Domtar Cuts 430 U.S., Canadian Jobs to Lower Capacity

Domtar Corp. (UFS), North America's largest producer of office paper, will cut about 430 jobs as it closes two factories in Canada and shuts down machines in Maine and Wisconsin to reduce excess capacity amid falling demand.

A mill in Gatineau, Quebec, and a finishing center in Ottawa will be permanently shut by October, affecting about 250 people, the Montreal-based company said.

Paper machines at mills in Baileyville, Maine, and Port Edwards, Wisconsin, have been halted, affecting 180 jobs, the company said. Domtar's total workforce numbers about 14,000.

``Adjusting our production to demand remains an ongoing exercise,'' Domtar Chief Executive Officer Raymond Royer said in a statement. He said the company may implement ``further rationalization,'' or the paring back of less efficient assets, in the ``near future.''

The closures will slash Domtar's annual papermaking capacity by 284,000 tons as it anticipates a 3.5 percent decline in North American demand for uncoated paper in 2007, according to spokesman Michel Rathier. This year would be the fifth cyclical slump in demand since 2000, he said.

``The assets they are closing are high-cost and old,'' said Stephen Atkinson, a BMO Capital Markets analyst in Montreal, who has an ``outperform'' rating on the stock and doesn't own any. ``They're going to produce the product more cheaply at more modern mills.''

Domtar's shares rose 15 cents to $9.51 as of 4:03 p.m. in New York Stock Exchange composite trading. They've risen 13 percent this calendar year.

To contact the reporters on this story: Nancy Moran in New York at nmoran@bloomberg.net.

To contact the editor responsible for this story: JoAnne Norton at jnorton@bloomberg.net.

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