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FIBREK REPORTS RECORD SALES AND STRONG EBITDA FOR 2010

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  Published in House and Home on Wednesday, February 23rd 2011 at 16:27 GMT by Market Wire
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TSX: FBK
[ www.fibrek.com ]

Compared to 2009:

• Sales grew 43% to a record $556.5 million
• EBITDA increased by $73.7 million from negative $11.9 million in 2009, EBITDA margin at 11.1%
• Net earnings increased by $87.0 million from a net loss of $79.2 million in 2009

Compared to the fourth quarter of 2009:

• Sales grew 14%
• EBITDA increased $5.7 million, despite major maintenance and capital work performed at the Saint-Félicien and Fairmont mills
• Net earnings were up $11.2 million

Highlights:

• Conversion to corporate structure
• Strong balance sheet following refinancing of long-term debt
• Gain of $5.5 million on settlement of a claim with AbitibiBowater Inc.
• New corporate strategy approved by board of directors
• Preparation of the Saint-Félicien mill to transition from 14 to 10 days of scheduled shutdown, effective in 2011

LONGUEUIL, QC, Feb. 23 /CNW Telbec/ - Fibrek Inc. (TSX: FBK), a leading producer and marketer of high-quality virgin and recycled kraft pulp, announced today results for the three months and year ended December 31, 2010.  All $ amounts are in Canadian dollars unless otherwise stated.

CONSOLIDATED RESULTS

Commenting on these results, Pierre Gabriel Côté, President and Chief Executive Officer, indicated: "2010 was a milestone year for our Company. The conversion from an income trust fund to a corporation, from SFK Pulp to Fibrek, marked a new beginning. Our many transformation initiatives began to bear fruit in 2010 and along with favourable market conditions enabled us to attain record sales this year, as well as major improvements in other key financial measures. We begin 2011 with a strong balance sheet and a newly-minted strategic plan which will focus in 2011 on improving our RBK business and product development."

FOURTH QUARTER 2010
Sales in the fourth quarter of 2010 totalled $131.5 million, compared with sales of $115.7 million for the same period last year. The increase of $15.8 million in sales is attributable to higher sales prices in both business segments and a higher NBSK sales volume, which were partially offset by a lower RBK sales volume and a stronger Canadian dollar compared to the US currency.

Production at the Mills during the quarter ended December 31, 2010 totalled 166,117 tonnes, compared with 173,594 tonnes for the fourth quarter of 2009. The change in the production level is attributable to less operating days in 2010 due to the major maintenance downtime taken at the Saint-Félicien and Fairmont mills. Shutdown costs for the Saint-Félicien mill were also higher than expected in the fourth quarter of 2010, due to the additional work performed to transition from 14 to 10 days of scheduled shutdown, starting in 2011.

EBITDA was $6.0 million compared to $0.4 million in the fourth quarter of 2009.

Financial charges decreased from $4.8 million in the fourth quarter of 2009 to $3.6 million in the fourth quarter of 2010. This $1.2 million reduction results mainly from a lower debt level due to the reduction of the amount outstanding under the revolving facilities and the reduction of the long-term debt as a result of the rights offering completed in July 2010 as well as lower interest rates following the refinancing transactions completed at the same time.

A net loss of $4.6 million was recorded in the fourth quarter of 2010, compared with a net loss of $15.7 million in the corresponding period of 2009. Net loss per share amounted to $0.05 (basic and diluted) in the fourth quarter of 2010, compared with a net loss per share of $0.18 (basic and diluted) in the corresponding period of 2009.

FULL YEAR 2010
In 2010, consolidated sales reached $556.5 million, an increase of $167.2 million when compared with sales of $389.3 million in 2009. This increase is mainly attributable to higher pulp prices and a favourable sales mix of $131.5 million and a higher sales volume for $95.9 million, which were partially offset by unfavourable exchange rate of $60.2 million.

Cost of products sold totalled $439.5 million in 2010, an increase of $90.4 million when compared with the corresponding period of 2009. This increase is primarily due to a higher sales volume of $75.7 million and higher input prices, such as wastepaper, which were partially offset by the impact of the exchange rate on our US operating costs.

EBITDA was strong for 2010 at $61.8 million (or 11.1% of sales), compared to negative EBITDA of $11.9 million for the corresponding period of 2009.

