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Domtar (UFS) Q1 Earnings Miss, Sales Beat Estimates, Shares Down

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Domtar Corporation’s (UFS - Free Report) shares have lost 0.6% since the company reported first-quarter 2021 results which came in lower than expected due to challenges related to the COVID-19 pandemic and severe winter weather. Its adjusted earnings of 9 cents per share in the quarter missed the Zacks Consensus Estimate of 51 cents. The company had reported adjusted loss per share of 27 cents in the prior-year quarter.

Including one-time items, Domtar posted a loss per share of 54 cents in the first quarter as against the earnings per share of 9 cents recorded in the prior-year quarter.

Consolidated sales declined 8.4% year over year to $944 million. The top-line figure, however, beat the Zacks Consensus Estimate of $930 million.

Operational Highlight

Consolidated adjusted operating income came in at $19 million during the March-end quarter as against the year-ago quarter’s operating loss of $1 million.

Domtar Corporation Price, Consensus and EPS Surprise

Domtar Corporation Price, Consensus and EPS Surprise

Domtar Corporation price-consensus-eps-surprise-chart | Domtar Corporation Quote

Segmental Performance

Quarterly revenues of the Pulp and Paper segment came in at $944 million, down 8.4% year on year. Adjusted operating income for the segment was $28 million in the first quarter, up from the year-earlier reported figure of $4 million.

Balance Sheet & Cash Flow

The company had cash and cash equivalents of $671 million at the end of first-quarter 2021, up from the $309 million witnessed at end of 2020. Net debt-to-total capitalization ratio was 6% as of Mar 31, 2021, down from 26% as of Dec 31, 2020.

Domtar generated $33 million of cash from operating activities during first-quarter 2021 compared with the $88 million reported in the year-earlier quarter.

Outlook

The company expects paper demand to remain uncertain in the ongoing year on concerns over the pandemic. However, Domtar believes this demand will rebound through the current year as people return to schools and offices. The pulp market is likely to gradually improve on steady demand growth and supply constraint. Domtar’s recently-announced price-rise actions in the pulp and paper segment will benefit the company. However, seasonally higher maintenance outage costs in the pulp and paper business might unfavorably impact the second-quarter performance.

On Mar 1, the company completed the sale of its Personal Care division to American Industrial Partners. The divesture aligns with Domtar’s primary focus on building an industry-leading Paper, Pulp and Packaging business. This move will also aid the company to strengthen its financial position, boost liquidity and share repurchases.

Price Performance

The stock has gained 36.4%, in the past three months, compared with the industry’s growth 19.7%.


 

Zacks Rank & Other Key Picks

Domtar currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other top-ranked stocks in the basic materials space include ArcelorMittal (MT - Free Report) , Celanese Corp. (CE - Free Report) and Dow Inc. (DOW - Free Report) .  All of these stocks flaunt a Zacks Rank #1 currently. .

ArcelorMittal has a projected earnings growth rate of 984.7% for the current fiscal year. The company’s shares have soared nearly 179% in the past year.

Celanese has an expected earnings growth rate of 68.3% for the current fiscal year. The company’s shares have rallied around 90% over the past year.

Dow has a projected earnings growth rate of 261.6% for the current fiscal year. The company’s shares have gained roughly 75% in a year’s time.2

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Domtar Corporation (UFS) - free report >>