EXHIBIT 3
                                                                       ---------



MANAGEMENT'S DISCUSSION AND ANALYSIS


                                                         AS AT FEBRUARY 27, 2004




TABLE OF CONTENTS


OVERVIEW AND HIGHLIGHTS OF 2003                                            40

RESULTS OF CONTINUING OPERATIONS                                           42

FINANCIAL POSITION AND LIQUIDITY                                           47

SELECTED ANNUAL INFORMATION                                                49

OTHER NOTEWORTHY EVENTS                                                    49

RISKS AND UNCERTAINTIES                                                    50

OUTLOOK                                                                    52

FORWARD-LOOKING STATEMENTS                                                 52

FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS                                52

CONTRACTUAL OBLIGATIONS                                                    53

OFF-BALANCE SHEET ARRANGEMENTS                                             53

TRANSACTIONS WITH RELATED PARTIES                                          53

CHANGES IN ACCOUNTING POLICIES                                             53

CRITICAL ACCOUNTING POLICIES AND ESTIMATES                                 54

USE OF NON-GAAP FINANCIAL MEASURES                                         55

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS                   56

OVERSIGHT ROLE OF AUDIT COMMITTEE AND THE BOARD OF DIRECTORS               56

ADDITIONAL INFORMATION                                                     56




OVERVIEW AND HIGHLIGHTS OF 2003
Abitibi-Consolidated is a global leader in newsprint and uncoated groundwood
(value-added groundwood) papers as well as a major producer of wood products,
generating sales of $4.8 billion in 2003. With 16,000 employees, excluding Pan
Asia Paper Co. Pte Ltd (PanAsia), the Company does business in more than 70
countries. Responsible for the forest management of 18  million hectares,
Abitibi-Consolidated is committed to the sustainability of the natural resources
in its care. The Company is also the world's largest recycler of newspapers and
magazines, serving 17 metropolitan areas with more than 11,200 Paper
Retriever(R) collection points and 14 recycling centres in Canada, the United
States and the United Kingdom. Abitibi-Consolidated operates 27 paper mills,
21 sawmills, 4 remanufacturing facilities and 1 engineered wood facility in
Canada, the U.S., the U.K., South Korea, China and Thailand.


Abitibi-Consolidated is one of the lowest cost global producers, annually
marketing approximately 6  million tonnes of newsprint including third parties'
volume, nearly 2 million tonnes of value-added groundwood papers and over
2 billion board feet of lumber.

$179 MILLION NET EARNINGS
Abitibi-Consolidated realized net earnings of $179 million, or 41 cents a share,
in 2003 compared to net earnings of $259 million, or 59 cents a share, in the
previous year. The weighted average number of shares outstanding remained
constant at 440 million during these periods.

The Company's operating loss from continuing operations amounted to $322 million
on net sales of $4,786 million in 2003 compared to an operating profit from
continuing operations of $182 million on net sales of $5,122 million in 2002.

The decrease in net sales is mainly attributable to the stronger Canadian dollar
compared to the U.S. currency and lower selling prices for value-added
groundwood papers. These factors were partly offset by higher prices for
newsprint as well as higher sales volume in the value-added groundwood papers
and wood products segments.

Lower operating profit from continuing operations resulted mainly from the
effect of the stronger Canadian dollar for an amount of $161 million and the
provision for closure costs and asset write-offs totalling $134 million
announced on December 10, 2003. Also, the Company incurred $51 million more in
countervailing duties (CVD) and anti-dumping duties (AD) in 2003 than in 2002.
Furthermore, the Company recognized in the fourth quarter a goodwill impairment
of $21 million related to its wood products segment. These elements were partly
offset by higher prices for newsprint as well as higher sales volume in the
value-added groundwood papers and wood products segments.

In 2003, the Company recorded an after-tax gain of $622 million on the
translation of foreign currencies, derived primarily from its U.S. dollar debt,
compared to $56 million in 2002.

Selling, general and administrative expenses totalled $181 million in 2003
compared to $169 million in 2002. This change is primarily attributable to the
Company's provision for bad debts having been reduced in 2002 as a result of
increased insurance coverage and a capital tax credit recorded in 2002 for prior
years. Expenses in 2003 were also affected by increased insurance premiums.

In the fourth quarter, the Company announced the indefinite idling of the
Lufkin, Texas and Port-Alfred, Quebec paper mills, resulting in a provision for
closure costs of $67 million.

The increase in amortization of plant and equipment is mainly attributable to
the asset write-off of $67 million following the permanent closure of two
previously idled paper machines, one in Port-Alfred and one in Sheldon, Texas.
In 2002, following the closure of the Thorold, Ontario thermo-mechanical pulp
mill, the Company wrote off its remaining book value of $12 million.

In the fourth quarter of 2003, the Company performed the required annual
goodwill impairment test and found that impairment did exist in its wood
products segment, mainly due to market conditions and a stronger Canadian
dollar. Consequently, an impairment charge of $21 million, representing the
total goodwill for the wood products segment, was recorded.

Financial expenses totalled $389 million in 2003 compared to $444 million in
2002. The reduction is primarily attributable to lower interest expense due to
the stronger Canadian dollar, lower interest rates and a lower debt level.

                                     40



Other expenses in 2003 include a gain of $2 million on the disposal of other
assets and a reduction of $1 million compared to 2002 in fees related to the
Company's securitization programs.

Income tax recovery during the year amounted to $151 million of which
$36 million is mostly attributable to favourable settlements of certain tax
litigation that had not been provided for in previous reporting periods. In
2002, the Company recorded an income tax recovery of $181 million of which
$64 million was mostly attributable to a re-evaluation of future income taxes.

IMPACT OF SPECIFIC ITEMS
Table 1 shows how certain specific items have affected the Company's results in
the reporting periods. The Company believes that it is useful supplemental
information as it provides an indication of the results excluding these specific
items. Readers should be cautioned however that this information should not be
confused with or used as an alternative for net earnings (loss) determined in
accordance with the Canadian generally accepted accounting principles (GAAP) as
an indicator of performance.


TABLE 1. IMPACT OF SPECIFIC ITEMS
In millions of dollars, except per share amounts


                                                  2003                    2002
                                                  ----                    ----
                                                    $                       $

Net earnings as reported                           179                     259
(in accordance with GAAP)
$ per share                                       0.41                    0.59

Specific items (after taxes):
  Gain on translation of
   foreign currencies                             (622)                    (56)
  Gain adjustment (gain) on sale
   of the Saint-Felicien pulp mill                   3                    (293)
  Income tax adjustments                           (36)                    (64)
  Interest earned on litigation
    settlement                                       -                      (7)
  Provision for closure costs                       44                       -
  Asset write-offs                                  42                       8
  Goodwill impairment                               21                       -
  Charge on debt repayment                           -                       7
  Reversal of Countervailing and
  Anti-dumping duties                                -                     (13)
--------------------------------------------------------------------------------
Loss excluding specific items                     (369)                   (159)
  (not in accordance with GAAP)
  $ per share                                    (0.84)                  (0.36)
--------------------------------------------------------------------------------



As the above table indicates, during 2003, the Company recorded an after-tax
gain on translation of foreign currencies of $622 million, an after-tax amount
of $3 million related to an adjustment of the price received from the sale of
75% of the Saint-Felicien pulp mill as well as favourable income tax adjustments
of $36 million. In the fourth quarter, the Company also announced the indefinite
idling of the Lufkin and Port-Alfred paper mills, resulting in a provision for
closure costs of $44 million after-tax and the permanent closure of two
previously idled paper machines, one in Port-Alfred and one in Sheldon
representing asset writeoffs of $42 million after-tax. The Company also recorded
$21 million in goodwill impairment in its wood products segment.

During 2002, the Company recorded an after-tax gain on translation of foreign
currency of $56 million, a $293 million net profit from the sale of 75% of the
Saint-Felicien pulp mill and a favourable income tax adjustment of $64 million.

The Company also recorded an after-tax gain of $7 million from interest earned
on a favourable litigation settlement, an after-tax charge of $8 million for the
write-off of the remaining book value of the Thorold thermomechanical pulp mill
and an after-tax charge of $7 million associated with debt retirement. During
2002, there was also an after-tax reversal of $13 million for excess CVD/AD that
had been provided for in the previous year but found to be unnecessary as a
result of the final determination issued by the U.S. International Trade
Commission (USITC) on May 22, 2002.

RATIONALIZATION/CONVERSION OF NEWSPRINT CAPACITY
In 2003, excluding PanAsia, the Company took 977,000 tonnes of market-related
downtime in order to adjust production according to its order book. The downtime
was mainly taken from the idling of the Sheldon mill and one machine at the
Port-Alfred mill. The remaining downtime was taken through temporary shutdowns
at all locations. This compares to 887,000 tonnes taken in 2002.

On December 10, 2003, the Company announced the continuation of its focused
downtime strategy by indefinitely idling the Company's Lufkin and Port-Alfred
paper mills, as of December 14, 2003, representing an additional combined annual
capacity of 432,000 tonnes of newsprint and 270,000 tonnes of other paper
grades. A provision for closure costs amounting to $67 million ($44 million
after-tax) was recorded in the fourth quarter of 2003. This announcement
affected 580 employees at the Lufkin mill and 640 employees at the Port-Alfred
mill.

The Company also announced the permanent closure of two previously idled
paper machines, one in Port-Alfred and one in Sheldon, representing a
combined annual newsprint capacity of 230,000 tonnes. Consequently, a fourth
quarter write-off of $67 million ($42 million after-tax) was taken. These
actions, combined with improved operating efficiencies, should reduce annual
operating costs by at least $125 million.

