amended: corrects and replaces Canadian dollars with US dollars throughout the storyPaper products maker Domtar Corp. (UFS,UFS.TO) on Friday reported a plunge in profit for the fourth quarter, reflecting flat revenues in a soft pulp market and higher operating expenses as well as the absence of last year's hefty tax benefit.
Net earnings for the quarter plunged to $61 million or $1.63 per share from $325 million or $7.59 per share for the fourth quarter of 2010.
The latest results included closure and restructuring costs of $23 million related mainly to the restructuring of certain U.S. pension benefit plans and a charge of $9 million related to the impairment and write-down of property, plant and equipment.
The prior-year results included benefits from cellulosic biofuel producer income tax credit of $127 million and reversal of a valuation allowance on Canadian deferred income tax assets of $100 million, among others.
Excluding such items, the company earned $93 million or $2.49 per share, compared to $103 million or $2.41 per share in the previous year. On average, six analysts polled by Thomson Reuters expected earnings of $2.24 per share. Analysts' estimates typically exclude special items.
Sales for the quarter totaled $1.369 billion, almost flat compared to $1.373 billion last year. Analysts expected revenues of $1.40 billion.
Sales in Pulp and Paper business slid to $1.18 billion from $1.21 billion, amid softness in global pulp markets.
Domtar CEO John Williams said, "Our pulp earnings were affected by the rapid decline in global pulp prices while earnings from our paper business were impacted by the typical seasonal slowdown of the fourth quarter."
Operating expenses increased to $1.27 billion from $1.22 billion, partly due to higher closure and restructuring costs.
For the full year, net earnings dropped to $365 million or $9.08 per share from $605 million or $14.00 per share in the prior year. Excluding items, earnings totaled $11.24 per share. Sales slipped to $5.61 billion from last year's $5.85 billion. Analysts were looking for earnings of $10.87 per share on revenues of $5.61 billion.
Looking ahead, the company expects prices for pulp to remain under pressure in certain geographies, although market dynamics in the Asian markets are stabilizing.
UFS closed on Thursday at $89.48, compared to the prior close of $89.02, on a volume of 346,000 shares.
UFS.TO settled at C$89.45 in Canada, up from the previous close of C$88.91, on 14,800 shares.
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