Domtar Corporation reports preliminary fourth quarter and fiscal year 2009
financial results


    
    Strong operational performance and pricing momentum drive solid results
    (All financial information is in U.S. dollars, and all earnings (loss)
    per share results are diluted, unless otherwise noted.)

    - Net earnings of $2.86 per share, earnings before items(1) of $1.39 per
      share
    - Papers segment benefits from continued strength in the pulp markets
    - Safety performance record improved by 24% in 2009 (total frequency rate
      of 1.50)

    TICKER SYMBOL
    UFS (NYSE, TSX)
    
</pre>
<p/>
<p><location>MONTREAL</location>, <chron>Feb. 4</chron> /CNW Telbec/ - Domtar Corporation (NYSE/TSX: UFS) today reported net earnings of <money>$124 million</money> (<money>$2.86</money> per share) for the fourth quarter of 2009 compared to net earnings of <money>$183 million</money> (<money>$4.24</money> per share) for the third quarter of 2009 and a net loss of <money>$676 million</money> (<money>$15.72</money> per share) for the fourth quarter of 2008. Sales for the fourth quarter of 2009 amounted to <money>$1.4 billion</money>. Excluding items listed below, the Company had earnings before items(1) of <money>$60 million</money> (<money>$1.39</money> per share) for the fourth quarter of 2009 compared to earnings before items(1) of <money>$57 million</money> (<money>$1.32</money> per share) for the third quarter of 2009 and a loss before items(1) of <money>$20 million</money> (<money>$0.46</money> per share) for the fourth quarter of 2008.</p>
<p/>
<pre>
    
    Fourth quarter 2009 items:
    --------------------------

    - Refundable excise tax credit for the production and use of alternative
      bio fuel mixtures of $162 million ($113 million after tax);
    - Closure and restructuring costs of $29 million ($24 million after tax);
    - Charge of $27 million ($22 million after tax) related to the impairment
      and write-down of property, plant and equipment; and
    - Loss on sale of property, plant and equipment of $5 million ($3 million
      after tax).

    Third quarter 2009 items:
    -------------------------

    - Refundable excise tax credit for the production and use of alternative
      bio fuel mixtures of $159 million ($116 million after tax);
    - Gains on sale of property, plant and equipment of $12 million
      ($12 million after tax); and
    - Closure and restructuring costs of $4 million ($2 million after tax).

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

    - 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.
    
</pre>
<p/>
<p>"We had improved pricing for our products in the fourth quarter when compared to the third quarter. In Papers, we recorded another solid performance despite it being a seasonally slower period, with lower volumes and higher maintenance costs. Our paper inventories were reduced for a fifth consecutive quarter contributing to cash flow," said John D. Williams, President and Chief Executive Officer. "We also moved forward with the Canadian Pulp and Paper Green Transformation Program submitting numerous projects to Natural Resources <location>Canada</location> during the quarter. We completed the environmental assessment for one project while six others are currently undergoing their assessments," added <person>Mr. Williams</person>.</p>
<p/>
<p>FISCAL YEAR 2009 HIGHLIGHTS</p>
<p/>
<p>For fiscal year 2009, net earnings amounted to <money>$310 million</money> (<money>$7.18</money> per share) compared to a net loss of <money>$573 million</money> (<money>$13.33</money> per share) for fiscal year 2008. The Company had earnings before items(1) of <money>$46 million</money> (<money>$1.06</money> per share) for fiscal 2009 compared to earnings before items(1) of <money>$88 million</money> (<money>$2.05</money> per share) for fiscal 2008. Sales amounted to <money>$5.5 billion</money> for fiscal year 2009.</p>
<p>Commenting on the 2009 performance, <person>Mr. Williams</person> said, "While we faced a high level of lack-of-order downtime and a steep decline in pulp prices in the first half of the year, we benefited from stable prices in papers and kept our inventories low. Meanwhile, our efforts to reduce working capital and lower fixed costs proved to be a catalyst for the second half of 2009. The sustained focus on customers, costs, and cash helped us deliver a stronger company to our shareholders and to start 2010 with optimism."</p>
<p/>
<p>SEGMENT REVIEW</p>
<p/>
<p>Papers</p>
<p/>
<p>Operating income before items(1) was <money>$104 million</money> in the fourth quarter of 2009 compared to operating income before items(1) of <money>$138 million</money> in the third quarter of 2009. Depreciation and amortization totaled <money>$95 million</money> in the fourth quarter of 2009. When compared to the third quarter of 2009, paper and pulp shipments decreased 3% and 13%, respectively. The shipments-to-production ratio for paper was 104% in the fourth quarter of 2009, compared to 106% in the third quarter of 2009. Paper inventories were lowered by 40,000 tons while pulp inventories increased by 39,000 metric tons at the end of December when compared to end of September levels.</p>
<p>The decrease in operating income before items(1) in the fourth quarter of 2009 was the result of higher usage and unit costs for energy and fiber, higher maintenance costs, lower paper and pulp shipments, and higher freight costs. These factors were partially offset by higher average selling prices for pulp and paper, and lower chemical costs.</p>
<p/>
<pre>
    
