Domtar Corporation (TSX: UFS, NYSE: UFS) is the largest integrated producer of uncoated freesheet paper in North America and the second largest in the world based on production capacity, and is also a manufacturer of papergrade pulp.
Domtar designs, manufactures, markets and distributes a wide range of business, commercial printing, publication as well as technical and specialty papers with recognized brands such as Cougar, Lynx Opaque Ultra, Husky Opaque Offset, First Choice and Domtar EarthChoice Office Paper, part of a family of environmentally and socially responsible papers.
Domtar owns and operates Domtar Distribution Group, an extensive network of strategically located paper distribution facilities. The company employs nearly 10,000 people. Its head office is in Montreal and its operations center is in Fort Mill, South Carolina.
Domtar Corporation (Domtar), incorporated on August 16, 2006, is an integrated manufacturer and marketer of uncoated freesheet paper in North America. Domtar designs, manufactures, markets and distributes a range of paper products for a variety of customers, including merchants, retail outlets, stationers, printers, publishers, converters and end-users. Domtar owns and operates Domtar Distribution Group, a network of paper distribution facilities. It also produces lumber and other specialty and industrial wood products. The Company has three business segments: Papers, Paper Merchants and Wood. Domtar’s uncoated freesheet papers and coated groundwood papers are used for business, commercial printing and publishing, and converting and specialty applications. In July 2010, Eacom Timber Corp completed the acquisition of the Forest Products business of Domtar Corporation.
Papers
Business papers include copy and electronic imaging papers, which are used with ink jet and laser printers, photocopiers and plain-paper fax machines, as well as computer papers, preprinted forms and digital papers. These products are primarily for office and home use. During the year ended December 31, 2009, business papers accounted for approximately 47% of the shipments of paper products.
The commercial printing and publishing papers include uncoated freesheet papers, such as offset papers and opaques and coated groundwood. These uncoated freesheet grades are used in sheet and roll fed offset presses across the range of commercial printing end-uses, including digital printing. The publishing papers include tradebook and lightweight uncoated papers used primarily in book publishing applications, such as textbooks, dictionaries, catalogs, magazines, hard cover novels and financial documents. Design papers, a sub-group of commercial printing and publishing papers, have diverse features of color, brightness and texture and are focused towards graphic artists, design and advertising agencies, primarily for special brochures and annual reports. Coated groundwood papers are used primarily in magazines, catalogs and inserts. During 2009, commercial printing and publishing papers accounted for approximately 29% of its shipments of paper products.
Domtar also produces paper for several converting and specialty markets. These converting and specialty papers consist primarily of base papers that are converted into finished products, such as envelopes, tablets, business forms and data processing/computer forms and base stock used by the flexible packaging industry in the production of food and medical packaging and other specialty papers for various other industrial applications, including base stock for sandpaper, base stock for medical gowns, drapes and packaging, as well as transfer paper for printing processes. It also participates in several converting grades for specialty and security applications. During 2009, the converting and specialty papers accounted for approximately 24% of its shipments of paper products.
Paper Merchants
The paper merchants business involves the purchasing, warehousing, sale and distribution of Domtar’s products and those of other manufacturers. Products include business, printing and publishing papers and certain industrial products. These products are sold to a diverse customer base, which includes small, medium and large commercial printers, publishers, quick copy firms, catalog and retail companies and institutional entities.
The product offerings address a range of printing, publishing, imaging, advertising, consumer and industrial needs and are comprised of uncoated, coated and specialized papers and industrial products. Its go-to-market strategy is to serve numerous segments of the commercial printing, publishing, retail, wholesale, catalog and industrial markets with logistics and services tailored to the needs of the customers. During 2009, approximately 68% of Domtar’s sales were made in the United States and 32% were made in Canada.
The Paper merchants operate in the United States and Canada under a single banner and umbrella name, the Domtar Distribution Group. Ris Paper, part of the Domtar Distribution Group, operates throughout the Northeast, Mid-Atlantic and Midwest areas from 20 locations in the United States, including 16 distribution centers serving customers across North America. The Canadian business operates as Buntin Reid in three locations in Ontario; JBR/La Maison du Papier in two locations in Quebec; and The Paper House from two locations in Atlantic Canada.
