Domtar Corp. (UFS, Financial) filed Quarterly Report for the period ended 2009-06-30.
Domtar is a major North American manufacturer of pulp and forest products fine papers and packaging that fosters sustainable development through the rigorous application of its integrated forest management policy. A leading manufacturer and marketer of printing and writing papers Domtar is also a significant Canadian producer of containerboard and corrugated containers and a major Eastern Canadian lumber producer. Domtar Corp. has a market cap of $1.13 billion; its shares were traded at around $27.42 with a P/E ratio of 45.8 and P/S ratio of 0.1.
Cost of sales, excluding depreciation and amortization, amounted to $1,116 million in the second quarter of 2009, a decrease of $220 million, or 16%, compared to cost of sales, excluding depreciation and amortization, of $1,336 million in the second quarter of 2008. This decrease was mainly attributable to lower shipments for paper ($121 million), lower costs for maintenance ($37 million), the decline in deliveries for our merchants business ($33 million), the favorable impact of a weaker Canadian dollar on our Canadian denominated expenses, net of our hedging program ($28 million), lower freight costs ($28 million), lower costs for fiber ($9 million) and energy ($6 million) and the realization of savings stemming from restructuring activities. These factors were partially offset by higher shipments for pulp ($23 million), higher costs related to the increase in lack-of-order downtime and machine slowdowns ($54 million) and higher costs for chemicals ($6 million).
Sales for the first half of 2009 amounted to $2,621 million, a decrease of $683 million, or 21%, from sales of $3,304 million in the first half of 2008. The decrease in sales was mainly attributable to lower shipments for paper ($457 million), reflecting softer market demand for uncoated freesheet in our Papers business which declined approximately 20% when compared to the first half of 2008, lower average selling prices for pulp ($161 million) as well as lower shipments and lower average selling prices for our wood products ($29 million and $9 million, respectively). These factors were partially offset by higher average selling prices for paper ($45 million) reflecting the price increases implemented in 2008.
Cost of sales, excluding depreciation and amortization, amounted to $2,239 million in the first half of 2009, a decrease of $439 million, or 16%, compared to cost of sales, excluding depreciation and amortization, of $2,678 million in the first half of 2008. This decrease was mainly attributable to lower shipments for paper ($344 million), the favorable impact of a weaker Canadian dollar on our Canadian denominated expenses, net of our hedging program ($63 million), lower costs for maintenance ($54 million), lower freight costs ($41 million) and the realization of savings stemming from restructuring activities. These factors were partially offset by higher costs for raw materials, including chemicals ($24 million) and fiber ($9 million), and higher costs related to the increase in lack-of-order downtime and machine slowdowns ($104 million). In the first quarter of 2008 we also recorded the reversal of a provision for $23 million due to the early termination by a counterparty of an unfavorable contract.
We incurred $54 million of interest expense in the first half of 2009, a decrease of $22 million compared to interest expense of $76 million in the first half of 2008. This decrease in interest expense is mainly due to a gain of $15 million related to the fair value increment associated with the portion of the 7.875% Notes we repurchased in the second quarter of 2009, lower long-term debt due to our repurchase of $60 million aggregate principal amount of our outstanding 7.875% Notes due 2011 and the repayment of a portion of our tranche B term loan in the fourth quarter of 2008, as well as lower interest rates in the first half of 2009 compared to the first half of 2008. These factors were partially offset by a $4 million premium paid on our repurchase of our 7.875% Notes due 2011 in the second quarter of 2009 as well as tender expenses of $1 million.
Income tax expense amounted to $60 million in the first half of 2009, which was comprised of current tax expense of $1 million and a deferred tax expense of $59 million. We made income tax payments, net of refunds, of $2 million during the first half of 2009. In the first half of 2009, our effective tax rate was 95% due mainly to managements current estimate that no tax benefits will be realized on additional 2009 Canadian operating losses, and partly to state tax law changes in the first quarter that provided additional tax benefit. Excluding a $321 million charge to income related to goodwill impairment and a $52 million charge to tax expense related to the valuation allowance on deferred tax assets, the effective tax rate was 20% for full year 2008. The actual effective tax rate of future periods could be impacted by a change in the ratio of Canadian income or loss to total consolidated income or loss for 2009.
Read the The complete ReportUFS is in the portfolios of Seth Klarman of The Baupost Group, Dodge & Cox, PRIMECAP Management.
Domtar is a major North American manufacturer of pulp and forest products fine papers and packaging that fosters sustainable development through the rigorous application of its integrated forest management policy. A leading manufacturer and marketer of printing and writing papers Domtar is also a significant Canadian producer of containerboard and corrugated containers and a major Eastern Canadian lumber producer. Domtar Corp. has a market cap of $1.13 billion; its shares were traded at around $27.42 with a P/E ratio of 45.8 and P/S ratio of 0.1.