Financial charges decreased from $17.8 million in 2009 to $17.2 million in 2010. This $0.6 million reduction results mainly from a lower debt level due to the reduction of the amount outstanding under the revolving facilities and the reduction of the long-term debt as a result of the rights offering completed in July 2010 as well as lower interest rates following the refinancing transactions in the second half of 2010.

Net earnings of $7.8 million were recorded in 2010, compared with a net loss of $79.2 million in the corresponding period of 2009. Net earnings per share amounted to $0.07 (basic and diluted) in 2010, compared with a net loss per share of $0.88 (basic and diluted) in the corresponding period of 2009.

SEGMENT REVIEW

NBSK Pulp Results

NBSK FOURTH QUARTER 2010
For the fourth quarter of 2010, NBSK pulp sales reached $72.0 million, compared to $59.4 million for the same period of 2009. The sales volume reached 89,268 tonnes, 6,871 tonnes higher than in the corresponding quarter of 2009. 

According to Resource Information Systems Inc. ("RISI"), NBSK market pulp prices (for pulp delivered in North America) increased by US$147 per tonne or 18% on average compared to the fourth quarter of 2009. However, the year-over-year increase in the value of the Canadian currency compared to the US dollar combined with an unfavourable market mix resulted in an average sales price of $807 in the fourth quarter of 2010 compared with $721 in the fourth quarter of 2009.

In November 2010, during the regular major maintenance shutdown, a machine press was installed to increase production and energy efficiency at the Saint-Félicien Mill. Although the installation and ramp up was longer than planned (3.5 days more than expected), early productivity indicators are already showing positive results. In addition, this project is energy efficient since the pulp contains less water prior to the drying stage. This project should meet the criteria for funding under the Canadian Green Transformation Program (CGTP). Therefore, out of the $20.9 million grant allocated to Fibrek under the CGTP, approximately $5 million could be applied to the machine press project. The remainder will be applied to our 9.5MW co-generation project.

NBSK FULL YEAR 2010
Sales for the year ended December 31, 2010 totalled $284.8 million, compared with $206.1 million for the corresponding period of 2009, representing an increase of $78.7 million. This increase is attributable to higher pulp prices of $81.1 million and a higher sales volume of $28.4 million which were partly offset by a stronger Canadian dollar compared to the US currency of $30.8 million.

The NBSK pulp sales volume totalled 343,627 tonnes in 2010, an increase of 34,328 tonnes when compared with 309,299 tonnes for the corresponding period of 2009. The increase in sales volume was mainly due to a strong recovery in 2010 despite an increase in world supply.

According to RISI, NBSK market pulp price (for pulp delivered in North America) was higher by US$242 per tonne or 34% on average during 2010 when compared with 2009. The increase in NBSK average market pulp price was partly offset by a stronger Canadian dollar when compared with 2009, resulting in an average sales price of CAN$989 per tonne, CAN$169 per tonne above the average sales price recorded in 2009.

During 2010, 14% of our sales of NBSK pulp were realized in Canada, 62% in the United States, 21% in Europe and 3% in other regions. Over the same period last year, these percentages were 21%, 49%, 26% and 4%, respectively.

RBK Pulp Results

RBK FOURTH QUARTER 2010
The RBK pulp sales reached $59.4 million in the fourth quarter of 2010, compared with sales of $56.3 million for the corresponding period of 2009. The sales volume totalled 79,881 tonnes in the fourth quarter of 2010, compared with 90,589 tonnes in the corresponding period of 2009.

RBK FULL YEAR 2010
For the year ended December 31, 2010, the RBK pulp segment recorded sales of $271.7 million, compared with $183.2 million for the corresponding period of 2009. This increase of $88.5 million is mainly attributable to higher net realized pulp prices of $52.7 million and by a higher sales volume of $65.2 million, which were partly offset by an unfavourable exchange rate of $29.4 million.

The RBK pulp sales volume reached 368,538 tonnes in 2010, compared with 280,168 for 2009. In 2009, the black liquor tax credit allocated to US virgin pulp producers impacted the RBK pulp demand. RBK pulp average sales prices increased by 25% (or 13% when translated in Canadian dollars) compared with the corresponding period in 2009.

