Domtar Corp reports 67.1% Net Income decline and 5.4% Revenue decline
05.02.2016 • About Domtar Corp (
$UFS) • By InTwits
Domtar Corp reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Domtar Corp is a company in decline: 2015 revenue growth was -5.4%, 5 years revenue CAGR was -2.1%
- Domtar Corp has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.2%. At the same time it's in pair with industry average of 28.2%.
- CAPEX is quite volatile: 319 in 2015, 355 in 2014, 227 in 2013, 169 in 2012, 135 in 2011
- The company has potentially unprofitable business model: ROIC is at 6.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Domtar Corp ($UFS) key annual financial indicators
| mln. $ | 2011 | 2012 | 2013 | 2014 | 2015 | 2015/2014 |
|---|
P&L
|
|---|
| Revenue | 5,612 | 5,482 | 5,391 | 5,563 | 5,264 | -5.4% |
| Gross Profit | 1,065 | 776 | 654 | 783 | 1,117 | 42.7% |
| SG&A | 340 | 358 | 381 | 416 | 394 | -5.3% |
| EBITDA | 968 | 752 | 537 | 748 | 647 | -13.5% |
| Net Income | 365 | 172 | 91 | 431 | 142 | -67.1% |
Balance Sheet
|
|---|
| Cash | 444 | 661 | 655 | 174 | 126 | -27.6% |
| Short Term Debt | 11 | 97 | 19 | 179 | 41 | -77.1% |
| Long Term Debt | 837 | 1,128 | 1,510 | 1,181 | 1,210 | 2.5% |
Cash flow
|
|---|
| Capex | 144 | 236 | 242 | 236 | 289 | 22.5% |
Ratios
|
|---|
| Revenue growth | -4.1% | -2.3% | -1.7% | 3.2% | -5.4% | |
| EBITDA growth | -3.0% | -22.3% | -28.6% | 39.3% | -13.5% | |
| Gross Margin | 19.0% | 14.2% | 12.1% | 14.1% | 21.2% | 7.1% |
| EBITDA Margin | 17.2% | 13.7% | 10.0% | 13.4% | 12.3% | -1.2% |
| Net Income Margin | 6.5% | 3.1% | 1.7% | 7.7% | 2.7% | -5.1% |
| SG&A, % of revenue | 6.1% | 6.5% | 7.1% | 7.5% | 7.5% | 0.0% |
| CAPEX, % of revenue | 2.6% | 4.3% | 4.5% | 4.2% | 5.5% | 1.2% |
| ROIC | 13.0% | 7.9% | 3.3% | 7.3% | 6.1% | -1.3% |
| ROE | 11.8% | 5.9% | 3.2% | 15.2% | 5.1% | -10.1% |
| Net Debt/EBITDA | 0.4x | 0.8x | 1.6x | 1.6x | 1.7x | 0.2x |
Revenue and profitability
The company's Revenue decreased on 5.4% in 2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.76 pp from 2.2% to 2.9% in 2015.
Gross Margin increased on 7.1 pp from 14.1% to 21.2% in 2015. SG&A as a % of Revenue showed almost no change in 2015.
Net Income marign decreased on 5.1 pp from 7.7% to 2.7% in 2015.
Capital expenditures (CAPEX) and working capital investments
Domtar Corp's CAPEX/Revenue was 5.5% in 2015. Domtar Corp's CAPEX/Revenue increased slightly on 1.2 pp from 4.3% in 2012 to 5.5% in 2015. For the last three years the average CAPEX/Revenue was 4.7%.
Return on investment
The company operates at low ROIC (6.06%) and ROE (5.12%). ROIC decreased slightly on 1.3 pp from 7.3% to 6.1% in 2015. ROE dropped on 10.1 pp from 15.2% to 5.1% in 2015.
Leverage (Debt)
Company's Net Debt / EBITDA is 1.7x and Debt / EBITDA is 1.9x. Net Debt / EBITDA jumped on 0.2x from 1.6x to 1.7x in 2015. Debt decreased on 8.0% in 2015 while cash dropped on 27.6% in 2015.
Management team
John D Williams is a Domtar Corp's CEO. John D Williams is a founder and has spent 9 years at the company. The company's CFO Daniel Buron has spent 14 years at the company.
