Norbord reports Q3 earnings of US$27M, level with year-ago earnings of U$27M, on sales up 3% to US$311M; CEO highlights positive result in spite of volatile OSB pricing, notes 45% price adjustment since spring

TORONTO , November 1, 2013 (press release) – Note: Financial references in US dollars unless otherwise indicated.


  • Earnings per share of $0.50 diluted ( $0.51 basic)
  • EBITDA of $45 million
  • North American shipment volumes to new home construction sector increased 25% year-to-date - reflecting the continuing US housing recovery
  • European markets continue to strengthen - OSB, particleboard prices up 8% year-over-year
  • Declared quarterly dividend of CAD $0.60 per share
Norbord Inc. (TSX: NBD, NBD.WT) today reported EBITDA of $45 million in the third quarter of 2013, compared to $66 million in the same quarter last year and $102 million in the second quarter of 2013. North American operations generated EBITDA of $36 million in the quarter versus $58 million last year and $92 million in the prior quarter. European operations generated EBITDA of $12 million in both the third and second quarters of 2013 versus $10 million in the third quarter last year.

Norbord recorded $27 million of earnings ( $0.50 per share diluted) in the third quarter of 2013 compared to $27 million ( $0.59 per share diluted) in the same quarter last year and $53 million ( $0.99 per share diluted) in the prior quarter. Earnings this quarter include a $9 million ( $0.17 per share diluted) one-time non-recurring income tax recovery.

"I am pleased with our third quarter result in spite of the volatile OSB pricing we've experienced in North America this year," said Barrie Shineton , President and CEO. "Prices have adjusted by 45% since the spring, yet even at today's more moderate levels, we continue to generate attractive free cash flow. OSB prices bottomed in September and we are now seeing a gradual, positive improvement that I believe will continue into the fourth quarter. Demand from our customers remains strong, their inventories are lean and Norbord has a healthy four-week order file."

"In Europe , panel markets continued to strengthen, particularly OSB, and our plants are running at capacity. It is clear that the housing recovery is now well entrenched in our core UK and German markets."

"Finally, I'm also pleased the Board has declared another quarterly dividend, reflecting our continuing favourable outlook for US and European housing and strong OSB industry fundamentals."

Market Conditions

August year-to-date US housing starts and permits were 23% and 21% higher, respectively, than the same period last year. US housing economists are in the process of adjusting their forecasts for the year and consensus is now just under 950,000 starts for 2013. While this is marginally lower than their earlier indications of 1.0 million starts, it is still a 20% increase over last year.

After a significant correction earlier in the year, North American North Central OSB prices were relatively stable in the third quarter, while South East prices drifted further in August. The North Central benchmark averaged $252 per thousand square feet (Msf) (7⁄16-inch basis) for the quarter, compared to $347 per Msf in the previous quarter and $313 per Msf in the same quarter last year. In the South East region, where approximately 55% of Norbord's North American capacity is located, benchmark prices averaged $207 per Msf in the third quarter, compared to $313 per Msf in the prior quarter and $274 per Msf in the same quarter last year. The wider than usual price spread reflects both the impact of OSB industry restart activity in the South East and the comparatively slower pace of the housing recovery in that region.

Third quarter European average panel prices were 7% higher than the same quarter last year and 2% better than the prior quarter. OSB and particleboard markets continued to perform well, with prices for both products up 8% over the same quarter last year. OSB and particleboard prices increased 3% and 2%, respectively, versus the prior quarter. MDF prices improved by 4% versus the same period a year ago and were relatively unchanged from the second quarter.


In North America , Norbord's third quarter OSB shipment volumes increased 11% year-over-year and 9% quarter-over-quarter due to improved mill operating performance and the ramp-up of the Jefferson, Texas mill. Norbord's OSB mills produced at approximately 80% of installed capacity, compared to 75% in the prior quarter and 70% in the same quarter last year.

Excluding the two mothballed mills, Norbord produced at approximately 100% of stated capacity compared to 105% in the prior quarter and unchanged from a year ago. Both comparative quarters exclude the Jefferson mill which started up at the end of June 2013 and represents 9% of the Company's 4.4 billion square feet (3/8-inch basis) of North American OSB capacity. Norbord will continue to monitor market conditions, but does not currently expect to restart its curtailed mills in Huguley, Alabama or Val-d'Or, Quebec in 2014.

