Domtar's Q4 net earnings increase to US$65M from US$19M in year-ago period, due to lower planned maintenance downtime and continued strength in pulp markets; Q4 net sales up 2.4% year-over-year, to US$1.36B
Debra Garcia
MONTREAL
,
February 7, 2014
(press release)
–
Acquired Laboratorios Indas, Spanish market leader in adult incontinence - a key milestone in the development of Domtar's Personal Care business (In millions of dollars) 4Q 2013 3Q 2013 Sales $1,359 $1,375 Operating income (loss) Pulp and Paper segment 75 42 Personal Care segment 9 11 Corporate 9 (4) Total 93 49 Operating income before items1 95 70 Depreciation and amortization 95 93 Domtar Corporation Highlights (In millions of dollars, unless otherwise noted) Three months ended December 31 Three months ended December 31 Twelve months ended December 31 Twelve months ended December 31 2013 2012 2013 2012 (Unaudited) $ $ $ $ Selected Segment Information Sales Pulp and Paper 1,193 1,218 4,843 5,088 Personal Care 172 111 566 399 Total for reportable segments 1,365 1,329 5,409 5,487 Intersegment sales - Pulp and Paper (6) (2) (18) (5) Consolidated sales 1,359 1,327 5,391 5,482 Depreciation and amortization and impairment and write-down of property, plant and equipment and intangible assets Pulp and Paper 85 91 345 365 Personal Care 10 5 31 20 Total for reportable segments 95 96 376 385 Impairment and write-down of property, plant and equipment and intangible assets - Pulp and Paper 5 12 20 14 Impairment and write-down of property, plant and equipment - Personal Care 2 - 2 - Consolidated depreciation and amortization and impairment and write-down of property, plant and equipment and intangible assets 102 108 398 399 Operating income (loss) Pulp and Paper 75 32 171 330 Personal Care 9 13 43 45 Corporate 9 (2) (53) (8) Consolidated operating income 93 43 161 367 Interest expense, net 22 22 89 131 Earnings before income taxes and equity loss 71 21 72 236 Income tax expense (benefit) 6 1 (20) 58 Equity loss, net of taxes - 1 1 6 Net earnings 65 19 91 172 Per common share (in dollars) Net earnings Basic 2.01 0.54 2.73 4.78 Diluted 2.00 0.54 2.72 4.76 Weighted average number of common and exchangeable shares outstanding (millions) Basic 32.4 35.1 33.3 36.0 Diluted 32.5 35.2 33.4 36.1 Cash flows provided from operating activities 124 140 411 551 Additions to property, plant and equipment 62 65 242 236
(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted.)
TICKER SYMBOL
(NYSE: UFS) (TSX: UFS)
Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $65 million ($2.00 per share) for the fourth quarter of 2013 compared to net earnings of $27 million ($0.82 per share) for the third quarter of 2013 and net earnings of $19 million ($0.54 per share) for the fourth quarter of 2012. Sales for the fourth quarter of 2013 were $1,359 million.
Excluding items listed below, the Company had earnings before items1 of $68 million ($2.09 per share) for the fourth quarter of 2013 compared to earnings before items1 of $41 million ($1.25 per share) for the third quarter of 2013 and earnings before items1 of $46 million ($1.31 per share) for the fourth quarter of 2012.
Fourth quarter 2013 items:
Net gain on sale of property, plant and equipment and business for $5 million ($4 million after tax); and
Charge of $7 million ($7 million after tax) for impairment of property, plant and equipment.
Third quarter 2013 items:
Loss on sale of business of $19 million ($12 million after tax); and
Negative impact of purchase accounting of $2 million ($2 million after tax).
Fourth quarter 2012 items:
Closure and restructuring costs of $27 million ($18 million after tax),
Charge of $12 million ($8 million after tax) related to the impairment and write-down of property, plant and equipment and intangible assets; and
Net losses on the sale of property, plant and equipment of $2 million ($1 million after tax).
Commenting on the fourth quarter results, John D. Williams, President and Chief Executive Officer, said, "Our solid results in the fourth quarter were mostly in line with our expectations in all of our businesses. Lower planned maintenance shutdowns and the continued momentum in pulp markets drove quarter over quarter earnings improvement."