Combined with the already idled newsprint mill at Sheldon, the Company has
therefore

                                     41



indefinitely idled 760,000 tonnes and permanently removed 230,000 tonnes of
high-cost newsprint capacity, thereby improving its overall cost structure and
better adjusting production to its order book for 2004. (See Table 2)

TABLE 2. AFFECTED CAPACITY
As at December 31, 2003
Capacity in thousands of tonnes


                                                      PERMANENT
                             TOTAL        IDLED       SHUTDOWN
                             -----        -----       ---------

Sheldon, Texas
  (Newsprint)                 468          328           140

Port-Alfred, Quebec
  (Newsprint)                              282            90
  (Other)                                   36
                              408          318            90

Lufkin, Texas
  (Newsprint)                              150
  (Other)                                  234
                              384          384
--------------------------------------------------------------------------------

Total
  (Newsprint)                              760           230
  (Other)                                  270
                            1,260        1,030           230
--------------------------------------------------------------------------------


On December 11, 2002, the Company announced it would convert the newsprint
machine at its mill in Alma, Quebec to produce the Company-developed EQUAL
OFFSET(R) paper grade. This project will permanently remove an additional
170,000 tonnes of annual newsprint capacity.

The Company begins 2004 with approximately one million tonnes of annual focused
downtime. In spite of this reduced capacity, the Company anticipates selling as
much, if not more, products in 2004 than in 2003.

PANASIA JOINT VENTURE
Abitibi-Consolidated owns 50% of PanAsia and, as per Canadian GAAP, consolidates
the joint venture's financial information proportionally. The information in
Table 3 represents the total activities of the joint venture and is presented in
U.S. dollars.

TABLE 3. PANASIA'S FINANCIAL HIGHLIGHTS
In millions of U.S. dollars


                                           2003              2002
                                         ------            ------
                                              $                 $
Net sales                                   846               797
EBITDA                                      134               218
Operating profit                             68               153
Net earnings                                 36                91
Capital expenditures                         48                17
Total assets                              1,375             1,359
Long-term debt
   (net of cash & cash equivalents)         354               328
------------------------------------------------------------------


PanAsia realized net earnings of US$36 million in 2003 compared to US$91 million
the previous year. The joint venture's operating profit amounted to US$68
million on net sales of US$846 million in 2003 compared to an operating profit
of US$153 million on net sales of US$797 million in 2002.

The increase of US$49 million in net sales is mainly attributable to a higher
sales volume in brokered tonnage partly offset by lower selling prices. Lower
operating profit resulted mainly from lower selling prices, the weakening U.S.
dollar and higher cost of products sold.

The joint venture's cost of products sold excluding brokered tonnes increased by
15% in 2003 compared to the average cost per tonne in 2002. The increase is
mainly attributable to higher recycled fibre and energy costs as well as a
weaker U.S. dollar.

INVESTMENT IN CHINA
On September 10, 2003, PanAsia announced the creation of a 65-35 percent
joint venture with Hebei Longteng Paper Corporation of China to build and
operate a newsprint mill in the industrially developed Hebei Province of
China, 280 km southwest of Beijing. Construction of the mill will begin
during the first quarter of 2004 and it is expected to start production
during the third quarter of 2005 with a rated capacity of 330,000 tonnes per
year. The newsprint will be produced from 100 percent recycled fibre. The
project represents an investment of approximately US$300 million without any
direct cash contribution from PanAsia's joint venture partners.

DIVIDENDS
Dividends paid in 2003 amounted to $110 million compared to $176
million in 2002. In the second quarter of 2003, the Company's Board of Directors
made the decision to reduce the quarterly dividend from $0.10 per share to
$0.025 in light of market and currency exchange conditions.

In the fourth quarter of 2003, the Company announced that, going forward,
dividend declarations will be decided upon at the same time as announcements of
quarterly results and payable within the same quarter.



RESULTS OF CONTINUING OPERATIONS

In 2003, the Company changed the name of its "Lumber" segment to "Wood products"
due to increased involvement in areas such as engineered wood. As previously
mentioned, Abitibi-Consolidated sold, in 2002, its pulp mill in Saint-Felicien,
which represented approximately 80% of the Company's market pulp capacity.
Consequently, the Company has removed the results of the mill from its
continuing operations.

In 2003, earnings before interest, taxes, depreciation and amortization (EBITDA)

                                     42



of $402 million, or 8.4% of net sales, were negatively impacted by $67 million
of closure costs relating to the Port-Alfred and Lufkin mills. This compares to
EBITDA of $846 million, or 16.5% of net sales, in 2002. Operating profit (loss)
from continuing operations per business segment for 2003 and 2002 is presented
in Table 4.

TABLE 4. OPERATING PROFIT (LOSS) FROM CONTINUING OPERATIONS
In millions of dollars


                           2003         2002
                          -----        -----
                              $            $
Newsprint                  (187)          0
Value-added
  groundwood papers         (49)        136
Wood products               (86)         46
--------------------------------------------
                           (322)        182
--------------------------------------------------------------------------------


In 2003, newsprint's operating results were negatively impacted by $50 million
for closure costs and $67 million for asset write-offs, compared to $12 million
in 2002. Also in 2003, the value-added groundwood papers' operating results were
negatively impacted by $17 million for closure costs. The wood products
operating results were affected, in 2003, by an impairment charge of $21 million
and in 2002, by a credit of $18 million related to a provision reversal for
CVD/AD.

NEWSPRINT
OPERATING RESULTS
As described further in the section OTHER NOTEWORTHY EVENTS, the Company has
included, in its newsprint segment, 100% of Alabama River's activities in 2003.

Net sales of newsprint were $2,805 million in 2003, compared to $2,915 million
in 2002. Operating loss from continuing operations in 2003 was $187 million, or
6.7% of net sales compared to breakeven in 2002. The reduction in net sales is
mainly attributable to a stronger average Canadian dollar compared with the U.S.
currency and lower sales volume partly offset by higher average prices
year-over-year. Operating loss from continuing operations in 2003 was also
affected by $117 million of closure costs and asset write-offs.

The average newsprint mill net decreased to $609 per tonne in 2003, a reduction
of 3% from the previous year primarily due to the strengthening of the Canadian
dollar. The Company's shipments totalled 4,611,000 tonnes compared to 4,624,000
tonnes sold in 2002. In 2003, excluding PanAsia, the Company took 977,000 tonnes
of market-related downtime in order to adjust production according to its order
book. This compares to 887,000 tonnes taken in 2002.

The Company's newsprint cost of products sold remained essentially the same in
2003 compared to 2002. The positive impact on cost of a stronger average
Canadian dollar on the manufacturing costs of U.S. mills was basically offset by
higher wood chips and energy prices combined with higher costs at PanAsia.

DISTRIBUTION OF NEWSPRINT SALES

2003
o United States 50%
o Europe 16%
o Asia 15%                    [GRAPHIC]
o Canada 9%
o Latin America 7%
o Other Countries 3%

2002
o United States 50%
o Europe 18%
o Asia 15%                    [GRAPHIC]
o Canada 8%
o Latin America 6%
o Other Countries 3%


NEWSPRINT MARKET
According to the Pulp and Paper Products Council (PPPC), North American
newsprint demand declined by 1.1% in 2003 from 2002 levels. National advertising
performed strongly but was partly offset by weaker retail and classified
advertising. Inventories at non-dailies decreased by 8.3% compared to 2002. The
average North American operating rate was 90% compared to 89% in 2002. North
American imports increased 14.1% compared to the previous year to 232,000
tonnes, while exports remained flat at 2,606,000 tonnes.

At the end of 2003, total producers' and customers' newsprint inventories were
19,000 tonnes higher than December of 2002, and U.S. dailies' stocks moved up
from 39 to 42 days of supply. The Company continued to employ disciplined
inventory management in 2003 in order to match output with its order book, and
by year-end, inventories were only slightly higher than 2002 year-end levels
which were at a record low since the Donohue acquisition in 2000.

In 2002, according to an industry publication, prices in the United States for
newsprint initially declined by US$55 per tonne through the first eight months
of the year. Prices increased thereafter from August to December 2002 by US$35
per tonne. In 2003, two price increases were announced and were put in effect on
March 1 and August 1. As a result, the 2003 year-end industry published
transaction price stood at US$515/tonne, 9.6% above the year-end 2002 price. On
January 12, 2004, an additional US$50 per tonne price increase was announced to
take place February 1, 2004. Newsprint prices in international markets, with the
exception of European countries, have increased between 10% and 20% during the
year. In 2003, published transaction prices in Europe were approximately 10%
lower than in 2002.

Management expects North American consumption to improve in 2004, increasing in
the low single-digit range compared to 2003. Key risk factors to a consumption
recovery include the strength of the North American economy, advertising
expenditures and interest rate levels, which could dampen some key classified
advertising categories. Management expects demand in Europe to improve in the
low single-digits compared to 2003. The main risk factors to demand in Europe
include weaker economic recovery and lack of employment growth in key markets
such as Germany.

CHANGE IN CAPACITY
On December 10, 2003, the Company announced the continuation of its focused
downtime strategy by indefinitely idling the Company's Lufkin and Port-Alfred
paper mills, as of December 14, 2003. The Company also announced the permanent
closure of two previously idled paper machines, one in Port-Alfred and one in

                                     43



Sheldon. Table 2 under RATIONALIZATION/ CONVERSION OF NEWSPRINT
CAPACITY presents the affected capacity as at December 31, 2003.

