Seasonally high level of scheduled maintenance; Good momentum
in pulp markets(All financial information is in U.S.
dollars, and all earnings per share results are diluted, unless
otherwise noted).
- First quarter 2017 net earnings of
$0.32 per share
- Price increases announced for several
pulp grades
- $91 million of cash flow from
operating activities
Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net
earnings of $20 million ($0.32 per share) for the first
quarter of 2017 compared to net earnings of $47 million ($0.75 per
share) for the fourth quarter of 2016 and net earnings of
$4 million ($0.06 per share) for the first quarter of 2016.
Sales for the first quarter of 2017 were $1.3 billion.
Excluding items listed below, the Company had earnings before
items1 of $20 million ($0.32 per share) for the first quarter of
2017 compared to earnings before items1 of $47 million ($0.75 per
share) for the fourth quarter of 2016 and earnings before items1 of
$22 million ($0.35 per share) for the first quarter of
2016.
First quarter 2017
items:
Fourth quarter 2016
items:
- Closure and restructuring impact of
$(1) million ($(1) million after tax); and
- Negative impact of purchase accounting
of $1 million ($1 million after tax).
First quarter 2016
items:
- Closure and restructuring costs of $2
million ($2 million after tax); and
- Impairment of property, plant &
equipment of $21 million ($16 million after tax).
QUARTERLY REVIEW
“The Ashdown mill continued to focus its efforts on the
production and quality of fluff pulp; we shipped primarily softwood
bales in the quarter, but we are making good progress with the
qualification of our grades and we’re receiving positive feedback
from our customers,” said John D. Williams, President and Chief
Executive Officer. “Our pulp business is growing and becoming more
meaningful. We’ve shipped nearly 25% more tons when compared to the
same quarter last year, and current initiatives will support
continued profitable growth. Our nearly 2 million tons of
high-quality softwood, fluff and specialty market pulp capacity
provides us with a scale business that will add momentum to our
growth strategy for years to come.”
Mr. Williams added, “In Personal Care, strong sales growth and
operational improvements in the first quarter continue to offset
currency, price and cost headwinds. We are focusing our efforts on
rolling out our growth plans, capturing the benefits of our cost
savings program and building value for our customers to effectively
compete in this competitive environment. Our sales pipeline remains
active with numerous opportunities to grow in both North America
and Europe.”
Operating income was $42 million in the first quarter of
2017 compared to an operating income of $74 million in the
fourth quarter of 2016. Depreciation and amortization totaled
$80 million in the first quarter of 2017.
Operating income before items1 was $42 million in the first
quarter of 2017 compared to an operating income before items1 of
$74 million in the fourth quarter of 2016.
(In millions of dollars)
1Q 2017 4Q
2016 Sales $ 1,304 $ 1,274 Operating income (loss) Pulp
and Paper segment 34 74 Personal Care segment 16 13 Corporate
(8 ) (13 ) Total operating income 42 74 Operating
income before items1 42 74 Depreciation and amortization 80 85
The decrease in operating income in the first quarter of 2017
was the result of higher maintenance costs, lower productivity,
lower average selling prices and higher raw material and other
costs. These factors were partially offset by higher volume, lower
selling, general and administrative expenses and favorable exchange
rates.
When compared to the fourth quarter of 2016, manufactured paper
shipments were up 1% and pulp shipments increased 9%. The
shipments-to-production ratio for paper was 105% in the first
quarter of 2017, compared to 104% in the fourth quarter of 2016.
Paper inventories decreased by 36,000 tons and pulp inventories
decreased by 61,000 metric tons when compared to the fourth quarter
of 2016.
LIQUIDITY AND CAPITAL
Cash flow from operating activities amounted to $91 million
and capital expenditures were $34 million, resulting in free
cash flow1 of $57 million for the first quarter of 2017.
Domtar’s net debt-to-total capitalization ratio1 stood at 30% at
March 31, 2017 and at December 31, 2016.
OUTLOOK
For the remainder of the year, we anticipate paper shipments to
be in-line with market demand. We expect to benefit from recently
announced pulp price increases, while mix should continue to
improve as we convert to more fluff pulp sales at our Ashdown mill.