Norbord's North American OSB cash production costs per unit (excluding mill profit share) increased by 8% year-over-year. Excluding the impact of higher raw material prices and Jefferson restart costs, unit costs increased by just 4% compared to the prior year. The remaining increase in unit costs was driven primarily by higher supplies and maintenance costs. Quarter-over-quarter, unit costs decreased by 4%, the result of lower supplies and maintenance costs, higher production volumes and reduced restart costs for the Jefferson mill.

In Europe , panel shipments were flat year-over-year. Total shipments, including flat-pack furniture, were 3% lower than the same quarter last year and 5% lower than the prior quarter reflecting the usual summer slowdown. Norbord's European panel mills produced at approximately 95% of capacity in the third quarters of both 2013 and 2012, compared to 100% in the prior quarter.

Norbord's mills continue to deliver positive results from the Company's Margin Improvement Program (MIP). However, the benefits of improved productivity and a richer added-value product mix were offset by higher supplies and maintenance costs.

Capital investments totaled $45 million year-to-date, $32 million higher than last year. The increase is primarily due to capital spending for the Jefferson mill restart that was completed in June 2013. Norbord's 2013 capital expenditures are targeted at $70 million , including approximately $16 million for Jefferson , versus $26 million in 2012.

Operating working capital was $66 million compared to $77 million at the end of the same quarter last year and $86 million in the prior quarter. The decrease versus both comparative quarters is primarily due to the timing of payments on accounts payable.

At quarter-end, Norbord had unutilized liquidity of $580 million , including $239 million of cash. The Company's tangible net worth was $519 million and net debt to total capitalization on a book basis was 28%, well within bank covenants.


The Board of Directors declared a quarterly dividend of CAD $0.60 per common share, payable on December 21, 2013 to shareholders of record on December 1, 2013 .

Additional Information

Norbord's Q3 2013 letter to shareholders, news release, management's discussion and analysis, consolidated unaudited financial statements and notes to the financial statements have been filed on SEDAR ( and are available in the investor section of the Company's website at Shareholders are encouraged to read this material.

Conference Call

Norbord will hold a conference call for analysts and institutional investors on Friday, November 1, 2013 at 11:00 a.m. ET . The call will be broadcast live over the Internet via and A replay number will be available approximately one hour after completion of the call and will be accessible until December 1, 2013 by dialing 1-888-203-1112 or 647-436-0148. The passcode is 9776176. Audio playback and a written transcript will be available on the Norbord website.

Norbord Profile

Norbord Inc. is an international producer of wood-based panels with assets of $1 billion , employing approximately 1,900 people at 13 plant locations in the United States , Europe and Canada . Norbord is one of the world's largest producers of oriented strand board (OSB). In addition to OSB, Norbord manufactures particleboard, medium density fibreboard (MDF) and related value-added products. Norbord is a publicly traded company listed on the Toronto Stock Exchange under the symbols NBD and NBD.WT.

This news release contains forward-looking statements, as defined in applicable legislation, including statements related to our strategy, projects, plans, future financial or operating performance and other statements that express management's expectations or estimates of future performance. Often, but not always, words such as "expect," "believe," "forecast," "likely," "support," "target," "consider," "continue," "suggest," "intend," "should," "appear," "would," "will," "will not," "plan," "can," "may," and other expressions which are predictions of or indicate future events, trends or prospects and which do not relate to historical matters identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Norbord to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Although Norbord believes it has a reasonable basis for making these forward-looking statements, readers are cautioned not to place undue reliance on such forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predictions, forecasts and other forward-looking statements will not occur. Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include: general economic conditions; risks inherent with product concentration; effects of competition and product pricing pressures; risks inherent with customer dependence; effects of variations in the price and availability of manufacturing inputs; risks inherent with a capital intensive industry; and other risks and factors described from time to time in filings with Canadian securities regulatory authorities.

Except as required by applicable laws, Norbord does not undertake to update any forward-looking statements, whether as a result of new information, future events or otherwise, or to publicly update or revise the above list of factors affecting this information. See the "Caution Regarding Forward-Looking Information" statement in the March 1, 2013 Annual Information Form and the cautionary statement contained in the "Forward-Looking Statements" section of the 2012 Management's Discussion and Analysis dated January 30, 2013 and Q3 2013 Management's Discussion and Analysis dated October 31, 2013 .