Wood
Domtar’s wood business comprises the manufacturing, marketing and distribution of lumber and wood-based products, and the management of forest resources. It operates seven sawmills with a production capacity of approximately 890 million board feet of lumber and one remanufacturing facility. It also has investments in two companies. Domtar produces primarily dimensional lumber used in the construction industry and its offerings include a variety of grades of kiln-dried softwood lumber, produced mainly from black spruce and jack pine. Domtar also manufactures a variety of products, including MSR 2100, MSR 1650, Premium, Select and Mid-line. Its remanufacturing facility produces specialty products mainly for the bed frame industry and home centers, and can produce a variety of products in various dimensions, in lengths of 4 inches to 16 feet. The Company sells all of its softwood lumber through the sales office in Montreal to a range of retailers, distributors, manufacturers and wholesalers in the United States and Canada. These wood products are consumed in the home construction, renovation and industrial markets.
After a number of excellent years at Domtar and in Canada generally, the bottom dropped out of the world economy in 1973 when the Organization of Petroleum Exporting Countries (OPEC) succeeded in quadrupling the price of oil. In the ensuing recession of 1974-1976, the downturn in Domtar's pulp and paper business was so severe that the company thought seriously of getting out of the industry altogether. Canada's share of the world market had shrunk to 19%, from 25% in 1961, and the prosperous 1960s had saddled Domtar with high labor costs at a time of shrinking sales and margins. New president Alex D. Hamilton adopted a conservative policy of closing marginally profitable mills while looking for further investments in construction, preferably in the United States. In 1978 Domtar satisfied both of those goals with its C$35 million purchase of Kaiser Cement's California wallboard facilities, which would also help to balance the flow of Canadian and U.S. dollars at Domtar, a company increasingly dependent on exports to the United States. Industry analysts described the move as typical of Domtar's recent tendency toward a conservative policy--the purchase was made a little late and at rather too high a price, but it was basically sound.
It was at about this time that Domtar became involved in a lengthy series of takeover bids. When the Argus Corporation, for many years owner of about 20% of Domtar's stock, decided to sell its Domtar holdings they were quickly snapped up by MacMillan Bloedel, a west-coast paper competitor of Domtar's. MacMillan then made an offer for Domtar's remaining shares, which elicited a counteroffer by Domtar for all of MacMillan's stock. At that point Canadian Pacific, a third paper company, also made a bid for MacMillan, prompting the premier of British Columbia to decree that MacMillan could not be purchased by any company outside the province. Chastened, MacMillan sold its 20% of Domtar to an agency of Quebec provincial government, the Caisse de dépôt et placement du Québec, entrusted with the investment of pension funds. A short time afterward, a second Quebec agency, the Société générale de financement du Québec also acquired a piece of Domtar, and by August 1981 the Quebec government thus controlled more than 40% of the company's stock. Under new president and CEO James H. Smith the company quickly underwent a thorough restructuring of its board of directors, which, together with the Quebec government's stock control, led to concern among English-speaking Canadian businessmen that Domtar would become an appendage of the French-speaking Quebec government. The issue came to a head when Domtar asked the Canadian government for help in funding the C$1 billion rehabilitation of its massive paper mill at Windsor, Ontario. The request was denied, fueling the conviction of Quebecois separatists that their province would never receive fair treatment at the hands of the Canadian government. As it turned out, Domtar went ahead with the work at the Windsor mill, creating a world-class fine-paper facility, while the Quebec government tried unsuccessfully to sell off the 46% of Domtar stock it still held.
In the meantime, Domtar sales had passed the C$1 billion mark in 1977 and leaped to C$1.7 billion in 1981. The severe recession of the early 1980s forced the company into a belt-tightening strategy and led to its request for federal aid on the big Windsor mill project, but in general the decade was good to Domtar. The company was again faced with the question of how best to expand beyond its already considerable size, and this time President Smith and his board of directors decided to concentrate on a fewer number of global products. In essence, that meant the end of Domtar's chemical businesses, which had long been dwarfed by the company's paper and construction interests, and by 1990 the chemical assets had been sold for about C$100 million. On the other hand, in 1987 Domtar paid US$241 million for Genstar Gypsum Products Company's family of wallboard plants in the United States, strengthening its construction division, and by 1989 the C$1 billion Windsor plant was onstream, producing over one-half of the company's fine paper products.
Like most of the world's large corporations, in the early 1990s Domtar focused its energy on a limited number of products it was prepared to sell worldwide. With its chemical division gone, Domtar remained primarily a pulp and paper products and a construction products company, those divisions contributing C$1.3 billion and C$721 million, respectively, to the corporate sales total of C$2.5 billion. The remainder is generated by a packaging division that was split off from pulp and paper although the bulk of its products are paper-based. Domtar has become much involved in the recycling of its products, both paper and gypsum, in anticipation of a long stay among the elite of Canada's forest products companies.
