Domtar Inc.

Domtar Posts Net Earnings of CDN$2 Million in Second Quarter of 2005

    Montreal (ots/PRNewswire) - TICKER SYMBOL: (TSX:DTC, NYSE:DTC)

    Domtar Inc. announced today net earnings of $2 million ($0.01 per common  share) in the second quarter of 2005 compared to a net loss of $1 million  ($0.01 per common share) in the second quarter of 2004 and net earnings of  $10 million ($0.04 per common share) in the first quarter of 2005.

@@start.t1@@      SUMMARY OF RESULTS
                                                                          Q2 2005  Q2 2004      Q1 2005(2)
      -------------------------------------------------------------------------
      (In millions of Canadian dollars,
        unless otherwise noted)
      Sales                                                                1,287      1,346            1,259
      Operating profit(1)                                              31          28                 34
      Net earnings (loss)                                                2          (1)                10
      Net earnings (loss)
        per common share (in dollars)                         0.01      (0.01)            0.04
      Excluding specified
        items(1)
         Operating profit                                                33          33                 35
         Net earnings (loss)                                            3            4                  9
         Net earnings (loss) per common share
          (in dollars)                                                 0.01        0.02              0.04
      -------------------------------------------------------------------------
      (1) For a discussion on specified items and the use of non-GAAP
            measures, see "Notes to the summary of results" in the appendix.
      (2) Domtar's results for the first quarter of 2005 include a tax recovery
            adjustment of $6 million (or $0.03 per common share) following the
            reassessment of a prior year's income taxes by tax authorities.@@end@@

    "Domtar achieved an operating profit in all business segments as a result of efficiency and cost reduction efforts by employees, an increase in average selling prices for pulp and paper, as well as higher pulp and lumber shipments, despite lower demand in the Papers segment, a weak US dollar and elevated levels of costs for freight, fiber, chemicals and energy," said Raymond Royer, President and Chief Executive Officer of Domtar. "Pressure stemming from these high costs continues to negatively impact our profitability. While Domtar progresses internally on its cost reduction initiatives, we have no indications that the increase in costs will ease in the near term. As such, these higher costs should be reflected over time in the selling prices of our products through inflation adjustments. We will continue to work with our customers to provide tailor-made solutions, notably through our supply chain management system and our expanding Domtar EarthChoice(R) line of socially and environmentally responsible papers,"  added Mr. Royer.

@@start.t2@@                                              OPERATIONAL REVIEW
                                              SECOND QUARTER 2005
                                      COMPARED TO FIRST QUARTER 2005
                                                         -----
      PAPERS                                                          Q2 2005  Q1 2005        Variance
      -------------------------------------------------------------------------
      (In millions of Canadian dollars)
      Operating profit                                                    2            6                (4)
      Operating profit,
        excluding specified items                                    4            9                (5)
      -------------------------------------------------------------------------@@end@@

    The $5 million decline in operating profit excluding specified items in the Papers segment was mainly attributable to lower paper shipments and  higher overall costs, namely higher purchased energy, chemicals and fiber  costs. In addition, during the second quarter, certain mills undertook  capital and maintenance downtime also contributing to higher overall costs.  These factors were partially offset by higher average selling prices for  paper and pulp and higher pulp shipments as well as the realization of  savings stemming from restructuring activities.

@@start.t3@@      PAPER MERCHANTS                                            Q2 2005  Q1 2005        Variance
      -------------------------------------------------------------------------
      (In millions of Canadian dollars)
      Operating profit                                                    4            5                 (1)
      -------------------------------------------------------------------------@@end@@

    The $1 million decline in operating profit in the Paper Merchants segment was mainly attributable to lower margins achieved as a result of higher purchased paper costs not being fully reflected in average paper selling prices.

@@start.t4@@      WOOD                                                              Q2 2005  Q1 2005        Variance
      -------------------------------------------------------------------------
      (In millions of Canadian dollars)
      Operating profit                                                  11            6                  5
      -------------------------------------------------------------------------@@end@@

    The $5 million improvement in operating profit in the Wood segment was mainly attributable to higher lumber shipments, partially offset by higher duties on softwood lumber exports due to a higher level of shipments being exported to the U.S. As of January 1, 2005, the countervailing and  antidumping duties rate has decreased from 27.22% to 20.95%. Since May 22,  2002, Domtar has made and expensed cash deposits of $175 million for export  duties.

