Domtar 8K Results of Operations and Financial Condition | UFS 30 Jul 10

Exhibit 99.1


				395 de Maisonneuve Blvd. West Montreal, QC H3A 1L6


TICKER SYMBOL				MEDIA AND INVESTOR RELATIONS
UFS (NYSE, TSX)				Pascal Bossé Vice-President Corporate Communications and Investor Relations Tel.: 514-848-5938

DOMTAR CORPORATION REPORTS PRELIMINARY SECOND QUARTER 2010 FINANCIAL RESULTS

Strong operational results despite cost impact of higher level of maintenance downtime

(All financial information is in U.S. dollars, and all earnings per share results are diluted, unless otherwise noted.)

•

Net earnings of $0.71 per share, earnings before items¹ of $2.67 per share

•

EBITDA before items¹ of $264 million

•

Closed sale of the Wood business

•

Company repurchased 340,130 shares of its common stock in the second quarter of 2010

Montreal, July 30, 2010 – Domtar Corporation (NYSE/TSX: UFS) today reported net earnings of $31 million ($0.71 per share) for the second quarter of 2010 compared to net earnings of $58 million ($1.34 per share) for the first quarter of 2010 and net earnings of $48 million ($1.12 per share) for the second quarter of 2009. Sales for the second quarter of 2010 amounted to $1.5 billion. Excluding items listed below, the Company had earnings before items¹ of $116 million ($2.67 per share) for the second quarter of 2010 compared to earnings before items¹ of $69 million ($1.59 per share) for the first quarter of 2010 and a loss before items¹ of $33 million ($0.77 per share) for the second quarter of 2009.

Second quarter 2010 items:

•

Loss on sale of the Wood business of $50 million ($50 million after tax);

•

Costs for debt repurchase, including premium paid, of $40 million ($24 million after tax);

•

Charge of $14 million ($9 million after tax) related to the impairment and write-down of property, plant and equipment;

•

Closure and restructuring costs of $5 million ($4 million after tax); and

•

Gain on sale of property, plant and equipment of $2 million ($2 million after tax).

First quarter 2010 items:

•

Refundable excise tax credit for the production and use of alternative bio fuel mixtures of $25 million ($18 million after tax);

•

Charge of $22 million ($16 million after tax) related to the impairment and write-down of property, plant and equipment;

•

Closure and restructuring costs of $20 million ($14 million after tax); and

¹	Non-GAAP financial measure. Refer to theReconciliation of Non-GAAP Financial Measures in the appendix.

1/12

•

Gain on sale of property, plant and equipment of $1 million ($1 million after tax).

Second quarter 2009 items:

•

Refundable excise tax credit for the production and use of alternative bio fuel mixtures of $131 million ($79 million after tax);

•

Gain on debt repurchase of $9 million ($6 million after-tax); and

•

Closure and restructuring costs of $6 million ($4 million after tax).

“We continue to execute remarkably well to deliver strong financial results. I am pleased that these efforts, coupled with our successful debt tender, have been recognized by rating agencies,”said John D. Williams, President and Chief Executive Officer. Commenting on strategic initiatives, Mr. Williams added,“We continue our work to streamline our portfolio; we exited the coated groundwood paper business and successfully closed the sale of our Wood business. We also announced an exciting and innovative partnership in the development of fiber-based nanotechnologies. As we continue to look for opportunities to address our issues of cyclicality and the secular decline of paper demand, our strong balance sheet provides us with financial flexibility to consider various options to create sustainable, long term value for our stockholders.”

SEGMENT REVIEW

Papers

Operating income before items¹ was $165 million in the second quarter of 2010 compared to operating income before items¹ of $137 million in the first quarter of 2010. Depreciation and amortization totaled $95 million in the second quarter of 2010. When compared to the first quarter of 2010, paper shipments decreased by 7% while pulp shipments increased by 25%. The shipments-to-production ratio for paper was 101% in the second quarter of 2010, compared to 106% in the first quarter of 2010. Paper and pulp inventories decreased by 9,000 tons and 95,000 metric tons, respectively, at the end of June when compared to end of March levels.

The increase in operating income before items¹ in the second quarter of 2010 was the result of higher average selling prices in pulp and paper, and higher shipments for pulp. These factors were partially offset by higher costs related to scheduled maintenance downtime, lower shipments for paper, and an unfavorable exchange rate including hedging.


