Adjusted EBITDA was $60.3 million on sales of $456.8 million in Q1'17 versus $51.3 million on sales of $442.3 million in Q4'16.

Notable items in the quarter included:

• Higher Lumber Prices
  • Key benchmark lumber prices increased during Q1'17 as a result of strong demand in both North American and international markets. The Southern Pine Composite increased US$23 to US$416 per mfbm, while the Western SPF Composite and KD H-F Stud 2x4 9' benchmarks were up US$34 to US$339 per mfbm and US$42 to US$360 per mfbm, respectively.
  • Interfor's average lumber selling price increased from $588 per mfbm in Q4'16 to $604 per mfbm in Q1'17. A substantial portion of the announced price increases that occurred in Q1'17 were realized in the later part of the quarter. Therefore, Interfor's average lumber selling price for the month of March, 2017 was $27 per mfbm higher than the average lumber selling price for Q1'17.
• Strong Cash Flow
  • Interfor generated $59.7 million in cash from operations in Q1'17, or $0.85 per share, before considering working capital changes.
  • Working capital increased by $55.0 million during the quarter as a result of several seasonal and non-recurring items, including: (i) the US$10 million contingent payment that was made to the former owner of the Tacoma sawmill; (ii) a $7.5 million increase in B.C. Interior log inventories ahead of spring breakup; (iii) an $11.0 million increase in lumber inventories due to an increase in production and various logistics issues; (iv) a $15.6 million increase in accounts receivables driven by increased lumber shipments and lumber prices towards the end of the quarter; and (v) $12.4 million in payments related to annual employee incentive plans.
  • Capital spending was $20.7 million in Q1'17 as compared to $19.8 million in Q4'16.
  • Net debt ended the quarter at $306.7 million, or 27.6% of invested capital.
• Production Gains Across Most Regions
  • In order to meet strong customer demand, Interfor increased lumber production in most of its regions. This resulted in 640 million board feet of production in Q1'17, up 33 million board feet over the preceding quarter. Sales of Interfor-produced lumber were 624 million board feet in Q1'17 versus 598 million board feet in Q4'16.
  • Production in the U.S. South region was up in Q1'17, increasing to 285 million board feet (equivalent to an operating rate of 86%) from 260 million board feet in the preceding quarter. The B.C. and U.S. Northwest regions accounted for 215 million board feet (equivalent to operating rates of 97% in the B.C. Interior and 43% on the B.C. Coast) and 140 million board feet (equivalent to an operating rate of 88%) in Q1'17, respectively, compared with 209 million board feet and 137 million board feet in Q4'16, respectively.
  • The B.C. Coast logging business was negatively impacted by difficult winter conditions that resulted in log production and log revenues declining by 18% and 39%, respectively, in Q1'17 versus Q4'16.
• Progress on Optimization Initiative and EBITDA Gains
  • In early 2016, Interfor launched a Business Optimization Initiative to capture additional margin opportunities across the Company's operating platform, with a particular focus on the U.S. South region, where $35 million in annualized EBITDA gains were targeted by year-end 2017. In Q1'17, the Company realized on 45% of the targeted EBITDA gains.
  • The Q1'17 gains were mostly realized in the later part of the quarter when various operational and product mix improvements allowed the Company to proceed with its plan to add incremental operating hours at certain mills.
  • The Company previously stated that its goal was to achieve an operating rate in the South of 90% or more by Q4'17. The Company is ahead of schedule, with the operating rate averaging 91% during the month of March.

¹ Refer to Adjusted EBITDA and Adjusted net earnings in Non-GAAP Measures section

Softwood Lumber Duties

Following the quarter end, the U.S. Department of Commerce ("DoC") preliminarily ruled on its case against Canadian softwood lumber producers. As a result, the U.S. Customs and Border Protection Agency will begin collecting deposits from Interfor on April 28, 2017, for countervailing duties at a preliminary rate of 19.88% on its shipments of softwood lumber from Canada into the U.S.