Principal Subsidiaries: Brompton Lands Limited; Domtar Enterprises Inc.; Domtar Realties Ltd.; Domtar Sonoco Containers Inc. (50%); Jellco Packaging Corp.; Lithotech Inc.; Maine Timber Holdings Limited; Pacos Carrier Inc.; San Marcos Carrier Inc.; 804736 Ontario Limited; Techni-Therm Inc. (50%); Domtar International B.V. (Netherlands); Domtar Pacific Pty. Limited (Australia); Domtar Industries Inc. (U.S.A.).
OVERALL
Beta: 2.79
Market Cap (Mil.): $3,984.18
Shares Outstanding (Mil.): 42.34
Annual Dividend: 1.00
Yield (%): 1.07
FINANCIALS
UFS Industry Sector
P/E (TTM): 5.91 5.74 24.46
EPS (TTM): 66.25 -- --
ROI: 12.14 1.40 17.95
ROE: 22.53 2.70 17.96
Statistics:
Public Company
Incorporated: 1929 as Dominion Tar & Chemical Company Limited
Employees: 13,000
Sales: C$2.31 billion (US$1.99 billion)
Stock Index: Montreal Toronto Vancouver New York
Name Age Since Current Position
MacKay, Harold 70 2007 Chairman of the Board
Williams, John 57 2009 President, Chief Executive Officer, Director
Buron, Daniel 47 Chief Financial Officer, Senior Vice President
Thomas, Richard 57 2009 Senior Vice President - Sales and Marketing
Anderson, Melissa 46 2010 Senior Vice President - Human Resources
Edwards, Michael 63 Senior Vice President - Pulp and Paper Manufacturing
Loulou, Patrick 42 2007 Senior Vice President - Corporate Development
Jablonski, Zygmunt 57 Senior Vice President - law and corporate affairs
Ushpol, Mark 47 2010 Senior Vice President - Distribution
Levitt, Brian 63 2007 Director
Onustock, Michael 71 2007 Director
Strobel, Pamela 58 2007 Director
Tan, Richard 55 2007 Director
Turcotte, Denis 49 2007 Director
Bingleman, Jack 68 2007 Independent Director
Gignac, Louis 60 2007 Independent Director
Moore, W. Henson 71 2007 Independent Director
Steacy, Robert 61 2007 Independent Director
Stivers, William 72 2007 Independent Director
Address:
395 de Maisonneuve Boulevard West
Montreal,
Quebec
H3A 1L6
Canada
Domtar designs, manufactures, markets and distributes a wide range of business, commercial printing, publication as well as technical and specialty papers with recognized brands such as Cougar, Lynx Opaque Ultra, Husky Opaque Offset, First Choice and Domtar EarthChoice Office Paper, part of a family of environmentally and socially responsible papers.
Domtar owns and operates Domtar Distribution Group, an extensive network of strategically located paper distribution facilities. The company employs nearly 10,000 people. Its head office is in Montreal and its operations center is in Fort Mill, South Carolina.
Domtar Corporation (Domtar), incorporated on August 16, 2006, is an integrated manufacturer and marketer of uncoated freesheet paper in North America. Domtar designs, manufactures, markets and distributes a range of paper products for a variety of customers, including merchants, retail outlets, stationers, printers, publishers, converters and end-users. Domtar owns and operates Domtar Distribution Group, a network of paper distribution facilities. It also produces lumber and other specialty and industrial wood products. The Company has three business segments: Papers, Paper Merchants and Wood. Domtar’s uncoated freesheet papers and coated groundwood papers are used for business, commercial printing and publishing, and converting and specialty applications. In July 2010, Eacom Timber Corp completed the acquisition of the Forest Products business of Domtar Corporation.
Papers
Business papers include copy and electronic imaging papers, which are used with ink jet and laser printers, photocopiers and plain-paper fax machines, as well as computer papers, preprinted forms and digital papers. These products are primarily for office and home use. During the year ended December 31, 2009, business papers accounted for approximately 47% of the shipments of paper products.
The commercial printing and publishing papers include uncoated freesheet papers, such as offset papers and opaques and coated groundwood. These uncoated freesheet grades are used in sheet and roll fed offset presses across the range of commercial printing end-uses, including digital printing. The publishing papers include tradebook and lightweight uncoated papers used primarily in book publishing applications, such as textbooks, dictionaries, catalogs, magazines, hard cover novels and financial documents. Design papers, a sub-group of commercial printing and publishing papers, have diverse features of color, brightness and texture and are focused towards graphic artists, design and advertising agencies, primarily for special brochures and annual reports. Coated groundwood papers are used primarily in magazines, catalogs and inserts. During 2009, commercial printing and publishing papers accounted for approximately 29% of its shipments of paper products.
