Domtar Corporation reports preliminary fourth quarter and fiscal year 2012 financial results

Fri Feb 1, 2013 7:30am EST

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The conversion to specialty and packaging paper at the  Marlboro  mill
 nearing completion

(All financial information is in U.S. dollars, and all earnings per
 share results are diluted, unless otherwise noted.)

* 
Fourth quarter 2012 net earnings of  $0.54  per share, earnings before
 items1  of  $1.31  per share

* 
Closed the sale of the  Ottawa/Gatineau  hydro assets for  CDN$46 million

* 
Free cash flow1  payout of 68% in 2012 through regular dividends and share
buybacks

TICKER SYMBOL 

(NYSE: UFS) (TSX: UFS)


MONTREAL,  Feb. 1, 2013  /PRNewswire/ - Domtar Corporation (NYSE: UFS)
 (TSX: UFS) today reported net earnings of  $19 million  ($0.54  per share)
 for the fourth quarter of 2012 compared to net earnings of  $66 million
 ($1.84  per share) for the third quarter of 2012 and net earnings of
  $61 million  ($1.63 per share) for the fourth quarter of 2011. Sales for
 the fourth quarter of 2012 amounted to  $1.3 billion.



Excluding items listed below, the Company had earnings before items1  of  $46
million  ($1.31  per share) for the fourth quarter of 2012
 compared to earnings before items1  of  $67 million  ($1.87  per share) for the
third quarter of 2012 and
 earnings before items1  of  $93 million  ($2.49  per share) for the fourth
quarter of 2011.


Fourth quarter 2012 items:

* 
Closure and restructuring costs of  $27 million  ($18 million  after tax);

* 
Charge of  $12 million  ($8 million  after tax) related to the impairment
 and write-down of property, plant and equipment and intangible assets;
 and

* 
Net losses on the sale of property, plant and equipment of  $2 million
 ($1 million  after tax).

Third quarter 2012 items:

* 
Closure and restructuring costs of  $2 million  ($1 million  after tax).

Fourth quarter 2011 items:

* 
Closure and restructuring costs of  $38 million  ($23 million  after tax);
 and

* 
Charge of  $12 million  ($9 million  after tax) related to the impairment
 and write-down of property, plant and equipment.

"Our paper and pulp businesses performed largely in-line with
 expectations from a sales standpoint in the fourth quarter,"  said  John D.
Williams, President and Chief Executive Officer.  "Higher costs for fiber and
energy and unexpected costs incurred at a
 pulp mill following a planned maintenance outage affected results."

FISCAL YEAR 2012 HIGHLIGHTS


For fiscal year 2012, net earnings amounted to  $172 million  ($4.76  per
 share) compared to net earnings of  $365 million  ($9.08  per share) for
 fiscal year 2011. The Company had earnings before items1  of  $233 million 
($6.45  per share) for fiscal 2012 compared to earnings
 before items1  of  $452 million  ($11.24 per share) for fiscal 2011. Sales
amounted to
  $5.5 billion  for fiscal year 2012.



Commenting on the year, Mr. Williams said,  "The down cycle in pulp prices
contributed to the majority of the
 decline in Domtar's earnings. We accomplished a great deal again in
 2012 nevertheless. We completed two acquisitions in our Personal Care
 business, we announced the conversion of a world-class commodity paper
 mill to manufacture specialty papers and launched several innovative
 projects that provide alternative uses for our wood fiber and the
 by-products of our manufacturing process. Our journey to build a
 growing fiber-based business is well underway,"  added Mr. Williams.


QUARTERLY REVIEW


Operating income before items1  was  $84 million  in the fourth quarter of 2012
compared to an operating
 income before items1  of  $111 million  in the third quarter of 2012.
Depreciation and
 amortization totaled  $96 million  in the fourth quarter of 2012.

 (In millions of dollars)                     4Q 2012    3Q 2012  
 Sales                                          $1,327     $1,389 
 Operating income (loss)                                          
                   Pulp and Paper segment          40        103 
                   Distribution segment           (8)        (5) 
                   Personal Care segment           13         12 
                   Corporate                      (2)        (1) 
                   Total                           43        109 
 Operating income before items1                     84        111 
 Depreciation and amortization                      96         96 


The decrease in operating income before items1  in the fourth quarter of 2012
was the result of lower average selling
 prices for pulp and paper, higher unit costs for fiber and energy,
 higher SG&A, freight, and maintenance costs and lower volumes for pulp
 and paper. These factors were partially offset by high productivity and
 lower costs for lack-of-order downtime in paper.



When compared to the third quarter of 2012, paper shipments decreased
 2.5% and pulp shipments decreased 7.2%. Paper deliveries of Ariva®  decreased
10.4% when compared to the third quarter of 2012. The
 shipments-to-production ratio for paper was 97% in the fourth quarter
 of 2012, compared to 105% in the third quarter of 2012. Lack-of-order
 downtime and machine slowdowns in papers totaled 23,000 short tons in
 the fourth quarter of 2012. Paper inventories increased by 27,000 tons
 while pulp inventories increased by 3,000 metric tons as at the end of
 December, compared to September levels.


LIQUIDITY AND CAPITAL


Cash flow provided from operating activities amounted to  $551 million
 and capital expenditures amounted to  $236 million, resulting in free
 cash flow1 of  $315 million  for fiscal year 2012. Domtar's net debt-to-total
 capitalization ratio1  stood at 16% at  December 31, 2012  compared to 12% at 
December 31, 2011.



