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Domtar Provides Sneak Peek into First-Quarter 2016 Results

Domtar Corporation UFS, a leading fiber-based technology company, recently provided an update on its first quarter 2016 financial performance. The company expects sales to be approximately $1,287 million and operating profit to be in the range of $16–$19 million. The company also expects adjusted EBITDA to be between $128 million and $131 million.

Operating profit in the first quarter 2016 includes impairment of property, plant and equipment of $21 million, closure and restructuring costs worth $2 million and depreciation and amortization worth $89 million.

In the prior guidance, the company had taken into account a negative impact of approximately $23 million related to the fluff pulp conversion outage at its Ashdown mill. It expected new customer wins to generate revenue growth at the Personal Care segment while costs of raw materials were expected to increase marginally.

Keeping its prior guidance in mind, Domtar extensively planned maintenance outages across its mill network in the first quarter. The company faced a couple of problems related to the shutdown of its mills due to which it had to incur higher planned maintenance and related costs.

The detailed earnings scenario will be unveiled on April 28, when Domtar is scheduled to release first-quarter 2016 results before the opening bell.

Domtar is currently seeking growth through profitable investment opportunities with a commitment to promote a pollution-free environment and sustainable practices. In the to-be-reported quarter, the company was focused on streamlining its cost structure, improving revenue quality and maintaining a healthy cash flow with a disciplined approach to cash utilization.

However, the pulp and paper industry is highly cyclical. Fluctuations in the prices and demand for the company’s pulp and paper products could result in lower sales volumes and smaller profit margins in comparison to the prior-year quarter.

Domtar carries a Zacks Rank #3 (Hold). Some better ranked stocks worth a glance include, Acacia Research Corporation ACTG, Fibria Celulose S.A. FBR and Stora Enso Oyj SEOAY, all three sport a Zacks Rank #1 (Strong Buy).

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ACACIA RESEARCH (ACTG): Free Stock Analysis Report
DOMTAR CORP (UFS): Free Stock Analysis Report
FIBRIA CELULOSE (FBR): Free Stock Analysis Report
STORA ENSO -ADR (SEOAY): Free Stock Analysis Report
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