“We have been proactive in reducing risk and safeguarding our ability to weather the current crisis. We are taking the appropriate steps to optimize our operations and to remain an agile, reliable partner to our customers,” says John D. Williams, president/CEO. “Despite the significant challenges we faced in Pulp and Paper markets, we have been able to manage costs while initiating cash and cost conservation initiatives across the network.
"In Personal Care, Q2 revenues were lower following a record Q1, which was driven partly by consumer pantry loading. While revenues were lower than prior quarter, good cost control and improved operational efficiencies supported a solid EBITDA performance.
"We expect the overall environment to continue to be challenging. In Paper, we expect demand to remain weak, with some incremental recovery expected in Q3 and toward 2021. We expect near-term pulp markets to be impacted by seasonal softness, elevated global inventories, and weak demand trends from paper markets. Personal Care will continue to benefit from productivity gains and the impact from new customer wins. Overall raw material costs are expected to remain stable.
“We remain disciplined in our efforts to manage our costs to improve profitability and further strengthen our balance sheet. In line with these goals and current market conditions, we are implementing a significant cost savings program to streamline operations, maximize productivity and improve margins. This program will create a stronger, leaner organization aligned to meet the needs of the business and our customers in a post-COVID-19 era. This important and necessary step is expected to reduce our annualized costs by more than $200 million, while significantly improving our free cash flow and return on invested capital. We have a talented and dedicated workforce at Domtar, and decisions that affect people are never easy. However, we are taking the necessary steps to better position our business for the future.”
Entering the recycled linerboard market at Kingsport, TN
Domtar plans to enter the linerboard market with the conversion of the Kingsport paper machine. Once in full operation, the mill will produce and market approximately 600,000 tons annually of high-quality recycled linerboard and medium, providing a strategic footprint in a growing adjacent market. The conversion is expected to be completed by Q1 2023.