Domtar Corporation (NYSE:UFS) Q2 2019 Earnings Conference Call - Final Transcript

Sep 01, 2019 • 10:00 am ET


Domtar Corporation (NYSE:UFS) Q2 2019 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen. Welcome to the Domtar's Second Quarter 2019 Earnings Conference Call with Financial Analysts. [Operator Instructions] As a reminder, this call is being recorded. Today is Thursday, August 1st, 2019. I would now like to turn the meeting over to Mr. Nicholas Estrela. Please go ahead.

Nicholas Estrela

Thank you. Good morning and welcome to our second quarter 2019 earnings call. Our speakers today will be John Williams, President and Chief Executive Officer and Daniel Buron, Senior Vice President and Chief Financial Officer. They will we supported by Michael Garcia from our Pulp and Paper division; and Michael Fagan from the Personal Care division. John and Daniel will begin with prepared remarks after which they will take questions.

During the call, references will be made to supporting slides and you can find this presentation in the Investor's section of the website. As a reminder, all statements made during the call that are not based on historical facts are forward-looking statements subject to a number of risks and uncertainties, many of which are outside our control. I invite you to review Domtar's filings to the Securities Commissions for a listing of those.

Finally, certain non-US GAAP financial measures will we presented and discussed and you can find a reconciliation to the closest GAAP measures in the appendix of this morning's release as well as on our website.

So with that, I will turn it over to John.

John Williams

Thank you, Nick and good morning everyone. This morning, we reported EBITDA before items of $133 million. Our results in the paper business fell short of our expectations. This was reflected in lower volumes and the market-related downtime we took in our system. We do believe the current softness in the uncoated freesheet market is short term in nature and driven mainly by a buildup of inventory in the supply chain, ahead of announced capacity closures and also imports.

Looking past quarter two, we expect channel inventory to adjust over the next few months, and we anticipate our shipments to pick up as the year progresses. Despite significant market-related downtime, our paper machines ran well with record productivity at some of our facilities. We also make progress with announced price increases across several uncoated freesheet grades. In Pulp, the current cycle in global markets led to downward price adjustments in most regions.

Quarter two was also our peak outage quarter this year. In total, we took maintenance downtime at 8 of our 13 mills, with maintenance spending $44 million higher versus the first quarter, which was in line with our plan. Although maintenance costs were in line with our guidance, the elevated level of outages led to the usual productivity impact. In Personal Care, we had a good performance considering the lower production volumes related to the permanent closure of the Waco, Texas facility in May. This was partially offset by favorable input costs and margin improvement initiatives coming in as planned.

On a consolidated basis, we generated a $119 million of operating