Norbord Reports First Quarter 2011 Results

Apr 28, 2011 | Posted in Corporate News

J. Barrie Shineton
President & CEO
April 28, 2011

To our Shareholders,
Our first quarter results are significantly improved from a year ago. The Company
generated positive EBITDA of $14 million, nearly double the same quarter last year.
This better-than-expected outcome was driven by stronger sales in North America and the
excellent performance of our European operations.

In North America, overall sales volumes grew significantly by 16% from last year, as
orders from our home improvement, industrial and export customers picked up. This
suggests our shift to a customer base that is less reliant on new home construction is
working well. North Central benchmark OSB prices firmed during the first quarter,
averaging $198/Msf. This is a modest gain from the prior quarter, but lower than the
same period in 2010.

I am extremely pleased with our European business. These operations represent only
one-quarter of our total production capacity, but contributed over three-quarters of
Norbord’s total EBITDA in Q1. European markets and prices were stronger than
expected and our panel shipments increased by almost 30% over last year. Our mills ran
at full capacity with three of our four manufacturing lines setting new production records
this quarter. Our mostly UK-based mills continue to benefit from a weaker pound. This
limits competing panel imports to the UK and allows us to ramp up exports to the
Continent. The geographic diversification I’ve often spoken of is clearly paying off.
Recent US housing numbers are not overly encouraging and the market continues to face
significant headwinds. The consensus forecast is now calling for 625,000 housing starts
in 2011, still a very low number. However, it is modestly higher than last year and
suggests the second half of this year will be stronger than the first. Housing affordability
has reached, and is expected to remain at, record highs. Personal income will grow as
employment rebounds and household wealth has already increased from recessionary
lows. Pent-up demand for new homes continues to grow and homebuilders are reporting
renewed interest from potential buyers. Positive momentum is building, albeit slowly,
and it will likely take at least the rest of this year to translate into a meaningful housing

As I look forward to the second quarter, the price bump we saw in North America last
year has not materialized – nor did I expect it to. In addition, we continue to experience
price pressure on our raw material inputs, particularly resin and wood. We are working
hard to offset the impact of these higher costs with aggressive margin improvement
initiatives. And I expect Europe to deliver strong results again next quarter.
1Like all Canadian public companies, this is our first quarter reporting under International
Financial Reporting Standards (IFRS). As I noted last year, these new accounting rules
have no material impact on Norbord’s earnings or cash flow. But you will notice our first
quarter financial statements and note disclosure have a ‘new look’.

As we move through 2011, Norbord is in much stronger financial shape. We have
liquidity of over $300 million including substantial cash on hand. We recently renewed
our bank lines and two new lenders have joined our bank group. Our core long-term debt
has manageable maturities and bond markets continue to be receptive to refinancing.
Finally, the rating agencies recently upgraded their outlook on Norbord’s credit to
‘stable’. I am comfortable that we can support all of our operating and capital priorities
for the foreseeable future.

Things are getting better and I am optimistic about the future. Our North American mills
have proven that they can perform well, even in a less-than-optimal market environment.
Our European business is delivering and I expect this to continue. We have cost saving
initiatives under way that will deliver benefits to the bottom line this year. I remain
confident in Norbord’s ability to deliver superior financial results when the housing
recovery takes hold. I look forward to reporting on our progress throughout the year.

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 “believe,” “should,”
“expect,” “suggest,” “likely,” “would,” 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 2010 Management’s
Discussion and Analysis dated January 28, 2011 and Q1 2011 Management’s Discussion and Analysis
dated April 28, 2011.

Note: Financial references in US dollars unless otherwise indicated. All prior period comparative
figures have been restated for IFRS.


  • Achieved positive EBITDA of $14 million
  • European panel shipments grew by 29% vs. Q1 2010; North American OSB shipments up 16%
  • Nacogdoches, Texas mill surpassed 3 years without a recordable injury
  • Added two new lenders to bank group and extended bank line maturity to 2014
  • Standard & Poor’s and Moody’s upgraded Norbord’s credit rating outlook to ‘stable’

TORONTO, ON (April 28, 2011) – Norbord Inc. (TSX: NBD, NBD.WT) today reported positive
EBITDA of $14 million in the first quarter of 2011, a $6 million improvement from the same quarter last
year and unchanged from the fourth quarter of 2010. North American operations generated EBITDA of
$7 million in the first quarter of 2011 versus $8 million in both the first and fourth quarters of 2010.
European operations generated EBITDA of $11 million in the first quarter of 2011 versus $4 million and
$11 million in the first and fourth quarters of 2010, respectively.