    (In millions of dollars)                            4Q 2009      3Q 2009
    -----------------------------------------------  -----------  -----------

    Sales                                                $1,188       $1,211

    Operating income                                       $212         $294

    Operating income before items(1)                       $104         $138

    Depreciation and amortization                           $95          $95
    
</pre>
<p/>
<p>On <chron>October 20, 2009</chron>, the Company announced that it would convert its Plymouth, North Carolina facility to 100% fluff pulp production by the fourth quarter of 2010. In connection with this announcement, the Company recognized, under impairment and write-down of property, plant and equipment, <money>$13 million</money> of accelerated depreciation in the fourth quarter of 2009 and is expected to record a further <money>$39 million</money> of accelerated depreciation over the first nine months of 2010 in relation to the assets that will cease productive use in <chron>October 2010</chron>. The assets of this facility have been tested for impairment and no additional impairment charge was required.</p>
<p/>
<p>Paper Merchants</p>
<p/>
<p>Operating income before items(1) was <money>$3 million</money> in the fourth quarter of 2009 compared to operating income before items(1) of <money>$2 million</money> in the third quarter of 2009. Depreciation and amortization was nil in the fourth quarter of 2009. Deliveries decreased 12% when compared to the third quarter of 2009. Lower deliveries were offset by higher prices.</p>
<p/>
<pre>
    
    (In millions of dollars)                            4Q 2009      3Q 2009
    -----------------------------------------------  -----------  -----------

    Sales                                                  $212         $239

    Operating income                                         $2           $2

    Operating income before items(1)                         $3           $2

    Depreciation and amortization                             -           $1
    
</pre>
<p/>
<p>Wood</p>
<p/>
<p>Operating loss before items(1) was <money>$5 million</money> in the fourth quarter of 2009, compared to operating loss before items(1) of <money>$9 million</money> in the third quarter of 2009. Depreciation and amortization totaled <money>$6 million</money> in the fourth quarter of 2009. When compared to the third quarter of 2009, lumber shipments increased 5%.</p>
<p>The decrease in operating loss before items(1) in the fourth quarter of 2009 was primarily the result of higher average selling prices.</p>
<p/>
<pre>
    
    (In millions of dollars)                            4Q 2009      3Q 2009
    -----------------------------------------------  -----------  -----------

    Sales                                                   $63          $59

    Operating loss                                         ($11)         ($1)

    Operating loss before items(1)                          ($5)         ($9)

    Depreciation and amortization                            $6           $5
    
</pre>
<p/>
<p>LIQUIDITY AND CAPITAL</p>
<p/>
<p>Cash flow provided from operating activities amounted to <money>$185 million</money> and free cash flow(1) amounted to <money>$145 million</money> in the fourth quarter of 2009. Domtar's net debt-to-total capitalization ratio(1) stood at 35% at <chron>December 31, 2009</chron> compared to 50% at <chron>December 31, 2008</chron>. Amounts drawn on the off balance sheet receivables securitization program are unchanged since <chron>September 30, 2009</chron> and stood at <money>$20 million</money> at the end of December.</p>
<p>As of <chron>December 31, 2009</chron>, we had completed sales of assets for proceeds of approximately <money>$20 million</money>. We have agreements to sell other non-core assets which we expect to generate approximately <money>$40 million</money> by mid-year. As we continue to strengthen our financial position, we will carefully consider additional non-core asset sales.</p>
<p/>
<p>OUTLOOK</p>
<p/>
<p>We expect that the increased economic activity will partially offset the secular decline in paper demand in 2010 and that pulp demand will remain strong in the short-term. We should also benefit from the recently announced price increases in the upcoming quarters. The economic recovery being slow and patchy, Domtar will continue to manage its business conservatively.</p>
<p>Due to the seasonality of the business and the impact of the price increases being implemented, we expect to make working capital investments in the first quarter of 2010.</p>
<p/>
<p>EARNINGS CONFERENCE CALL</p>
<p/>
<p>The Company will hold a conference call today at <chron>10:00 a.m. (ET</chron>) to discuss its fourth quarter 2009 financial results. Financial analysts are invited to participate in the call by dialing at least 10 minutes before start time 1 (888) 339-3507 (toll free - <location>North America</location>) or 1 (719) 325-2424 (International), while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at <a href="http://www.domtar.com">www.domtar.com</a>.</p>
<p>The Company will release its first quarter 2010 earnings on <chron>April 30, 2010</chron> before markets open, followed by a conference call at <chron>10:00 a.m. (ET</chron>) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the official earnings release date.</p>
<p/>
<p>About Domtar</p>
<p/>
<p>Domtar Corporation (NYSE/TSX:UFS) is the largest integrated manufacturer and marketer of uncoated freesheet paper in <location>North America</location> 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 publishing 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 over 10,000 people. To learn more, visit <a href="http://www.domtar.com">www.domtar.com</a>.</p>
<p/>
<p>Forward-Looking Statements</p>
<p/>
<p>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.</p>
<p/>
<pre>
    