In addition, the DoC has taken the unjustified position that most Canadian lumber producers, including Interfor, may be required to submit a deposit for retroactive countervailing duties for the 90-day period from January 28 to April 27, 2017. Interfor does not believe the retroactive application of duties will stand up under final scrutiny which, in turn, should result in a full return of the related deposit to the Company.

In Q1'17, Interfor shipped approximately 100 million board feet from its Canadian operations to the U.S. market, which represented approximately 16% of the Company's total lumber sales. Interfor is of the view that the DoC's positions are without merit and are politically driven. Interfor intends to vigorously defend the Company's and the Canadian industry's positions through various appeal processes, in conjunction with the B.C. and Canadian Governments.

Liquidity

Balance Sheet

Net debt at March 31, 2017 was $306.7 million, or 27.6% of invested capital, representing a decrease of $121.4 million from March 31, 2016 and an increase of $17.1 million from December 31, 2016. A slightly stronger Canadian Dollar against the U.S. Dollar offset Q1'17 borrowings by $2.7 million as the majority of debt is denominated in U.S. Dollars.

Capital Resources

The following table summarizes Interfor's credit facilities and availability as of March 31, 2017:

As of March 31, 2017, the Company had commitments for capital expenditures totaling $7.6 million, related to both maintenance and discretionary projects.

Interfor continues to maintain its disciplined focus on monitoring discretionary capital expenditures, optimizing inventory levels and matching production with offshore and domestic demand.

As at March 31, 2017, the Company had net working capital of $190.8 million and available capacity on operating and term facilities of $258.1 million. These resources, in addition to cash generated from operations, will be used to support working capital requirements, debt servicing commitments and capital expenditures. We believe that Interfor will have sufficient liquidity to fund operating and capital requirements for the foreseeable future.

Non-GAAP Measures

This release makes reference to the following non-GAAP measures: Adjusted net earnings (loss), Adjusted net earnings (loss) per share, EBITDA, Adjusted EBITDA, Pre-tax return on total assets, Net debt to invested capital and Operating cash flow per share (before working capital changes) which are used by the Company and certain investors to evaluate operating performance and financial position. These non-GAAP measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. The following table provides a reconciliation of these non-GAAP measures to figures as reported in the Company's unaudited interim consolidated financial statements prepared in accordance with IFRS:

Approved on behalf of the Board:

L. Sauder, Director

D.W.G. Whitehead, Director

FORWARD-LOOKING STATEMENTS

This release contains information and statements that are forward-looking in nature, including, but not limited to, statements containing the words "believes", "will", "should", "expects", "annualized" and similar expressions. Such statements involve known and unknown risks and uncertainties that may cause Interfor's actual results to be materially different from those expressed or implied by those forward-looking statements. Such risks and uncertainties include, among other things: price volatility, competition, availability and cost of log supply, natural or man-made disasters, currency exchange sensitivity, regulatory changes, allowable annual cut reductions, Aboriginal title and rights claims, potential countervailing and anti-dumping duties, stumpage fee variables and changes, environmental impact and performance, labour disruptions, and other factors referenced herein and in Interfor's Annual Report available on www.sedar.com and www.interfor.com. The forward-looking information and statements contained in this release are based on Interfor's current expectations and beliefs. Readers are cautioned not to place undue reliance on forward-looking information or statements. Interfor undertakes no obligation to update such forward-looking information or statements, except where required by law.

ABOUT INTERFOR

Interfor is a growth-oriented lumber company with operations in Canada and the United States. The Company has annual production capacity of approximately 3 billion board feet and offers one of the most diverse lines of lumber products to customers around the world. For more information about Interfor, visit our website at www.interfor.com.

The Company's unaudited consolidated financial statements and Management's Discussion and Analysis for Q1'17 are available at www.sedar.com and www.interfor.com.

There will be a conference call on Friday, May 5, 2017 at 8:00 a.m. (Pacific Time) hosted by INTERFOR CORPORATION for the purpose of reviewing the Company's release of its first quarter 2017 financial results.

The dial-in number is 1-866-233-4795. The conference call will also be recorded for those unable to join in for the live discussion, and will be available until June 4, 2017. The number to call is 1-888-203-1112, Passcode 4485904.