March 16, 2010 / 1:29 PM / 8 years ago

UPDATE 1-Domtar to close Mississippi paper mill, cut jobs

* Mill has currently 219 employees

* Operations expected to cease by April end

* To take $25 mln charges in Q1

March 16 (Reuters) - Forestry firm Domtar Corp (UFS.TO) (UFS.N) said it will exit the coated groundwood paper business and close its mill in Columbus, Mississippi, affecting 219 jobs, and expects related charges of about $25 million.

Operations at the mill are expected to cease by the end of April, Domtar, which operates across papers, paper merchants and wood segments, said in a regulatory filing.

The mill has an annual production capacity of 238,000 tons of coated groundwood and 70,000 metric tons of thermo-mechanical pulp, Domtar said.

Domtar said of the pretax charges, about $15 million is non-cash charges related to the write-off of the carrying amount of the paper mill’s equipment, related spare parts and storeroom inventory.

About $10 million is pretax cash charges related to severance and employee benefits, Domtar added.

    “Market conditions for coated groundwood paper are challenging and despite the best efforts of our employees -- and these efforts have been commendable -- the mill continues to suffer from a weak cost position,” Chief Executive John Williams said in a statement.

    Domtar also announced the sale of its Choctaw, Saturn and Jupiter coated groundwood product lines and trademarks to NewPage Corp. The sale includes the mill’s paper inventory and book of business.

    Domtar said it plans to dismantle and dispose of remaining assets.

    Domtar shares closed at C$64.34 Monday on the Toronto Stock Exchange. (Reporting by Isheeta Sanghi in Bangalore; Editing by Gopakumar Warrier)

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