Catalyst improves underlying financial results in 2008

    RICHMOND, BC, Feb. 12 /CNW/ - Catalyst Paper (TSX:CTL) posted a net loss
of $28.0 million ($0.08 per common share) before specific items in 2008, a
significant improvement over the prior year's net loss of $89.3 million ($0.42
per common share) before specific items.
    Including after-tax impairment charges, primarily associated with the
permanent closure of the Elk Falls sawdust pulp mill and white top linerboard
operation, and an after-tax foreign exchange loss on the translation of US
dollar-denominated debt, the net loss for 2008 was $221.1 million ($0.66 per
common share) compared with a net loss of $31.6 million ($0.15 per common
share) in 2007.
    Sales revenues of $1,849.4 million compared favourably with revenues of
$1,714.6 million in the prior year due to significant price increases for the
company's paper and pulp products in the early part of the year, as well as
the acquisition of the Snowflake mill in April, 2008. EBITDA was $159.4
million in 2008 compared to $27.0 million in the prior year, driven by
increased revenue and labour-cost savings from efficiency initiatives
implemented in 2007 and further workforce reductions in 2008.
    The recycled newsprint mill in Snowflake, Arizona contributed 215,200
tonnes to the company's newsprint production during the year. As of year-end,
the company had achieved an annualized run rate of US$9.2 million in synergies
from this acquisition.
    The decision to permanently close pulp and white top linerboard
operations at Elk Falls - necessitated by the unavailability of sawdust fibre
supplies - was implemented during the fourth quarter. The previous curtailment
of the Elk Falls No. 1 paper machine was also made indefinite during the year,
and curtailment across all operations and products totalled 361,100 tonnes.
    "We made progress on our objective to improve financial, labour and
operational efficiencies in 2008," said President and CEO Richard Garneau.
"The disciplined approach we have taken to eliminate unnecessary costs from
the business helped the company adjust, in the fourth quarter, to the
increasingly difficult economic and market conditions."
    Catalyst continued to be challenged during 2008 by rising energy prices
and related input costs, as well as currency volatility. Paper prices
recovered in early 2008 from previous lows, as capacity kept pace with demand
for most of the company's grades. Pricing momentum was undermined, however, by
the widespread economic slowdown in the latter part of the year, and in
particular by the steep decline in advertising spending. Pulp prices were also
high until declining rapidly in the last four months of the year.
    Sales volumes were up for specialty printing papers, largely as a result
of switching production from newsprint to uncoated grades, and average sales
revenues were up $54 per tonne. Newsprint sales volumes also increased,
largely reflecting the Snowflake acquisition, and average sales revenues were
up by $90 per tonne. Pulp sales volumes were down, reflecting both the Elk
Falls closure and market-related curtailment at Crofton in the fourth quarter,
while average sales revenue per tonne was virtually unchanged.
    Beyond operational rationalization, cost reductions through the year
centered on the $80 per tonne labour-cost target. A further reduction of
approximately 390 positions, or 14 per cent, was implemented across the
company's operations, and additional labour-cost savings of approximately $48
million were realized.
    New collective agreements reached with unions at all of the company's
Canadian paper mills in 2008 also include a commitment to complete plans which
will assist the company in reaching its stated goal of an $80 per tonne
labour-cost structure. Early conclusion of the agreement with union locals at
Port Alberni was a key factor in the re-start of the A4 paper machine in May
    Fourth quarter results were heavily impacted by deteriorating global
economic conditions. Negative impacts on pricing and demand were offset
somewhat by a decline in the value of the Canadian dollar. Net earnings before
specific items for the final quarter of the year were $9.3 million, compared
to net earnings before specific items of $7.2 million in the third quarter.
    Production curtailments taken in the fourth quarter of 2008 and announced
for the first quarter of 2009 have removed approximately 35 per cent of
Catalyst's newsprint capacity, five per cent of its specialty papers capacity
and 27 per cent of its market pulp capacity. An additional 30,000 to 35,000
tonnes of curtailment is expected to be necessary in the first quarter to
maintain inventory at an appropriate level. Based on current trends in
advertising and paper consumption, we expect production curtailment to
continue into the second quarter. Decisions on the extent of any further
curtailments will be made as required based on market conditions at the time.
    This highlights the competitive importance of further cost-structure
improvements and discussions are underway with municipal governments in
British Columbia on the need for major industry property tax reform to base
the mill rate levied on the cost of municipal services consumed.

