Domtar Reports Decline in Sales but Improvement in Operating Income for Q2 2026

Domtar Corporation reported its financial results for the second quarter and first half of 2026, revealing a slight decline in sales but a significant improvement in operating income compared to the same period in 2025. For the three months ended June 30, 2026, the company recorded sales of $1.755 billion, a decrease of $8 million from $1.763 billion in the prior year. However, operating income rose to $22 million, a substantial increase from an operating loss of $70 million in the second quarter of 2025. The net loss for the quarter was $56 million, an improvement from a net loss of $76 million a year earlier.

In the first half of 2026, Domtar's sales totaled $3.433 billion, down from $3.623 billion in the same period of 2025. The operating loss for the first six months was $96 million, compared to a loss of $4 million in the first half of 2025. The company attributed the decline in sales to lower average selling prices for pulp products and reduced volumes due to recent mill closures, including the Grenada, Crofton, and Coosa Pines facilities. Despite these challenges, the company experienced higher average selling prices for paper and wood products, which partially offset the declines.

Strategically, Domtar completed the sale of its Engineered Absorbent Materials Corporation on May 31, 2026, for $8 million, resulting in no net loss. The company also announced the indefinite idling of its Coosa Pines, Alabama mill, which will reduce annual market pulp production capacity by approximately 270,000 air-dried metric tons and lead to a workforce reduction of about 285 employees. Additionally, the company recorded impairment charges related to non-core assets and ongoing restructuring efforts, reflecting the impact of adverse market conditions.

Operationally, Domtar's Paper and Packaging segment saw sales increase by $15 million in the second quarter of 2026, driven by higher paper volumes, while the Pulp and Tissue segment experienced a $36 million decline in sales due to lower paper sales volumes and average selling prices. The Wood Products segment reported a $17 million increase in sales, attributed to higher average selling prices despite a decrease in volume. The company continues to focus on managing costs and aligning production with market demand, while also navigating the challenges posed by tariffs and fluctuating market conditions.

Looking ahead, Domtar anticipates steady demand for most paper grades and modest improvements in pulp demand, particularly for fluff pulp. The company expects pricing improvements in paper and is actively managing inventory levels. However, it also faces challenges from soft demand in the U.S. housing market and the impact of tariffs on its wood products. Overall, Domtar remains focused on controlling costs and generating cash flow while monitoring global supply chain and inflationary risks.