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Domtar Provides COVID-19 Update and First Quarter Results

General News

Domtar Corporation (“Domtar”) reported net earnings of $5 million ($0.09 per share) for the first quarter of 2020 compared to a net loss of $34 million ($0.59 per share) for the fourth quarter of 2019 and net earnings of $80 million ($1.27 per share) for the first quarter of 2019. Sales for the first quarter of 2020 were $1.3 billion.

Quarterly Review

“As the global community reacts to COVID-19 and the large-scale effort to contain it continues, we remain focused on navigating the crisis, keeping our employees and their families safe, serving our customers as an essential business, and protecting our financial stability. We are taking steps to reduce spending to further strengthen our balance sheet, liquidity and cash flow while seeking to ensure we are well positioned when the economy starts moving again”, said John D. Williams, President and Chief Executive Officer.

“Despite our paper volumes increasing in Q1, we experienced a significant reduction of orders in April due to the COVID crisis and the resulting lockdown of schools, offices, retailers and other business sectors. As a result, we are taking the appropriate steps to optimize our operations and to remain an agile, reliable partner to our customers. We continue to closely monitor customer orders and backlogs, and will adjust capacity accordingly, but we anticipate inventory to be at appropriate levels as a result of our recently-announced capacity reduction plan,” said Mr. Williams. “Our pulp shipments were stable in Q1 despite some logistical challenges and a major shutdown of operations in China due to COVID-19. We did see good demand from our North American tissue customers, and we expect overall demand for pulp in the second quarter to remain strong, particularly in China as they continue to reopen their economy.”

Commenting on Personal Care, Mr. Williams added, “We had a record sales and EBITDA quarter. Our sales line in Q1 benefited from consumer pantry loading in preparation for in-home quarantine and the scale-up of new customer wins. We continue to increase operating rates, and we have established rapid response teams to maximize productivity to support an uptick in demand, inventory replenishment and portfolio simplification.”

Operating income was $19 million in the first quarter of 2020 compared to an operating loss of $15 million in the fourth quarter of 2019. Depreciation and amortization totaled $72 million in the first quarter of 2020.

Operating income before items was $19 million in the first quarter of 2020 compared to operating income before items1 of $4 million in the fourth quarter of 2019.

The increase in operating income in the first quarter of 2020 was the result of favorable productivity, higher volume, lower selling, general and administrative expenses, lower raw material and freight costs and favorable exchange rates. These factors were partially offset by lower average selling prices in pulp and paper and higher maintenance, fixed and other costs.

When compared to the fourth quarter of 2019, manufactured paper shipments were up 4% and pulp shipments decreased 4%. The shipment-to-production ratio for paper was 105% in the first quarter of 2020, compared to 106% in the fourth quarter of 2019. Paper inventories decreased by 30,000 tons, and pulp inventories increased by 24,000 metric tons when compared to the fourth quarter of 2019.

Liquidity and Capital Resources

Cash flow from operating activities amounted to $88 million and capital expenditures were $62 million, resulting in free cash flow1 of $26 million for the first quarter of 2020. Domtar’s net debt-to-total capitalization ratio1 stood at 30% at March 31, 2020 compared to 27% at December 31, 2019. At March 31, 2020, we had total liquidity of approximately $643 million ($152 million of cash on hand, $491 million in available credit facilities) with no near-term debt maturities. Subsequently to March 31, 2020, the Company closed a new $300 million, five year term loan, the proceeds of which will be used to further improve its liquidity position.

COVID-19 Update

Government authorities across the globe have recognized the importance of the forest products sector based on the products we manufacture and their end uses. Accordingly, Domtar anticipates continuing to operate in all of its business segments, but the Company has taken and may take further temporary steps to reduce its current paper capacity to be in line with current and expected demand levels for the duration of the crisis.

Domtar has implemented COVID-19 response and business continuity plans to protect its employees and their families, to safeguard the continuity of Domtar’s operations, and to ensure full support to its customers and partners.

Cost Control Measures

Domtar is taking further actions to strengthen cash flow and improve liquidity. Cost control actions, capital deferment, closely managing working capital and a reduction of operating costs and selling, general and administrative expenses will generate cash savings, providing us flexibility to take advantage of opportunities as the market rebounds.

Suspension of Capital Return Program

Due to the unprecedented market conditions and uncertainty caused by COVID-19, the Company has suspended the payment of its regular quarterly dividend and stock repurchase program in order to preserve cash and provide additional flexibility in the current environment. The Board of Directors will continue to evaluate the Company’s capital return program based upon customary considerations, including market conditions.


The high degree of uncertainty and volatility day-to-day and the longer term potential impacts of the economic lockdown remain unclear. In Paper, we expect significantly lower demand in the second quarter. We expect demand for softwood and fluff pulp to remain strong in the near-term driven by accelerated growth in tissue and towel, while containment measures across Europe and North America are expected to weigh on certain end-use markets. Personal Care will continue to benefit from higher usage and the impact from new customer wins, but we expect a portion of the demand increase from consumer stock-up may reverse later in the year. Raw material costs are expected to remain stable.

For the full first quarter results, click here.

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 9,700 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 $5.2 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


Nicholas Estrela – Director Investor Relations – (514) 848-5049

Source: Domtar Corporation