UFS - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen. Welcome to the Domtar Corporation First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session.

As a reminder, this call is being recorded today, May 1, 2018. to meeting like to now would turn over the Mr. I Estrela. Nicholas ahead. Please go

Nicholas Estrela

morning, Thank earnings XXXX you, and to Don. Good welcome our first quarter call.

which Executive prepared and Officer. Care Daniel They will will President be the supported they Senior today Personal John Garcia will remarks and President Officer; from will Michael Mike Chief from Pulp Vice Financial speakers and Buron, division questions. and begin division. Chief Our and after John by with Daniel Paper be take and Williams, Fagan

call, references you websites. the section in will During supporting be the slides, can the made and of presentation to find this Investors

uncertainties, As a outside our of I not forward-looking of are facts Commissions which invite reminder, that control. are Domtar's listing review a you Securities statements those. and all statements, the subject the number filings many call on for a to historical during are based to to made risks of

GAAP can our of and release, financial the presented Appendix well measures this be reconciliation Finally, GAAP in closest on as the certain the as find non-U.S. measures will you website. morning's and discussed, to

with turn it over to So, that, John. I'll

John David Williams

billion. $XXX Thank we reported of This you, everyone. sales fourth million versus improved morning, on and of items before Nick, the EBITDA good $X.X quarter. Results morning,

results environment Pulp strong Paper more favorable businesses Our our strong we those generated businesses. products. and costs, for a the we were million momentum In our good results lower in price maintenance quarter, improved and over and delivered in $XX and operating pricing driven cash productivity, flow see continue by Paper, to

the a of quarter, X% during increased our paper increase that versus covered And volume majority the Our price we implement continued to announced four. previously grades. sales quarter

impacted that for mostly were the benefit up Pulp, recent we with further Results but $XX which results adult price Same our output our In foreign did pulp to in result, grew price momentum. solid, confirming currency sales uncoated increased raw the price April, were in due realizations Prices from input of below fourth incontinence but on line a exchange Care As flat quarter, are and increases X% and traction. up costs, moved diaper and further and gaining freesheet weather, the ton. translation per were Personal Care were and sales costs. by baby effects impacted volumes were material our expectations. in respectively. X%, margins side Personal slightly year-over-year,

We focusing for improving that, further we fourth portfolio. are our our taking the over before on to Daniel SG&A, quarter while turn for customer comments on Daniel? importantly, productivity, and the results financial review growth long-term by success, near-term outlook. opportunities. Most strategies to performance and making call our actions executing improve transitioning me With our optimizing our are let

Daniel Buron

and everyone. John, you, morning, good Thank

X. the financial share going slide per share on by first share per quarter quarter. for $X.XX compared $XXX per in amounted to the million earnings for earnings share Let's of over reported start the the items, $X.XX of XXXX. a for to quarter. fourth this earnings to Adjusting loss the quarter per highlights items the our $XXX of We first morning compared before net net in $X.XX fourth the for prior compared quarter $X.XX of quarter EBITDA were to of million,

$X quarter, fourth largely pulp. million amortization than volume Depreciation due SG&A to the than quarter the Paper Pulp quarter, the million due stock-based $XX on partially was to lower our offset than and higher sales earnings $X higher million compensation. lower mark-to-market Turning variation while were in sequential Consolidated X. business, prices slide in by and lower lower of was of to fourth the fourth

quarter, we of included a of equipment property, of $X a and the total million a XX%. tax on gain settlement results quarter litigation plant, recorded following first items; income $X or and first The $XX disposal the million. expense for million In

amounted cash Cash provided cash flows the on to activities to flow the from quarter. operating million million, X. flow in This turning in first of while slide $XX $XX $XX capital to free million. Now, resulted statement expenditures amounted

quarterly fourth $XX for million, X. by for for $X million, for million slide for SG&A selling higher When and million $X increased and costs raw Turning costs mix million. costs higher costs freight to prices $X $XX higher These compared waterfall material quarter, were million, $X $XX the before EBITDA lower million, the lower lower lower lower exchange a partially maintenance offset productivity million. other for $XX for rate to volume million, and to negative due for $XX million items $XX for

in some Our fiber costs. a We the were estimate particular impacted the first our energy in extent to paper mills incurred pulp and normal of lower quarter, in and by productivity $X weather-related higher results approximately and million severe lesser mills to some quarter. our than be condition costs of weather that

X. compared before our slide the segment, same to compared $XXX million XXXX. period Now, to sales the $XXX on items when the X% and quarter was to year. In quarter Paper higher of of review X% and last segment when the fourth were business million compared higher in fourth Pulp the EBITDA

million. higher estimated X% our quarter to Our versus year. QX X. higher were was on EBITDA $XX Manufactured higher Paper last last while before quarter compared year, paper ton business transaction $XX the and the items same and X% slide shipment than versus quarter. all last increased Sales last for X% per Average X% were higher versus the paper period grades prices were when same

was XX% XX% last XX. slide and EBITDA our X% versus items last before lower Pulp million. quarter versus shipment were period Pulp to the $XX the year. Let's XX% same year. turn were the fourth to the higher on Estimated when last quarter and same period compared Sales versus decreased business down

productivity sold than first XX,XXX out quarter. part we versus ton prices due shipment metric in lower as metric at pulp of were in quarter. increased of to lower quarter the the of the lower pulp inventory in Average per tons inventory Our fourth year in $XX QX, QX and the beginning the level

the tons increased Our Paper quarter, inventory pulp by for decreased are busy last while to we XX,XXX quarter a business. Pulp by inventories as compared our planning tons when in maintenance XX,XXX

