Personal Care: Domtar could push its growth objectives

Personal Care Domtar could push its growth objectives

Its president and CEO, John Williams, is confident of seeing the annual earnings before interest, taxes, depreciation and amortization (EBITDA) of this division range from US $300 million and US $500 million by 2017, but it does has no intention to bid to get there.

“We will remain cautious buyers because I have no intention of losing my head for an acquisition,” said he said on Thursday during a conference call to discuss third quarter results.

Since the beginning of the year, the personal care sector Domtar (TSX: UFS) has generated EBITDA of US $96 million, up from US $80 million in fiscal 2013 in total.

If there are currently opportunities for acquisition, Mr. Williams felt that they were not, however, about to materialize, because the prices charged.

“If we have to wait later than 2017 (to achieve our goals) just to be sure not to do anything stupid, I’m willing to go that route,” said the leader of the company.

Since 2011, the company completed the acquisition of five manufacturers of diapers for adults and children, the most recent being that of Spanish company Indas Laboratory, for a total of C $402.7 million.

In the third quarter, the personal care sector that makes incontinence products for adults and children generated profits of US $30 million, while they were $22 million in the same period the year before.

Revenues meanwhile jumped 33 percent to $234 million.

However, this performance was lower than the second quarter of fiscal 2014. “The results were affected by seasonality in our European operations, as well as a weakening of the euro,” said Mr. Williams.

The owner of Domtar also acknowledged that the company had lost a few clients, which slowed sales growth in the third quarter. However, the addition of five new machines is expected to generate cost reductions and increased revenue.

For the three months ended September 30, Domtar exceeded expectations by raking in a net profit of US $281 million, a performance that is due to savings of more than US $220 million related to tax credits.

Excluding this amount, and a restructuring charge of $2 million, the Montreal paper has earned a profit of US $61 million, or 94 cents per share, compared with $41 million, or 63 cents per share, to the same period in 2013.

Its turnover has meanwhile established at US $1.4 billion, up from US $1.385 billion in the third quarter of last year.

This performance was well received by investors, since midday, the Toronto Stock Exchange under the Domtar has appreciated by 10.37 percent or $4.21 to trade at $44.80.

The adjusted profit per share of the company has exceeded the forecast of 13 cents analysts surveyed by Thomson Reuters, who expected a profit of 81 cents per share.

Paul Quinn of RBC Capital Markets, called the quarterly results of Domtar “quite positive.”

“The personal care sector in particular should benefit from the addition of five new machines,” said the analyst in a note sent by email.

The quarterly performance of Domtar initiatives include a tax benefit of US $204 million as a result of an accident with the revenue agency of the United States regarding the use of alternative fuels regulations.

Operating income for the pulp and paper income was US $109 million, compared with US $42 million in the third quarter of 2013, while its adjusted profit increased from US $61 million to US $93 million.

However, its revenue declined slightly to stand at $1.19 billion.

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