EX-99.1 2 ufs-ex991_6.htm EX-99.1 ufs-ex991_6.htm

 

Exhibit 99.1

 

 

 

234 Kingsley Park Drive

Fort Mill, South Carolina 29715

 

News Release

 

TICKER SYMBOL

Investor RELATIONS

MEDIA RELATIONS

(NYSE: UFS) (TSX: UFS)

Nicholas Estrela

Director

Investor Relations

Tel.: 514-848-5049

David Struhs

Vice-President

Corporate Services and Sustainability

Tel.: 803-802-8031

DOMTAR CORPORATION REPORTS PRELIMINARY FIRST QUARTER 2019 FINANCIAL RESULTS

Price and volume momentum in Paper drive strong results

(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted).

 

First quarter 2019 net earnings of $1.27 per share; earnings before items1 of $1.44 per share

Paper prices $30 per ton higher quarter-over-quarter

Paper shipments increased 2% quarter-over-quarter

Fort Mill, SC, May 1, 2019 – Domtar Corporation (NYSE: UFS) (TSX: UFS) today reported net earnings of $80 million ($1.27 per share) for the first quarter of 2019 compared to net earnings of $87 million ($1.38 per share) for the fourth quarter of 2018 and net earnings of $54 million ($0.86 per share) for the first quarter of 2018. Sales for the first quarter of 2019 were $1.4 billion.

Excluding items listed below, the Company had earnings before items1 of $91 million ($1.44 per share) for the first quarter of 2019 compared to earnings before items1 of $103 million ($1.63 per share) for the fourth quarter of 2018 and earnings before items1 of $55 million ($0.87 per share) for the first quarter of 2018.

ITEMS

Description

Segment

Line item

Amount

After tax

effect

EPS impact

(per share)

 

 

 

(in millions)

 

First quarter 2019

 

 

 

 

 

 

 

 

 

 

 

Margin improvement

   plan

Personal Care

Impairment of property, plant

and equipment

$10

$8

$0.12

 

 

 

 

 

 

Margin improvement

   plan

Personal Care

Closure and

restructuring costs

$4

$3

$0.05

 

 

 

 

 

 

 

1 

  Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.

1 / 4


 

Description

Segment

Line item

Amount

After tax

effect

EPS impact

(per share)

 

 

 

(in millions)

 

Fourth quarter 2018

 

 

 

 

 

 

 

 

 

 

 

Margin improvement

   plan

Personal Care

Impairment of property, plant

and equipment

$7

$5

$0.08

 

 

 

 

 

 

Margin improvement

   plan

Personal Care

Closure and

restructuring costs

$8

$6

$0.09

 

 

 

 

 

 

U.S. Tax Reform

Corporate

Income tax expense

$5

$5

$0.08

 

 

 

 

 

 

First quarter 2018

 

 

 

 

 

 

 

 

 

 

 

Litigation settlement

Corporate

Other operating loss, net

$2

$2

$0.03

 

 

 

 

 

 

Gain on disposal

   of property, plant

   and equipment

Pulp and Paper

Other operating income, net

$1

$1

$0.02

 

QUARTERLY REVIEW

“We had a solid performance from Pulp and Paper despite a wood fiber shortage that negatively impacted costs and output,” said John D. Williams, President and Chief Executive Officer. “Price and volume momentum in paper continued in a favorable market environment, which led to strong productivity and a good cost performance. The pulp business was impacted by lower prices while higher internal pulp shipments due to wood fiber constraints negatively impacted our volumes. Nevertheless, we continued to improve and increase overall productivity and manage costs through saving initiatives.

Mr. Williams added, “In Personal Care, our margins improved driven by better productivity and operational efficiencies as our new customer ramp-up accelerates. We also successfully implemented price increases in both North America and Europe helping to partially offset raw material cost headwinds. Our teams continue to deliver on our margin improvement plan which is expected to progress throughout the year.”

Operating income was $115 million in the first quarter of 2019 compared to operating income of $133 million in the fourth quarter of 2018. Depreciation and amortization totaled $73 million in the first quarter of 2019.

