2008 was one of the most difficult years in the lumber industry in decades. The global financial crisis and its impact on lumber markets worldwide had a material impact on our financial performance last year. In spite of these challenges, we made significant progress towards our goal of becoming one of North America’s leading lumber and building products companies.

Highlights for the year included:

• Significant progress on the construction of the new Adams Lake sawmill;
• The acquisition of 2 mills from Pope & Talbot in the Southern Interior of British Columbia and another mill from Portac in Washington State;
• Agreement-in-principle to acquire additional timber rights in the Southern B.C. Interior from Weyerhaeuser; and
• Permanent closure of the Queensboro and Albion operations on the B.C. Coast.

These steps, along with others taken in recent years, have dramatically altered Interfor’s asset base and position in the industry. We are confident these changes will contribute to superior returns for our shareholders when markets recover.

In spite of the challenges faced by the industry in 2008, Interfor stayed true to its strategy of positioning for long-term success:

Construction of the new Adams Lake sawmill, which began in 2007, gained momentum in 2008. A total of $64.6 million was spent on the project in 2008, bringing the total spent-to-date to $84.2 million. Construction is on-time and on-budget, with approximately $16 million left to spend as at year-end. The first line of the new mill was commissioned in December with very encouraging results; a full start-up is scheduled for the second quarter of 2009.

In addition to Adams Lake, Interfor continued to pursue opportunities to broaden its regional and product mix in 2008 with the acquisition of two mills from Pope & Talbot in the Southern Interior of British Columbia in April and the purchase of Portac’s operation on the Olympic Peninsula in Washington in September.

The acquisition of the Grand Forks and Castlegar operations in the B.C. Interior adds critical mass in one of the Company’s core operating areas. The Grand Forks mill started up in August with very encouraging results. The Castlegar operation – which has traditionally been a high cost operation – remains curtailed while changes to the mill’s operating regime are put in place. Good progress has been made in recent months but there is more work to do. All-in-all, we remain confident both mills will make strong contributions to the Company’s results in the years ahead.

The former Portac operation in Washington is an excellent fit with our existing operations in the area both in terms of log supply and product mix. The mill has been renamed the ‘Beaver Division’ and has been operating at about the same rate as our other mills in the Pacific Northwest.

Early in 2008, Interfor reached agreement to acquire a timber tenure in the Kamloops region from Weyerhaeuser. The tenure, which currently provides for an allowable annual cut of approximately 275,000 m3, will strengthen the long-term fibre supply for the new mill at Adams Lake and help offset potential impacts in future supply as a result of the Mountain Pine Beetle infestation. Closing of the transaction has been delayed for a number of reasons, but is expected to be finalized in early 2009.

Following a prolonged curtailment, a decision was made in July to permanently close the Company’s Queensboro Division in New Westminster, B.C. The Queensboro property, which comprises 50 acres, is actively being marketed with a sale announced on March 30, 2009 of $30.1 million, anticipated to close in the third quarter of 2009.

In spite of the losses incurred in 2008, Interfor’s balance sheet remains one of the strongest in the sector. At year-end, the Company had net debt of $168 million or 29% of invested capital.

In February 2009, a commitment was obtained from our lending syndicate to extend the maturities of our credit lines. At the same time, a realignment of the amounts available under the various lines had the net effect of increasing the total amount of credit available to the Company by $30 to $35 million.

With our strong balance sheet, renewed credit facilities and cash expected from property sales, Interfor is well-positioned to weather a prolonged downturn in product markets.

We take our responsibility to shareholders very seriously. The drop in the Company’s share price during 2008 was, we feel, an overreaction to the broader challenges faced by the industry and concerns over the prospects of renewing our credit agreements.

In our view, the current share price significantly underestimates the value of the Company. We fully expect the price to move into line with our industry peers, and ultimately, into a range which more fully reflects the quality of the Company’s asset base and its cash generating capability.

We expect it will be some time before economic matters stabilize and the stimulus packages introduced by governments around the world encourage renewed activity. In the face of the uncertain economic environment, Interfor will maintain its disciplined approach to production and strict controls on capital spending. We remain absolutely convinced we are on track to build significant value for our shareholders.

Company Contact

For more information on Interfor, please contact:

John Horning, Senior Vice President, Chief Financial Officer and Corporate Secretary
International Forest Products Limited
PO Box 49114
Bentall Tower Four
3500-1055 Dunsmuir Street
Vancouver, BC V7X 1H7
T: 604 689 6829