FISCAL YEAR 2013 HIGHLIGHTS
For fiscal year 2013, net earnings amounted to $91 million ($2.72 per share) compared to net earnings of $172 million ($4.76 per share) for fiscal year 2012. The Company had earnings before items1 of $158 million ($4.73 per share) for fiscal 2013 compared to earnings before items1 of $233 million ($6.45 per share) for fiscal 2012. Sales amounted to $5.4 billion for fiscal year 2013.
"In 2013, we continued to transform the earnings profile of our company through further acquisitions in personal care, strategic investments in the pulp and paper business and the disposal of non-core assets. The recent acquisition of Indas represents a significant step in building out our personal care business, and will further help us achieve our goal of $300-$500 million of EBITDA from growing business by 2017. We have made meaningful progress towards this goal and the businesses we have acquired so far bring us closer to the lower end of our target. The continued execution of our strategy will drive earnings and cash flow growth in 2014 and beyond," added Mr. Williams.
QUARTERLY REVIEW
Operating income before items1 was $95 million in the fourth quarter of 2013 compared to an operating income before items1 of $70 million in the third quarter of 2013. Depreciation and amortization totaled $95 million in the fourth quarter of 2013.
The increase in operating income before items1 in the fourth quarter of 2013 was the result of lower costs for maintenance, higher average selling prices for paper and pulp, favorable exchange rates, higher productivity in pulp, and higher paper shipments. These factors were partially offset by higher raw material costs and an unfavorable mix of paper sold.
When compared to the third quarter of 2013, manufactured paper shipments increased 0.4% and pulp shipments increased 7.1%. The shipments-to-production ratio for paper was 100% in the fourth quarter of 2013, compared to 98% in the third quarter of 2013. Lack-of-order downtime and machine slowdowns in pulp and paper totaled 20,000 short tons in the fourth quarter of 2013. Paper inventories remained unchanged when compared to the end of September.
LIQUIDITY AND CAPITAL
In 2013, cash flow provided from operating activities amounted to $411 million and capital expenditures were $242 million, resulting in free cash flow1 of $169 million for fiscal 2013. Domtar's net debt-to-total capitalization ratio1 stood at 24% at December 31, 2013 compared to 16% at December 31, 2012.
Domtar returned a total of $250 million to its shareholders through a combination of dividends and share buybacks in fiscal 2013. Domtar repurchased a total of 11,170,506 shares of common stock at an average price of $78.48 since the implementation of its stock repurchase program in May 2010. At the end of the fourth quarter of 2013, Domtar had $121 million remaining under this program.
OUTLOOK
In 2014, we expect our paper shipments to be in-line with 2013 while we expect the market demand for uncoated free sheet to decline with long-term secular trends. Our paper prices will benefit from the implementation of recently announced price increases. We expect softwood pulp markets to maintain positive momentum but new scheduled industry hardwood pulp capacity makes the latter part of the year more uncertain. Personal care will continue to see earnings growth with the recent acquisition of Indas and with the addition of the new production lines towards the end of the year.
EARNINGS CONFERENCE CALL
The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its fourth quarter and fiscal 2013 financial results. Financial analysts are invited to participate in the call by dialing 1 (866) 321-8231 (toll free - North America) or 1 (416) 642-5213 (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.
A replay will be available by dialing 1 (888) 203-1112 (North America) or 1 (647) 436-0148 (International) using access code 5674179 until February 21, 2014.
About Domtar
Domtar Corporation (NYSE: UFS) (TSX: UFS) designs, manufactures, markets and distributes a wide variety of fiber-based products including communication papers, specialty and packaging papers and absorbent hygiene products. The foundation of its business is a network of world class wood fiber converting assets that produce papergrade, fluff and specialty pulps. The majority of its pulp production is consumed internally to manufacture paper and consumer products. Domtar is the largest integrated marketer of uncoated freesheet paper in North America with recognized brands such as Cougar®, Lynx® Opaque Ultra, Husky® Opaque Offset, First Choice® and Domtar EarthChoice®. Domtar is also a leading marketer and producer of a broad line of incontinence care products marketed primarily under the Attends®, IncoPack and Indasec® brand names as well as baby diapers. In 2013, Domtar had sales of US$5.4 billion from some 50 countries. The Company employs approximately 10,000 people. 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 2012 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.
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1 Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.
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