Sino-Forest Reports Record Results



    
    -   Revenue increased 29% surpassing the $700-million milestone
    -   EBITDA jumped 54% in the year to $488 million, and by over 66% in Q4
    -   CFFO increased 83% to $483 million, and 122% in Q4
    -   After impairment charge of $21 million, net income rose 34% in 2007,
        and 11% in Q4
    -   After impairment charge diluted EPS increased 11% to $0.90, but
        decreased 15% to $0.26 in Q4
    

    TORONTO, March 18 /CNW/ - Sino-Forest Corporation ("Sino-Forest") (TSX:
TRE and TRE.S) announced today its annual and fourth quarter 2007 financial
results. Dollar amounts in this news release are in U.S. currency unless
otherwise indicated.

    
    Financial Highlights

    (US$ millions,         Three months ended         Twelve months ended
     except margins          December 31(3)              December 31(3)
     and per share       2007     2006    Change     2007     2006    Change
     amounts)                                            (restated)
                            $        $         %        $        $         %
    -------------------------------------------------------------------------
    Revenue             310.9    233.3      33.3    713.9    555.5      28.5
    Gross Profit(1)      98.3     82.1      19.8    243.0    175.0      38.9
    Gross Profit Margin  31.6     35.2  (3.6%pts)    34.0     31.5   2.5%pts
    EBITDA(2)           246.2    148.3      66.1    487.6    316.9      53.9
    Net Income from
     Continuing
     Operations          41.3     40.1       2.9    142.4     92.2      54.5
    Net Income           47.4     42.5      11.4    152.3    113.5      34.2
    Diluted EPS from
     Continuing
     Operations          0.22     0.29     (22.0)    0.84     0.66      27.9
    Diluted Earnings
     Per Share           0.26     0.30     (15.4)    0.90     0.81      11.1
    Cash Flow from
     Operating Activities
     of Continuing
     Operations         266.6    120.1     122.0    482.5    264.2      82.6

    Note: See footnotes (1), (2) and (3) at end of this release
    

    In 2007, net income, before an impairment charge of $21 million on the
write-down of certain manufacturing assets in Gaoyao and Heilongjiang, was
$173 million ($1.03 per share), compared to $114 million ($0.82 per share) in
2006.
    Net income in the fourth quarter of 2007 before impairment charge was $68
million ($0.37 per share), compared with $43 million ($0.30 per share) in the
fourth quarter of 2006.
    Allen Chan, Chairman and CEO of Sino-Forest Corporation, said, "The
corporation made great strides last year towards strengthening its strategic
market position and is operating in nine provinces and regions across China.
Our growth rates and financial results were stellar in 2007 despite continuing
losses in certain manufacturing facilities. Not withstanding these losses,
2007 earnings per share increased 11% to 90 cents compared to 2006."
    Chan added, "To support our rapid growth, we completed two equity
offerings last year, which raised approximately $400 million to fund the
expansion of our plantation and manufacturing operations, and we signed two
long-term timber acquisition agreements in Yunnan and Guangxi. In tandem, we
have been working on ramping up and strengthening infrastructure for our
integrated operations in the south-western region of China."
    Revenue growth was strong in both the 12-month and 3-month periods ended
December 31, 2007 with increases of 29% and 33% respectively, primarily due to
higher sales of standing timber and revenue from manufacturing and other
operations, offset by a decrease in the sales of imported wood products.
    Gross profit increased 39% to $243 million in 2007 and 20% to $98 million
in the fourth quarter compared to a year ago. Overall gross profit margin
increased 3 percentage-points to 34% last year and decreased 4
percentage-points to 32% in the fourth quarter, mainly due to the lower
overall average yield of trees sold and to increased production costs at
manufacturing facilities, compared to fourth quarter of 2006.

