Domtar drops debt by $92 million in fourth quarter, $355 million since March 31

By Jennifer Lanning Drey

Portland, Ore., Feb. 15 - Domtar Corp.'s focus on deleveraging the company in 2007 resulted in a net debt reduction of $355 million since March 31, Raymond Royer, Domtar's chief executive officer, reported Friday during a conference call held to discuss the company's preliminary fourth-quarter financial results.

Domtar reduced debt by $92 million in the fourth quarter, helped by free cash flow of $131 million during the period. The company's free cash flow totaled $490 million for the full-year 2007, a number Royer referred to as "impressive."

He also said Domtar expects to generate strong free cash flow in 2008 as it reaches its targeted synergy and integration goals.

While the company's priority has been to delever the balance sheet in 2007 Domtar is reviewing various options for its best use of cash going forward, Royer said when asked by an analyst about the possibility of Domtar implementing a dividend in 2008.

"We know that in 2008 we'll generate good free cash flow; and believe me, my team and I are really looking at the issue to find the best option for the cash use going forward, but I cannot at this point add more to this," he said.

In addition to focusing on debt repayment during the fourth quarter, Domtar also made a series of changes to its capital structure, including the redemption of the preferred shares of its subsidiary, Domtar Inc., to eliminate dual financial reporting requirements for Domtar Corp.

"This will have a huge benefit on our financial reporting and it will eliminate some confusion regarding our financial results," Royer said.

The CEO also reported that Domtar exceeded its target of achieving $80 million in synergies in 2007, with the final number coming in at $130 million. Royer further said he is confident the company will achieve its target of $200 million of synergies by the end of 2008.

"I am proud of what we have done so far as an organization," he said.

Domtar's preliminary fourth-quarter results show a net loss of $26 million for the period, compared to net income of $36 million for the third quarter. The company said the stronger Canadian dollar reduced earnings during the quarter.

Domtar Corp. is a paper company based in Montreal.

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