On December 11, 2002, the Company announced it would convert the newsprint
machine at its mill in Alma to produce EQUAL OFFSET(R) grade. This project will
permanently remove 170,000 tonnes of annual newsprint capacity.

VALUE-ADDED GROUNDWOOD PAPERS
OPERATING RESULTS
Net sales of value-added groundwood papers were $1,396 million in 2003, compared
to $1,541 million in 2002. Operating loss from continuing operations was $49
million, or 3.5% of net sales in 2003, compared to an operating profit from
continuing operations of $136 million, or 8.8% of net sales, in 2002. The
reduction in net sales is mainly attributable to a stronger average Canadian
dollar compared with the U.S. currency and lower average prices year-over-year
partly offset by higher sales volume. Operating loss from continuing operations
in 2003 was also affected by $17 million of closure costs.

TABLE 5. SHIPMENTS OF VALUE-ADDED GROUNDWOOD PAPERS
In thousands of tonnes


                                     2003       2002
                                     ----       ----

SC, Soft-Nip papers                   733        728
ALTERNATIVE and EQUAL OFFSET(R)
  & hi-brite papers                   691        645
Directory papers                      132        129
Specialty papers                      185        187
-----------------------------------------------------
Total paper                         1,741      1,689
Market pulp                            69         81
-----------------------------------------------------
Total segment                       1,810      1,770
--------------------------------------------------------------------------------



The average mill net for value-added groundwood papers declined 11% to $771
per tonne in 2003 compared to the previous year. The Company's shipments of
value-added groundwood papers totalled 1,810,000 tonnes in 2003, compared to
1,770,000 tonnes in 2002.

The Company's cost of value-added groundwood papers sold remained flat in
2003 compared with the previous year. The impact of the stronger average
Canadian dollar on the manufacturing costs of the U.S. mill as well as the
lower usage of supplies and chemicals were partly offset by higher fibre and
energy prices.

DISTRIBUTION OF VALUE-ADDED GROUNDWOOD PAPERS SALES

2003
o United States 81%
o Canada 11%             [GRAPHIC]
o Other Countries 8%


2002
o United States 82%
o Canada 12%              [GRAPHIC]
o Other Countries 6%

ABICAL(TM) GRADES (SUPERCALENDERED ("SC") AND SOFT-NIP)
According to PPPC, North American shipments of glossy grades increased by 5.9%
in 2003. Glossy grades are mainly used in retail inserts, catalogues and
magazines. Shipments of the Company's ABICAL(TM) grades increased by 12%
compared to 2002. According to an industry publication, prices for
supercalendered (SCA) grades declined an average of 10% through the year in
2002. In 2003, prices were flat for the first half of the year and started to
increase to end the year at 6% higher than December 2002.

The Company believes that demand, driven by an improvement in advertising
expenditures and retail sales, should continue to improve in 2004 along with the
economy. However, the recent idling of the Lufkin mill will impact the Company's
shipments of these grades.

ABIOFFSET(TM) AND ABIBRITE(TM) GRADES
The Company continues to achieve success with its ABIOFFSET(TM) grades, which
consist of ALTERNATIVE OFFSET(R) and EQUAL OFFSET(R) grades. Shipments of
ABIOFFSET(TM) grades have increased by 9% in 2003. The Company is on track to
increase capacity in these grades this year through its Alma paper mill
investment. The project is on schedule for a start-up in the second quarter of
2004 ramping up to EQUAL OFFSET(R) grade in the second half of 2004.

According to an industry publication, prices for uncoated freesheet increased an
average of 4% through 2002. In 2003, prices started declining through the year
to end at 14% lower than December 2002.

MARKET OUTLOOK
The outlook for 2004 remains positive for all non-glossy grades. The Company
will continue to penetrate new markets with its ABIOFFSET(TM) grades and
increased advertising expenditure will benefit demand for the hi-brite grades.
The directory market is expected to remain flat with no evident threats from
electronic substitution.

CHANGE IN CAPACITY
On December 10, 2003, the Company announced the continuation of its focused
downtime strategy by indefinitely idling the Company's Lufkin and Port-Alfred
paper mills, as of December 14, 2003. Table 2 under RATIONALIZATION/CONVERSION
OF NEWSPRINT CAPACITY presents the affected capacity as of December 31, 2003.

On December 11, 2002, the Company announced the conversion of the newsprint
machine at its mill in Alma to produce EQUAL OFFSET(R) paper. The machine is
scheduled to start up in the second quarter of 2004 ramping up to
EQUAL OFFSET(R) paper in the second half of 2004. The machine will have an
annual production capacity of 230,000 tonnes of EQUAL OFFSET(R) paper.

WOOD PRODUCTS
On March 22, 2002, the U.S. Department of Commerce (USDOC) issued its final
determinations and imposed CVD of 19.34%, subsequently revised to 18.79%, and
Company-specific AD of 14.6%, subsequently revised to 12.44%, on Canadian
softwood lumber imports. The USDOC also determined that there was no condition
of Critical Circumstances. In accordance with U.S. law, the Company posted bonds
to secure the CVD/AD assessed in respect to the Company's net sales of softwood
lumber to the U.S. until May 5, 2002.

                                     44



On May 22, 2002, the USITC "determined that an industry in the United States is
threatened with material injury by reason of imports from Canada of softwood
lumber" and also "determined that it would not have found material injury".
Consequently and effective on the same date, this determination confirmed the
CVD of 18.79% and Company-specific AD of 12.44% on Canadian softwood lumber
imports but with no retroactive effect.

On September 27, 2002, the World Trade Organization (WTO) rendered its
preliminary decision on the CVD imposed by the USDOC on softwood lumber imported
from Canada, in which it ruled in Canada's favour.

On July 17, 2003, a North American Free Trade Agreement (NAFTA) panel issued its
decision on the AD, ordering the USDOC to recalculate its flawed determination
of duties on individual Canadian companies. On August 13, 2003, a NAFTA panel
issued its decision on the CVD, ruling that the method used by the USDOC to
measure the benefit of the alleged subsidies was contrary to law. On September
5, 2003, a NAFTA panel rejected all major arguments brought by the USITC to
justify the "threat of injury to a U.S. industry". If the "threat of injury to a
U.S. industry" is not proven, there is no justification to impose CVD or AD.

On August 29, 2003, a WTO panel issued its final report on the CVD issue
confirming the earlier decision that ruled largely in Canada's favour. On
January 19, 2004, the WTO Appellate Body ruled that USDOC's benefit measurement
methodology could be used in certain limited circumstances, but said it did not
have sufficient information to rule on the appropriateness or specifics of
USDOC's calculations in this case.

On December 6, 2003, Canada and the United States came up with a framework to
settle the softwood lumber dispute. The proposal, which was not accepted, could
have terminated both CVD and AD to return to a quota allocation system. The
Company continues to believe that stability will only return to the lumber
market once the dispute is resolved.

On January 13, 2004, the USDOC, following the NAFTA panel order dated August 13,
2003, released its revised CVD deposit rate of 13.23% compared to the current
rate of 18.79%. If this revised rate is confirmed by the NAFTA panel, it would
only take effect upon completion of the appeal mechanism, which could occur in
the second quarter of 2004 at the earliest.

The CVD/AD rates noted above are deposit rates for estimated duties. Actual duty
assessment rates are determined in annual reviews, which the USDOC initiated on
July 1, 2003. The USDOC is expected to issue preliminary results around June 1,
2004, and final results by the fourth quarter of 2004. Based on normal shipment
patterns, the impact of every 1% increase or decrease in CVD or AD represents a
change of approximately $1.8 million to net earnings annually.

The Company has paid and expensed in 2003 an amount of $77 million for CVD/AD,
compared to $44 million for the period from May 22, 2002 to December 31, 2002.

OPERATING RESULTS
Net sales of wood products decreased to $585 million in 2003, compared to
$666 million in 2002. The reduction in net sales is mainly attributable to a
stronger average Canadian dollar and the increased charge of CVD/AD, partly
offset by higher average U.S. dollar transaction prices year-over-year and
higher sales volume. As a result, the average mill net for wood products
decreased to $303 per thousand board feet in 2003, compared to $378 per thousand
board feet in 2002. The Company's shipments totalled 1,930 million board feet in
2003, compared to 1,759 million board feet in 2002.

Operating loss from continuing operations was $86 million, or 14.7% of net sales
in 2003, compared to an operating profit from continuing operations of $46
million, or 6.9% of net sales in 2002. Other than the elements mentioned in the
previous paragraph, operating results from continuing operations were also
affected by a charge of $77 million for CVD/AD in 2003, compared to a charge of
$26 million net of the provision reversal in 2002, as well as a 2003 goodwill
impairment charge of $21 million representing the total goodwill for the wood
products segment.

Cost of products sold in the Company's wood products segment decreased by 5%
compared to 2002, mainly due to higher wood chips revenue, which is accounted
for as a reduction in manufacturing costs, and better operating efficiency
partly offset by higher labour and energy costs.

DISTRIBUTION OF WOOD PRODUCTS SALES

2003
o United States 47%              [GRAPHIC]
o Canada 53%


2002
o United States 56%              [GRAPHIC]
o Canada 44%

ENGINEERED WOOD
The 50-50 joint venture formed by Abitibi-Consolidated and Louisiana-Pacific
Canada Ltd to produce solid-sawn flooring I-joists began production in May of
2003, reaching commercial production in the third quarter as expected. The
current annual production capacity of the mill stands at 70 million linear feet.

