Norske Skog Canada reports continued strong earnings

Apr 24, 2001, 01:00 ET from Norske Skog Canada Limited

    VANCOUVER, April 24 /PRNewswire/ - Norske Skog Canada today announced net
 earnings of $32.4 million, or 26 cents per share, for the three months ended
 March 31, 2001, compared to net earnings of $23.2 million, or 19 cents per
 share, for the same quarter a year earlier.  Excluding unusual items, net
 earnings for the quarter of $42.4 million, or 34 cents per share, improved by
 $19.2 million, or 15 cents per share, from the same quarter last year.  The
 results for the quarter include an expense of $19.0 million after tax, or 15
 cents per share, for the write-down of the asset value of the company's
 Mackenzie pulp facility, partially offset by the recognition of $9.0 million,
 or seven cents per share, in tax-loss benefits.
     Sales were $364.2 million in the quarter, up from $331.0 million for the
 same quarter last year.  Cash flow from operations was $65.7 million, compared
 to $72.9 million in the same quarter one year ago.  The company's cash and
 short term investments increased by $31.7 million to $961.4 million at the end
 of the quarter.
     Operating earnings for the newsprint and specialties printing papers
 segment of $37.3 million increased by $5.7 million from the previous quarter's
 operating earnings of  $31.6 million.  President and chief executive officer
 Russell Horner said this represents the highest quarterly operating for this
 segment in five years.  Average newsprint and groundwood specialty paper sales
 realizations were approximately $35 per tonne higher than in the preceding
 quarter, benefiting from higher prices and strengthening in the U.S. dollar at
 period end.  "The company closed 2000 with historically low newsprint and
 groundwood specialty paper inventories, and entered 2001 with minimum working
 inventory levels," Horner said. "Paper shipment levels were down by 22,000
 tonnes from the previous quarter, but were only 7,000 tonnes below production.
 Manufacturing cash costs were unchanged from the previous quarter despite
 slightly higher energy costs and production being lower by 9,000 tonnes,"
 Horner added.
     Newsprint demand eased to some extent during the quarter as a result of a
 softening in paper consumption in the United States and a decline in exports.
 "The company is curtailing newsprint production at its two printing paper
 facilities by approximately 22,000 tonnes in the second quarter to balance
 orders and production," Horner said.
       A newsprint price increase of US$50 per tonne in the company's main
 western North American market was implemented on March 1.  There has, however,
 been resistance to this increase in light of weakening demand.  "Another major
 supplier has announced today a price reduction of US$25 per tonne on May 1,
 and it is our intention to match that decrease," Horner said.  Depending on
 basis weight, a US$40 to US$42.50 per short ton price increase for the
 company's soft-nip calendered paper took effect March 1.  "The company
 anticipates steady demand for its groundwood specialty paper products as a
 result of stable conditions in this segment of the market," Horner noted.
     Operating earnings for the pulp and containerboard segment of $19.9
 million decreased by $5.7 million from the previous quarter.  Scheduled annual
 maintenance and market-related curtailment reduced pulp production by 3,000
 tonnes and 23,000 tonnes, respectively.  This compares to scheduled annual
 maintenance and market-related curtailment of 18,000 tonnes and 24,000 tonnes,
 respectively, in the previous quarter.  Both fibre costs and energy costs
 increased by approximately $5 per tonne for pulp and containerboard
 production.  Pulp sales volume increased by 32,000 tonnes from the preceding
 quarter, and exceeded production by 16,000 tonnes.  Average pulp and
 containerboard sales realizations were approximately $125 per tonne lower than
 three months earlier.
     "Softening worldwide demand for market pulp, particularly in Asia,
 resulted in weaker market conditions during the quarter," Horner said.
 Industry operating rates exceeded demand and inventories increased by
 approximately 165,000 tonnes during the quarter.  Pulp prices declined in all
 markets and by the end of the quarter were lower than December 2000 levels by
 approximately US$60 per tonne in the United States, US$90 per tonne in Europe,
 and US$110 per tonne in Japan.  The U.S. pulp market has been the most stable,
 with prices exceeding those in Asia and Europe.  Spot market prices continued
 to decline and remain below list price levels.  "The company expects pulp
 markets to remain under pressure in the near term, but a seasonal pickup in
 demand and industry production curtailment should result in lower inventory
 levels in the second quarter of 2001," Horner said.  "The company is
 cautiously optimistic that an improvement in the supply/demand balance for
 market pulp will develop in the second half of 2001," Horner noted.
     Containerboard market conditions remain favourable with demand and
 pricing relatively stable.
     Horner said the uncertain economic outlook reinforces Norske Skog
 Canada's resolve to continue to simplify its business processes, and achieve
 superior financial and operational performance throughout the company.
     "The proposed acquisition of Pacifica Papers Inc. and the sale of the
 company's Mackenzie pulp mill to Pope & Talbot Inc. represent a unique
 opportunity to create a strong enterprise capable of delivering superior
 shareholder returns and to be well positioned to grow," Horner added.
     The company's board of directors today declared a cash dividend of 15
 cents per share, payable June 15, 2001 to shareholders of record on June 4.
 