Care last and business XX. $X million, increased lower the slide Personal quarter to were higher than EBITDA quarter. on compared quarter was the versus same X% item $XX Our when Sales X% year. before last million fourth

slide turn Let's to XX.

will major and our you the maintenance to active can quarter regards Pulp see, with quarter Paper As be in planned shutdowns our second most business.

the spend be and should this and $XX to million than first approximately evenly expect what quarter, spent between increase Pulp in Paper. we We more split

And that, I'll the call review. financial my John. John? back turn to concludes with this So,

John David Williams

Thank you, Daniel.

continues well Our continued results to pricing cost above-average as to realign contracted in deliver led strategies despite spot with both Paper carrier ongoing remaining to costs, procurement impact pressures and us The distribution logistics business strong adjustments high. rates our our has to quarter the as costs. and truck freight This make shortage first approach.

decline where won shipments the imports in demand some capacity across impact in of We size drove part we have it seeing volume sales quarter our approach good business levels, of the we announced we a of with addition of business the year. paper in maintained above there our to more product solid We to closures Recently capacity, the in new challenges This industry several our been and helped what spot base service, plan. in had also ran reasonable inventory. communications earlier weather experienced stock all are machines incremental with Moreover, the very XX% near running freight and some and Although due in we're good of offset with XX XX,XXX service our compared customers strategic our sold satisfied with converters. most our grades from location and productivity costs. from production tons specialty We in of large converting customers. network. related resulting ahead, have X geographic our to in

Our strong, come. markets some the are of be balance over time in to backlogs announcement to expected keep closures can and

outlook remains our positive. So,

business shipments price April, increases. per a a seasonal prices increase recently mix announced lower-margin momentum In were did following we announced ton First exports, include of most but quarter overall, higher of on flex price tons. as and $XX severe impacted issues reflect and Pulp, which, approximately mentioned, our covering our continued In business. communication mills, the X.X volumes. resulted several costs at our operational grades million both in in weather These increases

trend. Our average upward their continued prices pulp

as per our price to of were of softwood $XX last and implementation we as compared continued Our ton announced increases week, higher effect Prices metric North to demand a of short higher head momentum four to and in also increase grades the prices China April. maintenance This term, American pulp quarter we reflects increases. North fluff America the Europe. And price in and improve softwood full when the in saw for shipments the on the into in grades by period. $XX supported price steady continued announced May seasonally $XX we

optimization North Europe NC-X line our Plymouth XX,XXX and day a to represent fluff sales our XX% with annualized. nearly reduction of reminder, Plymouth America pulp a approximately permanent benefits already streamlining shut. well next seeing we're executed per the from important plan an is immediate and our about The of step XX pulp closure occurred resulting The in of the NC-X in mill running market the mix. pulp measures line the NC-X the at the shutdown since quarter, mill. above during tons was As The closure tons of

focus we'll cost driving the the initiatives including Going improving the issues are Kingsport capturing Plymouth, on In and business. from pulp Nekoosa. now our quarter, of several paper us, within and improvement planned major behind outages savings also facilities, Dryden, forward, weather-related and Kamloops, at continuous and pulp productivity and strategic given are second

costs. our rising So, In pressure, vigilant safety reflect execution. raw Care, price conditions, and competitive on both we results be market will material and Personal

to highly-complex, phase It headwinds However, efforts efficiency include This changeovers into fewer productivity we will on categories. products. and wins. lower-value our and our translate savings are pipeline which will across costs, will new of we in mitigating completed streamlining will lines multiple SKU some result the a of cost manufacturing into on allow gains. sales first these converting which us also eliminate reduction focus On through

be be I'm expecting continues sizable in to execution some Our more we'll North partially we bid by be others able With We beginning pipeline and expected this with This won win and reduction compete this and major will diaper to effectively year that delivery quarter. offset challenging next savings, to – that retailer are volume infant quarter strong a cost confident with a market. American sales active. three. good

$XX allocation the we generated was X.X% of capital $XX which year. returned dividend, to a shareholders share million recently to during by our Turning via free for increased cash per per flow or group, million $X.XX quarter, to the

to the business, EBITDA meaningful over repurpose our to We're deploying flexibility and assets and leader reflects We've to made manufacture and growing growth We the shareholders. while continue strategic position provides our will last returning business to sheet deployment and positions in made years. fiber-based current disciplined balance strengthen will demand, cash, capital maximizing Paper several products mix the establish strengthen resources, to in decisions a value-creating these a to approach decisions our capital that maintain balanced core opportunities Domtar's markets. as consider markets. with new we

in As we're quarter and call, cost our fiber focusing portfolio optionality our business our Pulp building on of the on lines. fourth mentioned value investments to notably our asset with targeted preserve on reduction from investments,

outlook. Now, our turning to

paper in the we expect and benefit and our from imports, to price paper from increases. benefit saw industry shipments and capacity announced we quarter recently lower should As pulp one, closures our announced

affected be Paper The the higher our will our into some business Pulp second major seasonally activity shutdowns of quarter we and at move annual as facilities. by in maintenance

is our Personal of by impacted to offset expected costs be you raw And and material partially for higher cost time Finally, the unfavorable negatively an call for and to balance, questions. Nick savings support. I'll Thank turn initiatives. some over tender by Care your

Nicholas Estrela

John. you, Thank

questions. Daniel many Don, participants line and can. John you ask to a for people questions? a our the both available open get we as follow-ups, queue for ask at to So, few I'd as as return will for questions to time and can want be we

Operator

Connelly Mark your with We're And hear take you. Mr. mute Connelly, first check unable to our Stephens. Certainly. from we'll question function.