LUMBER MARKET
Demand in the United States remained strong throughout the year with housing
starts remaining above an annualized rate of 1.6 million units during each month
of 2003 and reaching an annualized rate of 2.09 million units in December 2003.
Demand in Canada continued to be strong as well, with housing starts remaining
above an annualized rate of 200,000 units for most of the year. Housing starts
in Japan increased by approximately 4% in 2003, positively impacting the
Company's 2x4 "J grade" products, sold through Canadian distributors.

Published lumber prices (f.o.b. Great Lakes) in North America remained flat in
the first half of 2003 compared to the second half of 2002. Prices increased in
the second half of

                                     45



2003 mainly due to the steady healthy demand in the United States and supply
uncertainty resulting from forest fires in British Columbia. Prices were also
influenced by the reduction of imports from non-Canadian sources due to the
weakening U.S. dollar. Pricing in Japan bottomed in the second quarter, showing
strength by year-end with the 2x4 "J grade" prices up 20% compared to January of
2003.

The Company expects housing starts to remain high in 2004 but to be slightly
lower than the previous year due to the historically high levels of 2003.

FOURTH QUARTER ANALYSIS
Abitibi-Consolidated reported a loss of $80 million, or 18 cents a share, in the
fourth quarter ended December 31, 2003 compared to net earnings of $29 million,
or 7 cents a share, in the same quarter of 2002. The weighted average number of
shares outstanding remained constant at 440 million during these periods.

Net sales were $1,208 million in the fourth quarter of 2003 compared to $1,316
million in the fourth quarter of 2002. The operating loss from continuing
operations was $210 million in the fourth quarter of 2003 compared to an
operating profit from continuing operations of $18 million for the fourth
quarter of 2002.

Lower operating income from continuing operations in the fourth quarter of 2003
resulted mainly from the provision for closure costs and asset write-offs
announced on December 10, 2003 and the goodwill impairment charge in the wood
products segment. The stronger Canadian dollar, lower selling prices for
value-added groundwood papers and lower newsprint sales volume also negatively
impacted operating income from continuing operations. These factors were
partially offset by higher newsprint prices in North America, lower newsprint
and value-added groundwood paper cost of goods sold and better performance in
wood products, which saw higher prices and sales volume as well as lower cost of
goods sold.

The Company recorded in the quarter an after-tax gain of $130 million on the
translation of foreign currencies, derived primarily from its U.S. dollar debt
compared to $25 million in the same quarter of 2002. Results in the fourth
quarter of 2003 also included an unfavourable income tax adjustment of $10
million compared to a favourable income tax adjustment of $42 million in 2002.

In the quarter, the Company announced the indefinite idling of the Lufkin and
Port-Alfred paper mills, resulting in a provision for closure costs of $67
million and recorded asset write-offs of $67 million following the permanent
closure of two previously idled paper machines, one in Port-Alfred and one in
Sheldon. In the fourth quarter of 2002, following the closure of the Thorold
thermomechanical pulp mill, the Company wrote off its remaining book value of
$12 million.

In the fourth quarter of 2003, the Company performed the required annual
goodwill impairment test and found that impairment did exist in its wood
products segment mainly as a result of economic market conditions and a strong
Canadian dollar. Consequently, an amount of $21 million representing all the
goodwill associated with the wood products segment was recorded as an impairment
charge in the quarter.

Financial expenses increased by $2 million compared to the fourth quarter of
2002, primarily because of $11 million in interest earned on a favourable
litigation settlement in 2002. This is partly offset by lower interest rates and
the impact of a stronger Canadian dollar.

For a more extensive analysis of the quarter, please refer to the fourth quarter
2003 MD&A dated January 27, 2004.

SUMMARY OF QUARTERLY RESULTS

TABLE 6. SUMMARY OF QUARTERLY RESULTS
In millions of dollars, except per share amounts

<TABLE>
<CAPTION>
                                                                         2003                                      2002
                                       --------------------------------------      ------------------------------------
                                        Q-4            Q-3      Q-2       Q-1        Q-4        Q-3       Q-2       Q-1
                                        ---            ---      ---       ---        ---        ---       ---       ---
                                          $              $        $         $          $          $         $         $

<S>                                    <C>           <C>      <C>       <C>        <C>        <C>       <C>       <C>
Net sales                              1,208         1,176    1,210     1,192      1,316      1,284     1,327     1,195
Operating profit (loss) from
  continuing operations                 (210)          (31)     (46)      (35)        18         29        94        41
Earnings (loss) from
  continuing operations                  (77)          (69)     147       181         25       (215)      200       (57)
Earnings (loss) from continuing
  operations per share                 (0.18)        (0.16)    0.34      0.41       0.06      (0.49)     0.45     (0.13)
Net earnings (loss)                      (80)          (69)     147       181         29         77       203       (50)
Net earnings (loss) per share          (0.18)        (0.16)    0.34      0.41       0.07       0.17      0.46     (0.11)
------------------------------------------------------------------------------------------------------------------------
</TABLE>


On a quarterly basis, net sales were negatively impacted by the strength of the
Canadian dollar compared to the U.S. currency going from an average of US$0.627
in the first quarter of 2002 to US$0.637 in the fourth quarter of 2002 and
US$0.76 in the fourth quarter of 2003. This represents a 19% strengthening of
the Canadian dollar in one year, partly offset by newsprint price increases.

                                     46



The Company's operating profit from continuing operations turned to a loss
position in 2003 mainly because of the strength of the Canadian dollar compared
to the U.S. currency. In the second quarter of 2002, Abitibi-Consolidated
reversed an amount of $32 million for excess CVD/AD that had been provided for
in previous quarters. In the fourth quarter of 2003, operating results were
negatively impacted by $67 million for closure costs, $67 million for asset
write-offs and $21 million for goodwill impairment.

Other than the elements mentioned above, the major element that affected the
Company's net earnings (loss) is the loss (gain) on translation of foreign
currencies, mainly due to the strengthening Canadian dollar compared to the U.S.
currency and its impact on the Company's debt denominated in U.S. dollars. (See
Table 6)

The weighted average number of shares outstanding remained constant at 440
million during these periods.


FINANCIAL POSITION AND LIQUIDITY

The Company's cash and cash equivalents at the end of 2003 amounted to
$53 million, a reduction of $93 million compared to $146 million at the end of
2002. In 2003, Abitibi-Consolidated generated $61 million of cash from
continuing operating activities and $179 million of cash from financing
activities of continuing operations while it used $312 million of cash for
investing activities of continuing operations. The major cash contribution
during 2003 came from operating working capital, more specifically accounts
receivable.

CONTINUING OPERATING ACTIVITIES
Cash generated from continuing operating activities totalled $61 million in
2003, compared to $243 million in 2002. The reduction in cash generated by
operating activities was mainly due to the reduction in operating profit from
continuing operations partly offset by the reduction of $158 million in non-cash
operating working capital in 2003 compared to an increase of $66 million in
2002. The reduction in non-cash operating working capital in 2003 is mainly due
to a reduction in accounts receivable and inventories, partly offset by a
reduction of accounts payable and accrued liabilities.

FINANCING ACTIVITIES OF CONTINUING OPERATIONS
Cash generated from financing activities of continuing operations totalled $179
million in 2003, compared to the utilization of $551 million in 2002. The
increase of cash generated was mainly due to the increase of long-term U.S.
dollar debt in 2003 compared to a reduction in 2002 and the reduction of
dividends paid.

In the third quarter of 2002, the Company bought back all of its outstanding
US$150 million 9.125% senior notes resulting largely from the proceeds of the
Saint-Felicien divestiture. At December 31, 2003, the available liquidities were
$635 million excluding cash of $53 million.

Long-term debt, including the current portion, amounted to $4,958 million at
December 31, 2003, representing a ratio of net debt to capitalization of 0.618
compared to $5,633 million and a ratio of 0.635 at December 31, 2002. The
decrease in long-term debt is mainly due to the positive impact of the
strengthening year-end Canadian dollar on U.S. dollar denominated debt. This
reduction is partly offset by the consolidation of 100% of the Alabama joint
venture's debt in the amount of $126 million as at January 1, 2003.

On June 18, 2003, Abitibi-Consolidated issued US$150 million 5.25% notes due
2008 and US$350 million 6% notes due 2013. The net proceeds from the offering
were used to repay outstanding debt under existing credit facilities. As a
result, the total debt of the Company remained at the same level. In connection
with the offering, the Company and its lenders have agreed to merge the
Company's $500 million 364-day and $300 million multi-year revolving credit
facilities and to reset the maturity dates to June 30, 2005, from December 17,
2003, and December 30, 2005 respectively. The new revolving credit facility has
substantially the same terms and conditions as in the prior agreement, except
for certain amendments, providing the Company with increased financial
flexibility. These amendments became effective upon completion of the offering.
They include changes to the net funded debt to capitalization ratio and to the
interest coverage ratio as shown in Table 7. The required interest coverage
ratio is essentially EBITDA to net interest charges on a trailing 12-month
basis.

TABLE 7. COVENANTS



Debt to Equity Ratio:
Net Funded Debt to Total Capitalization     70% or lower

Interest Coverage Ratio
(on a trailing 12-month basis):
1.25 times or more                      For the second quarter of 2003
1.00 time or more                       For the third and fourth quarter of 2003
1.25 times or more                      For the first and second quarter of 2004
1.50 times or more                      For the third and fourth quarter of 2004
2.00 times or more                      For 2005


On February 18, 2003, Standard and Poor's, one of the three rating agencies that
cover the Company's debt instruments, lowered its rating from BBB- with negative
outlook to BB+ with a stable outlook. The same rating agency revised the outlook
to negative from stable on October 27, 2003. On October 17, 2003, Moody's placed
the Ba1 debt rating

                                     47



of the Company under review for possible downgrade. On November 4, 2003, DBRS
downgraded the debt rating of the Company to BB (high) from BBB (low). The trend
changed to stable from negative. Finally, on February 20, 2004, Moody's lowered
its rating to Ba2 with negative outlook.

