Domtar can meet demand for copier paper if it wins anti-dumping case, CEO says

MONTREAL – Domtar wants to boost production of office copier paper if it wins an anti-dumping case against imports from five countries, including China, that the company alleges have violated international trade agreements.

“We’re confident we could supply the volume required,” Domtar CEO John Williams said Thursday in a conference call.

Domtar (TSX:UFS), three other paper producers and the union representing thousands of industry employees, are pushing for the United States to penalize imports of “uncoated free-sheet paper” from China, Indonesia, Brazil, Portugal and Australia.

The coalition alleges that the imports are benefiting from subsidies that violate trade agreements. Such complaints often take years to resolve completely, although national bodies such as the U.S. Department of Commerce and U.S. International Trade Commission have powers to impose duties that drive up the price of targeted imports.

Domtar — a leading North American producer of office paper — has been adapting its operations to make other types of product but Williams said it will have two paper machines remaining after it converts some output to fluff for use in personal-care products such as diapers. He said some paper grades can also be converted back to copier paper.

Meanwhile, Domtar said earlier Thursday that its first-quarter profit fell eight per cent to US$36 million on lower pulp and paper prices. The company, which reports in U.S. dollars, said it earned 56 cents per diluted share in the three months ended March 31. That compared with US$39 million or 60 cents per share a year earlier.

Domtar’s revenue for the three months ended March 31 were down 2.2 per cent from last year, dropping to US$1.35 billion

Excluding one-time charges, Domtar said it earned $48 million or 75 cents per diluted share, up from $42 million or 65 cents per share a year earlier. Domtar was expected to earn 74 cents per share in adjusted profits on 1.35 billion of revenues, according to analysts polled by Thomson Reuters.

Both the pulp and paper and the personal care divisions experienced lower operating earnings and revenues in the quarter. But Williams said the company had a “solid quarter” with strong paper volumes and operations running at near capacity that offset higher costs related to winter weather.

“We continue to focus on the fundamentals that drive our long-term performance. And we remain optimistic about our prospects for continuing to generate attractive shareholder returns,” he said.

Domtar, Packaging Corporation of America, Finch Paper, P.H. Glatfelter and the United Steelworks claim that U.S. imports from the five countries increased more than 44 per cent from 2011 to September 2014, despite lower U.S. demand that saw domestic shipments decrease by more than eight per cent.

In March, the U.S. trade commission agreed to investigate the actions.

Williams told analysts that “the affirmative vote is an important first step in our fight to end the unfair trade practices targeting the U.S. market and to restore a level playing field.”

The Department of Commerce is expected to decide in the new few months on whether to impose preliminary trade sanctions.

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