(In millions of dollars)	2Q 2010		1Q 2010
Sales	$	1,317	$	1,245
Operating income	$	149	$	120
Operating income before items¹	$	165	$	137
Depreciation and amortization	$	95	$	96

¹	Non-GAAP financial measure. Refer to theReconciliation of Non-GAAP Financial Measures in the appendix.

2/12

Paper Merchants

Operating loss was $1 million in the second quarter of 2010 compared to operating income of $1 million in the first quarter of 2010. Depreciation and amortization was $1 million in the second quarter of 2010. Deliveries remained flat when compared to the first quarter of 2010.

The decrease in operating income in the second quarter of 2010 was primarily the result of margins temporarily contracting due to supplier price increases. This factor was partially offset by higher selling prices.


(In millions of dollars)	2Q 2010			1Q 2010
Sales	$	213		$	212
Operating income (loss)	$	(1	)	$	1
Depreciation and amortization	$	1		$	1

Wood

Operating income before items¹ was nil in the second quarter of 2010, compared to an operating loss before items¹ of $6 million in the first quarter of 2010. Depreciation and amortization totaled $5 million in the second quarter of 2010. When compared to the first quarter of 2010, lumber shipments increased 14%.

The decrease in operating loss before items¹ in the second quarter of 2010 was primarily the result of higher shipments and higher average selling prices. These factors were partially offset by an unfavorable exchange rate including hedging.


(In millions of dollars)	2Q 2010			1Q 2010
Sales	$	83		$	67
Operating loss	$	(49	)	$	(5	)
Operating income (loss) before items¹	$	—		$	(6	)
Depreciation and amortization	$	5		$	5

¹	Non-GAAP financial measure. Refer to theReconciliation of Non-GAAP Financial Measures in the appendix.

3/12

LIQUIDITY AND CAPITAL

Cash flow provided from operating activities amounted to $610 million and free cash flow¹ amounted to $567 million in the second quarter of 2010. Cash received with regards to the alternative fuel tax credits amounted to $368 million in the second quarter of 2010. Domtar’s net debt-to-total capitalization ratio¹ stood at 22% at June 30, 2010 compared to 33% at March 31, 2010.

OUTLOOK

The Company expects third quarter paper shipments to be flat compared to the second quarter, before gradually declining towards year-end due to seasonal factors. Selling prices for paper grade pulp are expected to come under pressure. As previously communicated, costs related to planned maintenance shutdowns will be materially reduced in the third quarter. Inflation on input costs is expected to be marginal for the second half of the year.

EARNINGS CONFERENCE CALL

The Company will hold a conference call today at 11:00 a.m. (ET) to discuss its second quarter 2010 financial results. Financial analysts are invited to participate in the call by dialing at least 10 minutes before start time 1 (866) 321-8231 (toll free—North America) or 1 (416) 642-5213 (International), while media and other interested individuals are invited to listen to the live webcast on the Domtar Corporation website at www.domtar.com.

The Company will release its third quarter 2010 earnings on October 29, 2010 before markets open, followed by a conference call at 10:00 a.m. (ET) to discuss results. The date is tentative and will be confirmed approximately three weeks prior to the earnings release date.

About Domtar

Domtar Corporation (NYSE/TSX:UFS) is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on production capacity, and is also a manufacturer of papergrade, fluff and specialty pulp. The Company designs, manufactures, markets and distributes a wide range of business, commercial printing and publishing as well as converting and specialty papers including recognized brands such as Cougar^®, Lynx^® Opaque Ultra, Husky^® Opaque Offset, First Choice^® and Domtar EarthChoice^® Office Paper, part of a family of environmentally and socially responsible papers. Domtar owns and operates Domtar Distribution Group, an extensive network of strategically located paper distribution facilities. The Company employs over 9,000 people. To learn more, visitwww.domtar.com.