@@start.t5@@      PACKAGING                                                      Q2 2005  Q1 2005        Variance
      -------------------------------------------------------------------------
      (In millions of Canadian dollars)
      Operating profit                                                  11          13                 (2)
      Operating profit, excluding specified items        14          11                  3
      -------------------------------------------------------------------------@@end@@

    The $3 million improvement in operating profit excluding specified items in the Packaging segment (our 50% share of Norampac Inc.) was mainly attributable to higher shipments for corrugated containers, partially offset by lower shipments of containerboard and higher overall costs.

@@start.t6@@                                            LIQUIDITY AND CAPITAL
                                              SECOND QUARTER 2005
                                    COMPARED TO FIRST QUARTER 2005
                                                         -----
      FREE CASH FLOW(1)                                                        Q2 2005         Q1 2005
      -------------------------------------------------------------------------
      (in millions of Canadian dollars,
        unless otherwise noted)
      Cash flows provided from operating activities
        before changes in working capital and other items          90                 88
      Changes in working capital and other items                      (52)            (122)
                                                                                            -------------------
      Cash flows provided by (used for) operating activities    38                (34)
      Net additions to property, plant and equipment                (38)              (28)
                                                                                            -------------------
      Free cash flow                                                                      -                (62)
      -------------------------------------------------------------------------@@end@@

    Free cash flow improved by $62 million in the second quarter of 2005 compared to the first quarter of 2005. This improvement mainly reflects reduced working capital requirements, primarily attributable to inventory, trade and other payables and receivables fluctuations. The first quarter of the year is typically impacted by seasonally high requirements for working capital. These factors were partially offset by increased capital expenditures.

    Domtar's net debt-to-total capitalization ratio(1) as at June 30,
2005 stood at 51.1% compared to 49.5% as at December 31, 2004.
Domtar's total          long-term debt increased by $135 million,
largely due to additional net borrowings of $102 million and the
negative impact of $33 million  attributable to a stronger US dollar
(based on month-end foreign exchange  rates) on its US dollar
denominated debt.

    (1) For a discussion on the use of non-GAAP measures, see "Notes to the  summary of results" in the appendix.

    OUTLOOK

    Although the Company did experience slightly higher average selling prices for most of its pulp and paper products in the second quarter of 2005 compared to the first quarter of the year, the current business environment, mainly higher costs and lower demand for our products, is expected to remain challenging for the balance of the year. Despite the challenges that lie ahead, Domtar remains intent on delivering annualized targeted savings of $100 million by the end of 2005. As at June 30, 2005, the Company already stands at 60% of its goal.

    FORWARD-LOOKING STATEMENTS

    This press release may contain forward looking statements relating to trends in, or representing management's beliefs about, Domtar's future growth , results of operations, performance and business prospects and opportunities .These forward-looking statements are generally denoted by the use of words such as "anticipate", "believe", "expect", "intend", "aim", "target", "plan", "continue", "estimate", "may", "will", "should" and similar expressions.  These statements reflect management's current beliefs and are based on information currently available to management. Forward looking statements are  necessarily based upon a number of estimates and assumptions that, while  considered reasonable by management, are inherently subject to known and  unknown risks and uncertainties such as, but not limited to, general economic  and business conditions, product selling prices, raw material and operating  costs, changes in foreign currency exchange rates, the ability to integrate  acquired businesses into existing operations, the ability to realize anticipated cost savings, the performance of manufacturing operations and  other factors referenced herein and in Domtar's continuous disclosure  filings. These factors should be considered carefully and undue reliance  should not be placed on the forward looking statements. Although the forward  looking statements are based upon what management believes to be reasonable  estimates and assumptions, Domtar cannot ensure that actual results will not  be materially different from those expressed or implied by these forward  looking statements. Domtar assumes no obligation to update or revise these forward looking statements to reflect new events or circumstances. These  risks, uncertainties and other factors include, among other things, those  discussed under "Risk Factors" in Domtar's Management's Discussion and  Analysis (MD&A).

    SECOND QUARTER 2005 RESULTS WEBCAST

    You are invited to listen to a live broadcast of the conference call with financial analysts that the Company will be holding today to present its second quarter 2005 results. It will take place at 4:00 p.m. (EDT) on the Domtar corporate website at: www.domtar.com .

    Domtar's second quarter 2005 Management's Discussion and Analysis (MD&A) is available on the Domtar corporate website at: www.domtar.com .

