VANCOUVER - The chief executive of Canfor Corp. (TSX:CFP) says his industry was unprepared for such a severe downturn in lumber markets, but after deep production cuts and mill closures he believes it will come out stronger when business finally turns around

"This company wasn't ready for 2007 and neither was the industry," president and CEO Jim Shepard said after the company's annual shareholder meeting in Vancouver Friday.

Shepard said he didn't feel "a sense of urgency" when he came out of retirement a year ago to head Canfor, Canada's biggest softwood lumber producer.

"It's like they hadn't got it yet," said Shepard, a former CEO at Finning International Inc. (TSX:FTT).

"We were coming off the buoyant times of '04, '05, '06 and we had attitudes that weren't consistent with the realities."

Shepard said the forest industry, including everyone from executives to customers, have been forced to change their attitude, which will help it be more efficient in the long run.

Canfor has been whacked by the collapse in the U.S. housing market, alongside other lumber producers.

Troubles have been compounded by a 15 per cent export tax on softwood going to the United States and strength in the Canadian dollar that has eroded the value of exports to the U.S.

The company has cut its production by about 25 per cent to 2.9 billion board feet from four billion in 2006 by indefinitely closing mills and production lines and cutting shifts. The company has also cut overhead and administration costs, including a 25 per cent salary rollback for employees, including executives.

"We are of one vision in pursuit of a common goal and that is to be one of the forest sector companies that come out of this storm stronger, and in a position to take advantage of the opportunities that will present themselves when the market conditions turn around, and they will," Shepard told shareholders at the meeting.

Jim Pattison, Canfor's largest shareholder, said after the meeting he was "very supportive of the management and the things they are doing."

"This is a cyclical business .. and we're going through one."

He wouldn't says if he plans to increase his stake further.

Late last year, Pattison increased his stake from 25 per cent to 29 per cent.

In March 2007, three shareholders, including Pattison, announced a voting agreement that would see them vote for an agreed slate of directors and against a poison pill shareholder rights plan that would have prevented a creeping takeover.

The group, including New York fund management firm Third Avenue Management LLC and Matthews-Cartier Holdings Ltd., the holding company for Canfor's founding Prentice and Bentley families, owns about 52 per cent of Canfor.

Later that month, Canfor's former CEO, a different Jim Shepherd, announced his resignation, and the company unveiled its new slate of nominee directors

Also Friday, Canfor says its first-quarter net loss widened to $85.4 million or 60 cents per share compared to $42.7 million or 30 cents per share in the same quarter last year.

Revenues were $648.5 million, down from $850.6 million a year ago.

The expectation was for sales of $726 million and a loss of between 50 and 71 cents per share for the January-March period, according to analysts surveyed by Thomson Financial.

The loss included a $42-million hit for log inventory devaluation, which reduced net earnings by $29 million, as well as an after-tax foreign exchange translation loss on long-term debt net of investments of $10.1 million, and an income tax recovery of $9.1 million resulting from a reduction in British Columbia corporate income tax rates.

Canfor's adjusted net loss was $60.5 million, 42 cents per share.

On Friday, Canfor shares closed up 13 cents at $8.35 on the Toronto Stock Exchange. The stock's 52-week high was $13.98 in July, while it hit a low of $7.46 in March.

Canfor, which also makes plywood and oriented strand board, a popular plywood substitute, operates mills in B.C., Alberta, Quebec, Washington state, and North and South Carolina. It employs about 7,800 people.

Canfor also owns a 50.2 per cent interest in Canfor Pulp Limited Partnership, which is one of the largest producers of northern softwood kraft pulp in Canada.

The partnership earned a first-quarter profit of $43.5 million, 61 cents per unit, on sales of $211.4 million, compared to net income of $48.6 million or 68 cents per unit on sales of $238.2 million in the same period last year.

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