Domtar 3Q profit soars on tax credit, asset sales

Domtar reports jump in 3rd-quarter profit as tax credit, property sale gains buoy results

• On 11:48 am EDT, Friday October 30, 2009

PITTSBURGH (AP) -- Paper and wood products company Domtar Corp. reported sharply higher third-quarter profit Friday, helped by gains from a tax credit and the sale of property and equipment.

Results far exceeded analyst expectations, sending shares of the company higher.

Net income rose to $183 million, or $4.24 per share, compared with $43 million, or $1 per share, during the same period in 2008.

Excluding special items, Domtar earned $57 million, or $1.32 per share, in the latest quarter.

The latest quarter included a refundable excise tax credit of $116 million after tax for the production and use of biofuel mixtures, as well as a $12 million gain on the sale of property and equipment. It also included restructuring costs of $2 million after tax.

Revenue slipped nearly 12 percent to $1.44 billion from $1.63 billion.

Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, expected a profit of 29 cents per share on revenue of $1.34 billion.

John D. Williams, Domtar's president and CEO, said all the company's businesses posted stronger profits, particularly its pulp business, which gained from higher prices and demand, as well as the restart of its Woodland and Dryden pulp mills.

In Domtar's paper business, he said, "market conditions improved slightly quarter-over-quarter, as we had better shipments while taking the same level of lack-of-order downtime as in the second quarter."

Looking ahead to the fourth quarter, the company said it expects lower paper volumes due to seasonal factors, as well as higher costs due to planned maintenance shutdowns. It also said the strengthening of the Canadian dollar will hurt profits at its Canadian mills. Its papers segment is expected to gain from recently announced price increases, Domtar said.

Shares of Domtar, a U.S. company with headquarters in Canada, rose $3.02, or 7.6 percent, to $42.56 in morning trading. The stock has ranged from $6.12 to $45.62 over the past year.

Buzz up!