Mark Connelly

mean, about $XX $XX talked I'm – comments. I you price since hike. realized achieved. in mix looking QX John, of into help I'm you us understand prices Sorry. down what backing wondering of if you your despite just kind can prices actually

mix that's So, your the huge is time? actually or mix amount same at changing a negative of

John David Williams

couple again, margins impact stuff a increased. are I the increased the And shipments of stuff those I Mark. in can't bit book where of of trade of obviously see the you really give Certainly, the you detail, exports quarter our strong. that which of our quarter, the business a of We've in on a it's mix. not of things. happened. guess, and beginning some the for four, slightly season has sort some sort export first some Again, negative

March, say, we're would out of going the of if sort do believe traction in I quarter However, of I the coming quarter momentum end we've to in I look pricing, two. sort get at of seen which

So, I increases. overall, we'll impact see sizeable think, from fairly price these a

particularly because now is also to people in a opportunity now, really tightness gives prices. the that so in of I think the seeing increase for what terms actually we're curve and looking paper, us the supply-demand marketplace

actually, think, strong very feel I I now, price momentum have So, front. the we on

Mark Connelly

mind, to seem the your and that your prices? more. in the published see Warehouse, helpful. but happening pulp just And the discounting prices anymore. between used Okay. one that cuts actual much That's out price transaction of what's In hand, relationship don't you're when we to got see announce we to

John David Williams

interesting. it's Well,

So, most this And first part those we've the of because of the so in discounts year, looks hasn't the negotiations part seen right. market but you're those take Historically, of really opening happened different. sort up, year.

it say XX%, sort fairly a been that of whereas help? would historically, stable, stayed change. That to have would I XX% So,

Mark Connelly

Yeah. Thank for you Super. the help.

John David Williams

righty. All

Operator

question next from take We'll Sachs. our Goldman Maguire Brian with

Brian Maguire

Hi. morning, guys. Good

Daniel Buron

morning. Good

John David Williams

good Brian, morning.

Brian Maguire

Personal we're of And the prices pricing. through diapers seeing time Just like to then, increases hard own business in seems or for passing of to does increases whether a end customers, the be prices were in been to this on through it North announced year also, pulp but trying It China, were year. consumers. a your or American they where most having tissue price get question Care flat those it a lot even closer the pretty the Chinese seem have like

of about given given think on back I probably innings is later there, the other momentum more – are? some of But, towards of run peak closer mid-cycle. that sort to know past, on talked where us this prices out you we're guess do prices see going in just think So, the there you getting that I dynamics do question ahead? pulp backdrop, the the you've or the do in to you or

John David Williams

fairly I I why; I in actually The ahead. for developing dramatic couple demand a you product of momentum see more markets. reasons. mean, tell end-use is the

Baby markets, strong. in obviously strong. whole faster business very the developing incontinence it's developing of markets on is tissue GDP, developed sort So, markets is in Adult is but in developing that. markets than diaper and very still

coming So, if you at sort of look in there's you end-use mind, those to capacity runway. in lot of and my demand a markets, look at key

of as signs tissue right, you're to in the the of beginning to take Now, beginning you I the you're the pressure But able see move thing quite our business, within Care But, people customer the action, their example, think margins chain, with for absolutely in pressure. demand, supply But, there see see you're reducing Personal particularly tight think, price. is front fairly to value and I right, at count, their the in sort I terms a mean, has of, I there's underlying toilet people softwood, of think considerable that end. you're to being runway. kind improve balanced in market that as

Brian Maguire

Okay.

tight a with the comments outlook, a like to in the Just it's follow-up switching setup Paper business. about reductions. Seems market, it's number your the there capacity some of say, you had as Considering years. a like best

of to quarter, there, you that XQ changes margins would take the coming recently. your worth Just taken whether we're out traction. and heading rebound thinking view the changes seeing some how into them it's if first This about to whether pricing them putting assets wondering your of and and capital lot actions repurposing that need some yeah, have a timing, on market of to of improve action repurpose into the in considering others the

John David Williams

That's Right. no. a No, great question.

it's important an I let's about So, that, think point. because talk

on we us how paper manage seen really I the got demand put it, you've of through we've we've in what sort closure closure, see to never paper always depending of historically, what demand. So, that ahead do, tried would –

So, time other. that's see choices – us We're part repurposing do of one and you'll to work announcement the some way make one year-end have by an equation. busy and continuing we're or our made doing on the probably the

by in you though, Now, think must X-million even our still a business. see average remember what is sort network, have in that's the a wings product of of one sometimes ton below demonstrated I as we tail mix EBITDA,

of one we the the tail sure take still maintain make best of that we a about is, So, tighten always things we and can to think closure up business. sort do

a number right. are there but So, quite you're choices, of

you have you if where out at of look at we coming time. think there's had no this today, for absolutely look that capacity question, some ourselves haven't a we opportunity market, amount an while that's I find of the we for

Brian Maguire

much. very Thanks Okay.

John David Williams

All righty. Thanks.

Operator

We'll with take our from question KeyBanc. next Josephson Adam

Adam Jesse Josephson

John, Daniel, good morning.