Operating income before items1 was $129 million in the first quarter of 2019 compared to an operating income before items1 of $148 million in the fourth quarter of 2018.

 

 

1 

  Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.

2 / 4


 

 

 

 

 

 

 

 

 

 

(In millions of dollars)

 

1Q 2019

 

 

4Q 2018

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

1,376

 

 

$

1,390

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

Pulp and Paper segment

 

 

144

 

 

 

148

 

 

Personal Care segment

 

 

(8

)

 

 

(12

)

 

Corporate

 

 

(21

)

 

 

(3

)

 

Total operating income

 

 

115

 

 

 

133

 

 

Operating income before items1

 

 

129

 

 

 

148

 

 

Depreciation and amortization

 

 

73

 

 

 

75

 

 

 

The decrease in operating income in the first quarter of 2019 was the result of higher selling, general and administrative expenses, higher raw material costs and lower volume in pulp. These factors were partially offset by higher average selling prices for paper, lower fixed and other costs and favorable exchange rates.

When compared to the fourth quarter of 2018, manufactured paper shipments were up 2% and pulp shipments decreased 12%. The shipments-to-production ratio for paper was 97% in the first quarter of 2019, compared to 95% in the fourth quarter of 2018. Paper inventories increased by 22,000 tons, and pulp inventories increased by 24,000 metric tons when compared to the fourth quarter of 2018.

LIQUIDITY AND CAPITAL

Cash flow from operating activities amounted to $55 million and capital expenditures were $46 million, resulting in free cash flow1 of $9 million for the first quarter of 2019. Domtar’s net debt-to-total capitalization ratio1 stood at 23% at March 31, 2019 and at December 31, 2018.

OUTLOOK

Our paper shipments should benefit from higher demand from our customers following the industry capacity closures while our paper prices will further improve as we continue to implement our recently announced price increases. The second quarter will be adversely affected by seasonally higher maintenance activity in our Pulp and Paper business as we move into the annual shutdowns at some of our major facilities. Personal Care is expected to benefit from our margin improvement plan and the ramp-up of a new customer, partially offset by further raw material cost inflation.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 10:00 a.m. (ET) to discuss its first quarter 2019 financial results. Financial analysts are invited to participate in the call by dialing 1 (888) 394-8218 (toll free - North America) or 1 (323) 701-0225 (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.

 

1 

  Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP Financial Measures in the appendix.

3 / 4

 


 

The Company will release its second quarter 2019 earnings results on August 1, 2019 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 $5.5 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 2018 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.

- (30) -

 

4 / 4

 


Domtar Corporation

Highlights

(In millions of dollars, unless otherwise noted)

{

 

Three months ended

 

 

Three months ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

$

 

 

$

 

Selected Segment Information

 

 

 

 

 

 

 

 

Sales

 

 

 

 

 

 

 

 

Pulp and Paper

 

 

1,147

 

 

 

1,100

 

Personal Care

 

 

247

 

 

 

262

 

Total for reportable segments

 

 

1,394

 

 

 

1,362

 

Intersegment sales

 

 

(18

)

 

 

(17

)

Consolidated sales

 

 

1,376

 

 

 

1,345

 

Depreciation and amortization

 

 

 

 

 

 

 

 

Pulp and Paper

 

 

57

 

 

 

61

 

Personal Care

 

 

16

 

 

 

18

 

Total for reportable segments

 

 

73

 

 

 

79

 

Impairment of property plant and equipment - Personal Care

 

 

10

 

 

 

 

Consolidated depreciation and amortization and

   impairment of property, plant and equipment

 

 

83

 

 

 

79

 

Operating income (loss)

 

 

 

 

 

 

 

 

Pulp and Paper

 

 

144

 

 

 

76

 

Personal Care

 

 

(8

)

 

 

8

 

Corporate

 

 

(21

)

 

 

(7

)

Consolidated operating income

 

 

115

 

 

 

77

 

Interest expense, net

 

 

13

 

 

 

16

 

Non-service components of net periodic benefit cost

 

 

(3

)

 

 

(4

)

