Our preliminary Q2 2019 financial report is here. Highlights from this Domtar financial report include:
- Second-quarter 2019 net earnings of $0.28 per share
- Paper prices $22 per ton higher quarter over quarter
- 73,000 tons of market-related downtime in Paper
In its Q2 2019 financial report, Domtar reported net earnings of $18 million ($0.28 per share) for the second quarter of 2019 compared to net earnings of $80 million ($1.27 per share) for the first quarter of 2019 and net earnings of $43 million ($0.68 per share) for the second quarter of 2018. Sales for the second quarter of 2019 were $1.3 billion.
“Our results in the Paper business fell short of our expectations. This was primarily due to higher imports and customer destocking following a buildup of inventory ahead of the announced industry capacity closures, leading to lower volume and market-related downtime in our system. In Pulp, the current cycle in global markets led to downward price adjustments in most regions,” said John D. Williams, president and chief executive officer. “The second quarter was also our peak outage quarter this year, with planned maintenance spending $44 million higher versus the first quarter. The elevated level of outages impacted fixed-cost absorption and productivity in Pulp and Paper.”
Mr. Williams added, “In Personal Care, we had a good performance with favorable raw material costs, and margin improvement initiatives coming in as planned. Our results were negatively impacted by the permanent closure of the Waco, Texas, facility, resulting in lower overall production volumes and unfavorable absorption of fixed costs, but we do expect the full benefits of the closure to flow through in the second half of the year.”
Operating income was $34 million in the second quarter of 2019 compared to operating income of $115 million in the first quarter of 2019. Depreciation and amortization totaled $74 million in the second quarter of 2019.
Operating income was $57 million in the second quarter of 2019 compared to an operating income of $129 million in the first quarter of 2019.
The decrease in operating income in the second quarter of 2019 was the result of higher maintenance costs, unfavorable productivity, higher fixed and other costs, lower volume in paper and higher raw material and freight costs. These factors were partially offset by lower selling, general and administrative expenses.
When compared to the first quarter of 2019, manufactured paper shipments were down 7 percent and pulp shipments increased 6 percent. The shipment-to-production ratio for paper was 98 percent in the second quarter of 2019, compared to 97 percent in the first quarter of 2019. Paper inventories increased by 15,000 tons, and pulp inventories decreased by 2,000 metric tons when compared to the first quarter of 2019.
For the remainder of the year, we expect our paper volumes to improve and trend in line with the market while our paper prices should remain relatively stable. We will continue to balance our production to our customer demand in our Paper business. We anticipate some volatility in softwood and fluff pulp markets but should recover cyclically and seasonally in the second half. Personal Care is expected to benefit from our margin improvement plan and increased sales driven by a stronger order book. We expect moderate inflation in our costs for the second half of the year.