Domtar Corporation ( UFS Quick Quote UFS - Free Report) delivered fourth-quarter 2020 adjusted earnings of 34 cents per share as against the adjusted loss of 16 cents reported in the prior-year quarter. The bottom-line figure, however, missed the Zacks Consensus Estimate of 47 cents. Including one-time items, Domtar posted loss per share of $1.07 in the quarter as against the loss per share of 59 cents recorded in the prior-year quarter. Consolidated sales declined 10.4% year over year to $920 million. The top-line figure also missed the Zacks Consensus Estimate of $1,190 million. Operational Highlight
Consolidated adjusted operating income came in at $35 million during the December-end quarter as against the year-ago quarter’s operating loss of $6 million.
Quarterly revenues of the Pulp and Paper segment came in at $920 million, down 16.7% year on year. Adjusted operating income for the segment was $43 million in the fourth quarter, up from the year-earlier reported figure of $6 million.
Balance Sheet & Cash Flow
The company had cash and cash equivalents of $309 million as of Dec 31, 2020, up from $61 million as of Dec 31, 2019. Net debt-to-total capitalization ratio was 26% as of Dec 31, 2020, down from 27% as of Dec 31, 2019.
Domtar generated $411 million of cash from operating activities in 2020 compared with the $442 million reported in 2019. Outlook
The company expects paper demand to remain uncertain in the current year due to the pandemic-induced suspension of schools and offices. Domtar anticipates the pulp market to gradually improve on solid demand, maintenance outages and restocking in China. Overall raw-material costs and freight costs might flare up moderately.
On Jan 8, Domtar announced that it has entered into an agreement to divest its Personal Care business to American Industrial Partners (“AIP”) for $920 million. The divesture supports Domtar’s primary focus on building an industry-leading Paper, Pulp and Packaging business to maximize shareholder value. This move will also aid the company to strengthen its financial position, enhance liquidity and share repurchases. The company expects the deal to close in the current quarter. Price Performance
The stock has gained 2.6% in the past year compared with the
industry’s growth 19.6%. Zacks Rank & Other Key Picks
Domtar currently flaunts a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here. Other top-ranked stocks in the basic materials space include Fortescue Metals Group Limited ( FSUGY Quick Quote FSUGY - Free Report) , BHP Group ( BHP Quick Quote BHP - Free Report) and Impala Platinum Holdings Limited ( IMPUY Quick Quote IMPUY - Free Report) . All of these stocks currently sport a Zacks Rank of 1. Fortescue has a projected earnings growth rate of 75.5% for the current fiscal year. The company’s shares have soared 134% in the past year. BHP has an expected earnings growth rate of 59.5% for the current fiscal year. The company’s shares have gained around 28% over the past year. Impala has an estimated earnings growth rate of a whopping 189.4% for the current fiscal year. The stock has appreciated 51.3% in a year’s time. Zacks Top 10 Stocks for 2021
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