Canfor Corporation — Management Reports 2025

May 9, 2025

CANFOR

Canfor Corporation.

2025 Quarter One – Management’s discussion & analysis

For the three months ended March 31, 2025.

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Canfor Corporation.

First quarter 2025.

Management's discussion and analysis.

This interim Management's Discussion and Analysis ("MD&A") provides a review of Canfor Corporation's ("Canfor" or "the Company") financial performance for the quarter ended March 31, 2025, relative to the quarters ended December 31, 2024, and March 31, 2024, and the financial position of the Company at March 31, 2025. It should be read in conjunction with Canfor's unaudited interim consolidated financial statements and accompanying notes for the quarters ended March 31, 2025 and 2024, as well as the 2024 annual MD&A and the 2024 audited consolidated financial statements and notes thereto, which are included in Canfor's Annual Report for the year ended December 31, 2024 (available at www.canfor.com). The financial information contained in this interim MD&A has been prepared in accordance with IFRS Accounting Standards ("IFRS"), which is the required reporting framework for Canadian publicly accountable enterprises.

Throughout this discussion, reference is made to Operating Income (Loss) before Amortization, Asset Write-Downs and Impairments, Adjusted Operating Income (Loss) before Amortization, and Adjusted Operating Income (Loss), which Canfor considers to be a relevant indicator for measuring trends in the performance of each of its operating segments and the Company's ability to generate funds to meet its debt repayment and capital expenditure requirements. Reference is also made to Adjusted Shareholder Net Income (Loss) (calculated as Shareholder Net Income (Loss) less specific items affecting comparability with prior periods – for the full calculation, see the reconciliation included in the section "Selected Quarterly Financial information") and Adjusted Shareholder Net Income (Loss) per Share (calculated as Adjusted Shareholder Net Income (Loss) divided by the weighted average number of shares outstanding during the period). Operating Income (Loss) before Amortization, Asset Write-Downs and Impairments, Adjusted Operating Income (Loss) before Amortization, Adjusted Operating Income (Loss), Adjusted Shareholder Net Income (Loss), and Adjusted Shareholder Net Income (Loss) per Share are not generally accepted earnings measures and should not be considered as an alternative to net income (loss) or cash flows as determined in accordance with IFRS. As there is no standardized method of calculating these measures, Canfor's Operating Income (Loss) before Amortization, Asset Write-Downs and Impairments, Adjusted Operating Income (Loss) before Amortization, Adjusted Operating Income (Loss), Adjusted Shareholder Net Income (Loss) and Adjusted Shareholder Net Income (Loss) per Share may not be directly comparable with similarly titled measures used by other companies. Reconciliations of Operating Income (Loss) before Amortization, Asset Write-Downs and Impairments, Adjusted Operating Income (Loss) before Amortization, Adjusted Operating Income (Loss) to Operating Income (Loss) and Adjusted Shareholder Net Income (Loss) to Net Income (Loss) reported in accordance with IFRS are included in the "Non-IFRS financial measures" section of this MD&A. Throughout this discussion, reference is made to the current quarter, which refers to the results for the first quarter of 2025.

Also in this interim MD&A, reference is made to cash, net debt to total capitalization and return on invested capital ("ROIC") which the Company considers to be relevant performance indicators that are not generally accepted under IFRS. Therefore, these indicators, defined herein, may not be directly comparable with similarly titled measures used by other companies. Refer to the "Non-IFRS financial measures" section of this interim MD&A for further details.

Factors that could impact future operations are also discussed. These factors may be influenced by both known and unknown risks and uncertainties that could cause the actual results to be materially different from those stated in this discussion. Factors that could have a material impact on any future oriented statements made herein include, but are not limited to: general economic, market and business conditions; product selling prices; raw material and operating costs; currency exchange rates; interest rates; changes in law and public policy; the outcome of labour and trade disputes; and opportunities available to or pursued by Canfor.

All financial references are in millions of Canadian dollars unless otherwise noted. Certain comparative amounts have been reclassified to conform to current presentation. The information in this report is as at May 7, 2025.

Forward-looking statements.

Certain statements in this press release constitute "forward-looking statements" which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Words such as "expects", "anticipates", "projects", "intends", "plans", "will", "believes", "seeks", "estimates", "should", "may", "could", and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on Management's current expectations and beliefs and actual events or results may differ materially. There are many factors that could cause such actual events or results expressed or implied by such forward-looking statements to differ materially from any future results expressed or implied by such statements. Forward-looking statements are based on current expectations and the Company assumes no obligation to update such information to reflect later events or developments, except as required by law.

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First quarter 2025.

Overview.

(millions of Canadian dollars)	Q1 2025	Q4 2024	Q1 2024
Reported operating loss	$ (28.5)	$ (45.9)	$ (85.8)
Inventory recovery, net	$ (3.7)	$ (36.1)	$ (30.2)
Adjusted operating loss	$ (32.2)	$ (82.0)	$ (116.0)
Amortization	$ 101.1	$ 98.6	$ 105.6
Adjusted operating income (loss) before amortization	$ 68.9	$ 16.6	$ (10.4)

Selected financial information and statistics.

(millions of Canadian dollars, except ratios)	Q1 2025	Q4 2024	Q1 2024
Operating income (loss) by segment:
Lumber	$ (25.5)	$ (36.6)	$ (57.1)
Pulp and paper	$ 10.8	$ 4.1	$ (15.7)
Unallocated and other	$ (13.8)	$ (13.4)	$ (13.0)
Total operating loss	$ (28.5)	$ (45.9)	$ (85.8)
Add: Amortization¹	$ 101.1	$ 98.6	$ 105.6
Total operating income before amortization	$ 72.6	$ 52.7	$ 19.8
Add (deduct):
Non-cash working capital movements, net	$ (161.4)	$ 8.1	$ (154.7)
Defined benefit plan contributions, net	$ (2.5)	$ (2.7)	$ (3.3)
Income taxes received (paid), net	$ (6.9)	$ 8.4	$ (2.9)
Duties paid less than (greater than) accruals²	$ (0.6)	$ 0.8	$ 15.4
Other operating cash flows, net³	$ 28.2	$ 20.6	$ 44.7
Cash from operating activities	$ (70.6)	$ 87.9	$ (81.0)
Add (deduct):
Capital additions, net	$ (122.1)	$ (136.6)	$ (103.4)
Proceeds from sale of property, plant and equipment and intangible assets	$ 1.8	$ 0.7	$ 1.9
Conversion and changes in term debt, net	$ (0.1)	$ (45.0)	$ 0.2
Partial acquisition of Vida non-controlling interest	$ -	$ (118.3)	$ -
Finance expenses paid	$ (7.0)	$ (8.2)	$ (8.6)
Share purchases	$ (3.6)	$ (0.6)	$ (3.3)
Distributions paid to non-controlling interests, net	$ (1.3)	$ (50.7)	$ (0.4)
Foreign exchange gain (loss) on cash and cash equivalents	$ 11.5	$ 0.8	$ (11.3)
Other, net³	$ (7.6)	$ (2.2)	$ (5.8)
Change in cash / operating loans	$ (199.0)	$ (272.2)	$ (211.7)
ROIC – Consolidated period-to-date⁴	(0.6)%	(1.4)%	(1.7)%
Average exchange rate (US$ per C$1.00)⁵	$ 0.697	$ 0.715	$ 0.741
Average exchange rate (SEK per C$1.00)⁵	7.426	7.708	7.706

1. Amortization includes amortization of certain capitalized major maintenance costs.
2. Adjusted to true-up preliminary anti-dumping duty ("ADD") deposits to the Company's current accrual rates.
3. Further information on cash flows may be found in the Company's unaudited interim consolidated financial statements.
4. Consolidated ROIC is a non-IFRS financial measure. Refer to the "Non-IFRS financial measures" section for further details.
5. Source – Bank of Canada (monthly average rate for the period).