Daniel Buron

morning. Good

John David Williams

morning. Good

Adam Jesse Josephson

Brian John, quick to his your to response said thinking sounded I though a to (XX:XX:XX)? an expect announcement conversion leaning you said summarize necessary or question, year-end. are shift than what certainly question. quarter, in characterize changed, your not you've just or any has thinking -just conversion. Brian's last make had last follow-up you by (XX:XX:XX)? toward you How as given one to more talked one Has compared you you to your would It in Has just know, about thought changed what doing

John David Williams

I ago, changed I you question. our minute, we the that we mean a mean, where to to we're is much, take market, think, stage? can a has to match I then, is current of mix kind think Yeah. does some obviously couple action. of mean, very our we have thinking great possible, with if at months At competitive what that and mentioned. we be as I that dramatically. this we don't obviously – talked have it's the you

few going our there are to choice. trying parts sure that we obfuscate, be are but up make decisions before lined get those to a I'm So, over we the next make can have not of to we moving really made months. lot

Adam Jesse Josephson

Sure.

Thank And you. others. Okay. just couple a

On was the from material had outlook, that raw sequential you by inflation. XQ, XQ offset obviously pricing to

are the you. about the that presumably problems talking weather fact You're behind

in additional pulp more you pricing rates Are were XQ a – before. obviously, bit in think you're – that would improve both you they incremental than are expecting XQ spot sequentially that said are inflation weather thinking Do or I et of spot pricing, sequentially expect trucking reasonable not expect and you that offset problems raw paper. to that XQ you continue, think will some given to material the you necessarily don't cetera?

John David Williams

a substantially. question. That's Right. great Not

quarter I are changes, levels any the careful we're you for kind transport in do if transport remain is But sort a expecting normal one. the I but going thing increased one won't. think of of would There's new no of high. until be probably while versus not quarter I that inflation, something to product to it really reason of two think like, is believe

Adam Jesse Josephson

wouldn't If right? But that, it it... where just from at remains presumably, be there sequentially inflation incremental

John David Williams

mean, it quarter I but one history around we think versus it an is the at what level it's is, level. elevated

Adam Jesse Josephson

Sure.

John David Williams

help? That

Adam Jesse Josephson

– And just think so. yeah, I lastly

John David Williams

Okay.

Adam Jesse Josephson

those in outlook, comments sequential your the Personal other of mentioned? on expecting slide, factors the words, you as you Just are result nature? a Care you sequentially in In the down made EBITDA were outlook

John David Williams

we've actually at the made through. line three. quarter quarter two, through three, We quarter win to come major the two. beginning end kind quarter of wins four come major to trough tail And on the They're quarter started of, the made we've have then, or a, sales

two and lower So, three, ramp to the sales, to four. sort a start quarter see that quarter a, of, then three, you'll up quarter in you're going quarter lower see in

Adam Jesse Josephson

much, so Thanks John.

John David Williams

Thank righty. you. All

Operator

with to We'll Bank of George go next America. Staphos

George Leon Staphos

Thanks morning. details. everyone. Hi, the Good for

John David Williams

Hi, good morning.

George Leon Staphos

one bit from detail of should had EBITDA. How and case comparison us effects be are in couple we you we more In guess give a of like looking terms terms the up sequentially been my effect be Can of when you that'll maybe on Care, either what's year-on-year will we're sequentially just I XQ? doing? the Personal just sounds or whether first so And questions, the happening a I because versus tender proceed. neutralized? set given that XQ It see with lower at Adam, magnified

John David Williams

So, that's question, a great George.

four, beginning Quarter will much new Quarter down quarter you the but quarter three, to XXXX. So, pretty rate quarter four, down we'd on of be step three. at sales. will recover step a you end the two, see at in full a one see quarter in run sales, probably business;

pieces little sort down a see that of, you're Quarter at, up bit a So, see business in reflected two. customers. be won back quarter that but movement see been see And because And of little reduced strong EBITDA. our volume we've – we've will going three essentially, there a then, has trough again. downward is of level. – some new – you'll you'll to a very And obviously where that by that business, you'll some move our also, are

the put doesn't it always all together, way the you work you'd timing to. So, that like

earnings and So, you the to year. you see if that's line that you see this the sales why, like, the shape,

George Leon Staphos

So, John, just capture to that. trying

maybe So, there up number XXXX trying EBITDA to really directionally, anniversaried the quarter? looking segment by you we you've be should is until not it? – not fourth or year-on-year a get to not it out I'm when put I'm in just at

John David Williams

till of we customer really that win for up-front marketing that, business on, XXXX. And our It's is some is the support the reason early weighted. George, slightly as behind

that So, work to sort way the of, but that impacts, beginning, at the starts business on through. very through that its drop

I is help? the look. XXXX So, think Does to that time

George Leon Staphos

follow on it Thank on, you. I'll Obviously, follow over. cost been business. then your the adjusting additional you've position My Okay. and does. within one it turn – My yes,

how And its also these to It's within four investments adjusting environment three, extent more been ago. a customer are is, let's envisioned you'd or fit than us competitive where levels perhaps you're think current average two, you made so? certainly Care possible, Domtar when remarks, then, give call feel us if question and of Tell Personal at I first your your all, unrelated you has prices mentioned Thank during just formal the you over John, if the it, years the for in portfolio. vision quarter? you. last your and first relative some the for the pulp terms paper could year to last, changed, in

John David Williams

quite question. Right. a Gosh, that's

Let I remember me see if can it all.

we very a over believe versus think average putting another pricing, They, you I core We have think that business. SKUs if it our good And meant still On We small think I that to It good as think focused the haven't it's the environment margins, lost business. that's price very our haven't we announced So, is at fact we've in on but We I when announced, Personal carried quarter. this that as remarks, of of I published of And underlying actually to increases. machinery And give right point at that's about was $XX. two actually stronger that lost, March than like my I tough. it's top-line really we we know, think, us solid drive said and aspiration. should first right Care, generated over we our pricing our earlier, momentum pricing in paper a we the course, mid-teens as time, part sight much it's right. you earnings. has in But, and efficiency. we've got said sales issue we're or some I our now still the pretty productivity on change times growth. been think, it. operating some we're have, used now,

actually the expectation Does that get I get price So, tight a we're it and increase, out historical help? to very market is there. have we're solid versus to relatively going norms, going quickly because every

George Leon Staphos

$XX? exit I before the price have kind you fine. Well, And it's if don't, mean, of. an do you recognizing that's

John David Williams

Okay. was was The paper ton quarterly higher $X for per pulp. and price the for $XX than that exit the higher average,

if starting Does will. point, that George? help, the April that's So, X, you

George Leon Staphos

guys. Very you. so. much Thank Thank you,

John David Williams

Thank you.

