Domtar Financial Report: Q4 and Fiscal Year 2018

Our preliminary financial report for fourth-quarter and fiscal year 2018 is in. Highlights from this Domtar financial report include:

• Fourth-quarter 2018 net earnings of $1.38 per share
• Higher pulp and paper price realization
• $217 million of cash flow from operating activities

Quarterly Review

Domtar reported net earnings of $87 million ($1.38 per share) for the fourth quarter of 2018 compared to net earnings of $99 million ($1.57 per share) for the third quarter of 2018 and a net loss of $386 million ($6.16 per share) for the fourth quarter of 2017. Sales for the fourth quarter of 2018 were $1.4 billion.

'The fourth quarter was one of our best in several years,' said John D. Williams, President and Chief Executive Officer. 'Our results reflect a strong performance in Pulp and Paper as we benefited from solid business fundamentals, accelerating price realizations and improved productivity. I'm especially pleased with our cost performance in the quarter despite fiber availability issues at several of our facilities.'

Commenting on Personal Care, Williams added, 'Results improved from the third quarter led by seasonally stronger sales in Europe while new customer volume began to ramp up in North America. Higher volume and cost improvements also drove operational efficiencies and resulted in lower overall unit cost. Although markets remain challenged with raw material cost inflation, we do see some of the underlying fundamentals beginning to improve.'

Operating income was $133 million in the fourth quarter of 2018 compared to operating income of $114 million in the third quarter of 2018. Depreciation and amortization totaled $75 million in the fourth quarter of 2018.

The increase in operating income in the fourth quarter of 2018 was the result of lower maintenance costs; lower selling, general and administrative expenses; higher average selling prices for pulp and paper; lower fixed costs; and favorable productivity. These factors were partially offset by higher raw material costs.

Fiscal Year 2018 Highlights

For fiscal year 2018, net earnings amounted to $283 million ($4.48 per share) compared to a net loss of $258 million ($4.11 per share) for fiscal year 2017. Sales amounted to $5.5 billion for fiscal year 2018.

Commenting on the full-year results, Williams said, 'We had a strong finish to a great year where we significantly improved EBITDA and cash flow. Our solid performance enabled us to return cash to shareholders, manage our balance sheet to preserve financial flexibility and better position Domtar for sustainable, long-term growth.'

Outlook

In 2019, our paper shipments will increase as we respond to increased demand from our customers following the announced capacity closures. Paper prices will continue to improve in the wake of the recently announced price increases across the majority of our paper grades. Softwood and fluff pulp markets will remain balanced through the year due to continued steady demand growth and limited announced new capacity. We anticipate costs, including freight, labor and raw materials, to marginally increase. Personal Care is expected to benefit from our margin improvement plan and new customer wins, partially offset by further raw material cost inflation.

For more information on this Domtar quarterly and fiscal year 2018 financial report, please read the full press release. This and other press releases are available in our media center.

All information from the Domtar quarterly and fiscal year 2018 financial report is in U.S. dollars, and all earnings-per-share results are diluted, unless otherwise noted.

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