Domtar Corp CAPEX surged on 20.1% in 2016 while Revenue decreased on 3.2%
09.02.2017 • About Domtar Corp (
$UFS) • By InTwits
Domtar Corp reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Domtar Corp has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.1%. At the same time it's in pair with industry average of 24.1%.
- CAPEX is quite volatile: 109 in 2016, 88.1 in 2015, 39.6 in 2014, 22.3 in 2013, 16.6 in 2012
- The company has potentially unprofitable business model: ROIC is at 4.8%
- It operates with high leverage: Net Debt/EBITDA is 2.0x while industry average is 0.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Domtar Corp ($UFS) key annual financial indicators
| mln. $ | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 5,482 | 5,391 | 5,563 | 5,264 | 5,098 | -3.2% |
| Gross Profit | 776 | 654 | 783 | 1,117 | 1,063 | -4.8% |
| SG&A | 358 | 381 | 416 | 394 | 427 | 8.4% |
| EBITDA | 752 | 537 | 748 | 647 | 571 | -11.7% |
| Net Income | 172 | 91 | 431 | 142 | 128 | -9.9% |
Balance Sheet
|
|---|
| Cash | 661 | 655 | 174 | 126 | 125 | -0.8% |
| Short Term Debt | 97 | 19 | 179 | 41 | 75 | 82.9% |
| Long Term Debt | 1,128 | 1,510 | 1,181 | 1,210 | 1,218 | 0.7% |
Cash flow
|
|---|
| Capex | 236 | 242 | 236 | 289 | 347 | 20.1% |
Ratios
|
|---|
| Revenue growth | -2.3% | -1.7% | 3.2% | -5.4% | -3.2% | |
| EBITDA growth | -22.3% | -28.6% | 39.3% | -13.5% | -11.7% | |
| Gross Margin | 14.2% | 12.1% | 14.1% | 21.2% | 20.9% | -0.4% |
| EBITDA Margin | 13.7% | 10.0% | 13.4% | 12.3% | 11.2% | -1.1% |
| Net Income Margin | 3.1% | 1.7% | 7.7% | 2.7% | 2.5% | -0.2% |
| SG&A, % of revenue | 6.5% | 7.1% | 7.5% | 7.5% | 8.4% | 0.9% |
| CAPEX, % of revenue | 4.3% | 4.5% | 4.2% | 5.5% | 6.8% | 1.3% |
| ROIC | 7.9% | 3.3% | 7.3% | 6.1% | 4.8% | -1.2% |
| ROE | 5.9% | 3.2% | 15.2% | 5.1% | 4.8% | -0.3% |
| Net Debt/EBITDA | 0.8x | 1.6x | 1.6x | 1.7x | 2.0x | 0.3x |
Domtar Corp ($UFS) key quoterly financial indicators
| mln. $ | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,287 | 1,267 | 1,270 | 1,274 | -4.5% | -3.3% | -1.7% | -3.0% |
| EBITDA | 107 | 126 | 179 | 159 | -33.5% | -17.6% | 19.3% | -13.1% |
| Net Income | 4 | 18 | 59 | 47 | -88.9% | -52.6% | 436.4% | -17.5% |
Balance Sheet
|
|---|
| Cash | 97 | 111 | 168 | 125 | -47.0% | -46.4% | 31.3% | -0.8% |
| Short Term Debt | 47 | 65 | 63 | 75 | -73.1% | -61.8% | 46.5% | 82.9% |
| Long Term Debt | 1,211 | 1,237 | 1,309 | 1,218 | 2.7% | 5.0% | 5.1% | 0.7% |
Ratios
|
|---|
| Gross Margin | 18.4% | 20.0% | 23.7% | 21.3% | 3.9% | 0.4% | 3.1% | -2.1% |
| EBITDA Margin | 8.3% | 9.9% | 14.1% | 12.5% | -3.6% | -1.7% | 2.5% | -1.4% |
| Net Income Margin | 0.3% | 1.4% | 4.6% | 3.7% | -2.4% | -1.5% | 3.8% | -0.6% |
Revenue and profitability
Domtar Corp's Revenue decreased on 3.2%. Annual revenue decline showed slowdown in 16Q4 - revenue decreased on 3.0%. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 1.1 pp from 12.3% to 11.2% in 2016.
Gross Margin showed almost no change in 2016. SG&A as a % of Revenue increased slightly on 0.89 pp from 7.5% to 8.4% in 2016.
Net Income marign showed almost no change in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 Domtar Corp had CAPEX/Revenue of 6.8%. The company showed CAPEX/Revenue growth of 2.3 pp from 4.5% in 2013 to 6.8% in 2016. It's average level of CAPEX/Revenue for the last three years was 5.5%.Battling declining revenue the company invested a large share of EBITDA (60.8%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at low ROIC (4.84%) and ROE (4.80%). ROIC decreased slightly on 1.2 pp from 6.1% to 4.8% in 2016. ROE showed almost no change in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.0x and Debt / EBITDA is 2.3x. Net Debt / EBITDA surged on 0.3x from 1.7x to 2.0x in 2016. Debt increased on 3.4% while cash decreased slightly on 0.79%.