Costs, including freight, labor and chemicals are expected to
marginally increase. In Personal Care, market growth, investments
in advertising and promotion in addition to new customer wins
should drive higher sales, while raw material costs are expected to
marginally increase.
EARNINGS CONFERENCE CALL
The Company will hold a conference call today at 10:00 a.m. (ET)
to discuss its first quarter 2017 financial results. Financial
analysts are invited to participate in the call by dialing 1 (800)
499-4035 (toll free - North America) or 1 (416) 204-9269
(International) at least 10 minutes before start time, while media
and other interested individuals are invited to listen to the live
webcast on the Domtar Corporation website at www.domtar.com.
The Company will release its second quarter 2017 earnings
results on July 27, 2017 before markets open, followed by a
conference call at 10:00 a.m. (ET) to discuss results. The date is
tentative and will be confirmed approximately three weeks prior to
the official earnings release date.
About DomtarDomtar is a leading provider of a wide
variety of fiber-based products including communication, specialty
and packaging papers, market pulp and absorbent hygiene products.
With approximately 10,000 employees serving more than 50 countries
around the world, Domtar is driven by a commitment to turn
sustainable wood fiber into useful products that people rely on
every day. Domtar’s annual sales are approximately $5.1 billion,
and its common stock is traded on the New York and Toronto Stock
Exchanges. Domtar’s principal executive office is in Fort Mill,
South Carolina. To learn more, visit www.domtar.com.
Forward-Looking StatementsStatements in this release
about our plans, expectations and future performance, including the
statements by Mr. Williams and those contained under “Outlook,” are
“forward-looking statements.” Actual results may differ materially
from those suggested by these statements for a number of reasons,
including changes in customer demand and pricing, changes in
manufacturing costs, future acquisitions and divestitures,
including facility closings, and the other reasons identified under
“Risk Factors” in our Form 10-K for 2016 as filed with the SEC and
as updated by subsequently filed Form 10-Qs. Except to the extent
required by law, we expressly disclaim any obligation to update or
revise these forward-looking statements to reflect new events or
circumstances or otherwise.
Domtar CorporationHighlights(In millions of
dollars, unless otherwise noted)
Three months ended Three months ended
March
31, March 31,
2017 2016 (Unaudited)
$ $
Selected Segment Information Sales Pulp and
Paper
1,073 1,085 Personal Care
249 216
Total for reportable segments
1,322 1,301 Intersegment sales
(18 ) (14 )
Consolidated sales
1,304 1,287
Depreciation and
amortization
of property, plant and
equipment
Pulp and Paper
64 73 Personal Care
16
16 Total for reportable segments
80 89 Impairment of
property, plant
and equipment - Pulp and Paper
— 21
Consolidated depreciation and
amortization and
impairment of property, plant and
equipment
80 110
Operating income (loss)
Pulp and Paper
34 19 Personal Care
16 14 Corporate
(8 ) (15 )
Consolidated operating
income 42 18 Interest expense, net
17
17
Earnings before income taxes 25 1 Income
tax expense (benefit)
5 (3 )
Net
earnings 20 4 Per common share (in
dollars) Net earnings Basic
0.32 0.06 Diluted
0.32
0.06 Weighted average number of common
shares outstanding (millions)
Basic
62.6 62.7 Diluted
62.8 62.8 Cash
flows from operating activities
91 97 Additions to property,
plant and equipment
34 100
Domtar CorporationConsolidated Statements of
Earnings(In millions of dollars, unless otherwise noted)
Three months ended Three months ended
March
31, March 31,
2017 2016 (Unaudited)
$ $
Sales 1,304 1,287
Operating expenses
Cost of sales, excluding depreciation and amortization
1,075
1,050 Depreciation and amortization
80 89 Selling, general
and administrative
108 103 Impairment of property, plant and