    DOMTAR IS THE THIRD LARGEST PRODUCER OF UNCOATED FREESHEET PAPER IN NORTH AMERICA. IT IS ALSO A LEADING MANUFACTURER OF BUSINESS PAPERS, COMMERCIAL PRINTING AND PUBLICATION PAPERS, AND TECHNICAL AND SPECIALTY PAPERS. DOMTAR MANAGES ACCORDING TO INTERNATIONALLY RECOGNIZED STANDARDS 18 MILLION ACRES OF FORESTLAND IN CANADA AND THE UNITED STATES, AND PRODUCES LUMBER AND OTHER  WOOD PRODUCTS. DOMTAR HAS 10,000 EMPLOYEES ACROSS NORTH AMERICA. THE COMPANY  ALSO HAS A 50% INVESTMENT INTEREST IN NORAMPAC INC., THE LARGEST CANADIAN PRODUCER OF CONTAINERBOARD.

    APPENDIX

    NOTES TO THE SUMMARY OF RESULTS

    NOTE I.

    SPECIFIED ITEMS

    In Domtar's view, specified items are items that do not typify normal operating activities. The following table reconciles operating profit (loss), net earnings (loss) and net earnings (loss) per share, determined in accordance with GAAP(x), to operating profit (loss), net earnings (loss) and net earnings (loss) per share excluding specified items.

@@start.t7@@                                                              Q2 2005                                      Q2 2004
      -------------------------------------------------------------------------
      (In millions of Canadian dollars,
        unless otherwise noted)
                                                                                                                    Net
                                                                    Net                                  earnings
                                                            earnings                                        (loss)
                                                          per share                          Net per share
                          Operating          Net          (in  Operating earnings          (in
                                profit  earnings  dollars)        profit      (loss)  dollars)
      As per GAAP(x)         31              2         0.01            28            (1)      (0.01)
      Specified items:
         Sales of
          property,
          plant and
          equipment(a)        (4)          (3)                            -              -
         Closure and
          restructuring
          costs(b)              10              6                              -              -
         Unrealized
          mark-to-market
          gains or
          losses(c)            (1)          (1)                            5              3
         Foreign exchange
          impact
          on long-term
          debt(d)                 -              1                              -              2
         Insurance
          recoveries(e)      (3)          (2)                            -              -
                                 --------------------------------------------------------
                                        2              1              -              5              5         0.03
                                 --------------------------------------------------------
      Excluding
        specified items      33              3         0.01            33              4         0.02
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
                                                                                                              Q1 2005
      -------------------------------------------------------------------------
                                                                                                                    Net
                                                                                                            earnings
                                                                                                          per share
                                                                          Operating          Net          (in
                                                                                profit  earnings    dollars)
      As per GAAP(x)                                                         34            10         0.04
      Specified items:
         Sales of property, plant and
          equipment(a)                                                        (3)          (3)
         Closure and
          restructuring costs(b)                                         6              4
         Unrealized
          mark-to-market
          gains or losses(c)                                              (2)          (1)
         Foreign exchange impact
          on long-term debt(d)                                            -            (1)
         Insurance recoveries(e)                                         -              -
                                 --------------------------------------------------------
                                                                                        1            (1)            -
                                 --------------------------------------------------------
      Excluding specified items                                        35              9         0.04
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      (x) Except for operating profit which is a non-GAAP measure. See note 2.
      a) Sales of property, plant and equipment
          Domtar's results include gains or losses on sales of property, plant
          and equipment. These gains or losses are presented under "Selling,
          general and administrative" expenses in the financial statements.
      b) Closure and restructuring costs
          Domtar's results include closure and restructuring charges. These
          charges are presented under "Closure and restructuring costs" in the
          financial statements.
      c) Unrealized mark-to-market gains or losses
          Domtar's results include unrealized mark-to-market gains or losses on
          commodity swap contracts and foreign exchange contracts not considered
          as hedges for accounting purposes. Such gains or losses are presented
          under "Selling, general and administrative" expenses in the financial
          statements.
      d) Foreign exchange impact on long-term debt
          Domtar's results include foreign exchange gains or losses on the
          translation of a portion of its long-term debt. Such gains or losses
          are presented under "Financing expenses" in the financial statements.
      e) Insurance recoveries
          Domtar's results include insurance recoveries. These insurance
          recoveries are presented under "Selling, general and administrative"
          expenses in the financial statements.@@end@@

    NOTE 2.

