Canfor Reports Results for First Quarter of 2017

VANCOUVER, April 25, 2017

The following table summarizes selected financial information for the Company for the comparative periods:

(millions of Canadian dollars, except per share amounts)						Q1		Q4		Q1
						2017 ARIVA.DE Börsen-Geflüster Kurse Canfor Corp 9,75 € 0,00%		2016		2016
Sales					$	1,126.2	$	1,043.5	$	1,067.9
Operating income before amortization1					$	169.1	$	135.6	$	125.7
Operating income1					$	106.8	$	72.0	$	65.1
Net income attributable to equity shareholders of the Company					$	66.1	$	38.0	$	26.0
Net income per share attributable to equity shareholders of the Company, basic and diluted					$	0.50	$	0.29	$	0.20
Adjusted shareholder net income					$	59.3	$	37.7	$	20.9
Adjusted shareholder net income per share, basic and diluted					$	0.45	$	0.29	$	0.16

The Company's adjusted shareholder net income for the first quarter of 2017 was $59.3 million, or $0.45 per share, compared to an adjusted shareholder net income of $37.7 million, or $0.29 per share, for the fourth quarter of 2016, and adjusted shareholder net income of $20.9 million, or $0.16 per share for the first quarter of 2016.

The Company reported operating income of $106.8 million for the first quarter of 2017, up $34.8 million from adjusted operating income of $72.0 million for the fourth quarter of 2016. Higher earnings in the first quarter of 2017 reflected improved operating income in both the lumber and pulp and paper segments. Lumber segment results primarily reflected higher Western Spruce/Pine/Fir ("SPF") and Southern Yellow Pine ("SYP") sales realizations, offset in part by higher market-based stumpage and increased log costs resulting from extreme weather conditions in Western Canada towards the end of 2016 and into early 2017. Pulp and paper segment results were mostly attributable to higher pulp shipment volumes during the current quarter.  

North American lumber demand was solid in the first quarter of 2017, with US housing starts in line with the previous quarter, averaging 1,253,000 units on a seasonally adjusted basis. Canadian housing construction activity was strong in the first quarter of 2017, up 13% compared to the previous quarter, at an average of 225,000 units on a seasonally adjusted basis. Offshore lumber demand from China, Japan and other regions also improved through the first quarter, particularly for the Company's higher-value lumber products.

Western SPF lumber unit sales realizations increased compared to the previous quarter reflecting higher average Western SPF lumber prices, offset in part by a 1% stronger Canadian dollar. The average benchmark North American Random Lengths Western SPF 2x4 #2&Btr price was up US$33 per Mfbm, or 10%, compared to the fourth quarter of 2016, with more pronounced price increases in the Western SPF 2x6 #2&Btr price, and more modest price increases across wider-width dimensions. The improving benchmark prices were supported by strong underlying North American and offshore demand, in addition to uncertainty surrounding possible countervailing duties being imposed on Canadian lumber shipments destined to the US. SYP unit sales realizations also showed a modest improvement compared to the prior quarter as improved benchmark SYP lumber prices were supported by seasonally stronger demand and concerns around the effects of potential duties on Western SPF supply.

Total lumber production, at 1.3 billion board feet, was up 5% compared to the prior quarter, largely reflecting improved productivity and additional operating days in the current quarter. Total lumber shipments were in line with the previous quarter, as a tightening supply of railcars and trucks in North America, largely due to challenging weather conditions, placed constraints on shipments from Western Canada. Lumber unit manufacturing costs in the first quarter of 2017 were in line with the previous quarter as gains in productivity were offset by higher market-based stumpage and increased log costs resulting from the challenging weather conditions.

Northern Bleached Softwood Kraft ("NBSK") pulp average list prices to China, as published by RISI, moved up by US$50 per tonne as a result of successive price increases implemented through the first quarter, however, the Company's overall NBSK pulp unit sales realizations were relatively unchanged from the previous quarter, reflecting shipments of a higher proportion of orders taken in late 2016 and early in 2017, as well as further pressure on customer discounts and a stronger Canadian dollar. Higher Bleached Chemi-Thermo Mechanical Pulp ("BCTMP") unit sales realizations in the first quarter of 2017 reflected a continued improvement in BCTMP demand and prices in the current quarter. Energy revenues were up in the current quarter reflecting slightly higher energy prices combined with seasonally higher power generation.