    -----------------------
    (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)

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

                                         Three     Three    Twelve    Twelve
                                        months    months    months    months
                                         ended     ended     ended     ended
                                      December  December  December  December
                                            31        31        31        31
    -------------------------------------------------------------------------
                                          2009      2008      2009      2008
    -------------------------------------------------------------------------
                                     ----------------(Unaudited)-------------

                                             $         $         $         $

    Selected Segment Information

    Sales
        Papers                           1,188     1,240     4,632     5,440
        Paper Merchants                    212       228       873       990
        Wood                                63        59       211       268
    -------------------------------------------------------------------------
    Total for reportable segments        1,463     1,527     5,716     6,698
        Intersegment sales - Papers        (53)      (56)     (231)     (276)
        Intersegment sales - Wood           (6)       (6)      (20)      (28)
    -------------------------------------------------------------------------
    Consolidated sales                   1,404     1,465     5,465     6,394
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Depreciation and amortization
        Papers                              95       104       382       435
        Paper Merchants                      -         1         3         3
        Wood                                 6         5        20        25
    -------------------------------------------------------------------------
    Total for reportable segments          101       110       405       463
        Impairment and write-down of
         property, plant and equipment      27       383        62       383
        Impairment of goodwill and
         intangible assets                   -       325         -       325
    -------------------------------------------------------------------------
    Consolidated depreciation and
     amortization and write-down and
     impairment loss                       128       818       467     1,171
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Operating income (loss)
        Papers                             212      (693)      650      (369)
        Paper Merchants                      2         2         7         8
        Wood                               (11)      (28)      (42)      (73)
    -------------------------------------------------------------------------
    Total for reportable segments          203      (719)      615      (434)
        Corporate                            -         -         -        (3)
    -------------------------------------------------------------------------
    Consolidated operating income
     (loss)                                203      (719)      615      (437)
    Interest expense                        37        22       125       133
    -------------------------------------------------------------------------
    Earnings (loss) before income
     taxes                                 166      (741)      490      (570)
    Income tax expense (benefit)            42       (65)      180         3
    -------------------------------------------------------------------------
    Net earnings (loss)                    124      (676)      310      (573)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per common share (in dollars)
      Net earnings (loss)
        Basic                             2.88    (15.72)     7.21    (13.33)
        Diluted                           2.86    (15.72)     7.18    (13.33)
    Weighted average number of common
     and exchangeable shares
     outstanding (millions)
        Basic                             43.0      43.0      43.0      43.0
        Diluted                           43.3      43.0      43.2      43.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash flows provided from (used
     for) operating activities             185       (74)      792       197
    Additions to property, plant and
     equipment                              40        49       106       163
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

                                         Three     Three    Twelve    Twelve
                                        months    months    months    months
                                         ended     ended     ended     ended
                                      December  December  December  December
                                            31        31        31        31
    -------------------------------------------------------------------------
                                          2009      2008      2009      2008
    -------------------------------------------------------------------------
                                     ----------------(Unaudited)-------------

                                             $         $         $         $

    Sales                                1,404     1,465     5,465     6,394
    Operating expenses
        Cost of sales, excluding
         depreciation and amortization   1,109     1,254     4,472     5,225
        Depreciation and amortization      101       110       405       463
        Selling, general and
         administrative                     91        90       345       400
        Impairment and write-down of
         property, plant and equipment      27       383        62       383
        Impairment of goodwill and
         intangible assets                   -       325         -       325
        Closure and restructuring
         costs                              29        28        63        43
        Other operating income            (156)       (6)     (497)       (8)
    -------------------------------------------------------------------------
                                         1,201     2,184     4,850     6,831
    -------------------------------------------------------------------------

    Operating income (loss)                203      (719)      615      (437)

    Interest expense                        37        22       125       133
    -------------------------------------------------------------------------

    Earnings (loss) before income
     taxes                                 166      (741)      490      (570)

    Income tax expense (benefit)            42       (65)      180         3
    -------------------------------------------------------------------------

    Net earnings (loss)                    124      (676)      310      (573)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Per common share (in dollars)

      Net earnings (loss)
        Basic                             2.88    (15.72)     7.21    (13.33)
        Diluted                           2.86    (15.72)     7.18    (13.33)
    Weighted average number of common
     and exchangeable shares
     outstanding (millions)
        Basic                             43.0      43.0      43.0      43.0
        Diluted                           43.3      43.0      43.2      43.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