    
    Business Segment Highlights
    Wood Fibre Operations

    -------------------------------------------------------------------------
    Standing Timber             Year ended                Year ended
                            December 31, 2007          December 31, 2006
                        -----------------------------------------------------
                                   Sales                      Sales
                                     per    Total               per    Total
                        Hectares hectare  revenue Hectares  hectare  Revenue
                                       $    $'000                 $    $'000
    -------------------------------------------------------------------------
    Purchased
     plantations        136,396    3,713  506,466   73,665    3,959  291,650
    -------------------------------------------------------------------------
    Heyuan Pine
     Undertaking          1,969    1,771    3,487   32,426    1,692   54,864
    -------------------------------------------------------------------------
    Planted
     plantations          7,672    1,504   11,536    5,276    1,149    6,060
    -------------------------------------------------------------------------
    Total               146,037    3,571  521,489  111,367    3,166  352,574
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The total area of standing timber under Sino-Forest management decreased
11% to 312,000 hectares as at December 31, 2007, compared to 352,000 hectares
the previous year. However, notwithstanding the decrease in the number of
hectares, the total fibre in inventory increased 14% to approximately 31
million m3 by year end 2007, excluding trees less than 4 years of age. In the
fourth quarter, we sold over 100,000 hectares of trees in Jiangxi, where we
ended the year with less than 7,000 hectares under management in that
province. Thus, Sino-Forest suffered little impact from snow storms in Jiangxi
which occurred during the first quarter of 2008.
    The most severe snow storms in 50 years swept through 19 provinces,
autonomous regions and municipalities in China in January 2008. Sino-Forest
had approximately 90,000 hectares of plantations trees in the affected areas,
but according to the corporation's preliminary inspections, only 15,000
hectares endured some damage. We are of the current view that the damage will
not result in any significant write-down in the cost of our standing timber
from an accounting perspective. Rather, the impact will likely be on the type
and volume of fibre when harvested. The harvested fibre may have relatively
less logs versus residue fibre and therefore result in lower margins. In
addition, there may be an impact on the selling price of fibre in certain
markets as more fibre is brought to market as the damaged trees are harvested.
    The overall average selling price obtained for trees sold in 2007
increased 13% to $3,571 per hectare, which was attributable to yield and
higher selling prices per hectare for certain species, compared to the trees
sold last year. Standing timber sales contributed 73% of overall revenue in
2007, compared to 64% last year. During the quarter, we sold approximately
$6.2 million in logs harvested in Hunan. This level of sales was below our
estimates as we did not want to generate significant amounts of revenue until
we determine the appropriate transition structure for earning and recording
revenue in the PRC from our integrated operations model.
    The total fibre output sold in 2007 was up 2% from approximately 10.2
million m(3) to approximately 10.4 million m(3) with plantation operations
contributing approximately 9.8 million m(3), up 27% from approximately 7.7
million m(3) in 2006. Total hectares acquired in 2007, mainly in Guangxi and
Hunan, were approximately 104,500 hectares with approximately 14 million m(3)
of fibre.
    According to the recent forest asset valuation conducted by independent
forestry consultants, Poyry, the estimated volume of Sino-Forest's
merchantable standing timber increased 14% to approximately 31 million m(3) by
year end 2007, excluding trees less than 4 years of age. The valuation of the
corporation's forest assets as at December 31, 2007, based on a single
rotation, was $1.2 billion, and on a perpetual rotation that includes Guangxi,
Hunan and Yunnan, was $3.2 billion (using a pre-tax discount rate of 11.5%);
this represents increases of 35% and 124%, respectively, from the 2006
valuations. A full copy of the valuation report will be posted on our website
www.sinoforest.com under "Filings" and also filed on www.sedar.com on or about
March 31, 2008.
    Revenue from imported wood products decreased 16% to $151 million in
2007, and 38% to $34 million in the fourth quarter, as imported volume dropped
45% and 61%, respectively, in those periods from the previous year. This was
mainly due to a higher import tax levied by the Russian government, which
increased to 20% from 6.5% for certain products.
    To secure additional large-diameter logs, the corporation signed a sale
and purchase agreement in July last year with Greenheart Resources Holdings
Limited, a natural forest concession owner and operator in Suriname, South
America.
    Revenue from the sales of wood logs increased 553% to $3 million in 2007,
which was attributable to higher logs sales from Inner Mongolia. During the
third quarter of 2007, revenue from wood chip sales and commission were
reclassified as discontinued operations within the consolidated financial
statements in accordance with Section 3475 of the CICA Handbook.

