Domtar bets on aging populations

Paper and fibre producer looks to double revenues from its personal care products.

May 3, 2012   by The Canadian Press

MONTREAL: Domtar could expand its personal care business by adding more consumer incontinence products as part of a plan to transform from a traditional pulp and paper maker to a fibre innovator, the company’s CEO said Wednesday.

Chief executive John Williams told shareholders that the strategy of transforming itself will be “an evolution and not a revolution.”

The company’s goal is to eventually bring in US$300 million to US$500 million of pre-tax operating earnings (EBITDA) from alternative segments, including personal care products.

The Montreal-based company acquired adult diaper producer Attends HealthCare last year and added the European business early in 2012.

The deal cost US$551 million and added 850 employees on both sides of the Atlantic, or about 10% of Domtar’s global workforce.

More than 60% of Attends business is to institutional customers, rather than consumer buyers of adult incontinence products, feminine hygiene or baby diapers.

“If we can find other things that have compelling value in that kind of area getting closer to the consumer we may well do that,” Williams said after Domtar’s annual meeting.

Aging populations should drive strong demand in the US$8 billion a year global market that is growing at five to six per cent annually.

Domtar has said it hopes to double the Attends business over five years.

The opening of a converting facility in China is designed to expose it to the world’s most populated country and could lead to new opportunities for its Attends business.

“Let’s find out what it’s like to do business there and then are there opportunities for example for our Attends business on the ground, which is a much lower capital investment business,” Williams told reporters.

The Chinese operation is small, employing some 50 workers and costing about $40 million after working capital.

Proceeds will initially be minimal as it studies the market over about two years.

Domtar has pursued several initiatives to offset the three to four per cent annual decline in paper use. These include investing in the world’s first nanocrystalline cellulose demonstration facility in Windsor, Que., purchasing Attends to increase the use of fluff pulp and investing in its Plymouth, N.C., mill to extract lignin from black liquor currently burned in its recovery boilers.

Domtar also signed a long-term, $3-billion supply deal with specialty paper producer Appleton Papers that will direct paper to a growing market.

Domtar announced Wednesday that it is increasing its quarterly dividend by 29% as it continues to share its success with investors.

“(It’s) further proof or our confidence in the future prospects of Domtar and our commitment to return a majority of free cash flow to investors,” Williams said.

Domtar manufactures and distributes a variety of fibre-based products including communication papers, specialty and packaging papers and adult incontinence products.

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