Operator

to Citi. now We'll Pettinari Anthony with go

John David Williams

Anthony, hi.

Anthony Pettinari

Good Hi. morning.

John David Williams

Good morning.

Anthony Pettinari

wondering had EBITDA other. a Just you benefit the on $XX bridge, from million

bit. on think, Freight following $XX that And up a freight. could if Just quarter-over-quarter. Adam's just wondering out I you million question, then, drag was break on a

just impact? – step XQ, about is that or million Or you up size that could that As think rate? expect would run $XX to a you trying

Daniel Buron

first the answer question Let's first.

$XX of the benefit working line million on waterfall million accounting that pension. the have our actually or capital is you foreign see working the movement new of So, non-U.S. exchange that capital of a that there that items. $X linked working Actually, due There's on by is you $X P&L pronouncement. on was new the created that is million our the actually to to

There's is a You that benefit rest a that $X see reversal a and that small meaningless in is environmental provision million order the of now line. $X or of of amount to actually adds million. sum amount that

we John in QX. we've So, we current for explanation is the what there in $XX as see million. done that's the The why earlier, reason than freight, no don't mentioned the better environment how can do

coming the would freight I forecast in quarters. So, similar

looking the mean, for I of million or of the maybe million same risk to QX, of I year. increase, less further forecast but $X or there's if more would freight kind of forward much. QX at So, you're $X going the rest not

Anthony Pettinari

pulp I a the demand, of maybe levels, or with having kind think more earlier. bit inventory that on very so? demand going conversations about Chinese talk China underlying that in than to just you helpful. over then, Can a bit it had domestic Obviously, you touched you've prices last month prices. the of was buyers about Okay. Can just moved up conversations back Chinese That's you're in And terms the China. talk have

John David Williams

about talk so, – Sure. I let's mean demand.

China diapers all judgment diapers, still growth my look that, at adult that But inventory and all thing remember important of is strong. my stable most actually, first. weeks occasionally end few selling, are peak is see in China. in the Obviously, still and seems tissue is years. to the very, in sort in happening ever spectacularly it's urbanization And in could part think number way a there's go paper, best demand prices me I terms to judgment, there's baby change of experienced this, use just if you remembering i.e., non-buying no solid very we to runway product just they're this in it's very runway any off the all cycle; of within what's out will with blink to look it any try be they'll the and particular of and of you that stage And consumer, wrong, reason going is pulp. at pulp we've so we're I prices

pricing So, this above to years. we're But would it's coming small view over only capacity My call there below we're global versus the run. left plenty some sort what average of last of has room market, new of is that, mid-cycle and a really in. pricing, sort still of dollars pretty several Yes, softwood just I is number. is the number

guess, this my to So, continues.

Anthony Pettinari

That's very I'll it over. turn helpful. Okay.

John David Williams

you. Thank

Operator

Well, Gail Equity. question go to Roe will next Glazerman with our

Gail Glazerman

Good morning. Hey.

John David Williams

morning. Good Hey.

Gail Glazerman

So, of pretty seeing out, a you paper of you're can are and destruction, give that more the bit to concerns X% the the magnitude little confident the color might some demand wondering on of any if still it's on maybe the coming just X% demand on capacity signs within accelerating be given you what that's kind side you or range?

John David Williams

as see X% about it's our year-to-date, growth. can so you Well,

beginning months of it's XX% you capacities of sort So, to we know. industry XX% years, already, to XX as coming about over out estimate two

sit here XX% one capacity does that the we says, a math, market now very much the in if about So, it share. with leader as

think where long for who with they below. It's there is And nearest term. they believe almost place is that carefully competitor half. beginning around the are a customers our supplier a Our pretty long way strategic to business

quarter we'll it this So, precisely, an and continue for the in says we've you I that's an us what XXXX put all marketplace. done first position build and even in there's in XXXX. stronger to to opportunity do and And think, that together here

Gail Glazerman

tariffs front, just then, other little the of there also, Are I some you from different seeing shifting is There freesheet chance situation? freesheet uncoated trading movement Okay. from implication maybe in grades. groundwood was suppliers, then, the wondering any just pieces. And publications in because guess, I I'm of two people of And the on (XX:XX:XX) a on bit Asian any of on the to guess. duties

John David Williams

to second the say, nothing point. periphery, on but major, bit little A I would the

the the been in means markets, I the to on needs own even markets, which perhaps importing happening dollar is and it is been in with where you – the one at attractive pretty point, think price has if their so. it everybody in look to last strengthens what's or moving is Actually, dollar the as U.S. which, global course, as not domestic historically. it slightly if week first aggressively, of remember was

be that duties of the Does So, second help? bit I in that of year, difference that make it's but honest, movement going half the be dramatic. some to think don't in to the might little

Gail Glazerman

Thank Thank Yes. Okay. you. you.

