Domtar to Cut U.S., Canada Paper Output, 625 Jobs

Domtar (UFS) Corp., the world's second- largest maker of office paper, will reduce its production capacity by 7.1 percent and eliminate 625 jobs as demand for paper declines in North America.

A mill in Port Edwards, Wisconsin, will be closed in the second quarter and a paper-production line in Dryden, Ontario, will shut Dec. 22, Montreal-based Domtar said today in a statement. The company will restart a smaller paper line in Dryden.

Demand for office and facsimile paper has declined as the popularity of the Internet has grown. Domtar expects North American demand will fall as much as 2 percent this year, company spokesman Michel Rathier said today in an interview.

``We need to pursue the consolidation of our production capacity to improve our competitiveness in the North American market, given continued unfavorable economic conditions and a softening of demand for fine papers,'' Chief Executive Officer Raymond Royer said in the statement.

The production changes unveiled today will reduce Domtar's annual capacity of 4.8 million tons by 342,000 tons, Rathier said. The 625 jobs affected by the changes amount to 4.5 percent of Domtar's 14,000 employees, he said.

Closure of the 165,000-ton Port Edwards mill in the second quarter will affect about 500 jobs, the company said. The shutdown of the No. 2 paper machine in Dryden will eliminate 332,000 tons of capacity, affecting 125 jobs. Dryden will restart its 155,000-ton machine No. 1 in January, the company said in the statement.

Memphis, Tennessee-based International Paper Co. is the world's largest maker of office paper.

Domtar fell 3 cents to $7.56 at 4 p.m. in New York Stock Exchange composite trading. The shares have fallen 10 percent this year.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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