FORT MILL, S.C.--(BUSINESS WIRE)--Aug 1, 2018--Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $43 million ($0.68 per share) for the second quarter of 2018 compared to net earnings of $54 million ($0.86 per share) for the first quarter of 2018 and net earnings of $38 million ($0.61 per share) for the second quarter of 2017. Sales for the second quarter of 2018 were $1.4 billion.

Excluding items listed below, the Company had earnings before items 1 of $41 million ($0.65 per share) for the second quarter of 2018 compared to earnings before items 1 of $55 million ($0.87 per share) for the first quarter of 2018 and earnings before items 1 of $38 million ($0.61 per share) for the second quarter of 2017.

Second quarter 2018 items:

Gain on disposal of property, plant & equipment of $3 million ($2 million after tax).

First quarter 2018 items:

Litigation settlement of $2 million ($2 million after tax); and Gain on disposal of property, plant & equipment of $1 million ($1 million after tax).

Second quarter 2017 items:

None.

QUARTERLY REVIEW

“We had a solid performance in pulp and paper given the extensive scheduled maintenance outages at several facilities. Both businesses are providing us with good sales and cash flow and we are building on several important initiatives” said John D. Williams, President and Chief Executive Officer. “We continued to implement our announced price increases throughout the quarter with higher price realizations in both pulp and paper, which helped offset higher maintenance and inflation on some raw material and freight costs.”

Commenting on Personal Care, Mr. Williams added, “As expected, Personal Care results were impacted by anticipated volume reduction and continued commodity inflation. This was partially offset by strong cost savings and reduced overhead spending. We expect to improve margins towards the end of the year as the benefits of the new customer wins flow through.”

Operating income was $62 million in the second quarter of 2018 compared to operating income of $77 million in the first quarter of 2018. Depreciation and amortization totaled $79 million in the second quarter of 2018.

Operating income before items 1 was $59 million in the second quarter of 2018 compared to an operating income before items 1 of $78 million in the first quarter of 2018.

The decrease in operating income in the second quarter of 2018 was the result of higher maintenance costs, higher selling, general and administrative expenses, lower volume and unfavorable productivity. These factors were partially offset by higher average selling prices for pulp and paper and lower energy costs.

When compared to the first quarter of 2018, manufactured paper shipments were down 2% and pulp shipments increased 1%. The shipments-to-production ratio for paper was 102% in the second quarter of 2018, compared to 104% in the first quarter of 2018. Paper inventories decreased by 15,000 tons, and pulp inventories decreased by 26,000 metric tons when compared to the first quarter of 2018.

LIQUIDITY AND CAPITAL

Cash flow from operating activities amounted to $177 million and capital expenditures were $37 million, resulting in free cash flow 1 of $140 million for the second quarter of 2018. Domtar’s net debt-to-total capitalization ratio 1 stood at 25% at June 30, 2018 compared to 28% at March 31, 2018.

OUTLOOK

For the remainder of the year, we expect our paper shipments to trend better than market given the announced industry capacity closures. The announced price increases in paper are expected to continue to positively impact results in the second half of 2018. Pulp will benefit from lower planned maintenance costs and we expect prices will continue to trend positively. Personal Care results should improve towards the end of the year as the benefits of the new customer wins flow through. We expect moderate inflation in our costs for the second half of the year.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its second quarter 2018 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 third quarter 2018 earnings results on November 1, 2018 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 Domtar

Domtar 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 Statements

Statements 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 2017 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 Corporation Highlights (In millions of dollars, unless otherwise noted)

(1) As a result of adopting ASU 2014-09 “Revenue from Contracts with Customers,” the Company has revised its 2017 segment disclosures to conform to the new guideline. (Previously reported numbers for Sales for the three and six months ended June 30, 2017 were as follows: Pulp and Paper: $999 million and $2,072 million, respectively; Personal Care: $241 million and $490 million, respectively; Intersegment sales: $(16) million and $(34) million, respectively.)

(2) As a result of adopting ASU 2017-07 “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” the Company has revised its 2017 segment disclosures to conform to the new guideline. (Previously reported numbers for Operating income (loss) for the three and six months ended June 30, 2017 were as follows: Pulp and Paper: $65 million and $99 million, respectively; Personal Care: $13 million and $29 million, respectively; Corporate: $(14) million and $(22) million, respectively.)

Domtar Corporation Consolidated Statements of Earnings (In millions of dollars, unless otherwise noted)

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