During 2010, 80% of RBK pulp sales were realized in the United States, 10% in Europe and 10% in other countries. Over the same period last year, these percentages were 80% in the United States, 12% in Europe and 8% in other countries.

CORPORATE DEVELOPMENTS

Partial redemption of Debentures
Over the past year, Fibrek has achieved significant improvements in its earnings and operating cash flow. Fibrek has decided to use its available cash to partially redeem its convertible unsecured subordinated debentures maturing on December 31, 2011 (the "Debentures") in order to reduce interest expenses and debt. On redemption date, which is set to be on February 28, 2011, Fibrek will redeem Debentures in an aggregate principal amount of $25,874,000. With this redemption, Fibrek expects to save approximately $1.5 million in interest expense in 2011 and reduce its debt to total capitalization ratio by approximately 3%.

Gain on settlement of a claim
As announced on January 13, 2011, Fibrek received 236,226 shares of AbitibiBowater Inc. as compensation for an unsecured creditor claim for the repudiation by Abitibi Consolidated Company of Canada of the woodchip supply contract in 2009. As a result, the Company recorded a gain on settlement of a claim totalling $5.5 million in 2010. These shares were sold on the TSX on February 3, 2011 at a price of $26.75 per share, resulting in an additional $0.8 million gain, which will be recorded in the first quarter of 2011 results.

Co-generation project
In connection with the 9.5MW electricity sales contract concluded with Hydro-Québec in 2010, the Saint-Félicien Mill will be adding a third turbo generator group to its existing co-generation plant. Preliminary engineering is completed. Currently, the project cost is evaluated at approximately $37 million with expected EBITDA of approximately $6 million per year starting in January 2013. Detailed engineering is progressing according to plan and start up is scheduled for December 2012. This investment project qualifies under the Canadian Green Transformation Program (CGTP). The co-generation plant project will receive approximately $15.9 million of the $20.9 million grant allocated to Fibrek under the CGTP, while the added machine press at the Saint-Félicien Mill should receive the balance of $5 million.

New corporate strategy
In the fourth quarter of 2010, Fibrek's board of directors approved the Company's new corporate strategy. Fibrek's combination of strategic thinking and tactical operations optimization was developed in order to improve customer satisfaction through a culture of "Operational Excellence" supported by an engaged workforce. We believe this will translate into increased value for our shareholders.

On the strategic front, Fibrek will seek profitable growth and diversification opportunities (with a priority on tissue and energy), focus on debt reduction and maximize financial performance. On the operational front, the strategic plan focuses on efficiency improvements, cost control, supply chain management optimization (including a commercial strategy on wastepaper supply), innovation, high level of customer service and engagement of employees through talent development and knowledge.

"In line with our new corporate strategy, we have already undertaken several actions which are showing positive results. We have increased production and energy efficiency at the Saint-Félicien Mill with the addition of a machine press, resulting in lower transformation costs; we have reduced our debt level with our refinancing transactions of July 2010 and will continue to do so by redeeming approximately 50% of our Debentures on February 28, 2011, resulting in lower interest charges; we have set the basis to generate a new source of revenue starting in 2013 with our co-generation project in Saint-Félicien; we have created a new function aimed at product development and innovation in collaboration with FPInnovation; and we have also recently launched our new web site ([ www.fibrek.com ]) as a starting point to further increase communication with our stakeholders. We are committed to execute this strategy aimed at generating value for our shareholders," said Pierre Gabriel Côté.

OUTLOOK

"NBSK pulp market was forecasted to soften in the fourth quarter but, to the contrary, demand remained strong and is continuing to be strong in the first quarter of 2011. Market fundamentals such as low inventory levels and high demand from China are keeping prices at a healthy level. NBSK usage as a substitute for dissolving pulp is growing in Asia and Europe. Start-ups of idled mills did have an impact on the discounts given by Fibrek to its customers during the fourth quarter, but these discounts have all been removed in the first quarter of 2011, a clear indication of a good supply and demand balance. Moreover, price increases of US$30 per tonne will come into effect as of March 1st, as announced.