                                                    December 31  December 31
    -------------------------------------------------------------------------
                                                           2009         2008
                                                      -------(Unaudited)-----
                                                              $            $

    Assets
    Current assets
        Cash and cash equivalents                           324           16
        Receivables, less allowances of $8 and $11          536          477
        Inventories                                         745          963
        Prepaid expenses                                     46           27
        Income and other taxes receivable                   414           56
        Deferred income taxes                               137          116
    -------------------------------------------------------------------------
          Total current assets                            2,202        1,655

      Property, plant and equipment, at cost              9,575        8,963
      Accumulated depreciation                           (5,446)      (4,662)
    -------------------------------------------------------------------------
          Net property, plant and equipment               4,129        4,301
    Intangible assets, net of amortization                   85           81
    Other assets                                            103           67
    -------------------------------------------------------------------------
            Total assets                                  6,519        6,104
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
    Current liabilities
        Bank indebtedness                                    43           43
        Trade and other payables                            686          646
        Income and other taxes payable                       31           36
        Long-term debt due within one year                   11           18
    -------------------------------------------------------------------------
          Total current liabilities                         771          743

    Long-term debt                                        1,701        2,110
    Deferred income taxes and other                       1,019          824
    Other liabilities and deferred credits                  366          284

    Shareholders' equity
        Common stock                                          -            5
        Exchangeable shares                                  78          138
        Additional paid-in capital                        2,816        2,743
        Accumulated deficit                                (216)        (526)
        Accumulated other comprehensive loss                (16)        (217)
    -------------------------------------------------------------------------
          Total shareholders' equity                      2,662        2,143
    -------------------------------------------------------------------------
             Total liabilities and shareholders'
              equity                                      6,519        6,104
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

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

                                                         Twelve       Twelve
                                                         months       months
                                                          ended        ended
                                                    December 31  December 31
    -------------------------------------------------------------------------
                                                           2009         2008
    -------------------------------------------------------------------------
                                                      -------(Unaudited)-----

                                                              $            $
    Operating activities
    Net earnings (loss)                                     310         (573)
    Adjustments to reconcile net earnings (loss) to
     cash flows from operating activities
      Depreciation and amortization                         405          463
      Deferred income taxes                                 157          (42)
      Impairment and write-down of property, plant
       and equipment                                         62          383
      Impairment of goodwill and intangible assets            -          325
      Gain on repurchase of long-term debt and debt
       restructuring costs                                  (12)         (11)

      Net gains on disposals of property, plant and
       equipment and sale of trademarks                      (5)          (9)
      Stock-based compensation expense                        8           16
      Other                                                  14           12
    Changes in assets and liabilities
      Receivables                                           (55)           7
      Inventories                                           261          (85)
      Prepaid expenses                                       (3)         (19)
      Trade and other payables                               38         (117)
      Income and other taxes                               (357)          13

      Difference between employer pension and other
       post-retirement contributions and pension
       and post-retirement expense                          (61)        (141)
      Other assets and other liabilities                     30          (25)
    -------------------------------------------------------------------------
      Cash flows provided from operating activities         792          197
    -------------------------------------------------------------------------

    Investing activities
    Additions to property, plant and equipment             (106)        (163)
    Proceeds from disposals of property, plant and
     equipment and sale of trademarks                        21           35
    Business acquisition - joint venture                      -          (12)
    -------------------------------------------------------------------------
      Cash flows used for investing activities              (85)        (140)
    -------------------------------------------------------------------------

    Financing activities
    Net change in bank indebtedness                           -          (24)
    Change of revolving bank credit facility                (60)          10
    Issuance of long-term debt                              385            -
    Repayment of long-term debt                            (725)         (95)
    Debt issue and tender offer costs                       (14)           -
    -------------------------------------------------------------------------
      Cash flows used for financing activities             (414)        (109)
    -------------------------------------------------------------------------

    Net increase (decrease) in cash and cash
     equivalents                                            293          (52)
    Translation adjustments related to cash and
     cash equivalents                                        15           (3)
    Cash and cash equivalents at beginning of
     period                                                  16           71
    -------------------------------------------------------------------------
    Cash and cash equivalents at end of period              324           16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow information
      Net cash payments for:
        Interest                                            125          120
        Income taxes paid (refund)                          (20)          49
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Domtar Corporation
    Reconciliation of Non-GAAP Financial Measures
    (In millions of dollars, unless otherwise noted)
    
</pre>
<p/>
<p>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 Margin", "EBITDA Before Items", "EBITDA Margin 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.</p>
<p>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) and Cash flow provided from (used for) operating activities are the most directly comparable GAAP measures.</p>
<p/>
<pre>
    
