Good morning, ladies and gentlemen. Welcome to the West Fraser Timber Company Limited First Quarter 2011 Results Conference Call. During this conference call, we will be making certain statements about potential future developments. These forward-looking statements are intended to provide reasonable guidance to investors, but the accuracy of these statements depends on a number of assumptions and are subject to various risks and uncertainties. Actual outcomes will depend on a number of factors that could affect the ability of the company to execute its business plans, including those matters described under Risks and Uncertainties in our annual MD&A, which can be accessed on our website or through SEDAR and as supplemented by our quarterly MD&As. Accordingly, listeners will exercise caution in relying upon forward-looking statements. I would now like to turn the meeting over to Mr. Hank Ketcham, Chairman, President and Chief Executive Officer. Please go ahead.

Thank you, operator, and good morning. Welcome to the First Quarter West Fraser Conference Call. Yesterday, we reported earnings of $20 million and sales of $687 million. While these earnings are substantially lower than our fourth quarter earnings, our EBITDA was only slightly lower than the previous quarter. Gerry Miller, our CFO, will discuss our earnings more fully in his report. From an operational standpoint, the company performed very well in the first quarter. Our lumber mills ran at full capacity in Canada and production is up 9% over the previous quarter. Our U.S. lumber mills ran 75% of capacity, up from 70% in the fourth quarter, and production was up 8% versus the previous quarter. Log costs remained relatively flat quarter-over-quarter in both Canada and the United States. Benchmark SPF lumber prices were 10% higher in the first quarter and southern yellow pine prices were 14% higher compared with the previous quarter. However, after adjusting for a 3% increase in the value of the Canadian dollar, SPF prices expressed in Canadian dollar were up only 7%. The lumber market strengthened in the first quarter of the year due to supply constraints, continued growth in Chinese demand and low inventory throughout the supply chain. However, prices began to erode towards the end of the quarter as a result of more supply coming on the market. The U.S. lumber market remains extremely depressed, which continues to inhibit a sustained recovery of lumber prices. On the positive side, spending on home repairs and renovations continues to increase as does spending in the industrial and commercial sector. In addition, demand from China continues to grow impressively. In the first quarter, approximately 30% of our Canadian SPF lumber were shipped to Asia, up from 20% in the corresponding quarter in 2010. We anticipate continued…

Thanks, Hank, and good morning, everyone. We have fully transitioned to reporting our financial results under the new International Financial Reporting Standards. With these new reporting standards, you will see some changes in the presentation of our prior results. With the transition from the previously accepted accounting principles to IFRS, we have made several adjustments to our equity totaling approximately $195 million. The details of these adjustments are fully disclosed in Appendix B to the quarterly financial statements. Earnings for the quarter from continuing operations were $20 million or $0.44 per share on a diluted basis. Discontinued operation, the linerboard and kraft paper business that we shut down early last year contributed a loss of $1 million in the quarter. In the quarter, we generated EBITDA of $80 million, which is slightly lower than $81 million we generated in the previous quarter. We generated significantly higher EBITDA in our Lumber segment, but this was offset by slight reductions in both our Panels and Pulp and Paper segments and a higher equity based compensation expense experienced in the quarter. Excluding-equity based compensation expense, EBITDA would have been $106 million in this quarter compared to $100 million in the previous quarter. The higher equity-based compensation expense is mainly the result of the significant increase in our share price in the quarter, an increase of 28%. We use the Black-Scholes valuation model to value outstanding options, and the market price of our shares is a significant factor in that evaluation. Accordingly, the significant increase in our share price in the quarter resulted in a large increase in the equity-based compensation expense. If we were to calculate the equity-based compensation expense for the second quarter based on the closing value of our shares yesterday, reflecting about a 10% decline from the beginning of the…

Thank you. And I guess, operator, we'll now open it to questions.

[Operator Instructions] We do have a question from Bill Hoffman with RBC Capital Markets.

I wonder if you could talk a little bit about the shipments of lumber over the Asian markets, talking about that has moved up to about 30% in the first quarter. And then just want to get a sense of what you see might be the potential for opportunity for you all this year? What you're getting on realizations in those markets right now, and how it's helping you balance, obviously, your own system.

