MONTREAL - Forestry company Domtar Corp. (TSX:UFS) said Thursday it will permanently close its Lebel-sur-Quevillon, Que., pulp mill and sawmill which employed 565 people before they were idled more than two years ago.
Operations at the pulp mill were stopped in November 2005 and the sawmill was idled indefinitely in 2006.
"Market conditions and housing starts in the United States have continued to deteriorate in the last few years, affecting both the demand for wood products and the profitability of our operations. These factors, coupled with the reduction of harvesting potential in Quebec, have forced us to rationalize production," said Jean-Francois Merette, a senior vice-president at Domtar.
The Quebec government recently approved a plan to consolidate the available harvesting rights in the northern part of the province.
"This has led Domtar to concentrate on its active operations in order to preserve jobs and attempt to bring these facilities to a level of profitability," the company said.
Domtar said it continues to closely monitor inventory and manage working capital and will aim to cut production by 44,000 tonnes of pulp and 173,000 tons of paper in the current year-end quarter.
Domtar, the world’s second-largest maker of office paper - the kind used in fax machines and copiers - earned $43 million or eight cents per share in the most recent quarter, compared with a year-ago profit of $36 million, or seven cents per share.
Sales for the quarter fell slightly to $1.6 billion from a year earlier.
The closure follows an announcement by Domtar in early November that it will permanently close a paper machine and converting operation in Dryden, Ont., cutting 195 jobs. That followed the closure earlier this year of its Port Edwards, Wis., mill, eliminating 500 jobs.
The announcement is another blow to the Canadian forestry sector which has been battered by a high dollar and slumping demand for lumber and newsprint from the U.S. housing and newspaper industries.
The industry has asked Ottawa and the provinces to boost corporate credit, relax employment insurance rules and allow more mergers in the lumber and paper sector to prevent job losses at mill towns across the country.
In a letter to Prime Minister Stephen Harper on Tuesday, the Forest Products Association of Canada issued an urgent call for action - beginning with the Jan. 27 budget - that it says could save the 300,000 workers dependent on forestry.
Unlike the auto sector, which appears set for a $3.3 billion rescue package, association president Avrim Lazar says forestry’s request is relatively modest at $600 million over five years.
Domtar shares were down 10 cents to $2.05 in Thursday trading on the TSX.