                                      ---------------------------------------
                                      ---------------------------------------
                                                         2009
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                          Q1      Q2      Q3      Q4     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of
     "Earnings (Loss) Before
     Items" to Net earnings
     (loss)
          Net earnings (loss)     ($)    (45)     48     183     124     310
      (-) Alternative fuel
           tax credits            ($)    (28)    (79)   (116)   (113)   (336)
      (-) (Gains) Losses on
           sale of property,
           plant and
           equipment              ($)                    (12)      3      (9)
      (+) Write-down of
           PP&E / Impairment
           of PP&E and
           intangible assets      ($)     21                      22      43
      (+) Closure and
           restructuring
           costs                  ($)     14       4       2      24      44
      (-) Gain on debt
           repurchase             ($)             (6)                     (6)
      (+) Impairment of
           goodwill               ($)
      (+) Valuation
           allowance on
           Canadian deferred
           income tax assets      ($)
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)
      (-) Gain related to
           the sale of
           trademarks             ($)
      (=) Earnings (Loss)
           Before Items           ($)    (38)    (33)     57      60      46
      (/) Weighted avg.
           number of
           common shares
           outstanding
           (diluted)       (millions)   43.0    43.0    43.2    43.3    43.2
      (=) Earnings (Loss)
           Before Items per
           diluted share          ($)  (0.88)  (0.76)   1.32    1.39    1.06

    Reconciliation of
     "EBITDA" and "EBITDA
     Before Items" to Net
     earnings (loss)
          Net earnings (loss)     ($)    (45)     48     183     124     310
      (+) Income tax expense
           (benefit)              ($)     (8)     68      78      42     180
      (+) Interest expense        ($)     31      23      34      37     125
      (=) Operating income
           (loss)                 ($)    (22)    139     295     203     615
      (+) Depreciation and
           amortization           ($)     99     104     101     101     405
      (+) Write-down of
           PP&E / Impairment
           of goodwill, PP&E
           and intangible
           assets                 ($)     35                      27      62
      (equal) EBITDA              ($)    112     243     396     331   1,082
      (/) Sales                   ($)  1,302   1,319   1,440   1,404   5,465
      (=) EBITDA
           Margin                 (%)      9%     18%     28%     24%     20%

      (-) Alternative fuel
           tax credits            ($)    (46)   (131)   (159)   (162)   (498)
      (-) (Gains) Losses on
           sale of property,
           plant and
           equipment              ($)                    (12)      5      (7)
      (+) Closure and
           restructuring
           costs                  ($)     24       6       4      29      63
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)
      (-) Gain related to
           the sale of
           trademarks             ($)
      (=) EBITDA Before
           Items                  ($)     90     118     229     203     640
      (/) Sales                   ($)  1,302   1,319   1,440   1,404   5,465
      (=) EBITDA Margin
          Before Items            (%)      7%      9%     16%     14%     12%

    Reconciliation of "Free
     Cash Flow" to Cash
     flow from operating
     activities
          Cash flow provided
           from (used for)
           operating
           activities             ($)     57     306     244     185     792
      (-) Additions to
           property, plant
           and equipment          ($)    (24)    (18)    (24)    (40)   (106)
      (=) Free Cash
           Flow                   ($)     33     288     220     145     686

          Cash received from
           alternative fuel
           tax credits            ($)            137       3             140

    "Net Debt-to-Total
     Capitalization"
     Computation
          Bank indebtedness       ($)     52      24      30      43
      (+) Current portion of
           long-term debt         ($)     18      13      13      11
      (+) Long-term debt          ($)  2,195   2,162   1,971   1,701
      (equal) Debt                ($)  2,265   2,199   2,014   1,755
      (-) Cash and cash
           equivalents            ($)   (145)   (381)   (433)   (324)
      (=) Net
           Debt                   ($)  2,120   1,818   1,581   1,431
      (+) Shareholders'
           equity                 ($)  2,073   2,264   2,580   2,662
      (=) Total
           capitalization         ($)  4,193   4,082   4,161   4,093
          Net debt                ($)  2,120   1,818   1,581   1,431
      (/) Total
           capitalization         ($)  4,193   4,082   4,161   4,093
      (=) Net
           Debt-to-Total
           Capitalization         (%)     51%     45%     38%     35%
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------


