Norbord Reports 2011 Results

Jan 27, 2012 | Posted in Corporate News, News

Norbord Reports 2011 Results

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


  • Norbord achieved positive EBITDA of $45 million
  • Increased European EBITDA by $7 million to $44 million
  • Margin improvement program delivered $25 million of gains
  • Set annual productivity records at 7 of 9 operating OSB mills
  • Cordele, GA and Nacogdoches, TX mills completed 3+ years without a recordable injury
  • Cowie, Scotland mill Norbord Safety Star certified, the first in Europe

TORONTO, Jan. 27, 2012 /CNW/ – Norbord Inc. (TSX: NBD) (TSX: NBD.WT) today reported EBITDA of $45 million in 2011 compared to $107 million in 2010 on 15% lower North American OSB prices.  North American operations generated EBITDA of $14 million versus $83 million in the prior year and European operations generated EBITDA of $44 million versus $37 million in the prior year.  In the fourth quarter of 2011, Norbord recorded positive EBITDA of $9 million versus $12 million in the previous quarter and $14 million in the fourth quarter of 2010.

Norbord recorded earnings of negative $11 million or $0.25 per share for the full year compared to earnings of positive $13 million or $0.30 per share (basic) in 2010.  The Company recorded earnings of negative $9 million or $0.21 per share in the fourth quarters of both 2011 and 2010.

“Our 2011 financial results are disappointing in absolute terms,” said Barrie Shineton, President and CEO.  “However, I am pleased that Norbord’s operations in both North America and Europe performed exceptionally well this year.  We achieved $25 million of margin improvement gains, reflecting an outstanding effort across our company in reducing manufacturing costs and increasing mill productivity.  In North America, these gains allowed us to maintain positive EBITDA despite a 15% drop in OSB prices.  In Europe, our business held up surprisingly well in the face of increasing economic uncertainty.  We increased shipments by 10% and stronger product pricing offset sharply higher raw material costs.”

“Early indicators suggest some upside in both demand and price in North America as we move into the first quarter of 2012.  The OSB supply chain is lean and less capacity appeared to be available at the end of last year.  And, I believe our European business will continue to perform well, in spite of the evolving sovereign debt crisis that continues to dominate media headlines.”

Market Conditions

The seasonally-adjusted US housing starts number for December was 657,000, 25% ahead of last year’s year-end pace.  Full year housing starts, including multifamily, were approximately 610,000 in 2011, up 3% from 590,000 in 2010. However, the single family component, which is more important to the OSB industry, declined by 9% in 2011.

North Central benchmark OSB prices dropped from a peak of $218 per thousand square feet (Msf) (7?16-inch basis) in early January to a low of $165 per Msf in mid-May before stabilizing in a tighter range for the second half of the year.  The North Central benchmark OSB price averaged $186 per Msf in 2011 compared to $219 per Msf in 2010, as the exceptional price spike of Q2 2010 did not repeat this year. In the South East region, where approximately 55% of Norbord’s North American OSB capacity is located, prices remained at a discount to the North Central region, averaging $169 per Msf compared to $198 per Msf last year.

In the fourth quarter, North Central benchmark OSB prices averaged $190 per Msf, up $6 from the third quarter and in line with the fourth quarter of 2010. South East prices averaged $166 per Msf in the quarter, down $3 from the third quarter and in line with the fourth quarter of 2010.

In the UK, the market remained steady with flat year-over-year housing starts, stable home prices and a more positive mortgage lending environment.  In Germany, Norbord’s largest Continental market, housing starts averaged 20% higher than 2010.

Norbord’s European panel markets remained relatively robust throughout 2011.  All panel prices increased, reflecting industry efforts to recover substantially higher raw material input prices. OSB prices peaked mid-year and averaged 8% higher year-over-year. Particleboard and MDF prices firmed throughout the year, increasing 15% and 14%, respectively.  Norbord expects this positive dynamic to continue at least into the first half of 2012 despite declining consumer confidence across Europe and the negative impact of the European sovereign debt crisis.

In 2011, European currencies remained in a range that continued to benefit Norbord’s primarily UK-based operations. Exports from the Company’s UK-based manufacturing plants to Continental Europe increased again this year.


In North America, OSB shipment volumes for the full year decreased a modest 3% compared to the prior year. Norbord’s operating OSB mills ran at approximately 80% of their capacity in 2011, compared to 85% in 2010, due to more curtailments taken to manage inventory levels during the year. Including the indefinitely closed mills in Huguley, Alabama and Jefferson, Texas, the North American operations ran at approximately 65% of capacity in 2011 versus 70% in the prior year.