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Canfor Corporation

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Analysis of specific material items affecting comparability of shareholder net loss.

After-tax impact, net of non-controlling interests (millions of Canadian dollars, except per share amounts)	Q1 2025	Q4 2024	Q1 2024
Shareholder net loss, as reported	$ (31.0)	$ (63.3)	$ (64.5)
Foreign exchange (gain) loss on term debt	$ 1.2	$ (2.7)	$ 6.6
Foreign exchange (gain) loss on duty deposits loan	$ (2.5)	$ 21.3	$ -
(Gain) loss on derivative financial instruments	$ (5.8)	$ 4.8	$ 5.8
Net impact of above items	$ (7.1)	$ 23.4	$ 12.4
Adjusted shareholder net loss^{6}	$ (38.1)	$ (39.9)	$ (52.1)
Shareholder net loss per share (EPS), as reported	$ (0.26)	$ (0.53)	$ (0.54)
Net impact of above items per share	$ (0.06)	$ 0.20	$ 0.10
Adjusted shareholder net loss per share^{6}	$ (0.32)	$ (0.33)	$ (0.44)

1. Adjusted shareholder net loss is a non-IFRS financial measure. Refer to the "Non-IFRS financial measures" section for further details.

The Company reported an operating loss of $28.5 million for the first quarter of 2025, compared to an operating loss of $45.9 million in the fourth quarter of 2024. After taking into consideration a $3.7 million reversal of a previously recognized inventory write-down, the Company's adjusted operating loss was $32.2 million for the first quarter of 2025, compared to a similarly adjusted operating loss of $82.0 million for the fourth quarter of 2024. These results largely reflected improved lumber segment results and, to a lesser extent, pulp and paper earnings.

For the lumber segment, the operating loss was $25.5 million for the first quarter of 2025, compared to the previous quarter's operating loss of $36.6 million. After taking into consideration the aforementioned inventory adjustment, the Company's lumber segment adjusted operating loss was $29.2 million for the first quarter of 2025, compared to a similarly adjusted operating loss of $72.7 million for the fourth quarter of 2024.

These results principally reflected improved results from the Company's North American operations, most notably in Western Canada, combined with another quarter of solid earnings from its European operations. For the quarter overall, results reflected generally improved North American lumber benchmark pricing through most of the period, an uplift in European market pricing, and a 2 cent, or 3%, weaker Canadian dollar versus the US-dollar combined with a 4% weaker Canadian dollar versus the Swedish Krona ("SEK"). These factors were combined with an increase in production and shipments, predominantly in the US South, largely driven by the ongoing ramp-up of the Company's Urbana sawmill in Arkansas following its modernization and expansion project, as well as its greenfield sawmill in Axis, Alabama. These positive drivers were tempered, to a degree, by a decrease in Western Spruce/Pine/Fir ("SPF") production and shipments following the closures in the previous period, as well as an ongoing escalation in European log costs.

For the pulp and paper segment, operating income was $10.8 million for the first quarter of 2025, compared to $4.1 million for the fourth quarter of 2024. These results were largely driven by a modest uplift in Canfor Pulp Product Inc.'s ("CPPI") average Northern Bleached Softwood Kraft ("NBSK") pulp unit sales realizations in the current quarter combined with a 6% increase in pulp production compared to the fourth quarter of 2024.

Compared to the first quarter of 2024, adjusted operating results were up $83.8 million from an adjusted operating loss of $116.0 million in the comparative period, primarily consisting of a $58.1 million increase in lumber segment results and a $26.5 million improvement in pulp and paper segment earnings.

Improved lumber segment results were primarily driven by the Company's Western Canadian operations, as a 10% uplift in the North American Random Lengths Western SPF 2x4 #2&Btr lumber benchmark price was combined with, a 5 cent, or 6%, weaker Canadian dollar versus the US-dollar. These factors were tempered, to a degree, by slightly lower earnings in Europe, as ongoing log availability constraints gave rise to a significant uplift in European lumber unit manufacturing costs, and more than offset a notable increase in European lumber unit sales realizations. Results from the Company's US South operations were broadly comparable quarter-over-quarter.

For the pulp and paper segment, compared to the first quarter of 2024, operating results improved $26.5 million, primarily driven by a significant uplift in global pricing for both the pulp and paper segments quarter-over-quarter, coupled with the weaker Canadian dollar versus the US-dollar.

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Canfor Corporation

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Operating results by business segment.

Lumber.

Selected financial information and statistics – lumber.

(millions of Canadian dollars, unless otherwise noted)	Q1 2025	Q4 2024	Q1 2024
Sales7	$ 1,221.3	$ 1,122.6	$ 1,160.4
Reported operating income before amortization7	$ 64.4	$ 53.2	$ 31.0
Reported operating loss7	$ (25.5)	$ (36.6)	$ (57.1)
Inventory recovery, net	$ (3.7)	$ (36.1)	$ (30.2)
Adjusted operating loss8	$ (29.2)	$ (72.7)	$ (87.3)
Average WSPF 2x4 #2&Btr lumber price in US$9	$ 492	$ 435	$ 446
Average WSPF 2x4 #2&Btr lumber price in Cdn$9,11	$ 706	$ 608	$ 602
Average SYP 2x4 #2 lumber price in US$10	$ 448	$ 424	$ 419
Average SYP 2x4 #2 lumber price in Cdn$10,11	$ 643	$ 593	$ 565
Average SYP 2x6 #2 lumber price in US$10	$ 404	$ 367	$ 354
Average SYP 2x6 #2 lumber price in Cdn$10,11	$ 580	$ 513	$ 478
US housing starts (thousand units SAAR)12	1,393	1,392	1,407
Production – WSPF lumber (MMfbm)13	367	449	506
Production – SYP lumber (MMfbm)13	463	392	441
Production – European lumber (MMfbm)13	369	361	350
Shipments – WSPF lumber (MMfbm)14	398	464	544
Shipments – SYP lumber (MMfbm)14	443	387	431
Shipments – European lumber (MMfbm)14	425	419	396

1. Q1 2025 includes sales of $458.6 million, operating income of $4.8 million, and operating income before amortization of $23.6 million from European operations (Q4 2024 – sales of $363.8 million, operating income of $6.8 million, and operating income before amortization of $25.6 million; Q1 2024 – sales of $370.0 million, operating income of $13.3 million, and operating income before amortization of $31.4 million). Operating income from the European operations in Q1 2025 includes $9.7 million in incremental amortization and other expenses driven by the purchase price allocation at acquisition (Q4 2024 – $9.3 million; Q1 2024 – $9.4 million). Sawmill production from European operations was 410 MMfbm in Q1 2025 (Q4 2024 – 407 MMfbm; Q1 2024 – 437 MMfbm).
2. Adjusted operating loss is a non-IFRS financial measure. Refer to the "Non-IFRS Financial Measures" section for further details.
3. Western Spruce/Pine/Fir, per thousand board feet (Source – Random Lengths Publications, Inc.).
4. Southern Yellow Pine, Eastside, per thousand board feet (Source – Random Lengths Publications, Inc.).
5. Average lumber prices in Cdn$ calculated as average price in US$ multiplied by the average exchange rate – Cdn$ per US$1.00 according to Bank of Canada monthly average for the period.
6. Source – US Census Bureau, seasonally adjusted annual rate ("SAAR").
7. Excluding production of trim blocks.
8. Includes Canfor produced lumber, as well as lumber purchased for resale, remanufacture and engineered wood, excluding trim blocks, wholesale shipments and lumber sold on behalf of first parties.