November 1, 2013

To Our Shareholders,

I'm pleased with our third quarter results considering the scale of the North American OSB price correction that occurred from April to September this year. Norbord generated earnings of $0.51 per share on EBITDA of $45 million , in spite of average benchmark prices that were 27% lower than the previous quarter and 40% lower than the first quarter.

In North America , benchmark North Central OSB prices stabilized in August and averaged $252 per Msf for the quarter. However, in the South East where more than half of our capacity is located, prices continued to drift lower before bottoming in September, resulting in a $207 per Msf average. This wider than usual regional price spread reflects ongoing capacity restarts and the uneven pace of the housing recovery in the South East.

In Europe , our panel business delivered another solid result. It is now clear that the UK housing market is gaining real traction, much like we saw with the US housing sector a year ago. New home starts in the UK are up 25% year-to-date as the various government initiatives supporting homebuyers are having the intended positive effect. Panel markets are reflecting this recovering housing trend, with demand and prices strengthening steadily over the past 18 months. All our plants are running at capacity and I am optimistic that our European financial performance will improve again next year.

Lately there have been some mixed reports on US housing in the media. Housing economists have been lowering their 2013 forecasts from around 1.0 million starts earlier in the year to just under 950,000 today. And the larger public home builders are conceding that they may have pushed house prices a bit too hard in the early part of the year, justified by their concerns over lot availability and labour shortages. However, our view remains unchanged - we are in the early stages of a robust housing recovery that is now well entrenched. Even at the current consensus forecasts, this year's housing starts are still 20% better than last year.

Looking ahead to the fourth quarter, OSB demand from Norbord's three key customer segments remains strong. Sales to our big box, pro-dealer and industrial end-users are tracking 15-20% higher than last year. Our mill inventories remain at targeted low levels and we have temporarily moved to full shifting at our recently restarted Jefferson, Texas mill to keep up with our lengthy order file. I expect the price volatility and larger than normal regional price spreads that we've experienced this year to continue into next year. But overall, I believe the improving US economy and a growing US housing shortage will further increase the demand for OSB, resulting in firmer prices than we are seeing today.

Our Jefferson, Texas mill that restarted in June has ramped up well. And early next year, we will begin rebuilding the press line at our Huguley, Alabama mill to prepare it for restart in the first half of 2015. As I've said before, the scope of the work at Huguley will require a larger capital investment and longer timeline than at Jefferson . We have not made a final decision about the timing of a Huguley restart and will continue to assess market conditions. A restart date will only be set when it is sufficiently clear to us that Norbord's customers require more product.

Finally, our Board declared a third quarterly dividend of CAD $0.60 per share. We continue to take questions about our new dividend policy, so let me expand on what I said last quarter. Norbord's dividend will reflect the cyclicality, not the seasonality, of our business. In other words, it is not our intention to vary the dividend quarter to quarter as OSB prices and our free cash flow fluctuate. We do intend to continue paying a substantial dividend during the strong part of the cycle. However, we also recognize we may have to reduce the level of our dividend during the weaker part of the cycle.

I believe the unfolding US and European housing recoveries will drive strong cash generation at Norbord for several more years. In addition to returning some of this cash to our shareholders and reinvesting in high-return mill projects, we are continuing to explore opportunities to optimize the debt on our balance sheet. With strong operating cash flow and $580 million in cash and standby liquidity, Norbord is well positioned to fund our capital allocation priorities for the foreseeable future.

I look forward to reporting our full year results in January.


J. Barrie Shineton
President & CEO

This letter includes forward-looking statements, as defined by applicable securities legislation including statements related to our strategy, projects, plans, future financial or operating performance and other statements that express management's expectations or estimates of future performance. Often, but not always, forward-looking statements can be identified by the use of words such as "expect," "suggest," "support," "believe," "should," "potential," "likely," "continue," "forecast," "plan," "indicate," "consider," "future," or variations of such words and phrases or statements that certain actions "may," "could," "must," "would," "might," or "will" be undertaken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Norbord to be materially different from any future results, performance or achievement expressed or implied by the forward-looking statements. See the cautionary language in the Forward-Looking Statements section of the 2012 Management's Discussion and Analysis dated January 30, 2013 and Q3 2013 Management's Discussion and Analysis dated October 31, 2013 .

IndustryIntel Editor's Note: In an omitted table, Norbord reported Q3 2013 sales of US$311M and Q3 2012 sales of US$302M.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.