Domtar also produces paper for several converting and specialty markets. These converting and specialty papers consist primarily of base papers that are converted into finished products, such as envelopes, tablets, business forms and data processing/computer forms and base stock used by the flexible packaging industry in the production of food and medical packaging and other specialty papers for various other industrial applications, including base stock for sandpaper, base stock for medical gowns, drapes and packaging, as well as transfer paper for printing processes. It also participates in several converting grades for specialty and security applications. During 2009, the converting and specialty papers accounted for approximately 24% of its shipments of paper products.
Paper Merchants
The paper merchants business involves the purchasing, warehousing, sale and distribution of Domtar’s products and those of other manufacturers. Products include business, printing and publishing papers and certain industrial products. These products are sold to a diverse customer base, which includes small, medium and large commercial printers, publishers, quick copy firms, catalog and retail companies and institutional entities.
The product offerings address a range of printing, publishing, imaging, advertising, consumer and industrial needs and are comprised of uncoated, coated and specialized papers and industrial products. Its go-to-market strategy is to serve numerous segments of the commercial printing, publishing, retail, wholesale, catalog and industrial markets with logistics and services tailored to the needs of the customers. During 2009, approximately 68% of Domtar’s sales were made in the United States and 32% were made in Canada.
The Paper merchants operate in the United States and Canada under a single banner and umbrella name, the Domtar Distribution Group. Ris Paper, part of the Domtar Distribution Group, operates throughout the Northeast, Mid-Atlantic and Midwest areas from 20 locations in the United States, including 16 distribution centers serving customers across North America. The Canadian business operates as Buntin Reid in three locations in Ontario; JBR/La Maison du Papier in two locations in Quebec; and The Paper House from two locations in Atlantic Canada.
Wood
Domtar’s wood business comprises the manufacturing, marketing and distribution of lumber and wood-based products, and the management of forest resources. It operates seven sawmills with a production capacity of approximately 890 million board feet of lumber and one remanufacturing facility. It also has investments in two companies. Domtar produces primarily dimensional lumber used in the construction industry and its offerings include a variety of grades of kiln-dried softwood lumber, produced mainly from black spruce and jack pine. Domtar also manufactures a variety of products, including MSR 2100, MSR 1650, Premium, Select and Mid-line. Its remanufacturing facility produces specialty products mainly for the bed frame industry and home centers, and can produce a variety of products in various dimensions, in lengths of 4 inches to 16 feet. The Company sells all of its softwood lumber through the sales office in Montreal to a range of retailers, distributors, manufacturers and wholesalers in the United States and Canada. These wood products are consumed in the home construction, renovation and industrial markets.
After a number of excellent years at Domtar and in Canada generally, the bottom dropped out of the world economy in 1973 when the Organization of Petroleum Exporting Countries (OPEC) succeeded in quadrupling the price of oil. In the ensuing recession of 1974-1976, the downturn in Domtar's pulp and paper business was so severe that the company thought seriously of getting out of the industry altogether. Canada's share of the world market had shrunk to 19%, from 25% in 1961, and the prosperous 1960s had saddled Domtar with high labor costs at a time of shrinking sales and margins. New president Alex D. Hamilton adopted a conservative policy of closing marginally profitable mills while looking for further investments in construction, preferably in the United States. In 1978 Domtar satisfied both of those goals with its C$35 million purchase of Kaiser Cement's California wallboard facilities, which would also help to balance the flow of Canadian and U.S. dollars at Domtar, a company increasingly dependent on exports to the United States. Industry analysts described the move as typical of Domtar's recent tendency toward a conservative policy--the purchase was made a little late and at rather too high a price, but it was basically sound.
It was at about this time that Domtar became involved in a lengthy series of takeover bids. When the Argus Corporation, for many years owner of about 20% of Domtar's stock, decided to sell its Domtar holdings they were quickly snapped up by MacMillan Bloedel, a west-coast paper competitor of Domtar's. MacMillan then made an offer for Domtar's remaining shares, which elicited a counteroffer by Domtar for all of MacMillan's stock. At that point Canadian Pacific, a third paper company, also made a bid for MacMillan, prompting the premier of British Columbia to decree that MacMillan could not be purchased by any company outside the province. Chastened, MacMillan sold its 20% of Domtar to an agency of Quebec provincial government, the Caisse de dépôt et placement du Québec, entrusted with the investment of pension funds. A short time afterward, a second Quebec agency, the Société générale de financement du Québec also acquired a piece of Domtar, and by August 1981 the Quebec government thus controlled more than 40% of the company's stock. Under new president and CEO James H. Smith the company quickly underwent a thorough restructuring of its board of directors, which, together with the Quebec government's stock control, led to concern among English-speaking Canadian businessmen that Domtar would become an appendage of the French-speaking Quebec government. The issue came to a head when Domtar asked the Canadian government for help in funding the C$1 billion rehabilitation of its massive paper mill at Windsor, Ontario. The request was denied, fueling the conviction of Quebecois separatists that their province would never receive fair treatment at the hands of the Canadian government. As it turned out, Domtar went ahead with the work at the Windsor mill, creating a world-class fine-paper facility, while the Quebec government tried unsuccessfully to sell off the 46% of Domtar stock it still held.