equipment
— 21 Closure and restructuring costs
— 2
Other operating (income) loss, net
(1 )
4
1,262 1,269
Operating income
42 18 Interest expense, net
17 17
Earnings before income taxes 25 1 Income tax expense
(benefit)
5 (3 )
Net earnings
20 4
Per common share (in dollars) Net
earnings Basic
0.32 0.06 Diluted
0.32 0.06 Weighted
average number of common
shares outstanding (millions)
Basic
62.6 62.7 Diluted
62.8 62.8
Domtar CorporationConsolidated Balance Sheets
at(In millions of dollars)
March 31, December 31,
2017 2016
(Unaudited)
$ $
Assets Current
assets Cash and cash equivalents
111 125 Receivables,
less allowances of $7 and $7
662 613 Inventories
722
759 Prepaid expenses
34 40 Income and other taxes receivable
15 31
Total current assets
1,544 1,568
Property, plant and equipment, net
2,789 2,825
Goodwill 553 550
Intangible
assets, net 607 608
Other assets
132 129
Total assets 5,625
5,680
Liabilities and shareholders' equity Current
liabilities Bank indebtedness
2 12 Trade and other
payables
633 656 Income and other taxes payable
25 22
Long-term debt due within one year
64 63
Total current liabilities 724 753
Long-term
debt 1,188 1,218
Deferred income taxes and other
672 675
Other liabilities and deferred credits
356 358
Shareholders' equity Common stock
1 1
Additional paid-in capital
1,964 1,963 Retained earnings
1,205 1,211 Accumulated other comprehensive loss
(485 ) (499 )
Total shareholders'
equity 2,685 2,676
Total liabilities
and shareholders' equity 5,625 5,680
Domtar CorporationConsolidated Statements of Cash
Flows(In millions of dollars)
For the three months ended
March 31, 2017
March 31, 2016 (Unaudited)
$ $
Operating activities
Net earnings
20 4 Adjustments to reconcile net
earnings to cash flows from operating activities Depreciation and
amortization
80 89 Deferred income taxes and tax
uncertainties
(4 ) (3 ) Impairment of property, plant
and equipment
— 21 Stock-based compensation expense
1
1 Changes in assets and liabilities Receivables
(47 )
(6 ) Inventories
39 (1 ) Prepaid expenses
1 (1 )
Trade and other payables
(19 ) 2 Income and other
taxes
21 (9 ) Difference between employer pension and other
post-retirement
contributions and pension and other
post-retirement expense
— (1 ) Other assets and other liabilities
(1
) 1 Cash flows from operating activities
91 97
Investing activities Additions to
property, plant and equipment
(34 )
(100 ) Cash flows used for investing activities
(34
) (100 )
Financing activities Dividend
payments
(26 ) (25 ) Stock repurchase
— (10 )
Net change in bank indebtedness
(11 ) 7
Change in revolving credit facility
(20 ) — Proceeds from receivables securitization
facility
— 20 Repayments of receivables securitization
facility
(15 ) (20 ) Repayments of long-term debt
— (1 ) Cash flows used for financing
activities
(72 ) (29 )
Net decrease
in cash and cash equivalents (15 ) (32 ) Impact
of foreign exchange on cash
1 3 Cash and cash equivalents at
beginning of period
125 126
Cash and cash
equivalents at end of period 111 97
Supplemental cash flow information Net cash payments
(refunds) for: Interest
19 20 Income taxes
(8
) 6
Domtar CorporationQuarterly Reconciliation of Non-GAAP
Financial Measures(In millions of dollars, unless otherwise
noted)
The following table sets forth certain non-U.S. generally
accepted accounting principles (“GAAP”) financial metrics
identified in bold as “Earnings before items”, “Earnings before
items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before
items”, “EBITDA margin before items”, “Free cash flow”, “Net debt”
and “Net debt-to-total capitalization”. Management believes that
the financial metrics are useful to understand our operating
performance and benchmark with peers within the industry. The
Company calculates “Earnings before items” and “EBITDA before
items” by excluding the after-tax (pre-tax) effect of specified
items. These metrics are presented as a complement to enhance the
understanding of operating results but not in substitution for GAAP
results.
