At Domtar, we are taking action every day to shape our future and deliver meaningful value for our shareholders. Guided by clear strategic priorities and a well-defined plan that positions Domtar for sustainable growth, our business transformation is well underway, and our results demonstrate the progress we are making. Our goal over the longer term is to generate annual EBITDA of $300 million to $500 million from growing fiber-based businesses, while delivering solid value for shareholders along the way.

Our Personal Care division is gaining traction in North America and Europe, both in the adult incontinence and infant care categories, and growth is accelerating. Our Pulp and Paper division is proving resilient year after year. We remain the North American leader in uncoated freesheet, with industry-leading margins over the past several years. We are repurposing assets and leveraging the flexibility of this division’s integrated value chain to capture opportunities that deliver higher value, more sustainably.

Thanks to our strong and steady performance in our Pulp and Paper division, which generated approximately $4.5 billion in sales in 2015, we have been able to invest in growth markets and reward our shareholders. From January 2011 to December 2015, we returned approximately $1.3 billion to shareholders—fully 72% of our free cash flow, through share buybacks and dividends—while maintaining a strong financial position.

DRIVING VALUE IN OUR CORE BUSINESS

Our 2015 shipments of communication papers—which account for about 80% of Domtar’s total paper mix—benefited from higher white-collar employment and an increase in direct mail marketing. Shipments were also up for specialty and packaging grades, a category that represents 16% of our mix and tracks GDP growth.

In 2016, Domtar will remain a supplier of choice for a broad range of paper customers and channel partners by staying focused on innovation, product quality, technical support and excellent service. The recent favorable decisions by the U.S. International Trade Commission and the U.S. Department of Commerce to address unfairly-priced imports of certain uncoated paper into the United States will support higher shipments from U.S. manufacturers in 2016.

Our customers and partners continue to appreciate our initiatives to reinforce the practical and enduring qualities of paper and encourage its responsible use. This includes our Print Works! publications and our edgy, award-winning PAPERbecause campaign, which advocates for paper through innovative promotions.

Market pulp represents 19% of our consolidated sales, and we continue to diversify and expand in growth markets. Pulp volumes remained strong in 2015, and we expect higher sales following the completion of our paper machine conversion into a fluff pulp line in Ashdown, Arkansas, in the second half of 2016. We are adding over 500,000 air dry metric tons (ADMT) in annual pulp capacity on a machine that will also be able to produce softwood bales. The repurposing of this asset will further shift our pulp customer base toward growth markets. Our goal is for 50% of the production capacity on this machine to be used for fluff pulp by 2017.

The Pulp and Paper division achieved solid productivity last year, driven by full capacity operation and the introduction of continuous improvement and reliability programs across our mill network that is extracting costs from the system and is reducing maintenance spending, an ongoing objective. We expect these programs to generate further productivity improvements in 2016 and beyond as we pursue our goal to be the lowest cost producer in the industry.

EXPANDING DOMTAR’S FOOTPRINT IN PERSONAL CARE

Over the past few years, we have established a meaningful position in the global personal care market through strategic acquisitions, investments in expanded and improved manufacturing, product innovation and organic growth. Today, we have a growing position in institutional channels for adult incontinence products in North America and Europe. We are one of the largest suppliers of private-label baby diapers in the North American retail channel and a leader in the branded adult incontinence segment in Spain. The personal care market has attractive fundamentals, and we are investing to build efficiency and scale, and to expand our product offering.

In 2015, we achieved cost savings from our new manufacturing platform and secured significant new business in key retail channels that will be reflected in our 2016 sales. These wins reflect the strength of our partner brand model, a unique go-to-market approach that offers close alignment with the needs of our customers. We are bringing more choice, innovation and flexibility to the private-label market, as well as technical expertise, category management and customer service.

Whether developing products with our clients or marketing our own, we are at the forefront of innovation for absorbent materials and product design. We incorporated new innovation in the re-launch of our line of branded light incontinence products in Spain, which was well received by consumers, and we conducted consumer testing for innovations that will be launched in 2016 within our infant line and adult incontinence brief design. This is the R&D engine of our personal care business.

Overall, our broadening product assortment across the absorbent hygiene spectrum will further position us as a partner of choice, with the offering, insight and scale to provide required service levels in both products and distribution capabilities. As we continue to win new business and strengthen customer relationships, we are confident that this growth segment will contribute significantly to achieving Domtar’s long-term objectives.

CREATING VALUE FOR SHAREHOLDERS

We increased our quarterly dividend by 7% to $0.40 per share and our stock buyback program from $1 billion to $1.3 billion in 2015. For the year, we returned over 90% of our free cash flow directly to shareholders. We will continue to pursue a balanced approach to the deployment of our capital, while maintaining the flexibility to execute our growth strategy.

Maximizing value in our pulp and paper business and positioning Domtar in growth markets remain our strategic priorities. We are also committed to operating responsibly, an ethic that is engrained in our culture and drives everything we do. From the environmental compliance of our operations and making responsibly-sourced and manufactured products, to giving back to our communities, we are committed to setting an example of sustainable business.

We are pleased with our progress in 2015 and look forward to achieving new milestones in the years ahead as our investments and our efforts bear fruit. We are confident in our strategy. In 2016, a significant portion of our capital expenditures will be allocated to investments in pulp and personal care, further advancing our long-term financial objectives. We will remain squarely focused on execution and on ensuring that we deliver value for our shareholders, employees, customers and communities by shaping our future, every day.

John D. Williams

President and Chief Executive Officer

The terms “EBITDA” and “free cash flow” referred to in this message are non-GAAP financial measures. Please see “Reconciliation of non-GAAP financial measures” at domtar.com.

BUSINESS SEGMENTS

In 2015, the Personal Care division reduced incident frequency by 29%, with two sites remaining injury-free for the year. To further improve its safety performance, the recently implemented, division-wide Environmental Health and Safety Steering Council developed comprehensive safety plans for each facility.