Domtar Corporation announces second quarter 2007 results



    TICKER SYMBOL
    UFS (NYSE, TSX)

    MONTREAL, Aug. 13 /CNW Telbec/ - Domtar Corporation (NYSE/TSX: UFS)
announced today net income of $11 million ($0.02 per diluted share) in the
second quarter of 2007 compared to a net loss of $12 million ($0.04 per
diluted share) in the second quarter of 2006 and a net income of $49 million
($0.14 per diluted share) in the first quarter of 2007.

    
                             SUMMARY OF RESULTS
                                   -------

                                             Q2 2007     Q2 2006     Q1 2007
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (In millions of U.S. dollars,
     unless otherwise noted)

    Sales                                      1,620         809       1,051
    Operating income (loss)                       69         (21)         71
    Net income (loss)                             11         (12)         49

    Net income (loss) per common share -
     diluted                                    0.02       (0.04)       0.14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    "Our company is moving on several fronts and the second quarter proved to
be quite eventful. On synergies, the process is well underway and our people
have shifted to the implementation mode in an effort to quickly deliver
results. On integration, our new sales organization is now in place with their
focus on providing our customers the service solutions they expect. We are
also actively pursuing strategic initiatives with the sale of our Wood
business expected to close by year-end and more recently with the announcement
of the permanent closure of three paper machines as part of our review of
overall production capacity, including some mill overlaps," said Raymond
Royer, President and CEO.
    Commenting on the second quarter, Mr. Royer added: "Adjusting for the
seasonally high level of maintenance work at several of our operations, Domtar
continues to strengthen its profitability despite soft demand for uncoated
freesheet papers in North America and the strength of the Canadian dollar. In
these circumstances, I am particularly proud of our cash flow generation in
the quarter and with our progress toward debt reduction. This is a tribute to
our employees who have joined forces from the very beginning in this venture.
Their pride and good will are reshaping the look of our organization."


                               THE TRANSACTION
                                   -------

    Domtar Corporation started its operations on March 7, 2007 following the
combination of the Weyerhaeuser Fine Paper Business and Domtar Inc. Prior to
the completion of the Transaction, the Weyerhaeuser Fine Paper Business was
operated by Weyerhaeuser Company.
    The financial results of Domtar Corporation cover certain periods prior to
the Transaction. For accounting and financial reporting purposes, Weyerhaeuser
Fine Paper Business is considered to be the "predecessor" to Domtar
Corporation and as a result, its historical financial statements now
constitute the historical financial statements of Domtar Corporation.
Accordingly, the results reported for the second quarter of 2007 include the
results of operations of the new Company for the entire period. The results
reported for the second quarter of 2006 include only the results of operations
of the Weyerhaeuser Fine Paper Business, on a carve-out basis. The results
reported for the first quarter of 2007 include the results of operations of
the Weyerhaeuser Fine Paper Business, on a carve-out basis, for the period
from January 1, 2007 to March 6, 2007 and the results of operations of the new
Company for the period from March 7, 2007 to April 1, 2007.


                             OPERATIONAL REVIEW
                     SECOND QUARTER OF 2007 COMPARED TO
                           SECOND QUARTER OF 2006
                                   -------

    Operating income (loss)                  Q2 2007     Q2 2006    Variance
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (In millions of U.S. dollars)

    Papers                                        92         (16)        108

    Paper Merchants                                2           -           2

    Wood                                         (20)         (5)        (15)
    -------------------------------------------------------------------------


     PAPERS

    Operating income in our Papers business totaled $92 million in the second
quarter of 2007, an increase of $108 million compared to an operating loss of
$16 million in the second quarter of 2006. Net sales amounted to
$1,315 million in the second quarter of 2007 compared to $774 million in the
second quarter of 2006. Depreciation and amortization for the Papers segment
totaled $125 million in the second quarter of 2007.
    The results of Domtar Inc. contributed $49 million of the increase in
operating income in the second quarter of 2007. The remaining increase is
mainly attributable to higher average selling prices for paper and pulp, lower
costs for energy and chemicals, and lower freight expenses, mostly due to
freight optimization efforts. These factors were partially offset by lower
shipments for paper mostly due to a lower demand for uncoated freesheet in
North America, higher costs for purchased fiber and chips and lower shipments
for pulp.

    PAPER MERCHANTS

    This business segment was acquired by means of the transaction and
therefore was not one of Domtar Corporation's active businesses prior to
March 7, 2007. Net sales amounted to $225 million in the second quarter of
2007. Depreciation and amortization for the Paper Merchants segment were nil
for the same period.