2017 2016 Q1 Q1 Q2
Q3 Q4
Year Reconciliation of
"Earnings before items" to Net earnings
Net earnings ($) 20 4 18 59 47
128 (+)
Impairment of property, plant and equipment ($) — 16 2 4 —
22 (+) Closure and restructuring costs ($) — 2 16 8 (1 )
25 (+) Litigation settlement ($) — — 2 — —
2 (+)
Impact of purchase accounting ($) — — — — 1
1 (=)
Earnings before items ($) 20 22 38 71 47
178 (/)
Weighted avg. number of common shares outstanding (diluted)
(millions) 62.8 62.8 62.7 62.7 62.7
62.7 (=)
Earnings
before items per diluted share ($) 0.32 0.35 0.61 1.13 0.75
2.84 Reconciliation of "EBITDA" and "EBITDA before
items" to Net earnings Net earnings ($) 20 4 18 59 47
128 (+) Income tax expense (benefit) ($) 5 (3 ) 6 16 10
29 (+) Interest expense, net ($) 17 17 15 17 17
66
(=) Operating income ($) 42 18 39 92 74
223 (+) Depreciation
and amortization ($) 80 89 87 87 85
348 (+) Impairment of
property, plant and equipment ($) — 21 3 5 —
29 (=)
EBITDA ($) 122 128 129 184 159
600 (/) Sales ($)
1,304 1,287 1,267 1,270 1,274
5,098 (=)
EBITDA margin
(%) 9 % 10 % 10 % 14 % 12 %
12 % EBITDA ($) 122 128
129 184 159
600 (+) Closure and restructuring costs ($) — 2
21 10 (1 )
32 (+) Litigation settlement ($) — — 2 — —
2 (+) Impact of purchase accounting ($) — — — — 1
1
(=)
EBITDA before items ($) 122 130 152 194 159
635
(/) Sales ($) 1,304 1,287 1,267 1,270 1,274
5,098 (=)
EBITDA margin before items (%) 9 % 10 % 12 % 15 % 12 %
12 % Reconciliation of "Free cash flow" to
Cash flows from operating activities Cash flows from operating
activities ($) 91 97 118 95 155
465 (-) Additions to
property, plant and equipment ($) (34 ) (100 ) (119 ) (83 ) (45 )
(347 ) (=)
Free cash flow ($) 57 (3 ) (1 ) 12
110
118 "Net debt-to-total capitalization"
computation Bank indebtedness ($) 2 6 1 — 12 (+) Long-term debt
due within one year ($) 64 41 64 63 63 (+) Long-term debt ($) 1,188
1,211 1,237 1,309 1,218 (=) Debt ($) 1,254 1,258 1,302 1,372 1,293
(-) Cash and cash equivalents ($) (111 ) (97 ) (111 ) (168 ) (125 )
(=)
Net debt ($) 1,143 1,161 1,191 1,204 1,168 (+)
Shareholders' equity ($) 2,685 2,736 2,716 2,754 2,676 (=) Total
capitalization ($) 3,828 3,897 3,907 3,958 3,844 Net debt ($) 1,143
1,161 1,191 1,204 1,168 (/) Total capitalization ($) 3,828 3,897
3,907 3,958 3,844 (=)
Net debt-to-total capitalization (%)
30 % 30 % 30 % 30 % 30 %
“Earnings before items”, “Earnings before items per diluted
share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”, “EBITDA
margin before items”, “Free cash flow”, “Net debt” and “Net
debt-to-total capitalization” have no standardized meaning
prescribed by GAAP and are not necessarily comparable to similar
measures presented by other companies and therefore should not be
considered in isolation or as a substitute for Net earnings,
Operating income or any other earnings statement, cash flow
statement or balance sheet financial information prepared in
accordance with GAAP. It is important for readers to understand
that certain items may be presented in different lines by different
companies on their financial statements, thereby leading to
different measures for different companies.
Domtar CorporationQuarterly Reconciliation of Non-GAAP
Financial Measures – By Segment 2017(In millions of dollars,
unless otherwise noted)
The following table sets forth certain non-U.S. generally
accepted accounting principles (“GAAP”), financial metrics
identified in bold as “Operating income (loss) before items”,
“EBITDA before items” and “EBITDA margin before items” by
reportable segment. Management believes that the financial metrics
are useful to understand our operating performance and benchmark
with peers within the industry. The Company calculates the
segmented “Operating income (loss) before items” by excluding the
pre-tax effect of specified items. These metrics are presented as a
complement to enhance the understanding of operating results but
not in substitution for GAAP results.
