MONTREAL - Pulp and paper producer Domtar handily beat expectations Friday as its net income more than tripled to US$65 million in the fourth quarter, due to less scheduled maintenance and improved pulp markets.
The Montreal-based company, which reports in U.S. dollars, earned $2 per dilute share for the period ended Dec. 31. That compared to 54 cents per share or $19 million a year earlier.
On an adjusted basis, Domtar (TSX:UFS) earned $68 million or $2.09 per share — well above analyst estimates of $1.53 per share. In the prior year, adjusted profits were $46 million or $1.31, including $41 million in closure and impairment costs.
Domtar's overall sales grew to $1.36 billion from $1.33 billion, but the mix changed.
Revenue from personal care products, such as adult diapers, rose 55 per cent to $172 million while revenue from its main pulp and paper business declined two per cent to $1.19 billion.
"Our solid results in the fourth quarter were mostly in line with our expectations in all of our businesses," president and CEO John Williams said in a news release.
He said Domtar's profit in the three months ended Dec. 31 were also improved from the prior quarter ended Sept. 30 because of lower planned maintenace shutdowns and improved pulp markets.
Domtar's operating income increased due to higher average selling prices for paper and pulp, favourable exchange rates, higher productivity in pulp, and higher paper shipments. That was partially offset by higher raw material costs and an unfavourable product mix.
For the full-year, Domtar's results were less stellar. It earned $91 million or $2.72 per share, compared to $172 million or $4.76 per share in 2012. Adjusted profits were $158 million or $4.73 per share, down from $233 million or $6.45 per share a year earlier. Revenues fell to $5.4 billion from nearly $5.5 billion.
Williams said the company continued to transform itself last year through further acquisitions in the personal care sector, strategic investments in its core business and disposal of non-core assets.
In November, Domtar confirmed that it would acquire privately owned Laboratorios Indas, a leading European maker of adult diapers. That deal was valued at about C$565 million, including assumed debt.
Domtar sees Indas as a step towards its goal of earning $300 million to $500 million of EBITDA from the personal care business by 2017. It is also planning to add new production line later in the year.
"The continued execution of our strategy will drive earnings and cash flow growth in 2014 and beyond," Williams added.
The company said it expects paper shipments in 2014 will be in line with last year despite a continued decrease in demand for uncoated free-sheet — the type of paper used in office printers and copiers.
While softwood pulp markets should maintain "positive momentum," new scheduled hardwood capacity makes the end of the year more uncertain, Domtar said.
On the Toronto Stock Exchange, Domtar's shares lost $1.64 at C$117.38 in Friday morning trading. The shares recently hit a multi-year high of $121.45 and remain more than 50 per cent higher than they were at this time last year.