    Manufacturing and Other Operations

    Revenue from this business segment increased 60% to $38 million in 2007
and 63% to $16 million in the fourth quarter of 2007, mainly due to higher
sales of engineered-wood flooring products. Due to continuing losses incurred
in particleboard and oriented strand board operations, Sino-Forest recorded a
write-down of $21 million of capital assets, to reflect the fair market value
of the assets.

    Cash flow from operating activities of continuing operations increased
83% to $483 million in 2007 and 122% in the fourth quarter of 2007, primarily
as a result of increases in cash provided by working capital and in net
income.

    Selling, General and Administration Expenses

    Due to continued operations expansion, including the set-up of new
companies and hiring of additional personnel to support growth, SG&A expenses
increased 12% to $40 million in 2007.

    
    Capital Expenditures

    -------------------------------------------------------------------------
                                     Three months ended  Twelve months ended
                                      December 31, 2007    December 31, 2007
                                     ---------------------------------------
    (in millions)                    Hectares         $   Hectares         $
    -------------------------------------------------------------------------
    Tree acquisition -
     Purchased plantations             41,477     271.5    104,517     623.7
    -------------------------------------------------------------------------
    Re-planting and maintenance
     of plantations                                10.1                 23.3
    -------------------------------------------------------------------------
    Panel manufacturing and
     other operations                               6.2                 12.6
    -------------------------------------------------------------------------
    Total                                         287.8                659.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Sino-Forest continued to allocate most of its capital expenditures in
2007 to the acquisition of plantation trees to grow its inventory of wood
fibre. Total expenditures increased 58% to $660 million; tree acquisition
increased 63% while spending on re-planting and maintenance declined 3%.
    Despite the increase in plantation expenditures, the total area of trees
acquired in 2007 (104,517 hectares) decreased 19% from 129,276 hectares in the
previous year. However, the total amount of wood fibre purchased in cubic
metres was 32% more than last year 2006.
    Capital expenditures in 2008 are expected to exceed US$700 million for
plantations acquisition and replanting and maintenance, and approximately
US$30 million for the development of our manufacturing operations.

    Outlook

    The most severe snow storm in the past five decades occurred during the
first quarter of 2008 and has damaged China's agricultural and forestry
sectors. China's plan to increase its forest coverage will likely be delayed.
We anticipate that continued or accelerated supportive policies for the
forestry sector will be announced in the future to assist forestry companies.
As mentioned above, while we do not expect any write-down of our standing
timber holdings in the affected areas, the gross margin to be realized on
sales in affected regions may be negatively impacted as a result of the mix of
fibre (logs versus residue) harvested and the impact of an oversupply of fibre
from fallen trees on the market price.
    As the Central government strongly encourages forest sustainability and
yield improvement and vertical integration of wood manufacturing in order to
maximize fibre value and usage along the value chain, and to improve rural
area livelihood and development, we anticipate local and provincial
governments to be more supportive in assisting commercial players to spearhead
development. As a result, the year 2008 will be one when Sino-Forest focuses
on operational execution and optimization - taking advantage of the long-term
agreements and facilities we have in hand. As we intend to grow the
corporation, therefore, cash will be re-deployed toward the operation of
timber acquisitions and eventually re-planting to create long-term sustainable
output. We remain focused on strengthening our infrastructure and competitive
advantages as the leading supplier of wood fibre in China.

    Notice of Conference Call

    Sino-Forest will hold an investor conference call to further discuss its
fourth quarter and year-end results on March 18, 2008 at 8:30 am EST / 8:30 pm
HKT. To participate, please dial +(1) 416 695 9761 for local and international
callers or 877-461-2816 for North America toll-free access. Alternatively, to
join the live webcast and replay in a listen-only mode, log on to
Sino-Forest's website under "Investor Relations - Earnings Releases" or go
directly to http://www.sinoforest.com/earningsreleases.asp.
    NOTE: The unaudited Interim Consolidated Financial Statements and Notes
and Management Discussion and Analysis for the period ended December 31, 2007
will be available on our website
http://www.sinoforest.com/earningsreleases.asp today after 7:15 am and on
SEDAR www.SEDAR.com.

    About Sino-Forest Corporation

    Sino-Forest Corporation is a leading commercial forestry plantation
operator in China. The Canadian company started its operations in 1994 and was
the first foreign and privately managed operator involved in forest products
in China. Its principal businesses include the ownership and management of
forestry plantation trees and sales of standing timber, wood logs, and
complementary manufacturing of downstream engineered-wood products. The
Corporation's common shares have traded on the Toronto Stock Exchange under
the symbol TRE since 1995.

    Note (1) to the Financial Highlights table: Gross profit for any period
is defined as total revenue less cost of sales. Gross profit is presented as
additional information because we believe that it is a useful measure for
certain investors to determine our operating performance. Gross profit is not
a recognized term under Canadian GAAP and should not be considered as an
alternative to net income as an indicator of our operating performance or any
other measure of performance derived in accordance with Canadian GAAP. Because
it is not a Canadian GAAP measure, gross profit may not be comparable to
similar measures presented by other companies.

    Note (2) to the Financial Highlights table: EBITDA for any period is
defined as income from operations for the period after adding back
depreciation and amortization and depletion of timber holdings from cost of
sales, for the period. EBITDA is presented as additional information because
we believe that it is a useful measure for certain investors to determine our
operating cash flow and historical ability to meet debt service and capital
expenditure requirements. EBITDA is not a measure of financial performance
under Canadian GAAP and should not be considered as an alternative to cash
flows from operating activities, a measure of liquidity or an alternative to
net income as indicators of our operating performance or any other measures of
performance derived in accordance with Canadian GAAP.

    Note (3) to the Financial Highlights table: Results have been revised to
reflect the classification of wood chips and commission operations as
discontinued operations as disclosed in Note 18 Discontinued Operations in the
consolidated financial statements for the year ended December 31, 2007.

    No stock exchange or regulatory authority has approved or disapproved of
information contained herein. Certain information included in this news
release is forward-looking and is subject to important risks and
uncertainties. When used in this news release, the words "believe", "intend",
"estimate", "expect", "plan" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements
contain such words. These forward-looking statements are based on current
expectations. The results or events predicted in these statements may differ
materially from actual results or events and are no guarantees of future
performance of Sino-Forest. Factors which could cause results or events to
differ from current expectations include, among other things: our ability to
acquire rights to additional standing timber, our ability to meet our expected
plantation yields, the cyclical nature of the forest products industry and
price fluctuation in and the demand and supply of logs, our reliance on joint
venture partners, authorized intermediaries, key customers, suppliers and
third party service providers, our ability to operate our production
facilities on a profitable basis, changes in currency exchange rates and
interest rates, and PRC economic, political and social conditions and
government policy, and stock market volatility, other factors not currently
viewed as material could cause actual results to differ materially from those
described in the forwarding-looking statements. For additional information
with respect to certain of these and other factors, see the reports filed by
Sino-Forest Corporation with applicable Canadian securities administrators.
Sino-Forest Corporation disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.



    
                         CONSOLIDATED BALANCE SHEETS
              (Expressed in thousands of United States dollars)

    As at December 31,
                                                                   (Restated)
                                                            2007        2006
                                                               $           $
    -------------------------------------------------------------------------

    ASSETS
    Current
    Cash and cash equivalents                            328,690     152,887
    Short-term deposits                                   22,163      18,550
    Accounts receivable                                  105,329     124,784
    Inventories                                           46,661      15,178
    Prepaid expenses and other                            24,185      19,524
    Assets of discontinued operations                          -       2,686
    -------------------------------------------------------------------------
    Total current assets                                 527,028     333,609
    -------------------------------------------------------------------------
    Timber holdings                                    1,174,153     752,783
    Capital assets, net                                   78,608      87,939
    Other assets                                          57,708      32,924
    -------------------------------------------------------------------------
                                                       1,837,497   1,207,255
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank indebtedness                                     55,383      70,958
    Accounts payable and accrued liabilities             107,989      68,669
    Income taxes payable                                   1,615       1,121
    Liabilities of discontinued operations                32,016      38,300
    -------------------------------------------------------------------------
    Total current liabilities                            197,003     179,048
    -------------------------------------------------------------------------
    Long-term debt                                       441,985     450,000
    Derivative financial instrument                       11,211           -
    -------------------------------------------------------------------------
    Total liabilities                                    650,199     629,048
    -------------------------------------------------------------------------
    Commitments and Contingencies

    Shareholders' equity
    Share capital                                        537,141     143,511
    Contributed surplus                                    3,906       4,726
    Accumulated other comprehensive income               105,287      32,590
    Retained earnings                                    540,964     397,380
    -------------------------------------------------------------------------
    Total shareholders' equity                         1,187,298     578,207
    -------------------------------------------------------------------------
                                                       1,837,497   1,207,255
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    On behalf of the Board:

    Allen T.Y. Chan                James M.E. Hyde
    Director                       Director



                    CONSOLIDATED STATEMENTS OF INCOME AND
                              RETAINED EARNINGS
     (Expressed in thousands of United States dollars, except for earnings
                           per share information)

    Years ended December 31,
                                                                   (Restated)
                                                            2007        2006
                                                               $           $
    -------------------------------------------------------------------------
    Revenue                                              713,866     555,480

    Costs and expenses
    Cost of sales                                        470,825     380,508
    Selling, general and administration                   40,209      35,852
    Depreciation and amortization                          5,364       3,975
    -------------------------------------------------------------------------
                                                         516,398     420,335
    -------------------------------------------------------------------------
    Income from operations before the undernoted         197,468     135,145
    Interest expense                                     (43,960)    (37,340)
    Interest income                                       15,184       6,486
    Exchange gains                                        12,409       3,676
    Write-down of capital assets                         (20,846)       (877)
    Loss on changes in fair value of financial
     instrument                                           (2,996)     (1,179)
    Other income                                           3,206       1,312
    Amortization of deferred financing costs                   -      (1,819)
    -------------------------------------------------------------------------
    Income before income taxes                           160,465     105,404
    Provision for income taxes                           (18,034)    (13,192)
    -------------------------------------------------------------------------
    Net income from continuing operations                142,431      92,212
    Net income from discontinued operations                9,842      21,268
    -------------------------------------------------------------------------
    Net income for the year                              152,273     113,480
    -------------------------------------------------------------------------

    Earnings per share
    Basic                                                   0.91        0.82
    Diluted                                                 0.90        0.81
    -------------------------------------------------------------------------

    Earnings per share from continuing operations
    Basic                                                   0.85        0.67
    Diluted                                                 0.84        0.66
    -------------------------------------------------------------------------

    Earnings per share from discontinued operations
    Basic                                                   0.06        0.15
    Diluted                                                 0.06        0.15
    -------------------------------------------------------------------------

    Retained earnings
    Retained earnings, beginning of year, as previously
     presented                                           397,380     311,994
    Cumulative impact of accounting changes relating to
     income taxes                                              -     (28,094)
    Cumulative impact of accounting changes relating to
     financial instruments                                (8,689)          -
    -------------------------------------------------------------------------
    Retained earnings, beginning of year, as restated    388,691     283,900
    Net income for the year                              152,273     113,480
    -------------------------------------------------------------------------
    Retained earnings, end of year                       540,964     397,380
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  (Expressed in thousands of U.S. dollars)

                                                                   (Restated)
                                                            2007        2006
                                                               $           $
    -------------------------------------------------------------------------
    Net income for the year                              152,273     113,480
    Other comprehensive income, net of tax:
      Unrealized loss on financial assets designated as
       available-for-sale                                   (738)          -
      Unrealized gains on foreign currency translation
       of self-sustaining operations                      73,435      21,194
    -------------------------------------------------------------------------
    Other comprehensive income                            72,697      21,194
    -------------------------------------------------------------------------
    Comprehensive income                                 224,970     134,674
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                    CONSOLIDATED STATEMENTS OF CASH FLOWS
              (Expressed in thousands of United States dollars)

    Years ended December 31,
                                                                   (Restated)
                                                            2007        2006
                                                               $           $
    -------------------------------------------------------------------------
    CASH FLOWS FROM OPERATING ACTIVITIES
    Net income for the year                              152,273     113,480
    Net income from discontinued operations               (9,842)    (21,268)
    Add (deduct) items not affecting cash
      Depletion of timber holdings included in cost
       of sales                                          284,808     177,730
      Depreciation and amortization                        5,364       3,975
      Stock-based compensation                             2,898       3,105
      Amortization of deferred financing costs                 -       1,819
      Loss on disposal of capital assets                     135         212
      Write-down of capital assets                        20,846         877
      Gain on disposal of other assets                    (3,369)          -
      Loss on changes in fair value of financial
       instrument                                          2,996       1,179
      Loss on changes in fair value of other assets        1,663           -
      Interest income from Mandra                         (2,100)       (300)
      Other                                                1,645        (150)
      Exchange gains                                      (1,816)          -
    -------------------------------------------------------------------------
                                                         455,501     280,659
    Net change in non-cash working capital balances       27,000     (16,456)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows from operating activities of continuing
     operations                                          482,501     264,203
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash flows from operating activities of
     discontinued operations                               3,856      26,169
    -------------------------------------------------------------------------
    CASH FLOWS USED IN INVESTING ACTIVITIES
    Additions to timber holdings                        (640,257)   (415,087)
    Increase in other assets                             (31,225)    (10,000)
    Additions to capital assets                          (12,571)    (10,028)
    (Increase) decrease in non-pledged short-term
     deposits                                             (8,698)     11,912
    Business acquisition                                    (795)          -
    Proceeds from disposal of capital assets               1,073         167
    Proceeds from disposal of other assets                   151           -
    -------------------------------------------------------------------------
    Cash flows used in investing activities             (692,322)   (423,036)
    -------------------------------------------------------------------------
    CASH FLOWS FROM FINANCING ACTIVITIES
    Increase in long-term debt                                 -     150,000
    (Decrease) increase in bank indebtedness             (17,015)     29,175
    Issuance of shares, net of issue costs               389,912         513
    Decrease in pledged short-term deposits                6,180         385
    Payment on derivative financial instrument            (2,165)       (872)
    Increase in deferred financing costs                       -      (3,001)
    -------------------------------------------------------------------------
    Cash flows from financing activities                 376,912     176,200
    -------------------------------------------------------------------------
    Effect of exchange rate changes on cash and
     cash equivalents                                      4,856         933
    -------------------------------------------------------------------------
    Net increase in cash and cash equivalents            175,803      44,469
    Cash and cash equivalents, beginning of year         152,887     108,418
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of year               328,690     152,887
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental cash flow information
    Cash payment for interest charged to income           41,971      35,642
    Interest received                                     12,693       6,025
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: DAVE HORSLEY - Senior Vice President and Chief
Financial Officer, Tel: (905) 281-8889, Email: davehorsley@sinoforest.com;
LOUISA WONG - Senior Manager, Investor Communications & Relations, Tel: +852
2514 2109, Email: louisa-wong@sinoforest.com

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