Domtar returned a total of  $215 million  to its shareholders through a
 combination of dividends and share buybacks in 2012. Under its stock
 repurchase program, Domtar repurchased 2,000,925 shares of common stock
 throughout 2012 and a total of 8,660,703 shares of common stock at an
 average price of  $80.04  since the implementation of the program in  May
 2010. At the end of the year, Domtar had  $304 million  remaining under
 this program.


OUTLOOK  


In 2013, we expect market demand for uncoated freesheet paper to decline
 at a 3 to 4% rate in  North America, but our shipments are expected to
 trend slightly better than market due to an exposure to stable
 specialty and packaging papers and the incremental volume from the
 supply agreement signed with  Appleton. Paper prices are expected to
 trend at levels similar to year-end while we expect a slow and steady
 recovery in pulp prices. The implementation of our growth plans in the
 Personal Care segment are expected to yield incremental earnings
 beginning in the fourth quarter of 2013.


EARNINGS CONFERENCE CALL


The Company will hold a conference call today at  11:00 a.m. (ET)  to
 discuss its fourth quarter 2012 financial results. Financial analysts
 are invited to participate in the call by dialing at least 10 minutes
 before start time 1 (866) 321-8231 (toll free -  North America) or 1
 (416) 642-5213 (International), while media and other interested
 individuals are invited to listen to the live webcast on the Domtar
 Corporation website at  www.domtar.com.



The Company will release its first quarter 2013 earnings on  April 25,
 2013  before markets open, followed by a conference call at  10:00 a.m.
 (ET)  to discuss results. The date is tentative and will be confirmed
 approximately three weeks prior to the official earnings release date.

About Domtar  


Domtar Corporation (NYSE: UFS) (TSX: UFS) designs, manufactures, markets
 and distributes a wide variety of fiber-based products including
 communication papers, specialty and packaging papers and adult
 incontinence products. The foundation of its business is a network of
 world class wood fiber converting assets that produce papergrade, fluff
 and specialty pulps. The majority of its pulp production is consumed
 internally to manufacture paper and consumer products. Domtar is the
 largest integrated marketer of uncoated freesheet paper in  North
 America  with recognized brands such as Cougar®, Lynx®  Opaque Ultra, Husky® 
Opaque Offset, First Choice®  and Domtar EarthChoice®. Domtar is also a leading
marketer and producer of a complete line of
 incontinence care products marketed primarily under the Attends®  brand name.
Domtar owns and operates Ariva®, an extensive network of strategically located
paper and printing
 supplies distribution facilities. In 2012, Domtar had sales of  US$5.5
 billion  from nearly 50 countries. The Company employs approximately
 9,300 people. To learn more, visit  www.domtar.com.


Forward-Looking Statements

All statements in this news release that are not based on historical
 fact are "forward-looking statements." While management has based any
 forward-looking statements contained herein on its current
 expectations, the information on which such expectations were based may
 change. These forward-looking statements rely on a number of
 assumptions concerning future events and are subject to a number of
 risks, uncertainties, and other factors, many of which are outside of
 our control that could cause actual results to materially differ from
 such statements. Such risks, uncertainties, and other factors include,
 but are not necessarily limited to, those set forth under the captions
 "Forward-Looking Statements" and "Risk Factors" of the latest Form 10-K
 filed with the SEC as periodically updated by subsequently filed Form
 10-Q's. Unless specifically required by law, we assume no obligation to
 update or revise these forward-looking statements to reflect new events
 or circumstances.



_________________________


1   Non-GAAP financial measure. Refer to the  Reconciliation of Non-GAAP
Financial Measures  in the appendix.



Domtar Corporation  
Highlights  

(In millions of dollars, unless otherwise noted)

                                                                                                                                                                                                          
                                                                                                                                                                                                          
                                                                                                                          Three months        Three months        Twelve months       Twelve months       
                                                                                                                          ended December 31   
ended December 31  ended December 31   
ended December 31  
                                                                                                                          2012                2011                2012                2011                
                                                                                                                          (Unaudited)                                                                        
                                                                                                                                                                                                          
                                                                                                                                            $                   $                   $                   $ 
                                                                                                                                                                                                          
 Selected Segment Information                                                                                                                                                                               
                                                                                                                                                                                                          
 Sales                                                                                                                                                                                                      
                                                   Pulp and Paper                                                                       1,099               1,177               4,575               4,953 
                                                   Distribution                                                                           157                 177                 685                 781 
                                                   Personal Care                                                                          111                  54                 399                  71 
 Total for reportable segments                                                                                                            1,367               1,408               5,659               5,805 
                                                   Intersegment sales - Pulp and Paper                                                   (40)                (39)               (177)               (193) 
 Consolidated sales                                                                                                                       1,327               1,369               5,482               5,612 
 Depreciation and amortization and impairment and write-down                                                                                                                                                
 of property, plant and equipment and intangible assets                                                                                                                                                     
                                                   Pulp and Paper                                                                          90                  91                 361                 368 
                                                   Distribution                                                                             1                   1                   4                   4 
                                                   Personal Care                                                                            5                   3                  20                   4 
 Total for reportable segments                                                                                                               96                  95                 385                 376 
                                                   Impairment and write-down of property, plant and equipment - Pulp and                    7                  12                   9                  85 
                                                    Paper                                                                                                                                                 
                                                   Impairment and write-down of intangible assets - Distribution                            5                   -                   5                   - 
 Consolidated depreciation and amortization and impairment and                                                                              108                 107                 399                 461 
 write-down of property, plant and equipment and intangible assets                                                                                                                                          
                                                                                                                                                                                                          
