Domtar Corporation reports preliminary fourth quarter and fiscal year 2008 financial results



    
    TICKER SYMBOL
    UFS (NYSE, TSX)

    Profitability affected by impairment charges and costs related to lack-
    of-order downtime and machine slowdowns

    - Fourth quarter net loss of $1.31 per diluted share, loss before
      items(1) of $0.04 per diluted share
    - Lack-of-order downtime and machine slowdowns totaling 197 thousand
      short tons of papers and 100 thousand metric tonnes of pulp
    - Synergy program successfully completed
    

    MONTREAL, Feb. 5 /CNW Telbec/ - Domtar Corporation (NYSE/TSX: UFS) today
reported a net loss of $676 million ($1.31 per diluted share) for the fourth
quarter of 2008 compared to net earnings of $43 million ($0.08 per diluted
share) for the third quarter of 2008 and a net loss of $26 million ($0.05 per
diluted share) for the fourth quarter of 2007. Excluding items(1) listed
below, the Company lost $20 million ($0.04 per diluted share(1)) for the
fourth quarter of 2008 compared to earnings of $51 million ($0.10 per diluted
share(1)) for the third quarter of 2008 and earnings of $29 million ($0.06 per
diluted share(1)) for the fourth quarter of 2007. Sales for the fourth quarter
of 2008 amounted to $1.5 billion.

    
    Fourth quarter 2008:
    --------------------

    - Charge of $387 million ($270 million after tax) related to the
      impairment and write-down of property, plant and equipment and
      intangible assets;
    - Charge of $321 million ($321 million after tax) related to the
      impairment of goodwill;
    - Charge of $52 million related to a valuation allowance on Canadian
      deferred income tax assets;
    - Closure and restructuring costs of $28 million ($18 million after tax);
    - Gain on debt repurchase of $12 million ($8 million after tax); and
    - Costs of $5 million ($3 million after tax) related to synergies and
      integration.

    Third quarter 2008:
    -------------------

    - Costs of $10 million ($6 million after tax) related to synergies and
      integration; and
    - Closure and restructuring costs of $3 million ($2 million after tax).

    Fourth quarter 2007:
    --------------------

    - Charge of $96 million ($66 million after tax) related to the impairment
      of goodwill and property, plant and equipment;
    - Gains of $51 million ($35 million after tax) for lawsuit and insurance
      claim settlements;
    - Expenses of $25 million ($17 million after tax) related to the debt
      restructuring;
    - Costs of $21 million ($14 million after tax) related to synergies,
      integration and optimization;
    - Gain of $11 million related to a change in statutory income tax rates;
    - Closure and restructuring costs of $7 million ($5 million after tax);
      and
    - Gains of $2 million ($1 million after tax) related to financial
      instruments.
    

    "Balancing our production to customer demand through lack-of-order
downtime and machine slowdowns at various mills was very costly, yet prices
for our papers held steady in the quarter. Undoubtedly, the economic crisis is
a challenge for our business," said John D. Williams, President and Chief
Executive Officer. "Our organization must continue to execute quickly the
right sizing of the manufacturing system to extract costs and preserve
production efficiencies. Domtar's priority is cash flow generation with an
immediate focus on reducing discretionary spending, reviewing procurement
costs and pursuing the balancing of production and inventory control," added
Mr. Williams.

    FISCAL YEAR 2008 HIGHLIGHTS

    For fiscal year 2008, net loss amounted to $573 million ($1.11 per
diluted share) compared to net earnings of $70 million ($0.15 per diluted
share) for fiscal year 2007. Excluding items(1), the Company earned $88
million ($0.17 per diluted share(1)) for fiscal 2008 compared to earnings of
$131 million ($0.28 per diluted share(1)) for fiscal 2007. Domtar pursued its
synergy program in 2008 and successfully achieved its revised target of $250
million on a run-rate basis at the end of December 2008. Sales amounted to
$6.4 billion for fiscal year 2008.
    Commenting on the performance, Mr. Williams said, "The 2008 results were
negatively impacted by the weak volumes in our papers business including costs
related to lack-of-order downtime and higher costs for wood fiber, chemicals,
energy and freight. Despite the difficult operating environment, we were able
to raise our selling prices in papers and to reduce costs through the synergy
program."

    SEGMENT REVIEW

    Papers

    Operating income before items(1) was $29 million in the fourth quarter of
2008 compared to operating income before items(1) of $131 million in the third
quarter of 2008. Depreciation and amortization totaled $104 million in the
fourth quarter. When compared to the third quarter, paper shipments decreased
9% while pulp shipments increased 9%. The shipments-to-production ratio for
papers was 104% in the fourth quarter, compared to 97% in the third quarter.
Paper inventories were 32,000 tons lower at the end of December when compared
to end of September levels.
    The decrease in operating income before items(1) in the fourth quarter
was the result of lower paper shipments, costs related to lack-of-order
downtime and machine slowdowns, lower average selling prices for pulp, higher
usage for energy and higher costs for chemicals and fiber. These factors were
partially offset by lower energy prices, lower freight costs, a favorable
exchange rate net of hedging, and higher pulp shipments.

    
    (In millions of dollars)                             4Q 2008     3Q 2008
    -------------------------------------------------  ----------  ----------

    Sales                                                 $1,240      $1,364

    Operating income (loss)                                ($693)       $118

    Operating income before items(1)                         $29        $131

    Depreciation and amortization                           $104        $111

    Impairment and write-down of PP&E                       $373           -

    Impairment of goodwill                                  $321           -

    The carrying value of certain pulp, paper and converting assets has been
tested for impairment resulting in a reduction of $359 million. In addition,
some other fixed-assets have been written down for a total of $14 million.

    Paper Merchants

    Operating income was $2 million in the fourth quarter of 2008 compared to
operating income of $1 million in the third quarter of 2008. Depreciation and
amortization was $1 million in the fourth quarter. Deliveries decreased 11%
when compared to the third quarter.
    The increase in operating income in the fourth quarter was the result of
an increase in allowance for doubtful accounts recorded in the third quarter,
partially offset by lower paper deliveries.