In the meantime, Domtar sales had passed the C$1 billion mark in 1977 and leaped to C$1.7 billion in 1981. The severe recession of the early 1980s forced the company into a belt-tightening strategy and led to its request for federal aid on the big Windsor mill project, but in general the decade was good to Domtar. The company was again faced with the question of how best to expand beyond its already considerable size, and this time President Smith and his board of directors decided to concentrate on a fewer number of global products. In essence, that meant the end of Domtar's chemical businesses, which had long been dwarfed by the company's paper and construction interests, and by 1990 the chemical assets had been sold for about C$100 million. On the other hand, in 1987 Domtar paid US$241 million for Genstar Gypsum Products Company's family of wallboard plants in the United States, strengthening its construction division, and by 1989 the C$1 billion Windsor plant was onstream, producing over one-half of the company's fine paper products.
Like most of the world's large corporations, in the early 1990s Domtar focused its energy on a limited number of products it was prepared to sell worldwide. With its chemical division gone, Domtar remained primarily a pulp and paper products and a construction products company, those divisions contributing C$1.3 billion and C$721 million, respectively, to the corporate sales total of C$2.5 billion. The remainder is generated by a packaging division that was split off from pulp and paper although the bulk of its products are paper-based. Domtar has become much involved in the recycling of its products, both paper and gypsum, in anticipation of a long stay among the elite of Canada's forest products companies.
Principal Subsidiaries: Brompton Lands Limited; Domtar Enterprises Inc.; Domtar Realties Ltd.; Domtar Sonoco Containers Inc. (50%); Jellco Packaging Corp.; Lithotech Inc.; Maine Timber Holdings Limited; Pacos Carrier Inc.; San Marcos Carrier Inc.; 804736 Ontario Limited; Techni-Therm Inc. (50%); Domtar International B.V. (Netherlands); Domtar Pacific Pty. Limited (Australia); Domtar Industries Inc. (U.S.A.).
OVERALL
Beta: 2.79
Market Cap (Mil.): $3,984.18
Shares Outstanding (Mil.): 42.34
Annual Dividend: 1.00
Yield (%): 1.07
FINANCIALS
UFS Industry Sector
P/E (TTM): 5.91 5.74 24.46
EPS (TTM): 66.25 -- --
ROI: 12.14 1.40 17.95
ROE: 22.53 2.70 17.96
Statistics:
Public Company
Incorporated: 1929 as Dominion Tar & Chemical Company Limited
Employees: 13,000
Sales: C$2.31 billion (US$1.99 billion)
Stock Index: Montreal Toronto Vancouver New York
Name Age Since Current Position
MacKay, Harold 70 2007 Chairman of the Board
Williams, John 57 2009 President, Chief Executive Officer, Director
Buron, Daniel 47 Chief Financial Officer, Senior Vice President
Thomas, Richard 57 2009 Senior Vice President - Sales and Marketing
Anderson, Melissa 46 2010 Senior Vice President - Human Resources
Edwards, Michael 63 Senior Vice President - Pulp and Paper Manufacturing
Loulou, Patrick 42 2007 Senior Vice President - Corporate Development
Jablonski, Zygmunt 57 Senior Vice President - law and corporate affairs
Ushpol, Mark 47 2010 Senior Vice President - Distribution
Levitt, Brian 63 2007 Director
Onustock, Michael 71 2007 Director
Strobel, Pamela 58 2007 Director
Tan, Richard 55 2007 Director
Turcotte, Denis 49 2007 Director
Bingleman, Jack 68 2007 Independent Director
Gignac, Louis 60 2007 Independent Director
Moore, W. Henson 71 2007 Independent Director
Steacy, Robert 61 2007 Independent Director
Stivers, William 72 2007 Independent Director
Address:
395 de Maisonneuve Boulevard West
Montreal,
Quebec
H3A 1L6
Canada