So we're quite positive about our ability to continue to ship at that rate and possibly even higher, probably even higher, as long as the transportation system allows us to do that. So we're working very hard in that respect. You know sales realizations are not that dissimilar to what we're getting in North America. And I guess on the whole, this has been a great new market opportunity for us and the rest of the industry, and we don't see any reason right now why it won't continue to grow.

So like will we see spot prices moving around and dropping like they have in North America? Is that pulling the pricing in your export market down as well?

I don't want to get into it specifically. But, as I said, fundamentally, over time, prices are not significantly different between the two markets.

Okay. And then just second question is for Gerry, just in the capital spending program, you talked about the lumber ramp up. Can you just give us an idea of where you expect the second and third quarters might go relative to the first?

Bill, I think it was pretty light in the first quarter. I think we'd probably look at, I think we said in the past that maybe about $160 million for the year would be the plan. And we would kind of ramp up that over the next couple of quarters.

Okay. Great. And then just last question in the pulp side of the business. You did talk about the weakness in the BCTMP side. We realized that, that was a start of a machinary in China. I'm just wonder, I guess, theoretically, that's supposed to have begun to get integrated into paper asset cognisant side. Can you just give us an outlook on how you see the balance in those markets right now?

Well, it is -- the hardwood kraft and the mechanical pulp side, its supply definitely exceeds demand at this point in time. And our view is that, as I said, the imbalance or the gap between softwood kraft and hardwood kraft prices is significantly higher than historical averages. So somethings got to change there. I guess that's all I have to comment on that.

Okay.

The next question is from Alex Offshey [ph] With Goldman Sachs.

Hank, can you just talk about the key end uses for your mechanical pulps and also the key end uses for the kraft pulps and whether or not there's an opportunity for customers to switch from the kraft to the mechanical ones given the historical premium between the prices?

I'm going to let Ed Seraphin answer that question.

Good morning, Alex. I think, fundamentally, this price gap has been going on now for about nine months. And if things have not switched by now, we don't really intend to see significant switching in the near term. Longer-term, if it continues, customers are going to look for ways of, obviously, having the lowest-cost option. But at this point, we're not seeing a lot of switching and demand, or NBSK continues to be strong due -- and the NBC said it's going into. And I don't want to take too much time to get into that. But the other aspect has been, as you may know, the high pressures of developing pulp has also created significant demand for NBSK. So as we look at the near term, we don't see a lot of change.

Okay. That's helpful. And then just shifting to the lumber demand out of China. This will be a tough question to answer. But I think it was about 2 billion board feet last year. I think there's some out there as thousands that are maybe as much as 4 billion board feet for build exports feet that goes to China this year. But if you think about it longer term, three to five years out, Hank, what do you think is the right way to think about what the incremental demand out of China may be for lumber over the next five years?

If you just kind of look at the trajectory over the last five years, you'd should say it's going to be continuing significant growth. But I can't really project out. But I do believe that if the economy in China continues to operate the way it's operating now, we just continue to grow, to gain market share over there. And I don't see any reason for that to stop. So I can't really say. I couldn't predict on where this is going. All I can say is, 30% of our Canadian shipments are going there now, up from virtually nothing in the five years ago. So with the growing economy, the urbanization, we see it continuing to grow.

The next question is from Richard Skidmore with Goldman Sachs.

Hank, can you just talk to when you might see a step change in log availability in BC for either both West Fraser and/or the industry?

Well, it would be -- West Fraser and the industry is going to happen at about the same time. And we think that we're going to start to see some significant change five to six to seven years from now.

So over the next couple of years, you wouldn't anticipate much in the way of change in log availability for you?

No.

Gary, can you just comment on how we should think about the share price sensitivity share base comps to a dollar change and West Fraser's share price is equal to x million in your share base comp?

Rick, it's about $1.6 million.

And then, Hank, just maybe coming back to lumber just for a second. You mentioned some additional supply coming back in the first quarter or supply increasing. From your vantage point, is that kind of supply comes on from idle capacity restarting? Or is that just from competitors or your selves running existing capacity that's harder?

I think both. I think that some idle capacity has come on. Some hours have been added in mills that had reduced hours. And there's definitely production increases as people get new technology into their mills.

The next question is from Daryl Swetlishoff with Raymond James.