    USE OF NON-GAAP MEASURES

    Except where otherwise indicated, all financial information reflected herein is determined on the basis of Canadian GAAP.

    Operating profit (loss) is a non-GAAP measure that is calculated within Domtar's financial statements. Domtar focuses on operating profit (loss) as this measure enables it to compare its results between periods without regard to debt service or income taxes.

    Operating profit (loss) excluding specified items, net earnings (loss) excluding specified items and net earnings (loss) per common share excluding specified items are non-GAAP measures. Measures excluding specified items are used in evaluating the Company's performance between periods without regard  to specified items that adversely or positively affected its GAAP measures.

    Free cash flow is a non-GAAP measure that is defined as the amount by which cash flows provided from operating activities, as determined in accordance with GAAP, exceed net additions to property, plant and equipment, as determined in accordance with GAAP. Free cash flow is used in evaluating the Company's ability to service its debt and pay dividends to its shareholders.

    Net debt-to-total capitalization ratio is a non-GAAP measure that is calculated as long-term debt and bank indebtedness, net of cash and cash equivalents, to the sum of net debt and shareholders' equity. Domtar's management tracks this ratio on a regular basis in order to assess its debt position.

    The above non-GAAP measures have no standardized meaning prescribed by GAAP and are not necessarily comparable to similar measures presented by  other companies, and therefore should not be considered in isolation. Domtar believes that it would be useful for investors and other users to be aware of these measures so they can better assess the Company's performance.