Norbord’s North American OSB cash production costs per unit decreased by 1% versus 2010.  Lower raw materials usage and improved productivity decreased unit costs by 4%, but most of these gains were offset by higher resin prices, the stronger Canadian dollar and higher maintenance curtailment costs in the fourth quarter.

In Europe, panel shipments increased by 10% over the prior year.  Norbord’s European mills operated at full capacity in 2011 with the exception of a three-week shut for the Cowie, Scotland particleboard mill upgrade and planned holiday and maintenance curtailments.  Norbord intends to increase the stated capacity of the Genk, Belgium OSB mill from 260 MMsf (3?8-inch basis) to 350 MMsf effective year-end 2011, reflecting a step change improvement in operating efficiency.

Norbord’s Margin Improvement Program (MIP) delivered $25 million in gains in 2011.  In North America, the resin technology conversion contributed more than half of these benefits through productivity and raw material usage improvements, effectively offsetting the negative impact of higher resin prices and other uncontrollable costs.

Capital investments totaled $25 million in 2011 versus $16 million in 2010. The increase is primarily due to the Cowie, Scotland particleboard mill upgrade in the second quarter.  Norbord is planning for capital investments at the same $25 million level in 2012, including a pilot installation of new fines screening technology at the Nacogdoches, Texas mill.  Capital expenditures can be constrained to $15 million if market conditions warrant.

Operating working capital increased by $18 million during the year to $28 million at year-end.  The biggest component of this increase was higher accounts receivable related to stronger European panel prices and shipments.  Norbord’s accounts receivable metrics remain in line with prior periods.

At year-end, Norbord had unutilized liquidity of $350 million, consisting of $267 million in undrawn revolving bank lines and $83 million in cash and cash equivalents.  The Company’s tangible net worth was $343 million and net debt to total capitalization on a book basis was 51%, well within bank covenants.


This is Norbord’s first full year reporting under International Financial Reporting Standards (IFRS).  Extensive transitional disclosure was provided in the 2010 and each interim 2011 management’s discussion and analysis and consolidated financial statements. There was no material impact to earnings or cash flow as a result of the Company’s conversion to IFRS.

As announced last quarter, Norbord applied to the Toronto Stock Exchange (TSX) and received approval to renew its normal course issuer bid in accordance with TSX rules, beginning December 21, 2011.  Under the bid, the Company may purchase up to 2,178,705 of its common shares, which represented approximately 5% of the 43.6 million issued and outstanding common shares as of November 30, 2011.  Purchases under the bid will terminate on the earlier of December 20, 2012, the date Norbord completes its purchases pursuant to the notice of intention to make a normal course issuer bid filed with the TSX or the date of notice by Norbord of termination of the bid.  No share purchases were made under the Company’s previous normal course issuer bid that expired on September 16, 2011.

Additional Information

Norbord’s year-end 2011 letter to shareholders, news release, management’s discussion and analysis, annual consolidated audited 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, January 27, 2012 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 February 27, 2012 by dialing 1-888-203-1112 or 647-436-0148. The passcode is 9996439. 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 2,000 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 “suggest,” “appear,” “believe,” “expect,” “will,” “will not,” “intend,” “plan,” “can,” “should,” “forecasts,” “confident,” “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, 2011 Annual Information Form and the cautionary statement contained in the “Forward-Looking Statements” section of the 2011 Management’s Discussion and Analysis dated January 26, 2012.

January 27, 2012

To Our Shareholders,

2011 turned out to be another challenging year for Norbord.  Overall housing sentiment remained negative and our EBITDA result of $45 million is disappointing in absolute terms.  However, I am pleased to report that our operations in both North America and Europe continued to perform exceptionally well throughout last year.

We delivered $25 million in margin improvements, reflecting a company-wide effort to reduce manufacturing costs and increase mill productivity.  In North America, these gains allowed us to maintain positive EBITDA despite 15% lower OSB prices and higher raw material costs.  In Europe, our panel business performed well for the second year in a row, improving full-year EBITDA by 19% even as the sovereign debt crisis intensified.

The road to recovery has been bumpy, but it’s my view that the US housing sector is at an inflection point and is now in the early phase of a more gradual rebound.  While opinions still vary, several previously bearish housing economists have shifted positions and are now calling a bottom in the market.  Their views are supported by encouraging signs: job creation has been positive for five consecutive quarters, new home inventories are below historical levels, home affordability is at historical highs and mortgage availability is better than the headlines suggest.