                          NORSKE SKOG CANADA LIMITED
     --------------------------------------------------------------------------
                                                           3 months ended
     Consolidated Statements of Earnings                      March 31
     (in millions of dollars) unaudited                 2001           2000
     --------------------------------------------------------------------------
 
     Net sales                                      $    364.2     $    331.0
                                                    ---------------------------
     Operating expenses
       Cost of products sold                             263.1          257.3
       Selling and administrative                         14.8           15.5
       Depreciation                                       29.1           28.8
                                                    ---------------------------
                                                         307.0          301.6
                                                    ---------------------------
     Operating earnings                                   57.2           29.4
       Other income (expense) (note 1)                   (29.3)           0.6
       Interest income                                    12.9            9.6
                                                    ---------------------------
     Earnings before income taxes                         40.8           39.6
       Income taxes (note 1)                               8.4           16.4
                                                    ---------------------------
     Net earnings                                   $     32.4     $     23.2
                                                    ---------------------------
                                                    ---------------------------
     Basic and fully diluted earnings per share
      (in dollars)                                  $     0.26     $     0.19
     Class A common shares outstanding (millions)        124.2          124.2
 
 
                                                              As at
     Consolidated Balance Sheets                     March 31      December 31
     (in million s of dollars) unaudited                2001           2000
     --------------------------------------------------------------------------
     Assets
       Current assets
         Cash and short term investments            $    961.4     $    929.7
         Accounts receivable                             282.9          283.4
         Inventories                                     187.5          191.7
         Prepaid expenses                                 11.2            5.0
                                                    ---------------------------
                                                       1,443.0        1,409.8
       Fixed assets                                    1,255.1        1,298.5
       Other assets                                       12.0           12.3
                                                    ---------------------------
                                                    $  2,710.1     $  2,720.6
                                                    ---------------------------
                                                    ---------------------------
     Liabilities and shareholders' equity
       Current liabilities
         Accounts payable and
          accrued liabilities                       $    165.3     $    196.3
       Employee future benefits                           91.5           90.1
       Future income taxes                               256.6          233.4
       Deferred credits                                   17.7           35.6
                                                    ---------------------------
                                                         531.1          555.4
                                                    ---------------------------
       Shareholders' equity
         Share capital                                 1,262.6        1,262.6
         Retained earnings                               916.4          902.6
                                                    ---------------------------
                                                       2,179.0        2,165.2
                                                    ---------------------------
                                                    $  2,710.1     $  2,720.6
                                                    ---------------------------
                                                    ---------------------------
     On behalf of the board
 
 
     Director    Director
 
 
                          NORSKE SKOG CANADA LIMITED
     --------------------------------------------------------------------------
                                                           3 months ended
     Consolidated Statements of Cash Flows                    March 31
     (in millions of dollars) unaudited                 2001           2000
     --------------------------------------------------------------------------
     Cash provided by (used for)
     Operations
       Net earnings                                 $     32.4     $     23.2
       Items not requiring (providing) cash
         Depreciation                                     29.1           28.8
         Income taxes                                     26.4           16.9
         Employee future benefits                          1.4           (1.6)
         Other                                            29.7            0.1
                                                    ---------------------------
                                                         119.0           67.4
       Change in non-cash working capital                (53.3)           5.5
                                                    ---------------------------
       Cash provided by operations                        65.7           72.9
                                                    ---------------------------
       Per share (in dollars)                       $     0.53     $     0.59
 
