Domtar eyes move from 'challenged' businesses to new end use markets

By Lisa Kerner

Charlotte, N.C., Feb. 24 - Domtar Corp. president and chief executive officer John D. Williams said in 2010 the company reduced its exposure to "challenged" businesses such as wood and now focuses on three complementary businesses: paper, pulp and paper merchants.

Williams made his comments during a presentation at the Credit Suisse Global Paper and Packaging Conference Thursday in New York.

Also in 2010, Williams said Domtar's EBITDA was up 69% and paper margins were up about 700 basis points. Domtar generated over $1 billion of free cash flow during the year and cut its debt to $900 million.

Williams noted that the company made good on its promise to return extra cash to shareholders through dividends and a share buyback program.

The Montreal-based paper company has completely transformed its balance sheet from what it was a few years ago, Williams said.

Going forward, Williams said Domtar continues to streamline its asset portfolio and needs to improve its risk profile, as in fluff pulp for example.

Domtar is "repositioning its pulp business into end use markets where we like the dynamics" such as the tissue business in Asia and China and fluff pulp in the incontinence/diaper market, Williams said.

One goal is to achieve stronger, more predictable cash flow over time, possibly by leveraging existing capabilities such as Domtar's uncoated free sheet business.

"If you look at our cut-size business, what we really are is a private-label supplier to major retailers and wholesalers," Williams said. "Is there somewhere we can leverage that skill?"

Williams predicted there will be good opportunities, while not necessarily transformational, to take advantage of new applications for fiber, including a joint project with FP Innovations.

Domtar's near-term priorities include focusing on margins over volume in its paper business, expanding its end-user base and focusing on strategic customers.

Paper shipments will continue to be up and down, Williams said.

Williams said his company's supply chain is "a key competitive advantage" and minimizes any potential risk from imports.

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