COATED AND SPECIALTY PAPERS

In 2006, Bowater continued to add innovative products to our portfolio of assets, offering creative solutions to our customers’ needs while capitalizing on the strategic capabilities of our manufacturing platform.

Our Calhoun, Tennessee mill is one of four mills in the Bowater system with on-site kraft pulp production. This provides flexibility to shift newsprint capacity to higher-value grades. In June 2006, our Calhoun mill completed a significant capital project that improved the overall cost structure at the mill and shifted production on one of its newsprint machines to our new BowHybrid freesheet product, which primarily targets direct mail markets. This paper is a lightly coated, blended paper that offers the strength necessary for demanding printing and converting applications, with higher bulk at lighter basis weights to provide mailing and printing cost advantages to our customers.

Our coated and specialty products are predominantly used in growing customer segments such as magazine, catalog, commercial print, book and direct mail applications. Catalog and direct mail pieces provide advertisers and retailers a non-intrusive, targeted means of entry into consumers’ homes. Marketers use them in concert with campaigns in other advertising media. We are well positioned in these markets and look forward to continued positive developments for these product lines in coming years.