Domtar Business Analysis Research Paper Example | Topics and Well Written Essays - 2000 words

Domtar Business Analysis - Research Paper Example Domtar has exhibited excellent cash flow over the last few years. The cash flow is anticipated to rise to an average of 9% in the next one year. Domtar’s income has been declining considerably though is still considered to be performing well as compared to other companies in the same industry. Domtar Products Domtar specializes in a wide range of fiber-based products. The products include digital printing papers, specialty papers, EarthChoice papers, publishing papers, commercial printing papers, Business papers, as well as office papers. It is currently planning to start manufacturing packaging papers. Additionally, Domtar engages in the manufacture of paper grade, lumber, wood products, in addition to specialty pulp. Domtar sells its products to a wide range of customers such as merchants, retailers, printers, converters, publishers, as well as end users. Domtar sells its product within Canada, North America and exports to other regions of the world such as United State, whi ch is one of the main customers (Ivara, 2012) Domtar’s Financial Health Financially, Domtar has been performing considerably well. It is considered the second largest paper industry in the world in terms of financial standings. In the financial statement issued on July 27, 2012, which showed the financial performance for the second quarter of 2012, the report showed the considerable decline from that of the previous year. The company reported an operating income of $106 million. Although this was excellent compared to other companies in the same industry, it was, however, a decline from $ 109 million reported in the first quarter for the year 2012. The decline was attributed to increased maintenance costs in addition to reduced shipments for pulp as well as paper. However, the market prices had increased considerably which helped offset the losses, which could have been higher. However, Domtar is anticipating worse times in the third quarter due to the challenges facing the p ulp markets such as the declining demand for both paper and pulp shipments. Domtar management is planning to counteract the anticipated losses by converting the less needed communication paper to Specialty as well as packaging papers, which are still in higher demands. Additionally, Domtar hopes to increase the prices of pulp (Domtar, 2012). The cash flow from functioning activities amounted to about $30 million in the first quarter of 2011. The capital expenditures were approximately $29 million. By March 31, 2012, which marked the end of the first quarter of 2012, Domtar paid $47 million for outstanding premiums and recorded a free cash flow amounting to $48 million. This demonstrates strong cash flow. Additionally, Domtar’s cash flow is expected to average improve further in the future. Domtar’s stock price has outdone the benchmark in the first quarter of 2012. Investors are expected to increase their shareholdings. Additionally, the shares are expected to continue exchanging at bargain basement levels (Domtar, 2012). Any company has the main goal of increasing the value for the shareholders.  Ã‚