Our outlook continues to be very positive. The recovery in the U.S. new home segment is well underway and is underpinning rising global demand for lumber and logs. U.S. housing starts increased more than 18% in 2013 and are projected to grow a further 22% this year. Improving lumber demand in the U.S. will drive pricing for our commodity and Cedar product lines. Our revenues will further benefit from the weakening Canadian dollar.

Growth in China is expected to continue. Forest product demand in China is being supported by large scale government investments in infrastructure and housing. With both China and the U.S. competing for a constrained supply of lumber and logs, we can expect prices to rise further in 2014.

We also expect to see increased demand and higher pricing for specific products in Japan. As the U.S. market improves, we anticipate U.S. Pacific Northwest suppliers will redirect some volume back to their home market which will create opportunity for Western. Our improved cost structure, resulting from our capital investments, will allow us to increase volume into this market.

Our 2014 business plan is focused on leveraging improved markets to deliver even better financial results. We will fully utilize our log markets and flexible lumber manufacturing base to refine our product mix to drive margins higher. We are well positioned to capitalize on the spring building season with an improved log inventory compared to last year.

We are pursuing growth by accessing additional log supply. Internally, we will increase the availability of logs from our own tenures by recovering more sawable fibre from low value pulp logs. Externally, we will access more volume by building upon our mutually beneficial partnerships with First Nations and by increasing purchases. Our ability to attract external log volume is made possible by our capital investments, which have delivered a more competitive operating platform.

Growth will also come from our strategic capital investments which are performing above expectations. In 2014, we will benefit from the first phase of our Saltair sawmill project, the autograder at our Alberni Pacific sawmill, and the upgraded planer at Cowichan Bay. Encouraged by the initial returns from these projects, which will surpass 30%, we anticipate investing a further $40 million in targeted high return strategic capital projects in 2014.

As we grow the business, we will remain an industry leader with respect to safety. We are proud of the progress we have made in safety and remain resolute in our commitment to further improve the safety of our operations by identifying and managing hazards while implementing improved standards. Along with industry peers, we are developing a best-in-class suite of solutions to manage the hazards of sawmill dust. In 2014, we will continue to invest our resources in training, particularly for new workers joining the industry.

We are confident we will continue to improve our financial results. We continue to build a strong management team that is committed to delivering improved results and shareholder value. Coupled with our strong balance sheet and margin-focused growth strategy, we are well positioned to capitalize on increased demand for our log and lumber products.

I would like to thank our shareholders, customers, employees and communities for their continued support of Western Forest Products.

Don Demens

President and CEO