Domtar CEO balks at trade deal terms

VANCOUVER -- The head of one of Quebec's largest forest companies yesterday joined the call for changes to the controversial deal that aims to settle the Canada-U.S. softwood lumber dispute.

Domtar Inc. chief executive officer Raymond Royer said his company remains critical of the agreement in light of recent victories in Canada's efforts to have punitive duties on Canadian softwood lifted through a process of litigation.

"The settlement would deprive our shareholders of 20 per cent of the duties collected so far by the U.S. government, with no guarantee of a long-standing trade peace," Mr. Royer said in a conference call with analysts to discuss the firm's second-quarter results.

The push for change comes after International Trade Minister David Emerson said he plans to meet with Canadian softwood executives as part of a last-ditch effort to sell the contentious timber truce to the industry. However, his office yesterday could offer no details on the meetings. On Monday, Mr. Emerson confirmed that he would be meeting "shortly" with forestry executives, but said plans were still "to be determined."

Mr. Emerson appears to face a tough challenge, judging by Mr. Royer's statements, which follow similar comments by Jim Shepherd, the CEO of Canada's leading lumber producer, Canfor Corp.

Analysts said Mr. Royer's stance carries a fair amount of weight "politically," even though Domtar's lumber operations are relatively small in comparison with other diversified forest companies.

Meanwhile, analysts said Domtar is benefiting from improving conditions in the North American printing and writing sector, allowing it to deliver better-than-expected second-quarter results.

Buoyed by higher prices for its uncoated free sheet (UFS) paper and the recent restructuring of its Canadian operations, Domtar yesterday reported a loss of $9-million or 4 cents a share in the second quarter ended June 30, 2006, compared with a year-ago profit of $2-million or 1 cent.

Domtar said results in the quarter were affected by non-recurring items such as a 5-cent-a-share restructuring charge related to the recent closing of its Vancouver paper mill. When those items are stripped out, the company reported a profit of 1 cent, well ahead of the 3-cent loss predicted by analysts polled by Thomson First Call.

Domtar, which saw its shares rise 12 cents to $7.28 on the Toronto Stock Exchange yesterday, is North America's third largest UFS paper producer.