Domtar Corporation Reports Preliminary Fourth Quarter and Fiscal Year 2016 Financial Results

Lower selling prices and higher costs impact fourth quarter results
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted).
• Fourth quarter 2016 net earnings of $0.75 per share; earnings before items1 of $0.75 per share
• Best operating cash flow quarter of 2016
• Qualification of Ashdown fluff pulp underway with initial trials providing good results

Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $47 million ($0.75 per share) for the fourth quarter of 2016 compared to net earnings of $59 million ($0.94 per share) for the third quarter of 2016 and net earnings of $57 million ($0.91 per share) for the fourth quarter of 2015. Sales for the fourth quarter of 2016 were $1.3 billion.

Excluding items listed below, the Company had earnings before items1 of $47 million ($0.75 per share) for the fourth quarter of 2016 compared to earnings before items1 of $71 million ($1.13 per share) for the third quarter of 2016 and earnings before items1 of $70 million ($1.11 per share) for the fourth quarter of 2015.

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).

Third quarter 2016 items:
• Closure and restructuring costs of $10 million ($8 million after tax); and
• Impairment of property, plant & equipment of $5 million ($4 million after tax).

Fourth quarter 2015 items:
• Closure and restructuring costs of $1 million ($1 million after tax); and
• Impairment of property, plant & equipment of $20 million ($12 million after tax).

FISCAL YEAR 2016 HIGHLIGHTS
For fiscal year 2016, net earnings amounted to $128 million ($2.04 per share) compared to net earnings of $142 million ($2.24 per share) for fiscal year 2015. The Company had earnings before items1 of $178 million ($2.84 per share) for fiscal year 2016 compared to earnings before items1 of $211 million ($3.33 per share) for fiscal year 2015. Sales amounted to $5.1 billion for fiscal year 2016.

Commenting on the full-year results, John D. Williams, President and Chief Executive Officer, said, “Our businesses generated strong EBITDA and cash flow in a challenging macro-economic and competitive environment. This allowed us to further execute on our growth strategy, while returning cash to our shareholders.”

QUARTERLY REVIEW
“Our pulp business shipped record volumes of softwood in the fourth quarter. Nevertheless, the segment was impacted by lower prices and higher costs,” said John D. Williams, President and Chief Executive Officer. “Personal Care began manufacturing baby diapers using Ashdown fluff pulp with initial trials providing good results. This production is the first step towards qualifying Ashdown fluff pulp for the hygiene market.”

Mr. Williams added, “The fourth quarter marked our highest Personal Care sales and EBITDA of the year, which included the results of our recent HDIS acquisition. We are scaling up our capabilities in the rapidly growing direct-to-consumer channel, while expanding our partner-brand strategy to capture sales growth and higher margins by continuing to differentiate the way we sell our products.”

Operating income was $74 million in the fourth quarter of 2016 compared to an operating income of $92 million in the third quarter of 2016. Depreciation and amortization totaled $85 million in the fourth quarter of 2016.

The decrease in operating income in the fourth quarter of 2016 was the result of lower average selling prices, higher raw material costs, lower productivity and higher maintenance costs. These factors were partially offset by an increase in pulp sales volume and favorable exchange rates.

When compared to the third quarter of 2016, manufactured paper shipments were down 1% and pulp shipments increased 12%. The shipments-to-production ratio for paper was 104% in the fourth quarter of 2016, compared to 102% in the third quarter of 2016. Paper inventories decreased by 22,000 tons and pulp inventories increased by 19,000 metric tons when compared to the third quarter of 2016.
more detail at:  http://www.domtar.com/en/investors/pressreleases/index.asp?location=SecondaryNav

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