Markets.

Overall, North American lumber markets experienced a modest improvement in the first quarter of 2025. Despite solid underlying long-term fundamentals, affordability challenges and economic and political instability, driven primarily by concerns over potential US tariffs, continued to weigh on demand in the current period. Reduced supply from mill closures and market-related curtailments in Western Canada, coupled with weather-related disruptions in the US South, however, led to an increase in most North American lumber benchmark prices quarter-over-quarter.

US housing starts averaged 1,393,000 units on a seasonally adjusted basis for the current quarter, broadly in line with the previous quarter, as a 2% increase in multi-family starts was largely offset by a 1% decline in single-family starts. In Canada, housing starts averaged 223,000 units on a seasonally adjusted basis in the first quarter of 2025, down 10% from the previous quarter, primarily reflecting reduced construction of multi-family units, particularly in major urban centers.

In Japan, improved demand in the multi-family rental and non-residential segments through the first quarter of 2025 was combined with fewer imports into the region, which led to an uptick in pricing in the current period. In contrast, demand in China remained muted throughout the current quarter, as the real estate market continued to face difficulties despite the government's ongoing efforts to stimulate the economy. These demand factors were met with lower supply and resulted in relatively flat and subdued pricing in the region quarter-over-quarter.

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Canfor Corporation

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European lumber pricing experienced a moderate improvement through the first quarter of 2025, principally reflecting ongoing log supply constraints and high log prices, which lowered lumber inventories in the region and gave rise to pricing pressure in the current period.

Sales.

Sales revenues for the lumber segment for the first quarter of 2025 were $1,221.3 million, up $98.7 million compared to the previous quarter. This 9% increase in sales revenue over the prior quarter was largely driven by improved lumber unit sales realizations in Western Canada and Europe, combined with a 3% and 4% weaker Canadian dollar versus the US-dollar and SEK, respectively. These factors were mitigated, to a degree, by lower shipment volumes from Western Canada, largely associated with reduced production as the region experienced the full quarter impact of the permanent closure of the Plateau and Fort St. John sawmills in the prior period.

Compared to the first quarter of 2024, sales revenues increased by $60.9 million, or 5%, primarily driven by higher lumber unit sales realizations across all of the Company's operating regions, most notably in Western Canada and Europe, coupled with a 6% and 4% weaker Canadian dollar (relative to the US-dollar and SEK, respectively).

Total lumber shipments, at 1.27 billion board feet, were broadly in line with the previous quarter, as a 14% increase in Southern Yellow Pine ("SYP") shipments, largely associated with the ongoing ramp-up of the Company's recently completed capital investments at its Urbana and Axis sawmills, was mostly offset by a decrease in Western SPF shipments, principally reflecting the aforementioned reduced production in that region in the current period. European shipments were broadly comparable quarter-over-quarter.

Compared to the first quarter of 2024, total lumber shipments declined 8%, as a 7% uplift in European shipments was more than offset by a 27% reduction in Western Canadian shipments, largely tied to the full quarter impact of the Polar, Plateau and Fort St. John sawmill closures in the prior year. In the US South, a 3% increase in shipment volumes was principally tied to the benefit of increased volumes in the current period associated with the aforementioned Urbana and Axis sawmills, offset, in part, by the full quarter impact on US South production of the permanent closure of the Jackson and Mobile sawmills during 2024.

The average North American Random Lengths Western SPF 2x4 #2&Btr price for the first quarter of 2025 of US$492 per Mfbm was up US$57 per Mfbm, or 13%, from the previous quarter. The Western SPF 2x4 #2&Btr price showed gradual improvement through January and early February, followed by more solid gains in early March reaching a high of US$570 per Mfbm, before declining to end the quarter at US$540 per Mfbm. Consequently, the Company's Western SPF lumber unit sales realizations experienced a moderate uplift compared to the previous quarter, primarily reflecting this upward trend in the Western SPF 2x4 #2&Btr lumber benchmark price, combined with a 2 cent, or 3%, weaker Canadian dollar versus the US-dollar. These factors were partly offset however, by quarter-over-quarter declines in pricing for certain wider-width dimensions.

The average North American SYP East 2x4 #2 price opened the quarter at a low of US$414 per Mfbm and increased steadily throughout the quarter to finish the period at US$475 per Mfbm. Overall, the SYP East 2x4 #2 price averaged US$448 per Mfbm in the first quarter of 2025, up US$24 per Mfbm, or 6%, from the previous quarter. The SYP East 2x6 #2 price experienced slightly higher price appreciation compared to the SYP East 2x4 #2, averaging US$404 per Mfbm for the current quarter, up US$37 per Mfbm, or 10%, from the prior period. The Company's SYP lumber unit sales realizations, however, were broadly comparable quarter-over-quarter, as the aforementioned uptick in SYP lumber benchmark pricing was largely offset by lower pricing for certain wider-width dimension products.

The Company's European lumber unit sales realizations were moderately higher than the previous quarter, principally related to improved lumber market pricing in Europe combined with a 4% weaker Canadian dollar versus the SEK.

Compared to the first quarter of 2024, the average North American Random Lengths Western SPF 2x4 #2&Btr price increased US$46 per Mfbm, or 10%, with the Company's Western SPF lumber unit sales realizations largely reflecting this increase, coupled with favourable offshore unit sales realizations quarter-over-quarter and a 4 cent, or 6%, weaker Canadian dollar versus the US-dollar. In the US South, a slight increase in SYP lumber unit sales realizations compared to the first quarter of 2024 principally reflected a US$29 per Mfbm, or 7%, increase in the average North American SYP East 2x4 #2 price and a US$50 per Mfbm, or 14%, uptick in the average SYP East 2x6 #2 price over the same comparative period, offset by quarter-over-quarter declines in pricing for certain wider-width products. The Company's European lumber unit sales realizations experienced a significant increase compared to the same period in the prior year, primarily tied to improved lumber market pricing in European markets and a 4% weaker Canadian dollar versus the SEK.

Other revenues for the Company's lumber segment (which are primarily comprised of residual fibre, pulp log and pellets sales, as well as the Company's European operations' other related revenues) were significantly higher than the prior quarter, largely driven by an uplift in residual fibre revenues, most notably in Europe, as well as an increase in log sales in Europe, offset in part by lower log sales in Western Canada. Compared to the first quarter of 2024, other revenues experienced a moderate uplift principally reflecting an increase in log sales and residual fibre revenues at the Company's European operations in the current period.

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Canfor Corporation

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Operations.

