Canadian paper-maker Domtar Inc. is cutting 1,800 jobs and plans to close or sell several mills as part of a plan to steer the company back into profitability amid a downturn in the paper industry.
Montreal-based Domtar said Wednesday it expects to permanently shutter its mill in Cornwall, Ontario, and parts of its Ottawa, Ontario, mills. Under the plan, Domtar also would sell its mill in Vancouver, British Columbia, and shut its sawmills in Grand Remous and Malartic, Quebec.
The Cornwall cuts include 390 positions already eliminated in December 2004. The Cornwall mill is the largest to be closed, with 910 workers and a total capacity of 265,000 tons of uncoated and coated printing grades on three paper machines
Domtar is North America's third-biggest producer of free sheet paper, which is used for photocopying, as well as a major producer of other business papers and lumber products.
As part of the plan, the company's North American administrative offices will be consolidated in Montreal and Cincinnati, and Domtar will overhaul its supply chain. In all, the measures will result in pretax restructuring charges of $505 million, the company said.
"Unfortunately, sustained actions and dedicated efforts by our employees, as well as capital investments by the company, were not sufficient to guarantee the long-term viability of these operations within Domtar,'' Chief Executive Raymond Royer said in a prepared statement.
Employees affected by the cuts will receive financial assistance and be offered access to job-search services, Royer added.
Domtar's cuts follow similar moves by a number of other paper and lumber companies in recent months as they cope with rising energy costs and weak markets. For example, Atlanta-based Georgia-Pacific Corp., maker of Brawney paper towels and other products, said in October it would cut 1,100 jobs worldwide and 850 in North America in a broad restructuring that aims to save $100 million a year.
Domtar also blamed a stronger Canadian dollar, which has made its products more difficult to sell in the key U.S. market.
"The strengthening of the Canadian dollar has pushed some of our Canadian mills to negative cash-flow generation and we must focus on our most efficient mills in order to return to profitability in the foreseeable future,'' said Richard Garneau, executive vice president of operations. The strategy should improve cash flow by $160 million, he said.
Last week the forestry giant abruptly shut down its Lebel-sur-Quevillon pulp mill in northwestern Quebec, cutting 425 jobs. It cited rising costs and weak markets for pulp. The company warned last month it was considering closures as it posted a loss of $52 million in the third quarter. Domtar also canceled its dividend.
Domtar has 10,000 employees across North America and owns 50 percent of Norampac Inc., Canada's largest cardboard producer, which also reported a third-quarter loss - of $11 million.
Domtar also said it has amended its credit facility, which matures in 2010, "to improve financial flexibility.'' The new arrangement includes a maximum debt-to-capitalization ratio of 60 percent and reduces the company's credit line by $100 million to $600 million.Associated Press via Minneapolis Star Tribune