INVESTING ACTIVITIES OF CONTINUING OPERATIONS
The Company used $312 million of cash from investing activities of continuing
operations in 2003 and generated $200 million in 2002. In 2003,
Abitibi-Consolidated used $262 million for capital expenditures compared to
$214 million in 2002. The Company generated $460 million from the divestiture of
the Saint-Felicien mill in 2002. Construction payables included in capital
expenditures increased by $21 million in 2003 compared with a decrease of
$5 million in 2002 mainly due to the Alma conversion.

Major projects included the completion of the new thermomechanical pulp plant in
Baie-Comeau, Quebec ($4 million in 2003 and $37 million in 2002), the Alma
conversion ($105 million in 2003) and the beginning of the China machine project
($10 million in 2003). In the first quarter of 2003, the Company completed the
TMP modernization project at the Baie-Comeau mill. The project was completed
within budget and started up slightly ahead of expectations. The $181 million
project to convert the newsprint machine at the Alma mill to the EQUAL OFFSET(R)
grade began in the first quarter of 2003. The project is both on budget and on
schedule for a start-up in the second quarter of 2004 ramping up to EQUAL
OFFSET(R) paper in the second half of 2004. In 2002, Abitibi-Consolidated
approved the modernization of its hydroelectric generating facilities at
Iroquois Falls, Ontario. This project is also progressing both on budget and on
schedule for a start-up in July of 2004. Engineering work for the China machine
project has started and construction will begin during the first quarter of
2004. The remainder of the capital expenditures was mainly related to asset
maintenance.

The Company intends to limit its capital expenditure program in 2004 to below
$300 million excluding its portion of the capital expenditures of the PanAsia
joint venture.

The Company intends to continue to maintain a disciplined capital expenditure
program and apply free cash flows towards the reduction of debt.

BUSINESS ACQUISITION AND DISPOSAL
As discussed earlier, in August 2002, the Company sold its northern bleached
softwood kraft (NBSK) pulp mill located in Saint-Felicien to a member of a group
of entities controlled by SFK Pulp Fund (collectively, SFK) for a total
consideration valued at $693 million. The consideration consisted of $544
million in cash and some working capital elements as well as a 25% interest
through a holding of class "B" units. The Company realized a pre-tax gain of
$364 million on disposal of 75% of the pulp mill. More information is presented
in Note 3 of the consolidated financial statements.

2002 COMPARED TO 2001
Net sales totalled $5,122 million in 2002 compared to $5,811 million in 2001.
The Company's decrease in net sales was mainly attributable to lower prices for
newsprint and value-added groundwood papers, partly offset by higher sales
volume in all segments, primarily in the newsprint business due to the
acquisition of an additional 16.67% ownership of PanAsia in August of 2001.

The loss from continuing operations amounted to $47 million in 2002, or $0.11
per share, compared to net earnings from continuing operations of $70 million
in 2001, or $0.16 per share. The reduction of $117 million in earnings from
continuing operations resulted mainly from lower operating profit from
continuing operations of $783 million. This factor was partly offset by lower
financial expenses of $26 million, a gain of $54 million on translation of
foreign currencies compared to a loss of $265 million in 2001, an income tax
recovery of $181 million in 2002 compared to an expense of $84 million in
2001 and the elimination in 2002 of goodwill amortization of $40 million.

The Company posted net earnings of $259 million in 2002, or $0.59 per share,
compared to $106 million in 2001, or $0.24 per share. In 2002, the Company sold
its Saint-Felicien pulp mill and realized an after-tax gain of $293 million.

The Company's cash and cash equivalents at the end of 2002 amounted to $146
million, a reduction of $62 million compared to $208 million at the end of
2001. In 2002, Abitibi-Consolidated generated $243 million of cash from
continuing operating activities, $51 million of cash from discontinued
operations and $200 million of cash from investing activities of continuing
operations while it used $551 million of cash for financing activities of
continuing operations. The major cash transactions during 2002, excluding
cash from operations, payment of dividends and capital expenditures, were the
debt reduction and the divestiture of the Saint-Felicien pulp mill.

                                   48



SELECTED ANNUAL INFORMATION

TABLE 8. SELECTED ANNUAL INFORMATION
In millions of dollars, except as noted


                                             2003         2002            2001
                                             ----         ----            ----
                                                $            $               $

Net sales                                   4,786        5,122           5,811
Operating profit (loss)
  from continuing operations                 (322)         182             965
Earnings (loss) from continuing operations    182          (47)             70
Earnings (loss) from continuing
  operations per share                       0.41        (0.11)           0.16
Net earnings                                  179          259             106
Net earnings per share                       0.41         0.59            0.24
Total assets                               10,185       11,144          11,468
Total long-term liabilities                 5,661        6,529           6,993
Cash dividends declared per share           0.175        0.400           0.400
Exchange rates (CDN$1= US$):
  Closing exchange rate at year-end         0.771        0.634           0.628
  Average noon rate for the year            0.714        0.637           0.646
--------------------------------------------------------------------------------


Net sales were negatively impacted mainly by lower average prices in almost all
segments of the Company. The strengthening of the Canadian dollar compared to
the U.S. currency in 2003 also contributed to the downward trend going from an
average of US$0.637 in 2002 to US$0.714 in 2003. (See Table 8)

The Company's operating profit from continuing operations turned to a loss
position in 2003 mainly because of the strength of the Canadian dollar compared
to the U.S. currency. In 2003, operating results were negatively impacted by
$67 million for closure costs, $67 million for asset write-offs and goodwill
impairment of $21 million.

Other than the elements mentioned above, the major factor that affected the
Company's net earnings is the gain on translation of foreign currencies, mainly
due to the strengthening Canadian dollar and its impact on the Company's debt
denominated in U.S. dollars.

The downward trend in total assets and total long-term liabilities is mainly
caused by the strengthening of the Canadian dollar compared to the U.S. currency
going from a rate of US$0.628 at the end of 2001 to US$0.634 at the end of 2002
and to US$0.771 at the end of 2003.

The weighted average number of shares outstanding remained constant at
440 million during these periods.

In the second quarter of 2003, the Company's Board of Directors made the
decision to reduce the quarterly dividend from $0.10 per share to $0.025 in
light of market and currency exchange conditions.


OTHER NOTEWORTHY EVENTS

On February 10, 2004, the Company announced the sale of its remaining 25%
interest in SFK Pulp Fund for gross proceeds of $118.5 million. Net proceeds
will be used towards the repayment of certain outstanding debt and for general
corporate purposes. The transaction closed on February 27, 2004.

On January 22, 2004, the Communications, Energy and Paperworkers Union of Canada
(CEP) selected Abitibi-Consolidated as the pattern-setting employer in the
upcoming negotiations in Eastern Canada for a new collective agreement. Over the
past few years, the Company has sought to strengthen its partnership with its
employees and union leaders so as to create a collaborative working atmosphere.
Substantial work has been done on issues key to both parties in preparation for
future in-depth discussions at the negotiating table. In order to promote a
positive and productive approach to the 2004 negotiations, the CEP and the
Company will be conducting negotiations prior to the expiration of collective
agreements, to resolve local issues involving individual mills as well as major
issues impacting all divisions. As announced by the Union, these major issues
include the duration of the collective agreement, wages, benefits, pension plan
and job security.

On November 27, 2003, the Company and World Wildlife Fund Canada (WWF-Canada)
announced that they were joining forces on a new forestry conservation project.
Abitibi-Consolidated and WWF-Canada will work in partnership to identify high
conservation value forests (HCVF) within specific Abitibi-Consolidated woodlands
in Canada.

On November 17, 2003, Abitibi-Consolidated announced that its paper recycling
program Paper Retriever(R) is now available in five additional Mid-Western U.S.
cities. The launch of this program in these locations will increase internal
supply of recycled paper to the Company.

On June 26, 2003, Nature Conservancy of Canada and Abitibi-Consolidated
announced the creation of a new protected area at the Lloyd's River Escarpment
in Central Newfoundland. The 768-hectare (1,897-acre) gift of wilderness
property from Abitibi-Consolidated will provide critical habitat for the
endangered Newfoundland pine marten as well as greater sanctuary for the
declining population of the Canada lynx.

On June 16, 2003, the Company implemented a Small Shareholder Selling Program
that enabled registered and beneficial shareholders who own 99 or fewer common
shares of Abitibi-Consolidated to sell their shares without incurring any
brokerage commissions. The voluntary program expired on November 28, 2003. The
number of participating shareholders reached almost four thousand out of
approximately nine thousand for a participation rate of 41%.

Since January 1, 2003 and up to June 30, 2005,Abitibi-Consolidated has an option
to purchase its partner's 50% interest in Alabama River Newsprint Company and
Alabama River Recycling Company

                                  49



(Alabama joint venture) at a predetermined nominal amount. Because of this
option, in accordance with GAAP, the Company is deemed to control the Alabama
joint venture. Consequently, Abitibi-Consolidated has included the Alabama joint
venture's complete financial results, assets and liabilities in its consolidated
financial statements as of that date, adding US$61 million of debt to its
balance sheet as at December 31, 2003 compared to US$80 million as at January 1,
2003.

