Tembec Inc. announces results for the three-month period ended December 31, 1996 (Part 1 of 2, Financial Tables to Follow).

MONTREAL--(BUSINESS WIRE)--Jan. 23, 1997--TEMBEC INC.'s (ME;TSE TBC.A ) gross sales for the first quarter of fiscal 1997 were $257.4 million compared to $243.3 million for the comparable three-month period last year.

Gross profit on sales was $18.6 million which represents an $8.5 million improvement from the fourth quarter of fiscal 1996 but down from the $50.4 million reported in the comparable first quarter of last year. Net loss for the quarter was $8.6 million or $0.19 per share compared to a profit of $21.2 million or $0.45 per share last year. Operating activities before working capital changes generated $1.8 million in cash compared to $30.3 million of operating cash flow generated in the first quarter of fiscal 1996.

During the quarter, forest products generated $21.9 million of gross profit compared to $12.7 million last year. Shipments of commodity grade spruce pine fir (spf) lumber were up 20 percent over the comparable volumes last year and the average prices were up over 37 percent from the same period. Shipments of OSB from the Timmins plant resumed during the quarter and although prices were above break-even they were down 47 percent from the average prices experienced in the first quarter of last year.

The pulp group incurred a loss at the gross profit level of $6.8 million compared to $34.9 million of profit that was generated in the first quarter of fiscal 1996. Shipments of all pulp categories were above those recorded in the first quarter of fiscal 1996. Shipments of high yield were up over 48 percent, NBSK was up 19 percent and specialty cellulose was ahead of last year by about 3 percent. Average prices for high yield pulp were lower than the same period last year but were approximately 10 percent above the low point experienced in the quarter ended June 1996. Average prices for kraft have now improved about 14 percent above their low point also experienced in June 1996. Average prices for specialty cellulose improved about 3 percent from their low point that was hit in the quarter ended September 30, 1996.

Sales in the paperboard division were up 39 percent over the same quarter last year and the operation generated $2.7 million in gross profit compared to a loss of $1.9 million. Shipments were up 60 percent compared to December 1995 and average selling prices have improved about 8 percent from the low point that was hit in the September 1996 period.

The Company's share of sales of publishing paper at Malette Quebec Inc. operation were $7.9 million, down from the $11.6 million recorded in the comparable quarter last year. This operation incurred a loss of $0.5 million compared to a gross profit of $3.5 million earned in the first quarter of last year. Average selling prices were off about 60 percent from the prices enjoyed in the comparable quarter of last year.

Chemical and other products contributed sales of $8.3 million for the quarter and a gross profit of $1.3 million. This compares favourably to the $1.2 million in gross profit generated on sales of $6.6 million last year.

Net income at Spruce Falls amounted to $11.5 million for the quarter compared to $22.9 million a year earlier. The decline is due to the drop in newsprint prices. Tembec's 45 percent holding in Spruce Falls contributed $5.2 million in income during this quarter compared to $9.4 million last year. Tembec has also announced it is increasing its ownership in Spruce Falls above 50 percent pursuant to its rights under a shareholders agreement.

In summary, management believes that results should improve in the third and fourth quarter reflecting stronger pulp markets and continued strength in the lumber sector.

CONTACT: Tembec Inc.

Tom W. Laberge, 819/ 627-4268