Hank, just a follow on, on the Asian story. We heard a lot of noise about the ability or the potential for incremental lumber shipments to help rebuild Japan after the devastating earthquakes. Can you comment on what you see the opportunity for West Fraser is nearing long-term there?

Well, in Japan, we've been a long-term, large supplier for the Japanese SPF market and that's going to continue. You know with respect to the disaster that they've gone through and is still going through, I agree they can't comment on what that's going to mean to increase lumber shipments. We don't really look at it that way. Our job is to be ready if they need anything. Plywood shipments will probably increase somewhat. But we haven't seen any significant change up to this point in time. It's probably too early. But like I say, the industry has done a great job with BC industry and in contributing to the disaster relief. And we've got the lumber if they need it, and we'll be ready to supply them.

[Operator Instructions] The next question is from Sean Steuart with TD Newcrest.

Just a couple of questions. Gerry, wondering if you can talk on the cost we saw in Q1. I guess the unit cost of both the sawmills and the pulp mills were a little bit better than we had expected. Can you just talk about, I guess, progress you've made towards productivity improvement, offsetting input cost pressure and what you're expecting on the input cost pressure side over the next couple of quarters?

Well, I think if cost is -- that's what we do as West Fraser, and we really try hard to keep our unit cost in check. I think fuel is something -- if oil prices go up, we're going to have to work harder at offsetting that, various transportation and other costs. As far as logs go, majority in Canada, anyway the majority of our logs are in inventory. And I think for the next couple of quarters, we've already got that in place. So I think going forward, we work hard at it everyday, and we're going to continue to focus on keeping our cost as low as they can be.

Okay. And second question is for Ted. Ted, just hoping you can expand a little bit on your comments on softwood pulp markets. I guess, anecdotally, we've heard that spot prices in China have come off a little bit. These prices still went up in North America and Europe in April, you have good stats on the mill inventory side and shipment side, just wondering if you could talk a little bit about what you're expecting for prices through the summer here?

Sure. I think you've almost answered your question when you look at inventories are extremely low. You're talking about the spot prices in China. I think they're off $30 or $40. But the reality of it is, is that if China decides to back up a little bit, particularly through the maintenance shutdown period, I don't personally think that we'll see a significant impact on pricing. China is not as important pit spot in kraft as they are to the mechanical grades. So near term, we should see things get pretty strong, pretty balanced right through the next three to six months.

Okay.

The next question is from Paul Quinn with RBC Capital Markets.

A couple of questions. One, we've seen a, I guess a material drop in lumber prices with the increase in the Canadian dollar. I'm just wondering if there's a change in West Fraser in terms of operating rates going forward into Q2 and in the rest of the year?

Well, I mean, I think we look at that all the time, Paul. And, currently, we have no plans to alter anything. Our job is just to continue to drive costs down. But, obviously, as you recall, if we get back into the situation like we were in '09, we and everybody else are going to have to make some serious adjustments. But we don't foresee that at this point in time.

All right. In terms of transportation cost, what have you seen there? Is that coming up with the price of oil and diesel and, specifically, transportation cost to Asia?

Yes. Oil is driving up transportation cost, for sure, yes.

I guess just a clarification on CapEx for 2011. Gerry, you mentioned $160 million, that's $160 million plus the Green Transformation Program?

Yes, the $160 million, it's going to be a matter of how we roll out the spending. But that is in addition -- or the Green Transformation is in addition to that.

And then just lastly, you guys sell a lot into the, well, historically, sold a lot into U.S. home builders, what are you seeing on the customer side there? Are they reporting sort of a buzz to the spring home buying season? Or in certain markets is it a lot better than sort of what I'm seeing?

I think we've probably all seen the same thing. I mean, we don't see any -- maybe some regional markets are doing a little bit better. But fundamentally, we're not seeing any improvement in the new home building down there.

The next question is from Pierre Lacroix with Desjardins Securities.

Yes. Just on the balance sheet side, you have a strong balance sheet and good cash flow levels, so you invest in CapEx. You're now talking of buying back shares eventually. Where the acquisition theme fits into your strategy? Do have a lot of time for that these days? Or how we should look at it?

Our strategy is no different than it has always been. I mean we have to balance -- basically, we've always said, we want to always operate with a prudent balance sheet, which we intend to continue to do. If we drive strong cash flow, some will be applied to CapEx, that will be our first priority on high payback items. Our second priority will be on building shareholder value, however we can, whether it's in some form of acquisition or, in our case, share buyback. I mean, we now have another tool, and our job is to create shareholder value. And those are the three elements by which we can do it.