Total lumber production, at 1.20 billion board feet, was comparable quarter-over-quarter, as the increase in SYP production and, to a lesser extent, European lumber production, was largely offset by a decrease in Western SPF production. In the US South, the 18% increase in production was primarily driven by the ongoing benefit of the ramp-up of the Company's greenfield sawmill in Axis, Alabama as well as its Urbana sawmill in Arkansas, following the completion of its major capital upgrade in the second half of 2024. In Europe, the 2% uplift in production was largely attributable to fewer statutory holidays in the current quarter, offset, to a degree, by downtime taken in the current period as a result of ongoing log availability constraints in the region. In contrast, production in Western Canada declined by 18%, primarily reflecting the effect in the current quarter of the permanent closure of the Fort St. John and Plateau sawmills in the prior period.

Compared to the first quarter of 2024, total lumber production decreased by 8%, mainly due to a 27% decrease in production in Western Canada tied to the impact of the permanent closures of the Polar, Plateau, Fort St. John sawmills in the prior year. These factors were partially offset by a 5% increase in production in both the US South and Europe. In the US South, this uplift principally reflected the benefit from the commissioning of the aforementioned greenfield and brownfield projects during the current period, which more than outweighed the impact of the Jackson and Mobile mill closures in the US South in 2024. In Europe, increased production in the current quarter was primarily driven by the benefit of an additional shift at Borgstena sawmill which commenced in 2024.

Lumber unit manufacturing and product costs were modestly higher than the previous quarter, as a moderate uptick in log costs was offset by slightly lower per-unit conversion costs. The former primarily reflected significantly higher log costs in Europe stemming from ongoing log supply constraints and, to a lesser extent, an uplift in BC market-related stumpage costs in the current quarter. Reduced per-unit conversion costs were most notable in the US South mainly associated with the benefit of increased production during the current period.

Lumber unit manufacturing costs increased moderately from the first quarter of 2024, primarily due to significantly higher log costs in Europe and, to a lesser extent, increased per-unit conversion costs in the same region. This increase in log costs was driven by ongoing supply pressures in that region, while higher conversion costs reflected regional inflationary impacts. Lumber unit manufacturing costs in Western Canada and the US South were broadly comparable quarter-over-quarter.

Pulp and paper.

Selected financial information and statistics – pulp and paper.¹⁵

(millions of Canadian dollars, unless otherwise noted)	Q1	Q4	Q1
	2025	2024	2024
Sales	$ 196.2	$ 163.1	$ 222.3
Operating income before amortization¹⁶	$ 21.3	$ 12.3	$ 1.2
Operating income (loss)	$ 10.8	$ 4.1	$ (15.7)
Average NBSK pulp list price delivered to China – US$¹⁷	$ 793	$ 767	$ 745
Average NBSK pulp list price delivered to China – Cdn$¹⁷	$ 1,138	$ 1,073	$ 1,005
Production – pulp (000 mt)	104	98	158
Production – paper (000 mt)	34	34	32
Shipments – pulp (000 mt)	112	97	159
Shipments – paper (000 mt)	33	28	35

¹⁵. Includes 100% of Canfor Pulp Products Inc., which is consolidated in Canfor's operating results.
¹⁶. Amortization includes amortization of certain capitalized major maintenance costs.
¹⁷. Per tonne, NBSK pulp list net price delivered to China (as published by Resource Information Systems, Inc. ("RISI")); Average NBSK pulp list net price delivered to China in Cdn$ calculated as average NBSK pulp list net price delivered to China – US$ multiplied by the average exchange rate – Cdn$ per US$1.00 according to Bank of Canada monthly average rate for the period.

Markets.

Global softwood pulp market fundamentals experienced some positive improvement during the first quarter of 2025, with modest strength observed early in the quarter, particularly in China, as global pulp producer inventory levels began to stabilize. As the quarter progressed, however, this momentum diminished as global economic and trade uncertainty rose. As a result, US-dollar NBSK list prices to China, the world's largest pulp consumer, started the year at US$770 per tonne and saw a modest increase through the current period, ending March at US$798 per tonne. For the current quarter overall, US-dollar NBSK pulp list prices to China averaged US$793 per tonne, up US$26 per tonne, or 3%, from the prior quarter. Compared to the same period in the prior year, pulp list prices to China were up US$48 per tonne, or 6%.

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Other global regions, including North America, also saw modest price momentum in the first quarter. Consequently, US-dollar NBSK pulp list prices to North America averaged US$1,753 per tonne (before discounts) for the first quarter of 2025, up US$68 per tonne, or 4%, compared to the fourth quarter of 2024, and increased US$313 per tonne, or 22%, compared to the same period in the prior year.

Global softwood pulp producer inventories declined through the first quarter of 2025, ending February at 40 days of supply¹⁸, a decrease of 2 days compared to December 2024. Market conditions are generally considered balanced when inventories are in the 32-43 days of supply range¹⁸.

Global kraft paper market demand and pricing remained relatively stable through the first quarter of 2025, with some weakness in demand in the North American region experienced in the latter part of the period stemming from general uncertainty with respect to tariffs on US shipments.

Sales.

Pulp shipments for the first quarter of 2025 totaled 112,000 tonnes, up 15,000 tonnes, or 15%, from the previous quarter, primarily reflecting a 6% increase in pulp production, combined with a drawdown of inventory levels in the current period largely associated with the timing of shipments around quarter-end.

Compared to the first quarter of 2024, pulp shipments were down 47,000 tonnes, or 30%, principally driven by the decrease in production associated with the wind down of one pulp line at CPPI's Northwood NBSK pulp mill ("Northwood"), which was completed safely and efficiently in August 2024.

CPPI's average NBSK pulp unit sales realizations experienced a modest increase compared to the previous quarter, principally driven by the aforementioned improvement in US-dollar NBSK pulp list prices to China and other global regions in the current period, coupled with a 2 cent, or 3%, weaker Canadian dollar, offset to a degree, by an unfavourable timing lag in shipments versus orders.

Compared to the first quarter of 2024, CPPI's average NBSK pulp unit sales realizations saw a substantial increase, primarily attributable to improved market fundamentals quarter-over-quarter, including a 6% increase in US-dollar NBSK pulp list prices to China and a 22% increase in pricing to North America (before discounts), combined with a 5 cent, or 6%, weaker Canadian dollar.

Energy revenues increased in the current quarter compared to the fourth quarter of 2024, principally driven by a slight uplift in power pricing quarter-over-quarter. Compared to the first quarter of 2024, energy revenues declined, largely correlated with reduced power generation associated with lower pulp production as a result of the wind down of one production line at Northwood.

Paper shipments in the first quarter of 2025 were 33,000 tonnes, up 5,000 tonnes from the previous quarter, and down 2,000 tonnes from the first quarter of 2024, principally tied to the timing of shipments around quarter-end compared to both comparative periods.

Paper unit sales realizations in the first quarter of 2025 were slightly higher than the previous quarter, largely driven by the weaker Canadian dollar in the current period. Compared to the first quarter of 2024, paper unit sales realizations experienced a significant increase, primarily associated with an uptick in US-dollar paper prices quarter-over-quarter, combined with the weaker Canadian dollar.

Operations.

Pulp production was 104,000 tonnes for the first quarter of 2025, up 6,000 tonnes, or 6%, from the fourth quarter of 2024, primarily driven by improved operational reliability and productivity at both of CPPI's pulp mills in the current period.