Earnings before income taxes and equity loss

 

 

105

 

 

 

65

 

Income tax expense

 

 

24

 

 

 

11

 

Equity loss, net of taxes

 

 

1

 

 

 

 

Net earnings

 

 

80

 

 

 

54

 

Per common share (in dollars)

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

Basic

 

 

1.27

 

 

 

0.86

 

Diluted

 

 

1.27

 

 

 

0.86

 

Weighted average number of common

    shares outstanding (millions)

 

 

 

 

 

 

 

 

Basic

 

 

63.0

 

 

 

62.7

 

Diluted

 

 

63.2

 

 

 

62.9

 

Cash flows from operating activities

 

 

55

 

 

 

90

 

Additions to property, plant and equipment

 

 

46

 

 

 

25

 

 

 

 

 


Domtar Corporation

Consolidated Statements of Earnings

(In millions of dollars, unless otherwise noted)

 

 

Three months ended

 

 

Three months ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

Sales

 

 

1,376

 

 

 

1,345

 

Operating expenses

 

 

 

 

 

 

 

 

Cost of sales, excluding depreciation and amortization

 

 

1,052

 

 

 

1,084

 

Depreciation and amortization

 

 

73

 

 

 

79

 

Selling, general and administrative

 

 

123

 

 

 

110

 

Impairment of property, plant and equipment

 

 

10

 

 

 

 

Closure and restructuring costs

 

 

4

 

 

 

 

Other operating income, net

 

 

(1

)

 

 

(5

)

 

 

 

1,261

 

 

 

1,268

 

Operating income

 

 

115

 

 

 

77

 

Interest expense, net

 

 

13

 

 

 

16

 

Non-service components of net periodic benefit cost

 

 

(3

)

 

 

(4

)

Earnings before income taxes and equity loss

 

 

105

 

 

 

65

 

Income tax expense

 

 

24

 

 

 

11

 

Equity loss, net of taxes

 

 

1

 

 

 

 

Net earnings

 

 

80

 

 

 

54

 

Per common share (in dollars)

 

 

 

 

 

 

 

 

Net earnings

 

 

 

 

 

 

 

 

Basic

 

 

1.27

 

 

 

0.86

 

Diluted

 

 

1.27

 

 

 

0.86

 

Weighted average number of common

   shares outstanding (millions)

 

 

 

 

 

 

 

 

Basic

 

 

63.0

 

 

 

62.7

 

Diluted

 

 

63.2

 

 

 

62.9

 

 

 

 

 

 

 

 

 

 

 

 


Domtar Corporation

Consolidated Balance Sheets at

(In millions of dollars)

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(Unaudited)

 

 

 

$

 

 

$

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

94

 

 

 

111

 

Receivables, less allowances of $7 and $6

 

 

699

 

 

 

670

 

Inventories

 

 

813

 

 

 

762

 

Prepaid expenses

 

 

25

 

 

 

24

 

Income and other taxes receivable

 

 

21

 

 

 

22

 

Total current assets

 

 

1,652

 

 

 

1,589

 

Property, plant and equipment, net

 

 

2,564

 

 

 

2,605

 

Operating lease right-of-use assets

 

 

81

 

 

 

 

Intangible assets, net

 

 

587

 

 

 

597

 

Other assets

 

 

138

 

 

 

134

 

Total assets

 

 

5,022

 

 

 

4,925

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Bank indebtedness

 

 

3

 

 

 

 

Trade and other payables

 

 

675

 

 

 

757

 

Income and other taxes payable

 

 

49

 

 

 

25

 

Operating lease liabilities due within one year

 

 

25

 

 

 

 

Long-term debt due within one year

 

 

1

 

 

 

1

 

Total current liabilities

 

 

753

 

 

 

783

 

Long-term debt

 

 

853

 

 

 

853

 

Operating lease liabilities

 

 

65

 

 

 

 

Deferred income taxes and other

 

 

477

 

 

 

476

 

Other liabilities and deferred credits

 

 

266

 

 

 

275

 

Shareholders' equity

 

 

 

 

 

 

 