John David Williams

you. Thank

Operator

We'll to BMO Wilde Mark go with Markets. now Capital

Mark William Wilde

Daniel. morning, Good John. morning, Good

John David Williams

Mark, good morning.

Daniel Buron

Good morning.

Mark William Wilde

– offshore our come lot going just flows John, to up back of another to of a just equation cost raises the trade uncoated are mean, kind so isn't these I pulp pricing on of the piece freesheet. non-integrated, position? mills

John David Williams

Absolutely. Very much Yes. so.

Mark William Wilde

Yeah.

Okay.

John David Williams

I mean, the some of particularly No Asians. question.

Mark William Wilde

as tree us the little of here? of sort of the of what – of Okay. walk back And the on to Just are to sort over just then, kind decision through move decision. kind of a – containerboard process give issue, what you us of kind elements you sort clarity wonder key as questions the toward I conversion can doing, just your a you're to walk

John David Williams

Absolutely.

as So, with continue to done and know, do the work you Jacobs. we've

radio why, the that's ongoing. we've So, that at is because gone slightly minute, silent work

point we cost think, to our cost can well, competitive market? of in probably is level where three is key key brains without third to spend? four want have out containerboard is, get things we So, Point I can sensible a what Point reasonable Can market make So, be, comfortable first. we any – on of a entry competitive? is, we blowing be One the things. of we second, with that's CapEx a kind we're our the to can the the we not that do sort at that really fraught capital point risk. too

joint we an have venturing. open mind So, on

We customer we're working have an on is all prior on open sign-up mind that to furiously. –

we about. well, we also, Right do the we show do our good, a more something is I could the have? probably position what fourth tail margin as that with thing aggressive volumes do uncoated now, fairly are do but we have think freesheet

shot So, our implications uncoated market. freesheet the that to of

to us Mark, ought be I that things to we line think this up, really the to are is have something that be those comfortable So, for doing.

Mark William Wilde

if other on don't just issues I And this some couple Okay. to have. it's a wondered to a related heard I give you if you could do say a single to of I've thought this. us people be mean, just to want going you'd machine like

a of, move, also, mean big that. you or wondered strategy. to I customers. domestic part could, buyers? then, how customers be And some us approach mean sort of, going kind directly about, longer-term kind to going you talk of, if converters also that going sort you're to of confirm to If talking this and it's it to, could of, make a, export Does box

John David Williams

Right.

all of side. over above the to on customer multiyear the but the is time, So, it's And think a I certainly that answer process.

both conversion number competitive key be We issue basket from opportunity issue. key this wood of you supply, have, mills wood know, that as a in can is and obviously, a a environment, a is

want all So, but a detail, runway. that No can question. mind is to containerboard. multi-mill runway point, we go this through you is a of don't you be don't supplier there a there put I where at if together, the

Mark William Wilde

Care market market, more Okay. más down this these any going with in no I I signs one if the morning the And saw becoming seeing Care a any is the I in GP you markets. Augusta. over Personal last that thing in and of mill shutting All down is tissue just we're wondered of had the people competitive right. same tissue see Personal

John David Williams

Say again, going people ...

Mark William Wilde

Personal Any or capacity starting people sign kind in Care? exiting rationalize of to of

John David Williams

what growth. I we is I Actually no. mean, see think

individual people that see by to different buy Mark. product, to growth. So, we It's get top-line machinery continuing very

booming older are adult that now, sort patient. So, Europe have for of the in example, product the is you booming. to pull-ups business softening, as yourself fashion of That but product is diapers right the extent pull-ups some for a to assemble sort

rationalization Ontex assets. mean, these of I see I ownership there's some of don't But, haven't you cases. out. two pulling been people seen terms obvious Obviously, of in I So, what suggest. and ourselves the being

Mark William Wilde

That's Okay. helpful.

John David Williams

sense? make that Does

Mark William Wilde

sense. Yep. Thanks, It does John. make

John David Williams

All Thanks. righty.

Operator

We'll to Research. with Vertical Dillon go next Chip

Chip Dillon

Daniel. morning, Yes. Good John and

John David Williams

good morning. Chip,

Daniel Buron

Good morning.

Chip Dillon

the looks like us What a maintenance progression obviously we given look second great guidance of sequential million quarter pricing In My there's Pulp substantial – I costs, and a main Paper, is, pretty momentum. should expect in to Paper Pulp in at think first when Care. in increase, that question other we division? in and the and you've lot Personal words, got you've $XX-plus

hit, have weather would million I the You don't $X imagine.

weather price you wise? the maintenance, hit offset of the a the lack match first think or the or be do you can real and to do so, quarter, going increased the it's And think to stretch EBIT EBITDA

John David Williams

But, to that's sort I'm that here that guidance, if not you is intent. I and not of – planning planning is we're I'm in mean, Obviously, giving careful offset Chip, backing we're maintenance by momentum. what and all can tell Right. I you pricing my that we're

Okay.

Chip Dillon

I I you. got got you.

there. So, you can think you get

there is to your (XX:XX:XX) Okay. your containerboard? (XX:XX:XX) helpful. possible in is we're likely repurposing might is Is you whatever that be actually of containerboard? maybe it thing That's that in fluff tightness a a bit market. quite remotely be chance very then, most Is or that be is, still next likely second to as And (XX:XX:XX) something to the or is footprint or opposed mentioned the and that changes, seeing fluff

John David Williams

that's No, great a question.

option. look who two the obviously you three pulp, one always have globally and only are fluff IP. to of I I mean, think, mill. remind have We're know one it's So, an at GP than again them. you more other ourselves, if We players

the has open we is to have it's wood anyone to pulp so if us. third mill we competitive, a basket that a fluff And certainly, believe competitive So, that's optionality globally do.