@@start.t8@@                                          Consolidated Financial
                                                    Statements
                                                    Three months ended          Six months ended
                                                              June 30                          June 30
      CONSOLIDATED EARNINGS          2005      2005      2004      2005      2005      2004
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      (In millions of Canadian    ---- (Unaudited) ----      ---- (Unaudited) ----
        dollars, unless                    US$          $          $        US$          $          $
        otherwise noted)            (NOTE 3)                         (NOTE 3)
      Sales                                  1,050    1,287    1,346    2,077    2,546    2,571
      Operating expenses
         Cost of sales                      889    1,089    1,146    1,761    2,159    2,236
         Selling, general
          and administrative              51         62         78         99        121        147
         Amortization                         77         95         94        151        185        185
         Closure and
          restructuring costs
          (NOTE 5)                                8         10          -         13         16          8
                                                 ----------------------  ----------------------
                                                 1,025    1,256    1,318    2,024    2,481    2,576
                                                 ----------------------  ----------------------
      Operating profit (loss)          25         31         28         53         65         (5)
      Financing expenses                  32         39         41         60         73         80
      Amortization of deferred
        gain                                        (1)        (1)        (1)        (2)        (2)        (2)
                                                 ----------------------  ----------------------
      Loss before income taxes         (6)        (7)      (12)        (5)        (6)      (83)
      Income tax recovery                 (8)        (9)      (11)      (15)      (18)      (38)
                                                 ----------------------  ----------------------
      Net earnings (loss)                  2          2         (1)        10         12        (45)
                                                 ----------------------  ----------------------
                                                 ----------------------  ----------------------
      Per common share
        (in dollars)(NOTE 6)
        Net earnings (loss)
         Basic                                 0.01      0.01    (0.01)    0.04      0.05    (0.20)
         Diluted                              0.01      0.01    (0.01)    0.04      0.05    (0.20)
      Weighted average number
        of common shares
        outstanding (millions)
         Basic                                229.6    229.6    228.6    229.5    229.5    228.4
         Diluted                            230.7    230.7    228.6    230.6    230.6    228.4
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
                                                    Three months ended          Six months ended
                                                              June 30                          June 30
      CONSOLIDATED RETAINED          2005      2005      2004      2005      2005      2004
      EARNINGS
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      (In millions of Canadian      ---- (Unaudited) ----    ---- (Unaudited) ----
        dollars, unless                    US$          $          $        US$          $          $
        otherwise noted)            (NOTE 3)                         (NOTE 3)
      Retained earnings at
        beginning of period -
        as reported                          333        408        452        336        412        512
      Cumulative effect of
        change in accounting
        policy                                      -          -          -          -          -         (3)
                                                 ----------------------  ----------------------
      Retained earnings at
        beginning of period -
        as restated                          333        408        452        336        412        509
      Net earnings (loss)                  2          2         (1)        10         12        (45)
      Dividends on common shares    (12)      (14)      (14)      (23)      (28)      (27)
      Dividends on preferred
        shares                                    (1)        (1)        (1)        (1)        (1)        (1)
                                                 ----------------------  ----------------------
      Retained earnings at end
        of period                              322        395        436        322        395        436
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      The accompanying notes are an integral part of the consolidated financial
      statements.
      CONSOLIDATED BALANCE                                    June 30  June 30  December 31
      SHEETS  As at                                                    2005        2005              2004
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      (In millions of Canadian dollars,              --------- (Unaudited) ---------
        unless otherwise noted)                                    US$            $                  $
                                                                          (NOTE 3)
      Assets
         Current assets
         Cash and cash equivalents                                 57          70                 52
         Receivables                                                      216         265                233
         Inventories                                                      649         796                723
         Prepaid expenses                                                19          23                 12
         Income and other taxes receivable                    15          18                 17
         Future income taxes                                          69          84                 87
                                                                         -------------------------------
                                                                              1,025      1,256            1,124
      Property, plant and equipment                         3,364      4,123            4,215
      Goodwill                                                                68          84                 84
      Other assets                                                        245         300                265
                                                                         -------------------------------
                                                                              4,702      5,763            5,688
                                                                         -------------------------------
                                                                         -------------------------------
      Liabilities and shareholders' equity
      Current liabilities
         Bank indebtedness                                              24          29                 22
         Trade and other payables                                 509         624                654
         Income and other taxes payable                         27          33                 32
         Long-term debt due within one year                    1            2                  8
                                                                         -------------------------------
                                                                                 561         688                716
      Long-term debt                                                 1,768      2,167            2,026
      Future income taxes                                            441         540                557
      Other liabilities and deferred credits              268         328                343
      Shareholders' equity
         Preferred shares                                                30          37                 39
         Common shares                                                1,452      1,780            1,775
         Contributed surplus                                          10          12                 10
         Retained earnings                                            322         395                412
         Accumulated foreign currency
          translation adjustments (NOTE 9)                 (150)      (184)            (190)
                                                                         -------------------------------
                                                                              1,664      2,040            2,046
                                                                         -------------------------------
                                                                              4,702      5,763            5,688
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      The accompanying notes are an integral part of the consolidated financial
      statements
                                                    Three months ended          Six months ended
                                                              June 30                          June 30
      CONSOLIDATED CASH FLOWS        2005      2005      2004      2005      2005      2004
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      (In millions of Canadian      ---- (Unaudited) ----    ---- (Unaudited) ----
        dollars, unless                    US$          $          $        US$          $          $
        otherwise noted)            (NOTE 3)                         (NOTE 3)
      Operating activities
      Net earnings (loss)                  2          2         (1)        10         12        (45)
      Non-cash items:
         Amortization and
          write-down of property,
          plant and equipment
          (NOTE 5)                              79         97         94        153        187        185
         Future income taxes            (11)      (13)      (13)      (21)      (26)      (43)
         Amortization of
          deferred gain                      (1)        (1)        (1)        (2)        (2)        (2)
         Closure and restructuring
          costs, excluding write-down
          of property, plant and
          equipment (NOTE 5)                6          8          -         11         14          8
         Other                                    (2)        (3)         4         (6)        (7)        (3)
                                                    --------------------      --------------------
                                                      73         90         83        145        178        100
                                                    --------------------      --------------------
      Changes in working capital
        and other items
         Receivables                            8         10         (2)      (26)      (32)      (99)
         Inventories                            3          3         32        (56)      (69)        14
         Prepaid expenses                  (2)        (2)         5         (8)      (10)        (9)
         Trade and other payables    (35)      (43)      (46)      (14)      (17)      (26)
         Income and other taxes          -          -         (3)        (1)        (1)         6
         Early settlement of
          interest rate swap
          contracts (NOTE 8)                -          -          -          -          -         20
         Other                                    (6)        (7)        11        (14)      (17)         5
      Payments of closure and
        restructuring costs              (10)      (13)        (4)      (23)      (28)        (4)
                                                    --------------------      --------------------
                                                    (42)      (52)        (7)    (142)    (174)      (93)
                                                    --------------------      --------------------
         Cash flows provided from
          operating activities          31         38         76          3          4          7
                                                    --------------------      --------------------
      Investing activities
      Additions to property, plant
        and equipment                        (38)      (47)      (51)      (65)      (80)      (95)
      Proceeds from disposals
        of property, plant and
        equipment                                 7          9          1         11         14          4
      Business acquisition (NOTE 4)  -          -         (8)         -          -         (8)
      Other                                         1          1          -         (2)        (3)         -
                                                    --------------------      --------------------
         Cash flows used for
          investing activities         (30)      (37)      (58)      (56)      (69)      (99)
                                                    --------------------      --------------------
      Financing activities
      Dividend payments                  (11)      (14)      (14)      (23)      (28)      (28)
      Change in bank indebtedness    14         17          4          7          8          8
      Change in revolving bank
        credit, net of expenses         17         21         (6)      155        190        134
      Issuance of long-term debt,
        net of expenses                        -          -          -          -          -          1
      Repayment of long-term debt    (1)        (1)         -        (73)      (90)        (4)
      Common shares issued, net
        of expenses                              1          1          6          3          4         13
      Redemptions of preferred
        shares                                    (1)        (1)        (1)        (2)        (2)        (2)
                                                    --------------------      --------------------
         Cash flows provided from
          (used for) financing
          activities                          19          23      (11)        67         82        122
                                                    --------------------      --------------------
      Net increase in cash and
        cash equivalents                    20          24         7         14         17         30
      Translation adjustments
        related to cash and cash
        equivalents                              -            -        (1)         1          1         (1)
      Cash and cash equivalents
        at beginning of period          37          46        71         42         52         48
                                                    --------------------      --------------------
      Cash and cash equivalents
        at end of period                    57          70        77         57         70         77
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      The accompanying notes are an integral part of the consolidated financial
      statements.@@end@@