    (In millions of dollars)                             4Q 2008     3Q 2008
    -------------------------------------------------  ----------  ----------

    Sales                                                   $228        $257

    Operating income                                          $2          $1

    Depreciation and amortization                             $1          $1


    Wood

    Operating loss before items(1) was $9 million in the fourth quarter of
2008, compared to operating loss before items(1) of $11 million in the third
quarter of 2008. Depreciation and amortization totaled $5 million in the
fourth quarter. When compared to the third quarter, lumber shipments decreased
11%.
    The decrease in operating loss before items(1) in the fourth quarter was
the result of a favorable exchange rate. This factor was partially offset by
lower average selling prices and lower shipments.

    (In millions of dollars)                             4Q 2008     3Q 2008
    -------------------------------------------------  ----------  ----------

    Sales                                                    $59         $76

    Operating loss                                          ($28)       ($11)

    Operating loss before items(1)                           ($9)       ($11)

    Depreciation and amortization                             $5          $7

    Impairment and write-down of PP&E                        $10           -

    Impairment of intangible assets                           $4           -

    The carrying value of certain fixed-assets and harvesting rights have been
written down as a result of the fourth quarter decision to rationalize
operations which resulted in reductions in property, plant and equipment and
intangible assets of $10 million and $4 million, respectively.


    LIQUIDITY AND CAPITAL

    During the fourth quarter, Domtar made early contributions to its pension
trust funds of $96 million that reduces the Company's future funding
requirements. Also, Domtar repurchased a notional amount of $60 million of the
7 7/8% Notes due 2011 for a total cash consideration of $51 million.
    Including the aforementioned early contributions to pension trust funds,
cash flow from operations amounted to 197 million dollars and free cash
flow(1) amounted to $34 million in 2008. Domtar's net debt-to-total
capitalization ratio(1) increased to 50% at year end compared to 41% as at
December 30, 2007. Long-term debt decreased by $102 million over the same
period. Amounts drawn on our revolving credit facility amounted to $60 million
at December 31, 2008 compared to $50 million at December 30, 2007.

    OUTLOOK

    In the midst of a recession, the high level of uncertainty makes it
difficult to predict sales volumes as none of our markets are showing any
signs of demand recovery as of yet. Nonetheless, prices remain stable for
Domtar's uncoated freesheet paper products. Depending on customer demand, we
expect to continue to take lack-of-order downtime and machine slowdowns in
papers and pulp in the first half of 2009 while all efforts will be made to
manage and reduce costs.

    EARNINGS CONFERENCE CALL

    The Company will hold a conference call today at 10:00 a.m. (ET) to
discuss its fourth quarter 2008 financial results. Financial analysts are
invited to participate in the call by dialing at least 10 minutes before start
time 1 (866) 321-8231 (toll free - North America) or 1 (416) 642-5213
(International), while media and other interested individuals are invited to
listen to the live webcast on the Domtar Corporation website at
www.domtar.com.

                             --------------------

    About Domtar

    Domtar Corporation (NYSE/TSX:UFS) is the largest integrated manufacturer
and marketer of uncoated freesheet paper in North America and the second
largest in the world based on production capacity, and is also a manufacturer
of papergrade, fluff and specialty pulp. The Company designs, manufactures,
markets and distributes a wide range of business, commercial printing and
publication as well as converting and specialty papers including recognized
brands such as Cougar(R), Lynx(R) Opaque, Husky(R) Offset, First Choice(R) and
Domtar EarthChoice(R) Office Paper, part of a family of environmentally and
socially responsible papers. Domtar owns and operates Domtar Distribution
Group, an extensive network of strategically located paper distribution
facilities. Domtar also produces lumber and other specialty and industrial
wood products. The Company employs nearly 11,500 people. To learn more, visit
www.domtar.com.

    Forward-Looking Statements

    All statements in this news release that are not based on historical fact
are "forward-looking statements." While management has based any
forward-looking statements contained herein on its current expectations, the
information on which such expectations were based may change. These
forward-looking statements rely on a number of assumptions concerning future
events and are subject to a number of risks, uncertainties, and other factors,
many of which are outside of our control that could cause actual results to
materially differ from such statements. Such risks, uncertainties, and other
factors include, but are not necessarily limited to, those set forth under the
captions "Forward-Looking Statements" and "Risk Factors" of the latest Form
10-K filed with the SEC as periodically updated by subsequently filed Form
10-Q's. Unless specifically required by law, we assume no obligation to update
or revise these forward-looking statements to reflect new events or
circumstances.

    --------------------
    (1) Non-GAAP financial measure. Refer to the Reconciliation of Non-GAAP
        Financial Measures in the appendix.


    Domtar Corporation
    Highlights
    (In millions of dollars, unless otherwise noted)

    -------------------------------------------------------------------------
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                                Thirteen    Thirteen   Fifty-two   Fifty-two
                                   weeks       weeks       weeks       weeks
                                   ended       ended       ended       ended
    -------------------------------------------------------------------------
                                December    December    December    December
                                 31 2008     30 2007     31 2008   30 2007(1)
                               -----(Unaudited)------  ------(Unaudited)-----

                                       $           $           $           $

    Selected Segment
     Information
    Sales
      Papers                       1,240       1,401       5,440       5,116
      Paper Merchants                228         262         990         813
      Wood                            59          79         268         304
    -------------------------------------------------------------------------
    Total for reportable
     segments                      1,527       1,742       6,698       6,233
      Intersegment sales -
       Papers                        (56)        (73)       (276)       (235)
      Intersegment sales -
       Paper Merchants                 -           -           -          (1)
      Intersegment sales -
       Wood                           (6)        (16)        (28)        (50)
    -------------------------------------------------------------------------
    Consolidated sales             1,465       1,653       6,394       5,947
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and
     amortization
      Papers                         104         124         435         444
      Paper Merchants                  1           1           3           2
      Wood                             5           8          25          25
    -------------------------------------------------------------------------
    Total for reportable
     segments                        110         133         463         471
      Impairment and write-
       down of property, plant
       and equipment                 383          92         383          92
      Impairment of goodwill
       and intangible assets         325           4         325           4
    -------------------------------------------------------------------------
    Consolidated depreciation
     and amortization                818         229       1,171         567
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating income (loss)
      Papers                        (693)         25        (369)        321
      Paper Merchants                  2           1           8          13
      Wood                           (28)        (26)        (73)        (63)
    -------------------------------------------------------------------------
    Total for reportable
     segments                       (719)          -        (434)        271
      Corporate                        -           7          (3)         (1)
    -------------------------------------------------------------------------
    Consolidated operating
     income (loss)                  (719)          7        (437)        270
    Interest expense                  22          65         133         171
    -------------------------------------------------------------------------
    Earnings (loss) before
     income taxes                   (741)        (58)       (570)         99
    Income tax expense
     (benefit)                       (65)        (32)          3          29
    -------------------------------------------------------------------------
    Net earnings (loss)             (676)        (26)       (573)         70
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per common share (in
     dollars)
    Net earnings (loss)
      Basic                        (1.31)      (0.05)      (1.11)       0.15
      Diluted                      (1.31)      (0.05)      (1.11)       0.15
    Weighted average number
     of common and
     exchangeable shares
     outstanding (millions)
      Basic                        515.5       515.4       515.5       474.1
      Diluted                      515.5       515.4       515.5       475.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows provided from
     (used for) operating
     activities                      (74)        182         197         606
    Additions to property,
     plant and equipment              49          51         163         116
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The results for 2007 included the results of Domtar Inc., following
        the acquisition, starting on March 7, 2007. (See Note 1 in the 2007
        Annual Report on Form 10-K filed with the SEC.)


