Fraser Papers Announces Financial Results for the Fourth Quarter of 2008

During the fourth quarter of 2008, mill nets for the Company's paper products improved an average of $32 per ton over the third quarter despite a drop in benchmark commodity prices. Net pricing for specialty packaging papers improved $66 per ton while pricing for high-bright groundwood grades improved by $46 compared to the third quarter. Selling prices for specialty printing grades were marginally higher while pricing for commodity papers was lower. Compared to the fourth quarter of 2007, mill net realizations have improved $104 per ton or 11%, as price increases were implemented across most paper grades during 2008.

Total paper shipments were up 4% from the third quarter but were down 15% compared with shipments in the fourth quarter of 2007. Shipments of specialty packaging, printing and high-bright groundwood papers were largely in line with Q4 2007 levels. Commodity freesheet and commodity groundwood shipments were lower by 44%. This was due to a significant drop in demand for commodity papers in the fourth quarter of 2008 as well as the Company's reduced exposure to these markets. Weaker demand for commodity papers led the Company to take unscheduled downtime on two paper machines at its East Papers operations (eight days) and three paper machines at Gorham (10 days) in December. On a year-to-date basis, total shipments were 4% below 2007 due to the weaker demand experienced in the fourth quarter of 2008. The Company has continued to transition more of its capacity towards specialty papers, shipping 74% specialties in 2008 compared to 69% in 2007.

Shipments of northern bleached hardwood kraft pulp from the Company's pulp mill in Thurso, Quebec were 9% below third quarter levels. Compared to the fourth quarter of 2007, shipments were down 24%. The lower shipment levels were due to a significant drop in demand in the fourth quarter which required the Company to take downtime to match its inventories with customer demand. Average mill net realizations for hardwood pulp were lower by $112 per tonne compared to Q3, consistent with a $107 per tonne drop in average reference prices.

Average cash operating costs at Thurso increased compared to the third quarter due to an unplanned maintenance outage to repair a broken pulp line in October which negatively affected EBITDA by $3.0 million. In addition, the mill took market downtime in December. The impact of these shuts was only partly offset by the benefit of a weaker Canadian dollar and lower oil costs.

Lumber markets remained weak during the quarter as U.S. housing starts remained at historically low levels. Lumber prices fell to their lowest levels in eight years as the average Boston delivered reference price fell 20% to $276 per Mfbm. The Boston reference price ended the year at $262 per Mfbm, $261 off its cyclical peak in August 2004. As a result of these low prices, the Company's operating strategy is to run its lumbermills to support the chip requirements of the Edmundston, New Brunswick pulp mill. As a result of the start-up of the Juniper, New Brunswick lumbermill, lumber shipments increased 16% over third quarter levels.