Feb 09, 2007. /Lesprom Network/. TimberWest generated distributable cash of $27.5 million, or $0.35 per stapled unit for the fourth quarter, and $103.8 million of distributable cash, or $1.34 per unit, for the year 2006. This compares to $29.7 million of distributable cash for the fourth quarter of 2005, or $0.38 per unit, and $67.3 million, or $0.87 per unit, for the year 2005. "Weather-related production curtailments limited volume in both the third and fourth quarters this year," said president and CEO Paul McElligott. "As a result, we had less available to sell into both domestic and export markets. In spite of weakness in the US log market, sales realizations for the quarter were strong at $96 per cubic meter with demand from Japan remaining robust." Timberland results were weaker than this quarter last year primarily because of the low volume of log shipments. We shipped 644 000 cubic meters during the quarter, down from 990 000 cubic meters during the fourth quarter of 2005, to bring total shipments for the year to 3.1 million cubic meters (compared to 3.6 million cubic meters last year). Sales realizations in the fourth quarter of 2005 were $90 per cubic meters. We finished the year with average sales realizations higher than last year as well; $98 per cubic meters compared to $91 per cubic meters. Unfortunately, production costs increased by $3.3 per cubic meters for the year, primarily the result of higher input costs for our contractors. "During the quarter, we sold real estate from Campbell River in the northern part of our holdings down to Sooke," added Mr. McElligott. "Values remained strong across our entire real estate portfolio on Vancouver Island". Our Elk Falls lumber mill performed better this year but not well enough to encourage an offer from any prospective buyers. The mill is heavily focused on Japan and, with the Japanese lumber market remaining strong throughout 2006, it was able to run on three shifts all year. The sales process for the mill was still underway at year end with a final prospective purchaser performing due diligence. Countervailing duty refunds of $3.4 million were received during the quarter, which included interest in the amount of $0.4 million. Outlook In the near term, we continue to expect prices for logs and lumber to be weak in the US market while remaining strong in other markets. Weather-related curtailments throughout our region are causing log shortages, placing upward pressure on domestic log prices but also making it increasingly difficult to sell into export markets as local mills continue to block our export shipments using federal Notice 102. Proceedings on our Notice 102 lawsuit concluded in 2006 and we are awaiting a ruling from the Federal Court of Canada on this matter. Margins in our core timberlands business are expected to be comparable to 2006 levels for 2007 while the sawmill's performance is expected to weaken as competition intensifies in the Japanese market. The collective agreement with the United Steelworkers Union expires in June 2007. While the US housing market is expected to remain weak in the short run, long term prospects for log demand from our region are very good. With Asia continuing to increase its demand for logs and lumber, with positive demographics in the US expected to result in the return to a strong housing market, and with the inevitable future supply shortages caused by the Mountain Pine Beetle infestation in the BC Interior and further harvest level reductions in eastern Canada, we believe demand and pricing for log and lumber products in our region will improve. We are starting 2007 in a strong financial position and we expect to generate sufficient distributable cash in the year from both real estate and forestry operations to fund all of our unitholder distributions. TimberWest Forest Corp. is uniquely positioned as the largest owner of private forest lands in western Canada. The company owns in fee simple approximately 334 000 hectares or 825 000 acres of private timberland that, over the previous five years, have provided an annual average harvest of 2.6 million cubic meters of logs and have an approximate annual growth rate of 8.0 cubic meters per hectare per year on the productive land base.