Pulp shipment and production volumes were up 22% and 4%, respectively, from the previous quarter, with the increase in the former primarily reflecting increased shipments to China and North America, combined with the impact of the delayed vessel to Asia over the year end, and, to a lesser extent, improved productivity.  Pulp unit manufacturing costs saw a modest decrease in the current quarter, largely reflecting improved productivity, offset in part by seasonally higher energy consumption.

Commenting on the Company's first quarter results, Canfor's President and Chief Executive Officer, Don Kayne, said, "Despite the weather-related challenges in Western Canada, our lumber and pulp businesses recorded solid financial and operating performances in the first quarter of 2017, with operating income for both segments well up from the last quarter of 2016."

On November 25, 2016, a petition was filed by the US Lumber Coalition to the US Department of Commerce ("DOC") and the US International Trade Commission ("ITC") alleging certain subsidies and administered fees below the fair market value of timber that favour Canadian lumber producers, an assertion the Canadian industry and Provincial and Federal Governments strongly deny and have successfully disproven in international courts in the past. Canfor was selected by the DOC as a "mandatory respondent" to the countervailing and anti-dumping investigations and is subject to company specific countervailing and anti-dumping duties. On April 24, 2017, the DOC announced its preliminary countervailing duty of 20.26% specific to Canfor, and an industry average of 19.88%, to be posted by cash deposits or bonds on the exports of softwood lumber to the US on or after approximately May 1, 2017 for a period of 120 days, in accordance with US law.

The DOC is expected to announce its preliminary anti-dumping duty determination on June 23, 2017. The final countervailing and anti-dumping duty determinations will be aligned for DOC administrative purposes. This alignment could result in the suspension of preliminary countervailing duty cash deposit requirements after the initial four month period has expired and until an aligned final determination decision is established. Canfor continues to cooperate with the Provincial and Federal Governments of Canada who have indicated they will vigorously defend the interests of the industry.

Looking ahead, the US housing market is forecast to continue its gradual recovery through the balance of 2017. North American lumber consumption is forecast to improve reflecting steady demand in the residential construction market and continued strength from the repair and remodelling sector. Wide-width SYP and speciality lumber prices are anticipated to improve through the second and third quarter of 2017 reflecting stronger seasonal demand.

Absent a new Softwood Lumber Agreement, there remains a risk of material anti-dumping duties being imposed on Canadian lumber shipments destined to the US in addition to the preliminary countervailing duty rate. The Company anticipates marketplace volatility as investigations progress and determinations are made.

For the Company's key offshore lumber markets, demand is anticipated to show a solid improvement through the second quarter of 2017. In the pulp and paper segment, global softwood markets are projected to remain relatively strong during the second quarter. Reduced capacity over the traditional spring maintenance period may support further price increases in the second quarter of 2017. With the commissioning of new pulp capacity in the latter part of 2017 and into 2018, there is risk of downward pressure on pricing in the second half of this year.  For the month of April 2017, CPPI announced an increase of US$20 per tonne for NBSK pulp list price to China and North America.

Results in the second quarter of 2017 will reflect the positive impact of recent price gains, particularly in Asia, and scheduled maintenance outages at CPPI's Northwood and Taylor pulp mills, with a projected 33,000 tonnes of reduced NBSK pulp and 4,000 tonnes of reduced BCTMP production, respectively, as well as higher associated maintenance costs and lower projected shipment volumes.  For the third quarter of 2017, CPPI's Intercontinental pulp mill has a maintenance outage scheduled, with a projected 8,000 tonnes of reduced NBSK pulp production.

Additional Information and Conference Call 

A conference call to discuss the first quarter's financial and operating results will be held on Thursday, April 27, 2017 at 7:30 AM Pacific time. To participate in the call, please dial Toll-Free 888-390-0546. For instant replay access until May 11, 2017, please dial 888-390-0541 and enter participant pass code 426530#. The conference call will be webcast live and will be available at www.canfor.com. This news release, the attached financial statements and a presentation used during the conference call can be accessed via the Company's website at http://www.canfor.com/investor-relations/webcasts.

Forward Looking Statements
Certain statements in this press release constitute "forward-looking statements" which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements.  Words such as "expects", "anticipates", "projects", "intends", "plans", "will", "believes", "seeks", "estimates", "should", "may", "could", and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and actual events or results may differ materially.  There are many factors that could cause such actual events or results expressed or implied by such forward-looking statements to differ materially from any future results expressed or implied by such statements.  Forward-looking statements are based on current expectations and the Company assumes no obligation to update such information to reflect later events or developments, except as required by law.