In December 2001, the Canadian Competition Bureau appointed a sales agent to
attempt to find a buyer for the Port-Alfred newsprint mill. This appointment was
made pursuant to a previous agreement between the Company and the Bureau further
to the Donohue acquisition. The sales agent could not complete the divestiture
of Port-Alfred within the allowed time period. The Bureau then conducted an
inquiry on the sale process. In the second quarter of 2003, the Bureau closed
its file.

On September 19, 2001, the Company entered into a partnership (Exploits River
Hydro Partnership) with Central Newfoundland Energy Inc., a non-regulated
subsidiary of Fortis Inc., to further develop hydroelectric potential in
Newfoundland. Abitibi-Consolidated holds a 49% interest in the partnership. The
project has been completed, commissioned and received final approval from
Newfoundland and Labrador Hydro. Exploits River Hydro Partnership is supplying
power to the provincial grid under a long-term contract agreement to the
utility.


RISKS AND UNCERTAINTIES

PRICES
Paper prices are tied to the health of the economies of North and South America,
Asia and Europe, as well as to paper inventory levels in these regions.
Continued difficult economic conditions in 2003 limited the North American
growth in advertising spending and paper consumption.

Paper prices are also tied to variances in production capacity. The Company
believes that increases in worldwide newsprint capacity are at historical low
levels.

The Company expects a moderate improvement in the general market environment for
newsprint and value-added groundwood papers in 2004, arising from an economic
recovery in North America and in Europe, combined with the absence of
significant new capacity in North America.

FOREIGN EXCHANGE
The Company's principal paper markets are outside Canada and therefore exposure
to the U.S. dollar is a risk to its business. In 2003, approximately 71% of the
net revenues and 17% of manufacturing costs of the Company's operations,
excluding PanAsia, are in U.S. dollars. The U.S. dollar exposure may therefore
cause volatility in the Company's cash flows, earnings and debt.

The Company's foreign exchange program includes partial hedging of U.S. dollar
and other currencies cash flows. The Company also borrows most of its long-term
debt in U.S. dollars and this debt constitutes an effective partial economic
hedge on future U.S. dollar cash flows.

SOFTWOOD LUMBER DISPUTE
Since the end of the five-year softwood lumber agreement between Canada and the
United States in March 2001, the USDOC has instituted CVD/AD investigations. In
2002, "final determinations" were issued by the U.S. government and duties have
been imposed at rates of 18.79% for CVD and 12.44% for the Company-specific AD
calculated on the net sales of the Company's lumber shipped to the United
States. The USDOC has started to conduct retrospective annual reviews to
determine the actual amounts of CVD/AD owed. The final results of these reviews
are expected in the fourth quarter of 2004. The difference between the amounts
paid and owed would then be refundable to or payable by the Company, with
interest.

As a company with global manufacturing operations, Abitibi-Consolidated believes
free and open trade is critical to maintain global competitiveness and remains
confident that lower duty rates, if any at all, will prevail in the final
determination.

Based on normal shipment patterns, the impact of every 1% increase or decrease
in CVD/AD represents a change of approximately $1.8 million to net earnings
annually.

FIBRE SUPPLY
Fibre represents the Company's major raw material in the production of wood
products, paper and pulp. The Company uses both virgin fibre (wood chips and
logs) and recycled fibre (old newspapers and magazines) as fibre sources for its
paper mills.

The virgin fibre supply required by the Company in Canada is mostly assured by
agreements with provincial governments. The agreements are granted for various
terms, from 5 to 25 years, and are generally subject to regular renewal every 5
years. They incorporate commitments with respect to sustainable forest
management, silvicultural work, forest and soil renewal as well as cooperation
with other forest users. The Company believes that it is in material compliance
with all forest regulations.

Wood chips supplied from the Company's sawmills together with fibre exchanges
with independent sawmills, as well as long-term contracts with third parties are
conducted at market prices and represent approximately 88% of the Company's
Canadian pulp and paper mills' virgin fibre requirements.

Virgin fibre in the United States is obtained through the Company's private
timberlands and long-term supply contracts.

The Company is the largest North American consumer of old newspapers and
magazines. The Company is involved in the recovery of old paper and has
contracts with numerous recyclers, waste haulers and brokers in countries where
its mills are located. The Company's own recovery network, excluding PanAsia,
accounts for 39% of its recycled fibre needs.

The Company believes that the balance of fibre supply between its internal
sources and the open market is more than adequate to support its wood products,
paper and pulp production requirements.

                                     50



ENERGY
In its manufacturing processes, the Company consumes a large volume of natural
gas and bunker 'C' oil. Compared to 2002, North American index prices for these
two commodity products increased by approximately 60% and 20% respectively in
2003. These increases were partially offset by a stronger Canadian dollar and by
an overall reduction in usage. The Company also manages the flexibility that
some of the paper mills have to switch energy sources depending upon which
source is more advantageous.

In May 2002, the power market in the province of Ontario was deregulated. The
impact of deregulation in Ontario on the Company has been mitigated by its
ability to self-generate power in some of its facilities and by signing fixed
price supply contracts.

In 2003, the Company began the implementation of a corporate energy procurement
policy. The goals of the policy are to reduce the volatility in energy costs to
the Company and to establish and maintain cost levels that are acceptable to its
business needs.

LABOUR
The Company has several contracts with unionized employees. Some of these
contracts expire on April 30, 2004 and cover twelve of its paper mills, two in
Newfoundland, five in Quebec and five in Ontario.

As mentioned in the section OTHER NOTEWORTHY EVENTS, on January 22, 2004, the
Communications, Energy and Paperworkers Union of Canada (CEP) selected
Abitibi-Consolidated as the pattern-setting employer in the upcoming
negotiations in Eastern Canada for a new collective agreement.

The Company believes that its labour relations are good and does not anticipate
labour disruptions in its operations.

ENVIRONMENT
The Company is subject to environmental laws and regulations relating to
forest management, air emissions, wastewater discharge, waste management and
landfill sites. The Company believes that it is in material compliance with
all laws and regulations governing its activities and that the only
foreseeable significant capital expenditure in 2004-2005 will be some
modifications to its effluent treatment at its Grand Falls mill and its air
emission equipment at the Grand Falls and Stephenville, Newfoundland mills.

The Company conducts environmental compliance audits, generally performed by
internal auditors, which cover all the Company's paper and lumber sites over a
defined schedule of time. The Company has implemented Environmental Management
Systems in most of its operations.

The Company has implemented a certification process of its Environmental
Management Systems, under the International Standards Organization (ISO) for its
pulp and paper mills, sawmills, and woodlands operations. By the end of 2003,
the majority of the Company's operations were certified ISO 14001.

With respect to the Company's commitment to obtain the sustainable forest
management certification for its North American operations by the end of 2005,
the progress made to date is within expectations. The Company also concluded, in
2003, a high-conservation-value forest agreement with World Wildlife Fund.

PRICE AND EXCHANGE RATE SENSITIVITY
The Company's pre-tax earnings from continuing operations, net earnings from
continuing operations and diluted earnings from continuing operations per share
are impacted by fluctuations in selling prices and foreign exchange to the
extent shown in Table 9.

TABLE 9. 2004 SENSITIVITY ANALYSIS
In millions of dollars, except per share amounts

Based on financial hedges in place as at December 31, 2003, and on budgeted
volumes, prices and exchange rates.


                                                                       IMPACT ON
                                                --------------------------------
                                                 PRE-TAX        NET     EARNINGS
                                                EARNINGS   EARNINGS    PER SHARE
                                                --------------------------------
                                                       $          $            $

US$25 CHANGE IN TRANSACTION PRICE - PER UNIT
Newsprint(1)                                        158        108          0.24
Value-added groundwood papers(1)                     57         39          0.09
Wood products(2)                                     72         49          0.11

FOREIGN EXCHANGE(3)
US$0.01 change in relative value
  to the Canadian dollar
    Cash impact                                      26         18          0.04
    Translation of foreign currencies                60         49          0.11
--------------------------------------------------------------------------------

(1) per tonne
(2) per thousand board feet
(3) translation of foreign currencies will impact earnings inversely to cash

                                     51




OUTLOOK

The Company is a major global low-cost producer and marketer of newsprint and
value-added groundwood papers with interests in operations in Canada, the United
States, the United Kingdom, South Korea, China and Thailand. It is also one of
the major lumber producers in North America.

After taking into consideration machine start-ups, closures and conversions
completed in 2003, the Company's production capacity, at the beginning of 2004,
is as shown in Table 10.

TABLE 10. PRODUCTION CAPACITY



Newsprint(1)                         5,476 Thousand tonnes
Value-added groundwood papers(1)     2,039 Thousand tonnes
Market pulp                          87 Thousand tonnes
Lumber and other wood products       2,352 Million board feet
I-joists                             35 Million linear feet
--------------------------------------------------------------------------------

(1) includes currently idled capacity (see Table 2)

The Company believes, considering economists' forecasts for growth in the U.S.
economy during the year, that newsprint markets will moderately improve in 2004.

The Company expects the market for value-added groundwood papers will improve as
advertising expenditures and retail sales continue to recover in 2004 along with
the economy.

The Company intends to limit its capital expenditure program in 2004 at below
$300 million excluding its portion of the capital expenditures of the PanAsia
joint venture. The Company also intends to apply free cash flows toward the
reduction of long-term debt.


