Ainsworth Lumber Co. Ltd. Releases 2nd Quarter Earnings.

VANCOUVER, British Columbia--(BUSINESS WIRE)--Aug. 1, 1996--AINSWORTH LUMBER CO.(VSE,TSE:ANS) Ainsworth Lumber Co. Ltd. reports a net loss for the three months ended June 30, 1996 of $2.1 million ($0.15 per share) on sales of $78 million. During the same three month period in 1995, the Company experienced a net loss of $426,000 ($0.03 per share) on sales of $60 million.

For the six months ended June 30, 1996, the Company reports a net loss of $3.0 million ($0.20 per share) compared to net earnings of $3.0 million ($0.21 per share) for the six months ended June 30, 1995. Sales for the six month period ended June 30, 1996 were $141 million as opposed to $123 million for the comparative period in 1995.

For the three months ended June 30, 1996, cash flow from operations, before changes in non-cash working capital, was $5.9 million, or $0.40 per share, compared to $5.0 million ($0.35 per share) for the same period in 1995. Capital spending amounted to $4.3 million as the Company carried out its ongoing capital expenditure program and released payments for the completion of the Grande Prairie OSB facility.

The Company's second quarter financial results reflect two extra-ordinary items caused by a log inventory adjustment and retroactive chip price charges totaling $3.1 million on a pre-tax basis. Lower OSB prices than the comparable period in 1995 and further reductions in woodchip prices offset the positive effect from strong lumber prices during the second quarter. In addition, Ainsworth continued to experience high log costs as the strong lumber prices caused stumpage rates to remain at high levels during the quarter. (The market value of woodchips is not accounted for under the BC stumpage formula.)

Second quarter lumber prices were 17 percent higher than those of the previous quarter and 20 percent higher than those of the comparable three month period in 1995. The increase in prices was due to favorable housing starts as well as curtailed lumber production resulting from low woodchip prices. These strong lumber prices continued in spite of uncertainty related to the Canada/US softwood agreement. The Company curtailed cross-border shipments in mid-June by holding rail cars on the Canadian side of the border until July 1. While there were some predictions of a July 1 price drop caused by a Canadian lumber oversupply, the Company did not experience any significant negative price adjustments as demand has remained strong. Japanese lumber markets were also strong as demand for 2x4 constructed homes continues to grow.

Second quarter woodchip prices decreased by 37 percent from the previous quarter's levels due to a continued oversupply of pulp on world markets. Consequently, the Company received lower prices for its second quarter woodchip shipments and absorbed retroactive woodchip price adjustments and allowances associated with deliveries in earlier periods. As pulp prices are improving, some woodchip price increases are expected in the second half of 1996.

For the second quarter ended June 30, 1996 the Company's average OSB prices were unchanged from those of the prior quarter and 6 percent lower than the comparable three month period in 1995. While North American demand was relatively strong, OSB supply continued to increase and customers anticipating new OSB capacity from greenfield plants maintained low inventories by purchasing on a "Just In Time" basis. OSB prices are expected to remain relatively soft over the next twelve months as the new OSB production is absorbed and the curtailment of high cost sheathing plywood production continues.

The Japanese OSB market continues to grow and provide the Company with premium prices over the North American market. During the second quarter, the Company shipped approximately 40 percent of the 100 Mile House OSB plant's production to offshore markets.

Ainsworth's second OSB plant near Grande Prairie, Alberta, which produced its first OSB board on schedule on December 14, 1995, operated at an average of 60 percent of rated capacity during the second quarter. During the month of July, the plant produced at 75 percent of rated capacity with 98 percent of the production on-grade. This OSB facility has an annual capacity of approximately 500 million square feet (3/8 inch basis).

On balance, the Company maintains a cautiously optimistic outlook for the remainder of 1996. Lumber prices are expected to remain strong and some improvement in chip prices can be expected. Pacific Rim OSB markets continue to offer significant premiums for export grade OSB and Ainsworth's sales volume to these offshore markets is increasing. The production ramp-up of the Grande Prairie OSB plant is proceeding on schedule. This facility made a positive contribution to operating earnings during the quarter in spite of weak North American markets, and unit production costs will continue to drop as the mill approaches design capacity.

Ainsworth Lumber has operated as an integrated forest products company in British Columbia for more than forty years. In addition to its sawmill and OSB plant at 100 Mile House, Ainsworth operates a sawmill near Clinton, a sawmill and veneer plant at Lillooet, a specialty plywood plant at Savona, and a value-added plant at Abbotsford. Ainsworth's recently completed OSB facility in Grande Prairie, Alberta, is the Company's first operation outside of British Columbia.

CONTACT: Ainsworth Lumber Co. Ltd.

Kevin Ainsworth, 604/395-6233

or

Ainsworth Lumber Co. Ltd.

Catherine Ainsworth, 604/661-3223