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Domtar (UFS) to Optimize Operations, Restructure Portfolio

SLB NP UFS SPPJY

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Domtar Corporation (UFS - Free Report) , a leading paper and paper products manufacturer, recently announced plans to optimize its operations related to fluff pulp production at its Plymouth mill in North Carolina. The strategic move is aimed to strengthen its position in the global fluff pulp market by devising some ways to improve its profitability.

The restructuring process includes the permanent closure of the small pulp dryer facility and phasing out of the related assets. Simultaneously, Domtar intends to reduce the excess workforce by about 100 positions to right-size the employee count for optimum utilization of resources. The company has set an annualized production target of approximately 380,000 metric tons of fluff pulp for the Plymouth mill, including the manufacture of Lighthouse Fluff – the benchmark grade for high-quality fluff pulp. Domtar expects the entire restructuring process to be completed by mid-2017.

Manufacturing operations of fluff pulp is included in the Pulp and Paper segment of Domtar, which generates the lion's share of the corporate revenues producing over four million metric tons of softwood, fluff and hardwood pulp at its mills. Fluff pulp is bleached softwood cellulose fiber and is primarily used across the globe for absorbent applications in baby diapers, feminine hygiene and adult incontinence products.

During second-quarter 2016, Domtar acquired the assets of Butterfly Health Inc. for an undisclosed amount. The strategic acquisition expanded the Personal Care segment of Domtar with complementary products. The transaction is further expected to augment Domtar’s global footprint in healthcare markets, particularly in Europe.

At the same time, Domtar continues to streamline its network to build a more cost-competent distribution channel. Schlumberger Limited (SLB - Free Report) , a leading supplier of technology to the oil and gas industry with a healthy long-term earnings growth expectation of 9.3%, had invested in Domtar's CelluForce joint venture. The investment is aimed to explore the use of NanoCrystalline Cellulose to enhance the productivity of drilling operations in the industry. The joint venture is likely to reduce the input cost in the oil & gas industry, which is plagued by the slump in prices, and boost Domtar’s bottom line.

Domtar currently sports a Zacks Rank #1 (Strong Buy). A couple of other favorably ranked stocks in the industry include Neenah Paper, Inc. (NP - Free Report) and Sappi Limited (SPPJY - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Neenah Paper has a long-term earnings growth expectation of 10%. In addition, the stock has a solid earnings history, beating earnings estimates in each of the trailing four quarters.

With long-term earnings growth expectations of 16.6%, Sappi Limited is another star performer in the paper and related products industry.

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