Domtar Corporation

Domtar to Permanently Reduce Papermaking Capacity at Ashdown, AR Mill

Domtar Corporation announced that, no later than July 1, 2011, it will permanently shut down one of four paper machines at its Ashdown, Arkansas pulp and paper mill. This will reduce Domtar's annual uncoated freesheet paper production capacity by approximately 125,000 short tons. The mill's workforce will be reduced by approximately 110 employees.

"Domtar is committed to keeping a balance between its supply and its customer demand. Because secular demand decline in North America continues, we must permanently reduce our uncoated freesheet paper production capacity," said John D. Williams, president and chief executive officer of Domtar. "I want to thank affected employees for their efforts, and recognize all Domtar Ashdown mill employees for their hard work and continued focus on safety," added Mr. Williams.

Following the shutdown, the Ashdown mill will continue to operate three fiber lines, a pulp dryer and three paper machines, and employ approximately 940 people. The mill will have an annual production capacity of approximately 810,000 metric tons of pulp and approximately 780,000 short tons of paper.

The closure will result in an aggregate pre-tax charge to earnings of approximately $80 million, which includes an estimated $77 million in non-cash charges relating to the accelerated depreciation of the carrying amounts of manufacturing equipment and the write-off of related spare parts and $3 million related to other costs. Of the estimated total pre-tax charge of approximately $80 million, $6 million is expected to be recognized in the first quarter of 2011 and $74 million is expected to be incurred in the second quarter of 2011.

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