 Operating income (loss)                                                                                                                                                                                    
                                                   Pulp and Paper                                                                          40                  92                 346                 581 
                                                   Distribution                                                                           (8)                   -                (16)                   - 
                                                   Personal Care                                                                           13                   7                  45                   7 
                                                   Corporate                                                                              (2)                   -                 (8)                   4 
 Consolidated operating income                                                                                                               43                  99                 367                 592 
 Interest expense, net                                                                                                                       22                  20                 131                  87 
 Earnings before income taxes and equity earnings                                                                                            21                  79                 236                 505 
 Income tax expense                                                                                                                           1                  11                  58                 133 
 Equity loss, net of taxes                                                                                                                    1                   7                   6                   7 
 Net earnings                                                                                                                                19                  61                 172                 365 
                                                                                                                                                                                                          
 Per common share (in dollars)                                                                                                                                                                              
                          Net earning                                                                                                                                                                      
                                                   Basic                                                                                 0.54                1.64                4.78                9.15 
                                                   Diluted                                                                               0.54                1.63                4.76                9.08 
 Weighted average number of common                                                                                                                                                                          
 
and exchangeable shares outstanding (millions)                                                                                                                                                            
                                                   Basic                                                                                 35.1                37.1                36.0                39.9 
                                                   Diluted                                                                               35.2                37.4                36.1                40.2 
                                                                                                                                                                                                          
 Cash flows provided from operating activities                                                                                              140                 172                 551                 883 
 Additions to property, plant and equipment                                                                                                  65                  80                 236                 144 


Domtar Corporation  
Consolidated Statements of Earnings  

(In millions of dollars, unless otherwise noted)

                                                                                                                                                                                       
                                                                                                                                                                                       
                                                                                                       Three months        Three months        Twelve months       Twelve months       
                                                                                                       ended December 31   
ended December 31  ended December 31   
ended December 31  
                                                                                                       2012                2011                2012                2011                
                                                                                                       (Unaudited)                                                                        
                                                                                                                                                                                       
                                                                                                                         $                   $                   $                   $ 
                                                                                                                                                                                       
 Sales                                                                                                                 1,327               1,369               5,482               5,612 
 Operating expenses                                                                                                                                                                      
                                       Cost of sales, excluding depreciation and amortization                        1,058               1,039               4,321               4,171 
                                       Depreciation and amortization                                                    96                  95                 385                 376 
                                       Selling, general and administrative                                              90                  87                 358                 340 
                                       Impairment and write-down of property, plant and equipment and                   12                  12                  14                  85 
                                        intangible assets                                                                                                                              
                                       Closure and restructuring costs                                                  27                  38                  30                  52 
                                       Other operating loss (income), net                                                1                 (1)                   7                 (4) 
                                                                                                                       1,284               1,270               5,115               5,020 
                                                                                                                                                                                       
 Operating income                                                                                                         43                  99                 367                 592 
                                                                                                                                                                                       
 Interest expense, net                                                                                                    22                  20                 131                  87 
                                                                                                                                                                                       
 Earnings before income taxes and equity earnings                                                                         21                  79                 236                 505 
                                                                                                                                                                                       
 Income tax expense                                                                                                        1                  11                  58                 133 
                                                                                                                                                                                       
 Equity loss, net of taxes                                                                                                 1                   7                   6                   7 
                                                                                                                                                                                       
 Net earnings                                                                                                             19                  61                 172                 365 
                                                                                                                                                                                       
 Per common share (in dollars)                                                                                                                                                           
                                                                                                                                                                                       
                    Net earnings                                                                                                                                                        
                                       Basic                                                                          0.54                1.64                4.78                9.15 
                                       Diluted                                                                        0.54                1.63                4.76                9.08 
 Weighted average number of common                                                                                                                                                       
 
and exchangeable shares outstanding (millions)                                                                                                                                         
                                       Basic                                                                          35.1                37.1                36.0                39.9 
                                       Diluted                                                                        35.2                37.4                36.1                40.2 


Domtar Corporation  
Consolidated Balance Sheets at  

(In millions of dollars)

                                                                                                                                
                                                                                                      December 31  December 31  
                                                                                                      2012         2011         
                                                                                                      (Unaudited)                
                                                                                                                 $            $ 
                                                                                                                                
 Assets                                                                                                                             
 Current assets                                                                                                                     
                       Cash and cash equivalents                                                                 661          444 
                       Receivables, less allowances of $4 and $5                                                 562          644 
                       Inventories                                                                               675          652 
                       Prepaid expenses                                                                           24           22 
                       Income and other taxes receivable                                                          48           47 
                       Deferred income taxes                                                                      45          125 
                                       Total current assets                                                   2,015        1,934 
                                                                                                                                