Forward-Looking Statements

All statements in this press release that are not based on historical fact are “forward-looking statements.” While management has based any forward-looking statements contained herein on its current expectations, the information on which such expectations were based may change. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of risks, uncertainties, and other factors, many of which are outside of our control that could cause actual results to materially differ from such statements. Such risks, uncertainties, and other factors include, but are not necessarily limited to, those set forth under the captions “Forward-Looking Statements” and “Risk Factors” of the latest Annual Report on Form 10-K filed with the SEC as updated by the Company’s latest Quarterly Report on Form 10-Q. Unless specifically required by law, we assume no obligation to update or revise these forward-looking statements to reflect new events or circumstances.

- (30) -

¹	Non-GAAP financial measure. Refer to theReconciliation of Non-GAAP Financial Measures in the appendix.

4/12

Domtar Corporation

Highlights

(In millions of dollars, unless otherwise noted)


	Three months ended						Six months ended
	June 30 2010			June 30 2009			June 30 2010			June 30 2009
	(Unaudited)
Selected Segment Information
Sales
Papers	$	1,317		$	1,127		$	2,562		$	2,233
Paper Merchants		213			205			425			422
Wood		83			46			150			89

Total for reportable segments		1,613			1,378			3,137			2,744
Intersegment sales—Papers		(60	)		(55	)		(122	)		(115	)
Intersegment sales—Wood		(6	)		(4	)		(11	)		(8	)

Consolidated sales		1,547			1,319			3,004			2,621

Depreciation and amortization and impairment and write-down of property, plant and equipment
Papers		95			98			191			192
Paper Merchants		1			1			2			2
Wood		5			5			10			9

Total for reportable segments		101			104			203			203
Impairment and write-down of property, plant and equipment—Papers		14			—			36			35

Consolidated depreciation and amortization and impairment and write-down of property, plant and equipment		115			104			239			238

Operating income (loss)
Papers		149			150			269			144
Paper Merchants		(1	)		1			—			3
Wood		(49	)		(12	)		(54	)		(30	)
Corporate		(3	)		—			(3	)		—

Consolidated operating income		96			139			212			117
Interest expense		70			23			102			54

Earnings before income taxes		26			116			110			63
Income tax expense (benefit)		(5	)		68			21			60

Net earnings		31			48			89			3

Per common share (in dollars)
Net earnings
Basic		0.72			1.12			2.07			0.07
Diluted		0.71			1.12			2.05			0.07
Weighted average number of common and exchangeable shares outstanding (millions)
Basic		43.0			43.0			43.0			43.0
Diluted		43.4			43.0			43.4			43.0

Cash flows provided from operating activities		610			306			733			363
Additions to property, plant and equipment		43			18			74			42

5/12

Domtar Corporation

Consolidated Statements of Earnings

(In millions of dollars, unless otherwise noted)


	Three months ended						Six months ended
	June 30 2010			June 30 2009			June 30 2010		June 30 2009
	(Unaudited)
Sales	$	1,547		$	1,319		$	3,004	$	2,621
Operating expenses
Cost of sales, excluding depreciation and amortization		1,207			1,116			2,349		2,239
Depreciation and amortization		101			104			203		203
Selling, general and administrative		69			86			153		169
Impairment and write-down of property, plant and equipment		14			—			36		35
Closure and restructuring costs		5			6			25		30
Other operating loss (income), net		55			(132	)		26		(172	)

		1,451			1,180			2,792		2,504

Operating income		96			139			212		117
Interest expense		70			23			102		54

Earnings before income taxes		26			116			110		63
Income tax expense (benefit)		(5	)		68			21		60

Net earnings		31			48			89		3

Per common share (in dollars)
Net earnings
Basic		0.72			1.12			2.07		0.07
Diluted		0.71			1.12			2.05		0.07
Weighted average number of common and exchangeable shares outstanding (millions)
Basic		43.0			43.0			43.0		43.0
Diluted		43.4			43.0			43.4		43.0

6/12

Domtar Corporation

Consolidated Balance Sheets at

(In millions of dollars)


	June 30 2010			December 31 2009
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	514		$	324
Receivables, less allowances of $8 and $8		659			536
Inventories		616			745
Prepaid expenses		37			46
Income and other taxes receivable		38			414
Deferred income taxes		137			137

Total current assets		2,001			2,202
Property, plant and equipment, at cost		9,269			9,575
Accumulated depreciation		(5,401	)		(5,446	)

Net property, plant and equipment		3,868			4,129
Intangible assets, net of amortization		62			85
Other assets		120			103