Canfor is a leading integrated forest products company based in Vancouver, British Columbia ("BC") with interests in BC, Alberta, North and South Carolina, Alabama, Georgia, Mississippi and Arkansas. Canfor produces primarily softwood lumber and also owns a 53.9% interest in Canfor Pulp Products Inc., which is one of the largest global producers of market northern bleached softwood kraft pulp and a leading producer of high performance kraft paper. Canfor shares are traded on The Toronto Stock Exchange under the symbol CFP.             

Canfor Corporation
First Quarter 2017
Management's Discussion and Analysis

This interim Management's Discussion and Analysis ("MD&A") provides a review of Canfor Corporation's ("Canfor" or "the Company") financial performance for the quarter ended March 31, 2017 relative to the quarters ended December 31, 2016 and March 31, 2016, and the financial position of the Company at March 31, 2017. It should be read in conjunction with Canfor's unaudited interim consolidated financial statements and accompanying notes for the quarters ended March 31, 2017 and 2016, as well as the 2016 annual MD&A and the 2016 audited consolidated financial statements and notes thereto, which are included in Canfor's Annual Report for the year ended December 31, 2016 (available at www.canfor.com). The financial information in this interim MD&A has been prepared in accordance with International Financial Reporting Standards ("IFRS"), which is the required reporting framework for Canadian publicly accountable enterprises.

Throughout this discussion, reference is made to Operating Income before Amortization and Adjusted Operating Income before Amortization which Canfor considers to be a relevant indicator for measuring trends in the performance of each of its operating segments and the Company's ability to generate funds to meet its debt repayment and capital expenditure requirements.  Reference is also made to Adjusted Shareholder Net Income (Loss) (calculated as Shareholder Net income (loss) less specific items affecting comparability with prior periods – for the full calculation, see the reconciliation included in the section "Analysis of Specific Material Items Affecting Comparability of Net Income" and Adjusted Shareholder Net Income (Loss) per Share (calculated as Adjusted Shareholder Net Income (Loss) divided by the weighted average number of shares outstanding during the period). Operating Income before Amortization and Adjusted Shareholder Net Income (Loss) and Adjusted Shareholder Net Income (Loss) per Share are not generally accepted earnings measures and should not be considered as an alternative to net income or cash flows as determined in accordance with IFRS.  As there is no standardized method of calculating these measures, Canfor's Operating Income before Amortization, Adjusted Shareholder Net Income (Loss) and Adjusted Shareholder Net Income (Loss) per Share may not be directly comparable with similarly titled measures used by other companies.  Reconciliations of Operating Income before Amortization to Operating Income and Adjusted Shareholder Net Income (Loss) to Net Income (Loss) reported in accordance with IFRS are included in this MD&A. Throughout this discussion, reference is made to the current quarter, which refers to the results for the first quarter of 2017.  

Factors that could impact future operations are also discussed. These factors may be influenced by both known and unknown risks and uncertainties that could cause the actual results to be materially different from those stated in this discussion. Factors that could have a material impact on any future oriented statements made herein include, but are not limited to: general economic, market and business conditions; product selling prices; raw material and operating costs; currency exchange rates; interest rates; changes in law and public policy; the outcome of labour and trade disputes; and opportunities available to or pursued by Canfor.

All financial references are in millions of Canadian dollars unless otherwise noted. The information in this report is as at April 25, 2017. 

Forward Looking Statements

Certain statements in this MD&A constitute "forward-looking statements" which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements.  Words such as "expects", "anticipates", "projects", "intends", "plans", "will", "believes", "seeks", "estimates", "should", "may", "could", and variations of such words and similar expressions are intended to identify such forward-looking statements.  These statements are based on management's current expectations and beliefs and actual events or results may differ materially.  There are many factors that could cause such actual events or results expressed or implied by such forward-looking statements to differ materially from any future results expressed or implied by such statements.  Forward-looking statements are based on current expectations and the Company assumes no obligation to update such information to reflect later events or developments, except as required by law.

FIRST QUARTER 2017 OVERVIEW

Selected Financial Information and Statistics

(millions of Canadian dollars, except per share amounts)			Q1		Q4		Q1
		2017			2016		2016
Operating income (loss) by segment:
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