 

Common stock

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

1,982

 

 

 

1,981

 

Retained earnings

 

 

1,075

 

 

 

1,023

 

Accumulated other comprehensive loss

 

 

(450

)

 

 

(467

)

Total shareholders' equity

 

 

2,608

 

 

 

2,538

 

Total liabilities and shareholders' equity

 

 

5,022

 

 

 

4,925

 

 

 

 

 


Domtar Corporation

Consolidated Statements of Cash Flows

(In millions of dollars)

 

 

 

For the three months ended

 

 

 

March 31, 2019

 

 

March 31, 2018

 

 

 

(Unaudited)

 

 

 

$

 

 

$

 

Operating activities

 

 

 

 

 

 

 

 

Net earnings

 

 

80

 

 

 

54

 

Adjustments to reconcile net earnings to cash flows from operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

73

 

 

 

79

 

Deferred income taxes and tax uncertainties

 

 

(3

)

 

 

(3

)

Impairment of property, plant and equipment

 

 

10

 

 

 

 

Net gains on disposals of property, plant and equipment

 

 

 

 

 

(1

)

Stock-based compensation expense

 

 

2

 

 

 

3

 

Equity loss, net

 

 

1

 

 

 

 

Other

 

 

 

 

 

(1

)

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Receivables

 

 

(30

)

 

 

(2

)

Inventories

 

 

(49

)

 

 

(13

)

Prepaid expenses

 

 

 

 

 

(2

)

Trade and other payables

 

 

(69

)

 

 

(37

)

Income and other taxes

 

 

26

 

 

 

16

 

Difference between employer pension and other post-retirement

   contributions and pension and other post-retirement expense

 

 

1

 

 

 

 

Other assets and other liabilities

 

 

13

 

 

 

(3

)

Cash flows from operating activities

 

 

55

 

 

 

90

 

Investing activities

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(46

)

 

 

(25

)

Proceeds from disposals of property, plant and equipment

 

 

 

 

 

1

 

Other

 

 

 

 

 

(4

)

Cash flows used for investing activities

 

 

(46

)

 

 

(28

)

Financing activities

 

 

 

 

 

 

 

 

Dividend payments

 

 

(27

)

 

 

(26

)

Net change in bank indebtedness

 

 

3

 

 

 

 

Proceeds from receivables securitization facility

 

 

20

 

 

 

 

Repayments of receivables securitization facility

 

 

(20

)

 

 

(25

)

Other

 

 

(1

)

 

 

 

Cash flows used for financing activities

 

 

(25

)

 

 

(51

)

Net (decrease) increase in cash and cash equivalents

 

 

(16

)

 

 

11

 

Impact of foreign exchange on cash

 

 

(1

)

 

 

2

 

Cash and cash equivalents at beginning of period

 

 

111

 

 

 

139

 

Cash and cash equivalents at end of period

 

 

94

 

 

 

152

 

Supplemental cash flow information

 

 

 

 

 

 

 

 

Net cash payments for:

 

 

 

 

 

 

 

 

Interest

 

 

16

 

 

 

19

 

Income taxes

 

 

6

 

 

 

4

 

 

 


Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures

(In millions of dollars, unless otherwise noted)

 

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Earnings before items”, “Earnings before items per diluted share”, “EBITDA”, “EBITDA margin”, “EBITDA before items”, “EBITDA margin before items”, “Free cash flow”, “Net debt” and “Net debt-to-total capitalization”. Management believes that the financial metrics are useful to understand our operating performance and benchmark with peers within the industry. The Company calculates “Earnings before items” and “EBITDA before items” by excluding the after-tax (pre-tax) effect of specified items. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

 

 

 

 

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

Q1

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

Year

 

Reconciliation of "Earnings before items" to Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

($)

 

 

80

 

 

 

54

 

 

 

43

 

 

 

99

 

 

 

87

 

 

 

283

 

 

(+)

Impairment of property, plant and equipment

 

($)

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

5

 

 

(+)

Closure and restructuring costs

 

($)

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

6

 

 

(+)

Litigation settlement

 

($)

