Harold H. MacKay
Good morning, ladies and gentlemen. My name is Harold MacKay. I'm the nonexecutive Chairman of Board of Directors of Domtar, and I'll act as Chairman of the meeting. I think the first thing I would like to say is that I have no intention of trying to one up what we've just seen on the screen. I'm the straight man this morning.
The meeting will be conducted in both English and French, and we've provided, as you know, simultaneous translation. If you haven't received the necessary device and you wish to use the service, please ask an attendant at the entrance of the room for a receiving unit. I would ask, on another front, that each of us check to be sure that our communications devices, our cell phones, other devices are turned off so that the flow of the meeting is not disturbed. So if you don't mind double checking that, I would ask you to do that.
[French] I would like to welcome you to the annual meeting of stockholders of Domtar Corporation. I'd also like to welcome all the stockholders, other individuals who are joining us this morning by Internet. The archived webcast of the meeting will be available in the next 24 hours on our website.
I will now call the annual meeting to order. First, let me introduce the individuals who are sitting at the table with me. To my immediate left is John Williams, our Chief Executive Officer; and to his left, Mr. Razvan Theodoru, who is the Vice President of Corporate Law and Secretary of the Corporation and who's going to be acting as Secretary of the meeting.
So my first task is a pleasant one. I'd like to introduce the members of our board who are sitting in the first row. I'll be asking each Director to stand when his or her name is called and ask that you remained standing, please, until all are introduced. Unfortunately, 2 of our directors, Brian Levitt and Louis Gignac, who attended our board meetings yesterday, could not be here with us this morning because of unavoidable scheduling conflict. My Director colleagues who are in attendance are Ms. Giannella Alvarez, the Group President of Barilla America, Inc.; Mr. Robert Apple, who is the Chief Operating Officer of MasTec, Inc. Mr. Apple is standing for election by the stockholders for the first time in this year. David Maffucci, formerly a senior executive of Bowater; Mr. Bob Steacy, former Executive Vice President and CFO of Torstar Corporation; Ms. Pamela Strobel, former executive VP and Executive Administration -- and Chief Administrative Officer of Exelon Corporation; and Denis Turcotte, the President and CEO of North Channel Management and formerly the President and CEO of Algoma Steel Inc.
Ladies and gentlemen, your Board of Directors.
I'm now going to turn the microphone over to John Williams who will introduce members of his senior management team who are with us this morning.
John D. Williams
Good morning, ladies and gentlemen, and it's great pleasure that I would like to introduce my management team to you. They're sitting in the first row. I'll ask each of them, as I announce their name, to stand up and stay standing.
So first of all, Melissa Anderson, who's our VP of Human Resources; Daniel Buron, our Chief Financial Officer; Mike Edwards, Senior Vice President of Operations; Michael Fagan, Senior VP of our Personal Care division; Zygmunt Jablonski, Corporate Law; Patrick Loulou, Senior Vice President, Business Development; Dick Thomas, Senior Vice President of Sales, Pulp and Paper; and Mark Ushpol, Senior Vice President of Ariva.
Your management team, ladies and gentlemen.
Harold H. MacKay
Thank you, John. Also in attendance at the meeting are the corporation's independent registered public accounting firm, PricewaterhouseCoopers, who are represented this morning by Mr. Martin Foley and Michael Kuhn.
Before we turn to the formal business this morning, I'd like to say a few words on behalf of your board. John will shortly report on the company's business results and strategic initiatives during 2012. And as you will hear from him, significant progress has been made along the road to reposition the company for growth. This repositioning journey began several years ago when it became clear that the gradual secular decline in the fine paper business was an impediment to the company creating a long-term shareholder value. Since the most recent financial crisis, the company has had to address not only that secular decline but also the reality of a very sluggish North American economy.
Against that backdrop, job one for our dedicated employees in the Pulp and Paper business, the core division of our company, has been to run that business just as well as it can be run. We have world-class assets, and we have world-class people. Those 2 things provide us with very important competitive advantages. And I do want to thank all of those employees for their energy and continuing efforts.
