Weyerhaeuser Co. (WY) said its fine-paper business, which includes assets being combined with Domtar Inc., had a 2006 loss of $613 million, or $2.18 a share.

Fourth-quarter profit at the unit was $105 million, or 37 cents a share, on sales of $872 million, Federal Way, Washington- based Weyerhaeuser said today in a statement. Profit in the fourth-quarter included a $65 million gain from the refund of duties levied by the U.S. on imports of Canadian softwood lumber.

Weyerhaeuser and Montreal-based Domtar, North America's third-largest maker of office paper, are combining assets in the production of paper for facsimile machines and photocopiers to reduce costs and balance North American output with demand.

Sales at Weyerhaeuser's fine-paper business in 2006 were $3.3 billion, the company said.

Weyerhaeuser said 284.1 million shares of the new Domtar Corp. (UFS) would be issued to Weyerhaeuser investors as part of the fine-paper merger.

Shares of Weyerhaeuser rose 64 cents to $83.03 in New York Stock Exchange composite trading. They have gained 18 percent in the past year.

Domtar jumped C$1.30, or 13 percent, to C$10.94 on the Toronto Stock Exchange. They have surged 81 percent in the past year.

To contact the reporter on this story: Christopher Donville in Vancouver at cjdonville#bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net