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Catalyst Reduces Staff Due to Weak Economy

Richmond, British Columbia, Canada,  26 May 2009 – Catalyst Paper (TSX:CTL) today announced further staffing reductions in light of the global economic recession and deteriorating market conditions that have forced production curtailments at the company’s Elk Falls and Crofton pulp mills.

Approximately 100 staff positions will be affected. Permanent reductions will occur mainly at the Richmond and Nanaimo offices, and indefinite layoffs of 55 salaried staff will take place at the Elk Falls mill and Crofton pulp mill. Both mills were curtailed indefinitely at the end of February; nearly 40% of the company’s production capacity is currently idled.
The severance of 42 employees will be completed over the next few months as the business continues to streamline its corporate structure and support functions. Staff layoffs will take effect 08 June 2009.

The unprecedented layoffs within the salaried workforce reflect the severity of recent demand declines and the likelihood that curtailed production will not restart in the short term.

Expected savings from the layoffs are in the range of CAD 350,000 per month, with a further CAD 4 million in annualized savings from the permanent staffing reductions. One-time severance costs associated with this program are expected to not exceed CAD 5 million.

“This is an exceptionally difficult time in the industry and current market conditions cannot support the current staffing level,” said Richard Garneau, president and chief executive officer. “The steps we are taking today will continue to bring costs down as we strive to put in place the lean manufacturing structure necessary for what could be a smaller paper market going forward.”


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