Correction: The original story posted stated Domtar had a mill in Red Rock, Ont. However, the mill is no longer in the company's possession. Northern Ontario Business apologizes for the error.
Domtar's plan to divest about $150 million in assets across the organization could be hitting Northern Ontario soon as the 12-month deadline approaches at the end of first quarter 2010.
Selling company resources is nothing new for the pulp and paper manufacturer, but this marks the first time in recent history the company has set a target amount and date to sell off assets and discussed it openly with the public.
Domtar's CEO and president John Williams has previously stated selling the assets is part of Domtar's objective to minimize the amount of money tied up in working capital that is not generating a return.
"It is part of a plan to focus on core operations while we're generating cash for other purposes," says Michel Marcouiller, Domtar's senior manager of corporate communications.
The initiative to try and sell off the company's non-core assets was announced earlier this year. Unlike core assets, Non-core assets are not needed for paper production and are not involved with working mills.
The company's core business is the production of uncoated freesheet paper, which is primarily used in printers and photocopiers. Production of the paper is Domtar's biggest money-maker, with the company having a 32 per cent share of sales in the North American market.
Marcouiller was unable to say specifically what is being sold and where the sales will take place because talks with potential buyers are ongoing.
"We are not in a position to discuss negotiations. Obviously, we can announce transactions once they have been completed, but until then we don't announce it to the public."
But he says company officials will announce more sales in the coming months.
Domtar's investors are mostly behind the decision to reach the $150 million target, having known about the plan to liquidate assets since they were told in a conference call earlier after the first quarter, says Marcouiller.
The four main categories of non-core assets the company is selling include small hydro, idled or closed mills, lumber operations and forestlands. Much of the sales are scheduled to take place in Ontario and Quebec, the province where the company's headquarters are located. However, the cuts are coming from across the organization, says Marcouiller.
Being already among the top players at the forefront of the struggling forestry sector, Domtar suffered a further setback when the global economy crashed in the fall of 2008.
The company already let go of its mill in White River, located four hours north of Sault Ste. Marie, earlier this year. The mill hasn't been in operations since 2007. The buyer, White River Forest Products, plans to give the mill new life by expanding an existing co-generation plant for heat and power, adding some wood pellet technology and getting into some form of value-added forestry products.
Domtar has operations in Northern Ontario in Dryden, Gogama, Timmins, Elk Lake, Ear Falls, Espanola and Nairn Centre.
www.domtar.com