Compared to the first quarter of 2024, pulp production was down 54,000 tonnes, or 34%, principally reflecting the aforementioned indefinite closure of one pulp line at Northwood in August 2024. In the first quarter of 2024, pulp production was reduced by approximately 30,000 tonnes as a result of extreme winter weather conditions, as well as other minor operational disruptions.

Pulp unit manufacturing costs were slightly lower compared to the fourth quarter of 2024, as improved pulp productivity combined with lower maintenance spend (timing-related), was offset to a degree, by higher energy and fibre costs in the current period. Fibre costs saw a modest uplift quarter-over-quarter, primarily tied to an increase in the proportion of higher cost whole log chips, and, to a lesser extent, an uptick in market-based pricing for sawmill residual chips (linked to an uplift in Canadian dollar NBSK pulp sales realizations).

¹⁸. World 20 data is based on twenty producing countries representing 80% of world chemical market pulp capacity and is based on information compiled and prepared by the Pulp and Paper Products Council ("PPPC"). The upper and lower limits of the balanced range are the average level plus or minus one standard deviation, based on the last 60 data points (i.e. last five years).

7

Canfor Corporation

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Compared to the first quarter of 2024, pulp unit manufacturing costs were significantly higher, largely driven by higher fibre costs, as the impact on unit costs of a substantial reduction in pulp production was offset by reduced spend in the current period. The notable increase in fibre costs compared to the same period in the prior year, was principally attributable to an increase in the proportion of higher cost whole log chips, combined with an uplift in market-based prices for both sawmill residual and whole log chips.

Paper production for the first quarter of 2025 was 34,000 tonnes, broadly in line with the previous quarter, and up 2,000 tonnes from the first quarter of 2024. The latter was principally associated with improved productivity following minor operational challenges in the comparative period.

Paper unit manufacturing costs were slightly higher than the fourth quarter of 2024, largely driven by increased slush pulp costs (correlated with the increase in Canadian dollar NBSK pulp unit sales realizations) as per-unit conversion costs were broadly comparable quarter-over-quarter. Compared to the first quarter of 2024, paper unit manufacturing costs saw a moderate increase, primarily reflecting higher slush pulp costs (correlated with the increase in Canadian dollar NBSK pulp unit sales realizations), offset in part improved productivity and the associated benefit of lower per-unit conversion costs quarter-over-quarter.

Unallocated items.

Selected financial information.

(millions of Canadian dollars)	Q1 2025	Q4 2024	Q1 2024
Corporate costs	$ (13.8)	$ (13.4)	$ (13.0)
Finance expense, net	$ (19.9)	$ (18.8)	$ (2.6)
Foreign exchange gain (loss) on term debt, duty deposits loan and duty deposits recoverable, net	$ 0.6	$ (12.6)	$ 0.1
Gain (loss) on derivative financial instruments	$ 9.8	$ (8.2)	$ (10.3)
Other income (expense), net	$ (0.2)	$ 5.9	$ 19.2

Corporate costs were $13.8 million for the first quarter of 2025, up $0.4 million from the previous quarter and up $0.8 million from the same quarter in the prior year. The latter primarily reflected higher head office and general administrative expenses in the current quarter, offset in part by lower legal costs associated with the softwood lumber dispute.

Net finance expense of $19.9 million for the first quarter of 2025 was up $1.1 million from the previous quarter principally due to a decrease in interest income on US-dollar short term investments in the current period. Net finance expense of $2.6 million in the first quarter of 2024 primarily consisted of interest expense on operating loan and term debt facilities, largely offset by interest income on US-dollar short term investments.

In the first quarter of 2025, the Company recognized a foreign exchange gain of $0.6 million, as a $1.2 million loss on its US-dollar term debt held by US entities was more than offset by a $1.8 million gain on its US-dollar denominated duty deposits loan and net duty deposits recoverable tied to the slight strengthening of the Canadian dollar at the close of the current quarter compared to the end of December 2024 (see further discussion related to term debt in the "Liquidity and financial requirements" section).

At times, the Company uses a variety of derivative financial instruments as partial economic hedges against unfavourable changes in lumber prices, energy costs, interest and foreign exchange rates. In the first quarter of 2025, the Company recorded a net gain of $9.8 million related to its derivative instruments, primarily reflecting unrealized and realized mark-to-market gains on SEK foreign exchange forward contracts, offset in part by unrealized losses on lumber futures contracts.

Other comprehensive income.

The following table summarizes Canfor's other comprehensive income for the comparable periods:

(millions of Canadian dollars)	Q1 2025	Q4 2024	Q1 2024
Defined benefit plan actuarial gain (loss), net of tax	$ (2.2)	$ 5.9	$ 6.3
Foreign exchange translation differences for foreign operations, net of tax	$ 57.3	$ 98.3	$ 11.2
Other comprehensive income, net of tax	$ 55.1	$ 104.2	$ 17.5

8

Canfor Corporation

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In the first quarter of 2025, the Company recorded a loss of $3.0 million (before tax) related to changes in the valuation of the Company's defined benefit plans (comprised of defined benefit pension plans as well as other benefit plans), principally reflecting a 0.1% decrease in the discount rate used to value the net defined benefit obligations.

This compared to a gain of $8.1 million (before tax) recognized in the fourth quarter of 2024 in relation to the Company's net defined benefit obligations (comprised of defined benefit pension plans as well as other benefit plans), largely due to a gain associated with the distribution of a plan surplus to members following the final settlement of one of the Company's registered pension plans. In the first quarter of 2024, the Company recorded a gain of $8.6 million (before tax) primarily related to changes in the valuation of the Company's defined benefit plans (comprised of defined benefit pension plans as well as other benefit plans), primarily reflecting a 0.3% increase in the discount rate used to value the net defined benefit obligations.

In addition, the Company recorded an accounting gain of $57.3 million in the first quarter of 2025 related to foreign exchange differences for foreign operations principally due to the weakening of the Canadian dollar relative to the SEK at the close of the current quarter compared to the end of the prior year, offset slightly by a stronger Canadian dollar relative to the US-dollar at the end of the period. This compared to a gain of $98.3 million in the fourth quarter of 2024 and $11.2 million in the first quarter of 2024.

Summary of financial position.

The following table summarizes Canfor's cash flow and selected ratios and other key financial items for and as at the end of the following periods:

(millions of Canadian dollars, except ratios)	Q1 2025	Q4 2024	Q1 2024
Decrease in cash and cash equivalents^{19}	$ (142.3)	$ (267.3)	$ (194.8)
Operating activities	$ (70.6)	$ 87.9	$ (81.0)
Financing activities	$ 45.7	$ (108.8)	$ (15.3)
Investing activities	$ (117.4)	$ (246.4)	$ (98.5)
Ratio of current assets to current liabilities	1.8 : 1	1.9 : 1	2.3:1
Net debt (cash) to total capitalization^{20}	12.2%	7.8%	(3.5)%
Cumulative duty deposits paid	$ 1,020.3	$ 996.9	$ 944.0

1. Decrease in cash and cash equivalents shown before foreign exchange translation on cash and cash equivalents.
2. Net debt (cash) to total capitalization is a non-IFRS financial measure. Refer to the "Non-IFRS financial measures" section for further details.

Operating activities.