The repositioning of the business also means that we are taking steps to be sure that these world-class assets produce products that the market wants. Your management team has shown considerable foresight in that regard. I mentioned the Appleton transaction that John may refer to later. And the changes they have initiated are paying dividends. But running that core business and asset repurposing alone will certainly not do the job. Your board is working very closely with your management team to discuss and develop the corporate strategies, which will enable the company to be a profitable participant in emerging growth businesses.
John will be describing some of Domtar's strategic accomplishments in 2012. I would only add that the board considers us to be well embarked on the growth of our Personal Care segment, which is one of those very major initiatives. We expect that it will have, when fully developed, an important product and geographic reach. Ultimately, it should have the critical mass that will offset the financial impact of declining paper.
Your board continues to keep a particularly close eye on our capital allocation policy. And there, we see the need to maintain financial flexibility to successfully implement the strategic plan, while balancing it with returning capital to shareholders as they legitimately expect. I want to reiterate this morning the board's commitment to return the majority of free cash flow to shareholders, absent what we perceive to be value-creating acquisition opportunities. Since we publicly announced that commitment, we have done exactly as we have promised.
This morning, we announced a 22% increase in our dividend, which demonstrates again the confidence we have in Domtar's prospect. In total, it's interesting to look back and to see that there's been a 120% increase in the dividend since it was introduced in 2010.
Now good governance cannot assure a prosperous growth company. However, bad governance is a sure prescription for business failure. So our job as a board on behalf of you, the stockholders, and as my job as the company's nonexecutive Chairman, to ensure that our governance practices are first-rate, that our oversight of the company's affairs is strong, and that the board is playing its proactive role in developing the company's strategy in shaping its future. I can assure you this morning that we are doing just that. And I do want to thank my colleagues on the board for the diligence and the insight that they bring to their work.
I want to say a special word of thanks to Jack Bingleman, one of our long-serving directors. He's been on this board since our formation in 2007, and he was on the old Domtar board prior to the transaction that formed new Domtar. Jack is not standing for reelection today. During his business career, he had been an entrepreneurial leader of successful retail businesses. He brought to our boardroom an extraordinary knowledge of what it takes for a company like Domtar to meet customer requirements. He made the board a better board, and he made Domtar a better company. Although Jack is not able to be with us this morning, we do thank him for his service as he now retires from the board, I expect he may be watching, so please join me in a hand of appreciation to Jack.
Finally, I note the recent public recognition that our Chief Executive Officer, John Williams, has received for his leadership of Domtar. PaperAge is a leading information source on the global pulp and paper industry. And a few months ago, PaperAge selected John as its executive papermaker of the year. We congratulate you, John, on that accolade. It is well deserved. Again, a hand for John. But I do want to let you, John, your management and the stockholders know that the board is confident that the best is yet to come.
Having expressed those views on behalf of your board, we now turn to the formal proceedings of today's meeting, which are governed by Delaware law and our bylaws. The agenda of the meeting is included in the notice of annual meeting, which was sent to the stockholders with the proxy statement and the annual report on Form 10-K.
Now in order to have this formal business conducted efficiently, I would ask you to hold any questions, which are not related to the formal items under consideration until the question period later in the meeting. And I'd also ask that you keep your questions or comments relatively brief, limited to a few minutes at most to ensure that everyone who wants to participate has a chance to do that.
We have also asked certain proxy holders or stockholders to move and second the proposals on the agenda in order to advance the efficiency of their presentation. And I'll invite them to do so at an appropriate time.
The Secretary has advised me, he's in possession of the necessary affidavit of mailing, which confirms the formal regularities of the mailing of the necessary documents to stockholders, and that affidavit will be filed with the meeting minutes.
The board has appointed Computershare Trust to act as inspector of election, and they are represented here today by Ms. Iris Smith [ph] and Ms. Cathleen Welply [ph]. I have received a certificate from the inspector to the effect that there are one or more stockholders present in person or represented today by proxy or by voting instructions, which are entitled to cast in the aggregate at least 1/3 of the votes attaching to Domtar's outstanding common and exchangeable shares that are entitled to vote at the meeting. Consequently, there is a quorum present in accordance with the bylaws. The meeting is properly called, and I declare that we may now turn to the formal business.
