(RTTNews) - Paper manufacturer Domtar Corporation (UFS: News , UFS.TO) Friday announced preliminary results for the third quarter, reporting a surge in net profit, helped mainly by a refundable excise tax credit. Results also benefitted from lower operating costs. Domtar shares are currently trading up more than 8% on the NYSE and over 10% on the TSX.

For the third quarter, the Montreal, Canada-based company's net earnings were US$183 million or US$4.24 per share, much higher than US$43 million or US$1.00 per share in the prior-year period. On an adjusted basis, earnings rose to US$57 million or US$1.32 per share from US$51 million or US$1.19 per share last year. In the preceding second quarter, Domtar had reported net earnings of US$48 million or US$1.12 per share.

Adjusted results for the third quarter exclude pre-tax refundable excise tax credit totaling US$159 million, a pre-tax gain on sale of property, plant and equipment of US$12 million, and pre-tax closure and restructuring costs amounting to US$4 million. The refundable excise tax credit was for the production and use of alternative bio fuel mixtures.

On an average, 14 analysts polled by Thomson Reuters expected Domtar to earn US$0.29 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the third quarter declined to US$1.44 billion from US$1.63 billion in the third quarter of fiscal 2008, but improved from second quarter sales of US$1.32 billion. Analysts expected Domtar to generate revenues of US$1.34 billion during the quarter.

The company attributed the sequential improvement to stronger pulp and paper volumes and better pulp prices.
On a segmental basis, third-quarter sales from papers segment was US$1.21 billion versus US$1.36 billion last year, sales from paper merchants edged down to US$239 million from US$257 million in the 2008-year period, and wood sales was US$59 million compared to US$76 million a year earlier.

During the three-month period, selling, general and administrative costs incurred by Domtar fell to US$85 million from US$99 million in the previous year, and expenses related to depreciation and amortization were US$101 million versus US$119 million in fiscal 2008. Operating income for the quarter was US$295 million compared with US$108 million last year.

Commenting on the sequential improvement in results, president and chief executive officer John Williams said, "All of our businesses posted improved profitability, most notably in pulp which benefited from higher prices, better demand and lower downtime costs due to the restart of our Woodland and Dryden pulp mills."

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