Mr. Yvon Pelletier reports

FORTRESS PAPER ANNOUNCES FIRST QUARTER 2017 RESULTS

Fortress Paper Ltd. had 2017 first quarter operating EBITDA (defined below) of $7.5-million, an increase of $6.4-million relative to the comparative prior-year period and an increase of $1.1-million over the previous quarter. The dissolving pulp segment generated operating EBITDA of $8.3-million and the security paper products segment generated operating EBITDA of $1.5-million. Corporate costs included in operating EBITDA were $2.3-million.

Yvon Pelletier, chief executive officer, commented: "Management is pleased to report one of the best consolidated quarterly operating EBITDA results since the restart of our Fortress specialty cellulose mill as a dissolving pulp mill. We are particularly pleased to have been able to achieve this result during one of our seasonally slower winter quarters. Contributing to this positive result were stabilized results in our security paper products segment, as well as increased uptime and improved production at our dissolving pulp operation. Management continues to have a positive outlook for the 2017 fiscal year with material improvement in consolidated operating EBITDA."

First quarter 2017 results by segment

Dissolving pulp segment operating EBITDA was $8.3-million for the first quarter of 2017, representing an increase of $7.0-million over the prior-year comparative period and an increase of $1.6-million when compared with the fourth quarter of 2016. The results of the first quarter of 2017 were positively impacted by improvements in production rates and quality, particularly during the normally slower winter season, as well as better pricing relative to the prior-year comparative period. Improved operations, increased uptime and the resolution of a technical issue also positively impacted power generation and cogeneration revenue. Production rates per operating day in the quarter improved by 4.3 per cent relative to the prior-year comparative period and 7.6 per cent compared with the previous quarter. The Fortress specialty cellulose (FSC) mill produced 37,102 air-dried metric tonnes (ADMT) of dissolving pulp in the first quarter of 2017, significantly higher than the prior-year comparative period and the previous quarter as both comparative periods were impacted by shutdowns.

The company sold 37,833 ADMT of dissolving pulp in the first quarter of 2017, an increase of 19.1 per cent and 22.2 per cent from the previous-year comparative period and the previous quarter, respectively. Costs per ADMT in the quarter were $945, which, although above medium- and long-term goals, compare favourably with costs of $1,033 per ADMT in the prior-year comparative period, primarily due to improved uptime. Continuing initiatives to reduce operational costs are focused primarily in the following areas: productivity improvement, reducing fuel consumption, increasing power generation and chemical cost optimization. Separately, the fifth digester project is scheduled to be completed in the first quarter of 2018.

Security paper products segment operating EBITDA was $1.5-million for the first quarter of 2017, representing a decrease of $300,000 compared with the prior-year comparative period and a decrease of $100,000 compared with the fourth quarter of 2016. Quarterly rent of approximately $900,000 has been incurred since the sale and leaseback of the land and buildings transaction closed in July, 2016. Adjusting for rent, the first quarter of 2017 compares favourably with the prior-year comparative quarter. The Landqart mill continues to implement new initiatives to improve efficiencies and profitability. The buildout and installation of the second finishing machine, scheduled to be operational in the third quarter of 2017, are expected to debottleneck the mill and provide more production flexibility. The Landqart mill sold 2,836 tonnes of security paper in the first quarter of 2017, compared with 2,474 tonnes in the fourth quarter of 2016 and 2,655 in the prior-year comparative period. Results in the first quarter of 2017 were impacted primarily by product mix.

Management's outlook

Dissolving pulp segment

Despite some seasonal weakness, dissolving pulp and viscose staple fibre (VSF) prices have increased by $20 (U.S.) per tonne and $334 (U.S.) per tonne, respectively, when compared with this time last year. Management continues to believe that demand is positive and growing, and expects full-year 2017 pricing to compare favourably with full-year 2016 pricing. Assuming stable pricing and exchange rates, operating results for the dissolving pulp segment are anticipated to be materially higher in the second quarter relative to the prior-year comparative period.

Management continues to focus on positioning the FSC mill further down the global cost curve. The lean six sigma program, implemented at the mill, is expected to continue to drive production costs down with a number of active projects showing positive signals.