Before we turn to those individual items, let me just provide a quick overview.
First item of business deals with the election of 10 members of our board. And consistent with our certificate of incorporation, that election will be determined by the majority of votes cast with respect to each individual nominee.
The second item of business is the approval by a nonbinding advisory vote of the compensation which the corporation has paid to its named executive officers.
And the third item of business is the ratification of the appointment of PricewaterhouseCoopers LLP as our independent public accounting firm for 2013 fiscal year.
The second and third items require the approval of a majority of the voting power of the shares present in person or represented by proxy at the meeting.
So with that background, the 3 proposals, which we have today, we turn to the first item on the agenda, which deals with the election of directors, and I'll ask Ms. Paola Farnesi to make a motion for this on this matter.
Mr. Chairman, I'm a stockholder of the corporation, and I move for the election of the following Director nominee as stated in Item 1 of the proxy statement: Giannella Alvarez, Robert E. Apple, Louis P. Gignac, Brian M. Levitt, Harold H. Mackay, David G. Maffuci, Robert J. Steacy, Pamela B. Strobel, Denis Turcotte and John D. Williams.
Harold H. MacKay
Thank you. Is there a seconder?
[French] I second the motion.
Harold H. MacKay
Hearing none, we turn to the second item of business, which is the approval of the compensation paid by the corporation to its named executive officers. And I will now ask Rosie Toujin [ph] to make a motion for this approval.
[French] Mr. Chairman, I'm a stockholder of the corporation, and I move for the approval of the compensation paid by the corporation to its named executive officers as stated in Item 2 of the proxy statement.
Mr. Chairman, I second the motion.
Harold H. MacKay
Thank you. Is there any discussion on this motion? Hearing none, we turn to the third and last item on the agenda, which is the ratification of PricewaterhouseCoopers LLP as the independent public accounting firm for the corporation for the 2013 fiscal year. And I will ask the Chair of our Audit Committee, Bob Steacy, to make a motion in this regard.
Robert J. Steacy
Mr. Chairman, I'm a shareholder of the corporation, and I move for the ratification of the appointment of PricewaterhouseCoopers LLP as the corporation's independent public accounting firm for the 2013 fiscal year as stated in Item 3 of the proxy statement.
Harold H. MacKay
Thank you, Bob. Is there a seconder?
Mr. Chairman, I second the motion.
Harold H. MacKay
Thank you. Is there a discussion on this motion?
I'd like to just comment on the role of the auditors. What is the role of an auditor but to audit the books and find irregularities? Companies go bankrupt, and the auditors wash their hands, and they pretend always not their fault. How can you account for bad accounting auditing? When companies go bankrupt, nobody knows beforehand what happened. And like Lehman Brothers, you wouldn't believe this, but the directors went to that market to get some money to pay themselves some bonuses and compensation. And you know what? This was done before it was known to the public that they were bankrupt. The biggest bankruptcy in history after Enron. It is a calamity. What the auditors are doing? They get millions of dollars, and what are they responsible for? Aren't they responsible for finding irregularities and correct them before it leaks through.
Harold H. MacKay
Happy to respond to that question. Thank you very much. The -- that question may be more appropriately addressed later, but because it does relate to the election of our auditors as opposed to the general question you've asked, let me address it now. The role of an auditor in a public corporation is, of course, a very important one. We, as a board, maintain careful vigilance over the work of the auditor through our Audit Committee. Because as you pointed out, shoddy accounting work and bad reporting by companies can create disastrous results for investors. It is the task of the auditors, such as PricewaterhouseCoopers in Domtar, to review through a careful risk -- rated-risk assessed audit that management's presentation of the financial results is fair and accurate. And I can assure you that this job in Domtar is done extremely carefully. We have, as you will have seen in the proxy, a clean audit report. Auditors these days are also more carefully monitored by their own profession than they have been in the past. And that is a salutary development as well because I share your concern that shareholders, directors and indeed, our entire economy depend upon sound auditing work, and I believe that happens in Domtar. If you have further general questions, we'll deal with them in the question period at the conclusion of the meeting, which Mr. Williams and I will then participate in.
