Domtar Corp.

S&P Global Ratings estimates that UFS demand will continue its steady (low single-digit percentage) decline following the significant drop expected in 2020 related to the COVID-19 pandemic. We believe the impact on business papers, Domtar's largest shipment vertical, will be the most significant for the company. However, we expect industry capacity curtailments, including the idling Domtar announced, will continue to mitigate the impact on prices. In addition, the company is likely to gradually shift its business mix away from commodity paper, pending future conversions that could occur over the coming years. The stable outlook reflects S&P Global Ratings' expectation that Domtar will generate positive free cash flow in 2020 despite sharply weaker paper demand, with improvement in its credit measures

...Strong leadership position in the North American UFS industry. Domtar Corp. is the leader in the North American (N.A.) UFS industry, having about a 35% share of the concentrated N.A. UFS market. The company has generated relatively steady cash flows from this business over the past several years despite the structural decline in demand that has persisted mainly due to electronic substitution of paper. S&P Global Ratings estimates that UFS demand will continue its steady (low single-digit percentage) decline following the significant drop expected in 2020 related to the COVID-19 pandemic. We believe the impact on business papers, Domtar's largest shipment vertical, will be the most significant for the company. However, we expect industry capacity curtailments, including the idling Domtar announced, will continue to mitigate the impact on prices. In addition, the company is likely to gradually shift its business mix away from commodity paper, pending future conversions that could occur over...

Full Report