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    SECOND QUARTER 2005 (IN MILLIONS OF CANADIAN DOLLARS, UNLESS OTHERWISE  NOTED)

    NOTE I.

    BASIS OF PRESENTATION

    In the opinion of management, the accompanying unaudited interim consolidated financial statements, prepared in accordance with Canadian generally accepted accounting principles, contain all adjustments necessary  to present fairly Domtar Inc.'s (Domtar) financial position as at June 30,  2005 and December 31, 2004, as well as its results of operations and its  cash flows for the three months and six months ended June 30, 2005 and 2004.

    While management believes that the disclosures presented are adequate, these unaudited interim consolidated financial statements and notes should be read in conjunction with Domtar's annual consolidated financial statements.

    These unaudited interim consolidated financial statements follow the  same accounting policies as the most recent annual consolidated financial statements, except as described in Note 2.

    NOTE 2.

    ACCOUNTING CHANGE

    CONSOLIDATION OF VARIABLE INTEREST ENTITIES

    In June 2003, the Canadian Institute of Chartered Accountants (CICA) issued Accounting Guideline No. 15 (AcG-15) "Consolidation of Variable Interest Entities." AcG-15 applies to annual and interim periods beginning on or after November 1, 2004. The application of this guideline does not have an impact on Domtar's unaudited interim consolidated financial statements under Canadian GAAP.

    NOTE 3.

    UNITED STATES DOLLAR AMOUNTS

    The unaudited interim consolidated financial statements are
expressed in Canadian dollars and, solely for the convenience of the
reader, the 2005 unaudited interim consolidated financial statements
and the tables of certain related notes have been translated into
U.S. dollars at the June 2005        month-end rate of CAN$1.00 equals
US$0.8159. This translation should not be construed as an application
of the recommendations relating to the accounting for foreign
currency translation, but rather as supplemental information for the
reader.

    NOTE 4.

    BUSINESS ACQUISITION

    On April 2, 2004, Norampac (a 50-50 joint venture with Cascades Inc.) acquired the shares of Johnson Corrugated Products Corp., a corrugated products plant in Thompson, Connecticut. The Corporation's proportionate  share of the consideration is approximately $8 million (US$6 million)  excluding fees related to the transaction.

    NOTE 5.

    CLOSURE AND RESTRUCTURING COSTS

    In 2004, Domtar's management committed to workforce reduction and restructuring plans throughout the Corporation in Canada and the United States. In addition to the reconciling items in the table below, for the  three months and six months ended June 30, 2005, training costs of $1 million  and $2 million, respectively, and other closure related costs of $3 million  and $6 million, respectively, were incurred.

    During the second quarter of 2005, Norampac decided to close a corrugated products plant, resulting in a write-down of $2 million of property, plant  and equipment, representing the Corporation's proportionate share.

