Domtar Corp. is betting the stronger prices that boosted its fourth-quarter earnings will bode positively for the quarters to come.
Still, the Montreal-based company, which has seen the economic recession sap the forest-products industry, remains cautious.
"(With) the economic recovery being slow and patchy, Domtar will continue to manage its business conservatively," it said.
During the fourth quarter, ended Dec. 31, the company swung back into the black and beat analysts' estimates, helped in part by a stronger pulp market and a healthy tax credit.
Net earnings reached $124 million U.S., or $2.86 a share, compared with a net loss of $676 million U.S., or $15.72 a share, during the last three months of 2008.
Revenue for the quarter was $1.4 billion U.S., down slightly from the $1.47 billion U.S. recorded during the year-earlier period.
During the quarter, Domtar's bottom line was helped considerably by a $162-million tax credit for the production and use of biofuels, and suffered fewer writedowns than the year before.
In the fourth quarter of 2008, the company recorded about $708 million U.S. in accounting charges for writedowns and asset impairment and impairment of goodwill, and $28 million U.S. in costs related to closings and restructuring. The last quarter of 2009 had about the same amount of restructuring costs, but benefited from a much smaller charge of $27 million for writedowns and asset impairments.
If those special items are excluded, Domtar earned $60 million U.S., or $1.39 a share, in the quarter, compared with a loss of $20 million U.S., or 46 cents a share, in 2008.
For the year, Domtar reported net earnings of $310 million U.S., or $7.21 a share, compared with a net loss of $573 million U.S., or $13.33 a share, in fiscal 2008.
Revenue for the year was $5.5 billion U.S., down from $6.4 billion U.S.
"While we faced a high level of lack-of-order downtime and a steep decline in pulp prices in the first half of the year, we benefited from stable prices in papers and kept our inventories low," company president John Williams said. The company also focused on reducing working capital and fixed costs.
During the year, the company sold $20 million of non-core assets and has agreements to sell another $40 million by mid-year.
Domtar is the largest integrated manufacturer and marketer of uncoated free sheet paper in North America.
Despite the company's stronger performance in the quarter, Domtar's stock fell on the Toronto Exchange, closing at $53.58, down $3.07, or 5.42 per cent.
Industry analysts noted that much of the company's improved performance stemmed from the tax credit.