I want to comment on the previous resolution there...
Harold H. MacKay
Sorry, that actually is out of order because we've actually moved on from the discussion of that resolution. You...
I'll bring it up later.
Harold H. MacKay
Well, thank you very much. We'll now vote on these 3 items. After the balloting is complete, we will have the report from Mr. Williams, our CEO. Following that, we will resume the formal proceedings, report on the balloting and return to the question period.
Most of you have returned proxies, which authorized the persons who have been named on the proxy form to vote on your behalf. However, if you wish now to revoke that proxy and vote by ballot, please request ballots from one of the Computershare representatives in the room. In addition, if you wish to vote and did not return your proxy card, please cast your votes on the ballot you received at the registration desk and hand them to one of the Computershare representatives.
I now declare the polls open for a consideration of the 3 items, and the polls will remain open for 5 minutes, at which point the Computershare representatives will collect the ballots for counting. I'd now like to invite our President and Chief Executive Officer to deliver his report to the stockholders. John?
John D. Williams
So thank you, Mr. Chairman, and good morning, everyone. First of all, I too would like to welcome you to the 2013 Annual Meeting of Stockholders here in Montréal in this magnificent hall. I'd also like to welcome those joining us via the web. My objective today is to provide you with a State of the Union update on our journey to reposition the business from a being a traditional papermaker to being a true fiber innovator.
While we are in the early days of this transformation, the past year was important in our evolution. I'm pleased to report that the company's results are showing the benefits of investments we're making in our facilities, in our people and in our future. Looking back on 2012, we continued our relentless focus to perform against our key performance indicators of profitability, health and safety, customer satisfaction and poll productivity.
A key component of our performance is occupational health and safety where we performed much better than target with a total incident rate of 1.08, the lowest full year incident rate in our history. This means we had 20 fewer recordable incidents in 2012 compared to 2011, which represents a 20% improvement. Our incident rates dipped below 1 for 6 out of 12 months, a performance that is considered and we consider world-class. Enough cannot be said for those sites that have worked injury-free, maintained excellent performance and made significant improvements.
Looking at profitability as measured by earnings before interest, taxes, depreciation and amortization, commonly referred to as EBITDA, our performance eroded into 2012 after 2 years of consecutive record earnings. The cyclicality in global pulp prices that's embedded in our business contributed to the majority of the year-over-year earnings decline. But I'm also confident that this volatile earnings lever will provide positive momentum as the pulp market recovers.
Another challenge to our business was the return of the secular decline in fine paper demand in North America in 2012 after 2 years of relatively stable shipments. Despite these headwinds, our Pulp and Paper business performed well with good cost control and relatively stable paper pricing. And our Personal Care business also performed in line with our expectations. This resulted in a consolidated EBITDA before items of $799 million and a strong free cash flow of $315 million.
So all in all, we can be proud of what our 9,300 colleagues in North America, Europe and Asia have accomplished. Our mission is to execute flawlessly on things under our control with a focus on customers, costs and cash, and that's exactly what we did together in 2012.
Back in 2009, we introduced our Perform, Grow, Break out strategic roadmap that focuses on performing in the core but also on building a business for the future through our growth strategy and to find ways over time to break out from our traditional earning streams in pulp and paper.
A cornerstone of this strategy is the expansion into the personal care market that globally, is a multibillion-dollar business growing every year due to the aging population in North America, Northern Europe and Asia. The 2012 acquisition of Attends Europe in Aneby, Sweden, the sister operation of our North American Attends business, consolidates the Attends brand under one roof and gives us a strong foothold in the European adult incontinence market. It also provides opportunities for product development synergies across the spectrum of personal care products. Now part of the Domtar fold, these businesses have a strategic owner committed to investing in differentiation and growth, opening them up to new sales channels and a wider platform for growth internationally.
