HispanicBusiness

On March 1, 2013, the Company completed the acquisition of Rayonier Inc.'s Wood Products Business in Georgia, U.S.A. for $86.6 million. The acquisition includes three sawmills located in Baxley, Swainsboro and Eatonton, Georgia with a combined annual capacity of 360 million board feet, which increased the Company's annual production capacity to more than 2 billion board feet and broadened the product mix to include Southern Yellow Pine. The acquisition is consistent with the Company's strategy of adding capacity in attractive regional markets and was accretive to net earnings for the first quarter of 2013.

Sales

Interfor's 2012 sales revenues improved by $55.8 million to $242.5 million for the first quarter, 2013 compared to the same period, 2012.

First quarter, 2013 lumber shipments were comparable to the record lumber shipments achieved in the fourth quarter, 2012 and surpassed first quarter, 2012 lumber shipments by 20%, or 63 million board feet. The increase reflects the stronger North American demand driven by improved U.S. housing starts which increased 36% from an average of 715,000 units in the first quarter, 2012 to 969,000 units in the first quarter, 2013.

Improvements in average unit lumber sales values of $82 per mfbm, or 20%, in the first quarter, 2013 over the respective period, 2012 reflects the higher North American pricing, complemented by higher realizations in China.

Log sales were down by $0.8 million, or 3%, for the first quarter, 2013 despite a 20% decline in B.C. log sales volumes over the same period in 2012. On the B.C. Coast, where the majority of log sales are transacted, the price per cubic meter improved by 21% in the first quarter of 2013 compared to the same period in 2012, reflecting a shift in mix to offshore markets as well as higher export volumes and improved log markets.

Compared to the same periods of 2012, pulp chip and other residuals revenues for the first quarter of 2013 were down $1.6 million, as higher volumes from increased sawmill production were offset by lower chip prices. Average chip prices for the first quarter, 2013 decreased by 25% over the same quarter, 2012, reflecting lower pulp prices.

Operating Costs

Production costs for the first quarter of 2013 increased $26.5 million, or 15% compared to the same period in 2012.

The Company achieved record lumber production in the first quarter, 2013, at 390 million fbm, a 21% improvement over the same quarter, 2012. The Company's increased production was the result of increases in operating rates for the U.S. Pacific Northwest sawmills and the additional production in March, 2013 from the newly acquired U.S. Southeast sawmills.

Unit cash conversion costs for the first quarter, 2013 increased slightly as compared to the same period, 2012 despite improved operating rates, primarily due to increased labour and maintenance costs. Unit costs of logs consumed increased 5% quarter-over-quarter for 2013 as compared to 2012, resulting from higher delivered log prices and higher logging, hauling and stumpage costs in the B.C. Interior. Competition for logs from China spurred increased log costs on the Olympic Peninsula.

Compared to the same period in 2012, B.C. log production remained constant in the first quarter, 2013. A larger proportion of heli-logging production in the first quarter, 2013 and higher stumpage rates contributed to higher unit logging costs vis-a-vis the comparative period, 2012.