                                      ---------------------------------------
                                      ---------------------------------------
                                                         2008
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                          Q1      Q2      Q3      Q4     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of
     "Earnings (Loss) Before
     Items" to Net earnings
     (loss)
          Net earnings (loss)     ($)     36      24      43    (676)   (573)
      (-) Alternative fuel
           tax credits            ($)
      (-) (Gains) Losses on
           sale of property,
           plant and
           equipment              ($)
      (+) Write-down of
           PP&E / Impairment
           of PP&E and
           intangible assets      ($)                            270     270
      (+) Closure and
           restructuring
           costs                  ($)      1       7       2      18      28
      (-) Gain on debt
           repurchase             ($)                             (8)     (8)
      (+) Impairment of
           goodwill               ($)                            321     321
      (+) Valuation
           allowance on
           Canadian deferred
           income tax assets      ($)                             52      52
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)      5       5       6       3      19
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)    (17)                            (17)
      (-) Gain related to
           the sale of
           trademarks             ($)             (4)                     (4)
      (=) Earnings (Loss)
           Before Items           ($)     25      32      51     (20)     88
      (/) Weighted avg.
           number of
           common shares
           outstanding
           (diluted)       (millions)   43.0    43.0    43.0    43.0    43.0
      (=) Earnings (Loss)
           Before Items per
           diluted share          ($)   0.58    0.74    1.19   (0.46)   2.05

    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           ($)    116     118     119     110     463
      (+) Write-down of
           PP&E / Impairment
           of goodwill, PP&E
           and intangible
           assets                 ($)                            708     708
      (equal) EBITDA              ($)    210     198     227      99     734
      (/) Sales                   ($)  1,665   1,639   1,625   1,465   6,394
      (=) EBITDA
           Margin                 (%)     13%     12%     14%      7%     11%

      (-) Alternative fuel
           tax credits            ($)
      (-) (Gains) Losses on
           sale of property,
           plant and
           equipment              ($)
      (+) Closure and
           restructuring
           costs                  ($)      1      11       3      28      43
      (-) Reversal of a
           provision for
           unfavorable
           contract               ($)    (23)                            (23)
      (+) Costs related to
           synergies,
           integration and
           optimization           ($)      8       9      10       5      32
      (-) Gain related to
           the sale of
           trademarks             ($)             (6)                     (6)
      (=) EBITDA Before
           Items                  ($)    196     212     240     132     780
      (/) Sales                   ($)  1,665   1,639   1,625   1,465   6,394
      (=) EBITDA Margin
          Before Items            (%)     12%     13%     15%      9%     12%

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

          Cash received from
           alternative fuel
           tax credits            ($)

    "Net Debt-to-Total
     Capitalization"
     Computation
          Bank indebtedness       ($)     86      38      36      43
      (+) Current portion of
           long-term debt         ($)     17      19      19      18
      (+) Long-term debt          ($)  2,155   2,122   2,118   2,110
      (equal) Debt                ($)  2,258   2,179   2,173   2,171
      (-) Cash and cash
           equivalents            ($)    (57)    (61)   (127)    (16)
      (=) Net
           Debt                   ($)  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%
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------
    
</pre>
<p/>
<p>"Earnings (Loss) Before Items", "EBITDA", "EBITDA Margin", "EBITDA Before Items", "EBITDA Margin 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.</p>
<p/>
<p/>
<pre>
    
    Domtar Corporation
    Reconciliation of Non-GAAP Financial Measures - By Segment 2009
    (In millions of dollars, unless otherwise noted)
    
</pre>
<p/>
<p>The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP") financial metrics identified as "Operating Income (Loss) Before Items", "EBITDA Before Items" and "EBITDA Margin 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.</p>
<p>The company calculates the segmented "Operating Income (Loss) 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.</p>
<p/>
<pre>
    
                                      ---------------------------------------
                                      ---------------------------------------
                                                      Papers
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                       Q1'09   Q2'09   Q3'09   Q4'09     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of Operating
     income to "Operating Income
     Before Items"
          Operating
           income (loss)          ($)     (6)    150     294     212     650
      (-) Alternative fuel
           tax credits            ($)    (46)   (131)   (159)   (162)   (498)
      (+) Write-down of
           property, plant and
           equipment              ($)     35                      27      62
      (+) Closure and
           restructuring costs    ($)     22       4       4      22      52
      (-) (Gains) Losses on
           sale of property,
           plant and equipment    ($)                     (1)      5       4

      (=) Operating
           Income (Loss) Before
           Items                  ($)      5      23     138     104     270

    Reconciliation of "Operating
     Income Before Items" to
     "EBITDA Before Items"
          Operating
           Income (Loss) Before
           Items                  ($)      5      23     138     104     270
      (+) Depreciation and
           amortization           ($)     94      98      95      95     382

      (=) EBITDA Before
           Items                  ($)     99     121     233     199     652
      (/) Sales                   ($)  1,106   1,127   1,211   1,188   4,632
      (=) EBITDA Margin
           Before Items           (%)      9%     11%     19%     17%     14%
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------