    Domtar Corporation
    Consolidated Statements of Earnings
    (In millions of dollars, unless otherwise noted)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                Thirteen    Thirteen   Fifty-two   Fifty-two
                                   weeks       weeks       weeks       weeks
                                   ended       ended       ended       ended
    -------------------------------------------------------------------------
                                December    December    December    December
                                 31 2008     30 2007     31 2008   30 2007(1)
    -------------------------------------------------------------------------
                               -----(Unaudited)------  -----(Unaudited)------

                                       $           $           $           $

    Sales                          1,465       1,653       6,394       5,947
    Operating expenses
        Cost of sales,
         excluding
         depreciation and
         amortization              1,254       1,319       5,225       4,757
        Depreciation and
         amortization                110         133         463         471
        Selling, general and
         administrative               92         136         407         408
        Impairment and write-
         down of property,
         plant and equipment         383          92         383          92
        Impairment of goodwill
         and intangible assets       325           4         325           4
        Closure and
         restructuring costs          28           7          43          14
        Other operating income        (8)        (45)        (15)        (69)
    -------------------------------------------------------------------------
                                   2,184       1,646       6,831       5,677
    -------------------------------------------------------------------------
    Operating income (loss)         (719)          7        (437)        270
    Interest expense                  22          65         133         171
    -------------------------------------------------------------------------
    Earnings (loss) before
     income taxes                   (741)        (58)       (570)         99
    Income tax expense
     (benefit)                       (65)        (32)          3          29
    -------------------------------------------------------------------------
    Net earnings (loss)             (676)        (26)       (573)         70
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per common share (in
     dollars)
      Net earnings (loss)
        Basic                      (1.31)      (0.05)      (1.11)       0.15
        Diluted                    (1.31)      (0.05)      (1.11)       0.15
    Weighted average number
     of common and
     exchangeable shares
     outstanding (millions)
        Basic                      515.5       515.4       515.5       474.1
        Diluted                    515.5       515.4       515.5       475.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The results for 2007 included the results of Domtar Inc., following
        the acquisition, starting on March 7, 2007. (See Note 1 in the 2007
        Annual Report on Form 10-K filed with the SEC.)


    Domtar Corporation
    Consolidated Balance Sheets at
    (In millions of dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                        December    December
                                                              31          30
    -------------------------------------------------------------------------
                                                            2008        2007
                                                       -----(Unaudited)------

                                                               $           $

    Assets
    Current assets
        Cash and cash equivalents                             16          71
        Receivables, less allowances of $11 and $9           477         504
        Inventories                                          963         936
        Prepaid expenses                                      27          14
        Income and other taxes receivable                     56          69
        Deferred income taxes                                116         182
    -------------------------------------------------------------------------
          Total current assets                             1,655       1,776

      Property, plant and equipment, at cost               8,963       9,685
      Accumulated depreciation                            (4,662)     (4,323)
    -------------------------------------------------------------------------
          Net property, plant and equipment                4,301       5,362
    Goodwill                                                   -         372
    Intangible assets, net of amortization                    81         111
    Other assets                                              67         105
    -------------------------------------------------------------------------
            Total assets                                   6,104       7,726
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
    Current liabilities
        Bank indebtedness                                     43          63
        Trade and other payables                             646         765
        Income and other taxes payable                        36          28
        Long-term debt due within one year                    38          17
    -------------------------------------------------------------------------
          Total current liabilities                          763         873

    Long-term debt                                         2,090       2,213
    Deferred income taxes                                    824       1,003
    Other liabilities and deferred credits                   284         440

    Shareholders' equity
        Common stock                                           5           5
        Exchangeable shares                                  138         293
        Additional paid-in capital                         2,743       2,573
        (Deficit) retained earnings                         (526)         47
        Accumulated other comprehensive income              (217)        279
    -------------------------------------------------------------------------
          Total shareholders' equity                       2,143       3,197
    -------------------------------------------------------------------------
            Total liabilities and shareholders' equity     6,104       7,726
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Domtar Corporation
    Consolidated Statements of Cash Flows
    (In millions of dollars)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                Thirteen    Thirteen   Fifty-two   Fifty-two
                                   weeks       weeks       weeks       weeks
                                   ended       ended       ended       ended
    -------------------------------------------------------------------------
                                December    December    December    December
                                 31 2008     30 2007     31 2008   30 2007(1)
    -------------------------------------------------------------------------
                               -----(Unaudited)------  -----(Unaudited)------

                                       $           $           $           $

    Operating activities
    Net earnings (loss)             (676)        (26)       (573)         70
    Adjustments to reconcile
     net earnings (loss) to
     cash flows from operating
     activities
      Depreciation and
       amortization                  110         133         463         471
      Deferred income taxes          (88)        (48)        (42)        (73)
      Impairment and write-
       down of property, plant
       and equipment                 383          92         383          92
      Impairment of goodwill
       and intangible assets         325           4         325           4
      Gain on repurchase of
       long-term debt and debt
       restructuring costs           (12)         25         (12)         25
      Net gains on disposals
       of property, plant and
       equipment and sale of
       trademarks                      -           -          (9)          -
      Stock-based compensation
       expense                         3           8          16          12
      Other                            5          (4)         13          (2)
    Changes in assets and
     liabilities, net of
     effects of acquisitions
      Receivables                     91          40           7         (39)
      Inventories                    (17)          7         (85)         38
      Prepaid expenses                29          10           3           6
      Trade and other payables      (143)          2        (139)         68
      Income and other taxes          14         (30)         13          13
      Difference between
       employer pension and
       other post-retirement
       contributions and
       pension and other post-
       retirement expense            (89)        (27)       (141)        (69)
      Other assets and other
       liabilities                    (9)         (4)        (25)        (10)
    -------------------------------------------------------------------------
      Cash flows provided from
       (used for) operating
       activities                    (74)        182         197         606
    -------------------------------------------------------------------------