     Investment
       Additions to fixed assets                         (15.8)          (7.4)
       Proceeds from sale of fixed assets                  0.2              -
       Decrease in other assets                            0.2            2.0
                                                    ---------------------------
                                                         (15.4)          (5.4)
                                                    ---------------------------
     Financing
       Dividends paid                                    (18.6)         (18.6)
                                                    ---------------------------
     Increase in cash                                     31.7           48.9
     Cash at beginning of period                         929.7          744.6
                                                    ---------------------------
     Cash at end of period                          $    961.4     $    793.5
                                                    ---------------------------
                                                    ---------------------------
     Supplemental information
       Income taxes paid                            $      1.2     $      0.6
 
 
                                                           3 months ended
     Segmented Information                                    March 31
     (in millions of dollars) unaudited                 2001           2000
     --------------------------------------------------------------------------
     Net sales
       Newsprint and specialties                    $    209.0     $    164.1
                                                    ---------------------------
       Pulp and containerboard                           177.7          184.5
       Less:  Inter-segment sales of pulp                (22.5)         (17.6)
                                                    ---------------------------
                                                         155.2          166.9
                                                    ---------------------------
                                                    $    364.2     $    331.0
                                                    ---------------------------
                                                    ---------------------------
     Operating earnings (loss)
       Newsprint and specialties                    $     37.3     $     (9.1)
       Pulp and containerboard                            19.9           38.5
                                                    ---------------------------
                                                    $     57.2     $     29.4
                                                    ---------------------------
                                                    ---------------------------
     Depreciation
       Newsprint and specialties                    $     15.4     $     15.6
       Pulp and containerboard                            13.7           13.2
                                                    ---------------------------
                                                    $     29.1     $     28.8
                                                    ---------------------------
                                                    ---------------------------
     Shipments - M tonnes
       Newsprint and specialties                           222            238
       Market pulp(x)                                      184            188
       Containerboard                                       24             27
 
     Production - M tonnes
       Newsprint and specialties                           229            219
       Market pulp                                         168            182
       Containerboard                                       25             26
 
     (x) Shipment and production volumes for market pulp exclude inter-segment
         sales of pulp.
 
 
                          NORSKE SKOG CANADA LIMITED
     --------------------------------------------------------------------------
                                                           3 months ended
     Consolidated Statements of Retained Earnings             March 31
     (in millions of dollars) unaudited                 2001           2000
     --------------------------------------------------------------------------
     Balance, beginning of period                   $    902.6     $    814.0
       Net earnings                                       32.4           23.2
       Dividends                                         (18.6)         (18.6)
                                                    ---------------------------
     Balance, end of period                         $    916.4     $    818.6
                                                    ---------------------------
                                                    ---------------------------
 
     Notes to the Consolidated Financial Statements
     (tabular figures in millions of dollars) unaudited
 
     1.   Significant Accounting Policies
 
          The statements have been prepared consistent with the accounting
          policies described in the audited consolidated financial statements
          for the fiscal year ended December 31, 2000. Interim financial
          statements do not include all disclosures required for annual
          financial statements by Canadian generally accepted accounting
          principles, and accordingly these interim financial statements
          should be read in conjunction with Norske Skog Canada Limited's most
          recent annual consolidated financial statements.
 