           Property, plant and equipment, at cost                                                               8,793        8,448 
           Accumulated depreciation                                                                           (5,392)      (4,989) 
                                       Net property, plant and equipment                                      3,401        3,459 
 Goodwill                                                                                                          263          163 
 Intangible assets, net of amortization                                                                            309          204 
 Other assets                                                                                                      135          109 
                                                          Total assets                                       6,123        5,869 
                                                                                                                                
 Liabilities and shareholders' equity                                                                                               
 Current liabilities                                                                                                                
                       Bank indebtedness                                                                          18            7 
                       Trade and other payables                                                                  646          688 
                       Income and other taxes payable                                                             15           17 
                       Long-term debt due within one year                                                         79            4 
                                       Total current liabilities                                                758          716 
                                                                                                                                
 Long-term debt                                                                                                  1,128          837 
 Deferred income taxes and other                                                                                   903          927 
 Other liabilities and deferred credits                                                                            457          417 
                                                                                                                                
 Shareholders' equity                                                                                                               
                       Exchangeable shares                                                                        48           49 
                       Additional paid-in capital                                                              2,175        2,326 
                       Retained earnings                                                                         782          671 
                       Accumulated other comprehensive loss                                                    (128)         (74) 
                                       Total shareholders' equity                                             2,877        2,972 
                                                          Total liabilities and shareholders' equity         6,123        5,869 


Domtar Corporation  
Consolidated Statements of Cash Flows  

(In millions of dollars)

                                                                                                                                                                           
                                                                                                                                                                           
                                                                                                                                   Twelve months       Twelve months       
                                                                                                                                   ended December 31   
ended December 31  
                                                                                                                                   2012                2011                
                                                                                                                                   (Unaudited)                              
                                                                                                                                                     $                   $ 
                                                                                                                                                                           
 Operating activities                                                                                                                                                        
 Net earnings                                                                                                                                        172                 365 
 Adjustments to reconcile net earnings to cash flows from operating                                                                                                          
  activities                                                                                                                                                                 
                           Depreciation and amortization                                                                                            385                 376 
                           Deferred income taxes and tax uncertainties                                                                              (1)                  40 
                           Impairment and write-down of property, plant and equipment and                                                            14                  85 
                            intangible assets                                                                                                                               
                           Loss on repurchase of long-term debt                                                                                       -                   4 
                           Net losses (gains) on disposals of property, plant and equipment and                                                       2                 (6) 
                            sale of business                                                                                                                                
                           Stock-based compensation expense                                                                                           5                   3 
                           Equity loss, net                                                                                                           6                   7 
                           Other                                                                                                                   (13)                   - 
 Changes in assets and liabilities, excluding the effects of acquisition                                                                                                     
  and sale of businesses                                                                                                                                                     
                           Receivables                                                                                                               99                (12) 
                           Inventories                                                                                                                5                   2 
                           Prepaid expenses                                                                                                         (3)                   2 
                           Trade and other payables                                                                                               (118)                (27) 
                           Income and other taxes                                                                                                   (4)                  33 
                           Difference between employer pension and other post-retirement                                                           (13)                (18) 
                            contributions                                                                                                                                   
                           
and pension and other post-retirement expense                                                                                                   
                           Other assets and other liabilities                                                                                        15                  29 
                           Cash flows provided from operating activities                                                                            551                 883 
                                                                                                                                                                           
 Investing activities                                                                                                                                                        
 Additions to property, plant and equipment                                                                                                        (236)               (144) 
 Proceeds from disposals of property, plant and equipment                                                                                             49                  34 
 Proceeds from sale of business                                                                                                                        -                  10 
 Acquisition of businesses, net of cash acquired                                                                                                   (293)               (288) 
 Investment in joint venture                                                                                                                         (6)                 (7) 
                           Cash flows used for investing activities                                                                               (486)               (395) 
                                                                                                                                                       
 Financing activities                                                                                                                                                        
 Dividend payments                                                                                                                                  (58)                (49) 
 Net change in bank indebtedness                                                                                                                      11                (16) 
 Issuance of long-term debt                                                                                                                          548                   - 
 Repayment of long-term debt                                                                                                                       (192)                (18) 
 Debt issue and tender offer costs                                                                                                                     -                 (7) 
 Stock repurchase                                                                                                                                  (157)               (494) 
 Other                                                                                                                                                 -                  10 
                           Cash flows provided from (used for) financing activities                                                                 152               (574) 
                                                                                                                                                                           
 Net  increase (decrease) in cash and cash equivalents                                                                                               217                (86) 
 Cash and cash equivalents at beginning of year                                                                                                      444                 530 
 Cash and cash equivalents at end of year                                                                                                            661                 444 
                                                                                                                                                                           
 Supplemental cash flow information                                                                                                                                          
                           Net cash payments for:                                                                                                                           
                                                                Interest (including $47 million of tender offer premiums in 2012)                  116                  74 
                                                                Income taxes paid                                                                   76                  60 


Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures

(In millions of dollars, unless otherwise noted)


The following table sets forth certain non-U.S. generally accepted
 accounting principles ("GAAP") financial metrics identified in bold as
 "Earnings before items", "Earnings before items per diluted share",
 "EBITDA", "EBITDA margin", "EBITDA before items", "EBITDA margin before
 items", "Free cash flow", "Net debt" and "Net debt-to-total
 capitalization." Management believes that the financial metrics
 presented are frequently used by investors and are useful to evaluate
 our ability to service debt and our overall credit profile. Management
 believes these metrics are also useful to measure the operating
 performance and benchmark with peers within the industry. These metrics
 are presented as a complement to enhance the understanding of operating
 results but not in substitution for GAAP results.



