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Tembec Extends Operations Downtime in Response to Weak Lumber Markets
Temiscaming, Quebec, Canada 22 May 2008 – Tembec has extended a series of shutdowns at its sawmills in Elko and Canal Flats in British Columbia. The mills, with an annual capacity of 450 million board feet (mmbf) and employing roughly 350 people, will shut down for the weeks of 28 July and 04 August. These shutdowns could also affect the company’s related finger joint facility in Cranbrook, British Columbia.

The company indicated that, based on its view of present and foreseen market conditions, it will extend the indefinite idlings and reduced operations in place at a number of Ontario and Quebec sawmills. Four sawmills and one value-added facility in eastern Canada are indefinitely idled, and nine other facilities, including six in eastern Canada and the three sites in British Columbia, are either taking periodic downtime or running at reduced rates. In total, the sites affected represent annual production of more than 600 million board feet out of the company’s total annual production of 1.68 billion board feet.

“These shutdowns are in response to the prolonged downturn in the U.S. housing market and the directly related impact on the demand and price for lumber,” said Dennis Rounsville, executive vice president and president of Tembec’s Forest Products Group. “With these market conditions expected to continue for the next several quarters, significant action beyond that already taken is underway. Some 800 employees are affected by the temporary downtime being taken and a further 600 affected by the indefinite idlings. Reflecting the seriousness of this situation, we have also laid off 25 management and staff personnel in administrative and support functions that simply could not be carried in these difficult times.”

In addition to these capacity management measures, the company intends to reduce its dependence on the framing housing market through a series of marketing initiatives, including some specialty product applications. It expects to divert 100 mmbf (roughly 10% of current production) into more stable and higher margin products. The company also indicated it was taking aggressive steps to lower fixed costs and to further reduce working capital.

“We believe that through management of log and finished product inventories, and more aggressive management of receivables and payables, that further gains on reducing working capital will be achieved. We also see the market initiatives as being positive in terms of both reducing our reliance on the commodity grade housing market and improving margins on that volume,” Rounsville said.

Tembec is a large, diversified and integrated forest products company which stands as the global leader in sustainable forest management practices. With operations principally located in North America and in France, the company employs approximately 8000 people. Tembec’s common shares are listed on the Toronto Stock Exchange under the symbol TMB and warrants under TMB.WT. Additional information on Tembec is available on its website at www.tembec.com.

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