Cash used from operating activities was $70.6 million in the first quarter of 2025, compared to cash generated of $87.9 million in the previous quarter and cash used of $81.0 million in the first quarter of 2024. The $158.5 million decrease in operating cash flows from the previous quarter primarily reflected unfavourable movements in non-cash working capital balances, partly offset by higher cash earnings in the current period. The former was principally driven by an increase in trade receivables combined with the traditional seasonal log inventory build during the current quarter, partially offset by a timing-related increase in accounts payable and accrued liabilities. Compared to the first quarter of 2024, operating cash flows improved by $10.4 million, mainly due to higher cash earnings in the current quarter.

Financing activities.

Cash generated from financing activities in the first quarter of 2025 was $45.7 million, compared to cash used of $108.8 million in the previous quarter and cash used of $15.3 million in the first quarter of 2024. Financing activities in the current quarter largely consisted of a net $67.7 million draw-down on the Company's operating loan facilities (refer to the "Liquidity and Financial Requirements" section for further details), offset in part by lease and interest payments as well as share repurchases. In the fourth quarter of 2024, financing activities primarily included $50.7 million in net cash distributions to non-controlling interests, the majority of which related to a Vida dividend payment, combined with a $45.0 million repayment of long-term debt, and, to a lesser extent, lease and interest payments. In the first quarter of 2024, financing activities were principally comprised of share repurchases, lease and interest payments.

Investing activities.

Cash used for investing activities was $117.4 million for the current quarter, compared to $246.4 million for the previous quarter and $98.5 million for the same quarter of 2024. Investing activities in the current quarter, as well as both comparative periods, were mainly comprised of capital additions. Investing activities in the fourth quarter of 2024 also included the acquisition of an additional 7% of the outstanding shares in Vida for $118.3 million (SEK 916.6 million).

9
Canfor Corporation

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Capital additions in the first quarter of 2025 were $122.1 million, down $14.5 million from the previous quarter and up $18.7 million from the first quarter of 2024. In the lumber segment, current quarter capital expenditures mainly reflected the wrap up of spend on the Company's greenfield sawmill in Axis, Alabama, ongoing capital investment at the Company's Iron Mountain sawmill in Arkansas, as well as the continuation of spend related to the expansion of the Bruza sawmill in Sweden. Capital spend in the current period also included maintenance-of-business capital across all three lumber operating regions. In the pulp and paper segment, capital expenditures were predominantly associated with maintenance-of-business capital spend.

Liquidity and financial requirements.

Operating loans – Consolidated.

At March 31, 2025, on a consolidated basis, including CPPI and Vida, the Company had cash and cash equivalents of $128.5 million, with $174.9 million drawn on its operating loans and facilities, and an additional $54.7 million reserved for several standby letters of credit. At the end of the quarter, the Company had available and undrawn operating loan facilities of $1,258.0 million, including an undrawn committed revolving credit facility.

Operating loans – Canfor, excluding Vida and CPPI.

At March 31, 2025, Canfor, excluding Vida and CPPI, had available operating and revolving loan facilities totaling $1,219.6 million, with $94.4 million drawn on its operating loan facilities, and an additional $48.7 million reserved for several standby letters of credit, the majority of which related to unregistered pension plans, leaving $1,076.5 million available and undrawn at the end of the current period.

Interest is payable on Canfor's committed operating and revolving loan facilities at floating rates based on the lenders' Canadian prime rate, bankers' acceptances, US-dollar base rate or US-dollar floating rate, plus a margin that varies with Canfor's net debt to total capitalization ratios. Canfor's committed operating and revolving credit facilities have certain financial covenants, including a maximum net debt to total capitalization ratio of 50.0% and a minimum earnings before interest, taxes, depreciation and amortization ("EBITDA") interest coverage ratio test of two times, which becomes effective if Canfor's net debt to total capitalization ratio exceeds 42.5%.

Canfor's principal committed operating loan facility matures on April 16, 2028. Canfor's committed revolving credit facility matures on June 28, 2025. On June 28, 2025, any amounts drawn on the committed revolving credit facility will be converted to US-dollar denominated floating rate term debt, with a maturity date of June 28, 2030.

Operating loans – Vida.

At March 31, 2025, Vida had $5.5 million drawn on its $108.0 million operating loan facilities, leaving $102.5 million available and undrawn at the end of the current quarter.

Vida's operating loan facilities are denominated in various currencies, with interest payable at fixed rates ranging from 4.2% to 6.6%. Vida also has separate overdraft facilities with fixed interest rates ranging from 3.8% to 7.5%.

Operating loans – CPPI.

At March 31, 2025, CPPI had $75.0 million drawn on its $160.0 million operating loan facility, with $6.0 million reserved for several standby letters of credit under the operating loan facility, leaving $79.0 million available and undrawn at the end of the current period.

The terms of CPPI's operating loan facility include interest payable at floating rates based on lenders' Canadian prime rate, bankers' acceptances, US-dollar base rate or US-dollar floating rate, plus a margin that varies with CPPI's net debt to total capitalization ratio.

CPPI's operating loan facility is repayable on May 2, 2027, and has certain financial covenants, including a maximum debt to total capitalization ratio of 60.0% (2024 – 50.0%) and a minimum EBITDA interest coverage ratio test of two times, which becomes effective if CPPI's net debt to total capitalization ratio exceeds 42.5%. In addition, if the net debt to total capitalization reaches a certain threshold, a general security agreement on the property of CPPI is introduced and the minimum EBITDA interest coverage ratio is lowered to one and a half times.

Term debt.

Canfor's and CPPI's term debt, excluding Vida, is unsecured. Vida's term debt is secured by its property, plant and equipment.

Debt covenants.

Canfor, Vida and CPPI remained in compliance with all covenants relating to their respective operating loan facilities and term debt during the quarter. Substantially all borrowings of Vida and CPPI are non-recourse to other entities within the Company.

10
Canfor Corporation

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Net debt and liquidity.

At March 31, 2025, on a consolidated basis, including CPPI and Vida, the Company had total net debt of $498.6 million, a $195.4 million increase from net debt of $303.2 million at the end of the previous quarter. Available liquidity of $1,386.5 million, decreased by $194.4 million from the previous quarter.

The Company's consolidated net debt to total capitalization at the end of the first quarter of 2025 was 12.2%. For Canfor, excluding CPPI, net debt to total capitalization at the end of the first quarter of 2025 was 10.8%.

Normal course issuer bid

On March 19, 2025, the Company announced that it received regulatory approval for a renewal of its normal course issuer bid whereby it can purchase for cancellation up to 5,916,775 common shares, or approximately 5%, of its issued and outstanding common shares as of March 14, 2025. The renewed normal course issuer bid is set to expire on March 20, 2026.

During the first quarter of 2025, the Company purchased 275,824 common shares for $4.2 million (an average price of $15.34 per common share), before tax of $0.1 million, and of which $3.5 million was paid during the current quarter.

Shares outstanding.

As at March 31, 2025, and May 7, 2025, based on trade date, there were 118,129,252 and 117,436,141 common shares of the Company outstanding, respectively. Canfor's ownership interest in CPPI and Vida was at 54.8% and 77.0%, respectively.

Countervailing and anti-dumping duties.