Total assets		6,051			6,519

Liabilities and shareholders’ equity
Current liabilities
Bank indebtedness		30			43
Trade and other payables		678			686
Income and other taxes payable		41			31
Long-term debt due within one year		30			11

Total current liabilities		779			771
Long-term debt		1,186			1,701
Deferred income taxes and other		1,033			1,019
Other liabilities and deferred credits		411			366
Shareholders’ equity
Exchangeable shares		73			78
Additional paid-in capital, includes treasury stock of $29		2,792			2,816
Accumulated deficit		(138	)		(216	)
Accumulated other comprehensive loss		(85	)		(16	)

Total shareholders’ equity		2,642			2,662

Total liabilities and shareholders’ equity		6,051			6,519

7/12

Domtar Corporation

Consolidated Statements of Cash Flows

(In millions of dollars)


	Six months ended
	June 30 2010			June 30 2009
	(Unaudited)
Operating activities
Net earnings	$	89		$	3
Adjustments to reconcile net earnings to cash flows from operating activities
Depreciation and amortization		203			203
Deferred income taxes		3			59
Impairment and write-down of property, plant and equipment		36			35
Loss (gain) on repurchase of long-term debt		40			(15	)
Net losses on disposals of property, plant and equipment and sale of business		47			—
Stock-based compensation expense		2			5
Other		(6	)		8
Changes in assets and liabilities
Receivables		(147	)		(117	)
Inventories		79			171
Prepaid expenses		(12	)		(1	)
Trade and other payables		5			(24	)
Income and other taxes		392			18
Difference between employer pension and other post-retirement contributions and pension and other post-retirement expense		3			15
Other assets and other liabilities		(1	)		3

Cash flows provided from operating activities		733			363

Investing activities
Additions to property, plant and equipment		(74	)		(42	)
Proceeds from disposals of property, plant and equipment		14			1
Proceeds from sale of business		97			—

Cash flows provided from (used for) investing activities		37			(41	)

Financing activities
Net change in bank indebtedness		(13	)		(19	)
Change of revolving bank credit facility		—			90
Issuance of long-term debt		—			385
Repayment of long-term debt		(530	)		(409	)
Borrowings under accounts receivable securitization program		20			—
Debt issue and tender offer costs		(26	)		(13	)
Stock repurchase		(19	)		—
Prepaid on structured stock repurchase		(10	)		—
Other		(3	)		—

Cash flows provided from (used for) financing activities		(581	)		34

Net increase in cash and cash equivalents		189			356
Translation adjustments related to cash and cash equivalents		1			9
Cash and cash equivalents at beginning of period		324			16

Cash and cash equivalents at end of period		514			381

8/12

Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures

(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified in bold as “Earnings (Loss) Before Items”, “Earnings (Loss) Before Items per diluted share”, “EBITDA”, “EBITDA Margin”, “EBITDA Before Items”, “EBITDA Margin Before Items”, “Free Cash Flow”, “Net Debt” and “Net Debt-to-Total Capitalization.” Management believes that the financial metrics presented are frequently used by investors and are useful to evaluate our ability to service debt and the overall credit profile. Management believes these metrics are also useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

The Company calculates “Earnings (Loss) Before Items” and “EBITDA Before Items” by excluding the after-tax (pre-tax) effect of items considered by management as not reflecting our ongoing operations. Management uses these measures, as well as EBITDA and Free Cash Flow, to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Net earnings (loss) provides for a more complete analysis of the results of operations. Net earnings (loss) and Cash flow provided from operating activities are the most directly comparable GAAP measures.


		2010						2009
		Q1		Q2		YTD		Q1		Q2		Q3		Q4		YTD
Reconciliation of “Earnings (Loss) Before Items” to Net earnings (loss)
Net earnings (loss)	($)	58		31		89		(45	)	48		183		124		310
(-) Alternative fuel tax credits	($)	(18	)	—		(18	)	(28	)	(79	)	(116	)	(113	)	(336	)
(+) Write-down of PP&E / Impairment of PP&E and intangible assets	($)	16		9		25		21		—		—		22		43
(+) Closure and restructuring costs	($)	14		4		18		14		4		2		24		44
(-) (Gains) Losses on sale of property, plant and equipment and business	($)	(1	)	48		47		—		—		(12	)	3		(9	)
(-) (Gain) Loss on debt repurchase	($)	—		24		24		—		(6	)	—		—		(6	)
(=) Earnings (Loss) Before Items	($)	69		116		185		(38	)	(33	)	57		60		46
(/) Weighted avg. number of common shares outstanding (diluted)	(millions)	43.3		43.4		43.4		43.0		43.0		43.2		43.3		43.2
(=) Earnings (Loss) Before Items per diluted share	($)	1.59		2.67		4.26		(0.88	)	(0.77	)	1.32		1.39		1.06

