Goldman Sachs Maintains Buy Rating on Domtar (UFS)

In its research report published today, Goldman Sachs maintains its Buy rating on Domtar Corp. UFS despite a decline in the uncoated freesheet paper market. UCFS volumes declined 7.5% yoy in October. Total printing and writing paper shipments declined 4.0% yoy. In a note to clients, Goldman Sachs writes, "Although Domtar is the largest UCFS producer and we acknowledge UCFS volumes are likely to continue to decline, we remain Buy rated on Domtar, given (1) expectations for UCFS markets to stay balanced, (2) robust free cash flow (+20% FCF yield), and (3) our forecast that Domtar will increase its return of cash to shareholders in 2011 by repurchasing $400 mn of its stock." UFS closed Monday at $78.69.