On January 1, 2025, the Company moved into the eighth period of review ("POR8"), which is based on sales and cost data in 2025. Consistent with prior periods of review, the Company was unable to estimate an applicable countervailing duty ("CVD") rate separate from the cash deposit rate prescribed by the US Department of Commerce ("DOC"). As a result, CVD was expensed at a rate of 6.14% and anti-dumping duty ("ADD") was expensed at an estimated accrual rate of 10.00%. This resulted in a combined accounting rate of 16.14% for the first quarter of 2025 (versus the DOC's combined cash deposit rate of 16.58% for the same period), down 12.0% from the previous quarter's accrual rate of 28.14% as a result of improved lumber pricing and lower costs.

In March 2025, the DOC announced the preliminary ADD results for the sixth period of review ("POR6"), which indicated that the Company's preliminary ADD rate for 2023 was 34.61%. Subsequently, in April 2025, the DOC announced the preliminary countervailing results for POR6, which indicated that the Company's preliminary CVD rate for 2023 was 11.87%, resulting in a preliminary combined rate of 46.48%. Upon finalization of these rates (anticipated in the third quarter of 2025), an expense estimated at $83.1 million (US$57.8 million), will be recognized in the Company's interim consolidated financial statements to reflect the difference between the combined accrual rate of 35.95% between January and July 2023 and 36.36% for August to December 2023, and the DOC's combined rate for POR6 (currently estimated to be 46.48%). In addition, once final, the Company's current combined cash deposit rate of 16.58% will be reset to the DOC rates for POR6 (currently estimated to be 46.48% based on the preliminary determination).

Canfor will continue to reassess the ADD accrual estimate at each quarter-end, applying the DOC's methodology to updated sales and cost data as this becomes available. Quarterly revisions to the ADD rate may result in a material adjustment to the consolidated statement of income (loss) while the Administrative Reviews are taking place. Changes to the DOC's existing CVD and ADD rates during the course of each administrative review may also result in material adjustments to the consolidated statement of income (loss).

Canfor and other Canadian forest product companies, the Federal Government and Canadian Provincial Governments continue to categorically deny the US allegations and strongly disagree with the current CVD and ADD determinations made by the DOC. Canada has proceeded with legal challenges under the Canada-United States-Mexico Agreement ("CUSMA") and through the World Trade Organization, where Canadian litigation has proven successful in the past. Most recently, on September 9, 2024, the Canadian Federal Government launched two legal challenges against the US DOC related to the final rates for POR5.

Outlook.

Lumber.

Looking ahead, North American lumber markets are anticipated to experience continued volatility and uncertainty throughout the second quarter of 2025. Ongoing affordability challenges and tariff-related disruptions to traditional trade flows are projected to result in tepid demand in the near term.

11
Canfor Corporation

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In addition to the pre-existing CVD and ADD impacts on the Company, Canfor continues to monitor the trade situation between Canada and the US. With a diversified global operating platform, the Company is positioned to mitigate some of these costs. However, potential tariffs do present challenges for the Company's Canadian operations. As a result, the Company is continuing to focus on domestic markets, as well as strengthening its presence in non-US markets.

In Japan, lumber demand and pricing are anticipated to continue to improve through the second quarter of 2025 as a result of ongoing strength in the multi-family rental and non-residential sectors, coupled with relatively lean inventory levels in the region. In China, the subdued market conditions experienced in the first quarter of 2025 are forecast to continue through the second quarter.

In Europe, lumber supply is projected to remain under pressure in the second quarter of 2025 as a result of ongoing log supply constraints and persistently high log prices in the region. This constrained lumber supply, when combined with an anticipated slight improvement in affordability, is forecast to result in an uplift in European lumber prices in the second quarter.

Pulp and paper.

While global pulp demand and pulp producer inventory levels are currently stable, looking ahead, global softwood pulp markets are anticipated to remain subdued as increasing uncertainty associated with economic concerns and potential trade disruptions weigh on market conditions.

Like Canfor, CPPI continues to monitor the trade situation between Canada and the US and is prepared with mitigation plans to mostly offset the impact should tariffs on US shipments be imposed. CPPI is also monitoring the broader global trade situation. With its high quality, specialty product offering and market diversification, CPPI is positioned to respond to any potential tariffs.

CPPI remains focused on optimizing its operating footprint, enhancing operational reliability as well as closely managing manufacturing and fibre costs. Looking forward, there remains significant uncertainty with regards to the availability of economically viable fibre within BC. As a result, CPPI continues to anticipate that escalating log cost pressures and transportation costs in BC will translate into a higher cost fibre supply for its pulp mills (both for sawmill residual chips and whole log chips). CPPI will continue to evaluate operating conditions and adjust operating rates at its pulp mills to align with economically viable fibre supply. These factors could also affect CPPI's operating plan, liquidity, cash flows and the valuation of long-lived assets.

The relatively muted North American demand for bleached kraft paper experienced at the end of the first quarter is projected to continue to through the second quarter of 2025, largely as a result of uncertainty surrounding the trade situation between Canada and the US and the potential for tariffs on US shipments.

No major maintenance outages are planned at CPPI's pulp mills or its paper machine for the second quarter of 2025. Looking forward, CPPI has revised its maintenance schedule for the second half of 2025. A maintenance outage is now scheduled in the third quarter of 2025 at CPPI's Intercon Pulp mill and at its Paper machine. This maintenance outage is projected to reduce both NBSK market pulp production and paper production by 2,000 tonnes each. In the fourth quarter of 2025, a maintenance outage is now scheduled at CPPI's Northwood Pulp mill which is projected to reduce NBSK market pulp production by 10,000 tonnes.

Critical accounting estimates.

The preparation of financial statements in conformity with IFRS requires Management to make estimates and assumptions that affect the amounts recorded in the financial statements. On an ongoing basis, Management reviews its estimates, including those related to useful lives for amortization, impairment of long-lived assets, certain receivables, pension and other employee future benefit plans, asset retirement and deferred reforestation obligations, and the determination of ADD expensed and recorded as recoverable based upon currently available information. While it is reasonably possible that circumstances may arise which cause actual results to differ from these estimates, Management does not believe it is likely that any such differences will materially affect the Company's financial condition, other than the possibility of material effects to the income statement from the Company's estimated ADD net duty deposits recoverable as discussed in Notes 4 and 12 of the condensed consolidated interim financial statements.

Internal controls over financial reporting.

During the quarter ended March 31, 2025, there were no changes in the Company's internal controls over financial reporting that materially affected, or would be reasonably likely to materially affect, such controls.

12

Canfor Corporation

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Risks and uncertainties.

A comprehensive discussion of risks and uncertainties is included in the Company's 2024 annual statutory reports which are available on canfor.com or sedarplus.com.

Canfor continues to monitor the trade situation between Canada and the US, as tariffs or potential tariffs could impact the Company's financial results. Please see the Company's annual disclosures referenced above for further information.

In addition to exposure to changes in product prices and foreign exchange, the Company's financial results are impacted by seasonal factors such as weather and building activity. Adverse weather conditions, as well as forest fires, can cause logging curtailments, which can affect the supply of raw materials to sawmills and pulp mills. Market demand also varies seasonally to some degree. For example, building activity and repair and renovation work, which affects demand for lumber products, is generally stronger in the spring and fall months. Shipment volumes are affected by these factors as well as by global supply chain networks and demand conditions. Net income (loss) is also impacted by fluctuations in Canadian dollar exchange rates, and the revaluation to the period end rate of US-dollar and SEK denominated working capital balances, US-dollar and SEK denominated debt and revaluation of outstanding derivative financial instruments.

Selected quarterly financial information.