                                                           3 months ended
                                                              March 31
                                                        2001           2000
                                                    ---------------------------
     2.   Unusual Income (Expense)
 
          Other Expense
            Write-down of Mackenzie pulp operations $    (30.0)    $        -
                                                    ---------------------------
          Income Taxes
            Recovery on write-down of Mackenzie pulp
             operations                                   11.0              -
            Amortization of deferred credits on
             utilization of acquired tax losses            9.0              -
                                                    ---------------------------
                                                          20.0              -
                                                    ---------------------------
          Net earnings effect                       $    (10.0)    $        -
                                                    ---------------------------
                                                    ---------------------------
          Net earnings effect per basic and fully
           diluted share                            $    (0.08)    $        -
                                                    ---------------------------
                                                    ---------------------------
 
          On March 29, 2001, the Company entered into an agreement to sell the
          Mackenzie pulp operations. The agreement is expected to close on or
          around May 31, 2001.  The Company has written down the assets of the
          Mackenzie pulp operations by $30.0 million based on the estimated
          net proceeds on the sale. The write-down is based on the trading
          price of the purchaser's shares, to be received in partial payment,
          as at March 31, 2001 and management estimates. Actual results could
          differ.
 
     3.   Derivatives
          The Company uses options and forward contracts to hedge a portion of
          its future U.S. dollar revenues. Options and forward contracts
          outstanding as at March 31, 2001 are as follows:
 
              Forward Contracts                       Options
          --------------------------    ---------------------------------------
                                              Floor             Ceiling
                                        ---------------------------------------
 
                       US$                US$      Minimum    US$      Maximum
          Maturity     Amount   C$ Rate   Amount   C$ Rate    Amount   C$ Rate
          --------     ------   -------   ------   -------    ------   -------
 
          Fiscal 2001  $  156  1.4844  $   24   1.5250    $   24    1.5419
          Fiscal 2002     159  1.4870      39   1.5065        39    1.5552
          Fiscal 2003      66  1.5020      30   1.5150        30    1.5400
 
     4.   Comparative Figures
 
          Certain figures for previous periods have been reclassified to
          conform with the current period's presentation.
 
     5.   Subsequent Events
 
          On March 25, 2001, the Company announced that it plans to acquire
          Pacific Papers Inc. ("Pacifica"). The acquisition is subject to
          approval by Pacifica shareholders and certain regulatory
          authorities. In addition, the Company announced it intends to pay a
          special distribution of $12.00 per share for each currently issued
          Class A common share of the Company. The special distribution is
          subject to the approval of the Company's shareholders.
 
 