The Company calculates "Earnings before items" and "EBITDA before items"
 by excluding the after-tax (pre-tax) effect of items considered by
 management as not reflecting our current operations. Management uses
 these measures, as well as EBITDA and Free cash flow, to focus on
 ongoing operations and believes that it is useful to investors because
 it enables them to perform meaningful comparisons between periods.
 Domtar believes that using this information along with Net earnings
 provides for a more complete analysis of the results of operations. Net
 earnings and Cash flow provided from operating activities are the most
 directly comparable GAAP measures.

                                                                                                                                                                                                             
                                                                                                                                       2012                                   2011                                   
                                                                                                                                       Q1     Q2     Q3     Q4     YTD    Q1     Q2     Q3     Q4     YTD    
 Reconciliation of "Earnings before items" to Net earnings                                                                                                                                                     
                                                     Net earnings                                                          ($)             28     59     66     19    172    133     54    117     61    365 
                           (+)                       Impairment and write-down of property, plant and equipment and        ($)              1      -      -      8      9      2     38      4      9     53 
                                                      intangible assets                                                                                                                                      
                           (+)                       Closure and restructuring costs                                       ($)              1      -      1     18     20      8      1      1     23     33 
                           (-)                       Net losses (gains) on disposals of property, plant and equipment and  ($)              -      -      -      1      1    (5)      5    (3)      -    (3) 
                                                      sale of business                                                                                                                                       
                           (+)                       Impact of purchase accounting                                         ($)              1      -      -      -      1      -      -      1      -      1 
                           (+)                       Loss on repurchase of long-term debt                                  ($)             30      -      -      -     30      -      -      3      -      3 
                           (=)                       Earnings before items                                                 ($)             61     59     67     46    233    138     98    123     93    452 
                           ( / )                     Weighted avg. number of common and exchangeable shares outstanding    (millions)    37.0   36.6   35.8   35.2   36.1   42.4   41.4   39.7   37.4   40.2 
                                                      (diluted)                                                                                                                                              
                           (=)                       Earnings before items per diluted share                               ($)           1.65   1.61   1.87   1.31   6.45   3.25   2.37   3.10   2.49  11.24 
                                                                                                                                                                                                             
 Reconciliation of "EBITDA" and "EBITDA before items" to Net earnings                                                                                                                                          
                                                     Net earnings                                                          ($)             28     59     66     19    172    133     54    117     61    365 
                           (+)                       Equity loss, net of taxes                                             ($)              2      2      1      1      6      -      -      -      7      7 
                           (+)                       Income tax expense                                                    ($)              8     27     22      1     58     57     20     45     11    133 
                           (+)                       Interest expense, net                                                 ($)             71     18     20     22    131     21     21     25     20     87 
                           (=)                       Operating income                                                      ($)            109    106    109     43    367    211     95    187     99    592 
                           (+)                       Depreciation and amortization                                         ($)             97     96     96     96    385     93     95     93     95    376 
                           (+)                       Impairment and write-down of property, plant and equipment and        ($)              2      -      -     12     14      3     62      8     12     85 
                                                      intangible assets                                                                                                                                      
                           (-)                       Net losses (gains) on disposals of property, plant and equipment and  ($)              -      -      -      2      2    (7)      6    (4)    (1)    (6) 
                                                      sale of business                                                                                                                                       
                           (=)                       EBITDA                                                                ($)            208    202    205    153    768    300    258    284    205  1,047 
                           (/)                       Sales                                                                 ($)          1,398  1,368  1,389  1,327  5,482  1,423  1,403  1,417  1,369  5,612 
                           (=)                       EBITDA margin                                                         (%)            15%    15%    15%    12%    14%    21%    18%    20%    15%    19% 
                                                     EBITDA                                                                ($)            208    202    205    153    768    300    258    284    205  1,047 
                           (+)                       Closure and restructuring costs                                       ($)              1      -      2     27     30     11      2      1     38     52 
                           (+)                       Impact of purchase accounting                                         ($)              1      -      -      -      1      -      -      1      -      1 
                           (=)                       EBITDA before items                                                   ($)            210    202    207    180    799    311    260    286    243  1,100 
                           (/)                       Sales                                                                 ($)          1,398  1,368  1,389  1,327  5,482  1,423  1,403  1,417  1,369  5,612 
                           (=)                       EBITDA margin before items                                            (%)            15%    15%    15%    14%    15%    22%    19%    20%    18%    20% 
                                                                                                                                                                                                             
 Reconciliation of "Free cash flow" to Cash flow provided from operating                                                                                                                                       
  activities                                                                                                                                                                                                   
                                                     Cash flow provided from operating activities                          ($)             30    175    206    140    551    148    306    257    172    883 
                           (-)                       Additions to property, plant and equipment                            ($)           (29)   (76)   (66)   (65)  (236)   (13)   (20)   (31)   (80)  (144) 
                           (=)                       Free cash flow                                                        ($)              1     99    140     75    315    135    286    226     92    739 
                                                                                                                                                                                                             