                                      ---------------------------------------
                                      ---------------------------------------
                                                  Paper Merchants
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                       Q1'09   Q2'09   Q3'09   Q4'09     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of Operating
     income to "Operating Income
     Before Items"
          Operating
           income (loss)          ($)      2       1       2       2       7
      (-) Alternative fuel
           tax credits            ($)
      (+) Write-down of
           property, plant and
           equipment              ($)
      (+) Closure and
           restructuring costs    ($)              1               1       2
      (-) (Gains) Losses on
           sale of property,
           plant and equipment    ($)

      (=) Operating
           Income (Loss) Before
           Items                  ($)      2       2       2       3       9

    Reconciliation of "Operating
     Income Before Items" to
     "EBITDA Before Items"
          Operating
           Income (Loss) Before
           Items                  ($)      2       2       2       3       9
      (+) Depreciation and
           amortization           ($)      1       1       1               3

      (=) EBITDA Before
           Items                  ($)      3       3       3       3      12
      (/) Sales                   ($)    217     205     239     212     873
      (=) EBITDA Margin
           Before Items           (%)      1%      1%      1%      1%      1%
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------


                                      ---------------------------------------
                                      ---------------------------------------
                                                        Wood
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                       Q1'09   Q2'09   Q3'09   Q4'09     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of Operating
     income to "Operating Income
     Before Items"
          Operating
           income (loss)          ($)    (18)    (12)     (1)    (11)    (42)
      (-) Alternative fuel
           tax credits            ($)
      (+) Write-down of
           property, plant and
           equipment              ($)
      (+) Closure and
           restructuring costs    ($)      2       1               6       9
      (-) (Gains) Losses on
           sale of property,
           plant and equipment    ($)                     (8)             (8)

      (=) Operating
           Income (Loss) Before
           Items                  ($)    (16)    (11)     (9)     (5)    (41)

    Reconciliation of "Operating
     Income Before Items" to
     "EBITDA Before Items"
          Operating
           Income (Loss) Before
           Items                  ($)    (16)    (11)     (9)     (5)    (41)
      (+) Depreciation and
           amortization           ($)      4       5       5       6      20

      (=) EBITDA Before
           Items                  ($)    (12)     (6)     (4)      1     (21)
      (/) Sales                   ($)     43      46      59      63     211
      (=) EBITDA Margin
           Before Items           (%)                              2%
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------


                                      ---------------------------------------
                                      ---------------------------------------
                                                     Corporate
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                       Q1'09   Q2'09   Q3'09   Q4'09     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of Operating
     income to "Operating Income
     Before Items"
          Operating
           income (loss)          ($)
      (-) Alternative fuel
           tax credits            ($)
      (+) Write-down of
           property, plant and
           equipment              ($)
      (+) Closure and
           restructuring costs    ($)
      (-) (Gains) Losses on
           sale of property,
           plant and equipment    ($)                     (3)             (3)

      (=) Operating
           Income (Loss) Before
           Items                  ($)                     (3)             (3)

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

      (=) EBITDA Before
           Items                  ($)                     (3)             (3)
      (/) Sales                   ($)
      (=) EBITDA Margin
           Before Items           (%)
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------

    
</pre>
<p/>
<p>"Operating Income (Loss) Before Items", "EBITDA Before Items" and "EBITDA Margin 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.</p>
<p/>
<p/>
<pre>
    
    Domtar Corporation
    Reconciliation of Non-GAAP Financial Measures - By Segment 2008
    (In millions of dollars, unless otherwise noted)
    
</pre>
<p/>
<p>The following table sets forth certain non-U.S. generally accepted accounting principles ("GAAP") financial metrics identified as "Operating Income (Loss) Before Items", "EBITDA Before Items" and "EBITDA Margin 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.</p>
<p>The company calculates the segmented "Operating Income (Loss) 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.</p>
<p/>
<pre>
    
                                      ---------------------------------------
                                      ---------------------------------------
                                                      Papers
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                       Q1'08   Q2'08   Q3'08   Q4'08     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of
     Operating income to
     "Operating Income
     Before Items"
          Operating income
           (loss)                 ($)    114      92     118    (693)   (369)
      (+) Impairment and
           write-down of
           goodwill, PP&E
           and intangible
           assets                 ($)                            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 (Loss) Before
           Items                  ($)    100     106     131      29     366

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

      (=) EBITDA Before
           Items                  ($)    210     216     242     133     801
      (/) Sales                   ($)  1,429   1,407   1,364   1,240   5,440
      (=) EBITDA Margin
           Before Items           (%)     15%     15%     18%     11%     15%
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------


                                      ---------------------------------------
                                      ---------------------------------------
                                                  Paper Merchants
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                       Q1'08   Q2'08   Q3'08   Q4'08     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of
     Operating income to
     "Operating Income
     Before Items"
          Operating income
           (loss)                 ($)      3       2       1       2       8
      (+) Impairment and
           write-down of
           goodwill, PP&E
           and intangible
           assets                 ($)
      (+) 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 (Loss) Before
           Items                  ($)      3       2       1       2       8

