MONTREAL – Paper and pulp producer Domtar Corp. earned its first profits from the acquisition of Attends during the third quarter as it pushed to double the business of the adult incontinence products company in five years.
Quebec-based Domtar, which beat analyst expectations with its third-quarter earnings on Thursday, said the personal care products segment has earned $2 million in profit from $17 million worth of sales since the deal closed Sept. 1.
“The Attends acquisition is small but an important step in developing revenues in growing markets,” chief executive John Williams said during a conference call with analysts.
The company’s third-quarter earnings came in above what analysts had anticipated even though its profits dropped amid weaker selling prices and higher costs.
Domtar (TSX:UFS) earned $117 million or $2.95 per share, compared with $191 million or $4.44 per share in the same 2010 quarter.
Excluding one-time items such as asset sales and closure costs, Domtar earned $123 million or $3.10 per share in the third quarter, compared to $183 million or $4.26 a year earlier.
Pre-tax operating profits or EBITDA was $284 million.
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Analysts had expected $2.48 per share in adjusted profits and $270 million in earnings before interest, taxes, depreciation and amortization.
Sales revenue for the three months ended Sept. 30 totalled $1.42 billion, down from $1.47 billion in the prior-year period.
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Williams said the long-term outlook for this market is very positive and Domtar is positioned for “excellent profitable growth going forward” as it unleashes the segments “great organic potential.”
Sales should increase about six to seven per cent a year as the sector expands and its product offerings increase.
“There are elements of the product range where we don’t have the full range, so we see opportunities there and we also see opportunities in a couple of channels, particularly the home-care channel.”
Domtar paid $315 million cash to purchase privately-held Attends Healthcare Inc. as part of its diversification efforts to offset the secular decline in paper demand.
Williams said it is looking for other acquisition opportunities up to $1 billion to $1.5 billion in size.
“Our capital structure is in good shape and we’re well positioned to pursue opportunities that make good financial and strategic sense,” he told analysts.
Although lower than the prior year, the third quarter results marked an improvement from the second quarter.
“Our results cap off a solid third quarter as we achieved growth in EBITDA against the second quarter despite accelerating softness in pulp markets and headwinds stemming from the high input cost environment,” he added.
“Paper price increases moved through supported by tight inventory management and high operating rates.”
He said the company has earned nearly $900 million in EBITDA so far this year and is “tracking well” to its record 2010 results.
Domtar expects a seasonal slowdown of paper shipments in the fourth quarter and reduced pulp prices caused by the cyclical downturn in global markets.
Paul Quinn of RBC Capital Markets said the results were positive as gains in its paper segment were partial offset by lower pulp prices and lower paper and pulp shipments
Domtar is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on production capacity, and is also a manufacturer of paper grade, fluff and specialty pulp.
On the Toronto Stock Exchange, its shares gained $4.87, or 6.2 per cent, at C$82.86 in afternoon trading.
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