SOURCE Norske Skog Canada Limited
    VANCOUVER, April 24 /PRNewswire/ - Norske Skog Canada today announced net
 earnings of $32.4 million, or 26 cents per share, for the three months ended
 March 31, 2001, compared to net earnings of $23.2 million, or 19 cents per
 share, for the same quarter a year earlier.  Excluding unusual items, net
 earnings for the quarter of $42.4 million, or 34 cents per share, improved by
 $19.2 million, or 15 cents per share, from the same quarter last year.  The
 results for the quarter include an expense of $19.0 million after tax, or 15
 cents per share, for the write-down of the asset value of the company's
 Mackenzie pulp facility, partially offset by the recognition of $9.0 million,
 or seven cents per share, in tax-loss benefits.
     Sales were $364.2 million in the quarter, up from $331.0 million for the
 same quarter last year.  Cash flow from operations was $65.7 million, compared
 to $72.9 million in the same quarter one year ago.  The company's cash and
 short term investments increased by $31.7 million to $961.4 million at the end
 of the quarter.
     Operating earnings for the newsprint and specialties printing papers
 segment of $37.3 million increased by $5.7 million from the previous quarter's
 operating earnings of  $31.6 million.  President and chief executive officer
 Russell Horner said this represents the highest quarterly operating for this
 segment in five years.  Average newsprint and groundwood specialty paper sales
 realizations were approximately $35 per tonne higher than in the preceding
 quarter, benefiting from higher prices and strengthening in the U.S. dollar at
 period end.  "The company closed 2000 with historically low newsprint and
 groundwood specialty paper inventories, and entered 2001 with minimum working
 inventory levels," Horner said. "Paper shipment levels were down by 22,000
 tonnes from the previous quarter, but were only 7,000 tonnes below production.
 Manufacturing cash costs were unchanged from the previous quarter despite
 slightly higher energy costs and production being lower by 9,000 tonnes,"
 Horner added.
     Newsprint demand eased to some extent during the quarter as a result of a
 softening in paper consumption in the United States and a decline in exports.
 "The company is curtailing newsprint production at its two printing paper
 facilities by approximately 22,000 tonnes in the second quarter to balance
 orders and production," Horner said.
       A newsprint price increase of US$50 per tonne in the company's main
 western North American market was implemented on March 1.  There has, however,
 been resistance to this increase in light of weakening demand.  "Another major
 supplier has announced today a price reduction of US$25 per tonne on May 1,
 and it is our intention to match that decrease," Horner said.  Depending on
 basis weight, a US$40 to US$42.50 per short ton price increase for the
 company's soft-nip calendered paper took effect March 1.  "The company
 anticipates steady demand for its groundwood specialty paper products as a
 result of stable conditions in this segment of the market," Horner noted.
     Operating earnings for the pulp and containerboard segment of $19.9
 million decreased by $5.7 million from the previous quarter.  Scheduled annual
 maintenance and market-related curtailment reduced pulp production by 3,000
 tonnes and 23,000 tonnes, respectively.  This compares to scheduled annual
 maintenance and market-related curtailment of 18,000 tonnes and 24,000 tonnes,
 respectively, in the previous quarter.  Both fibre costs and energy costs
 increased by approximately $5 per tonne for pulp and containerboard
 production.  Pulp sales volume increased by 32,000 tonnes from the preceding
 quarter, and exceeded production by 16,000 tonnes.  Average pulp and
 containerboard sales realizations were approximately $125 per tonne lower than
 three months earlier.
     "Softening worldwide demand for market pulp, particularly in Asia,
 resulted in weaker market conditions during the quarter," Horner said.
 Industry operating rates exceeded demand and inventories increased by
 approximately 165,000 tonnes during the quarter.  Pulp prices declined in all
 markets and by the end of the quarter were lower than December 2000 levels by
 approximately US$60 per tonne in the United States, US$90 per tonne in Europe,
 and US$110 per tonne in Japan.  The U.S. pulp market has been the most stable,
 with prices exceeding those in Asia and Europe.  Spot market prices continued
 to decline and remain below list price levels.  "The company expects pulp
 markets to remain under pressure in the near term, but a seasonal pickup in
 demand and industry production curtailment should result in lower inventory
 levels in the second quarter of 2001," Horner said.  "The company is
 cautiously optimistic that an improvement in the supply/demand balance for
 market pulp will develop in the second half of 2001," Horner noted.
     Containerboard market conditions remain favourable with demand and
 pricing relatively stable.
     Horner said the uncertain economic outlook reinforces Norske Skog
 Canada's resolve to continue to simplify its business processes, and achieve
 superior financial and operational performance throughout the company.
     "The proposed acquisition of Pacifica Papers Inc. and the sale of the
 company's Mackenzie pulp mill to Pope & Talbot Inc. represent a unique
 opportunity to create a strong enterprise capable of delivering superior
 shareholder returns and to be well positioned to grow," Horner added.
     The company's board of directors today declared a cash dividend of 15
 cents per share, payable June 15, 2001 to shareholders of record on June 4.
 
                          NORSKE SKOG CANADA LIMITED
     --------------------------------------------------------------------------
                                                           3 months ended
     Consolidated Statements of Earnings                      March 31
     (in millions of dollars) unaudited                 2001           2000
     --------------------------------------------------------------------------
 
     Net sales                                      $    364.2     $    331.0
                                                    ---------------------------
     Operating expenses
       Cost of products sold                             263.1          257.3
       Selling and administrative                         14.8           15.5
       Depreciation                                       29.1           28.8
                                                    ---------------------------
                                                         307.0          301.6
                                                    ---------------------------
     Operating earnings                                   57.2           29.4
       Other income (expense) (note 1)                   (29.3)           0.6
       Interest income                                    12.9            9.6
                                                    ---------------------------
     Earnings before income taxes                         40.8           39.6
       Income taxes (note 1)                               8.4           16.4
                                                    ---------------------------
     Net earnings                                   $     32.4     $     23.2
                                                    ---------------------------
                                                    ---------------------------
     Basic and fully diluted earnings per share
      (in dollars)                                  $     0.26     $     0.19
     Class A common shares outstanding (millions)        124.2          124.2
 
