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Domtar Closes Lebel-sur-Quévillon Pulp Mill and Sawmill in Quebec
Montreal, Quebec, Canada, 18 December 2008 – Domtar Corporation (NYSE/TSX: UFS) announced today the permanent closing of its sawmill and pulp mill at Lebel-sur-Quévillon, Quebec. Operations at the pulp mill were halted on 24 November 2005 because of unfavorable economic conditions. The sawmill has been indefinitely idled since 2006 and at that time employed approximately 140 people. The pulp mill had an annual production capacity of 300,000 metric tons of softwood kraft pulp and employed approximately 425 employees.

The permanent closing of the pulp mill comes after all other solutions have been considered in the last three years and as the global pulp market now faces deteriorating conditions, therefore putting an end to any expectation to relaunch a profitable operation at Lebel-sur-Quévillon.

“Market conditions and housing starts in the United States have continued to deteriorate in the last few years, affecting both the demand for wood products and the profitability of our operations. These factors, coupled with the reduction of harvesting potential in Quebec, have forced us to rationalize production,” said Jean-François Mérette, senior vice president of Forest Products at Domtar.

Given the very weak economy and poor market conditions in the pulp and paper business, Domtar continues to closely monitor inventory levels and manage working capital by balancing production with its customer demand. As a result, the company will have curtailed production through lack-of-order downtime and slowdowns that are estimated to total 44,000 tonnes of pulp and approximately 173,000 tons of paper in the fourth quarter of 2008.

More recently, the Quebec government approved a plan to consolidate the available forest harvesting rights in northern Quebec. This has led Domtar to concentrate on its active operations to preserve jobs and attempt to bring these facilities to a level of profitability. Industry producers accepted the consolidation plan following consultations with the communities in the region.

Domtar Corporation (NYSE/TSX:UFS) is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second largest in the world based on production capacity, and is also a manufacturer of papergrade, fluff, and specialty pulp. The company designs, manufactures, markets, and distributes a wide range of business, commercial printing and publication, converting and specialty papers, and a family of environmentally and socially responsible papers. Domtar owns and operates Domtar Distribution Group, an extensive network of strategically located paper distribution facilities. Domtar also produces lumber and other specialty and industrial wood products. The company employs nearly 13,000 people. To learn more, visit www.domtar.com.

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