Domtar is implementing a cost-reduction program, targeting $200 million in annual run-rate cost savings to be realized by the end of 2021. The goal of the program is to build a stronger business operation, enhance the Company’s cost efficiency and improve operating margins and maximize productivity and cash flow.
The cost-saving initiatives include capacity reduction and asset closures, mill-level cost savings and rightsizing support functions. The leaner organizational structure is also expected to improve communication flow and cross-functional collaboration, leveraging more efficient business processes.
As part of the cost-savings program, the Company will permanently close the uncoated freesheet manufacturing at the Kingsport, Tennessee, and Port Huron, Michigan, mills; the remaining paper machine at the Ashdown, Arkansas, mill; and the converting center in Ridgefields, Tennessee.
These actions will reduce the Company’s annual uncoated freesheet paper capacity by approximately 721,000 short tons and will result in a workforce reduction of approximately 780 employees. The Kingsport and Ashdown paper machines, which have been idled since April 2020, will not recommence operations. Port Huron and Ridgefields mills are expected to shut down by the end of the first quarter of 2021.
“We remain disciplined in our efforts to manage our costs to improve profitability and further strengthen our balance sheet. In line with these goals and current market conditions, we are implementing a significant cost-savings program to streamline operations, maximize productivity and improve margins. This program will create a stronger, leaner organization aligned to meet the needs of the business and our customers in a post COVID-19 era,” said Williams. “This important and necessary step is expected to reduce our annualized costs by more than $200 million, while significantly improving our free cash flow and return on invested capital. We have a talented and dedicated workforce at Domtar, and decisions that affect people are never easy. However, we are taking the necessary steps to better position our business for the future.”
