased 0.9% and pulp shipments increased 12.8%. Paper deliveries of Ariva decreased 4.6% when compared to the second quarter of 2012. The shipments-to-production ratio for paper was 105% in the third quarter of 2012, compared to 98% in the second quarter of 2012. Lack-of-order downtime and machine slowdowns in papers totaled 38,000 tons. Paper inventories decreased by 38,000 tons while pulp inventories increased by 15,000 metric tons as at the end of September, compared to June levels.

Outlook
Due to seasonal factors, Domtar paper shipments are expected to decline in the fourth quarter when compared to the third quarter. In pulp, we anticipate that prices will begin to gradually increase in the medium term due to favorable market dynamics and low softwood inventory levels. Input costs, notably energy and chemicals are expected to increase slightly in the fourth quarter.