FORWARD-LOOKING STATEMENTS

Certain statements contained in this MD&A and in particular the statements
contained in various outlook sections, constitute forward-looking statements.
These forward-looking statements relate to the future financial condition,
results of operations or business of the Company. These statements may be
current expectations and estimates about the markets in which
Abitibi-Consolidated operates and management's beliefs and assumptions regarding
these markets. These statements are subject to important risks and uncertainties
which are difficult to predict and assumptions which may prove to be inaccurate.
The results or events predicted in the forward-looking statements contained in
this MD&A may differ materially from actual results or events. Some of the
factors, which could cause results or events to differ materially from current
expectations, are discussed under the section RISK AND UNCERTAINTIES and other
cautionary factors are outlined elsewhere in this MD&A. The Company disclaims
any intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise. In
particular, forward-looking statements do not reflect the potential impact of
any mergers, acquisitions or other business combinations or divestitures that
may be announced or completed after such statements are made.


FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS

In the normal course of business, the Company is exposed to certain financial
risks. The Company does not hold financial instruments for speculative purposes
but only to reduce the volatility of its results from its exposure to these
risks. The market value of financial instruments contracted by the Company
arises mostly from changes in interest and exchange rates between the inception
dates of these contracts and the balance sheet date. More information on
financial instruments is presented in note 21 of the consolidated financial
statements.

FOREIGN EXCHANGE
The Company uses various financial instruments such as U.S. dollar forwards as
well as U.S. dollar and euro zero cost option tunnels, to reduce its exposure to
foreign currency exchange risk. The Company's sales, excluding PanAsia,
denominated in U.S. dollars and euros represent 71% and 5% of total sales
respectively. The foreign exchange financial contracts only hedge a portion of
the sales. This portion declines as the hedge horizon increases. These hedges
are all due to mature within the next two years. The gains and losses on foreign
exchange contracts are recognized in earnings when the related hedged revenue is
recorded.

Furthermore, the long-term debt expressed in U.S. dollars is also considered an
effective economic hedge against the exchange risk related to the future revenue
streams originating from sales denominated in U.S. dollars.

INTEREST RATE
At year-end, 73% of the Company's recourse debt was at fixed rates. The Company
uses interest rate swap agreements to increase the floating interest rate mix of
its recourse debt portfolio. The interest rate contracts are only for a portion
of the Company's bond portfolio and mature in the years 2005 through 2010.

Interest expense on the debt is adjusted to include payments made or received
under these agreements. The net related amount receivable from counterparts is
included in accounts receivable.

                                     52



CREDIT RISK
The Company is exposed to credit risk on the accounts receivable from its
customers. In order to manage its credit risk, the Company has adopted policies,
which include the analysis of the financial position of its customers and the
regular review of their credit limits. The Company also subscribes to credit
insurance and, in some cases, requires bank letters of credit. As a result, the
Company does not have significant exposure to any individual customer. Its
customers are mainly in the newspaper publishing, commercial printing,
advertising and paper converting as well as lumber wholesaling and retailing
businesses.

The Company is exposed to credit risk on the favourable fair value of its
derivative financial instruments. In order to mitigate this risk, the Company
contracts its derivative financial instruments with credit worthy financial
institutions.


CONTRACTUAL OBLIGATIONS

The Company has operating leases and other commitments entered into in the
normal course of business. These commitments, which are not accounted for on the
Company's consolidated balance sheet, are described in note 22 of the
consolidated financial statements.

Table 11 presents contractual agreements that are enforceable and are legally
binding on the Company. Consequently, all recourse and non-recourse obligations
to the Company have been included in the total commitments. The non-recourse
information is also shown separately.

TABLE 11. SUMMARY OF CONTRACTUAL OBLIGATIONS
In millions of dollars


                                                                            NON-
                                    TOTAL COMMITMENTS BY PERIOD         RECOURSE
--------------------------------------------------------------------------------
                                                                             FOR
                       TOTAL   WITHIN     1 - 3    4 - 5     AFTER   INFORMATION
                 COMMITMENTS   1 YEAR     YEARS    YEARS   5 YEARS          ONLY
                 -----------   ------     -----    -----   -------   -----------
                           $        $         $        $         $             $

Long-term debt         4,955      314     1,117      813     2,711           479
Capital leases             3        3         -        -         -             3
Operating leases          72       20        25       12        15             1
Purchase obligations     119      119         -        -         -            62
--------------------------------------------------------------------------------
TOTAL CONTRACTUAL
OBLIGATIONS            5,149      456     1,142      825      2,726          545
--------------------------------------------------------------------------------


Abitibi-Consolidated has long-term debt with contractual maturities as described
in note 18 of the consolidated financial statements.

Purchase obligations are entirely composed of capital expenditures. At the end
of 2003, the Company's portion of PanAsia's firm commitments was US$48 million
related to the China machine project. The Company had direct commitments of $33
million related to the Alma conversion and $24 million related to the
modernization of its hydroelectric generating facilities in Iroquois Falls.


OFF-BALANCE SHEET ARRANGEMENTS

The Company has ongoing programs to sell up to US$500 million of accounts
receivable, with minimal recourse, to major financial institutions. Under these
programs, the outstanding balance in Canadian dollars, as at December 31, 2003
was $504 million compared to $472 million at December 31, 2002.


TRANSACTIONS WITH RELATED PARTIES

As at December 31, 2003, the Company owned an interest of 25% in SFK GP.
Historically, the Company supplied all the required fibre to the Saint-Felicien
mill to produce market pulp. SFK GP has a 20-year fibre supply agreement with
the Company. Subject to certain conditions, the price of fibre payable by SFK GP
will be tied to the price of pulp for the first 740,000 tonnes of fibre per
year. Also, the Company has agreed to purchase some market pulp from SFK GP.
These transactions are in the normal course of operations and have been carried
out on the same terms as would have applied with unrelated parties and were
accounted for at the exchange value, except the fibre sales as mentioned
previously.

TABLE 12. TRANSACTIONS WITH RELATED PARTIES
In millions of dollars


                                    2003           2002
                                    ----           ----

Fibre sales                           92             36
Purchases of market pulp              25             13
Accounts receivable from SFK GP        2              5
--------------------------------------------------------------------------------


CHANGES IN ACCOUNTING POLICIES

ADOPTED DURING FISCAL YEAR OF 2003
SHARE PURCHASE LOANS
Effective January 1, 2003, the Company prospectively applied the new guidelines
of Emerging Issues Committee (EIC) Abstract 132 of the Handbook on accounting
for share purchase loans receivable from employees. Consequently, these loans
are no longer presented as accounts receivable, but as a deduction from
shareholders' equity, more precisely from capital stock, and interest received
on such loans is no longer considered as income, but accounted for as a capital
transaction in shareholders' equity.

The impact of the loans reclassification represented $5 million as at January 1,
2003 and $3 million at the end of the year.

EXPECTED TO BE ADOPTED IN SUBSEQUENT YEARS
ELIMINATION OF INDUSTRY PRACTICE
The new Canadian Institute of Chartered Accountants (CICA)
Handbook section 1100, "GENERALLY ACCEPTED ACCOUNTING

                                     53



PRINCIPLES", has been issued, effective for fiscal years beginning on or
after October 1, 2003. The new section establishes standards for financial
reporting in accordance with GAAP. It clarifies the relative authority of
various accounting pronouncements and other sources of guidance within GAAP,
complementing section 1000, "FINANCIAL STATEMENT CONCEPTS". The new standard
eliminates "industry practice" as a possible source to consult. As a result,
starting January 1, 2004, the Company will retroactively apply its
distribution costs as an expense, instead of a reduction of gross sales to
determine the net sales.

The application of the new standard will increase both net sales and expenses by
$577 million in 2003, $582 million in 2002 and $581 million in 2001 resulting in
no impact on net earnings and on cash flows.

IMPAIRMENT OF LONG-LIVED ASSETS
The Accounting Standards Board (ASB) of the CICA has issued section 3063,
"IMPAIRMENT OF LONG-LIVED ASSETS", which is effective for fiscal years beginning
on or after April 1, 2003. This section establishes standards for recognition,
measurement and disclosure of the impairment of non-monetary long-lived assets,
including property, plant and equipment, intangible assets with finite useful
lives, deferred pre-operating costs and long-term prepaid assets.

The Company does not expect that the implementation of this new standard will
have a significant impact on its consolidated financial statements.

ASSET RETIREMENT OBLIGATIONS
The ASB of the CICA has issued a new section in the CICA Handbook, section 3110,
"ASSET RETIREMENT OBLIGATIONS", which is effective for fiscal years beginning on
or after January 1, 2004. This standard focuses on the recognition, measurement
and disclosure of liabilities related to legal obligations associated with the
retirement of tangible long-lived assets. Under this standard, these obligations
are initially measured at fair value and subsequently adjusted for the passage
of time and any changes in the underlying cash flows. The asset retirement cost
is to be capitalized to the related asset and amortized into earnings over time.

The Company does not expect that the implementation of this new standard will
have a significant impact on its consolidated financial statements.

STOCK-BASED COMPENSATION
The ASB of the CICA has issued new recommendations relative to Handbook section
3870, "STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS", which is
effective for fiscal years beginning on or after January 1, 2004. The
recommendation states that the fair value-based method must be used, the
intrinsic value method being no longer acceptable. The Company will adopt the
new recommendation retroactively with restatement.

The Company does not expect that the implementation of this new standard will
have a significant impact on its consolidated financial statements.

