Norbord Reports First Quarter 2012 Results

Apr 27, 2012 | Posted in Corporate News, News

Note:  Financial references in US dollars unless otherwise indicated.

  • Achieved positive EBITDA of $21 million – more than double the prior quarter
  • Improved North American EBITDA – $14 million vs. $2 million the prior quarter
  • European panel markets holding – shipments up 11% vs. the prior quarter
  • Margin improvement program delivered $7 million of gains
  • Best-ever quarterly safety performance – incident rate of just 0.40 YTD

TORONTO, ON (April 27, 2012) – Norbord Inc. (TSX: NBD, NBD.WT) today reported EBITDA of  $21 million in the first quarter of 2012, a $12 million improvement from the fourth quarter of 2011 and a $7 million improvement from the same quarter last year.  North American operations generated EBITDA of $14 million in the first quarter of 2012 versus $2 million and $7 million in the fourth and first quarters of 2011, respectively.  European operations generated EBITDA of $11 million in the first quarters of 2012 and 2011 versus $10 million in the fourth quarter of 2011.

Norbord recorded break-even earnings in the first quarter of 2012 compared to a loss of $9 million or $0.21 per share in the prior quarter.  In the same quarter last year, the Company recorded a loss of $2 million or $0.05 per share, which included a non-recurring income tax recovery of $5 million or $0.11 per share.

“Our first quarter results are evidence that business is getting better,” said Barrie Shineton, President and CEO.  “Our EBITDA improvement reflects a 7% quarter-over-quarter increase in North American benchmark OSB prices as well as continuing strong results from our European operations.  I am particularly pleased with our Margin Improvement Program, which delivered another $7 million in gains from reduced raw material usages and record plant productivity.”

“This more positive trend should continue through the remainder of 2012.  In North America, US economic news is improving and housing starts appear to be making a slow comeback.  In Europe, our business is holding up better than expected and I now believe we will have another solid year.”

Market Conditions
US housing starts were 20% higher during the first quarter of this year compared to the same period last year and permits were 30% higher.  More importantly for the OSB industry, US single family housing starts were 17% better versus last year.  In this firmer demand environment, the North American North Central benchmark OSB price averaged $203 per thousand square feet (Msf) (7⁄16-inch basis) in the first quarter compared to $190 per Msf in the prior quarter and $198 per Msf during the same quarter last year.  In the South East region, where approximately 55% of Norbord’s North American capacity is located, prices averaged $190 per Msf in the first quarter, compared to $166 per Msf in the prior quarter and $177 per Msf during the same quarter last year.  Expert forecasts for 2012 US housing starts now range from 680,000 to 770,000, which is 11%-26% higher than last year’s 610,000 starts.

In Europe, despite the negative economic news, overall panel markets continued to show surprising strength.  In the UK, where the majority of Norbord’s European assets are located, the housing market continues to slowly recover with home prices, housing starts activity and mortgage lending all trending up.  In addition, the UK government recently announced the “NewBuy” program to spur new home sales and increase home buyer eligibility by guaranteeing mortgages.  The UK government also announced legislative changes aimed at unblocking the permit planning pipeline.  Both of these initiatives are expected to be positive for housing demand over the longer term.

In the quarter, average European panel prices softened slightly compared to the previous quarter but remain higher than last year.  After peaking mid-last year, OSB prices were 7% lower than the same quarter a year ago and 5% down from the prior quarter.  However, particleboard and MDF prices are holding on to double digit gains compared to the same quarter last year, at 13% and 11% higher, respectively.  Quarter-over-quarter, particleboard and MDF prices were essentially flat.

In North America, OSB shipment volumes increased 5% versus the prior quarter and were consistent year-over-year. Norbord’s operating OSB mills ran at approximately 85% of their capacity in the first quarter of 2012.  Including the indefinitely closed mills in Huguley, Alabama and Jefferson, Texas, the North American operations ran at approximately 65% of capacity in the first quarter of 2012 compared to 60% the previous quarter and identical to the same period a year ago.

Norbord’s North American OSB cash production costs per unit decreased by 3% versus the same quarter last year due to lower raw material usage and productivity gains resulting from the Company’s Margin Improvement Program (MIP).  Cash costs remained in line with the prior quarter.

In Europe, panel shipments increased by 11% over the prior quarter and 3% over the same quarter a year ago.  Norbord’s European mills produced at approximately 95% of estimated capacity in the quarter, which reflects the 6% increase in stated panel capacity effective December 31, 2011.

Norbord’s MIP delivered $7 million in gains in the quarter.  Contributions to the MIP include improved production efficiencies, raw material usage reduction initiatives and a richer added-value product mix.

Capital investments totaled $3 million in the first quarter of 2012 compared to $9 million in the prior quarter and $8 million in the first quarter of 2011.  Norbord’s total capital investments for 2012 are expected to total $25 million, which will include a forming line upgrade at the Bemidji, Minnesota mill and the Company’s pilot investment in fines screening technology at its Nacogdoches, Texas mill.

Operating working capital was $71 million at quarter-end compared to $28 million in the prior quarter and $51 million in the prior year.  The quarter-over-quarter increase is due to seasonal logging in the northern mills, as well as higher accounts receivable driven by higher shipments and stronger North American OSB prices.  Finished goods inventory remains at minimal levels and accounts receivable performance is in line with prior periods.

At quarter-end, Norbord had unutilized liquidity of $327 million, consisting of $267 million in undrawn revolving bank lines and $60 million in cash and cash equivalents.  The Company’s tangible net worth was $344 million and net debt to total capitalization on a book basis was 53%, well within bank covenants.

Subsequent to quarter-end, Norbord announced that effective July 2012, production at its Val-d’Or, Quebec mill will be suspended indefinitely.  Approximately 120 employees are affected by this decision.  Prior to this announcement, the mill had been operating in a partially curtailed mode for the last five years.  Customers will continue to be serviced without disruption.  The Company does not expect to incur any material one-time charges as a result of this decision.

The Company continues to explore a range of attractive debt market refinancing options related to the July 1, 2012 bond maturity and expects to announce an outcome in the coming weeks.  In addition, Norbord still has the option to repay half the bond maturity from its revolving bank lines and the other half from a standby lending commitment from its largest shareholder, Brookfield Asset Management.

Additional Information
Norbord’s Q1 2012 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, April 27, 2012 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 25, 2012 by dialing 1-888-203-1112 or 647-436-0148.  The passcode is 4302017.  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.

Heather Colpitts
Manager, Corporate Affairs
Tel. (416) 365-0705

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  “should,” “appear,” “suggest,” “expect,” “believe,” “will,” “will not,” “intend,”
“plan,” “can,” “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, 2012 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 and Q1 2012 Management’s Discussion and Analysis dated April 26, 2012.

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