Domtar Corporation Reports Preliminary Second Quarter 2012 Financial Results

Domtar Corporation reported net earnings of $59 million ($1.61 per share) for the second quarter of 2012 compared to net earnings of $28 million ($0.76 per share) for the first quarter of 2012 and net earnings of $54 million ($1.30 per share) for the second quarter of 2011. Sales for the second quarter of 2012 amounted to $1.4 billion.

Excluding items listed below, the Company had earnings before items1 of $59 million ($1.61 per share) for the second quarter of 2012 compared to earnings before items1 of $61 million ($1.65 per share) for the first quarter of 2012 and earnings before items1 of $98 million ($2.37 per share) for the second quarter of 2011.

Second quarter 2012 items:

• None.

First quarter 2012 items:

• Premium paid and costs related to the debt repurchase of $50 million ($30 million after tax);

• Closure and restructuring costs, including write-down of property, plant and equipment, of $3 million ($2 million after tax); and

• Negative impact of purchase accounting of $1 million ($1 million after tax).

Second quarter 2011 items:

• Charge of $62 million ($38 million after tax) related to the impairment and write-down of property, plant and equipment;

• Net losses on the sale of property, plant and equipment and business of $6 million ($5 million after tax); and

• Closure and restructuring costs of $2 million ($1 million after tax).

"We had a good operating performance in the quarter despite costs associated with lack-of-order downtime," said John D. Williams, President and CEO. "So far this year, our shipments have declined due to softness in market demand for paper but our average pricing and margins are holding up well. The ramp-up of the Appleton paper supply agreement and the conversion of the Marlboro, South Carolina mill to lightweight specialty and packaging grades will remove high volume paper capacity and help reduce the amount of potential downtime for the back half of 2012."

Commenting on the Personal Care segment, Mr. Williams added, "Our Personal Care business continues its growth, reaching annualized sales of over $425 million in the second quarter. The addition of EAM Corporation will provide a long term research capability to help further differentiate our offering and grow the business."

QUARTERLY REVIEW

Operating income before items1 was $106 million in the second quarter of 2012 compared to an operating income before items1 of $113 million in the first quarter of 2012. Depreciation and amortization totaled $96 million in the second quarter of 2012.

(In millions of dollars)                        2Q 2012                      1Q 2012

Sales                                                    $1,368                         $1,398

Operating income (loss)                                                

Pulp and Paper segment                      96                    107

Distribution segment                           (2)                    (1)

Personal Care segment                        12                    8

Corporate                                            -                       (5)

Total                                                    106                  109