Domtar Kamloops 'above water' in tough market

Pulp and paper producer reports net earnings of $59 million

Domtar's Kamloops pulp mill is likely eking out a small profit at today's falling prices, an analyst said Friday.

The international pulp and paper producer reported net earnings of $59 million in the second quarter of this year. That compares with $54 million for the same period in 2011.

Revenues were down slightly to $1.37 billion.

The company said paper shipments are expected to continue to decline along with demand. It also said pulp markets are also expected to be challenging.

Paul Quinn, an analyst with RBC Capital Markets, said European economic problems have assisted producers in that continent due to the decline in value of the Euro. There is a glut of pulp on the market worldwide and more is expected with additional capacity being added to a huge Russian mill.

"The only guy buying is China."

Domtar does not break down its revenue and profitability by location, unlike Teck Resources Ltd., which produces detailed numbers for Highland Valley Copper. The company also does not publicly comment on its operations here.

Quinn said the Kamloops pulp operation will likely focus on cutting costs in the tough economic environment.

"That mill, given the money Domtar put into it, is still above water (not losing money) at these prices. It's not making much money."

In the past four years Domtar has invested about $121 million in its Kamloops operation, the bulk of that a federal government subsidy to counter similar payouts to United States pulp mills.

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