    The following table provides a reconciliation of all closure and restructuring cost provisions:

@@start.t9@@                                                                          June 30  June 30  December 31
                                                                                2005        2005              2004
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
                                                                          --------- (Unaudited) --------
                                                                                 US$            $                  $
                                                                          (NOTE 3)
      Balance at beginning of period                            31          38                 13
      Severance payments                                              (16)        (20)              (12)
      Reversal of provision                                          (1)         (1)              (10)
      Proceeds on disposition                                         -            -                  1
      Additions
         Labor costs                                                         6            7                 45
         Dismantling costs                                                -            -                  1
                                                                          ------------------------------
      Balance at end of period                                      20          24                 38
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
                                                        NOTE 6.
                                                _________________
                                         EARNINGS (LOSS) PER SHARE
      The following table provides the reconciliation between basic and diluted
      earnings (loss) per share:
                                                    Three months ended          Six months ended
                                                              June 30                          June 30
                                                  2005      2005      2004      2005      2005      2004
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
                                                ---- (Unaudited) ----      ---- (Unaudited) ----
                                                    US$          $          $        US$          $          $
                                              (NOTE 3)                          (NOTE 3)
      Net earnings (loss)                  2          2         (1)        10         12        (45)
      Dividend requirements of
        preferred shares                      1          1          1          1          1          1
                                                ------------------------ ----------------------
      Net earnings (loss)
        applicable to common shares    1          1         (2)         9         11        (46)
      Weighted average number of
        common shares outstanding
        (millions)                         229.6    229.6    228.6    229.5    229.5    228.4
      Effect of dilutive stock
        options (millions)                1.1        1.1          -        1.1        1.1          -
                                                ------------------------ ----------------------
      Weighted average number
        of diluted common shares
        outstanding (millions)      230.7    230.7    228.6    230.6    230.6    228.4
                                                ------------------------ ----------------------
      Basic earnings (loss)
        per share (in dollars)        0.01      0.01    (0.01)    0.04      0.05    (0.20)
      Diluted earnings (loss)
        per share (in dollars)        0.01      0.01    (0.01)    0.04      0.05    (0.20)
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      The following table provides the securities that could potentially dilute
      basic earnings (loss) per share in the future but were not included in
      the computation of diluted earnings (loss) per share because to do so
      would have been anti-dilutive for the periods presented:
                                                                                    June 30              June 30
                                                                                         2005                  2004
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
      Number of shares
      Options                                                                4,890,136            5,537,659
      Bonus shares                                                                    -                230,393
      Rights                                                                      84,500                 93,000
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------@@end@@

    NOTE 7.

    BANK FACILITY

    On March 3, 2005, the Corporation entered into a new five-year unsecured revolving credit facility of US$700 million. This new facility replaced the prior credit facility, which consisted of a US$500 million unsecured  revolving credit facility and a US$70 million unsecured term loan that was  scheduled to mature in July 2006.

    Borrowings under this new unsecured revolving credit facility bear interest at a rate based on the Canadian dollar bankers' acceptance or U.S. dollar LIBOR rate, each with an added spread that varies with Domtar's credit rating, or on the Canadian or U.S. prime rate. This new credit facility also requires commitment fees that vary with Domtar's credit rating.

    NOTE 8.

    INTEREST RATE RISK

    In the first quarter of 2004, the Corporation terminated, prior to maturity, interest rate swap contracts for net cash proceeds of $20 million (US$15 million). The resulting gain of $17 million recorded under "Other liabilities and deferred credits" is being amortized over the original designated hedging period of the underlying 5.375% notes due in November  2013.

    NOTE 9.