HEDGING RELATIONSHIPS
The ASB of the CICA has issued Accounting Guideline (AcG) AcG-13 "HEDGING
RELATIONSHIPS", which should be applied to hedging relationships in effect in
fiscal years beginning on or after July 1, 2003. The guideline presents the
views of the ASB on the identification, designation, documentation and
effectiveness of hedging relationships, for the purpose of applying hedge
accounting, as well as on the discontinuance of hedge accounting. The guideline
establishes certain conditions when hedge accounting may be applied.

The Company does not expect that the implementation of this guideline will have
a significant impact on its consolidated financial statements.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES
The ASB of the CICA issued AcG-15, "CONSOLIDATION OF VARIABLE INTEREST
ENTITIES", which will be effective for annual and interim periods beginning
on or after November 1, 2004. This guideline addresses the application of
consolidation principles to entities that are subject to control on a basis
other than ownership of voting interests.

The Company does not expect that the implementation of this guideline will have
a significant impact on its consolidated financial statements.

REVENUE RECOGNITION
The EIC of the CICA issued EIC-141, "REVENUE RECOGNITION", EIC-142, "REVENUE
ARRANGEMENTS WITH MULTIPLE DELIVERABLES" and EIC-143, "ACCOUNTING FOR SEPARATELY
PRICED EXTENDED WARRANTY AND PRODUCT MAINTENANCE CONTRACTS", which will all be
effective for annual and interim periods beginning on or after December 17,
2003. EIC-141 summarizes the principles set as interpretative guidance on the
application of Handbook section 3400, "REVENUE". Specifically, this EIC presents
the criteria to be met for revenue recognition to be considered achieved.
EIC-142 addresses certain aspects of the accounting by a vendor for arrangements
under which it will perform multiple revenue-generating activities for a given
customer. Finally, EIC-143 considers the issue of how revenue and costs from a
separately priced extended warranty or product maintenance contract should be
recognized.

The Company does not expect that the implementation of the accounting treatments
presented in these EICs will have a significant impact on its consolidated
financial statements.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's summary of significant accounting policies is described in note 1
of the consolidated financial statements. Abitibi-Consolidated believes its most
critical accounting policies include those related to foreign exchange;
property, plant and equipment; goodwill; employee future benefit plans; and
future income taxes.

FOREIGN EXCHANGE
The application of CICA Handbook Section 1650 "FOREIGN CURRENCY TRANSLATION"
requires that monetary assets and liabilities of domestic and integrated foreign
operations denominated in foreign currencies be translated at year-end exchange
rate and the gains or losses resulting from the period to period exchange
variation be absorbed in the consolidated statement of earnings.

The majority of the Company's long-term debt is denominated in U.S. dollars. A
variation of US$0.01 in relative value to

                                     54



the Canadian dollar represents $60 million of non-cash pre-tax gain or loss to
the Company's consolidated statement of earnings.

PROPERTY, PLANT AND EQUIPMENT
The Company records its property, plant and equipment at cost, including
capitalized interest and pre-production costs. Investment tax credits and
government capital grants received reduce the cost of the related assets.
Property, plant and equipment purchased following a business acquisition are
recorded at their fair value based on an independent study.

The Company amortizes plant and equipment over their productive life mainly
using the straight-line method. However, the Company could write off certain
plant and equipment in case of premature termination of their useful life.

GOODWILL
The application of CICA Handbook Section 3062 "GOODWILL AND OTHER INTANGIBLE
ASSETS" requires that the excess of the purchase amount of acquisitions over the
value of the identifiable net assets should not be amortized to earnings, but
periodically tested for impairment.

The Company uses certain operating and financial assumptions to conduct its
impairment test. This test uses current market information, when available, or
other generally accepted valuation methods, such as discounted cash flows.
Differences in assumptions regarding discount rates and projection of future
operating cash flows could have a significant impact on the determination of the
impairment amount reported through the Company's consolidated statement of
earnings. These assumptions are tested against relevant independent information
for consistency and reliability.

Changes in estimates or assumptions could affect the goodwill impairment in the
statement of earnings and goodwill in the balance sheet of the Company's
consolidated financial statements.

EMPLOYEE FUTURE BENEFIT PLANS
The application of CICA Handbook Section 3461 "EMPLOYEE FUTURE BENEFITS"
requires judgments regarding certain assumptions that affect the amounts
recorded for estimated plans accrued benefit obligations and related income or
expense.

The Company uses independent actuarial firms to perform actuarial valuation of
the fair values of post-retirement and pension plans obligations. The major
assumptions are the discount rate used to calculate the present value of the
pension obligation, the expected return on plan assets and the rate of
compensation increase. The Company, based on its own experience and
recommendations from its actuarial firms, evaluates these assumptions annually.
The Company amortizes past service costs and cumulative unrecognized net
actuarial gains and losses, in excess of 10% of the greater of the accrued
benefit obligation or the market-related value of plan assets, over the average
remaining service period of the active employee group covered by the plans.

As at December 31, 2003, the Company's deficit of the fair value of the pension
plan assets over its accrued benefit obligation was $696 million compared to
$791 million at the end of 2002. This improvement is mainly attributable to the
high return on plan assets in the last quarter of 2003. In 2004, the Company
will perform an actuarial valuation on most of its pension plans. As a result,
the Company anticipates that it will fund its actuarial deficit over the next
five years. Consequently, the Company believes its minimum pension funding in
excess of pension expenses will be in the range of $100 million for 2004
compared to $34 million in 2003.

Changes in estimates or assumptions could affect cost of products sold in the
statement of earnings and the employee future benefits in the balance sheet of
the Company's consolidated financial statements.

A description of the plans, the assumptions used in the calculation and certain
sensitivities are presented in note 19 of the consolidated financial statements.

FUTURE INCOME TAXES
The application of CICA Handbook Section 3465 "INCOME TAXES" requires that
future income tax assets and liabilities be recognized for the future income tax
consequences of events that have been included in the consolidated statement of
earnings or income tax returns. Future income tax is provided for using the
liability method and recognizes all significant temporary differences between
the tax and consolidated financial statements bases of assets, liabilities and
certain carry forward items.

The Company's future income tax assets are recognized only to the extent that,
in the Company's opinion, it is more likely than not that the future income tax
assets will be realized. This opinion is based on certain estimates and
assumptions. If these estimates or assumptions change in the future, the Company
could be required to reduce or increase the value of the future income tax
assets resulting in income tax expense or recovery. The Company evaluates its
future income tax assets periodically.

Changes in estimates or assumptions could affect the income tax in the statement
of earnings and the future income taxes in the balance sheet of the Company's
consolidated financial statements.


USE OF NON-GAAP FINANCIAL MEASURES

EBITDA is not a recognized measure under Canadian GAAP. The Company believes
that this measure is useful supplemental information as it provides readers with
an indication of cash available prior to debt service, capital expenditures and
income taxes. Readers should be cautioned however, that this information should
not be confused with or used as an alternative for net earnings determined in
accordance with GAAP as an indicator of performance or cash flows from
continuing operating, investing and financing activities as a measure of
liquidity and cash flows.

                                     55



TABLE 13. EBITDA RECONCILIATION
In millions of dollars


                                                           2003           2002
                                                           ----           ----
                                                              $              $

Operating profit (loss) from continuing operations       (322)(1)          182
Plus:
  Amortization of plant and equipment                     687              648
  Amortization of intangible assets                        16               16
  Goodwill impairment                                      21                -
--------------------------------------------------------------------------------
EBITDA                                                     402 (1)         846
--------------------------------------------------------------------------------

(1) includes $67 million of closure costs

EBITDA is calculated by adding amortization of plant and equipment, amortization
of intangible assets as well as goodwill impairment to operating profit from
continuing operations. The Company's method for calculating this information may
differ from that used by other companies and, accordingly, this information may
not be comparable to measures used by other companies. (See Table 13)


DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS

Disclosure controls and procedures have been established by the Company to
ensure that information disclosed by the Company in this MD&A and the related
financial statements was properly recorded, processed, summarized and ultimately
reported to the Board and the Audit Committee.

The Company has also established internal controls and procedures for financial
reporting to ensure that the financial information contained in this MD&A and
the related financial statements is fairly presented in conformity with GAAP and
that the Company's transactions are properly approved, its assets are
safeguarded against unauthorized or improper use, and the transactions it enters
into are properly recorded and reported to permit the preparation of the
Company's financial statements in conformity with GAAP.

In the year ended December 31, 2003, the Company did not make any significant
changes in, nor take any significant corrective actions regarding, the controls
and procedures described in the two preceding paragraphs, or other factors that
could significantly affect these controls and procedures. The Company's CEO and
CFO periodically review the aforementioned controls and procedures for
effectiveness and conduct an evaluation each quarter. As of the end of the
fourth quarter, the Company's CEO and CFO were satisfied with the effectiveness
of the aforementioned controls and procedures.


OVERSIGHT ROLE OF AUDIT COMMITTEE AND THE BOARD OF DIRECTORS

The Audit Committee reviews the Company's annual MD&A and related financial
statements with management and the external auditors, and recommends their
approval to the Board. Management and the internal auditor of the Company also
present periodically to the committee a report of their assessment of the
Company's internal controls and procedures for financial reporting. The external
auditor periodically prepares for management a report on internal control
weaknesses identified during the course of the auditor's annual audit, which is
reviewed by the Audit Committee.

ADDITIONAL INFORMATION

Additional information relating to Abitibi-Consolidated, including the Annual
Information Form, is on SEDAR at www.sedar.com, on EDGAR at www.edgar-online.com
and on the Company's website at www.abitibiconsolidated.com.

                                     56