Highlight of Business Operations:
Sales for the second quarter of 2009 amounted to $1,319 million, a decrease of $320 million, or 20%, from sales of $1,639 million in the second quarter of 2008. The decrease in sales was mainly attributable to lower shipments for paper ($196 million), reflecting softer market demand for uncoated freesheet in our Papers business which declined approximately 18% when compared to the second quarter of 2008, lower average selling prices for pulp ($96 million), a decline of approximately 14% in deliveries for our merchants business when compared to the second quarter of 2008 ($34 million), as well as lower shipments and lower average selling prices for our wood products ($15 million and $5 million, respectively). These factors were partially offset by higher shipments for pulp ($32 million).Cost of sales, excluding depreciation and amortization, amounted to $1,116 million in the second quarter of 2009, a decrease of $220 million, or 16%, compared to cost of sales, excluding depreciation and amortization, of $1,336 million in the second quarter of 2008. This decrease was mainly attributable to lower shipments for paper ($121 million), lower costs for maintenance ($37 million), the decline in deliveries for our merchants business ($33 million), the favorable impact of a weaker Canadian dollar on our Canadian denominated expenses, net of our hedging program ($28 million), lower freight costs ($28 million), lower costs for fiber ($9 million) and energy ($6 million) and the realization of savings stemming from restructuring activities. These factors were partially offset by higher shipments for pulp ($23 million), higher costs related to the increase in lack-of-order downtime and machine slowdowns ($54 million) and higher costs for chemicals ($6 million).
Sales for the first half of 2009 amounted to $2,621 million, a decrease of $683 million, or 21%, from sales of $3,304 million in the first half of 2008. The decrease in sales was mainly attributable to lower shipments for paper ($457 million), reflecting softer market demand for uncoated freesheet in our Papers business which declined approximately 20% when compared to the first half of 2008, lower average selling prices for pulp ($161 million) as well as lower shipments and lower average selling prices for our wood products ($29 million and $9 million, respectively). These factors were partially offset by higher average selling prices for paper ($45 million) reflecting the price increases implemented in 2008.
Cost of sales, excluding depreciation and amortization, amounted to $2,239 million in the first half of 2009, a decrease of $439 million, or 16%, compared to cost of sales, excluding depreciation and amortization, of $2,678 million in the first half of 2008. This decrease was mainly attributable to lower shipments for paper ($344 million), the favorable impact of a weaker Canadian dollar on our Canadian denominated expenses, net of our hedging program ($63 million), lower costs for maintenance ($54 million), lower freight costs ($41 million) and the realization of savings stemming from restructuring activities. These factors were partially offset by higher costs for raw materials, including chemicals ($24 million) and fiber ($9 million), and higher costs related to the increase in lack-of-order downtime and machine slowdowns ($104 million). In the first quarter of 2008 we also recorded the reversal of a provision for $23 million due to the early termination by a counterparty of an unfavorable contract.
We incurred $54 million of interest expense in the first half of 2009, a decrease of $22 million compared to interest expense of $76 million in the first half of 2008. This decrease in interest expense is mainly due to a gain of $15 million related to the fair value increment associated with the portion of the 7.875% Notes we repurchased in the second quarter of 2009, lower long-term debt due to our repurchase of $60 million aggregate principal amount of our outstanding 7.875% Notes due 2011 and the repayment of a portion of our tranche B term loan in the fourth quarter of 2008, as well as lower interest rates in the first half of 2009 compared to the first half of 2008. These factors were partially offset by a $4 million premium paid on our repurchase of our 7.875% Notes due 2011 in the second quarter of 2009 as well as tender expenses of $1 million.
Income tax expense amounted to $60 million in the first half of 2009, which was comprised of current tax expense of $1 million and a deferred tax expense of $59 million. We made income tax payments, net of refunds, of $2 million during the first half of 2009. In the first half of 2009, our effective tax rate was 95% due mainly to managements current estimate that no tax benefits will be realized on additional 2009 Canadian operating losses, and partly to state tax law changes in the first quarter that provided additional tax benefit. Excluding a $321 million charge to income related to goodwill impairment and a $52 million charge to tax expense related to the valuation allowance on deferred tax assets, the effective tax rate was 20% for full year 2008. The actual effective tax rate of future periods could be impacted by a change in the ratio of Canadian income or loss to total consolidated income or loss for 2009.
Read the The complete ReportUFS is in the portfolios of Seth Klarman of The Baupost Group, Dodge & Cox, PRIMECAP Management.