 
                                                              As at
     Consolidated Balance Sheets                     March 31      December 31
     (in million s of dollars) unaudited                2001           2000
     --------------------------------------------------------------------------
     Assets
       Current assets
         Cash and short term investments            $    961.4     $    929.7
         Accounts receivable                             282.9          283.4
         Inventories                                     187.5          191.7
         Prepaid expenses                                 11.2            5.0
                                                    ---------------------------
                                                       1,443.0        1,409.8
       Fixed assets                                    1,255.1        1,298.5
       Other assets                                       12.0           12.3
                                                    ---------------------------
                                                    $  2,710.1     $  2,720.6
                                                    ---------------------------
                                                    ---------------------------
     Liabilities and shareholders' equity
       Current liabilities
         Accounts payable and
          accrued liabilities                       $    165.3     $    196.3
       Employee future benefits                           91.5           90.1
       Future income taxes                               256.6          233.4
       Deferred credits                                   17.7           35.6
                                                    ---------------------------
                                                         531.1          555.4
                                                    ---------------------------
       Shareholders' equity
         Share capital                                 1,262.6        1,262.6
         Retained earnings                               916.4          902.6
                                                    ---------------------------
                                                       2,179.0        2,165.2
                                                    ---------------------------
                                                    $  2,710.1     $  2,720.6
                                                    ---------------------------
                                                    ---------------------------
     On behalf of the board
 
 
     Director    Director
 
 
                          NORSKE SKOG CANADA LIMITED
     --------------------------------------------------------------------------
                                                           3 months ended
     Consolidated Statements of Cash Flows                    March 31
     (in millions of dollars) unaudited                 2001           2000
     --------------------------------------------------------------------------
     Cash provided by (used for)
     Operations
       Net earnings                                 $     32.4     $     23.2
       Items not requiring (providing) cash
         Depreciation                                     29.1           28.8
         Income taxes                                     26.4           16.9
         Employee future benefits                          1.4           (1.6)
         Other                                            29.7            0.1
                                                    ---------------------------
                                                         119.0           67.4
       Change in non-cash working capital                (53.3)           5.5
                                                    ---------------------------
       Cash provided by operations                        65.7           72.9
                                                    ---------------------------
       Per share (in dollars)                       $     0.53     $     0.59
 
     Investment
       Additions to fixed assets                         (15.8)          (7.4)
       Proceeds from sale of fixed assets                  0.2              -
       Decrease in other assets                            0.2            2.0
                                                    ---------------------------
                                                         (15.4)          (5.4)
                                                    ---------------------------
     Financing
       Dividends paid                                    (18.6)         (18.6)
                                                    ---------------------------
     Increase in cash                                     31.7           48.9
     Cash at beginning of period                         929.7          744.6
                                                    ---------------------------
     Cash at end of period                          $    961.4     $    793.5
                                                    ---------------------------
                                                    ---------------------------
     Supplemental information
       Income taxes paid                            $      1.2     $      0.6
 
 
                                                           3 months ended
     Segmented Information                                    March 31
     (in millions of dollars) unaudited                 2001           2000
     --------------------------------------------------------------------------
     Net sales
       Newsprint and specialties                    $    209.0     $    164.1
                                                    ---------------------------
       Pulp and containerboard                           177.7          184.5
       Less:  Inter-segment sales of pulp                (22.5)         (17.6)
                                                    ---------------------------
                                                         155.2          166.9
                                                    ---------------------------
                                                    $    364.2     $    331.0
                                                    ---------------------------
                                                    ---------------------------
     Operating earnings (loss)
       Newsprint and specialties                    $     37.3     $     (9.1)
       Pulp and containerboard                            19.9           38.5
                                                    ---------------------------
                                                    $     57.2     $     29.4
                                                    ---------------------------
                                                    ---------------------------
     Depreciation
       Newsprint and specialties                    $     15.4     $     15.6
       Pulp and containerboard                            13.7           13.2
                                                    ---------------------------
                                                    $     29.1     $     28.8
                                                    ---------------------------
                                                    ---------------------------
     Shipments - M tonnes
       Newsprint and specialties                           222            238
       Market pulp(x)                                      184            188
       Containerboard                                       24             27
 
     Production - M tonnes
       Newsprint and specialties                           229            219
       Market pulp                                         168            182
       Containerboard                                       25             26
 
     (x) Shipment and production volumes for market pulp exclude inter-segment
         sales of pulp.
 
