::The Center for Paper Business and Industry Studies::

080422 Deutsche Bank Report - Q1 Preview For The Tree Stocks

What To Expect

We are generally looking for poorer results this quarter relative to the previous quarter. The only companies expected to generate positive earnings in Q1/08 are International Paper, Domtar, Mercer and Cascades. However, of these only Cascades is expected to post improving results.

We have made a number of revisions to our commodity price forecasts. Positive changes include upward revisions to pulp, newsprint and uncoated free sheet prices. On the negative side, we have lowered our lumber price forecast and increased prices for most grades of recovered paper.

We have increased our price targets on Catalyst and Tembec, but have reduced them on AbitibiBowater, Weyco, Cascades, Interfor, Louisiana- Pacific and Canfor. As of April 22, we have upgraded Catalyst from SU to SP and Norbord from SP to SO.

Our top three picks are Mercer International, Domtar, and International Paper, while our bottom three are Tembec, Fraser Papers and Canfor. We maintain our Underweight recommendation on the sector as a whole.