Domtar, Other Global Paper Companies Among Those with Brexit Complications

 

According to a report this past week by Zacks (Chicago, Ill., USA) on the position of paper product company Domtar (Montreal, Que., Canada), with global demand for pulp likely to be volatile due to appreciation of the U.S. dollar and swings in consumer inventory, especially in China, the company is reported to be aware and/or cautious about fluctuations that may come from other political factors such as the U.K. "Brexit" national referendum vote, where 52% of the population chose the position that the U.K. shall not remain a part of the EU.

Given its international presence, the company and others like it may often face unfavorable foreign currency movements. Any future slowdown in the global economy or the manufacturing industry as a whole, particularly in the aftermath of the Brexit referendum, will have an adverse impact on the pulp and paper business according to Zacks, hampering long-term growth potential and possible investment interest.

The revamped market dynamics following Brexit are expected to affect other firms, like Domtar, that have significant presence in the U.K. Companies will face renegotiated deals and restrictions imposed on trade with other remaining EU members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the EU, lowering productivity of P&P producers who feel sensitive in their investment when faced with unknown or unfavorable foreign currency, change, or trade redefinition.

Domtar’s investment strategy in particular is described in this report as taking a "holistic view" of this rapidly evolving market.