March 29, 2011 / 1:32 PM / in 7 years

UPDATE 2-Domtar to cut jobs, capacity at Arkansas mill

* To cut workforce by 10 percent

* To cut paper production by 14 percent (Adds details)

March 29 (Reuters) - Pulp and paper producer Domtar Corp said it will cut about 110 jobs and permanently shut down one of four paper machines at its Ashdown, Arkansas pulp and paper mill by July 1, as it sees demand for paper in North America declining.

“Because secular demand decline in North America continues, we must permanently reduce our uncoated freesheet paper production capacity,” Chief Executive John Williams said in a statement.

Domtar will cut its workforce by about 10 percent to 940 and reduce uncoated freesheet paper production capacity by 14 percent to 780,000 short tons per year at the mill, a spokesman for the company told Reuters.

The closure will result in a charge of $6 million in the first quarter and $74 million in the second quarter, the company said.

Domtar sells more than half of its pulp to Europe and Asia. It will now be able to sell over 200,000 tons of pulp, compared with 80,000 tons previously, as it will use less pulp internally, the spokesman said.

Shares of the Montreal-based company, which posted fourth-quarter results below market estimates, were trading up over 1 percent at C$87.73 on Tuesday afternoon on the Toronto Stock Exchange. (Reporting by Bhaswati Mukhopadhyay and Mayuresh Tungare in Bangalore; Editing by Maju Samuel, Roshni Menon)

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