But as you look at the market these days, do you think -- do you find the market more attractive than it was? Or how do you position yourself with the market -- during market conditions?

You mean the economics?

For the acquisition, yes.

Well, you mean the market for acquisitions, is that what you're asking, Pierre?

Yes.

I can't really comment on that. We don't view it any different than in any other time. If an attractive opportunity comes along, we would certainly look at it, and that's exactly what we do today.

Okay. Just a couple of small questions on the startup of some of head over capacity, can you provide -- or do you have an idea of where that capacity is coming from on a regional basis if more on the West Coast, even the Asian? Or do you see that on U.S., South or on the East side as well?

So where idled capacity might start up? I think there's idled capacity in all through the system, and so it can start up all over North America, it seems to me.

Okay. The final one on the plywood side, you mentioned that there might be some demand coming from Japan. Can you specify how much of your capacity is certified for the Japanese market?

Probably, most of it is certified. We have three mills. I think we have two certified and we'd probably get approved once certified very quickly.

The next question is from Robert Duncan [ph] with Canaccord Genuity.

Earlier in the conference call, there's a discussion about log availability, and you talked about significant changes occurring five to six years out. Can you characterize those, the word significant in terms of upsize and amounts?

I'll let -- Wayne Clogg will answer that question for us.

Good morning, Robert. That's a very difficult question to answer. And the reason is, it ends very much on utilizing debt and damage time. So recently the province has reset the allowable cut in two supplier, a significant one in Prince George and Cornell. And they've essentially maintained the cut at a level that the industry was using the volume for a period less than 10 years. But there's a very strong caveat there that, that depends on a very heavy utilization of dead pine. The ability to use that dead pine is not just a physical thing, but it's an economic thing. So it depends very much on lumber market condition. The ability to use all of that deadwood. So what we're looking at is that, given reasonable economic conditions, it's likely that, that we're looking at a five- to 10-year horizon to be able to utilize that resource. But we can't forecast today, Robert, what economic conditions will look like six years from now for instance.

But then, again, at the beginning of the conference call, you talked about applying 80% of your pine was infected, which is, obviously, reducing grade and it's reducing, as you said, lumber recovery. So while the logs are available, the quality and the quantity of lumber is already beginning to deteriorate, is that correct?

Yes. And things that are -- our folks in the middle level are working very, very hard to push back on that, to continue to be able to recover products and to keep our quality up.

The next question is from Alex Offshey [ph] with Goldman Sachs.

I have a few more questions. One is if you look at the housing market, I think it's a lot easier to make the case for multi-family units to recover a lot quicker than single family, given that vacancy rates are a lot more closer to normal than multi-family. So the first part of the question is , Hank, based on what you're seeing in the market, would you agree that we're more likely to see a recovery in multi-family occur before single family. And the second part of that question is, if this does occur, how does a recovery multi-family impact your businesses?

Well, I think, you're right. I mean, I think that likely, we're going to see a higher percentage of multi-families than single families over the next little while. And, of course, on a unit-per-unit basis is more what's used than in a single family. So that will be more helpful if the ratio was in reverse. But that's just a fact of life. So that's going to be the way it is for a little while until we bleed off all of this excess housing inventory that we have down there. But I think, you've capture that correctly. That's one of the reasons why the lumber prices continue to be depressed.

Is there any rule of thumb to think about how much lumber would be used for single-family unit versus the multi-family unit? Is it too difficult to be able to think about it that way?

There is a rule of thumb. I can't tell you right off the top of my head. I'll tell you what, we'll get back to you.

Okay. I very much appreciate that. And then secondly, if you think about some of the other end uses for lumber, repair or remodel, investor-end uses. Any noticeable change in the demand front for those end-uses at this point?

For repair and remodel and industrial?

Yes. Just what your customers are maybe saying, that trend may look like over the next year or so?

I can't say specifically, but it is trending up.

That concludes today's Q&A session. I would now like to turn the meeting back over to Mr. Ketcham.

Well, great, thank you. And thank you all for attending. And we'll talk to you on our second quarter conference call. I appreciate it very much. Goodbye.