Reconciliation of “EBITDA” and “EBITDA Before Items” to Net earnings (loss)
Net earnings (loss)	($)	58		31		89		(45	)	48		183		124		310
(+) Income tax expense (benefit)	($)	26		(5	)	21		(8	)	68		78		42		180
(+) Interest expense	($)	32		70		102		31		23		34		37		125
(=) Operating income (loss)	($)	116		96		212		(22	)	139		295		203		615
(+) Depreciation and amortization	($)	102		101		203		99		104		101		101		405
(+) Write-down of PP&E / Impairment of goodwill, PP&E and intangible assets	($)	22		14		36		35		—		—		27		62
(-) (Gains) Losses on sale of property, plant and equipment and business	($)	(1	)	48		47		—		—		(12	)	5		(7	)
(=) EBITDA	($)	239		259		498		112		243		384		336		1,075
(/) Sales	($)	1,457		1,547		3,004		1,302		1,319		1,440		1,404		5,465
(=) EBITDA Margin	(%)	16	%	17	%	17	%	9	%	18	%	27	%	24	%	20	%
EBITDA	($)	239		259		498		112		243		384		336		1,075
(-) Alternative fuel tax credits	($)	(25	)	—		(25	)	(46	)	(131	)	(159	)	(162	)	(498	)
(+) Closure and restructuring costs	($)	20		5		25		24		6		4		29		63
(=) EBITDA Before Items	($)	234		264		498		90		118		229		203		640
(/) Sales	($)	1,457		1,547		3,004		1,302		1,319		1,440		1,404		5,465
(=) EBITDA Margin Before Items	(%)	16	%	17	%	17	%	7	%	9	%	16	%	14	%	12	%

Reconciliation of “Free Cash Flow” to Cash flow provided from operating activities
Cash flow provided from operating activities	($)	123		610		733		57		306		244		185		792
(-) Additions to property, plant and equipment	($)	(31	)	(43	)	(74	)	(24	)	(18	)	(24	)	(40	)	(106	)
(=) Free Cash Flow	($)	92		567		659		33		288		220		145		686

“Net Debt-to-Total Capitalization” Computation
Bank indebtedness	($)	19		30				52		24		30		43
(+) Current portion of long-term debt	($)	31		30				18		13		13		11
(+) Long-term debt	($)	1,600		1,186				2,195		2,162		1,971		1,701
(=) Debt	($)	1,650		1,246				2,265		2,199		2,014		1,755
(-) Cash and cash equivalents	($)	(314	)	(514	)			(145	)	(381	)	(433	)	(324	)
(=) Net Debt	($)	1,336		732				2,120		1,818		1,581		1,431
(+) Shareholders’ equity	($)	2,748		2,642				2,073		2,264		2,580		2,662
(=) Total capitalization	($)	4,084		3,374				4,193		4,082		4,161		4,093
Net debt	($)	1,336		732				2,120		1,818		1,581		1,431
(/) Total capitalization	($)	4,084		3,374				4,193		4,082		4,161		4,093
(=) Net Debt-to-Total Capitalization	(%)	33	%	22	%			51	%	45	%	38	%	35	%

“Earnings (Loss) Before Items”, “Earnings (Loss) Before Items per diluted share”, “EBITDA”, “EBITDA Margin”, “EBITDA Before Items”, “EBITDA Margin Before Items”, “Free Cash Flow”, “Net Debt” and “Net Debt-to-Total Capitalization” 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 or as a substitute for Net earnings (loss), Operating income (loss) or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements thereby leading to different measures for different companies.