The subsequent acquisition of EAM Corporation of Jesup, Georgia, an innovative manufacturer of super absorbent cords, adds an R&D engine to our Personal Care business, giving us an opportunity to further differentiate our full line of personal care products.
So these 2 additions to the Personal Care segment really cement our commitment to organically grow and double earnings from this business within 5 years. The integration is progressing well, and to that end, we've reorganized the management structure and opened up a global office for the Personal Care division in Raleigh, North Carolina. We will undoubtedly benefit from our proximity to nearby university campuses that would become a hub of consumer product research.
On the financial side, the results from Personal Care are continuing to be strong. Personal Care accounted for 7% of Domtar's total sales in 2012 and 10% of our consolidated run rate EBITDA based on our fourth quarter financial results.
We are in the process of completing capital investments in Greenville, North Carolina and Aneby, Sweden to support the organic growth, and we expect to see incremental earnings by late 2013. Meanwhile, we continue to look for additional acquisitions to support the growth in Personal Care, which we define as any consumer product that uses an absorbent core.
While we invest in the growth of our Personal Care business, we're firmly committed to maximizing and enhancing the value of our existing pulp and paper assets. The ongoing transformation to fiber innovator involves, just as importantly, the repurposing and repositioning of pulp and paper operations. In Marlboro, South Carolina, we are converting a mill to the manufacturer of specialty papers. This $32 million investment will provide the mill with a flexibility to make thermal base stock for binder sale paper, a fast growing market.
Our strategy to focus on growth markets is paying off. Our shipments of specialty and packaging paper grades increased 15% compared to 2011 to reach 15% of our total paper shipments in 2012. This means that we shipped close to 500,000 tons of specialty paper last year. We also completed a $26 million capital investment at our Ashdown, Arkansas mill to gain flexibility in switching from the manufacturer of hardwood pulp to the manufacturing of softwood pulp. We did this to capitalize on the mill's low-cost position and the better long-term outlook for softwood pulp grades.
Turning now to our Chinese converting and distribution operation in Shenzhen in the southern province of Guangdong, the facility has been fully operational since mid-2012. We have over 60 employees working out of a 200,000 square-foot facility, and they're making steady progress as we learn the market and build a customer base in this part of the country with a high concentration of commercial printers.
I'll close this flyover of developments and our continued repositioning of the company's core business by noting the recent agreement we reached to purchase Xerox's paper and print media products business in North America. Xerox is a household brand, and adding it to our existing portfolio of high-quality, sustainably driven branded papers, such as Cougar, Husky, Lynx, First Choice and EarthChoice will add to our customers' range of products.
The transaction will also see Domtar market and distribute carbonless and wide-format paper that we do not manufacture. The transaction is expected to close in the second quarter of this year. We are excited about this development because it supports our strong brand strategy in our paper business, one that delivers value to our customers and also helps us with the secular demand decline in commodity papers across North America.
We are also working to break out from traditional pulp and paper making through innovation. Indeed, we're investing in fiber-centric research and development for the purpose of extracting the most value from the molecular building blocks of wood fiber. One example is our successful start-up of a commercial-scale lignin separation plant at our Plymouth, North Carolina mill in early 2013. By separating lignin, we solved a recovery boil of bottleneck issue improving the efficiency of our pulp making process. But it also opens up the possibility of a whole range of higher-value industrial applications for this lignin as a bio-based alternative to fossil fuel additives using a range of industrial applications from the automotive industry to road construction.
Turning to nanocrystalline cellulose. Our CelluForce joint venture in Windsor, Québec has produced enough inventory for us to continue developing a strong customer base. We're now actively looking for a strategic partner on the project who can deliver business opportunities in the near term while supporting CelluForce in the next phase of its development.
The third R&D project I'll mention is a clean technology joint venture we are currently pursuing at our Dryden, Ontario mill where we're looking into transforming wood waste into transportation biofuel through fast pyrolysis. Fast pyrolysis technology uses heat without oxygen to quickly and cleanly convert woody biomass to crude bio oil and gas.