	Q1 2025	Q4 2024	Q3 2024	Q2 2024	Q1 2024	Q4 2023	Q3 2023	Q2 2023
Sales and income (loss)
(millions of Canadian dollars)
Sales	$ 1,417.5	$ 1,285.7	$ 1,202.9	$ 1,381.5	$ 1,382.7	$ 1,282.9	$ 1,312.3	$ 1,446.0
Operating income (loss) before amortization, asset write-downs and impairments^{21}	$ 72.6	$ 52.7	$ (144.4)	$ (98.3)	$ 19.8	$ (89.1)	$ 42.6	$ 41.0
Operating loss	$ (28.5)	$ (45.9)	$ (559.7)	$ (250.8)	$ (85.8)	$ (191.3)	$ (65.1)	$ (66.7)
Net loss	$ (26.0)	$ (62.2)	$ (423.3)	$ (186.4)	$ (64.3)	$ (121.6)	$ (34.7)	$ (48.6)
Shareholder net loss	$ (31.0)	$ (63.3)	$ (350.1)	$ (191.1)	$ (64.5)	$ (117.1)	$ (23.1)	$ (43.9)
Per common share (Canadian dollars)
Shareholder net loss – basic and diluted	$ (0.26)	$ (0.53)	$ (2.96)	$ (1.61)	$ (0.54)	$ (0.98)	$ (0.19)	$ (0.36)
Book value^{22}	$ 28.18	$ 27.97	$ 27.41	$ 30.32	$ 31.69	$ 32.10	$ 32.89	$ 32.63
Statistics
Lumber shipments (MMfbm)^{23}	1,266	1,270	1,228	1,386	1,371	1,333	1,288	1,406
Pulp shipments (000 mt)	112	97	125	145	159	136	142	179
Average exchange rate – US$/Cdn$	$ 0.697	$ 0.715	$ 0.733	$ 0.731	$ 0.741	$ 0.734	$ 0.746	$ 0.745
Average exchange rate – SEK/Cdn$	7.426	7.708	7.639	7.806	7.706	7.819	8.056	7.833
Average Western SPF 2x4 #2&8tr lumber price (US$)	$ 492	$ 435	$ 366	$ 386	$ 446	$ 400	$ 419	$ 358
Average SYP (East) 2x4 #2 lumber price (US$)	$ 448	$ 424	$ 380	$ 354	$ 419	$ 448	$ 452	$ 486
Average SYP (East) 2x6 #2 lumber price (US$)	$ 404	$ 367	$ 270	$ 308	$ 354	$ 333	$ 404	$ 385
Average NBSK pulp list price delivered to China (US$)	$ 793	$ 767	$ 771	$ 811	$ 745	$ 748	$ 680	$ 668

1. Amortization includes amortization of certain capitalized major maintenance costs; includes asset write-down and impairment charges of $311.3 million in Q3 2024, and $31.6 million in Q2 2024.
2. Book value per common share is equal to shareholders' equity at the end of the period, divided by the number of common shares outstanding at the end of the period.
3. Includes Canfor produced lumber, as well as lumber purchased for resale, remanufacture and engineered wood, excluding trim blocks, wholesale shipments and lumber sold on behalf of first parties.

13

Canfor Corporation

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Other factors that impact the comparability of the quarters are noted below:

After-tax impact, net of non-controlling interests (millions of Canadian dollars, except for per share amounts)	Q1 2025	Q4 2024	Q3 2024	Q2 2024	Q1 2024	Q4 2023	Q3 2023	Q2 2023
Shareholder net loss, as reported	$(31.0)	$(63.3)	$(350.1)	$(191.1)	$(64.5)	$(117.1)	$(23.1)	$(43.9)
Foreign exchange (gain) loss on term debt	$1.2	$(2.7)	$(3.5)	$3.1	$6.6	$(5.3)	$6.4	$(6.7)
Foreign exchange (gain) loss on duty deposits loan	$(2.5)	$21.3	$-	$-	$-	$-	$-	$-
(Gain) loss on derivative financial instruments	$(5.8)	$4.8	$0.2	$(3.9)	$5.8	$(4.8)	$(2.7)	$6.3
Asset write-downs and impairments	$-	$-	$158.7	$23.2	$-	$-	$-	$-
Net impact of above items	$(7.1)	$23.4	$155.4	$22.4	$12.4	$(10.1)	$3.7	$(0.4)
Adjusted shareholder net loss24	$(38.1)	$(39.9)	$(194.7)	$(168.7)	$(52.1)	$(127.2)	$(19.4)	$(44.3)
Shareholder net loss per share (EPS), as reported	$(0.26)	$(0.53)	$(2.96)	$(1.61)	$(0.54)	$(0.98)	$(0.19)	$(0.36)
Net impact of above items per share	$(0.06)	$0.20	$1.31	$0.19	$0.10	$(0.08)	$0.03	$-
Adjusted net loss per share24	$(0.32)	$(0.33)	$(1.65)	$(1.42)	$(0.44)	$(1.06)	$(0.16)	$(0.36)

1. Adjusted shareholder net loss is a non-IFRS financial measure. Refer to the "Non-IFRS financial measures" section for further details.

Non-IFRS financial measures.

Throughout this interim MD&A, reference is made to certain non-IFRS financial measures which are used to evaluate the Company's performance but are not generally accepted under IFRS. The following table provides a reconciliation of these non-IFRS financial measures to figures reported in the Company's condensed consolidated interim financial statements:

(millions of Canadian dollars)	Q1 2025	Q4 2024	Q1 2024
Reported operating loss	$(28.5)	$(45.9)	$(85.8)
Inventory recovery, net	$(3.7)	$(36.1)	$(30.2)
Adjusted operating loss	$(32.2)	$(82.0)	$(116.0)
Amortization	$101.1	$98.6	$105.6
Adjusted operating income (loss) before amortization	$68.9	$16.6	$(10.4)
(millions of Canadian dollars, except ratios)	Q1 2025	Q4 2024	Q1 2024
---	---	---	---
Reported operating loss	$(28.5)	$(45.9)	$(85.8)
Realized (gain) loss on derivative financial instruments	$(4.6)	$3.9	$0.4
Other income (expense), net	$(0.2)	$5.9	$19.2
Less: non-controlling interests	$(6.7)	$17.0	$7.1
Loss	$(26.6)	$(53.1)	$(73.3)
Average invested capital35	$4,106.7	$3,911.8	$4,267.9
Return on invested capital (ROIC)	(0.6)%	(1.4)%	(1.7)%

1. Average invested capital represents the average during the period of total assets excluding cash and cash equivalents and total liabilities excluding term debt, retirement benefit obligations, long-term deferred reforestation obligations, and deferred taxes, net of non-controlling interests.

(millions of Canadian dollars, except ratios)	As at March 31, 2025	As at December 31, 2024	As at March 31, 2024
Term debt	$119.6	$120.6	$163.9
Duty deposits loan	$332.6	$335.1	$-
Operating loans	$174.9	$106.8	$116.1
Less: cash and cash equivalents	$128.5	$259.3	$421.3
Net debt (cash)	$498.6	$303.2	$(141.3)
Total equity	$3,604.4	$3,583.8	$4,222.1
Total capitalization	$4,103.0	$3,887.0	$4,080.8
Net debt (cash) to total capitalization	$12.2%	$7.8%	$(3.5)%

14

Canfor Corporation