 "Net debt-to-total capitalization" computation                                                                                                                                                                
                                                     Bank indebtedness                                                     ($)             13     22     15     18            25     25     17      7        
                           (+)                       Long-term debt due within one year                                    ($)              6      6      7     79             2      2      5      4        
                           (+)                       Long-term debt                                                        ($)            952    950  1,196  1,128           825    824    837    837        
                           (=)                       Debt                                                                  ($)            971    978  1,218  1,225           852    851    859    848        
                           (-)                       Cash and cash equivalents                                             ($)          (315)  (276)  (593)  (661)         (604)  (742)  (461)  (444)        
                           (=)                       Net debt                                                              ($)            656    702    625    564           248    109    398    404        
                           (+)                       Shareholders' equity                                                  ($)          3,009  2,948  3,004  2,877         3,288  3,194  2,999  2,972        
                           (=)                       Total capitalization                                                  ($)          3,665  3,650  3,629  3,441         3,536  3,303  3,397  3,376        
                                                     Net debt                                                              ($)            656    702    625    564           248    109    398    404        
                           ( / )                     Total capitalization                                                  ($)          3,665  3,650  3,629  3,441         3,536  3,303  3,397  3,376        
                           (=)                       Net debt-to-total capitalization                                      (%)            18%    19%    17%    16%            7%     3%    12%    12%        


"Earnings before items", "Earnings before items per diluted share",
 "EBITDA", "EBITDA margin", "EBITDA before items", "EBITDA margin before
 items", "Free cash flow", "Net debt" and "Net debt-to-total
 capitalization" have no standardized meaning prescribed by GAAP and are
 not necessarily comparable to similar measures presented by other
 companies and therefore should not be considered in isolation or as a
 substitute for Net earnings, Operating income or any other earnings
 statement, cash flow statement or balance sheet financial information
 prepared in accordance with GAAP. It is important for readers to
 understand that certain items may be presented in different lines by
 different companies on their financial statements thereby leading to
 different measures for different companies.



Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment
 2012

(In millions of dollars, unless otherwise noted)


The following table sets forth certain non-U.S. generally accepted
 accounting principles ("GAAP"), financial metrics identified in bold as
 "Operating income (loss) before items", "EBITDA before items" and
 "EBITDA margin before items" by reportable segment. Management believes
 that the financial metrics presented are frequently used by investors
 and are useful to measure the operating performance and benchmark with
 peers within the industry. These metrics are presented as a complement
 to enhance the understanding of operating results but not in
 substitution for GAAP results.


The Company calculates the segmented "Operating income (loss) before
 items" by excluding the pre-tax effect of items considered by
 management as not reflecting our ongoing operations. Management uses
 these measures to focus on ongoing operations and believes that it is
 useful to investors because it enables them to perform meaningful
 comparisons between periods. Domtar believes that using this
 information along with Operating income (loss) provides for a more
 complete analysis of the results of operations. Operating income (loss)
 by segment is the most directly comparable GAAP measure.

                                                                                                                                                                                                                                                                                                     
                                                                                                                          Pulp and Paper                         Distribution                          Personal Care  (1)                    Corporate                            Total                                  
                                                                                                                          Q1'12  Q2'12  Q3'12  Q4'12  YTD    Q1'12  Q2'12  Q3'12  Q4'12  YTD   Q1'12  Q2'12  Q3'12  Q4'12  YTD   Q1'12  Q2'12  Q3'12  Q4'12  YTD  Q1'12  Q2'12  Q3'12  Q4'12  YTD    
 Reconciliation of Operating income (loss) to "Operating income (loss)                                                                                                                                                                                                                                 
  before items"                                                                                                                                                                                                                                                                                        
                                                     Operating income (loss)                                         ($)     107     96    103     40    346    (1)    (2)    (5)    (8)  (16)      8     12     12     13    45    (5)      -    (1)    (2)  (8)    109    106    109     43    367 
                           (+)                       Impairment and write-down of property, plant and equipment and  ($)       2      -      -      7      9      -      -      -      5     5      -      -      -      -     -      -      -      -      -    -      2      -      -     12     14 
                                                      intangible assets                                                                                                                                                                                                                              
                           (+)                       Closure and restructuring costs                                 ($)       1      -      -     26     27      -      -      1      1     2      -      -      1      -     1      -      -      -      -    -      1      -      2     27     30 
                           (-)                       Net losses on disposals of property, plant and equipment        ($)       -      -      -      2      2      -      -      -      -     -      -      -      -      -     -      -      -      -      -    -      -      -      -      2      2 
                           (+)                       Impact of purchase accounting                                   ($)       -      -      -      -      -      -      -      -      -     -      1      -      -      -     1      -      -      -      -    -      1      -      -      -      1 
                                                                                                                                                                                                                                                                                                     
                           (=)                       Operating income (loss) before items                            ($)     110     96    103     75    384    (1)    (2)    (4)    (2)   (9)      9     12     13     13    47    (5)      -    (1)    (2)  (8)    113    106    111     84    414 
                                                                                                                                                                                                                                                                                                     
 Reconciliation of "Operating income (loss) before items" to "EBITDA                                                                                                                                                                                                                                   
  before items"                                                                                                                                                                                                                                                                                        
                                                     Operating income (loss) before items                            ($)     110     96    103     75    384    (1)    (2)    (4)    (2)   (9)      9     12     13     13    47    (5)      -    (1)    (2)  (8)    113    106    111     84    414 
                           (+)                       Depreciation and amortization                                   ($)      93     88     90     90    361      1      2      -      1     4      3      6      6      5    20      -      -      -      -    -     97     96     96     96    385 
                                                                                                                                                                                                                                                                                                     
