Mr. R.S. Smith reports

CANFOR REPORTS RESULTS FOR FOURTH QUARTER OF 2011

Canfor Corp. has released its financial results, including a net loss attributable to shareholders of $44.1-million, or 31 cents per share, for the fourth quarter of 2011, compared with a shareholder net loss of $21.6-million, or 15 cents per share, for the third quarter of 2011 and shareholder net income of $32.9-million, or 23 cents per share, for the fourth quarter of 2010. For the year ended Dec. 31, 2011, the company's shareholder net loss was $56.6-million, or 40 cents per share, compared with shareholder net income of $81.4-million, or 57 cents per share, for 2010.

The shareholder net loss for the fourth quarter of 2011 included various items affecting comparability with prior periods, which had an overall net negative impact of $12.0-million, or nine cents per share. After adjusting for such items, the company's adjusted shareholder net loss for the fourth quarter of 2011 was $32.1-million, or 22 cents per share, compared with an adjusted shareholder net loss of $1.8-million, or one cent per share, for the third quarter of 2011, and adjusted shareholder net income of $15.1-million, or 11 cents per share, for the fourth quarter of 2010. For the year ended Dec. 31, 2011, the adjusted shareholder net loss was $31.7-million, or 22 cents per share, compared with adjusted shareholder net income of $74.1-million, or 52 cents per share, for 2010.

The company reported an operating loss of $64.0-million for the fourth quarter of 2011, an adverse variance of $78.5-million from operating income of $14.5-million in the third quarter of 2011. Included in this variance are restructuring costs of $22.5-million related to the announced closures of the company's Rustad sawmill and Tackama plywood plant in the B.C. Interior and asset impairment charges of $9.2-million relating to certain lumber and panels assets. Excluding these items and the impact of inventory valuation adjustments, Canfor's operating loss was $21.4-million, an adverse variance of $36.0-million compared with similarly adjusted operating earnings for the previous quarter, reflecting lower prices and higher log costs in the lumber segment, as well as lower prices in the pulp and paper segment.

U.S. housing activity saw a modest improvement in the fourth quarter of 2011, aided by unseasonably mild weather and a slight improvement in the U.S. economy. U.S. housing starts for the quarter averaged 657,000 units (seasonally adjusted annual rate), up 8 per cent from the previous quarter, though much of the increase related to multifamily units, which use a lower proportion of lumber than single family units. While the company's offshore lumber shipments remained at high levels in the quarter, sales realizations were adversely impacted by softer demand, particularly for lower lumber grades.

The average North America benchmark Western SPF two-by-four No. 2 Btr price showed a modest decline from the previous quarter. Prices for lower-grade product, however, fell sharply during the quarter, with No. 3 lumber prices down almost 25 per cent, in part reflecting slowing Chinese consumption ahead of the lunar new year. Prices for SYP products fared slightly better, with the benchmark SYP two-by-four price essentially unchanged compared with the previous quarter. Northern bleached softwood kraft pulp markets continued to weaken during the quarter. The average North America list price was $920 (U.S.) per tonne, down 7 per cent from the previous quarter, while further price erosion was seen in prices to China. Canadian-dollar sales realizations for all products were positively impacted by a weaker Canadian dollar (down over four cents, or 4 per cent, from the previous quarter), which somewhat mitigated the effects of lower U.S.-dollar pricing.

Lumber shipments were in line with the previous quarter at just under one billion board feet. Production was down 7 per cent, for the most part reflecting downtime taken over the Christmas period, which pushed up unit cash conversion costs, along with seasonally higher energy consumption. Higher unit log costs in the period reflected a shortage of log truckers in parts of the B.C. Interior in the quarter, along with unseasonably mild weather and higher diesel prices. These increases were partially mitigated by continuing improved productivity at operations upgraded during the year.

Shipment volumes for pulp products were down 5 per cent, reflecting the weaker pulp markets, though production levels were up from third quarter levels with less downtime taken at Canfor Pulp's Northwood pulp mill for its recovery boiler and precipitator upgrade, which was completed early in the fourth quarter. Total pulp unit cash manufacturing costs were down from the previous quarter, mostly due to the higher production levels and lower fibre costs.

The company continued to make progress on the $300-million, three-year capital investment program at its lumber operations during the quarter, completing new energy systems at its Plateau and Chetwynd sawmills, planer and logyard upgrades at its Grande Prairie mill, and a planer upgrade at its Prince George sawmill. The company's recently upgraded Vavenby sawmill, which restarted in September on one shift, transitioned to two shifts in December.

Commenting on the quarter, Canfor's president and chief executive officer, Don Kayne, said: "The fourth quarter provided challenges on several fronts. We saw weaker lumber and NBSK pulp realizations, related in part to the slowdown in demand from China, particularly for lower lumber grades, the ongoing slow U.S. recovery and overall global economic issues. To mitigate log cost pressures, we have made significant strides in addressing trucker availability, while we continue to see positive trends in productivity, lumber recoveries, and conversion costs from our capital investment and continuous improvement initiatives. We expect to see further benefits from our capital investment program in 2012.