    WOOD

    Operating loss in our Wood business totaled $20 million in the second
quarter of 2007, an increase of $15 million compared to an operating loss of
$5 million in the second quarter of 2006. Net sales amounted to $80 million in
the second quarter of 2007 compared to $35 million in the second quarter 2006.
Depreciation and amortization for the Wood segment totaled $6 million in the
second quarter 2007.
    The results of Domtar Inc. contributed $16 million of the increase in
operating loss in the second quarter of 2007. Excluding operating loss
attributable to Domtar Inc., operating loss amounted to $4 million, a decrease
of $1 million compared to the second quarter of 2006, mainly due to savings
resulting from sawmill closures partially offset by lower average selling
prices.


                                   OUTLOOK
                                   -------

    Going into the second half of the year, fine paper volumes are expected to
remain under pressure compared to last year while price realizations should
improve compared to the second quarter as a result of the carry over from the
price increases for copy paper and for pulp implemented late in the quarter.
In light of the decline in North American demand for fine papers and the
resulting excess capacity, notably in commercial printing paper grades, Domtar
will continue to monitor its production and inventories to meet customer
demand.


                         FORWARD-LOOKING STATEMENTS
                                   -------

    FORWARD-LOOKING STATEMENTS

    This press release may contain forward-looking statements relating to
trends in, or representing management's beliefs about, Domtar's future growth,
results of operations, performance and business prospects and opportunities.
These forward-looking statements are generally denoted by the use of words
such as "anticipate," "believe," "expect," "intend," "aim," "target," "plan,"
"continue," "estimate," "project," "may," "will," "should" and similar
expressions. These statements reflect management's current beliefs and are
based on information currently available to management. Forward-looking
statements are necessarily based upon a number of estimates and assumptions
that, while considered reasonable by management, are inherently subject to
known and unknown risks and uncertainties and other factors that could cause
actual results to differ materially from historical results or those
anticipated. Accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will occur, or if any occurs,
what effect they will have on Domtar's results of operations or financial
condition. These factors include, but are not limited to:

      - the effect of general economic conditions, particularly in the U.S.
        and Canada;
      - market demand for Domtar Corporation's products, which may be tied
        to the relative strength of various U.S. and/or Canadian business
        segments;
      - product selling prices;
      - energy prices;
      - raw material prices;
      - chemical prices;
      - performance of Domtar Corporation's manufacturing operations
        including unexpected maintenance requirements;
      - the successful integration of the Weyerhaeuser Fine Paper Business
        with Domtar and the execution of internal performance plans;
      - the ability to realize anticipated cost savings;
      - the ability to implement cost reduction iniatives;
      - the ability to integrate acquired businesses into existing
        operations;
      - the closing of our transaction to sell substantially all of our Wood
        business;
      - the level of competition from domestic and foreign producers;
      - the effect of forestry, land use, environmental and other
        governmental regulations, and changes in accounting regulations;
      - the effect of weather and the risk of loss from fires, floods,
        windstorms, hurricanes and other natural disasters;
      - transportation costs;
      - the loss of current customers or the inability to obtain new
        customers;
      - legal proceedings;
      - changes in asset valuations, including write downs of property,
        plant and equipment, inventory, accounts receivable or other assets
        for impairment or other reasons;
      - changes in currency exchange rates, particularly the relative value
        of the U.S. dollar to the Canadian dollar;
      - the effect of timing of retirements and changes in the market price
        of Domtar Corporation's common stock on charges for stock-based
        compensation; and
      - performance of pension fund investments and related derivatives.

    These factors should be considered carefully and undue reliance should not
be placed on the forward-looking statements, which speak only as of the date
made, when evaluating the information presented in this document. Unless
specifically required by law, Domtar Corporation assumes no obligation to
update or revise these forward-looking statements to reflect new events or
circumstances.


                    SECOND QUARTER 2007 FINANCIAL RESULTS
                                   WEBCAST
                                   -------

    You are invited to listen to a live broadcast of the conference call with
financial analysts that the Company will be holding to present its second
quarter 2007 financial results on Monday, August 13, at 11:00 a.m. (EDT) on
the Domtar Corporate website at: www.domtar.com.

    DOMTAR CORPORATION (NYSE/TSX: UFS) IS THE LARGEST PRODUCER OF UNCOATED
FREESHEET PAPER AND ONE OF THE LARGEST MANUFACTURERS OF PAPERGRADE MARKET PULP
IN NORTH AMERICA. THE COMPANY DESIGNS, MANUFACTURES, MARKETS AND DISTRIBUTES A
WIDE RANGE OF BUSINESS, COMMERCIAL PRINTING, PUBLICATION AS WELL AS TECHNICAL
AND SPECIALTY PAPERS WITH RECOGNIZED BRANDS SUCH AS FIRST CHOICE(R), DOMTAR
MICROPRINT(R), WINDSOR OFFSET(R), COUGAR(R) AS WELL AS ITS FULL LINE OF
ENVIRONMENTALLY AND SOCIALLY RESPONSIBLE PAPERS, DOMTAR EARTHCHOICE(R). 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 14,000 PEOPLE. TO LEARN MORE, VISIT WWW.DOMTAR.COM.