Unlocking the full potential of what's currently seen as a waste stream is being pursued with a partnership with Ontario-based CRIBE and Battelle, the world's largest private R&D institute.
Finally, 2012 also saw us continue to dispose of noncore assets in our Pulp and Paper business that would otherwise consume management time and company resources. This included the sale of the Lebel-sur-Quévillon, Québec mill that have been shuttered since 2005, the sale of our hydro assets in Ottawa Gatineau that was sold to an Energy Ottawa affiliate for $46 million and finally, the resale of our Port Edwards site in the state of Wisconsin, a mill that has been closed since 2008.
So turning to our strategic plan in 2012, we continue to balance our investments in growth with a stated commitment to return a majority of the free cash flow the business is generating to shareholders. As a result, between share buybacks and dividends, we returned 68% of free cash flow to shareholders in 2012, similar to 2011, for a total of $214 million. With regard to share buybacks, it's our intention to ramp up our activity across the remainder of 2013 as evidenced by the 600,000 shares of common stock we repurchased in the first quarter of this year for a total of $47 million.
Another proof point of our aggressive buyback strategy is our April activity where we repurchased over 658,000 common shares, which represents $50 million of investment in the company's share price. And today, we announced a 22% increase in our regular quarterly dividend, taking it to $2.20 per year, consistent with our commitment to return capital to shareholders while investing in the earnings growth potential of the company.
Our dividend policy is robust, and our long-term aspiration is to keep growing the dividend to a level that delivers on our 3 strategic objectives, increasing at a rate consistent with the businesses' long-term earnings growth. Domtar's financial position is solid and made even stronger by low debt servicing costs after our successful issuance of the 30-year $300 million notes at historically low interest rates. And these steps have been taken with the objective of building a capital structure for the long term.
Our prudent finish it financial management puts us in an enviable financial position to grow the business with vision and with purpose while giving us the ability to quickly execute on our growth plans when the right opportunities present themselves.
Our goal is to reach $300 million to $500 million of annualized EBITDA from alternative business streams within 5 years, including but not limited to, our Personal Care segment.
The message I want to leave you with today is that we have a strong plan to grow the company's top line and the financial flexibility to execute against it. We have a strong strategic plan, we're executing well on it, and we remain strongly committed to returning the majority of free cash flow to shareholders through dividends and buybacks.
The board's decision today on the dividend recognizes the continued progress we are making on our strategic roadmap as does our increased share buyback activity. All of this speaks to the fact that we're creating value for shareholders as we build a sustainable business for the long term.
Speaking of sustainability, as we continue to investigate opportunities to go beyond the traditional pulp and paper markets, we remain committed to maintaining our standing of social and environmental performance leaders in our industry. Sustainability is at the core of our pulp and paper business model, and it is the foundation of our EarthChoice family of products that now represent nearly 1/4 of all the paper we sell. It's clear that our customers want environmentally responsible paper choices. And that's what our EarthChoice family of papers and its many FSC-certified options deliver with certainty.
The EarthChoice cycle starts in the forest with our commitment to increase our FSC fiber mix by 25% by 2020, eventually getting to the 100% mark. It then continues to the manufacturing process at our mills where we've set the greenhouse gas reduction target and are working on water and waste reduction targets. It includes, of course, our customers as we support them in greening their businesses through tools, such as our ever-expanding Paper Trail website and our EarthChoice Advisory Services team. And finally, it extends to promoting recycling with our partnership with Recyclebank.
These I see as proof points for our sustainability performance that continue to demonstrate market leadership and garner customer loyalty. Of course, our sustainability engagement also includes the marketing of our products.
And in this regard, our PAPER because campaign continued to generate support in 2012. The videos we played at the start of the meeting are the latest additions to the campaigns really, really short film series. The focus has shifted from the office, as you saw, to social settings, but the message is still the same: even in a digital age, arguably more so in the digital age, paper as a tactile and emotive communications platform has an enduring place.