Pulp and Paper Personal
Care Corporate Total Q1'17
Q2'17 Q3'17 Q4'17
YTD Q1'17
Q2'17 Q3'17 Q4'17
YTD Q1'17
Q2'17 Q3'17 Q4'17
YTD Q1'17
Q2'17 Q3'17 Q4'17
YTD Reconciliation
of Operating income (loss)
to "Operating income (loss) before
items"
Operating income (loss) ($) 34 — — —
34 16 — — —
16
(8) — — —
(8)
42
— — —
42 (+) Impairment of property, plant and equipment ($)
— — — —
— — — — —
— — — — —
— — — — —
—
(+) Impact of purchase accounting ($) — — — —
— — — — —
—
—
—
— —
—
— — — —
— (+) Closure and restructuring costs ($) — — — —
— — — — —
— — — — —
— — — — —
— (+)
Litigation settlement ($) — — — —
— — — — —
— — — — —
— — — — —
— (=)
Operating income (loss) before
items ($) 34 — — —
34 16 — — —
16
(8)
—
— —
(8)
42
— — —
42 Reconciliation of "Operating income
(loss)
before items" to "EBITDA before
items"
Operating income (loss) before items ($) 34 — — —
34 16 — —
—
16 (8) — — —
(8) 42 — — —
42 (+)
Depreciation and amortization ($) 64 — — —
64 16 — — —
16 — — — —
— 80 — — —
80 (=)
EBITDA
before items ($) 98 — — —
98 32 — — —
32 (8) — —
—
(8) 122 — — —
122 (/) Sales ($) 1,073 — — —
1,073 249 — — —
249 — — — —
— 1,322 — — —
1,322 (=)
EBITDA margin before items (%) 9% — — —
9% 13% — — —
13% — — — —
— 9% — — —
9%
“Operating income (loss) before items”, “EBITDA before items”
and “EBITDA margin before items” have no standardized meaning
prescribed by GAAP and are not necessarily comparable to similar
measures presented by other companies and therefore should not be
considered in isolation or as a substitute for Operating income
(loss) or any other earnings statement, cash flow statement or
balance sheet financial information prepared in accordance with
GAAP. It is important for readers to understand that certain items
may be presented in different lines by different companies on their
financial statements thereby leading to different measures for
different companies.
Domtar CorporationQuarterly Reconciliation of Non-GAAP
Financial Measures – By Segment 2016(In millions of dollars,
unless otherwise noted)
The following table sets forth certain non-U.S. generally
accepted accounting principles (“GAAP”), financial metrics
identified in bold as “Operating income (loss) before items”,
“EBITDA before items” and “EBITDA margin before items” by
reportable segment. Management believes that the financial metrics
are useful to understand our operating performance and benchmark
with peers within the industry. The Company calculates the
segmented “Operating income (loss) before items” by excluding the
pre-tax effect of specified items. These metrics are presented as a
complement to enhance the understanding of operating results but
not in substitution for GAAP results.
