Leaving a paper trail is Domtar's business; the company is North America's #1 uncoated freesheet paper manufacturer and marketer. Some 85% of its sales are from paper, comprising office, commercial printing and publishing, and converting and specialty papers. The lines include offset printing paper, photocopying paper, as well as fine and imaging (security) papers. Its top paper, freesheet (coated and uncoated), is used for a range of printed materials with demanding image and press requirements, such as food packaging, medical, and industrial applications. The company's Distribution segment buys, stores, and sells paper products made by Domtar and other manufacturers.
Despite posting overall positive gains in 2010, Domtar suffered decreases in both its profit and revenue levels for 2011. Net sales dipped by 4%, from $5.9 billion to $5.6 billion, while profits declined by roughly 40%, from $605 million to $365 million. Domtar has felt the painful effects as more customers cut back on paper and switch to new forms of digital communication. Upward momentum has also been offset by its Distribution business (formerly known as Paper Merchants), which has experienced reduced consumer consumption due to the accelerating adoption of electronic document storage. For a third consecutive year, this segment's sales dropped modestly in 2011.
In order to adjust its cost structure, Domtar has been disposing of several underperforming operations. The paper maker in mid-2011 sold its Prince Albert, Saskatchewan, pulp mill to Netherlands-based Paper Excellence Canada Holdings for $200 million. The year before, Domtar axed its wood processing business, selling it to EACOM Timber Corporation for roughly $120 million. The cash sale (plus certain capital adjustments) to EACOM reflected the economic downturn and industry-wide sagging demand for wood-related products in the US and Canada.
Domtar intends to broaden its product offerings through business acquisitions and alliances. In mid-2012, it obtained EAM Corporation, a maker of laminated absorbent cores used in hygiene, adult incontinence, baby diapers, and medical packaging products. Domtar bought EAM for $61 million, and the deal broadened its adult incontinence product portfolio and added to its newly created Personal Care business segment.
Domtar formed this new segment earlier when it bought Attends Healthcare, a manufacturer and supplier of incontinence products, for $315 million from KPS Capital Partners in late 2011. Attends has a 775,000-sq.-ft. plant and distribution center in North Carolina. A few months later Domtar bought Attends' European operations for €180 million ($235 million). In Europe, Attends has a 374,000-sq.-ft. plant in Sweden, as well as distribution centers in Germany, Scotland, and Sweden. – less