Good things are happening at Norbord, though I do acknowledge that our progress is sometimes hard to see in our bottom line.  However, I am confident that all of our efforts will pay off once the housing recovery takes hold.

We have solid financial runway

Our balance sheet continues to be well managed.  In 2011, we added two new lenders to our bank group, extended the maturity of our lines and increased the commitment to $270 million.  We improved access to our bank lines through an amendment of the net debt to total capitalization covenant, giving us additional headroom should it be required.  Most importantly, we put in place a backup refinancing plan for our 2012 bond maturity to maintain financial flexibility.  Operating working capital remains tightly controlled and our balance sheet metrics remain comfortably inside bank covenant levels.  Our available liquidity at year-end was $350 million, more than sufficient to support our operating and capital investment priorities for the foreseeable future.

Margin improvement is an operational priority

We continue to find new ways to reduce costs at both the operational and corporate levels.  In 2011, our operations delivered $25 million of margin improvement gains, reflecting an outstanding effort by all our teams to improve manufacturing efficiency.  The conversion to a new resin technology in North America contributed more than half of this result, and effectively offset the negative impact of higher resin prices in that part of our business.  We expect to deliver similar gains across the Company again in 2012.

Careful reinvestment is delivering results

Operational performance continues to improve.  In 2011, seven of our nine operating OSB mills set annual productivity records.  Of particular note, our Genk OSB facility in Belgium has matured and we will restate this mill’s annual capacity from 260 MMsf (3?8-inch basis) to 350 MMsf for 2012 to reflect the step change in production output.

Our capital investments have been appropriately kept to minimal levels for the last five years.  However, the projects we did prioritize are delivering solid results.  The recent upgrade to our particleboard facility in Cowie, Scotland is delivering the raw material usage gains we targeted and productivity is ramping up nicely.  This year, we will proceed with our first installation of fines screening equipment at the Nacogdoches, Texas mill.  This pilot project, when implemented across the Company, has the same potential for manufacturing cost reduction as our resin conversion initiative.  We look forward to proving this out in 2012.

Our customer strategy continues to evolve

In North America, we continue to diversify our exposure away from new home construction by growing our big box, industrial and export volumes.  Today, almost two-thirds of our North American sales volume is directed toward these market segments.  At the same time, we have maintained a strong position with the leading national pro-dealers and remain well positioned to grow with these customers when housing activity rebounds.

World-class safety performance is the goal

Most of our operations continued to show year-over-year safety improvement in 2011.  Our Cordele, Georgia and Nacogdoches mills both achieved a new milestone, having worked three years without a recordable injury.  And in December, our Cowie mill became the first Norbord operation outside the US to achieve Safety Star certification.  This program is based on OSHA’s Voluntary Protection Program and sets safety standards that go well beyond regulatory requirements.  We have an aggressive schedule to certify the remaining Norbord sites as it is clear that our mills that have achieved this rigorous standard also provide the safest workplaces for our employees.

Succession planning ensures organizational continuity

Peter Wijnbergen is now settled into his role as Chief Operating Officer and it is his focus on new cost and productivity improvement initiatives that is behind our accelerating margin improvement results.  In Europe, we have reorganized our business to provide more clarity around commercial and operational activities and to more effectively position the talents of our existing leadership team.

This year, Dave McElroy, Deputy Managing Director of our European business, and Bob Kinnear, Senior Vice President, Corporate Services, will retire after more than 28 and 10 respective years of service.  I thank them both for their invaluable contributions to the Company and wish them well.

Outlook for 2012

The North American housing picture is getting brighter, in spite of the remaining structural issues.  And while I believe overall OSB pricing will trend sideways for most of 2012, early indicators are pointing to some upside in OSB demand as we move into the first quarter.  Supply chain inventories are extremely lean, less capacity appeared to be available at the end of last year and the latest housing numbers were stronger than most forecasters had predicted.

Norbord’s European operations performed well last year and, so far this year, have been largely unaffected by the sovereign debt crisis.  This is due in large part to a quality customer base and a continuing currency advantage over Continental-based producers.  I believe our European business will deliver a solid financial result again in 2012 even though the robust panel pricing of the past two years appears to have peaked.

We continue to monitor industry developments closely.  Last year, we were right to be concerned about rising raw material prices.  This year, as China’s rapid economic growth moderates and some southern European countries fall into recession, raw material prices may ease.  We are also watching currencies closely and stand ready to protect our UK business against any significant weakening of the Euro.