Appendix 1: Peers in Basic Materials
Below we provide Domtar Corp benchmarking against other companies in Basic Materials industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Northern Sun Mining Corp ($NSC) | -93.3% | 315.4% | -99.4% | 8,924.9% | |
| Turquoise Hill Resources Ltd ($TRQ) | | | -34.0% | 3,268.9% | -5.8% |
| Asian Mineral Resources Ltd ($ASN) | | | | 859.1% | |
| Ur-Energy Inc ($URE) | | | | 285.4% | |
| Nevsun Resources Ltd ($NSU) | | 3.3% | -72.5% | 256.5% | |
| |
|---|
| Median (129 companies) | 27.8% | 8.5% | -5.0% | -1.1% | 5.1% |
|---|
| Domtar Corp ($UFS) | | -2.3% | -1.7% | 3.2% | -5.4% |
Top companies by Gross margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Nevsun Resources Ltd ($NSU) | 90.3% | 89.9% | 94.8% | 95.5% | |
| Franco-Nevada Corp ($FNV) | 84.6% | 86.1% | 85.0% | 83.5% | |
| Labrador Iron Ore Royalty Corp ($LIF) | 80.2% | 80.2% | 80.2% | 80.2% | |
| Lucara Diamond Corp ($LUC) | | 42.5% | 57.4% | 66.7% | |
| Royal Gold Inc ($RGL) | 68.9% | 71.5% | 70.6% | 57.6% | 86.0% |
| |
|---|
| Median (132 companies) | 31.2% | 31.8% | 21.9% | 17.2% | 16.5% |
|---|
| Domtar Corp ($UFS) | 19.0% | 14.2% | 12.1% | 14.1% | 21.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Royal Gold Inc ($RGL) | 86.1% | 88.2% | 88.6% | 84.4% | 65.0% |
| Franco-Nevada Corp ($FNV) | 38.6% | 62.1% | 44.6% | 72.3% | |
| Silver Wheaton Corp ($SLW) | 84.8% | 82.6% | 75.3% | 69.6% | |
| Sandstorm Gold Ltd ($SSL) | 63.8% | 74.3% | 49.9% | 62.1% | |
| Nevsun Resources Ltd ($NSU) | 81.0% | 76.8% | 54.5% | 60.4% | |
| |
|---|
| Median (136 companies) | 23.3% | 18.5% | 11.5% | 9.6% | 6.6% |
|---|
| Domtar Corp ($UFS) | 17.2% | 13.7% | 10.0% | 13.4% | 12.3% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Barkerville Gold Mines Ltd ($BGM) | 123.7% | 38.5% | 49.9% | 7,166.9% | 3.2% |
| Marlin Gold Mining Ltd ($MLN) | | | | 508.8% | |
| Imperial Metals Corp ($III) | 28.2% | 69.2% | 185.7% | 280.2% | |
| Golden Minerals Co ($AUM) | 462.4% | 36.9% | 16.8% | 212.8% | |
| Franco-Nevada Corp ($FNV) | 9.3% | 3.7% | 35.5% | 201.6% | |
| |
|---|
| Median (138 companies) | 24.1% | 26.3% | 25.4% | 16.1% | 8.7% |
|---|
| Domtar Corp ($UFS) | 2.6% | 4.3% | 4.5% | 4.2% | 5.5% |
Top companies by ROIC, %
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Lucara Diamond Corp ($LUC) | -7.1% | -2.9% | 41.3% | 54.7% | |
| CanAf Group Inc ($CAF) | 74.9% | 37.0% | 65.2% | 37.6% | |
| Nevsun Resources Ltd ($NSU) | 89.8% | 52.2% | 8.8% | 35.0% | |
| Dynacor Gold Mines Inc ($DNG) | 45.6% | 62.8% | 50.9% | 31.3% | |
| Canfor Pulp Products Inc ($CFX) | 103.5% | 4.9% | 13.2% | 21.3% | |
| |
|---|
| Median (142 companies) | 5.4% | 4.8% | -0.1% | -0.3% | -6.0% |
|---|
| Domtar Corp ($UFS) | 13.0% | 7.9% | 3.3% | 7.3% | 6.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| VMS Ventures Inc ($VMS) | | | | 86.7x | 4.7x |
| Ur-Energy Inc ($URE) | | | | 55.1x | |
| Katanga Mining Ltd ($KAT) | 0.4x | 19.4x | 3.3x | 18.8x | |
| HudBay Minerals Inc ($HBM) | -2.8x | -4.8x | 2.0x | 14.0x | |
| Imperial Metals Corp ($III) | -0.1x | 1.5x | 4.9x | 12.9x | |
| |
|---|
| Median (93 companies) | -0.1x | 0.3x | 0.7x | 0.9x | 1.5x |
|---|
| Domtar Corp ($UFS) | 0.4x | 0.8x | 1.6x | 1.6x | 1.7x |