    Selected Financial Highlights

    (In millions of dollars, except where otherwise stated)
                              2008      2007      2006
    Sales                   $1,849.4  $1,714.6  $1,882.5

    Operating earnings
     (loss)                   (157.4)   (149.4)      3.9
    EBITDA(1)                  159.4      27.0     211.0
      - before specific
         items(1)              189.5     116.7     211.0
    Net earnings (loss)       (221.1)    (31.6)    (15.9)
      - before specific
         items(1)              (28.0)    (89.3)    (25.0)
    EBITDA margin(1)             8.6%      1.6%     11.2%
      - before specific
         items(1)               10.2%      6.5%     11.2%
    Net earnings (loss) per
     share (in dollars)
      - basic and diluted   $  (0.66) $  (0.15) $  (0.07)
      - before specific
         items(1)              (0.08)    (0.42)    (0.12)

    (In millions of dollars, except where otherwise stated)
                              Total       Q4        Q3        Q2        Q1
    Sales                   $1,849.4  $  492.2  $  504.8  $  452.9  $  399.5

    Operating earnings
     (loss)                   (157.4)     11.5      14.0    (153.3)    (29.6)
    EBITDA(1)                  159.4      64.7      53.1      29.5      12.1
      - before specific
         items(1)              189.5      65.9      66.2      30.7      26.7
    Net earnings (loss)       (221.1)    (48.5)    (10.9)   (124.3)    (37.4)
      - before specific
         items(1)              (28.0)      9.3       7.2     (22.7)    (21.8)
    EBITDA margin(1)             8.6%     13.1%     10.5%      6.5%      3.0%
      - before specific
         items(1)               10.2%     13.4%     13.1%      6.8%      6.7%
    Net earnings (loss) per
     share (in dollars)
      - basic and diluted   $  (0.66) $  (0.13) $  (0.03) $  (0.34) $  (0.17)
      - before specific
         items(1)              (0.08)     0.02      0.02     (0.06)    (0.10)

    (1)EBITDA, EBITDA before specific items, EBITDA margin, EBITDA margin
       before specific items, net earnings (loss) before specific items, and
       net earnings (loss) per share before specific items are non-GAAP
       measures. EBITDA margin and EBITDA margin before specific items are
       defined as EBITDA and EBITDA before specific items as a percentage of
       sales and adjusted sales, respectively. Refer to 2008 Annual
       Management's Discussion and Analysis - Section 10, "Non-GAAP
       Measures" for further details.

    Further Detailed Results

    This release, a summary slide presentation, and full annual report (MD&A,
financial statements and accompanying notes) are available on our web site at The full annual report is also filed with
SEDAR in Canada and EDGAR in the United States.

    Catalyst is the largest producer of specialty printing papers and
newsprint in Western North America and also produces market kraft pulp and
owns Western Canada's largest paper recycling facility. The company's six
mills have a combined annual production capacity of 2.5 million tonnes.
Catalyst is headquartered in Richmond, British Columbia, Canada and its common
shares trade on the Toronto Stock Exchange under the symbol CTL.

    Richard Garneau, president and CEO and David Smales, vice-president,
finance and CFO will hold a conference call with financial analysts and
institutional investors on Friday, February 13, 2009 at 11 a.m. ET, 8 a.m. PT
to present the company's fourth quarter and annual results. Media and other
interested people may listen to the live broadcast at

    Forward-Looking Statement

    Certain matters in this news release, including statements with respect
to general economic and market conditions, demand for products, pricing
expectations, anticipated cost savings and capital expenditures, are forward
looking. These forward-looking statements reflect management's current views
and are based on certain assumptions including assumptions as to future
economic conditions, demand for products, levels of advertising, product
pricing, our ability to achieve operating and labour cost reductions, currency
fluctuations, production flexibility and courses of action, as well as other
factors management believes are appropriate. Such forward looking statements
are subject to risks and uncertainties that may cause actual results to differ
materially from those contained in these statements, including those risks and
uncertainties identified under the heading "Risks and uncertainties" in
Catalyst's management's discussion and analysis for the year ended December
31, 2008 available at

For further information:

For further information: Investors: David Smales, Vice-President,
Finance & CFO, (604) 247-4013; Media: Lyn Brown, Vice-President, Corporate
Relations, (604) 247-4713

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Catalyst Paper Corporation

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