High Operating Costs Eat Into Domtar’s Pulp and Paper Profits

SEATTLE (Scrap Monster): Domtar Corporation- the largest integrated producer of uncoated freesheet paper in North America has announced preliminary Q4 and full year 2017 financial results. The higher maintenance expenses and operating costs negatively impacted the company’s Paper and Pulp segment results during the year. The company reported net loss during the fourth quarter.

Domtar Corporation reported net loss of $340 million in Q4, as compared with the net earnings of $47 million during the corresponding quarter in 2016. It must be noted that the company had reported net earnings of $70 million during the third quarter of 2017. The company’s quarterly sales surged higher by 4% to total $1.3 billion during the quarter.

John D. Williams, President and Chief Executive Officer, Domtar Corp. noted that despite the impacts of higher maintenance and operating costs, the company’s pulp price realizations stood higher during the quarter. Also, the company shipped record volumes of tissue grade and fluff pulp. During the full year 217, Domtar generated nearly $450 million of operating cash flow. The cash flow from operating activities amounted to $54 million for the fourth quarter of 2017. Incidentally, the company has announced a 4.8% dividend increase.

ALSO READ: Domtar Corp. Releases 2017 Sustainability Report

Looking forward, the company expects marginal increase to freight, labor and raw material costs in 2018. The anticipated industry capacity closures are likely to benefit Domtar’s paper shipments. The company projects marginal improvement in paper prices. The volume growth in fluff will benefit pulp segment outperformance. However, the performance of the Personal Care business segment will continue to be impacted by an increasingly competitive market. Although the company foresees long-term growth in the sector, the environment is expected to remain extremely challenging in the near-term.