    Investing activities
    Additions to property,
     plant and equipment             (49)        (51)       (163)       (116)
    Proceeds from disposals
     of property, plant and
     equipment and sale of
     trademarks                        5           6          35          29
    Business acquisition -
     cash acquired                     -           -           -         573
    Business acquisition               -           -         (12)          -
    Other                              -           -           -          (1)
    -------------------------------------------------------------------------
      Cash flows provided from
       (used for) investing
       activities                    (44)        (45)       (140)        485
    -------------------------------------------------------------------------

    Financing activities
    Net change in bank
     indebtedness                      3         (12)        (24)        (21)
    Change of revolving bank
     credit facility                  60          50          10          50
    Issuance of short-term
     debt                              -           -           -       1,350
    Issuance of long-term debt         -           -           -         800
    Repayment of short-term
     debt                              -           -           -      (1,350)
    Repayment of long-term
     debt                            (54)       (155)        (95)       (311)
    Debt issue costs                   -         (15)          -         (39)
    Premium on redemption of
     long-term debt                    -         (40)          -         (40)
    Repurchase of minority
     interest                          -         (28)          -         (28)
    Distribution to
     Weyerhaeuser prior to
     March 7, 2007                     -           -           -      (1,431)
    Other                              -           -           -          (5)
    -------------------------------------------------------------------------
      Cash flows provided from
       (used for) financing
       activities                      9        (200)       (109)     (1,025)
    -------------------------------------------------------------------------

    Net (decrease) increase in
     cash and cash equivalents      (109)        (63)        (52)         66
    Translation adjustments
     related to cash and cash
     equivalents                      (2)         (2)         (3)          4
    Cash and cash equivalents
     at beginning of period          127         136          71           1
    -------------------------------------------------------------------------
    Cash and cash equivalents
     at end of period                 16          71          16          71
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     information
      Net cash payments for:
        Interest                      39          67         120         155
        Income taxes                   3          74          49         112
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) The cash flows for 2007, included the cash flows of Domtar Inc.,
        following the acquisition, starting on March 7, 2007. (See Note 1 in
        the 2007 Annual Report on Form 10-K filed with the SEC.)


    Domtar Corporation
    Reconciliation of Non-GAAP Financial Measures
    (In millions of dollars, unless otherwise noted)

    The following table sets forth certain non-U.S. generally accepted
accounting principles ("GAAP") financial metrics identified in bold as
"Earnings (Loss) Before Items," "EBITDA," "EBITDA Before Items," "Free Cash
Flow," "Net Debt" and "Net Debt-to-Total Capitalization." Management believes
that the financial metrics presented are frequently used by investors and are
useful to evaluate our ability to service debt and the overall credit profile.
Management believes these metrics are also useful to measure the operating
performance and benchmark with peers within the industry. These metrics are
presented as a complement to enhance the understanding of operating results
but not in substitution for GAAP results.
    The Company calculates "Earnings (Loss) Before Items" and "EBITDA Before
Items" by excluding the after-tax (pre-tax) effect of items considered by
management as not typifying the Net earnings (loss) reported under U.S. GAAP.
Management uses these measures, as well as EBITDA and Free Cash Flow, to focus
on ongoing operations and believes that it is useful to investors because it
enables them to perform meaningful comparisons between periods. Domtar
believes that using this information along with Net earnings (loss) provides
for a more complete analysis of the results of operations. Net earnings (loss)
is the most directly comparable GAAP measure.

                                      ---------------------------------------
                                                         2008
                                                                      -------
                                      ---------------------------------------
                                          Q1      Q2      Q3      Q4     YTD
                                      ---------------------------------------
    Reconciliation of
     "Earnings (Loss)
     Before Items" to Net
     Earnings (Loss)
          Net earnings (loss)     ($)     36      24      43    (676)   (573)
      (+) Impairment of
           goodwill               ($)                            321     321
      (+) Impairment of
           property, plant
           and equipment
           and intangible
           assets                 ($)                            270     270
      (+) Valuation allowance
           on Canadian
           deferred income
           tax assets             ($)                             52      52
      (+) Closure and
           restructuring
           costs                  ($)      1       7       2      18      28
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)      5       5       6       3      19
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)    (17)                            (17)
      (-) Gain on debt
           repurchase             ($)                             (8)     (8)
      (-) Gain related to
           the sale of
           trademarks             ($)             (4)                     (4)
      (-) Gains for lawsuit
           and insurance
           claim settlements      ($)
      (+) Expenses related
           to the debt
           restructuring          ($)
      (-) Gain related to
           change in
           statutory income
           tax rate               ($)
      (-) Gains related to
           financial
           instruments            ($)
      (=) Earnings (Loss)
           Before Items           ($)     25      32      51     (20)     88
      (/) Weighted avg.
           number of
           common shares
           outstanding
           (diluted)       (millions)  515.9   515.8   515.7   515.5   515.5
      (=) Earnings (Loss)
           Before Items per
           diluted share          ($)   0.05    0.06    0.10   (0.04)   0.17

    Reconciliation of
     "EBITDA" and "EBITDA
     Before Items" to Net
     Earnings (Loss)
          Net earnings (loss)     ($)     36      24      43    (676)   (573)
      (+) Income tax expense
           (benefit)              ($)     19      19      30     (65)      3
      (+) Interest expense        ($)     39      37      35      22     133
      (=) Operating income
           (loss)                 ($)     94      80     108    (719)   (437)
      (+) Depreciation and
           amortization           ($)    116     118     119     110     463
      (+) Impairment of
           goodwill, PP&E
           and intangible
           assets                 ($)                            708     708
      (equal) EBITDA              ($)    210     198     227      99     734