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

      (=) EBITDA Before
           Items                  ($)      3       3       2       3      11
      (/) Sales                   ($)    262     243     257     228     990
      (=) EBITDA Margin
           Before Items           (%)      1%      1%      1%      1%      1%
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------


                                      ---------------------------------------
                                      ---------------------------------------
                                                        Wood
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                       Q1'08   Q2'08   Q3'08   Q4'08     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of
     Operating income to
     "Operating Income
     Before Items"
          Operating income
           (loss)                 ($)    (22)    (12)    (11)    (28)    (73)
      (+) Impairment and
           write-down of
           goodwill, PP&E
           and intangible
           assets                 ($)                             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 (Loss) Before
           Items                  ($)    (22)    (12)    (11)     (9)    (54)

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

      (=) EBITDA Before
           Items                  ($)    (16)     (5)     (4)     (4)    (29)
      (/) Sales                   ($)     63      70      76      59     268
      (=) EBITDA Margin
           Before Items           (%)
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------


                                      ---------------------------------------
                                      ---------------------------------------
                                                     Corporate
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                       Q1'08   Q2'08   Q3'08   Q4'08     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Reconciliation of
     Operating income to
     "Operating Income
     Before Items"
          Operating income
           (loss)                 ($)     (1)     (2)                     (3)
      (+) Impairment and
           write-down of
           goodwill, PP&E
           and intangible
           assets                 ($)
      (+) 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 (Loss) Before
           Items                  ($)     (1)     (2)                     (3)

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

      (=) EBITDA Before
           Items                  ($)     (1)     (2)                     (3)
      (/) Sales                   ($)
      (=) EBITDA Margin
           Before Items           (%)
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------
    
</pre>
<p/>
<p>"Operating Income (Loss) Before Items", "EBITDA Before Items" and "EBITDA Margin 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.</p>
<p/>
<p/>
<pre>
    
    Domtar Corporation
    Supplemental Segmented Information
    (In millions of dollars, unless otherwise noted)

                                      ---------------------------------------
                                      ---------------------------------------
                                                         2009
                                      ---------------------------------------
                                      ---------------------------------------
                                                                      -------
                                          Q1      Q2      Q3      Q4     YTD
                                      ---------------------------------------
                                      ---------------------------------------
    Papers Segment
      Sales                       ($)  1,106   1,127   1,211   1,188   4,632
        Intersegment sales -
         Papers                   ($)    (60)    (55)    (63)    (53)   (231)
      Operating income (loss)     ($)     (6)    150     294     212     650
      Depreciation &
       amortization               ($)     94      98      95      95     382
      Impairment and write-down
       of goodwill and PP&E       ($)     35                      27      62

      Papers
      Papers Production     ('000 ST)    869     912     920     903   3,604
      Papers Shipments      ('000 ST)    913     929     972     943   3,757
        Uncoated freesheet  ('000 ST)    887     901     939     890   3,617
        Coated groundwood   ('000 ST)     26      28      33      53     140

      Pulp
      Pulp Shipments(a)   ('000 ADMT)    314     393     446     386   1,539
        Hardwood Kraft Pulp       (%)     33%     33%     40%     35%     36%
        Softwood Kraft Pulp       (%)     54%     54%     49%     54%     52%
        Fluff Pulp                (%)     13%     13%     11%     11%     12%

    Paper Merchants Segment
      Sales                       ($)    217     205     239     212     873
      Operating income            ($)      2       1       2       2       7
      Depreciation &
       amortization               ($)      1       1       1               3

    Wood Segment
      Sales                       ($)     43      46      59      63     211
        Intersegment sales -
         Wood                     ($)     (4)     (4)     (6)     (6)    (20)
      Operating loss              ($)    (18)    (12)     (1)    (11)    (42)
      Depreciation &
       amortization               ($)      4       5       5       6      20
      Impairment of goodwill,
       PP&E and intangible
       assets                     ($)

      Lumber
       Production      (Millions FBM)    121     131     147     161     560
      Lumber
       Shipments       (Millions FBM)    125     135     153     161     574


    Average Exchange Rates       CAN   1.245   1.167   1.097   1.056   1.142
                                  US   0.803   0.857   0.911   0.947   0.876
                                                                      -------
                                      ---------------------------------------
                                      ---------------------------------------


                                      ---------------------------------------
                                      ---------------------------------------
                                                         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 and write-down
       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

      Pulp
      Pulp Shipments(a)   ('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%

    Paper Merchants Segment
      Sales                       ($)    262     243     257     228     990
      Operating income            ($)      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


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

    (a) 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.

    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 and Investor Relations: Pascal Bossé, Vice-President, Corporate Communications and Investor Relations, (514) 848-5938

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Domtar Corporation

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