"Looking ahead, the acquisition of Tembec Industries Ltd.'s Southern British Columbia Interior wood products assets is currently scheduled to close towards the end of the first quarter of 2012, subject to customary closing conditions including regulatory approval. Commenting on the acquisition, Mr. Kayne said, "This acquisition demonstrates our long-term confidence in the lumber sector and aligns very well with our strategic focus."

The North American lumber market is forecast to improve modestly as the U.S. economy continues on its slow road to recovery, while the Canadian housing market is projected to remain steady. Strong offshore demand is anticipated to continue into 2012. Shipments to China have picked up in early 2012 after slowing in advance of the lunar new year, although prices for lower-grade lumber are forecast to remain at low levels through the first quarter. The global softwood pulp market is forecast to remain soft through the first quarter of 2012.

Additional information and conference call

A conference call to discuss the fourth quarter financial and operating results will be held on Feb. 9, 2012, at 8 a.m. (Pacific Time). To participate in the call, please dial 416-340-9547 or toll-free 877-340-9914. For instant replay access until Feb. 9, 2013, please dial 905-694-9451 or 800-408-3053 and enter participant passcode 7168261 followed by the number sign. The conference call will be webcast live and will be available at the Canfor website. This news release, the attached financial statements and a presentation used during the conference call can be accessed on the company's website.

Outlook

Lumber

The North American lumber market is forecast to improve modestly as the U.S. economy continues on its slow road to recovery. The residential construction market is projected to trend higher with historically low mortgage rates and improved job markets contributing to record levels of housing affordability and attracting potential homebuyers into the market. The repair and remodelling segment is also projected to show a modest pickup following the recent improvement in housing activity. The Canadian housing market is projected to remain steady.

Strong offshore demand is anticipated to continue into 2012. Shipments to China have picked up in early 2012 after slowing in advance of the lunar new year, although prices for lower-grade lumber are forecast to remain at low levels through the first quarter. Demand from Japan is forecast to remain stable through early 2012.

Pulp and paper

The global softwood pulp market is forecast to remain soft through the first quarter of 2012. There is ample supply as historically there is minimal scheduled maintenance downtime at pulp mills during the winter months. However, current pricing at or below cash costs for some NBSK producers may reduce the risk of further price erosion. Global softwood pulp demand is projected to remain flat in 2012 on slowed growth from China and declining production of graphic papers in mature markets. European demand may be somewhat influenced by the ability of Europe to manage through the current debt crisis in certain countries.

            CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
                        (in millions of dollars)

                                     Three months           Twelve months
                                       ended Dec.             ended Dec.
                                          31,                     31,      
                                   2011        2010         2011        2010

Sales                       $     576.2 $     629.1 $    2,421.4 $   2,430.4
Costs and expenses                                                          
Manufacturing and product                                                  
costs                             421.5       407.4      1,629.8     1,514.3
Freight and other                                                          
distribution costs                113.6       113.7        467.9       428.0
Export taxes                        9.6        10.3         39.9        40.0
Amortization                       47.6        41.8        169.3       167.7
Selling and administration                                                 
costs                              15.9        13.2         58.6        61.3
Asset impairments                   9.2          --          9.2          --
Restructuring, mill                                                        
closure and severance                                                     
costs                              22.8         1.0         38.3        32.4
Total                             640.2       587.4      2,413.0     2,243.7
Operating income (loss)           (64.0)       41.7          8.4       186.7
Finance expense, net               (4.3)       (4.6)       (22.5)      (26.8)
Foreign exchange gain (loss)                                                
on long-term debt and                                                      
investments, net                    4.9         9.8         (5.0)       14.7
Gain (loss) on derivative                                                   
financial instruments               9.6         1.8          3.5         0.1
Other income, net                   1.3        11.0          5.9         8.1
Net income (loss) before                                                    
income taxes                      (52.5)       59.7         (9.7)      182.8
Income tax recovery                                                         
(expense)                          14.4        (2.8)        20.5        (9.5)
Net income (loss)            $    (38.1) $     56.9 $       10.8 $     173.3
Net income (loss)                                                           
attributable to                                                           
Equity shareholders of the                                                  
company                     $     (44.1) $     32.9 $      (56.6) $     81.4
Non-controlling interests           6.0        24.0         67.4        91.9
Net income (loss)           $     (38.1) $     56.9 $       10.8 $     173.3
Net income (loss) per                                                       
common share: (in dollars)                                                 
attributable to equity                                                      
shareholders of the                                                        
company,                                                                    
basic and diluted            $    (0.31) $     0.23 $      (0.40) $     0.57

We seek Safe Harbor.