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

(-)

Net gains on disposals of property, plant and equipment

 

($)

 

 

 

 

 

(1

)

 

 

(2

)

 

 

 

 

 

 

 

 

(3

)

 

(-)

U.S. Tax Reform

 

($)

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

5

 

 

 

(2

)

 

(=)

Earnings before items

 

($)

 

 

91

 

 

 

55

 

 

 

41

 

 

 

92

 

 

 

103

 

 

 

291

 

 

(/)

Weighted avg. number of common shares outstanding (diluted)

 

(millions)

 

 

63.2

 

 

 

62.9

 

 

 

63.2

 

 

 

63.2

 

 

 

63.0

 

 

 

63.1

 

 

(=)

Earnings before items per diluted share

 

($)

 

 

1.44

 

 

 

0.87

 

 

 

0.65

 

 

 

1.46

 

 

 

1.63

 

 

 

4.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of "EBITDA" and "EBITDA before items" to

   Net earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

($)

 

 

80

 

 

 

54

 

 

 

43

 

 

 

99

 

 

 

87

 

 

 

283

 

 

(+)

Equity loss, net of taxes

 

($)

 

 

1

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

 

 

2

 

 

(+)

Income tax expense

 

($)

 

 

24

 

 

 

11

 

 

 

8

 

 

 

3

 

 

 

35

 

 

 

57

 

 

(+)

Interest expense, net

 

($)

 

 

13

 

 

 

16

 

 

 

16

 

 

 

15

 

 

 

15

 

 

 

62

 

 

(+)

Depreciation and amortization

 

($)

 

 

73

 

 

 

79

 

 

 

79

 

 

 

75

 

 

 

75

 

 

 

308

 

 

(+)

Impairment of property, plant and equipment

 

($)

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

7

 

 

(-)

Net gains on disposals of property, plant and equipment

 

($)

 

 

 

 

 

(1

)

 

 

(3

)

 

 

 

 

 

 

 

 

(4

)

 

(=)

EBITDA

 

($)

 

 

201

 

 

 

159

 

 

 

143

 

 

 

193

 

 

 

220

 

 

 

715

 

 

(/)

Sales

 

($)

 

 

1,376

 

 

 

1,345

 

 

 

1,353

 

 

 

1,367

 

 

 

1,390

 

 

 

5,455

 

 

(=)

EBITDA margin

 

(%)

 

 

15

%

 

 

12

%

 

 

11

%

 

 

14

%

 

 

16

%

 

 

13

%

 

 

EBITDA

 

($)

 

 

201

 

 

 

159

 

 

 

143

 

 

 

193

 

 

 

220

 

 

 

715

 

 

(+)

Closure and restructuring costs

 

($)

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

8

 

 

(+)

Litigation settlement

 

($)

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

(=)

EBITDA before items

 

($)

 

 

205

 

 

 

161

 

 

 

143

 

 

 

193

 

 

 

228

 

 

 

725

 

 

(/)

Sales

 

($)

 

 

1,376

 

 

 

1,345

 

 

 

1,353

 

 

 

1,367

 

 

 

1,390

 

 

 

5,455

 

 

(=)

EBITDA margin before items

 

(%)

 

 

15

%

 

 

12

%

 

 

11

%

 

 

14

%

 

 

16

%

 

 

13

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures

(In millions of dollars, unless otherwise noted)

 

 

 

 

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

Q1

 

 

Q1

 

 

Q2

 

 

Q3

 

 

Q4

 

 

Year

 

Reconciliation of "Free cash flow" to Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

($)

 

 

55

 

 

 

90

 

 

 

177

 

 

 

70

 

 

 

217

 

 

 

554

 

 

(-)

Additions to property, plant and equipment

 

($)

 

 

(46

)

 

 

(25

)

 

 

(37

)

 

 

(49

)

 

 

(84

)

 

 

(195

)

 

(=)

Free cash flow

 

($)

 

 

9

 

 

 

65

 

 

 

140

 

 

 

21

 

 

 

133

 

 

 

359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"Net debt-to-total capitalization" computation