Domtar Financial Report: Q1 2019

Quarterly Review

Domtar reported net earnings of $80 million ($1.27 per share) for the first quarter of 2019 compared to net earnings of $87 million ($1.38 per share) for the fourth quarter of 2018 and net earnings of $54 million ($0.86 per share) for the first quarter of 2018. Sales for the first quarter of 2019 were $1.4 billion.

“We had a solid performance from Pulp and Paper despite a wood fiber shortage that negatively impacted costs and output,” said President and CEO John D. Williams. “Price and volume momentum in paper continued in a favorable market environment, which led to strong productivity and a good cost performance. The pulp business was impacted by lower prices while higher internal pulp shipments due to wood-fiber constraints negatively impacted our volumes. Nevertheless, we continued to improve and increase overall productivity and manage costs through saving initiatives.”

On Personal Care, Williams said, “Our margins improved, driven by better productivity and operational efficiencies as our new customer ramp-up accelerates. We also successfully implemented price increases in both North America and Europe, helping to partially offset raw material cost headwinds. Our teams continue to deliver on our margin improvement plan, which is expected to progress throughout the year.”

Operating income was $115 million in the first quarter of 2019 compared to operating income of $133 million in the fourth quarter of 2018. Depreciation and amortization totaled $73 million in the first quarter of 2019.

The decrease in operating income in the first quarter of 2019 was the result of higher selling, general and administrative expenses, higher raw material costs, and lower volume in pulp. These factors were partially offset by higher average selling prices for paper, lower fixed and other costs, and favorable exchange rates.

When compared to the fourth quarter of 2018, manufactured paper shipments were up 2 percent and pulp shipments decreased 12 percent. The shipments-to-production ratio for paper was 97 percent in the first quarter of 2019, compared to 95 percent in the fourth quarter of 2018. Paper inventories increased by 22,000 tons, and pulp inventories increased by 24,000 metric tons when compared to the fourth quarter of 2018.

Outlook

Our paper shipments should benefit from higher demand from our customers following the industry capacity closures, while our paper prices will further improve as we continue to implement our recently announced price increases. The second quarter will be adversely affected by seasonally higher maintenance activity in our Pulp and Paper business as we move into the annual shutdowns at some of our major facilities. Personal Care is expected to benefit from our margin improvement plan and the ramp-up of a new customer, partially offset by further raw material cost inflation.

For more information on this Domtar Q1 2019 financial report, please read the full press release. This and other press releases are available in our media center.

All information from the Domtar Q1 2019 financial report is in U.S. dollars, and all earnings-per-share results are diluted, unless otherwise noted.