Domtar Expects Operating Loss, Lower Sales In Q2; Shares Fall - Update

(RTTNews) - Paper producer Domtar Corp. (UFS, UFS.TO) Friday said it expects to report an operating loss as well as lower sales for its second quarter of 2013, citing significant planned maintenance and delayed restarts in its pulp mills. The shares are currently down about 5 percent on the NYSE and Toronto Stock Exchange.

The company, however, said it remains confident of returning to more normalized productivity levels across the business by the end of the third quarter.

Montreal, Canada-based company expects sales for the second quarter to be $1.312 billion and operating loss to be between $30 million and $35 million. On average, eight analysts polled by Thomson Reuters expect the company to report second-quarter sales of $1.36 billion.

For the second quarter of 2012, the company had posted sales of $1.368 billion and operating income before items of $106 million.

Domtar noted that its estimated operating loss in the recent quarter includes a litigation settlement charge of $49 million, closure and restructuring costs of $18 million, a charge of $5 million related to the impairment and write-down of property, plant and equipment, and depreciation and amortization of $93 million.

Domtar anticipates quarterly EBITDA before items to be between $130 million and $135 million, mainly due to a combination of costs related to maintenance shutdowns, lower pulp productivity, lower paper and pulp shipments and higher costs for freight.

According to the firm, paper and pulp shipments in the second quarter of 2013 stood at 801,000 tons and 344,000 metric tons, respectively.

John Williams, president and chief executive officer of the company said, "We had sub optimal pulp productivity and unusually high costs due to significant planned maintenance and delayed restarts in our pulp mills. However, a closer look at our operations demonstrates that by quarter end we made very good progress on addressing production issues in the Pulp and Paper business."

The company is scheduled to release its second-quarter results on July 25.

UFS is currently trading at $69.39, down 5.36 percent on the NYSE. On the Toronto Stock Exchange, Domtar shares trade at C$72.24, lower 5.26 percent.