Norbord recorded a loss of $2 million or $0.05 per share in the first quarter of 2011 compared to $7
million or $0.16 per share in the same quarter last year and $9 million or $0.21 per share in the prior

“Our first quarter results improved from a year ago and were better than we expected,” said Barrie
Shineton, President and CEO. “I continue to be pleased with the performance of our European business
which almost tripled its EBITDA contribution of last year. Our UK-based business is benefitting from a
currency advantage that is positively impacting both domestic markets and export opportunities. Our
European mills ran at capacity and panel shipments were up by almost 30%. In North America, our sales
volume to our core home improvement and industrial customers was strong and we expanded our export
order files.”

“I expect the positive momentum we are seeing in our European business to continue. In North America,
I am not discouraged by the slow start to this year. Repair and renovation activity has picked up, existing
home sales are recovering, US economic news is improving and unemployment numbers are falling. As a
result, I believe we will begin to see stronger housing activity in the second half of 2011.”

Market Conditions

In North America, actual first quarter US housing starts were 10% lower than the first quarter of 2010.
This likely reflects the impact of last year’s US home buyer tax credit that pulled forward demand into the
first half of last year. North Central benchmark OSB prices averaged $198 per thousand square feet (Msf)
(7⁄16-inch basis) in the first quarter compared to $212 and $191 per Msf in the first and fourth quarters of
2010, respectively. Experts now forecast between 0.60 and 0.65 million US housing starts in 2011, a
modest improvement over the 0.59 million houses started in 2010.

In Europe, despite adverse weather conditions in the early part of the quarter, panel markets continued to
show strength. Panel prices held firm at the prior quarter’s robust levels and average OSB, particleboard
and MDF prices were up by 18%, 7% and 11%, respectively, versus the first quarter last year. These
strong markets are expected to continue.


In North America, first quarter OSB shipment volumes increased by 16% versus the same quarter last
year and Norbord’s operating OSB mills ran at approximately 85% of their capacity. Including the
Company’s two indefinitely closed mills, the North American operations ran at approximately 65% of
estimated capacity in the first quarter of 2011, the same operating level as the first and fourth quarters of

Norbord’s North American OSB cash production costs per unit decreased by 2% versus the same quarter
last year when adverse weather impacted costs in the southern US. Higher shipment volumes and
improved raw material usages more than offset the negative impact of slightly higher resin prices and the
stronger Canadian dollar.

In Europe, panel shipments grew by 29% over the same quarter last year as demand remained strong and
the Company’s mills ran well. Norbord’s mills produced at 105% of estimated capacity in the quarter,
versus approximately 90% in the first and fourth quarters of 2010, as three mills set production records
this quarter. The higher panel prices and shipment volumes more than offset the significantly higher fibre
and resin prices versus last year.

Capital investments totaled $8 million in the first quarter of 2011 compared to $7 million in the prior
quarter and $1 million in the first quarter of 2010. Norbord’s total 2011 capital investment is expected to
be modestly higher than last year at $25 million, which includes an upgrade to the Cowie, Scotland
particleboard mill that will be complete by the middle of this year.

The Company’s operating working capital increased in the first quarter due to seasonal logging in the
northern mills. Finished goods inventory remains at minimal levels and accounts receivable performance
is in line with prior periods. The Company’s tangible net worth for financial covenant purposes was $351
million and net debt to total capitalization on a book basis was 51%.


During the quarter, Standard & Poor’s and Moody’s upgraded the outlook on Norbord’s credit ratings to
‘stable’. All three rating agencies now rate Norbord’s long-term issuer credit at BB-, or the equivalent,
with a ‘stable’ outlook.

Subsequent to period-end, the Company renewed its bank lines, adding two new lenders and extending
the maturity by one year. The Company now has total committed revolving bank lines of $270 million
which mature in May 2014. Taking the renewed bank line commitment into account, Norbord had
unutilized liquidity of $343 million at period-end, consisting of $260 million in revolving bank lines and
$83 million in cash and cash equivalents.

Effective January 1, 2011, the Company has adopted International Financial Reporting Standards (IFRS).
This is the first interim reporting period under IFRS. Extensive transitional disclosure was provided in
the 2010 Annual Management’s Discussion and Analysis, in addition to the Q1 2011 Consolidated
Financial Statements. There is no material impact to earnings or cash flow as a result of the Company’s
conversion to IFRS.

Additional Information

Norbord’s Q1 2011 letter to shareholders, news release, management’s discussion & 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 Thursday, April 28, 2011 at
2:00 p.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 May 27, 2011 by dialing 1-888-203-1112 or 647-436-0148. The
passcode is 3283860. 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 2,030 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
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