* Q4 adj EPS $2.41 vs est $3.02
* Q4 sales fall to $1.42 bln from $1.46 bln last yr
* Sees N.American paper demand declining in long term
* Shares fall 6 pct
(Recasts; adds analyst comment, shares)
By Isheeta Sanghi
BANGALORE, Feb 4 Domtar Corp (UFS.TO) (UFS.N)
posted quarterly results below market estimates, and said it
expects North American paper demand to continue to decline in
the long term, sending its shares down 6 percent.
The Montreal-based company's bleak outlook comes a day
after its U.S.-based rival International Paper Co (IP.N)
forecast strong earnings improvement this year. [ID:nN03243479]
Domtar, which operates across paper and pulp segments, said
it expects the gradual return of employment in the United
States, closer to pre-recession levels, to partially offset
waning paper demand.
U.S. employment probably shifted into a higher gear in
January to post a fourth straight month of gains, offering more
evidence of a broadening economic recovery. [ID:nN0366997]
"I think (Domtar is) just being cautious ... I think things
are going to be better than that," RBC Capital Markets analyst
Paul Quinn said.
Domtar said its papers segment is benefiting from a more
favorable pulp product mix that should result in reduced
pricing volatility, but that rising commodity prices should put
pressure on input costs this year.
"They also pointed out cost increases on fiber and energy,
and I could see the energy and I could see chemicals, but fiber
does not seem to be moving up for anybody, so I am a bit
surprised about that," analyst Quinn said.
INVESTING FOR GROWTH
Domtar, one of the largest producers of uncoated freesheet
paper in North America, has been focusing on paper and
specialty pulp businesses. Last year, the company sold its
forestry unit to Eacom Timber Corp ETR.V.
"We have also made strategic investments in growth markets
that bode well for the future, notably in fluff pulp and
nanocrystalline cellulose," Chief Executive John Williams said
in a statement.
Fluff pulp is bleached softwood cellulose fiber used in
baby diapers, feminine hygiene products and adult incontinence
Domtar's October-December net profit rose to $325 million,
or $7.59 a share, from $124 million, or $2.86 a share, a year
The company benefited from an income tax credit of $127
million and $100 million in reversal of Canadian deferred
income tax allowance.
Excluding one-time items, Domtar, with a market value of
C$3.76 billion, earned $2.41 a share.
Analysts, on average, had expected earnings of $3.02 a
share, excluding items, on revenue of $1.46 billion, according
to Thomson Reuters I/B/E/S.
Shares of the company, which have gained 56 percent over
the past year, were down 5 percent at C$83.85 on Friday on the
Toronto Stock Exchange. They touched a low of $82.51 earlier.
(Reporting by Isheeta Sanghi; Editing by Maju Samuel,