UPDATE 2-Forestry firm Domtar Q1 beats market estimates

Fri Apr 30, 2010 8:52am EDT

* Q1 EPS $1.59 vs analyst view $1.07

* Q1 consolidated sales up 12 pct (Recasts, adds details)

April 30 (Reuters) - Forestry firm Domtar Corp (UFS.TO) (UFS.N) posted a first-quarter profit that beat market estimates, aided by price increases and higher pulp, paper and wood shipments.

Higher prices for pulp, lumber and oriented strand board have boosted shares of companies like Domtar, whose shares have seen a more than three-fold increase since last year. [ID:nN23241340]

Domtar said it is now operating at full capacity with a lengthening backlog as a result of increased paper demand.

The company said it has built inventories of pulp ahead of the second quarter as it expects a higher level of maintenance work at its mills in preparation for the recently announced investment at its Kamloops, British Columbia-based pulp mill that will result in a 41 day shut down.

Domtar said it will benefit from price increases in pulp and paper, which are in the process of being implemented, but warned that input costs may rise moderately.

Q1 BEATS STREET

The company, which operates across paper, pulp, and wood segments, saw profits of $58 million or $1.34 a share, compared with a loss of $45 million or $1.05 a share, a year ago.

Dual-listed Domtar earned $1.59 a share, excluding items.

Included in the first-quarter results was a pre-tax $25 million refundable excise tax credit for the production and use of alternative biofuel mixtures. That is down from the $46 million it received last year.

Analysts on average had expected Domtar, one of the largest producers of uncoated freesheet paper in North America, to earn $1.07 cents a share, on revenue of $1.44 billion, according to Thomson Reuters I/B/E/S.

Consolidated sales for the Montreal-based company rose 12 percent to $1.46 billion.

Domtar said demand for its uncoated freesheet paper remains stable from month to month, and it expects the increasing level of economic activity to be supportive of the recent trend.

In March, Domtar sold its forest products business to Eacom Timber Corp ETR.V for C$80 million, plus certain capital adjustments, allowing Domtar to focus on its paper and speciality pulp businesses.[IDn:N29244352]

Domtar's shares closed at C$76.60 Thursday on the Toronto Stock Exchange.

(Reporting by Isheeta Sanghi in Bangalore; Editing by Roshni Menon)

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