I'll close by looking to the past to talk about Domtar's future. As we move forward on our journey of transformation, we do so with the deep understanding of our legacy. Roots are at the core of who we are and what we do at Domtar. We are in the process of building on them to write the next chapter of the Domtar story. Roots and the trees they feed are also the primary feedstock of our manufacturing process and the promise of our future.
As we continue to evolve the business, we retain an unwavering commitment to the 3 strategic priorities that govern our way forward. First is to find ways to grow the business so that we're less vulnerable to the secular decline in uncoated freesheet paper demand in North America. Second is to reduce the volatility of our earnings profile by improving the predictability and the visibility of our cash flows. And our third and final strategic objective is to create value over time by investing our capital wisely.
I offer to you that on all these fronts, we delivered in 2012 and that we will continue to do so in 2013 and beyond. We're truly in the process of building our future in fiber, and we're doing it together. I think our results speak to our shared commitment to performance and the teamwork that fuels it.
With that, I thank you for your attention and your support, and I'll turn it back to our Chairman, Harold MacKay. Harold?
Harold H. MacKay
Thank you very much, John. I am pleased now to report on the results of the balloting. Those voting results as tabulated by the inspector of election are as follows. First of all, in respect to our proposal #1, each of the board nominees has received votes in favor of their election in excess of 92.6% of the shares represented in person by voting by voting instructions or by proxy.
In respect to our proposal #2, 94.2% of the total shares represented in person by voting instructions or by proxy voted in favor.
As to proposal #3, 98.9% of the total shares voted in favor.
All of the proposals are therefore carried as presented.
We now turn to the question period, and I would invite any stockholder or a stockholder or a person holding a proxy to ask a question. If you ask -- want to ask a question, please go to a microphone, state your name, please advice whether you are a stockholder or a proxy and if you're holding a proxy, please state the shareholder whom you represent.
As I mentioned at the beginning of the meeting, I would ask you to be brief in your questions to be sure that all who wish to do so can participate. Speaker here.
Yes. My name is Kim Rogerson. I'm a stockholder of the corporation; I have a question for Mr. Williams. The company has faced operational issues in pulp and paper in the first quarter, and this has impacted the profits in share price. When will these issues be resolved?
John D. Williams
Well, I mean, certainly, we did have our operational issues in quarter 1. I don't think they're all going to be resolved immediately, but we see certainly over the second quarter improvement, pretty dramatic improvement, actually. But I think we really have to focus on 3 issues here. So we've got to settle the product mix in our facilities, we've got to get our productivity back to normalized levels, and we have to, as importantly, I think, replenish our paper inventories because undoubtedly, some of our service slipped in the first quarter. We've got to get that back because we've had, and it's our aspiration to continue to have, by far the best service relationship with our customers in the industry.
Harold H. MacKay
Recognize this microphone.
John D. Williams
Jack Grey [ph], a shareholder. This question is for John. You have a lot of cash and a low level of debt to support your growth plans, but it seems as if progress has been somewhat slow. When should we expect this capital to be deployed?
John D. Williams
Well, over the last 18 months, we've spent pretty actively on acquisitions and also have spent considerable capital actually in our Personal Care segment, and it’s our intention to continue to do that. We still believe very strongly that actually we're on track. We've made that promise that we would double the earnings from the Personal Care business over 5 years, and I believe very strongly that we -- we're on track to do that. And I only hope that Mike Fagan feels the same way, so no pressure there, Mike, but there it is. Also, we're always scanning the horizon to grow our Personal Care business for further acquisitions. We continue to do that, and I'd be very surprised, really, if the balance sheet wasn't deployed in the next 18 to 24 months, exactly along those lines.
Harold H. MacKay
Thank you, John. Recognize this microphone.
My name is Erica Tiedeman [ph]. I'm a shareholder. I'm a long-term shareholder...
Harold H. MacKay
Would you state your name, please?