Chip. always on So, that's our mind,

Chip Dillon

pulp a you eucalyptus? as I especially blending last significant be, can America market, in how their do Okay. you limited, look is, And force South radiata of question quick think pine the fluff guess, with at the

John David Williams

Yeah. an interesting question. that's Well,

So, sort XX% belief for talk player, in, if of drop probably their is you their the of appropriate material. sort to is major a most

not material with loblolly going to going you're fluff. pine to have you're to So, – that blend

before you're a that more you pulp it upfront there's the So, believe challenge in price a you've of major unless customer, in bit handle some of mill. arbitrage somehow hammer got if there, terms hits you a how technical

So, of we because the don't to I it's of front it's that not, I my a players major option. converting shall the out, lines. great Care, believe find plays mind, but how that the think don't issue its think, it'll place, see I in Personal for But, at

Chip Dillon

helpful. Thank very That's you, John.

John David Williams

Thanks.

Operator

Capital CIBC question next our Markets. take We'll from Patel Hamir with

Hamir Patel

morning. Good Hi.

John David Williams

morning. Good

Hamir Patel

from retailer to Care producer? that is a just a the you be referenced is another on that going share brand, private displacing label curious or taking major John, I'm win Personal side.

John David Williams

producer. versus label label to very plans That's taking private But, share from putting grow own retailer truthful, out being brands. the another I'm within stores ambitious private dramatically share their if is

partner – major is I store think And and So, that to going think as be mean, how I brand this vindicates portfolio. a category see they're have within transpires actually strategy going fascinating brand what run their you're now this actually. we to to – it'll see our that of I sort really

Hamir Patel

then, you indications just reducing price are of way? we've seeing, counts And helpful. seeing recover given to diaper That's John. Thanks, curious any cost that producers been the pulp inflation that

John David Williams

the of little seen yes, it, bit in marketplace. a You've

of that. Some the have done major brands

I I'm of domain. taken it's public major Some in on the sort count. school. out tales mean, brands some telling tissue of of the out have all not

So And one it's to to margin. you're way – a think I price and that. going lot maintain point a still see maintain of

some I remember is pulp sometimes think way thing the to one U.S. these operate. in contracts the of

brands. some players the major that may hit, a you the think I see to lag and really of major of more announced starts actually pretty have that and as between months. large Some it's well price of matter of a price from increase, And

Hamir Patel

on, maybe, to then, put And flexibility to the it piece institutional different the are suppliers with (XX:XX:XX). the respect to that John, dynamics way

John David Williams

In Personal Care?

Hamir Patel

Yeah.

John David Williams

depends. In Personal Care. It

various health you system three those of national you're bidding prices that So, sometimes get health organizations, two regional opportunity have make bids you're the you year, a and and yes, lasts bid, national in years, kind from next a years. the where in business for to

And, whole you increase. opportunities. while a truthful, while a space I'm in material the seeing who's to you're on from move to when can everybody I portfolio you that we we in takes So, as takes And margins, fixed, think get to it have where it is portfolio. own that bid price but see based the being opportunity. Hamir, a have brand, get our fixed, have reporting. it's this raw But, probably Obviously our

Hamir Patel

all Fair That's enough. I John. have. Thanks,

John David Williams

welcome. You're

Operator

Chercover now to Davidson. with go Steve We'll

Steven Pierre Chercover

And everyone. Thanks. good morning,

John David Williams

morning. good Steve,

Steven Pierre Chercover

So, and the will my phrase offset sales the hope be to Personal recent question capacity? that I costs diminished elaborate expect – more is I restructuring, you Care, the and But, on accretive lost do it properly. than

John David Williams

Absolutely. Yes.

gain any products on on and the we'd And XX/XX – machine you in is classic to the the want maybe number that platform of to to a to where we've when portfolio. terms efficiency at complex sales in those on we terms overstate we're business. have SKUs have in slightly offered reduce platforms loss rest make I look we don't disproportionate this, solid of a output of that, have, But, offer. both the margin too going a We number we XX%, and are there of margin the but where on a the

doing nice stuff So, do, smaller more the versus exponential we a of which earnings to a the my for mind, like large, us generate is or on to some it. running output can a if and item it's get go small I changeover something I the versus business pull-up X% with can X% required

Steven Pierre Chercover

Sure.

Okay.

the Care target EBITDA of U-shaped the of recovery vicinity million. of million was for objective? If still I does that the the restructuring, kind understand or the is XXXX. After recall, I think $XXX in this over we course change So, $XXX Personal

John David Williams

That's still the objective.

Steven Pierre Chercover

the number? that is right And

John David Williams

Yeah.

Steven Pierre Chercover

Great.

Okay. Thank you.

Operator

Paul We'll question RBC Capital with take our next Quinn Markets. from

Paul Quinn

Hey. John. Morning, Thanks Daniel. very Morning, much.

John David Williams

morning. Paul, good

Daniel Buron

morning. Good

Paul Quinn

a imports referenced had you paper, the XX%. – to on just just I trade down on back being question

with American how up. North on move prices the is wondering the sustainable Just paper especially that

John David Williams

know. is few look of pricing. at at last look we My – got the a the in view number I the the Europeans some when months, if I know the in we'll Well, I trouble prices of is, mean, way, Asian have

the going some the to these I – second we're so bit market at still half a imports little bit. it's think, they're in attractive Paul, only they little domestic it doubt in import think the of risk. risk was, to going But, to a and year, in imports going stuff, be they're this I their see I of on some and there pretty if It'll steamy of a markets, don't last more of – level don't years. biblical number is duties there's stay some there're they no can. a We'll to but like at a be than used of think it's

Paul Quinn

Okay.