    Domtar Corporation
    Quarterly Statistical Review

                                                                    2007
    -------------------------------------------------------------------------
                                                                 1st     2nd
                                                                 Qtr     Qtr
                                                              ---------------
    Total Shipments by
     Category of Products

    Papers (in thousands of
     ST)(a) - actual                                             871   1,209
    Papers (in thousands of
     ST)(a,b) - combined                                       1,247       -

    Market Pulp (in thousands
     of ADMT)(c) - actual                                        249     330
    Market Pulp (in thousands
     of ADMT)(b,c) - combined                                    355       -

    Lumber (in millions
     of FBM) - actual                                             88     227
    Lumber (in millions of
     FBM)(b) -  combined                                         209       -
    -------------------------------------------------------------------------

    Benchmark Prices for the
     Majority of our
     Products(d)

      - 20-lb repro bond,
         92 bright (copy)     ($/ton)                           $930    $963
      - 50-lb offset, rolls   ($/ton)                           $810    $810
      - Coated publication
         No. 5, 40-lb offset,
         rolls                ($/ton)                           $778    $748

      - Pulp NBSK -
         U.S. market         ($/ADMT)                           $790    $810
      - Pulp NBHK -
         Japan market(e)     ($/ADMT)                           $640    $640

      - Lumber G.L.
         2x4x8 studs         ($/MFBM)                           $317    $335
      - Lumber G.L. 2x4 R/L,
         no. 1 & no. 2       ($/MFBM)                           $332    $332
    -------------------------------------------------------------------------

    Average Exchange Rates       CAN                           1.172   1.098
                                  US                           0.854   0.910
    -------------------------------------------------------------------------


                                                        2006
    -------------------------------------------------------------------------
                                         1st     2nd     3rd     4th
                                         Qtr     Qtr     Qtr     Qtr    Year
                                      ---------------------------------------

    Total Shipments by
     Category of Products

    Papers (in thousands of
     ST)(a) - actual                     813     732     711     768   3,024
    Papers (in thousands of
     ST)(a,b) - combined               1,446   1,304   1,267   1,280   5,297

    Market Pulp (in thousands
     of ADMT)(c) - actual                207     205     180     207     799
    Market Pulp (in thousands
     of ADMT)(b,c) - combined            342     359     352     377   1,430

    Lumber (in millions of
     FBM) - actual                        93      47      43      40     223
    Lumber (in millions of
     FBM)(b) - combined                  349     317     274     199   1,139
    -------------------------------------------------------------------------

    Benchmark Prices for the
     Majority of our
     Products(d)

      - 20-lb repro bond,
         92 bright (copy)     ($/ton)   $820    $890    $950    $947    $902
      - 50-lb offset, rolls   ($/ton)   $765    $840    $850    $838    $823
      - Coated publication
         No. 5, 40-lb offset,
         rolls                ($/ton)   $898    $895    $848    $813    $863

      - Pulp NBSK -
         U.S. market         ($/ADMT)   $653    $707    $757    $770    $722
      - Pulp NBHK -
         Japan market(e)     ($/ADMT)   $542    $572    $618    $637    $592

      - Lumber G.L.
         2x4x8 studs         ($/MFBM)   $391    $371    $313    $302    $344
      - Lumber G.L. 2x4 R/L,
         no. 1 & no. 2       ($/MFBM)   $409    $386    $351    $327    $368
    -------------------------------------------------------------------------

    Average Exchange Rates       CAN   1.155   1.122   1.121   1.139   1.134
                                  US   0.866   0.891   0.892   0.878   0.882
    -------------------------------------------------------------------------

    (a) Figures exclude shipments made by our Paper Merchants.

    (b) Figures represent shipments to external customers on a combined
        basis, giving effect to the transaction as if it occured on January 1
        of 2006 and 2007. The combined shipments figures are for illustrative
        information purposes only and are not necessarily indicative of the
        results had the transactions actually taken place at the dates
        indicated and does not purport to be indicative of future results.

    (c) Figures are gross of market pulp purchased from other producers on
        the open market for some of our paper making operations. Market pulp
        represent the amount of pulp produced in excess of our internal
        requirement.

    (d) Source: Pulp & Paper Week and Random Lengths.

    (e) 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.
    




For further information:

For further information: Media relations: Michel A. Rathier, (514)
848-5103; Investor relations: Pascal Bossé, (514) 848-5938

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Domtar Corporation

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