                           (=)                       EBITDA before items                                             ($)     203    184    193    165    745      -      -    (4)    (1)   (5)     12     18     19     18    67    (5)      -    (1)    (2)  (8)    210    202    207    180    799 
                           (/)                       Sales                                                           ($)   1,191  1,132  1,153  1,099  4,575    189    172    167    157   685     70    107    111    111   399      -      -      -      -    -  1,450  1,411  1,431  1,367  5,659 
                           (=)                       EBITDA margin before items                                      (%)     17%    16%    17%    15%    16%      -      -      -      -     -    17%    17%    17%    16%   17%      -      -      -      -    -    14%    14%    14%    13%    14% 


"Operating income (loss) before items", "EBITDA before items" and
 "EBITDA margin before items" have no standardized meaning prescribed by
 GAAP and are not necessarily comparable to similar measures presented
 by other companies and therefore should not be considered in isolation
 or as a substitute for Operating income (loss) or any other earnings
 statement, cash flow statement or balance sheet financial information
 prepared in accordance with GAAP. It is important for readers to
 understand that certain items may be presented in different lines by
 different companies on their financial statements thereby leading to
 different measures for different companies.

 (1)  On March 1, 2012, the Company acquired 100% of the shares of Attends  
       Healthcare Limited.                                                  
      
On May 1, 2012, the Company acquired 100% of the shares of EAM       
       Corporation.                                                         


Domtar Corporation
Quarterly Reconciliation of Non-GAAP Financial Measures - By Segment
 2011

(In millions of dollars, unless otherwise noted)


The following table sets forth certain non-U.S. generally accepted
 accounting principles ("GAAP"), financial metrics identified in bold as
 "Operating income (loss) before items", "EBITDA before items" and
 "EBITDA margin before items" by reportable segment. Management believes
 that the financial metrics presented are frequently used by investors
 and are useful to measure the operating performance and benchmark with
 peers within the industry. These metrics are presented as a complement
 to enhance the understanding of operating results but not in
 substitution for GAAP results.


The Company calculates the segmented "Operating income (loss) before
 items" by excluding the pre-tax effect of items considered by
 management as not reflecting our ongoing operations. Management uses
 these measures to focus on ongoing operations and believes that it is
 useful to investors because it enables them to perform meaningful
 comparisons between periods. Domtar believes that using this
 information along with Operating income (loss) provides for a more
 complete analysis of the results of operations. Operating income (loss)
 by segment is the most directly comparable GAAP measure.

                                                                                                                                                                                                                                                                                                          
                                                                                                                                Pulp and Paper                         Distribution                         Personal Care  (1)                    Corporate                            Total                                  
                                                                                                                                Q1'11  Q2'11  Q3'11  Q4'11  YTD    Q1'11  Q2'11  Q3'11  Q4'11  YTD  Q1'11  Q2'11  Q3'11  Q4'11  YTD   Q1'11  Q2'11  Q3'11  Q4'11  YTD  Q1'11  Q2'11  Q3'11  Q4'11  YTD    
 Reconciliation of Operating income (loss) to "Operating income (loss)                                                                                                                                                                                                                                      
  before items"                                                                                                                                                                                                                                                                                             
                                                     Operating income (loss)                                               ($)     209     91    189     92    581      3    (2)    (1)      -    -      -      -      -      7     7    (1)      6    (1)      -    4    211     95    187     99    592 
                           (+)                       Impairment and write-down of property, plant and equipment            ($)       3     62      8     12     85      -      -      -      -    -      -      -      -      -     -      -      -      -      -    -      3     62      8     12     85 
                           (+)                       Closure and restructuring costs                                       ($)      11      2      1     37     51      -      -      -      1    1      -      -      -      -     -      -      -      -      -    -     11      2      1     38     52 
                           (-)                       Net losses (gains) on disposals of property, plant and equipment and  ($)     (4)     12    (4)    (1)      3    (3)      -      -      -  (3)      -      -      -      -     -      -    (6)      -      -  (6)    (7)      6    (4)    (1)    (6) 
                                                      sale of business                                                                                                                                                                                                                                    
                           (+)                       Impact of purchase accounting                                         ($)       -      -      -      -      -      -      -      -      -    -      -      -      1      -     1      -      -      -      -    -      -      -      1      -      1 
                                                                                                                                                                                                                                                                                                          
                           (=)                       Operating income (loss) before items                                  ($)     219    167    194    140    720      -    (2)    (1)      1  (2)      -      -      1      7     8    (1)      -    (1)      -  (2)    218    165    193    148    724 
                                                                                                                                                                                                                                                                                                          
 Reconciliation of "Operating income (loss) before items" to "EBITDA                                                                                                                                                                                                                                        
  before items"                                                                                                                                                                                                                                                                                             
                                                     Operating income (loss) before items                                  ($)     219    167    194    140    720      -    (2)    (1)      1  (2)      -      -      1      7     8    (1)      -    (1)      -  (2)    218    165    193    148    724 
                           (+)                       Depreciation and amortization                                         ($)      92     94     91     91    368      1      1      1      1    4      -      -      1      3     4      -      -      -      -    -     93     95     93     95    376 
                                                                                                                                                                                                                                                                                                          