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. Daniel Buron is a 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 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Avino Silver & Gold Mines Ltd ($ASM) | | 613.6% | 19.9% | -1.1% | 109.1% |
| Trevali Mining Corp ($TV) | | | | 12.9% | 86.4% |
| Geodrill Ltd ($GEO) | | -43.3% | -4.3% | 34.6% | 53.1% |
| Tahoe Resources Inc ($THO) | | | | 48.4% | 50.9% |
| Osisko Gold Royalties Ltd ($OR) | | | | 164.4% | 38.0% |
| |
|---|
| Median (82 companies) | 100.8% | -3.8% | 1.8% | -1.7% | 6.8% |
|---|
| Domtar Corp ($UFS) | | -1.7% | 3.2% | -5.4% | -3.2% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Nevsun Resources Ltd ($NSU) | 89.9% | 94.8% | 95.5% | 82.3% | 79.7% |
| Labrador Iron Ore Royalty Corp ($LIF) | 80.2% | 80.2% | 80.2% | 80.3% | 80.3% |
| Lucara Diamond Corp ($LUC) | 42.5% | 57.4% | 66.7% | 60.9% | 65.6% |
| Trevali Mining Corp ($TV) | | | 49.0% | 59.3% | |
| Perseus Mining Ltd ($PRU) | 52.5% | 50.9% | 32.0% | 53.7% | 26.3% |
| |
|---|
| Median (94 companies) | 32.2% | 22.7% | 19.1% | 16.4% | 24.8% |
|---|
| Domtar Corp ($UFS) | 14.2% | 12.1% | 14.1% | 21.2% | 20.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Labrador Iron Ore Royalty Corp ($LIF) | | | | 72.8% | 73.5% |
| Silver Wheaton Corp ($SLW) | 82.6% | 75.3% | 69.6% | 65.8% | 59.7% |
| Franco-Nevada Corp ($FNV) | 62.1% | 44.6% | 72.3% | 60.8% | 70.3% |
| Lucara Diamond Corp ($LUC) | 7.6% | 57.3% | 57.5% | 60.0% | 62.4% |
| Sandstorm Gold Ltd ($SSL) | 74.3% | 49.9% | 62.1% | 56.5% | 64.6% |
| |
|---|
| Median (100 companies) | 18.6% | 11.5% | 10.3% | 6.7% | 24.5% |
|---|
| Domtar Corp ($UFS) | 13.7% | 10.0% | 13.4% | 12.3% | 11.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Largo Resources Ltd ($LGO) | | | | 567.6% | |
| Sandstorm Gold Ltd ($SSL) | 152.1% | 118.8% | 49.4% | 412.7% | 17.3% |
| Silver Wheaton Corp ($SLW) | 75.5% | 286.8% | 22.5% | 279.2% | 90.3% |
| Franco-Nevada Corp ($FNV) | 3.7% | 35.5% | 201.6% | 230.0% | 122.4% |
| Avino Silver & Gold Mines Ltd ($ASM) | 211.7% | 5.6% | 89.8% | 163.3% | |
| |
|---|
| Median (100 companies) | 28.1% | 27.4% | 17.8% | 17.2% | 18.3% |
|---|
| Domtar Corp ($UFS) | 4.3% | 4.5% | 4.2% | 5.5% | 6.8% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Lucara Diamond Corp ($LUC) | -2.9% | 41.3% | 54.7% | 39.6% | 58.5% |
| Western Forest Products Inc ($WEF) | 9.0% | 25.1% | 15.7% | 16.4% | 25.1% |
| Geodrill Ltd ($GEO) | 8.6% | -3.5% | -9.3% | 3.6% | 20.3% |
| Supremex Inc ($SXP) | 14.1% | 18.5% | 16.5% | 23.4% | 19.3% |
| Canfor Pulp Products Inc ($CFX) | 4.9% | 13.2% | 21.3% | 24.1% | 17.0% |
| |
|---|
| Median (99 companies) | 4.9% | 0.1% | 1.2% | -3.8% | 4.0% |
|---|
| Domtar Corp ($UFS) | 7.9% | 3.3% | 7.3% | 6.1% | 4.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Canam Group Inc ($CAM) | 4.2x | 2.6x | 3.2x | 1.8x | 13.9x |
| Taseko Mines Ltd ($TKO) | 7.4x | 5.9x | 10.2x | 5.9x | 11.0x |
| Methanex Corp ($MX) | 5.2x | 0.7x | 0.9x | 3.0x | 5.2x |
| Copper Mountain Mining Corp ($CUM) | 3.9x | 5.0x | 5.4x | 30.6x | 5.1x |
| Cameco Corp ($CCO) | 2.0x | 2.1x | 2.5x | 1.9x | 5.1x |
| |
|---|
| Median (57 companies) | 0.3x | 0.7x | 1.1x | 1.5x | 0.6x |
|---|
| Domtar Corp ($UFS) | 0.8x | 1.6x | 1.6x | 1.7x | 2.0x |