So, side terms Maybe a where just quarters over the forward going here. we hardwood expect XXXX it in What sounds should on question NBSK, we of the that and pretty pulp now insulated like the expect the three fluff in capacity? expect mix and some have you least. at should to last be you shipments volatile been between what fluff shed

John David Williams

if million number and sort Paul. sales look maybe. million rough of $XX is a quarterly at softwood, hardwood, X% And wrong, $XXX on I million that number, think XX% to reasonable about hardwood fluff, XX% it's pulp. $XXX for I'm I

Paul Quinn

luck, all of That's Thanks. Best I guys. have. Excellent.

John David Williams

All you. right. Thank

Operator

We'll KeyBanc. to Josephson Adam go next with

Adam Jesse Josephson

John, follow-up. my Daniel, for taking thanks

John David Williams

You're welcome.

Adam Jesse Josephson

And quick so, one Would asking changed, John, subject, – ago? for very your say forgive me if harping a John, the months containerboard from three but language has how? question. you on

John David Williams

base that be you'd of is, its can solid judge cost our still answer still to me. be we market. better in of terms position. is an think mind, opportunity enough enough way there. there's I good think think strong my I vindicated The than a I find I our that the and in into very feel no. asset

good we're and get hard choice. sufficient to a data our make still to So, working make choices

Adam Jesse Josephson

Sure. Sure.

Just others. two

know formal Chip. XQ don't – give outlook, with about were Just I just you this a talking your – you on but one

If $XX incremental sequentially. you're of maintenance, have to and Care going expecting you'll – million right, have you're be to down Personal

add-back no what So, raw of obviously, Is material combination pricing happen? be, sequential well would higher indeed have the you're could in flat, assuming to be the cost order of that $XX the to incremental inflation. it, thinking call million, and weather

Daniel Buron

wildcard the pricing think I here. is

own its So, judgment. to make wanted

very the of the the quarter doubt, usage is more we're weather we'll if back. pricing, quantifying have think in little mean, But right difficult. that that I (XX:XX:XX) we'll outside I is now, positive. bit first weather And higher There's should But be there's of ton and doubt, of a negative have, a and quarter. had the of we'll will of QX. maintenance, negative But ton in get us. pulp the there's tough back XX,XXX no on to paper lose production impact we volume, XX,XXX the we production the no

again, part. I are always, believe the the the mean, positive. direction, the signs right very So, prices, rolling But as we is in and toughest ball

Adam Jesse Josephson

that real you on – producers? producers you, last here. based and in just what one light to just know Thank what of think Kimberly-Clark there's pulp quarter in one had, difficult pulp, that, go that John, you was I just said Daniel. thinking, ways I to prices. other the have go, this been I And tissue of has they've just has of what how a for life had higher makes on confident mean, some tissue way difficult you given pain the very light already largest

John David Williams

caused sort by issue. I find operational prices of X-year it's well frankly, own people average – look of quite our at think about $XX hard I I talk And business, Well, supply-demand I the in part probably of and actually to below our pulp. we look right only looking And are realized think the grade. to sort but $XX I at can which quarter had still a one, challenges now

norms. I is we're versus average to if this ramp historical as it's massive mean, on not So, pricing. mind, still the up – there's below nine-year my some

peak within had much pricing X-year that maybe We haven't year. a period for really

I shouldn't it reason no see particular continue. So, why

Adam Jesse Josephson

Thank it. I appreciate John. you,

John David Williams

Welcome.

Operator

Bank George America. with go And next Staphos we'll of to

George Leon Staphos

follow-on. Hi, everyone. Thanks for taking my

couple a you in what a and was just of quarter. believe, shipments luck the us made Thanks the of quarter to volumes kind that gives in whether in end. uncoated you're for and affecting a in the inventory was quarter? the What Can pre-buying the it mention then, John, questions your fairly for pulp quick in give issues, I it dog minimal there's any cat sense terms Just at? quarter. there in Daniel, was in there comfort in any And you refresher of freesheet? getting good

Daniel Buron

pre-buying I so little one We pre-buying. inventories. difficult a to good there's assume We sold from always volumes that in answer. can on bit mean, is had QX, your of question

not. So, can that maintenance we Probably high repeat performance a quarter? in

little So, in QX volume bit expecting a reasonable. I'm is lower

that very expect In you inventory, terms – is not pulp for the more of We method produce high quarter shipment. ton a should was XXX-some is in of well of XX,XXX more actually I ton we've something sold thousand us QX it's the QX shipped in inventory, out terms every so and think quarter.

but Our we should on should of normal be average, you quarter. shipment plus ship if and more around will ton above look – minuses XXX,XXX per be because an there maintenance,

abnormally So, was QX high.

George Leon Staphos

Daniel. luck quarter, the makes sense. you, Thank on Good guys. That

John David Williams

Thank you, George.

Operator

does this to closing Nicholas session. turn remarks. time, the Mr. for back That question-and-answer conclude Estrela conference At I'll today's any

Nicholas Estrela

Thank Don. you,

for Thank quarter will you We Thursday, our listening have second XXXX. and on release X, day. results XXXX great a August

Operator

conclude today's you for Thank This conference. participation. does your

may You now disconnect.

Domtar (UFS) 1 May 182018 Q1 Earnings call transcript