Pulp and Paper Personal
Care (1) Corporate Total
Q1'16 Q2'16 Q3'16 Q4'16
Year
Q1'16 Q2'16 Q3'16 Q4'16
Year
Q1'16 Q2'16 Q3'16 Q4'16
Year
Q1'16 Q2'16 Q3'16 Q4'16
Year
Reconciliation of Operating income (loss)
to "Operating income (loss) before
items"
Operating income (loss) ($) 19 35 89 74
217 14 15 15 13
57 (15) (11) (12) (13)
(51) 18 39 92 74
223
(+) Impairment of property, plant and equipment ($) 21 3 5 —
29 — — — —
— — — — —
— 21 3 5 —
29 (+)
Impact of purchase accounting ($) — — — —
— — — — 1
1
— — — —
— — — — 1
1 (+) Closure and restructuring
costs ($) 2 21 10 (2)
31 — — — 1
1 — — — —
— 2
21 10 (1)
32 (+) Litigation settlement ($) — — — —
—
— — — —
— — 2 — —
2 — 2 — —
2 (=)
Operating
income (loss) before items ($) 42 59 104 72
277 14 15 15
15
59 (15) (9) (12) (13)
(49) 41 65 107 74
287
Reconciliation of "Operating income (loss)
before items" to "EBITDA before
items"
Operating income (loss) before items ($) 42 59 104 72
277 14
15 15 15
59 (15) (9) (12) (13)
(49) 41 65 107 74
287 (+) Depreciation and amortization ($) 73 72 71 68
284 16 15 16 17
64 — — — —
— 89 87 87 85
348 (=)
EBITDA before items ($) 115 131 175
140
561 30 30 31 32
123 (15) (9) (12) (13)
(49) 130 152 194 159
635 (/) Sales ($) 1,085 1,054
1,054 1,046
4,239 216 228 231 242
917 — — — —
— 1,301 1,282 1,285 1,288
5,156 (=)
EBITDA margin
before items (%) 11% 12% 17% 13%
13% 14% 13% 13% 13%
13% — — — —
— 10% 12% 15% 12%
12%
“Operating income (loss) before items”, “EBITDA before items”
and “EBITDA margin before items” have no standardized meaning
prescribed by GAAP and are not necessarily comparable to similar
measures presented by other companies and therefore should not be
considered in isolation or as a substitute for Operating income
(loss) or any other earnings statement, cash flow statement or
balance sheet financial information prepared in accordance with
GAAP. It is important for readers to understand that certain items
may be presented in different lines by different companies on their
financial statements thereby leading to different measures for
different companies.
(1) On October 1, 2016, the Company acquired 100% of the shares
of Home Delivery Incontinent Supplies Co. in the United States.
Domtar CorporationSupplemental Segmented
Information(In millions of dollars, unless otherwise noted)
2017 2016 Q1 Q1 Q2
Q3 Q4
Year Pulp and Paper Segment
Sales ($) 1,073 1,085
1,054 1,054 1,046
4,239 Operating income ($) 34 19 35 89 74
217 Depreciation and amortization ($) 64 73 72 71 68
284 Impairment of property, plant and equipment ($) — 21 3 5
—
29 Paper Paper Production ('000 ST) 709 785
715 726 714
2,940 Paper Shipments - Manufactured ('000 ST)
745 786 752 744 739
3,021 Communication Papers ('000 ST) 622
657 627 620 618
2,522 Specialty and Packaging ('000 ST) 123
129 125 124 121
499 Paper Shipments - Sourced from 3rd
parties ('000 ST) 29 32 29 35 27
123 Paper Shipments - Total
('000 ST) 774 818 781 779 766
3,144 Pulp Pulp
Shipments(a) ('000 ADMT) 453 369 360 369 415
1,513 Hardwood
Kraft Pulp (%) 4 % 6 % 4 % 5 % 8 %
6 % Softwood Kraft
Pulp (%) 71 % 69 % 66 % 67 % 67 %
67 % Fluff Pulp (%)
25 % 25 % 30 % 28 % 25 %
27 % Personal Care
Segment Sales ($) 249 216 228 231 242
917 Operating
income ($) 16 14 15 15 13
57 Depreciation and amortization
($) 16 16 15 16 17
64 Average Exchange Rates
$US / $CAN 1.323 1.375 1.289 1.305 1.333
1.325 $CAN / $US
0.756 0.727 0.776 0.766 0.750
0.755 € / $US 1.066 1.103
1.130 1.116 1.078
1.107
(a) Figures are gross of market pulp purchased from other
producers on the open market for some of our paper making
operations. Pulp Shipments represent the amount of pulp produced in
excess of our internal requirement.
Note: the term “ST” refers to a short ton and the term “ADMT”
refers to an air dry metric ton.
1 Non-GAAP financial measure. Refer to the Reconciliation of
Non-GAAP Financial Measures in the appendix.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170427005783/en/
Domtar CorporationINVESTOR RELATIONSNicholas
Estrela, 514-848-5555 x 85979DirectorInvestor RelationsorMEDIA
RELATIONSDavid Struhs, 803-802-8031Vice-PresidentCorporate
Services and Sustainability
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