Fraser Papers Announces Financial Results for the Fourth Quarter of 2008

Market Wire, February, 2009

(All financial references are in U.S. dollars unless otherwise noted)

Fraser Papers Inc. (TSX: FPS) ("Fraser Papers" or the "Company") today reported financial results for the fourth quarter and year ended December 31, 2008.

The Company generated an EBITDA loss of $3.3 million in the fourth quarter compared to an EBITDA loss of $12.2 million in the third quarter. Fourth quarter results were negatively impacted by unscheduled maintenance at the Thurso, Quebec pulp mill of $3.0 million. Third quarter results were impacted by scheduled maintenance outages at the Company's East Papers and Gorham operations. Improvements in the results of the paper operations were partly offset by significant declines in demand and pricing for pulp and lumber.

The Company generated a loss (after interest, depreciation and income taxes) of $15.9 million or $0.32 per share in the fourth quarter compared to a loss of $21.3 million or $0.42 per share in the third quarter.

For the twelve months ended December 31, 2008, the Company generated a loss of $71.9 million or $1.48 per share compared to a loss of $43.1 million or $1.47 per share in 2007. Results in 2007 included a pre-tax gain of $38.4 million ($1.08 per share) on the sale of the Company's interest in Acadian Timber Income Fund (TSX: ADN.UN) and pre-tax restructuring charges of $15.9 million ($0.53 per share) related to the permanent closure of two paper machines at the Company's East Papers operations.

HIGHLIGHTS

- During the quarter, the paper operations generated $9.8 million in EBITDA reflecting higher net selling prices from sales of specialty papers and lower operating costs. Net realizations for the quarter improved by $32 per ton or 3% compared to Q3 2008. Manufacturing costs were $114 per ton lower due to no maintenance outages, improved operations and lower input costs, partly offset by the impact of market-related closures in December.

- Specialty paper grades made up 74% of the Company's product mix in 2008 compared to 69% in 2007. This improvement included a 35% increase in shipments of high-bright groundwood papers and an 11% increase in specialty packaging papers.

- Continued improvements in operating performance compared to Q4, 2007 include:

-- 42% reduction in oil consumption as a result of a number of energy initiatives;

-- 8% increase in throughput in the paper operations as a result of better uptime; and

-- 5% improvement in operating efficiency at the Edmundston pulp mill as a result of lower process losses and improved uptime.

- To reduce risk of currency fluctuation on Fraser Papers' financial performance, the Company has bought forward 40% of its estimated 2009 Canadian dollar requirements at an exchange rate of CAD$1.00 equals USD$0.79.

                             FINANCIAL SUMMARY

----------------------------------------------------------------------------
                              Three Months Ended                Years Ended
US$ MILLIONS, EXCEPT  ------------------------------------------------------
 PER SHARE AMOUNTS    Dec 31, 2008  Dec 31, 2007 Dec 31, 2008  Dec 31, 2007
----------------------------------------------------------------------------
EBITDA                      $ (3.3)      $ (17.2)     $ (33.6)      $ (41.9)

Earnings/(loss)            $ (15.9)      $ (20.3)     $ (71.9)      $ (43.1)
 Per share                 $ (0.32)      $ (0.69)     $ (1.48)      $ (1.47)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

"We are pleased with the improved results of our paper operations which provided our best EBITDA performance from this business segment since 2006. Our focus on improving throughput and operating efficiency, reducing energy consumption and reducing our fixed costs has positioned us to benefit from lower commodity input costs and a weaker Canadian dollar," said Peter Gordon, President and CEO of Fraser Papers. "As we enter 2009, we believe we are better positioned than many in the paper industry given the specialty nature of the majority of our paper products. The outlook for pulp and lumber is much less certain. However, lower input costs and improved operations at our paper mills should position us to compete in these tough economic times."

RESULTS OF OPERATIONS

EBITDA in the fourth quarter of 2008 was a loss of $3.3 million, compared to an EBITDA loss of $12.2 million in the third quarter of 2008. Third quarter results included $7.2 million related to planned outages at the recovery boiler and cogeneration facility at the Company's East Papers operations and a regular maintenance outage at the Gorham, New Hampshire paper mill. Excluding the impact of the outages, EBITDA improved by $1.7 million compared to the third quarter. A significant improvement in the results of the Company's paper operations for the quarter was partly offset by a dramatic drop in both demand and the market price for the Company's lumber and pulp products.

EBITDA in the current quarter improved over results from one year ago. In the fourth quarter of 2007 EBITDA was negative $17.2 million. Improved paper pricing, operating efficiencies and lower input costs were partly offset by the impact of lower selling prices for pulp and lumber. A weaker Canadian dollar and lower oil prices contributed $10.6 million dollars to EBITDA compared to the fourth quarter of 2007.