Tembec's forest product division today reported a further fall into the red during its fiscal first quarter ended Dec. 25, 2010, with an operating loss of C$11 million (US$10.8 million) compared with the C$8 million (US$7.9 million) operating loss the company posted a year earlier.

The division, which produces lumber for the Canadian wood and paper giant, also posted sales of C$113 million (US$111.4 million), a 19% increase from last year's first quarter sales of C$95 million (US$93.7 million). The division also absorbed about C$3 million (US$2.9 million) in export taxes, a C$1 million increase versus the year before.

A stronger Canadian dollar, averaging 99 cents on the U.S. dollar, helped to offset some of the U.S. price increases on random lumber and stud lumber. Random lumber increased by US$39 per thousand board feet (MBF), while stud lumber increased by US$13 per mbf.

The price increase led to an increase in earnings before interest, taxes, depreciation, and amortization (EBITDA) of C$1 million (US$986,000).

Weak demand for SPF lumber was cited as the main culprit, with the company only moving lumber at 54% capacity, up from the 42% capacity the company operated at during the same period last year. The company also said that low seasonal productivity as well as timber quality issues at some of its sawmills helped to increase costs and operating losses.

Overall, Tembec posted total sales of C$422 million (US$416 million), up 2.4% from C$412 million (US$406.2 million) during the year-earlier period. The company posted an EBITDA of C$11 million (US$10.8 million).

"While a decline in the December 2010 quarterly results were anticipated, several unforeseen items negatively impacted financial performance," Tembec said in a statement. "The relative strength of the Canadian dollar, which averaged nearly 99 cents versus the U.S. dollar, reduced the EBITDA of all operating segments."