      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)    (23)                            (23)
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)      8       9      10       5      32
      (+) Closure and
           restructuring
           costs                  ($)      1      11       3      28      43
      (-) Gain related to
           the sale of
           trademarks             ($)             (6)                     (6)
      (-) Gains for lawsuit
           and insurance
           claim settlements      ($)
      (-) Gains related to
           financial
           instruments            ($)
      (=) EBITDA Before
           Items                  ($)    196     212     240     132     780

    Reconciliation of "Free
     Cash Flow" to Cash
     Flow from Operating
     Activities
          Cash flow
           provided from
           operating
           activities             ($)     27     113     131     (74)    197
      (-) Additions to
           property, plant
           and equipment          ($)    (29)    (36)    (49)    (49)   (163)
      (equal) Free Cash Flow      ($)     (2)     77      82    (123)     34

    "Net Debt-to-Total
     Capitalization"
     Computation
          Bank indebtedness       ($)     86      38      36      43
      (+) Current portion of
           long-term debt         ($)     17      19      19      38
      (+) Long-term debt          ($)  2,155   2,122   2,118   2,090
      (-) Cash and cash
           equivalents            ($)    (57)    (61)   (127)    (16)
      (equal) Net Debt            ($)  2,201   2,118   2,046   2,155
      (+) Shareholders'
           equity                 ($)  3,172   3,217   3,194   2,143
      (=) Total
           capitalization         ($)  5,373   5,335   5,240   4,298
          Net debt                ($)  2,201   2,118   2,046   2,155
      (/) Total
           capitalization         ($)  5,373   5,335   5,240   4,298
      (=) Net Debt-to-Total
           Capitalization         (%)     41%     40%     39%     50%
                                      ---------------------------------------
                                                                      -------

                                      ---------------------------------------
                                                         2007
                                                                      -------
                                      ---------------------------------------
                                          Q1      Q2      Q3      Q4     YTD
                                      ---------------------------------------
    Reconciliation of
     "Earnings (Loss)
     Before Items" to Net
     Earnings (Loss)
          Net earnings (loss)     ($)     49      11      36     (26)     70
      (+) Impairment of
           goodwill               ($)                              4       4
      (+) Impairment of
           property, plant
           and equipment
           and intangible
           assets                 ($)                             62      62
      (+) Valuation allowance
           on Canadian
           deferred income
           tax assets             ($)
      (+) Closure and
           restructuring
           costs                  ($)      2       1       1       5       9
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)      4       4       8      14      30
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)
      (-) Gain on debt
           repurchase             ($)
      (-) Gain related to
           the sale of
           trademarks             ($)
      (-) Gains for lawsuit
           and insurance
           claim settlements      ($)                            (35)    (35)
      (+) Expenses related
           to the debt
           restructuring          ($)                             17      17
      (-) Gain related to
           change in
           statutory income
           tax rate               ($)     (6)     (1)      3     (11)    (15)
      (-) Gains related to
           financial
           instruments            ($)             (6)     (4)     (1)    (11)
      (=) Earnings (Loss)
           Before Items           ($)     49       9      44      29     131
      (/) Weighted avg.
           number of
           common shares
           outstanding
           (diluted)       (millions)  348.4   516.3   517.8   515.4   475.9
      (=) Earnings (Loss)
           Before Items per
           diluted share          ($)   0.14    0.02    0.09    0.06    0.28

    Reconciliation of
     "EBITDA" and "EBITDA
     Before Items" to Net
     Earnings (Loss)
          Net earnings (loss)     ($)     49      11      36     (26)     70
      (+) Income tax expense
           (benefit)              ($)     11      11      39     (32)     29
      (+) Interest expense        ($)     11      47      48      65     171
      (=) Operating income
           (loss)                 ($)     71      69     123       7     270
      (+) Depreciation and
           amortization           ($)     78     132     128     133     471
      (+) Impairment of
           goodwill, PP&E
           and intangible
           assets                 ($)                             96      96
      (equal) EBITDA              ($)    149     201     251     236     837

      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)      7       6      14      21      48
      (+) Closure and
           restructuring
           costs                  ($)      3       2       2       7      14
      (-) Gain related to
           the sale of
           trademarks             ($)
      (-) Gains for lawsuit
           and insurance
           claim settlements      ($)                            (51)    (51)
      (-) Gains related to
           financial
           instruments            ($)            (10)     (6)     (2)    (18)
      (=) EBITDA Before
           Items                  ($)    159     199     261     211     830

    Reconciliation of "Free
     Cash Flow" to Cash
     Flow from Operating
     Activities
          Cash flow
           provided from
           operating
           activities             ($)     91     189     144     182     606
      (-) Additions to
           property, plant
           and equipment          ($)    (14)    (32)    (19)    (51)   (116)
      (equal) Free Cash Flow      ($)     77     157     125     131     490

    "Net Debt-to-Total
     Capitalization"
     Computation
          Bank indebtedness       ($)     89      74      75      63
      (+) Current portion of
           long-term debt         ($)     21      19      19      17
      (+) Long-term debt          ($)  2,577   2,425   2,356   2,213
      (-) Cash and cash
           equivalents            ($)   (110)    (80)   (136)    (71)
      (equal) Net Debt            ($)  2,577   2,438   2,314   2,222
      (+) Shareholders'
           equity                 ($)  2,941   3,094   3,212   3,197
      (=) Total
           capitalization         ($)  5,518   5,532   5,526   5,419
          Net debt                ($)  2,577   2,438   2,314   2,222
      (/) Total
           capitalization         ($)  5,518   5,532   5,526   5,419
      (=) Net Debt-to-Total
           Capitalization         (%)     47%     44%     42%     41%
                                      ---------------------------------------
                                                                      -------

    "Earnings (Loss) Before Items," "EBITDA," "EBITDA Before Items," "Free
Cash Flow", "Net Debt" and "Net Debt-to-Total Capitalization" have no
standardized meaning prescribed by GAAP and are not necessarily comparable to
similar measures presented by other companies and therefore should not be
considered in isolation or as a substitute for Net earnings (loss), Operating
income (loss) or any other earnings statement, cash flow statement or balance
sheet financial information prepared in accordance with GAAP. It is important
for readers to understand that certain items may be presented in different
lines by different companies on their financial statements thereby leading to
different measures for different companies.


