As a result of its annual goodwill and indefinite life intangible assets impairment tests, the company recorded a non-cash goodwill impairment charge of $578 million associated with Personal Care. Growing competitive market pressures in the healthcare and retail markets over the last year, including the entry of new competitors in the private label category, excess industry capacity and the decline of healthcare spending by governmental agencies, are expected to result in lower than previously anticipated sales and operating margins. In light of this weakened market outlook, Domtar’s current business forecast was not sufficient to support the carrying value of the goodwill associated with Personal Care, leading to the impairment.
Commenting on the full-year results, John D. Williams, president and CEO, says, “We generated nearly $450 million of operating cash flow and continued our solid track record of rewarding shareholders with a high payout ratio while maintaining financial flexibility. Our performance, combined with our confidence in our cash flow generating capabilities, enable us to announce a 4.8% dividend increase. Looking ahead, we remain focused on maximizing long-term profitability and value creation.”
Commenting on Personal Care, Williams adds, “While we had good results in 2017, we have concluded that the performance of our Personal Care business will continue to be impacted by an increasingly competitive market. We remain optimistic about the long-term growth trajectory of the absorbent hygiene market; however, this increasingly competitive market will negatively impact our sales, and we expect the environment to remain challenging for the foreseeable future. Importantly, the goodwill impairment charge is non-cash. It does not alter our current financial flexibility, and our overall cash generating capabilities remains strong.”