Dec. 12, 2005—The Bowery Ballroom in New York City Nov. 30 grooved to music from the 60s and 70s, and a psychedelic oil-and-water light show surfaced on a projection screen, created by James Oluess and his company J.O.E. Domtar’s East Coast celebration of its line of EarthChoice papers—the seventh and last of such events held across the country this year—was nothing less than hippie-dippy fun.

The venue showed off album covers designed by legendary artist Gary Burden, R. Twerk & Co., Malibu, Calif., recreated on various examples from the EarthChoice line. Mr. Burden’s portfolio includes covers for The Eagles, The Doors, Steppenwolf, and Neil Young, as well as more contemporary artists such as the Dixie Chicks.

Mr. Burden helped Domtar and its partners in conservation, the Rainforest Alliance and the Forest Stewardship Council (FSC), get the word out that environmentally friendly papers do not have to be inferior in quality or cost more. In fact, the line, which consists of 13 stocks for a variety of applications, carries no upcharge and is counted among the company’s other high-quality lines.

“This could be another revolution,” Mr. Burden said during his remarks, noting that in the 60s and 70s, he was fighting big corporations, but it was refreshing to find one that is as concerned about his kids and his kids’ kids as he is. “The times have changed, but the social and environmental ethics we advocated in the 60s and 70s are more relevant than ever.”

To illustrate that earth-friendly choices can be made in creating new projects, as well as recreating old ones, Mr. Burden highlighted the new Neil Young album and CD cover, both of which were created using all environmentally sound materials.

He is also, he noted, working with the Dixie Chicks on their new album, and hopes to go the same route with them. In addition, books were handed out at the event that were a collaboration of Mr. Burden, Domtar, and printer Insync Media featuring some of his classic album covers on EarthChoice papers, with background on the covers and how they were reproduced. A picutre of the cover of the book is seen on the front page. All of the album covers were also displayed at the event.

“Gary Burden pulled out all the stops for this exhibit,” said Steve Barker, Domtar’s senior vice president for pulp and paper sales and marketing. “The result is a vivid demonstration of just how far socially and environmentally responsible papers have come, and how far an inspired vision can make them go.”

EarthChoice papers are targeted toward business applications such as brochures and promotional materials, annual reports, business forms, direct-mail pieces, catalogs, magazines, and presentation folders. They first debuted in April, and each of the stocks contains virgin fiber certified by SmartWood. The SmartWood program is a Rainforest Alliance initiative that independently certifies papers to FSC standards. Most of the line also contains post-consumer waste content.

Business Decisions
Separate from the event, Domtar announced a series of measures aimed at returning the company to profitability. The plan includes closures of paper mills and sawmills, the sale of a paper mill, and cost-cutting initiatives.

“The mill closures only affect our overall capacity. The EarthChoice line remains intact, and in fact will continue to grow. We will shift grades to other locations that are FSC-certified to keep the integrity of the line,” according to Lewis Fix, director, business development, corporate markets/EarthChoice.

The cost reduction program includes: reduced selling, general, and administrative expenses by eliminating approximately 100 corporate and divisional positions; implementing cost reductions at the mill level by eliminating approximately 200 operational positions; and consolidating North American administrative offices in Montreal and Cincinnati.

“The strengthening of the Canadian dollar has pushed some of our Canadian mills to negative cash flow generation, and we must focus on our most efficient mills in order to return to profitability in the foreseeable future. We are sad to announce that this plan will translate into a permanent workforce reduction of approximately 1,800 positions across the company, that includes the reorganization announced in December 2004 at the Cornwall (Ontario) mill. We believe that these actions, our previously announced dividend cut, and other measures to reinforce our support to customers, should improve our cash flow by approximately $160 million, and constitute an important step toward improving our margins,” said Richard Garneau, executive vice president, operations.

The Cornwall mill will be permanently shut down March 31, 2006. This will result in the elimination of approximately 910 positions, including the 390 positions already affected by the shutdown of the pulp mill, PM No. 6. Total annual capacity of 265,000 tons of uncoated and coated printing grades on three paper machines as well as 160,000 tons of pulp will be permanently taken off the market.

The closure of PM No. 10 and PM No. 11 at the non-integrated Ottawa-Hull complex, Ontario, effective March 31, 2006, will lead to 185 positions eliminated and 65,000 tons of paper capacity removed from the market.

The company is still seeking a buyer for the Vancouver coated paper mill. This mill employs approximately 285 workers and produces 120,000 tons of coated paper.

The Grand Remous and Malartic, Quebec mills will close Feb. 28, 2006. There are approximately 200 employees working at these facilities. Subject to government approval, the wood fiber allocation will be transferred to Domtar’s other Quebec sawmills. This will ensure more efficient operations by going to three shifts, and will offer about 80 employees from Grand Remous and Malartic the possibility of transferring to new positions. The company is working with a partner in collaboration with the government on a project that would create more than 300 new positions using the Grand Remous and Malartic infrastructures.

“Mill closures are very difficult decisions to make. [These measures] are necessary actions that will help the corporation return to profitability. Unfortunately, sustained actions and dedicated efforts by our employees as well as capital investments by the company were not sufficient to guarantee the long-term viability of these operations within Domtar,” said Raymond Royer, president and CEO. “Some of our facilities face significant challenges posed by high cost structures and the ever-strengthening Canadian dollar. Our market pulp operations will remain under particular scrutiny. “We are calling for the cooperation of employees, union representatives, community leaders, and government officials to help us improve our competitive position. Domtar is determined to emerge from this difficult period a stronger organization. In keeping with the company’s corporate values, all employees impacted by [this] announcement will receive financial assistance and be offered access to outplacement services.”