UPDATE 1-Canada's Canfor posts narrower-than-expected Q3 loss

* Q3 adj loss C$0.23/shr vs est. loss/shr C$0.25

* Q3 sales fall 19 percent

* To curtail activity at sawmills during Christmas

* Sees weak lumber market for rest of year

Oct 29 (Reuters) - Canada's Canfor Corp (CFP.TO) reported narrower-than-expected third quarter loss, helped largely by a foreign exchange gain, and said it will take curtailments at most of its sawmills over the Christmas period.

For the quarter, the company posted a net loss of C$5.2 million, or 4 Canadian cents a share, compared with a loss of C$94.2 million, or 66 Canadian cents a share, a year ago.

The quarter's narrower loss was helped by cost reductions, higher pulp sales revenue and a foreign exchange gain of C$19.6 million.

Excluding items, Canfor reported a loss of 23 Canadian cents a share.

Sales fell to C$540.9 million from C$668 million.

Analysts on average expected a loss of 25 Canadian cents a share, before items, on revenue of C$552 million, according to Thomson Reuters I/B/E/S.

Canfor, Canada's second-largest producer of softwood lumber, said cash conservation efforts continue to be a primary focus. At the end of the third quarter, it had cash of C$153 million, and C$413 million of undrawn operating lines of credit.

"Our third-quarter results reflect further progress in our cost reduction efforts and a welcome uplift in pulp prices, but there is no disguising the continued challenges presented by the troubled U.S. housing market," Chief Executive Jim Shepard said in a statement.

The company's decision to curtail activity at its sawmills will reduce its lumber production by about 37 million board feet of SPF lumber, it said.

Shares of the Vancouver-based company closed at C$6.44 Thursday on the Toronto Stock Exchange. (Reporting by Isheeta Sanghi in Bangalore; Editing by Unnikrishnan Nair) ((isheeta.sanghi@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: isheeta.sanghi.thomsonreuters.com@reuters.net))