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Domtar Acquires Home Delivery Incontinent Supplies

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Price movement

Domtar (UFS) has a market cap of $2.5 billion. It rose by 0.60% and closed at $38.45 per share on August 18, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -1.7%, 10.7%, and 6.4%, respectively, on the same day. Domtar is trading 0.92% above its 20-day moving average, 5.3% above its 50-day moving average, and 5.4% above its 200-day moving average.

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Related ETFs and peers

The Vanguard High Dividend Yield ETF (VYM) invests 0.03% of its holdings in Domtar. VYM tracks the FTSE High Dividend Yield Index. The index selects high-dividend-paying US companies, excluding REITS, and weights them by market cap. VYM’s YTD price movement was 11.5% on August 18.

The iShares MSCI KLD 400 Social ETF (DSI) invests 0.03% of its holdings in Domtar. DSI tracks a market-cap-weighted index of 400 companies deemed to have positive environmental, social, and governance characteristics by the Metals Service Center Institute.

The market caps of Domtar’s competitors are as follows:

  • International Paper Company (IP) – $19.8 billion
  • WestRock Company (WRK) – $11.7 billion

Latest news on Domtar

Domtar agreed to purchase Home Delivery Incontinent Supplies—a provider of adult incontinence and related products—for a total cash consideration of $45 million with an earn-out payment of up to $10 million to improve the services provided to its customers. This transaction is expected to close by the end of the year.

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Performance in 2Q16

Domtar reported 2Q16 consolidated sales of $1.27 billion—a fall of 3.3% from consolidated sales of $1.31 billion in 2Q15. Sales in its Pulp and Paper segment fell by 5.0%, while sales in its Personal Care segment rose by 5.6% between 2Q15 and 2Q16.

The company’s cost of sales excluding depreciation and amortization and operating income fell by 0.44% and 37.1%, respectively, between 2Q15 and 2Q16. It reported closure and restructuring costs of $21.0 million in 2Q16—compared to $1.0 million in 2Q15. Its net income and EPS (earnings per share) fell to $18.0 million and $0.29, respectively, in 2Q16—compared to $38.0 million and $0.60, respectively, in 2Q15.

Domtar’s cash and cash equivalents and inventories fell by 11.9% and 1.7%, respectively, between 4Q15 and 2Q16. Its current ratio rose to 1.99x and its debt-to-equity ratio fell to 1.12x in 2Q16—compared to 1.97x and 1.13x, respectively, in 4Q15.

Quarterly dividend

Domtar declared a quarterly dividend of $0.42 per share on its common stock. The dividend will be paid on October 17, 2016, to shareholders of record on October 3, 2016.

In the next part of this series, we’ll discuss Sanderson Farms (SAFM).

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