    Domtar Corporation
    Reconciliation of Non-GAAP Financial Measures - By Segment 2008
    (In millions of dollars, unless otherwise noted)

    The following table sets forth certain non-U.S. generally accepted
accounting principles ("GAAP") financial metrics identified as "Operating
Income Before Items" and "EBITDA Before Items" by reportable segment.
Management believes that the financial metrics presented are frequently used
by investors and are useful to measure the operating performance and benchmark
with peers within the industry. These metrics are presented as a complement to
enhance the understanding of operating results but not in substitution for
GAAP results.
    The company calculates the segmented "Operating Income Before Items" by
excluding the pre-tax effect of items considered by management as not
typifying the segment Operating income (loss) reported under U.S. GAAP.
Management uses these measures to focus on ongoing operations and believes
that it is useful to investors because it enables them to perform meaningful
comparisons between periods. Domtar believes that using this information along
with Operating Income (loss) provides for a more complete analysis of the
results of operations. Operating Income (loss) by segment is the most directly
comparable GAAP measure.

                                      ---------------------------------------
                                                      Papers
                                                                      -------
                                      ---------------------------------------
                                       Q1'08   Q2'08   Q3'08   Q4'08     YTD
                                      ---------------------------------------
    Reconciliation of
     Operating Income to
     "Operating Income
     Before Items"
          Operating Income
           (loss)                 ($)    114      92     118    (693)   (369)
      (+) Impairment of
           goodwill, PP&E
           and intangible
           assets                 ($)                            694     694
      (+) Closure and
           restructuring
           costs                  ($)      1      11       3      23      38
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)      8       9      10       5      32
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)    (23)                            (23)
      (-) Gain related to
           the sale of
           trademarks             ($)             (6)                     (6)

      (=) Operating Income
           Before Items           ($)    100     106     131      29     366

    Reconciliation of
     "Operating Income
     Before Items" to
     "EBITDA Before Items"
          Operating Income
           Before Items           ($)    100     106     131      29     366
      (+) Depreciation and
           amortization           ($)    110     110     111     104     435

      (=) EBITDA Before
           Items                  ($)    210     216     242     133     801

                                      ---------------------------------------
                                                                      -------

                                      ---------------------------------------
                                                  Paper Merchants
                                                                      -------
                                      ---------------------------------------
                                       Q1'08   Q2'08   Q3'08   Q4'08     YTD
                                      ---------------------------------------
    Reconciliation of
     Operating Income to
     "Operating Income
     Before Items"
          Operating Income
           (loss)                 ($)      3       2       1       2       8
      (+) Impairment of
           goodwill, PP&E
           and intangible
           assets                 ($)
      (+) Closure and
           restructuring
           costs                  ($)
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)
      (-) Gain related to
           the sale of
           trademarks             ($)

      (=) Operating Income
           Before Items           ($)      3       2       1       2       8

    Reconciliation of
     "Operating Income
     Before Items" to
     "EBITDA Before Items"
          Operating Income
           Before Items           ($)      3       2       1       2       8
      (+) Depreciation and
           amortization           ($)              1       1       1       3

      (=) EBITDA Before
           Items                  ($)      3       3       2       3      11

                                      ---------------------------------------
                                                                      -------

                                      ---------------------------------------
                                                        Wood
                                                                      -------
                                      ---------------------------------------
                                       Q1'08   Q2'08   Q3'08   Q4'08     YTD
                                      ---------------------------------------
    Reconciliation of
     Operating Income to
     "Operating Income
     Before Items"
          Operating Income
           (loss)                 ($)    (22)    (12)    (11)    (28)    (73)
      (+) Impairment of
           goodwill, PP&E
           and intangible
           assets                 ($)                             14      14
      (+) Closure and
           restructuring
           costs                  ($)                              5       5
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)
      (-) Gain related to
           the sale of
           trademarks             ($)

      (=) Operating Income
           Before Items           ($)    (22)    (12)    (11)     (9)    (54)

    Reconciliation of
     "Operating Income
     Before Items" to
     "EBITDA Before Items"
          Operating Income
           Before Items           ($)    (22)    (12)    (11)     (9)    (54)
      (+) Depreciation and
           amortization           ($)      6       7       7       5      25

      (=) EBITDA Before
           Items                  ($)    (16)     (5)     (4)     (4)    (29)

                                      ---------------------------------------
                                                                      -------

                                      ---------------------------------------
                                                     Corporate
                                                                      -------
                                      ---------------------------------------
                                       Q1'08   Q2'08   Q3'08   Q4'08     YTD
                                      ---------------------------------------
    Reconciliation of
     Operating Income to
     "Operating Income
     Before Items"
          Operating Income
           (loss)                 ($)     (1)     (2)                     (3)
      (+) Impairment of
           goodwill, PP&E
           and intangible
           assets                 ($)
      (+) Closure and
           restructuring
           costs                  ($)
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)
      (-) Gain related to
           the sale of
           trademarks             ($)

      (=) Operating Income
           Before Items           ($)     (1)     (2)                     (3)

    Reconciliation of
     "Operating Income
     Before Items" to
     "EBITDA Before Items"
          Operating Income
           Before Items           ($)     (1)     (2)                     (3)
      (+) Depreciation and
           amortization           ($)

      (=) EBITDA Before
           Items                  ($)     (1)     (2)                     (3)

                                      ---------------------------------------
                                                                      -------

    "Operating Income Before Items" and "EBITDA Before Items" have no
standardized meaning prescribed by GAAP and are not necessarily comparable to
similar measures presented by other companies and therefore should not be
considered in isolation or as a substitute for Operating income (loss), or any
other earnings statement, cash flow statement or balance sheet financial
information prepared in accordance with GAAP. It is important for readers to
understand that certain items may be presented in different lines by different
companies on their financial statements thereby leading to different measures
for different companies.


    Domtar Corporation
    Reconciliation of Non-GAAP Financial Measures - By Segment 2007
    (In millions of dollars, unless otherwise noted)

    The following table sets forth certain non-U.S. generally accepted
accounting principles ("GAAP") financial metrics identified as "Operating
Income Before Items" and "EBITDA Before Items" by reportable segment.
Management believes that the financial metrics presented are frequently used
by investors and are useful to measure the operating performance and benchmark
with peers within the industry. These metrics are presented as a complement to
enhance the understanding of operating results but not in substitution for
GAAP results.
    The company calculates the segmented "Operating Income Before Items" by
excluding the pre-tax effect of items considered by management as not
typifying the segment Operating income (loss) reported under U.S. GAAP.
Management uses these measures to focus on ongoing operations and believes
that it is useful to investors because it enables them to perform meaningful
comparisons between periods. Domtar believes that using this information along
with Operating Income (loss) provides for a more complete analysis of the
results of operations. Operating Income (loss) by segment is the most directly
comparable GAAP measure.

