Domtar to Permanently Reduce Uncoated Freesheet Paper Capacity

MONTREAL—March 29, 2011—Domtar Corp. announced that, no later than July 1, 2011, it will permanently shut down one of four paper machines at its Ashdown, AR, pulp and paper mill. This will reduce Domtar’s annual uncoated freesheet paper production capacity by approximately 125,000 short tons. The mill’s workforce will be reduced by approximately 110 employees.

“Domtar is committed to keeping a balance between its supply and its customer demand. Because secular demand decline in North America continues, we must permanently reduce our uncoated freesheet paper production capacity,” said John D. Williams, president and CEO of Domtar. “I want to thank affected employees for their efforts, and recognize all Domtar Ashdown mill employees for their hard work and continued focus on safety.”

Following the shutdown, the Ashdown mill will continue to operate three fiber lines, a pulp dryer and three paper machines, and employ approximately 940 people. The mill will have an annual production capacity of approximately 810,000 metric tons of pulp and approximately 780,000 short tons of paper.

The closure will result in an aggregate pre-tax charge to earnings of approximately $80 million, which includes an estimated $77 million in non-cash charges relating to the accelerated depreciation of the carrying amounts of manufacturing equipment and the write-off of related spare parts and $3 million related to other costs. Of the estimated total pre-tax charge of approximately $80 million, $6 million is expected to be recognized in the first quarter of 2011 and $74 million is expected to be incurred in the second quarter of 2011.

About Domtar
Domtar Corp. is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on production capacity, and is also a manufacturer of papergrade, fluff and specialty pulp. The company designs, manufactures, markets and distributes a wide range of business, commercial printing and publishing as well as converting and specialty papers including recognized brands such as Cougar, Lynx Opaque Ultra, Husky Opaque Offset, First Choice and Domtar EarthChoice Office Paper, part of a family of environmentally and socially responsible papers. Domtar owns and operates Ariva, an extensive network of strategically located paper distribution facilities. The company employs approximately 8,500 people. To learn more, visit www.domtar.com.

Source: company release.