The RBK pulp market continues to be negatively impacted by the continued oversupply position of the hardwood kraft pulp market.  In addition, wastepaper prices, although flat in the fourth quarter, are still high and forecasted to remain flat in the first quarter of 2011. The financial results of this business segment are still below our expectations. Our focus is to increase the margins of the RBK operations through innovation, product development, cost-plus contracts and a push to increase recycled contents in tissue and food packaging grades.

We are pursuing our debt reduction initiative which began with the refinancing transactions in July 2010 and now with the redemption of approximately 50% of the Debentures. It is currently the Company's intention to repurchase the remaining Debentures prior to their December 31, 2011 maturity, assuming the financial position and prevailing market conditions are appropriate," concluded Pierre Gabriel Côté.

CONFERENCE CALL
Fibrek will hold a conference call on Thursday, February 24, 2011 at 10:00 a.m. (Eastern Time), to discuss its results. Pierre Gabriel Côté, President and Chief Executive Officer, and Patsie Ducharme, Vice President and Chief Financial Officer, will host the conference call followed by a question-and-answer session to discuss financial results. To participate in the conference call, investment professionals and business media may dial 416-644-3425 (for all Toronto and overseas participants) or 1-877-974-0445, access code 4404338# (for all other North American calls).  Participants not able to listen to the live call can access a replay of the archived call by calling 1-877-289-8525, access code 4404338#. The replay will be available until 11:59 PM on Thursday, March 3^rd, 2011.

About Fibrek
Fibrek (TSX: FBK) is a leading producer and marketer of high-quality virgin and recycled kraft pulp.  The company operates three mills located in Saint-Félicien, Québec, Fairmont, West Virginia, and in Menominee, Michigan with a combined annual production capacity of 760,000 tonnes. Fibrek has approximately 500 employees. The Saint-Félicien mill provides northern bleached softwood kraft pulp (product known as NBSK pulp) to various sectors of the paper industry mainly in Canada, the United States and Europe, for use in the production of specialized products. The Fairmont and Menominee mills manufacture air-dried recycled bleached kraft pulp (product known as RBK pulp) and primarily supply manufacturers of fine uncoated paper, household paper for commercial and industrial uses, and coated paper in the United States.

Forward-Looking Statements 
This press release contains "forward-looking statements" within the meaning of applicable securities laws. These statements include, but are not limited to, statements about the Company's intention to repurchase the remaining Debentures prior to their December 31, 2011 maturity, expected project costs of the new turbogenerator to be installed at the Saint-Félicien Mill in connection with the Hydro-Québec electricity purchase agreement and expected EBITDA as a result thereof, expected qualification of the Saint-Félicien machine press under the CGTP, expected collection of accounts receivable, expected capital expenditures, estimated sufficiency of wood fibre deliveries, expected sufficiency of cash flows to fund operating needs, expected collection of accounts receivable and capital expenditures and to meet contractual obligations, recoverability of capital assets and similar statements concerning Fibrek's future outlook, business strategy, plans, expectations, results or actions, or the assumptions underlying any of the foregoing. Forward-looking statements can generally be identified by words such as "may", "should", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect", "outlook" and similar expressions. These statements are based on information currently available to Fibrek's management ("Management") and on the current assumptions, intentions, plans, expectations and estimates of Management regarding Fibrek's future growth, results of operations, performance, business prospects and opportunities and ability to attract and retain customers as well as the economic environment in which it operates. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors which could cause actual results of Fibrek to differ materially from the conclusion, forecast or projection stated in such forward-looking statements. These risks, uncertainties and other factors include, but are not limited to: general economic conditions, pulp prices and sales volume, competitive markets, exchange rate fluctuations, cost and supply of wood fibre and wastepaper, major dependence upon key customers, chemical and energy costs, increased production capacity, competing technologies, pension contributions, major disruptions capital requirements, labour relations, environment and health and safety requirements and other factors referenced in Fibrek's continuous disclosure filings which are available on SEDAR at [ www.sedar.com ]. Readers should not place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this press release, and, except as required by applicable securities laws, Fibrek assumes no obligation to update or revise them to reflect new events or circumstances.

Note to readers: Complete audited consolidated financial statements and Management's Discussion & Analysis are available on the Company's web site at: [ www.fibrek.com ] and SEDAR web site at: [ www.sedar.com ].

Fibrek Inc.: Financial Highlights - Fourth quarter and year ended December 31, 2010

Financial Position