                                      ---------------------------------------
                                                      Papers
                                                                      -------
                                      ---------------------------------------
                                       Q1'07   Q2'07   Q3'07   Q4'07     YTD
                                      ---------------------------------------
    Reconciliation of
     Operating Income to
     "Operating Income
     Before Items"
          Operating Income
           (loss)                 ($)     71      92     133      25     321
      (+) Impairment of
           goodwill and
           property, plant
           and equipment          ($)                             92      92
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)      7       6      14      21      48
      (-) Gains for
           lawsuit and
           insurance claim
           settlements            ($)                            (39)    (39)
      (-) Gains related to
           financial
           instruments            ($)            (10)     (6)     (2)    (18)
      (+) Closure and
           restructuring
           costs                  ($)      2       2       2       7      13

      (=) Operating Income
           Before Items           ($)     80      90     143     104     417

    Reconciliation of
     "Operating Income
     Before Items" to
     "EBITDA Before Items"
          Operating Income
           Before Items           ($)     80      90     143     104     417
      (+) Depreciation and
           amortization           ($)     72     126     122     124     444

      (=) EBITDA Before
           Items                  ($)    152     216     265     228     861

                                      ---------------------------------------
                                                                      -------

                                      ---------------------------------------
                                                  Paper Merchants
                                                                      -------
                                      ---------------------------------------
                                       Q1'07   Q2'07   Q3'07   Q4'07     YTD
                                      ---------------------------------------
    Reconciliation of
     Operating Income to
     "Operating Income
     Before Items"
          Operating Income
           (loss)                 ($)      4       2       6       1      13
      (+) Impairment of
           goodwill and
           property, plant
           and equipment          ($)
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)
      (-) Gains for
           lawsuit and
           insurance claim
           settlements            ($)
      (-) Gains related to
           financial
           instruments            ($)
      (+) Closure and
           restructuring
           costs                  ($)

      (=) Operating Income
           Before Items           ($)      4       2       6       1      13

    Reconciliation of
     "Operating Income
     Before Items" to
     "EBITDA Before Items"
          Operating Income
           Before Items           ($)      4       2       6       1      13
      (+) Depreciation and
           amortization           ($)      1                       1       2

      (=) EBITDA Before
           Items                  ($)      5       2       6       2      15

                                      ---------------------------------------
                                                                      -------

                                      ---------------------------------------
                                                        Wood
                                                                      -------
                                      ---------------------------------------
                                       Q1'07   Q2'07   Q3'07   Q4'07     YTD
                                      ---------------------------------------
    Reconciliation of
     Operating Income to
     "Operating Income
     Before Items"
          Operating Income
           (loss)                 ($)     (4)    (20)    (13)    (26)    (63)
      (+) Impairment of
           goodwill and
           property, plant
           and equipment          ($)                              4       4
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)
      (-) Gains for
           lawsuit and
           insurance claim
           settlements            ($)
      (-) Gains related to
           financial
           instruments            ($)
      (+) Closure and
           restructuring
           costs                  ($)      1                               1

      (=) Operating Income
           Before Items           ($)     (3)    (20)    (13)    (22)    (58)

    Reconciliation of
     "Operating Income
     Before Items" to
     "EBITDA Before Items"
          Operating Income
           Before Items           ($)     (3)    (20)    (13)    (22)    (58)
      (+) Depreciation and
           amortization           ($)      5       6       6       8      25

      (=) EBITDA Before
           Items                  ($)      2     (14)     (7)    (14)    (33)

                                      ---------------------------------------
                                                                      -------

                                      ---------------------------------------
                                                     Corporate
                                                                      -------
                                      ---------------------------------------
                                       Q1'07   Q2'07   Q3'07   Q4'07     YTD
                                      ---------------------------------------
    Reconciliation of
     Operating Income to
     "Operating Income
     Before Items"
          Operating Income
           (loss)                 ($)             (5)     (3)      7      (1)
      (+) Impairment of
           goodwill and
           property, plant
           and equipment          ($)
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)
      (-) Gains for
           lawsuit and
           insurance claim
           settlements            ($)                            (12)    (12)
      (-) Gains related to
           financial
           instruments            ($)
      (+) Closure and
           restructuring
           costs                  ($)

      (=) Operating Income
           Before Items           ($)             (5)     (3)     (5)    (13)

    Reconciliation of
     "Operating Income
     Before Items" to
     "EBITDA Before Items"
          Operating Income
           Before Items           ($)             (5)     (3)     (5)    (13)
      (+) Depreciation and
           amortization           ($)

      (=) EBITDA Before
           Items                  ($)             (5)     (3)     (5)    (13)

                                      ---------------------------------------
                                                                      -------

    "Operating Income Before Items" and "EBITDA Before Items" have no
standardized meaning prescribed by GAAP and are not necessarily comparable to
similar measures presented by other companies and therefore should not be
considered in isolation or as a substitute for Operating income (loss), or any
other earnings statement, cash flow statement or balance sheet financial
information prepared in accordance with GAAP. It is important for readers to
understand that certain items may be presented in different lines by different
companies on their financial statements thereby leading to different measures
for different companies.