9/12

Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures—By Segment 2010

(In millions of dollars, unless otherwise noted)

The following table sets forth certain non-U.S. generally accepted accounting principles (“GAAP”) financial metrics identified as “Operating Income (Loss) Before Items”, “EBITDA Before Items” and “EBITDA Margin Before Items” by reportable segment. Management believes that the financial metrics presented are frequently used by investors and are useful to measure the operating performance and benchmark with peers within the industry. These metrics are presented as a complement to enhance the understanding of operating results but not in substitution for GAAP results.

The company calculates the segmented “Operating Income (Loss) Before Items” by excluding the pre-tax effect of items considered by management as not reflecting our ongoing operations. Management uses these measures to focus on ongoing operations and believes that it is useful to investors because it enables them to perform meaningful comparisons between periods. Domtar believes that using this information along with Operating income (loss) provides for a more complete analysis of the results of operations. Operating income (loss) by segment is the most directly comparable GAAP measure.


		Papers						Paper Merchants					Wood						Corporate
		Q1’10		Q2’10		YTD		Q1’10		Q2’10		YTD	Q1’10		Q2’10		YTD		Q1’10	Q2’10		YTD
Reconciliation of Operating Income (Loss) to “Operating Income (Loss) Before Items”
Operating income (loss)	($)	120		149		269		1		(1	)	—	(5	)	(49	)	(54	)	—	(3	)	(3	)
(+) Alternative fuel tax credits	($)	(25	)	—		(25	)	—		—		—	—		—		—		—	—		—
(+) Write-down of property, plant and equipment	($)	22		14		36		—		—		—	—		—		—		—	—		—
(+) Closure and restructuring costs	($)	20		5		25		—		—		—	—		—		—		—	—		—
(-) (Gains) Losses on sale of property, plant and equipment and business	($)	—		(3	)	(3	)	—		—		—	(1	)	49		48		—	2		2
(=) Operating Income (Loss) Before Items	($)	137		165		302		1		(1	)	—	(6	)	—		(6	)	—	(1	)	(1	)
Reconciliation of “Operating Income (Loss) Before Items” to “EBITDA Before Items”
Operating Income (Loss) Before Items	($)	137		165		302		1		(1	)	—	(6	)	—		(6	)	—	(1	)	(1	)
(+) Depreciation and amortization	($)	96		95		191		1		1		2	5		5		10		—	—		—
(=) EBITDA Before Items	($)	233		260		493		2		—		2	(1	)	5		4		—	(1	)	(1	)
(/) Sales	($)	1,245		1,317		2,562		212		213		425	67		83		150		—	—		—
(=) EBITDA Margin Before Items	(%)	19	%	20	%	19	%	1	%	—		—	—		6	%	3	%	—	—		—

“Operating Income (Loss) Before Items”, “EBITDA Before Items” and “EBITDA Margin Before Items” 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 or as a substitute for Operating income (loss), or any other earnings statement, cash flow statement or balance sheet financial information prepared in accordance with GAAP. It is important for readers to understand that certain items may be presented in different lines by different companies on their financial statements thereby leading to different measures for different companies.

10/12

Domtar Corporation

Quarterly Reconciliation of Non-GAAP Financial Measures—By Segment 2009

(In millions of dollars, unless otherwise noted)