 
                          NORSKE SKOG CANADA LIMITED
     --------------------------------------------------------------------------
                                                           3 months ended
     Consolidated Statements of Retained Earnings             March 31
     (in millions of dollars) unaudited                 2001           2000
     --------------------------------------------------------------------------
     Balance, beginning of period                   $    902.6     $    814.0
       Net earnings                                       32.4           23.2
       Dividends                                         (18.6)         (18.6)
                                                    ---------------------------
     Balance, end of period                         $    916.4     $    818.6
                                                    ---------------------------
                                                    ---------------------------
 
     Notes to the Consolidated Financial Statements
     (tabular figures in millions of dollars) unaudited
 
     1.   Significant Accounting Policies
 
          The statements have been prepared consistent with the accounting
          policies described in the audited consolidated financial statements
          for the fiscal year ended December 31, 2000. Interim financial
          statements do not include all disclosures required for annual
          financial statements by Canadian generally accepted accounting
          principles, and accordingly these interim financial statements
          should be read in conjunction with Norske Skog Canada Limited's most
          recent annual consolidated financial statements.
 
                                                           3 months ended
                                                              March 31
                                                        2001           2000
                                                    ---------------------------
     2.   Unusual Income (Expense)
 
          Other Expense
            Write-down of Mackenzie pulp operations $    (30.0)    $        -
                                                    ---------------------------
          Income Taxes
            Recovery on write-down of Mackenzie pulp
             operations                                   11.0              -
            Amortization of deferred credits on
             utilization of acquired tax losses            9.0              -
                                                    ---------------------------
                                                          20.0              -
                                                    ---------------------------
          Net earnings effect                       $    (10.0)    $        -
                                                    ---------------------------
                                                    ---------------------------
          Net earnings effect per basic and fully
           diluted share                            $    (0.08)    $        -
                                                    ---------------------------
                                                    ---------------------------
 
          On March 29, 2001, the Company entered into an agreement to sell the
          Mackenzie pulp operations. The agreement is expected to close on or
          around May 31, 2001.  The Company has written down the assets of the
          Mackenzie pulp operations by $30.0 million based on the estimated
          net proceeds on the sale. The write-down is based on the trading
          price of the purchaser's shares, to be received in partial payment,
          as at March 31, 2001 and management estimates. Actual results could
          differ.
 
     3.   Derivatives
          The Company uses options and forward contracts to hedge a portion of
          its future U.S. dollar revenues. Options and forward contracts
          outstanding as at March 31, 2001 are as follows:
 
              Forward Contracts                       Options
          --------------------------    ---------------------------------------
                                              Floor             Ceiling
                                        ---------------------------------------
 
                       US$                US$      Minimum    US$      Maximum
          Maturity     Amount   C$ Rate   Amount   C$ Rate    Amount   C$ Rate
          --------     ------   -------   ------   -------    ------   -------
 
          Fiscal 2001  $  156  1.4844  $   24   1.5250    $   24    1.5419
          Fiscal 2002     159  1.4870      39   1.5065        39    1.5552
          Fiscal 2003      66  1.5020      30   1.5150        30    1.5400
 
     4.   Comparative Figures
 
          Certain figures for previous periods have been reclassified to
          conform with the current period's presentation.
 
     5.   Subsequent Events
 
          On March 25, 2001, the Company announced that it plans to acquire
          Pacific Papers Inc. ("Pacifica"). The acquisition is subject to
          approval by Pacifica shareholders and certain regulatory
          authorities. In addition, the Company announced it intends to pay a
          special distribution of $12.00 per share for each currently issued
          Class A common share of the Company. The special distribution is
          subject to the approval of the Company's shareholders.
 
 SOURCE Norske Skog Canada Limited