    Domtar Corporation
    Supplemental Segmented Information
    (In millions of dollars, unless otherwise noted)

                                      ---------------------------------------
                                                         2008
                                                                      -------
                                      ---------------------------------------
                                          Q1      Q2      Q3      Q4     YTD
                                      ---------------------------------------
    Papers Segment
      Sales                       ($)  1,429   1,407   1,364   1,240   5,440
        Intersegment
         sales - Papers           ($)    (83)    (73)    (64)    (56)   (276)
      Operating income
       (loss)                     ($)    114      92     118    (693)   (369)
      Depreciation &
       amortization               ($)    110     110     111     104     435
      Impairment of
       goodwill and PP&E          ($)                            694     694

      Papers
      Papers Production     ('000 ST)  1,173   1,146   1,115     951   4,385
      Papers Shipments      ('000 ST)  1,205   1,137   1,079     985   4,406
          Uncoated
           freesheet        ('000 ST)  1,149   1,096   1,044     952   4,241
          Coated
           groundwood       ('000 ST)     56      41      35      33     165
      20-lb repro bond,
       92 bright (copy)(a)
       list price             ($/ton)  1,007   1,050   1,103   1,101   1,065
      50-lb offset,
       rolls(a) list
       price                  ($/ton)    860     907     944     945     914
      Coated publication
       No. 5, 40-lb
       offset, rolls(a)
       list price             ($/ton)    900     975   1,000     988     966

      Pulp
      Pulp Shipments(b)   ('000 ADMT)    347     347     325     353   1,372
          Hardwood
           Kraft Pulp             (%)     44%     43%     41%     37%     41%
          Softwood
           Kraft Pulp             (%)     47%     46%     47%     50%     48%
          Fluff Pulp              (%)      9%     11%     12%     13%     11%
      Pulp NBSK -
       U.S. market(a)
       list price            ($/ADMT)    880     880     882     789     858
      Pulp NBHK -
       Japan market(a)(c)
       list price            ($/ADMT)    715     755     785     673     732

    Paper Merchants
     Segment
      Sales                       ($)    262     243     257     228     990
        Intersegment
         sales - Paper
         Merchants                ($)
      Operating income            ($)      3       2       1       2       8
      Depreciation &
       amortization               ($)              1       1       1       3

    Wood Segment
      Sales                       ($)     63      70      76      59     268
        Intersegment
         sales - Wood             ($)     (6)     (8)     (8)     (6)    (28)
      Operating loss              ($)     (22)   (12)    (11)    (28)    (73)
      Depreciation &
       amortization               ($)       6      7       7       5      25
      Impairment of
       goodwill, PP&E
       and intangible
       assets                     ($)                             14      14

      Lumber
       Production      (Millions FBM)    168     155     163     181     667
      Lumber
       Shipments       (Millions FBM)    160     181     178     158     677
      Lumber G.L.
       2x4x8 studs(a)
       prices                ($/MFBM)    277     306     290     246     280
      Lumber G.L.
       2x4 R/L, no. 1 &
       no. 2(a) prices       ($/MFBM)    291     309     346     272     304

    Average Exchange
     Rates                       CAN   1.004   1.010   1.042   1.212   1.067
                                  US   0.996   0.990   0.960   0.825   0.937
                                      ---------------------------------------
                                                                      -------

                                      ---------------------------------------
                                                         2007
                                                                      -------
                                      ---------------------------------------
                                          Q1      Q2      Q3      Q4     YTD
                                      ---------------------------------------
    Papers Segment
      Sales                       ($)    955   1,349   1,411   1,401   5,116
        Intersegment
         sales - Papers           ($)    (24)    (66)    (72)    (73)   (235)
      Operating income
       (loss)                     ($)     71      92     133      25     321
      Depreciation &
       amortization               ($)     72     126     122     124     444
      Impairment of
       goodwill and PP&E          ($)                             92      92

      Papers
      Papers Production     ('000 ST)    826   1,216   1,187   1,182   4,411
      Papers Shipments      ('000 ST)    871   1,209   1,261   1,160   4,501
          Uncoated
           freesheet        ('000 ST)    814   1,163   1,194   1,104   4,275
          Coated
           groundwood       ('000 ST)     57      46      67      56     226
      20-lb repro bond,
       92 bright (copy)(a)
       list price             ($/ton)    930     963     990     990     968
      50-lb offset,
       rolls(a) list
       price                  ($/ton)    810     810     803     847     818
      Coated publication
       No. 5, 40-lb
       offset, rolls(a)
       list price             ($/ton)    778     748     782     840     787

      Pulp
      Pulp Shipments(b)   ('000 ADMT)    249     335     334     411   1,329
          Hardwood
           Kraft Pulp             (%)     21%     46%     48%     45%     42%
          Softwood
           Kraft Pulp             (%)     61%     41%     40%     46%     46%
          Fluff Pulp              (%)     18%     13%     12%      9%     12%
      Pulp NBSK -
       U.S. market(a)
       list price            ($/ADMT)    790     810     837     858     824
      Pulp NBHK -
       Japan market(a)(c)
       list price            ($/ADMT)    640     640     658     683     655

    Paper Merchants
     Segment
      Sales                       ($)     76     226     249     262     813
        Intersegment
         sales - Paper
         Merchants                ($)             (1)                     (1)
      Operating income            ($)      4       2       6       1      13
      Depreciation &
       amortization               ($)      1                       1       2

    Wood Segment
      Sales                       ($)     47      90      88      79     304
        Intersegment
         sales - Wood             ($)     (3)    (15)    (16)    (16)    (50)
      Operating loss              ($)     (4)    (20)    (13)    (26)    (63)
      Depreciation &
       amortization               ($)      5       6       6       8      25
      Impairment of
       goodwill, PP&E
       and intangible
       assets                     ($)                              4       4

      Lumber
       Production      (Millions FBM)     68     152     164     158     542
      Lumber
       Shipments       (Millions FBM)     88     227     197     172     684
      Lumber G.L.
       2x4x8 studs(a)
       prices                ($/MFBM)    317     335     336     294     321
      Lumber G.L.
       2x4 R/L, no. 1 &
       no. 2(a) prices       ($/MFBM)    332     332     343     308     329

    Average Exchange
     Rates                       CAN   1.172   1.098   1.044   0.981   1.074
                                  US   0.854   0.911   0.958   1.019   0.931
                                      ---------------------------------------
                                                                      -------

    (a) Source: Pulp & Paper Week and Random Lengths.
    (b) Figures are gross of market pulp purchased from other producers on
        the open market for some of our paper making operations. Pulp
        shipments represents the amount of pulp produced in excess of our
        internal requirement.
    (c) Based on Pulp & Paper Week's Southern Bleached Hardwood Kraft pulp
        prices for Japan, increased by an average differential of $15/ADMT
        between Northern and Southern Bleached Hardwood Kraft pulp prices.

        Note: the term "ST" refers to a short ton, the term "ADMT" refers to
              an air dry metric ton, and the term "FBM" refers to foot board
              measure.
    




For further information:

For further information: Media Relations: Michel A. Rathier, (514)
848-5103, communications@domtar.com; Investor Relations: Pascal Bossé, (514)
848-5938, ir@domtar.com

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Domtar Corporation

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