Erica Tiedeman [ph]. I would like to comment on Say-on-Pay, an advisory vote to approve normal executive officer compensation. Shareholders in general seem to be very concerned on the big salaries and compensation and bonuses, that is $1 million, paid to directors. We, the shareholders, believe that the directors' compensation salaries are much too high. Apparently, in different industries, the directors believe they are compensated according to the market. It is also well known that the pulp and paper industry had very serious difficulties in the past. And they seem to be -- and eventually, they all seem to have gone bankrupt. Domtar was bought by an American company, Weyerhaeuser. As such, Domtar should be a profitable company for Weyerhaeuser. And I heard that -- or whatever it is. Did the parent company, Weyerhaeuser, close down the fine paper mill and winter mills, and they produce their fine paper now in their North Carolina plant. And another thing I want to say is we, the people of Canada, would like to see the pulp industry rejuvenated and returned to our country. Québecers are known to be the users of wood and drawers of water. We believe the salaries of the directors of the pulp and paper industry should come down to earth and they should be paid reasonable salaries the industry can support. A small company is unable to pay the huge salaries of directors. People would be glad, I believe, to work again in their industry at salaries the industry can support. There are other industries we would like to be -- should be repatriated on the same basis like Alcan. And that's the comment I would like to make.
Harold H. MacKay
Thank you for those observations, and I'll respond to them. First of all, you are correct that compensation levels for both officers and directors in public companies are a matter of quite intense shareholder scrutiny and interest. And what I can assure you of, in Domtar in particular, is that we engage in a very deliberate process in respect of compensation to be sure that we are well within line and not out of line, measured by our industry and not by other more profitable industries. That process includes the use of external consultants where it's appropriate, and those consultants are totally independent of our management. We believe that the results are also appropriate, and it is instructive that the advisory firms who advise on compensation practices this year both recommended that votes be cast in favor of the resolution that you spoke about. And indeed, as I've just mentioned, over 94% of those voting agreed with that recommendation. Now that doesn't make it right, and it doesn't make it perfect. And I can assure you that there will be continued attention to that very important issue, both on the question of executive compensation to be sure the structure is right and the pay is right and also to ensure that director compensation, to which you also referred, is well within appropriate norms. I do want to touch on the other matter you mentioned, namely, the Weyerhaeuser relationship with Domtar. The transaction you referred to in 2007 was indeed the transaction that brought together Domtar, as you had known it prior to the transaction, and a unit of the Weyerhaeuser Company, not the full company. But what you may not have realized is that Weyerhaeuser did not keep its investment. It immediately gave the shares it owned to its shareholders. So Weyerhaeuser no longer, in fact, has not since 2007, owned any shares in our company. We have an arm's length relationship with Weyerhaeuser, and it's not a stockholder. So whatever mill closures they may have done have not been part of our business. And I can assure you, for instance, you mentioned the Windsor location, that mill is one of our flagships. We value it highly. It is a profitable mill, and there are no concerns that you need to have about its future. Other questions? This microphone.
My name is Suzy Ima [ph]. I work in treasury here in Montréal. Given your -- sorry, I have to put my glasses on. Given your aspiration to build the consumer products business and the fact that demand for uncoated freesheet paper is in decline, have you given any thoughts to changing your stock ticker, UFS?
John D. Williams
A little, not a great deal at this point. The reason being that, obviously, the Personal Care segment at this moment in time is 7% of sales and 10%, 12% of earnings. So I don't think it's appropriate at this time because there is no doubt. Still, if you think about the business, there are 2 key tasks here. One is to drive the core business, which is represented by that ticker, and that's still the majority of our earnings at the moment. I think if the business mix shift, you could think about it. But I think we'll get there when we get there. I don't think it's a burning issue of the day.
Harold H. MacKay
Other questions? Seeing none, ladies and gentlemen, this concludes our Annual Stockholders' Meeting. I want to thank all of our stockholders for their continuing support, and I especially like to thank those of you who joined us here this morning or who have listened via the webcast. I now invite a motion to adjourn the meeting.
Mr. Chairman, I'm a stockholder, and I move that the meeting be adjourned.
Harold H. MacKay
Is there a seconder?
[French] Mr. Chairman, I'd like to support this motion.
Harold H. MacKay
Hearing none, I declare the meeting adjourned. Thank you very much.
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