Finally, North American OSB markets continue to be hampered by overcapacity and it’s my view that any meaningful growth is likely a few years away.  For this reason, some analysts have been calling for consolidation in our industry.  We have been focused on improving the efficiency of our mills, but I also believe that we could improve our business through acquisition when the time and opportunity are right.

Norbord is Ready

While there is more work to be done and headwinds remain, I am optimistic about the future.  Our cost-saving initiatives are delivering better cash flows.  Our mills are performing well and we continue to find opportunities to push productivity and take out costs.  We have strong customer partnerships and have been successful in securing additional home improvement centre business.  We have sufficient financial liquidity and plans are in place to address our upcoming bond maturity.  Norbord is well positioned to benefit from stronger OSB prices when the US housing recovery takes hold.

On behalf of everyone at Norbord, I thank you for your continued support.  I look forward to reporting on our progress throughout the year.

(signed) 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 “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 2011 Management’s Discussion and Analysis dated January 26, 2012.

Consolidated Balance Sheets

(US $ millions) Dec 31 2011 Dec 31 2010 Jan 1 2010
Current assets
Cash and cash equivalents $           83 $          111 $          20
Accounts receivable            102               90             88
Tax receivable                 5                 6             57
Inventory               88               84             72
           278             291           237
Non-current assets
Property, plant and equipment            787             814           854
Other assets                 5               13             14
           792             827           868
$     1,070 $       1,118  $        1,105
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued liabilities $       162 $         164  $           139
Current portion of long-term debt            242                –             –
           404             164           139
Non-current liabilities
Long-term debt            196             443           471
Other long-term debt               69               60             62
Other liabilities               40               35             27
Deferred income taxes               61               85             85
           366             623           645
Shareholders’ equity            300             331           321
$      1,070 $      1,118 $      1,105

Consolidated Statements of Earnings

Years ended December 31 (US $ millions, except per share information) 2011 2010
Sales $        965 $        962
Cost of sales          (907)          (842)
General and administrative expenses            (13)            (13)
Earnings before interest, income tax, depreciation and provision for non-core operation              45           107
Interest expense            (33)            (34)
Provision for non-core operation               –                (8)
Earnings before income tax and depreciation              12             65
Depreciation            (51)            (51)
Income tax recovery (expense)              28             (1)
Earnings $         (11) $          13
Earnings per common share
Basic $     (0.25) $       0.30
Diluted         (0.25)          0.29

Consolidated Statements of Comprehensive (Loss)/Income

Years ended December 31 (US $ millions) 2011 2010
Earnings $           (11) $             13
Other comprehensive (loss) income, net of tax
Foreign currency translation loss on foreign operations                 (4)                 (7)
Net (loss) gain on hedge of net investment in foreign operations                 (1)                   5
Actuarial loss on post-employment obligation (17) (7)
             (22)                 (9)
Comprehensive (loss) income $           (33) $                4

Consolidated Statements of Changes in Shareholders’ Equity

Years ended December 31 (US $ millions) 2011 2010
Share Capital
Balance, beginning of year $    340 $      335
Issue of common shares, net             –              5
Balance, end of year $    340 $      340
Contributed Surplus
Balance, beginning of year $       41 $        40
Stock-based compensation             2             1
Balance, end of year $       43 $        41
Retained Earnings
Balance, beginning of year  $    (54) $      (60)
Earnings         (11)           13
Other comprehensive loss         (17)           (7)
Balance, end of year $    (82) $     (54)
Accumulated Other Comprehensive Income
Balance, beginning of year  $       4 $          6
Other comprehensive loss           (5)           (2)
Balance, end of year $        (1) $          4
Shareholders’ equity $     300 $      331

Consolidated Statements of Cash Flows

Years ended December 31  (US $ millions) 2011 2010
Operating Activities
Earnings $         (11) $           13
Items not affecting cash:
Depreciation              51             51
Deferred income tax            (31)                1
Other items               –                  2
               9              67
Net change in non-cash operating working capital balances            (23)                8
Net change in tax receivable                1              52
           (13)            127
Investing Activities
Investment in property, plant and equipment            (23)             (14)
Realized net investment hedge (loss) gain              (1)                6
           (24)               (8)
Financing Activities
Accounts receivable securitization proceeds (repayments)              10               (1)
Debt issue costs              (1)               (2)
Revolving bank lines repayments               –               (27)
Issue of shares               –                  2
               9             (28)
Cash and Cash Equivalents
(Decrease) increase during the year            (28)              91
Balance, beginning of year           111              20
Balance, end of year  $         83 $         111