@@start.t10@@                                      ACCUMULATED FOREIGN CURRENCY
                                          TRANSLATION ADJUSTMENTS
                                                                          June 30  June 30  December 31
                                                                                2005        2005              2004
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
                                                                          --------- (Unaudited) --------
                                                                                 US$            $                  $
                                                                          (NOTE 3)
      Balance at beginning of period                         (155)      (190)            (145)
      Effect of changes in exchange rates
        during the period:
         On net investment in self-sustaining
          foreign subsidiaries                                        25          31              (141)
         On certain long-term debt denominated
          in foreign currencies designated as
          a hedge of net investment in
          self-sustaining foreign subsidiaries            (26)        (32)              117
         Future income taxes thereon                                6            7                (21)
                                                                          ------------------------------
      Balance at end of period                                  (150)      (184)            (190)
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
                                                      NOTE 10.
                                                _________________
                                         DEFINED BENEFIT PLANS AND
                                 OTHER EMPLOYEE FUTURE BENEFIT PLANS
                                                    Three months ended          Six months ended
                                                              June 30                          June 30
                                                  2005      2005      2004      2005      2005      2004
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
                                                  ---- (Unaudited) ----      ---- (Unaudited) ---
                                                    US$          $          $        US$          $          $
                                            (NOTE 3)                          (NOTE 3)
      Net periodic benefit
        cost for defined
        benefit plans                          9         11         13         16         20         22
      Net periodic benefit cost
        for other employee future
        benefit plans                          2          3          3          5          6          6
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------@@end@@

    NOTE 11.

    SEGMENTED DISCLOSURES

    Domtar operates in the four reportable segments described below. Each reportable segment offers different products and services and requires different technology and marketing strategies. The following summary briefly describes the operations included in each of Domtar's reportable segments:

@@start.t11@@      - PAPERS - represents the aggregation of the manufacturing and
         distribution of business, commercial printing and publication, and
         technical and specialty papers, as well as pulp.
      - PAPER MERCHANTS - involves the purchasing, warehousing, sale and
         distribution of various products made by Domtar and by other
         manufacturers. These products include business and printing papers,
         graphic arts supplies and certain industrial products.
      - WOOD - comprises the manufacturing and marketing of lumber and
         wood-based value-added products and the management of forest resources.
      - PACKAGING - comprises the Corporation's 50% ownership interest in
         Norampac, a company that manufactures and distributes containerboard
         and corrugated products.@@end@@

    Domtar evaluates performance based on operating profit, which represents sales, reflecting transfer prices between segments at fair value, less allocable expenses before financing expenses and income taxes.

@@start.t12@@                                                    Three months ended          Six months ended
                                                              June 30                          June 30
      SEGMENTED DATA                      2005      2005      2004      2005      2005      2004
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------
                                                 ---- (Unaudited) ----      ---- (Unaudited) ----
                                                    US$          $          $        US$          $          $
                                              (NOTE 3)                          (NOTE 3)
      Sales
         Papers                                 626        768        836    1,252    1,534    1,624
         Paper Merchants                  212        260        268        423        519        531
         Wood                                    164        201        191        315        386        334
         Packaging                            139        170        163        269        330        309
                                                ------------------------ ----------------------
      Total for reportable
        segments                            1,141    1,399    1,458    2,259    2,769    2,798
         Intersegment sales
          - Papers                            (59)      (73)      (75)    (121)    (148)    (153)
         Intersegment sales
          - Wood                                (31)      (38)      (35)      (59)      (72)      (70)
         Intersegment sales
          - Packaging                         (1)        (1)        (2)        (2)        (3)        (4)
                                                ------------------------ ----------------------
      Consolidated sales              1,050    1,287    1,346    2,077    2,546    2,571
                                                ------------------------ ----------------------
                                                ------------------------ ----------------------
      Operating profit (loss)
         Papers                                    2          2          5          6          8        (33)
         Paper Merchants                      3          4          5          7          9         11
         Wood                                        9         11          6         14         17         (7)
         Packaging                                9         11          8         20         24         19
                                                ------------------------ ----------------------
      Total for reportable
        segments                                 23         28         24         47         58        (10)
         Corporate                                2          3          4          6          7          5
                                                ------------------------ ----------------------
      Consolidated operating
        profit (loss)                         25         31         28         53         65         (5)
      -------------------------------------------------------------------------
      -------------------------------------------------------------------------@@end@@

    NOTE 12.

    COMPARATIVE FIGURES

    To conform with the basis of presentation adopted in the current period, certain figures previously reported have been reclassified.

ots Originaltext: Domtar Inc.
Im Internet recherchierbar: http://www.presseportal.ch

Contact:
For further information: Christian Tardif, Manager, Corporate and
Financial Communications, +1-(514)-848-5515,
christian.tardif@domtar.com ; Source: Daniel Buron, Senior
Vice-President and Chief Financial Officer, +1-(514)-848-5234,
daniel.buron@domtar.com ; To request a free copy of this
organization's annual report, please go to http://www.newswire.ca and
click on reports@cnw



Weitere Meldungen: Domtar Inc.

Das könnte Sie auch interessieren: