West Fraser Announces First Quarter Results



    VANCOUVER, April 23 /CNW/ - West Fraser Timber Co. Ltd. today reported a
first quarter loss of $5 million or $0.12 per share on sales of $759 million
compared to earnings of $296 million or $6.87 per share (earnings of
$7 million or $0.17 per share prior to softwood lumber duty refunds) on sales
of $727 million in the fourth quarter of 2006 and earnings of $6 million or
$0.14 per share on sales of $902 million in the first quarter of last year.
    EBITDA(1) was $41 million or 5% of sales for the quarter compared to
EBITDA of $115 million or 13% of sales for the comparable period last year.
For the fourth quarter of 2006, EBITDA, excluding the duty refund, would have
been $40 million or 6% of sales.

    
    First quarter 2007 earnings reflect the following after-tax items:

    -   A gain of $3 million or $0.06 per share related to the translation of
        U.S. dollar denominated debt; and
    -   A gain of $7 million or $0.16 per share related to the termination of
        two pulp supply contracts.

    First Quarter 2006 earnings reflect the following after-tax items:

    -   An expense of $25 million or $0.58 per share related to a
        restructuring charge resulting from the announced closure of the
        No.1 pulp machine and the woodroom at the Company's NBSK pulp mill in
        Hinton, Alberta; and
    -   An expense of $2 million or $0.04 per share related to the
        translation of U.S. dollar denominated debt.

        ---------------------------------------------------------------------
        (1) Throughout this news release, reference is made to EBITDA
        (defined as operating earnings plus amortization and restructuring
        charges), which the Company considers to be a key performance
        indicator. EBITDA is not a generally accepted earnings measure and
        should not be considered as an alternative to earnings or cash flows
        as determined in accordance with Canadian generally accepted
        accounting principles. As there is no standardized method of
        calculating EBITDA, the Company's use of the term may not be directly
        comparable with similarly titled measures used by other companies.
    

    Operational Results

    Lumber EBITDA for the quarter was negative $13 million compared to
$1 million in the fourth quarter of 2006, excluding duty refunds. First
quarter 2007 results reflect log inventory writedowns amounting to $18
 million.
    Prices for SPF lumber strengthened marginally compared to the fourth
quarter of 2006, averaging US $253 per Mfbm compared to US $245 per Mfbm.
Prices for SYP averaged US $263 per Mfbm compared to US $267 per Mfbm in the
fourth quarter of 2006. Continuing low lumber prices are mainly the result of
weak housing starts in the U.S. and excess supply.
    Lumber production for the quarter was 994 MMfbm, an improvement of
84 MMfbm from the previous quarter, reflecting strong operating performance.
    Panel operations generated EBITDA of $15 million or 13% of sales compared
to $5 million or 5% of sales in the previous quarter. The improvement was
primarily due to higher plywood prices, lower plywood production costs and
increased LVL and MDF shipment volumes. The improvement was partially offset
by lower LVL prices and decreased plywood shipment volumes.
    EBITDA for the pulp and paper operations was $35 million or 12% of sales,
compared to $42 million or 16% of sales in the fourth quarter of 2006. These
results reflect improved prices for pulp, linerboard and kraft paper. This
improvement was offset by higher transportation costs as a result of the
Canadian National Railway Company ("CN") strike and lower production volumes
at Hinton and Kitimat, resulting in higher manufacturing costs.
    Production problems relating to the start-up of the turbo-generator at
the Kitimat linerboard and kraft paper mill resulted in lower production in
the quarter. By the end of the first quarter, the turbo-generator was running
at approximately 75 percent of target.
    Annual maintenance shutdowns scheduled at the Kitimat, Hinton and Cariboo
mills in the second quarter are expected to reduce normal production by
approximately 50,000 tonnes in aggregate.

    U.S. sawmill acquisition

    On March 31, 2007, West Fraser completed the acquisition of 13 sawmills
in the southern United States from International Paper Company. The
preliminary price, after taking into account estimated transaction expenses,
the termination of two long-term pulp supply contracts, and working capital is
$390 million (US $337 million). Further adjustments to the purchase price may
be made in 2007. The 13 sawmills have a combined annual production capacity of
approximately 1.8 billion board feet of SYP lumber and employ approximately
2,200 people. With its two existing sawmills in the southern United States,
the Company now has total production capacity in the United States of
approximately 2.2 billion board feet. When combined with the SPF lumber
capacity from its Canadian operations, West Fraser is the second largest
lumber producer in North America with an annual production capacity of
approximately 6.2 billion board feet.

    Transportation Issues

    West Fraser welcomed the intervention of the Canadian government to end
the labour disruption at CN Rail. The labour dispute, which started on
February 10, 2007, adversely affected shipments and costs in the first
quarter. With both the labour disruption and winter conditions substantially
over, West Fraser expects rail service to return to more acceptable levels.

    The Company

    West Fraser is an integrated forest products company producing lumber,
LVL, MDF, plywood, pulp, linerboard, kraft paper and newsprint. The Company
has approximately 9,100 employees and operations in British Columbia, Alberta
and the southern United States.

    Forward-Looking Statements

    Some information contained in this release is prospective, such as
statements about potential future developments, and may be affected by known
or unknown risks and uncertainties, which are mostly outside the control of
West Fraser. The results or outcomes of events mentioned in such prospective
information may differ materially from actual results or outcomes. This
prospective information and statements are not guaranteed by the Company and
actual results and outcomes will depend on a number of factors including those
described in the Company's 2006 annual Management Discussion & Analysis under
"Risks and Uncertainties." Readers should exercise caution in relying on such
information and statements. The Company undertakes no obligation to publicly
revise these forward looking statements to reflect subsequent events or
circumstances.

    Conference Call

    Investors are invited to listen to the quarterly conference call on
Tuesday, April 24 at 8:30 a.m. Pacific Daylight Time (11:30 a.m. Eastern
Daylight Time) by dialing 1-888-575-8232 (toll-free North America). The call
may also be accessed through West Fraser's web site at www.westfraser.com.

    Annual Meeting

    West Fraser's annual meeting will be held on April 25, 2007 at 11 a.m. at
the Company's offices in Quesnel, BC.

    
           West Fraser shares trade on the Toronto Stock Exchange
                           under the symbol:"WFT"


                     MANAGEMENT'S DISCUSSION & ANALYSIS
    

    The following discussion and analysis should be read in conjunction with
the unaudited interim consolidated financial statements included in this
quarterly report and Management's Discussion & Analysis included in the
Company's 2006 annual report. The figures are expressed in Canadian dollars,
unless otherwise indicated. Additional information relating to the Company,
including the Company's Annual Information Form is available on SEDAR at
www.sedar.com.
    This report of management's discussion and analysis contains historical
information, descriptions of current circumstances and statements about
potential future developments. The latter, which are forward-looking
statements, are presented to provide reasonable guidance to the reader but the
accuracy of these statements depends on a number of assumptions and is subject
to various risks and uncertainties. These include, but are not limited to,
uncertainties associated with the effect of general economic conditions on
demand for the Company's products, foreign exchange rate fluctuations, trade
sanctions, the availability of fibre and changes in stumpage fees,
competition, operational curtailments and transportation limitations, natural
disasters, insect infestation, the effects of forestry, land use,
environmental and other government laws and regulations, First Nations claims
and the ability of the Company to execute its business plans. These statements
are not guaranteed by the Company and actual outcomes and results may differ
materially from those anticipated or projected. Accordingly, readers should
exercise caution in relying upon forward-looking statements. The Company
undertakes no obligation to publicly revise these forward-looking statements
to reflect subsequent events or circumstances.
    Throughout this report, reference is made to EBITDA (defined as operating
earnings plus amortization and restructuring charges), which the Company
considers to be a key performance indicator. EBITDA is not a generally
accepted earnings measure and should not be considered as an alternative to
earnings or cash flows as determined in accordance with Canadian generally
accepted accounting principles. As there is no standardized method of
calculating EBITDA, the Company's use of the term may not be directly
comparable with similarly titled measures used by other companies.
    The information in this report is as at April 23, 2007, unless otherwise
indicated.

    U.S. Sawmill Acquisition

    On March 31, 2007, the Company acquired 13 sawmills from International
Paper Company and became the second largest lumber producer in North America
with an annual capacity of approximately 6.2 billion board feet. The 13 mills,
which are located in North and South Carolina, Georgia, Florida, Alabama,
Arkansas and Texas, employ approximately 2,200 people and have a combined
annual production capacity of approximately 1.8 billion board feet of southern
yellow pine ("SYP") lumber.
    Operating activities of the acquired sawmills prior to March 31, 2007
were managed by and for the benefit of the previous owner and are not
reflected in the financial results covered by this report.

    Transaction Terms

    The preliminary purchase price after taking into account estimated
transaction expenses and the termination of two long-term pulp supply
contracts is $390 million (US $337 million). Further adjustments to the
purchase price may be made pursuant to the agreement of purchase and sale.
    The transaction includes the assignment of multi-year market-price log
supply agreements which are expected to provide, in aggregate, approximately
15% of the acquired mills' current log requirements. West Fraser also entered
into long-term agreements to sell residual wood chips at market prices. The
transaction resulted in the termination of two supply contracts for 170,000
tonnes of NBSK pulp per year, which were entered into as part of West Fraser's
2004 acquisition of Weldwood of Canada Limited ("Weldwood"). The termination
of these contracts is not expected to have a material impact on West Fraser's
pulp operations.

    Financing, Synergies and Current Operations

    The acquisition was financed with cash on hand, available lines of credit
and a $100 million term loan which is payable at the Company's option on or
before March 31, 2010.
    West Fraser has established US $23 million in annual pre-tax synergies as
a target to be realized by the end of the third year after the completion of
the acquisition. Synergies are expected to be achieved by implementing best
practices and by centralizing U.S. sales and administrative offices.

    Softwood Lumber Agreement

    The Softwood Lumber Agreement (the "SLA 2006") came into force on
October 12, 2006. Under the SLA 2006, the Canadian provinces were required to
choose one of two options with respect to lumber shipments to the U.S.: to pay
to the Canadian government either a variable export tax based on price or a
lower variable export tax but subject to a quota on total shipments. B.C. and
Alberta elected the export tax only option, which results in West Fraser's
Canadian lumber operations being subject to the following export taxes:

    
    -------------------------------------------------------------------------
    Prevailing price(1)                                        Export Tax (%)
    -------------------------------------------------------------------------
    Over US $355                                                         Nil
    US $336 - $355                                                         5
    US $316 - $335                                                        10
    US $315 or under                                                      15
    -------------------------------------------------------------------------
    (1). Based on Random Lengths Framing Lumber Composite Price (the
         "Reference Price").
    

    The export tax rate is set monthly based on a four-week average Reference
Price that is published 21 days prior to the start of any given month.
Shipments to the U.S. from B.C. and Alberta during the first quarter of 2007
resulted in a 15% export tax being incurred.
    Also, if monthly shipments from the B.C. Interior region or from Alberta
(as export tax-only regions) exceed a certain trigger volume as defined in the
SLA 2006, a surge mechanism (the "Surge") will result in a 50% increase in the
applicable export tax rate for that month. The Surge is calculated monthly
based on trailing estimated U.S. lumber consumption. For the first quarter of
2007 the Canadian government determined that the Surge did not apply.
    The United States government has asserted that, for the purposes of the
Surge calculation, lumber consumption levels should be based on actual rather
than estimated consumption and that this adjustment mechanism should also
apply to export tax-only regions. If this position prevailed, the B.C.
Interior region could be subject to the Surge adjustment. This issue is now
the subject of consultations between the two governments and could be referred
to arbitration under the SLA 2006. We believe the Canadian position will
prevail, however, if the Surge adjustment applies the Company would incur
additional export taxes of approximately $3 million for each month of Surge.

    
    Revenue & Earnings Comparison

    -------------------------------------------------------------------------
                                         Q1-2007     Q4 - 2006     Q1 - 2006
    -------------------------------------------------------------------------
    Production
    Lumber - MMfbm                           994           910         1,136
    MDF - MMsf (3/4" basis)                   68            67            71
    Plywood - MMsf (3/8" basis)              186           172           184
    LVL - Mcf                                750           655           781
    BCTMP - Mtonnes                          139           138           140
    NBSK - Mtonnes                           118           141           141
    Linerboard and Kraft Paper
     - Mtonnes                               105           117           120
    Newsprint - Mtonnes                       32            31            32

    Shipments
    Lumber - MMfbm                           956         1,000         1,098
    MDF - MMsf (3/4" basis)                   75            55            78
    Plywood - MMsf (3/8" basis)              157           163           175
    LVL - Mcf                                707           526           751
    BCTMP - Mtonnes                          139           108           163
    NBSK - Mtonnes                           119           136           145
    Linerboard and Kraft Paper
     - Mtonnes                               110           114           124
    Newsprint - Mtonnes                       30            29            32

    Financial Highlights ($ millions)
    Sales                                    759           727           902
    -------------------------------------------------------------------------

    EBITDA                                    41           427           115
    Amortization                             (62)          (69)          (62)
    Restructuring charge                       -             -           (38)
    -------------------------------------------------------------------------
    Operating earnings                       (21)          358            15
    -------------------------------------------------------------------------
    Interest income on duty refund             -            50             -
    Interest expense - net                    (2)           (7)          (10)
    Exchange gain (loss) on
     long-term debt                            3           (14)           (1)
    Other income                              12            46             6
    Recovery (provision) for
     income taxes                              3          (137)           (4)
    -------------------------------------------------------------------------
    Earnings                                  (5)          296             6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    $CDN/$US - average                      1.17          1.14          1.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Selected Quarterly Information
    ($ millions, except earnings per share ("EPS") amounts which are in $)
    -------------------------------------------------------------------------
               Q1-07   Q4-06   Q3-06   Q2-06   Q1-06   Q4-05   Q3-05   Q2-05
    -------------------------------------------------------------------------
    Sales        759     727     809     888     902     832     890     953
    Earnings      (5)    296      (8)    104       6       9      18      38
    Basic EPS
     - $       (0.12)   6.93   (0.19)   2.43    0.14    0.20    0.42    0.89
    Diluted
     EPS - $   (0.12)   6.87   (0.19)   2.41    0.14    0.20    0.42    0.88
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating earnings in the quarter improved by $8 million from the fourth
quarter of 2006, ignoring the effect of the $387 million duty refund received
in that quarter, primarily due to higher SPF, plywood, pulp, linerboard and
kraft paper prices. The increase was partially offset by a log inventory
write-down of $18 million and lower production volumes at the Hinton and
Kitimat mills which resulted in higher costs per tonne.
    Operating earnings in the quarter declined by $36 million from the first
quarter of 2006 reflecting lower lumber prices and the log inventory writedown
as well as higher costs at the Kitimat mill. This earnings reduction was
partially offset by improved pricing for pulp, linerboard and kraft paper. The
Company's results for the first quarter of 2006 also included a $38 million
Hinton pulp restructuring charge.
    Administration expense of $21 million was $12 million lower than the
fourth quarter of 2006 and $9 million lower than the first quarter of 2006 due
primarily to an $8 million adjustment to incentive compensation accrued at
December 31, 2006. Administration expense for the quarter includes a share
option expense of $2 million compared to a $5 million expense in the fourth
quarter of 2006 and a $1 million expense in the first quarter of 2006.
    Interest expense of $2 million was $5 million lower than the fourth
quarter of 2006 and $8 million lower than in the first quarter of 2006 due to
lower debt levels and interest earned on cash held on deposit. Results for the
fourth quarter of 2006 also included interest income of $50 million related to
the return of softwood lumber duties.
    The change in value of the Canadian dollar relative to the U.S. dollar
resulted in an exchange gain of $3 million in the quarter on the Company's
U.S. denominated long-term debt compared to an exchange loss of $14 million in
the fourth quarter of 2006 and an exchange loss of $2 million in the first
quarter of 2006.
    Other income included a $4 million loss on the translation of U.S. dollar
cash, receivables and foreign operations, compared to a $19 million
translation gain in the fourth quarter of 2006 and a $4 million translation
gain in the first quarter of 2006. Other income for the quarter also included
a $10 million gain resulting from the termination of pulp supply contracts
related to the U.S. sawmill acquisition (see note 3 to the unaudited interim
consolidated financial statements), gains on the sale of property, plant,
equipment and timber and other items for all quarters.

    
    Lumber

    -------------------------------------------------------------------------
                                                     Q1-07    Q4-06    Q1-06
    -------------------------------------------------------------------------
    Sales - $ millions                                 361      358      505
    EBITDA - $ millions                                (13)     388       91
    EBITDA margin - %                                    -      102       17
    Operating earnings - $ millions                    (40)     354       64
    Benchmark Price
      SPF No. 2 & Better 2 x 4 (per Mfbm)(1) US $      253      245      343
      SYP No. 2 West 2 x 4 (per Mfbm)(2) US $          263      267      409
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    1. Source: Random Lengths - 2 x 4, No. 2 & Better
        - Net FOB mill.
    2. Source: Random Lengths - 2 x 4 - Net FOB mill
        Westside.

    Operating earnings declined by $7 million from the fourth quarter of 2006,
ignoring the $387 million duty refund received that quarter. Log inventories
were written down by $18 million in the quarter and export tax was charged
during the entire quarter instead of a partial quarter. These factors were
partially offset by higher SPF and chip prices in the first quarter of 2007.
Shipment volumes were down due to the Canadian National Railway Company ("CN")
strike and the sale of Burns Lake and Decker Lake sawmills on October 31,
2006.
    Operating earnings declined by $104 million from the first quarter of 2006
reflecting lower lumber prices which also resulted in an $18 million log
inventory writedown in the quarter. Production volumes decreased compared to
the first quarter of 2006 primarily due to the sale of the Burns Lake and
Decker Lake sawmills. This sale and the CN strike during the quarter resulted
in lower shipment volumes over the comparative period in 2006.
    West Fraser, along with others in the industry, is working closely with
the British Columbia government to address the economic impact of the
continuing mountain pine beetle ("MPB") infestation on operations. This
includes ensuring that the most current information related to the impact on
operations is factored into stumpage determinations and that the log grades
introduced in 2006 accurately reflect the potential of MPB-affected logs to
yield merchantable lumber. The Company is also working with the B.C.
government to develop the most appropriate policies to deal with non-sawlog
material left in harvested areas.
    The Alberta government is taking proactive action to control the spread of
the MPB and to reduce the area of stands at risk for attack. An advisory group
made up of representatives from the provincial and local governments,
industry, aboriginal groups, academia and environmental organizations is
advising the Alberta government on strategies to contain and prevent further
spread of the infestation. Although the hardest hit areas in Alberta are to
the north and west of West Fraser's operating areas, all of the Company's
Alberta operations are shifting harvest activities into pine stands which have
been identified as being at high risk of infestation.
    The Company experienced railcar shortages in the first quarter of 2007 and
of 2006 due to winter operating conditions. During the first quarter of 2007,
service was further reduced by the CN strike which resulted in partial service
for 15 days. The result was an increase in inventory levels and increased
transportation and loading costs as product was shipped by other more costly
methods. Inconsistent rail service remains a significant issue.
    The new sawmill in Quesnel operated on a three shift basis during the
quarter and its startup is progressing largely as expected. Additional planer
capacity will be added to the Quesnel operations to handle the increased
volume of lumber to be produced.
    SPF lumber prices strengthened marginally compared to the fourth quarter
of 2006, averaging US $253 per Mfbm compared to US $245 per Mfbm, both of
which are significantly down from the average price during the first quarter
of 2006 of US $343 per Mfbm. SYP lumber prices averaged US $263 per Mfbm
during the quarter compared to US $267 per Mfbm in the fourth quarter of 2006
and US $409 per Mfbm in the first quarter of 2006. The pricing fluctuations
are due primarily to significantly reduced U.S. housing starts resulting in
excess lumber supply. Annualized U.S. housing starts are forecast to average
1.5 million for 2007 compared to an annualized average of just over 1.8
million for 2006.
    Lumber supply is expected to decrease further in the second quarter of
2007 due to production curtailments but the market is likely to remain
oversupplied resulting in a depressed lumber pricing environment for the
balance of the year.

    Panels

    -------------------------------------------------------------------------
                                                     Q1-07    Q4-06    Q1-06
    -------------------------------------------------------------------------
    Sales - $ millions                                 119      102      124
    EBITDA - $ millions                                 15        5       16
    EBITDA margin - %                                   13        5       13
    Operating earnings (loss) - $ millions               5       (5)       7
    Benchmark price
      Plywood (per Msf 3/8" basis)(1) Cdn $            379      367      375
      MDF (per Msf 3/4" basis)(2) US $                 451      462      414
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    1. Source: Crow's Market Report - Delivered Toronto.
    2. Source: Resource Information Systems, Inc.
       - MDF Western U.S. - Net FOB mill.

    Operating earnings for the quarter increased by $10 million from the
fourth quarter of 2006 primarily due to higher plywood prices, improved
plywood production costs and higher LVL and MDF shipment volumes. The increase
was partially offset by lower LVL prices and plywood shipment volumes.
    Operating earnings declined by $2 million from the first quarter of 2006
primarily due to lower LVL prices, lower plywood and LVL shipment volumes and
higher LVL unit production costs. The decline was partially offset by higher
MDF and chip prices.
    Permanent plywood plant closures have removed approximately 10% of
Canadian plywood production from the market leading to improved product
pricing. The reduced supply combined with relatively strong forecast housing
demand in Canada for 2007 should lead to a stable pricing environment for the
balance of 2007.
    MDF markets for the first quarter of 2007 were strong and price levels are
expected to improve in the second quarter.

    Pulp & Paper

    -------------------------------------------------------------------------
                                                     Q1-07    Q4-06    Q1-06
    -------------------------------------------------------------------------
    Sales - $ millions                                 279      267      273
    EBITDA - $ millions                                 35       42       13
    EBITDA margin - %                                   12       16        5
    Operating earnings (loss) - $ millions              10       19      (48)
    Benchmark price
      NBSK (US $ per tonne)(1)                         790      770      653
      Linerboard (US $ per tonne)(2)                   568      568      513
      Newsprint (US $ per tonne)(3)                    614      654      644
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    1. Source: Resource Information Systems, Inc.
        - U.S. list price delivered U.S.
    2. Source: Pulp & Paper Week - Unbleached
        linerboard kraft, East.
    3. Source: Resource Information Systems, Inc.
        - U.S. delivered 48.8 gram newsprint.
    

    Operating earnings were $9 million lower than the fourth quarter of 2006
primarily due to lower production and shipment volumes at the Hinton and
Kitimat mills, higher fibre and unit manufacturing costs at most of the
Company's pulp and paper mills and higher transportation costs relating to the
CN labour disruption. The higher costs were partially offset by improved
prices for pulp, linerboard and kraft paper.
    Operating earnings were $10 million compared to an operating loss of $48
million in the first quarter of 2006 primarily due to improved prices for
pulp, linerboard and kraft paper and the $38 million restructuring charge for
the Hinton pulp mill recorded in the first quarter of 2006. The improvement in
prices was partially offset by higher fibre costs at most mills, lower
production at the Kitimat and NBSK mills resulting in higher unit production
costs, higher transportation costs as a result of the CN labour disruption,
lower newsprint prices and lower shipment volumes for all the pulp and paper
products.
    Annual maintenance shutdowns are scheduled at the Hinton and Cariboo pulp
mills and the Kitimat linerboard and kraft paper mill in the second quarter of
2007. The annual shutdowns are expected to reduce normal production by
approximately 50,000 tonnes.

    Pulp

    The Company's BCTMP mills ran well in the quarter producing 139,000
tonnes compared to 138,000 tonnes in the fourth quarter of 2006 and 140,000
tonnes in the first quarter of 2006. Combined production at the two NBSK mills
was 118,000 tonnes compared to 141,000 tonnes in the fourth quarter of 2006
and the first quarter of 2006. The lower production was primarily due to the
closure of the woodroom and the No. 1 pulp machine at the Hinton pulp mill at
the end of 2006 and various production issues at both NBSK mills during the
quarter. Fibre costs were higher during the quarter due to rising woodchip
prices and, in the case of Hinton pulp, the purchase of higher priced whole
log chips.
    The woodroom at the Hinton mill was closed at the end of 2006 as part of
the previously announced restructuring, although the No. 1 pulp machine ran on
a limited basis in the quarter because of current high pulp prices.
    The $20 million upgrade of the remaining Hinton pulp machine, expected to
be completed by the end of the second quarter of 2007, is expected to result
in improved operations and lower production costs at the mill. After
completion of the upgrade, the annual capacity of the mill will be 350,000
tonnes reflecting a net reduction of approximately 70,000 tonnes. In the first
quarter of 2006, a $35 million writedown of property, plant, equipment and
timber and a charge of $3 million for other costs related to the restructuring
plan was recorded.
    Although paper demand was flat in the first quarter, NBSK pulp markets
demonstrated continued strength. The NBSK pulp capacity reductions that took
place in 2006 as well as tight chip supplies in Canada and Europe continue to
support improved pricing. The benchmark NBSK pulp price in North America
increased $20 per tonne in January of 2007 and there was a further $20 per
tonne in April to US $810 per tonne. Current market indicators suggest that
NBSK pulp markets should remain strong through the third quarter of 2007.
However weak paper markets and growth in southern hemisphere capacity may
impact pulp markets in the latter part of the year.
    Market conditions for other pulp grades, including BCTMP, were weaker in
the quarter due to new southern hemisphere hardwood kraft capacity ramping up.

    Linerboard and Kraft Paper

    Production at the Kitimat linerboard and kraft paper mill in the quarter
was significantly below expectations as a result of production problems
relating to the start-up of the turbo-generator as well as several other
operational issues. During the quarter, the turbo-generator commenced
operations and by the end of the quarter was running at approximately 75
percent of the target run rate.
    The production shortfall of approximately 15,000 tonnes compared to the
first quarter of 2006 resulted in higher unit production costs. In addition,
higher fibre costs and higher natural gas consumption further reduced
profitability for linerboard and kraft paper.
    During the quarter, overseas linerboard markets continued to strengthen,
driven by positive demand and higher fibre costs. North American markets were
flat due to lower box shipments and, as a result, the announced first quarter
price increase was not achieved.
    Kraft paper markets continued to strengthen with price levels increasing
by 10-15% in the last year. Improved markets were the result of capacity
reductions and improving demand in offshore markets. Markets are expected to
remain strong for the remainder of the year.

    Newsprint

    The Alberta Newsprint mill operated well in the quarter with production
volumes and costs similar to the first quarter of 2006.
    Newsprint prices declined in the first quarter of 2007 compared to the
fourth quarter of 2006 and the first quarter of 2006 as newsprint demand
continued to decline. This price trend may continue for the remainder of the
year.

    Change in Accounting Policies

    Financial Instruments

    The Canadian Institute of Chartered Accountants issued new accounting
rules on financial instruments, hedges and comprehensive earnings that will
require the Company to account for derivatives and financial assets held for
trading or available for sale at fair value. Loans, receivables and
investments held to maturity will be measured at amortized cost using the
effective interest rate method. Other financial liabilities will be measured
at fair value or at amortized cost using the effective interest rate method.
The effective interest rate method establishes the discount rate which equates
the estimated future cash flows with the net carrying amount of the financial
asset or liability.
    Other comprehensive earnings is the method used to record revenues,
expenses, gains and losses on net financial assets that are not required to be
included in earnings. Foreign currency translation gains and losses on self-
sustaining foreign operations will be included in other comprehensive
earnings. Comprehensive earnings are the sum of earnings for the period plus
other comprehensive earnings.
    The new rules do not have a significant impact on the Company's financial
statements.

    Translation of Foreign Operations

    The Company has determined that the Company's foreign operations became
self-sustaining upon the acquisition of 13 sawmills in the United States (see
note 3 to the unaudited interim consolidated financial statements).
Accordingly, on March 31, 2007, the Company changed its translation method
from the temporal method to the current rate method.
    Under the current rate method all assets and liabilities are translated
at the exchange rate in effect at the balance sheet date and the resulting
unrealized gains or losses are included in accumulated other comprehensive
earnings. Under the temporal method, monetary assets and liabilities are
translated at the exchange rate in effect at the balance sheet date while non-
monetary items are translated at historical exchange rates.
    The result of this change in accounting policy was a reduction of
$18.2 million in accumulated other comprehensive earnings included in
shareholders' equity. Unrealized gains or losses in translation are included
in other comprehensive earnings from the date of the change.

    Capital Structure

    The number of Common shares and Class B common shares outstanding was
42,774,689 as at March 31, 2007. The increase reflects the issuance of 2,752
Common shares pursuant to the Employee Share Purchase Plan. On February 15,
2007, 2,000,000 Class B common shares were converted to Common shares.

    
    -------------------------------------------------------------------------
                                                         March      December
                                                      31, 2007      31, 2006
    -------------------------------------------------------------------------
    Common                                          39,889,483    37,886,731
    Class B common                                   2,885,206     4,885,206
    -------------------------------------------------------------------------
    Total                                           42,774,689    42,771,937
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Capital Requirements and Liquidity

    Summary of Financial Position ($ millions, except
     as otherwise indicated)
    -------------------------------------------------------------------------
                                                     Q1-07    Q4-06    Q1-06
    -------------------------------------------------------------------------
    Net cash(1)                                         12      606       22
    Current assets                                   1,076    1,451    1,130
    Current liabilities                                636      830      713
    Ratio of current assets to current liabilities     1.7      1.7      1.6
    Net debt                                           756       19      847
    Shareholders' equity                             2,210    2,239    1,866
    Net debt to capitalization(2) - %                   25        1       31
    -------------------------------------------------------------------------
    1. Net cash consists of cash and short-term investments less outstanding
       cheques in excess of funds on deposit.
    2. Net debt (total debt less cash and short-term investments) divided by
       net debt plus shareholders' equity.

    West Fraser's cash requirements, other than for operating purposes, are
primarily for interest payments, repayment of debt, additions to property,
plant, equipment and timber, acquisitions and payment of dividends. In years
without a major acquisition or debt repayment, cash on hand and cash provided
by operations have normally been sufficient to meet these requirements.

    Selected Cash Flow Items ($ millions)
    -------------------------------------------------------------------------
                                                     Q1-07    Q4-06    Q1-06
    -------------------------------------------------------------------------
    Operating Activities
    Cash provided before working capital changes        52      364      102
    Non-cash working capital change                   (384)     260     (117)
    -------------------------------------------------------------------------
    Cash provided by (used in) operating activities   (332)     624      (15)
    -------------------------------------------------------------------------
    Financing Activities
    Debt and operating loans                           150      (66)      75
    Dividends and other                                 (6)      (6)      (6)
    -------------------------------------------------------------------------
    Cash provided by (used in) financing activities    144      (72)      69
    -------------------------------------------------------------------------
    Investing Activities
    Acquisition                                       (379)       -        -
    Additions to property, plant, equipment &
     timber                                            (27)     (46)     (55)
    Other - net                                          1       89        5
    -------------------------------------------------------------------------
    Cash provided by (used in) investing activities   (405)      43      (50)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Change in cash                                    (593)     595        4
    -------------------------------------------------------------------------
    Ending cash                                         12      606       22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Non-cash working capital items in the quarter included a $167 million
decrease in income taxes payable primarily due to income tax payments of
$165 million, and a $131 million decrease in accounts payable primarily due to
the $122 million payment of the special charge related to the SLA 2006 on the
prior year duty refunds. First quarter non-cash working capital items also
include the seasonal build up of log inventory.
    Investing activities include $379 million for the purchase of 13 sawmills
in the southern United States and $27 million in property, plant and equipment
additions.
    On March 30, 2007, West Fraser extended its current $500 million
committed revolving credit facility from June 2010 to March 2012 and entered
into a 5-year $100 million committed revolving facility for its U.S.
operations. Also, West Fraser entered into a $100 million 3-year term facility
to fund part of the U.S. acquisition. The revolving and term facilities are at
floating interest rates.



    
    West Fraser Timber Co. Ltd.
    Consolidated Balance Sheets
    (in millions of Canadian dollars - unaudited)
                                                         As at         As at
                                                      March 31,  December 31,
                                                          2007          2006
    -------------------------------------------------------------------------

    Assets
    ------
    Current assets
    Cash and short-term investments                  $    42.6     $   605.6
    Accounts receivable                                  332.8         300.9
    Inventories                                          684.4         531.9
    Prepaid expenses                                      16.3          12.9
                                                     ------------------------
                                                       1,076.1       1,451.3
    Property, plant, equipment and timber              2,394.9       2,133.9
    Deferred charges                                      35.6          38.1
    Goodwill                                             263.7         263.7
    Other assets (note 4)                                128.2         127.7
                                                     ------------------------
                                                     $ 3,898.5     $ 4,014.7
                                                     ------------------------
                                                     ------------------------
    Liabilities and Shareholders' Equity
    ------------------------------------
    Current liabilities
    Cheques issued in excess of funds on deposit     $    30.3     $       -
    Operating loans (note 5)                              45.9             -
    Accounts payable and accrued liabilities             365.4         468.4
    Income taxes payable                                  11.5         178.9
    Current portion of reforestation obligations          54.2          54.2
    Current portion of long-term debt (note 5)           128.2         128.2
                                                     ------------------------
                                                         635.5         829.7
    Long-term debt (note 5)                              594.5         496.0
    Other liabilities (note 6)                           150.1         137.5
    Future income taxes                                  308.4         312.4
                                                     ------------------------
                                                       1,688.5       1,775.6
                                                     ------------------------
    Shareholders' equity (note 7)                      2,210.0       2,239.1
                                                     ------------------------
                                                     $ 3,898.5     $ 4,014.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Number of Common shares outstanding at April 23, 2007 was 42,797,376



    West Fraser Timber Co. Ltd.
    Consolidated Statements of Earnings
    (in millions of Canadian dollars - unaudited)

                                                       January 1 to March 31
                                                          2007          2006
    -------------------------------------------------------------------------

    Sales                                            $   758.6     $   902.0
                                                     ------------------------
    Costs and expenses
    Cost of products sold                                547.1         589.7
    Freight and other distribution costs                 126.1         145.4
    Export taxes                                          23.5             -
    Amortization                                          62.1          61.8
    Selling, general and administration                   21.0          29.5
    Restructuring charge (note 8)                            -          37.6
    Duty expense                                             -          22.4
                                                     ------------------------
                                                         779.8         886.4
                                                     ------------------------
    Operating earnings (loss)                            (21.2)         15.6

    Other
    Interest expense - net                                (2.2)        (10.0)
    Exchange gain (loss) on long-term debt                 3.2          (1.5)
    Other income                                          11.8           6.2
                                                     ------------------------
    Earnings (loss) before income taxes and
     non-controlling interest                             (8.4)         10.3
    Recovery of (provision for) income taxes (note 9)      3.3          (3.8)
                                                     ------------------------
    Earnings (loss) before non-controlling interest       (5.1)          6.5
    Non-controlling interest                                 -          (0.4)
                                                     ------------------------
    Earnings (loss)                                  $    (5.1)    $     6.1
                                                     ------------------------
                                                     ------------------------

    Earnings (loss) per share (note 11)
      Basic                                          $   (0.12)    $    0.14
      Diluted                                        $   (0.12)    $    0.14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    West Fraser Timber Co. Ltd.
    Consolidated Statements of Retained Earnings and Accumulated Other
    Comprehensive Earnings
    (in millions of Canadian dollars - unaudited)

                                                       January 1 to March 31
                                                          2007          2006
    -------------------------------------------------------------------------

    Retained Earnings
    -----------------
    Balance - beginning of period                    $ 1,641.3     $ 1,268.8
    Earnings (loss)                                       (5.1)          6.1
                                                     ------------------------
                                                       1,636.2       1,274.9
    Common share dividends                                (6.0)         (6.0)
                                                     ------------------------
    Balance - end of period                          $ 1,630.2     $ 1,268.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated Other Comprehensive Earnings
    ----------------------------------------
    Balance - beginning of period                     $       -    $       -
    Cumulative translation adjustment on self-
     sustaining foreign operations (note 2)               (18.2)           -
                                                      -----------------------
    Balance - end of period                           $   (18.2)   $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    West Fraser Timber Co. Ltd.
    Consolidated Statements of Cash Flows
    (in millions of Canadian dollars - unaudited)

                                                       January 1 to March 31
                                                          2007          2006
    -------------------------------------------------------------------------
    Cash flows from operating activities
    ------------------------------------
    Earnings (loss)                                  $    (5.1)    $     6.1
                                                     ------------------------
      Items not affecting cash
        Amortization                                      62.1          61.8
        Write down of pulp assets (note 8)                   -          34.8
        Exchange (gain) loss on long-term debt            (3.2)          1.5
        Change in reforestation obligations               11.5          12.4
        Future income taxes                               (4.0)        (15.4)
        Other                                             (9.8)          0.9
                                                     ------------------------
                                                          51.5         102.1
    Net change in non-cash working capital items        (384.1)       (116.8)
                                                     ------------------------
                                                        (332.6)        (14.7)
                                                     ------------------------
    Cash flows from financing activities
    ------------------------------------
    Repayment of long-term debt                           (0.3)         (0.3)
    Proceeds from long-term debt                         102.8             -
    Net proceeds from operating loans                     47.9          74.9
    Common share dividends                                (6.0)         (6.0)
    Other                                                  0.1           0.1
                                                     ------------------------
                                                         144.5          68.7
                                                     ------------------------
    Cash flows from investing activities
    ------------------------------------
    Acquisition (note 3)                                (379.2)            -
    Additions to property, plant, equipment
     and timber                                          (26.6)        (54.7)
    Proceeds from disposal of property, plant,
     equipment and timber                                  3.0           3.2
    (Increase) decrease in other assets                   (2.4)          1.4
                                                     ------------------------
                                                        (405.2)        (50.1)
                                                     ------------------------
    (Decrease) increase in net cash(*)                  (593.3)          3.9
    Net cash - beginning of period                       605.6          18.3
                                                     ------------------------
    Net cash - end of period                         $    12.3     $    22.2
                                                     ------------------------
                                                     ------------------------
    (*) Net cash consists of cash and short-term investments less cheques
        issued in excess of funds on deposit.

    Supplemental information:
    Interest paid                                    $     0.4     $     2.7
    Income taxes paid                                $   164.5     $    35.5

    Non cash investing activity:
    Pulp supply contracts terminated on
     acquisition (note 3)                            $   (10.4)    $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    West Fraser Timber Co. Ltd.
    First Quarter Segmented Information
    (in millions of Canadian dollars - unaudited)

                                                  Pulp &  Corporate   Consol-
                              Lumber    Panels     paper   & other    idated
    -------------------------------------------------------------------------
    January 1, 2007 to
     March 31, 2007

    Sales
      To external customers  $ 361.1   $ 118.8   $ 278.7   $     -   $ 758.6
                                                                     --------
                                                                     --------
      To other segments         25.0       2.7         -         -
                            ---------------------------------------
                             $ 386.1   $ 121.5   $ 278.7   $     -
                            ---------------------------------------
                            ---------------------------------------

    EBITDA(1)                $ (13.4)  $  15.4   $  34.7   $   4.2   $  40.9
    Amortization                26.2      10.8      24.3       0.8      62.1
                            -------------------------------------------------
    Operating earnings
     (loss)                    (39.6)      4.6      10.4       3.4     (21.2)
    Interest expense - net      (2.8)     (0.8)     (0.3)      1.7      (2.2)
    Exchange gain on
     long-term debt                -         -         -       3.2       3.2
    Other income                 1.2         -       9.9       0.7      11.8
                            -------------------------------------------------
    Earnings (loss) before
     income taxes and
     non-controlling
     interest                $ (41.2)  $   3.8   $  20.0   $   9.0   $  (8.4)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    January 1, 2006 to
     March 31, 2006

    Sales
      To external customers  $ 505.2   $ 123.8   $ 273.0   $     -   $ 902.0
                                                                     --------
                                                                     --------
      To other segments         21.0       2.6         -         -
                            ---------------------------------------
                             $ 526.2   $ 126.4   $ 273.0   $     -
                            ---------------------------------------
                            ---------------------------------------

    EBITDA(1)                $  91.4   $  16.4   $  12.5   $  (5.3)  $ 115.0
    Amortization                27.9       9.8      23.2       0.9      61.8
    Restructuring charge           -         -      37.6         -      37.6
                            -------------------------------------------------
    Operating earnings (loss)   63.5       6.6     (48.3)     (6.2)     15.6
    Interest expense - net      (5.2)     (1.8)     (2.9)     (0.1)    (10.0)
    Exchange loss on
     long-term debt                -         -         -      (1.5)     (1.5)
    Other income                 2.0       0.2       1.3       2.7       6.2
                            -------------------------------------------------
    Earnings (loss) before
     income taxes and
     non-controlling
     interest                $  60.3   $   5.0   $ (49.9)  $  (5.1)  $  10.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Non GAAP measure:
        EBITDA is defined as operating earnings plus amortization and
        restructuring charge.



    West Fraser Timber Co. Ltd.
    Notes to Interim Consolidated Financial Statements
     (figures are in millions of dollars except where indicated - unaudited)

    1.  Basis of presentation

        These interim consolidated financial statements should be read in
        conjunction with the consolidated annual financial statements for the
        year ended December 31, 2006.

        These interim consolidated financial statements follow the same
        accounting policies and methods of their application as the
        December 31, 2006 consolidated annual financial statements except as
        disclosed in note 2.

        Certain comparative figures have been reclassified to conform to the
        current period's presentation.

    2.  Changes in accounting and estimates

        Foreign currency translation

        The Company has determined that the Company's foreign operations
        became self sustaining upon the acquisition of 13 sawmills in the
        United States (note 3). Accordingly, on March 31, 2007, the Company
        changed its translation method from the temporal method to the
        current rate method.

        Under the current rate method all assets and liabilities are
        translated at the exchange rate in effect at the balance sheet date
        and the resulting unrealized gains or losses are included in
        accumulated other comprehensive earnings. Under the temporal method,
        monetary assets and liabilities are translated at the exchange rate
        in effect at the balance sheet date while non-monetary items are
        translated at historical exchange rates.

        The result of this change in accounting policy was a reduction of
        $18.2 million in accumulated other comprehensive earnings included in
        shareholders' equity. Unrealized gains or losses on translation are
        included in other comprehensive earnings from the date of the change.

        Financial instruments

        Effective January 1, 2007, the Company adopted the new accounting
        standards issued by the Canadian Institute of Chartered Accountants
        for financial instruments, hedges and comprehensive earnings. The
        recommendations require the Company to account for derivatives and
        financial assets held for trading or available for sale at fair
        value. Loans, receivables and investments held to maturity are
        measured at amortized cost using the effective interest rate method.
        Other financial liabilities will be measured at fair value or at
        amortized cost using the effective interest rate method. The
        effective interest rate method establishes the discount rate which
        equates the estimated future cash flows with the net carrying amount
        of the financial asset or liability.

        Other comprehensive earnings is the method used to record revenues,
        expenses, gains and losses on net financial assets that are not
        required to be included in earnings. Foreign currency translation
        gains and losses on self-sustaining foreign operations will be
        included in other comprehensive earnings. Comprehensive earnings are
        the sum of earnings (loss) for the period plus other comprehensive
        earnings (loss).

        The adoption of the new recommendations did not materially impact the
        Company's financial statements.

        Change in estimates

        The December 31, 2006 estimate of accrued incentive compensation was
        reduced by $8.0 million in the quarter resulting in a reduction to
        selling, general and administration expenses.

    3.  Acquisition

        On March 31, 2007 the Company acquired 13 sawmills from International
        Paper Company ("IP") for $389.6 million. The 13 mills are located in
        the southern United States.

        The transaction resulted in the termination of supply contracts under
        which IP agreed to purchase 170,000 tonnes of NBSK pulp annually. The
        terminated pulp supply contracts were entered into as part of the
        Company's 2004 acquisition of Weldwood of Canada Limited and had a
        remaining term of less than eight years. These pulp supply contracts
        were valued at $10.4 million based on an analysis of market
        conditions at the time of termination and a settlement gain of
        $10.4 million is recorded in other income.

        The acquisition has been accounted for using the purchase method,
        whereby the purchase consideration was allocated to the estimated
        fair values of the assets acquired and liabilities assumed at the
        effective date of the purchase. The Company has not yet finalized the
        allocation of the purchase cost for the acquisition. The preliminary
        allocation of the purchase cost is based on management's best
        estimates and information available at the time of preparing these
        consolidated financial statements and any changes may be material.

        The preliminary purchase price allocation is as follows:

        Current assets                                             $   102.2
        Current liabilities                                            (28.1)
        Property, plant and equipment                                  315.5
        ---------------------------------------------------------------------
        Consideration                                                  389.6

        Consideration attributed to termination of
         pulp supply contracts                                         (10.4)
        ---------------------------------------------------------------------
        Net cash consideration                                     $   379.2
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The allocation above includes estimated costs related to the
        acquisition of $6.2 million. Actual amounts incurred may differ from
        this estimate and any such difference will be factored into the final
        allocation.

    4.  Other assets

                                                      March 31,  December 31,
                                                          2007          2006
        ---------------------------------------------------------------------
        Power purchase agreements - net              $   100.6     $   102.4
        Investments                                        9.7          10.7
        Advances for timber and timber deposits           17.9          14.6
        ---------------------------------------------------------------------
                                                     $   128.2     $   127.7
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    5.  Long-term debt and operating loans

                                                      March 31,  December 31,
                                                          2007          2006
        ---------------------------------------------------------------------
        Cdn $125 debentures due 2007; interest
         at 6.8%                                     $   125.0     $   125.0
        Cdn $150 debentures due 2009; interest
         at 4.94%                                        150.0         150.0
        Cdn $100 term note due 2010; interest at
         floating rates(1)                               100.0             -
        US $300 senior notes due 2014; interest
         at 5.2%                                         346.4         349.6
        Cdn $3 term note; interest at floating
         rates(1)                                          3.0           3.3
        Cdn $4 note payable due 2020; interest at 5.5%     2.8             -
        Deferred financing costs                          (4.5)         (3.7)
        ---------------------------------------------------------------------
                                                         722.7         624.2
        Less: Current portion of long-term debt         (128.2)       (128.2)
        ---------------------------------------------------------------------
                                                     $   594.5     $   496.0
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        (1) Floating rates are based on Prime, US base, Banker's Acceptances
            or LIBOR at the Company's option.

        The Company has approximately $605.0 million in revolving lines of
        credit available, of which $47.9 million was drawn as at March 31,
        2007. Deferred financing costs of $2.0 million are offset against
        operating loans for presentation purposes. Interest is payable at
        floating rates based on Prime, US base, Bankers' Acceptances or LIBOR
        at the Company's option. The Company has also issued $17.1 million
        under various letters of credit.

    6.  Other liabilities
                                                      March 31,  December 31,
                                                          2007          2006
        ---------------------------------------------------------------------

        Post-retirement obligations                  $    54.3     $    54.0
        Timber damage deposits                            15.2          14.6
        Reforestation obligations - long-term             71.6          60.1
        Other asset retirement obligations                 9.0           8.8
        ---------------------------------------------------------------------
                                                     $   150.1     $   137.5
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    7.   Shareholders' equity

                                       March 31, 2007      December 31, 2006
                                 Number of              Number of
                                    Shares                 Shares
                                    Issued     Amount      Issued     Amount
        ---------------------------------------------------------------------
        Common                  39,889,483  $   597.9  37,886,731  $   597.6
        Class B common           2,885,206        0.3   4,885,206        0.5
        ---------------------------------------------------------------------
        Total Common            42,774,689      598.2  42,771,937      598.1
        Retained earnings                     1,630.2                1,641.3
        Accumulated other
         comprehensive earnings                 (18.2)                     -
        Share purchase loans                     (0.2)                  (0.3)
        ---------------------------------------------------------------------
        Shareholders' equity                $ 2,210.0              $ 2,239.1
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Common shares

        For the three months ended March 31, 2007, the Company issued
        2,752 Common shares for cash of $0.1 million and 2,000,000 Class B
        common shares in the amount of $0.2 million were exchanged for Common
        shares (for the three months ended March, 2006 the Company issued
        3,422 Common shares for cash of $0.1 million).

    8.  Restructuring charge

        In the first quarter of 2006, the Company expensed $37.6 million
        related to a restructuring of the pulp mill in Hinton, Alberta. Of
        this amount, $34.8 million was for the writedown of property, plant,
        equipment and timber with the balance for other restructuring costs.

    9.  Income taxes

        The Company's effective tax rate is as follows:

                                            January 1 to        January 1 to
                                          March 31, 2007      March 31, 2006
                                        Amount         %    Amount         %
        ---------------------------------------------------------------------
        Income taxes at statutory
         rates                         $   2.8      34.1   $  (3.5)    (34.1)
        Large corporations tax               -         -      (0.7)     (6.7)
        Non-taxable amounts                0.4       4.7      (0.7)     (6.7)
        Rate differentials between
         jurisdictions and on
         specified activities              0.9       9.9       1.9      18.4
        Other                             (0.8)     (9.4)     (0.8)     (7.8)
        ---------------------------------------------------------------------
        Income tax recovery (expense)  $   3.3      39.3   $  (3.8)    (36.9)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    10. Employee future benefits

        The total benefit cost of the Company's defined benefit pension plans
        was $5.6 million for the three months ended March 31, 2007 (three
        months ended March 31, 2006 - $5.7 million).

    11. Earnings per share

        Basic earnings per share is calculated based on earnings available to
        Common shareholders, as set out below, using the weighted average
        number of Common shares outstanding. Diluted earnings per share
        assume the exercise of share options using the treasury stock method.

                                                       January 1 to March 31
                                                          2007          2006
        ---------------------------------------------------------------------
        Earnings (loss)                                $  (5.1)      $   6.1
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Weighted average number of shares (thousands)
        Weighted average shares - basic                 42,761        42,740
        Share options - treasury stock method              473           375
        ---------------------------------------------------------------------
        Weighted average shares - diluted               43,234        43,115
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Earnings per share (dollars)
        Basic                                          $ (0.12)      $  0.14
        Diluted                                        $ (0.12)      $  0.14
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    -------------------------------------------------------------------------
                    For the use of CNW GROUP SERVICE only

           West Fraser shares trade on the Toronto Stock Exchange
                           under the symbol: "WFT"
    
    %SEDAR: 00002660E




For further information:

For further information: Mr. Martti Solin, Executive Vice-President,
Finance and Corporate Development and Chief Financial Officer; Mr. Rodger
Hutchinson, Vice-President, Corporate Controller, (604) 895-2700,
www.westfraser.com

Organization Profile

WEST FRASER TIMBER CO. LTD.

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