Security paper products segment

The Landqart mill continues to build on a strong order book for 2017 and 2018, comprising a mix of new and repeat orders, including for Durasafe. Operating EBITDA at the Landqart mill for the quarter ended March 31, 2017, was comparable with the fourth quarter of 2016, which is in line with management expectations. Operating EBITDA in the second quarter is expected to be similar when compared with the first quarter, with improved results anticipated in the second half of the year, assuming expectations relating to improved product mix and cost reduction initiatives.

Based on multiple Durasafe trials being conducted at various stages, management continues to anticipate additional orders in the near, medium and long term.

Corporate and cash

Corporate expenses in the fourth quarter increased by $400,000, compared with the previous quarter, to $2.3-million. In the short term, corporate quarterly expenses are expected to be modestly lower.

Cash and restricted cash ended the first quarter at $57.8-million, up from $37.1-million at the 2016 fiscal year-end. Management anticipates that the cash balance, excluding any potential new growth initiatives, will continue to build in 2017 both from operations as well as assuming the positive outcome of pursuing opportunities to reduce working capital.

Management remains pleased with this increased liquidity profile, and believes that cash on hand and anticipated cash generated from operations and other initiatives will be sufficient to meet all debt obligations and to contribute to future business growth initiatives.

For a summary of significant developments, please refer to the management's discussion and analysis (MD&A) for the three-month period ended March 31, 2017 (available on SEDAR).

Selected financial information

The selected financial information presented herein is qualified in its entirety by, and should be read in conjunction with, the company's unaudited condensed consolidated financial statements as at and for the three-month period ended March 31, 2017, and the related notes thereto and MD&A, which are available on SEDAR.

Reference is made in this news release to operating EBITDA (defined as net income before interest, income taxes, depreciation, amortization, non-operating income and expenses, and stock-based compensation), which the company considers to be an indicative measure of operating performance and a metric to evaluate profitability. Operating EBITDA is not a generally accepted earnings measure, and should not be considered as an alternative to net loss or cash flows as determined in accordance with IFRS. As there is no standardized method of calculating this measure, the company's operating EBITDA may not be directly comparable with similarly titled measures used by other companies.

            SELECTED FINANCIAL INFORMATION AND STATISTICS
     (in thousands of dollars, except shipments, unaudited)

                                                   Q1 2017   Q4 2016   Q1 2016 
                                                                           
Sales                                             $ 92,460  $ 80,863  $ 80,012 
Operating EBITDA                                     7,489     6,352     1,055 
Net (loss)                                          (2,745)   (7,274)  (13,041)
Adjusted net (loss)                                 (2,999)   (6,980)  (12,189)
Paper shipments (tonnes)                             2,836     2,474     2,655 
Pulp shipments (ADMT)                               37,833    30,962    31,762 

A conference call to discuss the financial results for the first quarter 2017 will be held on May 12, 2017, at 9:30 a.m. PDT. To participate in the conference call, please dial one of the following numbers:

• 604-681-8564, Vancouver;
• 403-532-5601, Calgary or international;
• 780-429-5820, Edmonton;
• 416-623-0333, Toronto;
• 613-212-0171, Ottawa;
• 514-687-4017, Montreal.

Toll-free dial-in number:  1-855-353-9183 from Canada and the United States

Participant passcode:  15086 followed by the pound key

Conference reference No.:  1216477 followed by the pound key

A replay of the conference call will be available for 30 days. To access the replay, listeners may dial 1-855-201-2300 from North America or 403-255-0697 international. The conference reference number is 1216477 followed by the pound key and the participant passcode to access the replay is 15086 followed by the pound key.

A presentation to complement the company's first quarter earnings conference call is available under the investor relations section of the company's website.

About Fortress Paper Ltd.

Fortress Paper operates internationally in two distinct business segments: dissolving pulp and security paper products. The company operates its dissolving pulp business at the Fortress specialty cellulose mill, located in Canada, which has expanded into the renewable energy generation sector with the construction of a cogeneration facility. The company operates its security paper products business at the Landqart mill, located in Switzerland, where it produces banknote, passport, visa, and other brand protection and security papers.

We seek Safe Harbor.