		Papers										Paper Merchants										Wood										Corporate
		Q1’09		Q2’09		Q3’09		Q4’09		YTD		Q1’09		Q2’09		Q3’09		Q4’09		YTD		Q1’09		Q2’09		Q3’09		Q4’09		YTD		Q1’09	Q2’09	Q3’09		Q4’09	YTD
Reconciliation of Operating Income (Loss) to “Operating Income (Loss) Before Items”
Operating income (loss)	($)	(6	)	150		294		212		650		2		1		2		2		7		(18	)	(12	)	(1	)	(11	)	(42	)	—	—	—		—	—
(-) Alternative fuel tax credits	($)	(46	)	(131	)	(159	)	(162	)	(498	)	—		—		—		—		—		—		—		—		—		—		—	—	—		—	—
(+) Write-down of property, plant and equipment	($)	35		—		—		27		62		—		—		—		—		—		—		—		—		—		—		—	—	—		—	—
(+) Closure and restructuring costs	($)	22		4		4		22		52		—		1		—		1		2		2		1		—		6		9		—	—	—		—	—
(-) (Gains) Losses on sale of property, plant and equipment	($)	—		—		(1	)	5		4		—		—		—		—		—		—		—		(8	)	—		(8	)	—	—	(3	)	—	(3	)
(=) Operating Income (Loss) Before Items	($)	5		23		138		104		270		2		2		2		3		9		(16	)	(11	)	(9	)	(5	)	(41	)	—	—	(3	)	—	(3	)
Reconciliation of “Operating Income (Loss) Before Items” to “EBITDA Before Items”
Operating Income (Loss) Before Items	($)	5		23		138		104		270		2		2		2		3		9		(16	)	(11	)	(9	)	(5	)	(41	)	—	—	(3	)	—	(3	)
(+) Depreciation and amortization	($)	94		98		95		95		382		1		1		1		—		3		4		5		5		6		20		—	—	—		—	—
(=) EBITDA Before Items	($)	99		121		233		199		652		3		3		3		3		12		(12	)	(6	)	(4	)	1		(21	)	—	—	(3	)	—	(3	)
(/) Sales	($)	1,106		1,127		1,211		1,188		4,632		217		205		239		212		873		43		46		59		63		211		—	—	—		—	—
(=) EBITDA Margin Before Items	(%)	9	%	11	%	19	%	17	%	14	%	1	%	1	%	1	%	1	%	1	%	—		—		—		2	%	—		—	—	—		—	—

11/12

Domtar Corporation

Supplemental Segmented Information

(In millions of dollars, unless otherwise noted)


		2010						2009
		Q1		Q2		YTD		Q1		Q2		Q3		Q4		YTD
Papers Segment
Sales	($)	1,245		1,317		2,562		1,106		1,127		1,211		1,188		4,632
Intersegment sales—Papers	($)	(62	)	(60	)	(122	)	(60	)	(55	)	(63	)	(53	)	(231	)
Operating income (loss)	($)	120		149		269		(6	)	150		294		212		650
Depreciation & amortization	($)	96		95		191		94		98		95		95		382
Impairment and write-down of PP&E	($)	22		14		36		35		—		—		27		62
Papers
Papers Production	(‘000 ST)	906		882		1,788		869		912		920		903		3,604
Papers Shipments	(‘000 ST)	960		891		1,851		913		929		972		943		3,757
Uncoated freesheet	(‘000 ST)	925		889		1,814		887		901		939		890		3,617
Coated groundwood	(‘000 ST)	35		2		37		26		28		33		53		140
Pulp
Pulp Shipments^(a)	(‘000 ADMT)	388		486		874		314		393		446		386		1,539
Hardwood Kraft Pulp	(%)	40	%	38	%	39	%	33	%	33	%	40	%	35	%	36	%
Softwood Kraft Pulp	(%)	49	%	52	%	51	%	54	%	54	%	49	%	54	%	52	%
Fluff Pulp	(%)	11	%	10	%	10	%	13	%	13	%	11	%	11	%	12	%
Paper Merchants Segment
Sales	($)	212		213		425		217		205		239		212		873
Operating income (loss)	($)	1		(1	)	—		2		1		2		2		7
Depreciation & amortization	($)	1		1		2		1		1		1		—		3
Wood Segment
Sales	($)	67		83		150		43		46		59		63		211
Intersegment sales—Wood	($)	(5	)	(6	)	(11	)	(4	)	(4	)	(6	)	(6	)	(20	)
Operating loss	($)	(5	)	(49	)	(54	)	(18	)	(12	)	(1	)	(11	)	(42	)
Depreciation & amortization	($)	5		5		10		4		5		5		6		20
Lumber Production	(Millions FBM)	172		165		337		121		131		147		161		560
Lumber Shipments	(Millions FBM)	164		187		351		125		135		153		161		574
Average Exchange Rates	CAN	1.041		1.028		1.034		1.245		1.167		1.097		1.056		1.142
	US	0.961		0.973		0.967		0.803		0.857		0.911		0.947		0.876

(a)	Figures are gross of market pulp purchased from other producers on the open market for some of our paper making operations. Pulp shipments represents the amount of pulp produced in excess of our internal requirement.

Note: the term “ST” refers to a short ton, the term “ADMT” refers to an air dry metric ton, and the term “FBM” refers to foot board measure.

12/12

Domtar (UFS) 8-KResults of Operations and Financial Condition