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Q1 2013 Earnings Call
April 25, 2013 10:00 am ET
Pascal Bossé - Vice President of Corporate Communications and Investor Relations
John D. Williams - Chief Executive Officer, President and Director
Daniel Buron - Chief Financial Officer, Principal Accounting Officer and Senior Vice President
Richard L. Thomas - Senior Vice President of Sales & Marketing
Michael Edwards - Senior Vice-President of Pulp & Paper Manufacturing
George L. Staphos - BofA Merrill Lynch, Research Division
Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division
Sean Steuart - TD Securities Equity Research
Phil M. Gresh - JP Morgan Chase & Co, Research Division
James Armstrong - Vertical Research Partners, LLC
Mark Wilde - Deutsche Bank AG, Research Division
Steven Chercover - D.A. Davidson & Co., Research Division
Albert T. Kabili - Crédit Suisse AG, Research Division
Usha Chundru Guntupalli - Goldman Sachs Group Inc., Research Division
Paul C. Quinn - RBC Capital Markets, LLC, Research Division
Daryl Swetlishoff - Raymond James Ltd., Research Division
Anthony Pettinari - Citigroup Inc, Research Division
Previous Statements by UFS
» Domtar's Management Presents at 2013 Goldman Sachs Paper, Forest Products and Packaging Conference (Transcript)
» Domtar Corporation's CEO Discusses Q4 2012 Earnings Results - Earnings Call Transcript
» Domtar Management Discusses Q3 2012 Results - Earnings Call Transcript
Thank you, Valerie, and good morning. Welcome to our First Quarter 2013 Earnings Call. Our speakers for today will be John Williams, President and CEO; and Daniel Buron, Chief Financial Officer. John and Daniel will begin with prepared remarks, after which, we will take questions.
During the call, references will be made to supporting slides, and you can find this presentation in the Investors section of the website. As a reminder, all statements made during the call that are not based on historical facts are forward-looking statements subject to a number of risks and uncertainties, many of which are outside of our control. I invite you to review Domtar's filings with the Securities Commissions for a listing of those.
And finally, certain non-U.S. GAAP financial measures will be presented and discussed, and you can find the reconciliation to the closest GAAP measures in the appendix of this morning's release, as well as on our website. So with that, I'll turn the call over to John.
John D. Williams
Thank you, Pascal. This morning, we reported first quarter net earnings of $45 million or $1.29 per diluted share on sales of $1.3 billion. Our financial performance in our core Paper business was weaker than in the fourth quarter, and this is due to lower productivity, which resulted in higher cost per ton.
The reconfiguration of our Marlboro, South Carolina operations lead to multiple paper-grade transfers at several of our mills and negatively impacted our productivity.
We estimate lost paper production at about 16,000 tons, and Daniel will talk to the detail of that in a minute, but we anticipate a return to a normal output in the quarters to come.
From a sales standpoint, we performed well, with better paper volumes shipping from inventory, and we benefited from better paper pricing than we had anticipated. We also exited the quarter with paper inventories below where we'd like them to be. For the months ahead, we'll be focused on 3 things: Settling the product mix in our mills; bringing productivity back up to normal levels; and replenishing our inventories.
On Pulp, results were better than fourth quarter with a $26 million EBITDA improvement. That's due to lower maintenance costs and higher selling prices.
Turning to Personal Care, performance was on target, with volumes up 7% compared to first quarter 2012 and an EBITDA of $19 million.
I'm pleased with the progress we're making on integration in the division and with our execution on our growth plans.
The addition of new production lines is progressing as planned, and I look forward to introducing the business and discussing our growth plans for Personal Care at our Investor Day we'll be holding in the coming months.
On capital allocation, we remain aggressive on our buyback and have repurchased over 600,000 shares of common stock for $47 million in the first quarter. And in total, capital return to shareholders amounted to $63 million, including dividends.
With these brief remarks, I'll turn the call over to Daniel for the financial review, and I'll come back with our priorities and our outlook. Daniel?
Thank you, John, and good morning, everyone. Let's start by going over the financial highlights of the quarter on Slide 4. We reported this morning net earnings of $1.29 per share for the first quarter, compared to net earnings of $0.54 per share for the first -- fourth quarter of 2012. Net earnings before items, our earnings were $0.95 per share in the first quarter compared to earnings of $1.31 per share for the fourth quarter.
EBITDA before items amounted to $170 million, compared to $180 million in the fourth quarter. Free cash flow totaled $7 million compared to $75 million in the fourth quarter and $1 million in the first quarter last year.
Turning to sequential variation in earnings on Slide 5. Consolidated sales were $18 million higher than the fourth quarter, primarily driven by higher paper shipments and higher pulp prices, mitigated by lower paper prices.
SG&A was $91 million, in line with the fourth quarter. We recorded a charge of $10 million to finalize the accelerated depreciation related to the closure of a pulp line at our Kamloops facility.