                           (=)                       EBITDA before items                                                   ($)     311    261    285    231  1,088      1    (1)      -      2    2      -      -      2     10    12    (1)      -    (1)      -  (2)    311    260    286    243  1,100 
                           (/)                       Sales                                                                 ($)   1,269  1,261  1,246  1,177  4,953    217    190    197    177  781      -      -     17     54    71      -      -      -      -    -  1,486  1,451  1,460  1,408  5,805 
                           (=)                       EBITDA margin before items                                            (%)     25%    21%    23%    20%    22%      -      -      -     1%    -      -      -    12%    19%   17%      -      -      -      -    -    21%    18%    20%    17%    19% 


"Operating income (loss) before items", "EBITDA before items" and
 "EBITDA margin before items" have no standardized meaning prescribed by
 GAAP and are not necessarily comparable to similar measures presented
 by other companies and therefore should not be considered in isolation
 or as a substitute for Operating income (loss) or any other earnings
 statement, cash flow statement or balance sheet financial information
 prepared in accordance with GAAP. It is important for readers to
 understand that certain items may be presented in different lines by
 different companies on their financial statements thereby leading to
 different measures for different companies.

(1)  On  September 1, 2011, the Company acquired 100% of the shares of
 Attends Healthcare Inc. 




Domtar Corporation
Supplemental Segmented Information

(In millions of dollars, unless otherwise noted)

                                                                                                                                                                     
                                                                                               2012                                   2011                                   
                                                                                               Q1     Q2     Q3     Q4     YTD    Q1     Q2     Q3     Q4     YTD    
 Pulp and Paper Segment                                                                                                                                         
           Sales                                                                   ($)           1,191  1,132  1,153  1,099  4,575  1,269  1,261  1,246  1,177  4,953 
                                           Intersegment sales - Pulp and Paper    ($)            (52)   (43)   (42)   (40)  (177)   (63)   (48)   (43)   (39)  (193) 
           Operating income                                                        ($)             107     96    103     40    346    209     91    189     92    581 
           Depreciation and amortization                                           ($)              93     88     90     90    361     92     94     91     91    368 
           Impairment and write-down of property, plant and equipment              ($)               2      -      -      7      9      3     62      8     12     85 
                                                                                                                                                                     
           Papers                                                                                                                                                     
           Papers Production                                                       ('000 ST)       870    832    788    831  3,321    899    890    875    871  3,535 
           Papers Shipments                                                        ('000 ST)       870    819    826    805  3,320    913    901    889    831  3,534 
                                           Communication Papers                   ('000 ST)       756    705    709    684  2,854    816    794    784    729  3,123 
                                           Specialty and Packaging                ('000 ST)       114    114    117    121    466     97    107    105    102    411 
                                                                                                                                                                     
           Pulp                                                                                                                                                       
           Pulp Shipments(a)                                                       ('000 ADMT)     389    368    415    385  1,557    375    361    358    403  1,497 
                                           Hardwood Kraft Pulp                    (%)             15%    16%    20%    19%    18%    20%    19%    18%    19%    19% 
                                           Softwood Kraft Pulp                    (%)             61%    57%    55%    56%    57%    55%    54%    57%    58%    57% 
                                           Fluff Pulp                             (%)             24%    27%    25%    25%    25%    25%    27%    25%    23%    24% 
                                                                                                                                                                     
 Distribution Segment                                                                                                                                                  
           Sales                                                                   ($)             189    172    167    157    685    217    190    197    177    781 
           Operating income (loss)                                                 ($)             (1)    (2)    (5)    (8)   (16)      3    (2)    (1)      -      - 
           Depreciation and amortization                                           ($)               1      2      -      1      4      1      1      1      1      4 
           Impairment and write-down of intangible assets                          ($)               -      -      -      5      5      -      -      -      -      - 
                                                                                                                                                                     
 Personal Care Segment                                                                                                                                                 
           Sales                                                                   ($)              70    107    111    111    399      -      -     17     54     71 
           Operating income                                                        ($)               8     12     12     13     45      -      -      -      7      7 
           Depreciation and amortization                                           ($)               3      6      6      5     20      -      -      1      3      4 
                                                                                                                                                                     
                                                                                                                                                                     
 Average Exchange Rates                                                             $US / $CAN    1.001  1.010  0.995  0.991  0.999  0.986  0.968  0.980  1.023  0.989 
                                                                                  $CAN / $US    0.999  0.990  1.006  1.009  1.001  1.014  1.034  1.021  0.977  1.011 
                                                                                  €EUR / $US    1.312  1.283  1.252  1.298  1.286      -      -      -      -      - 


 (a)  Figures are gross of market pulp purchased from other producers on the   
       open market for some of our paper making operations. Pulp Shipments     
       represent the amount of pulp produced in excess of our internal         
       requirement.                                                            
                                                                               
      Note: the term "ST" refers to a short ton and the term "ADMT" refers to  
       an air dry metric ton.                                                  


SOURCE  DOMTAR CORPORATION

MEDIA AND INVESTOR RELATIONS

Pascal Bossé

Vice-President

Corporate Communications and Investor Relations

Tel.: 514-848-5938

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