Norbord Reports 2012 Third Quarter Results

Oct 25, 2012 | Posted in Corporate News, News

Note: Financial references in US dollars unless otherwise indicated.


  • Positive earnings of $0.64 per share (basic)
  • EBITDA of $66 million – more than double Q2 and $54 million better than Q3 2011
  • North Central benchmark OSB price averaged $313/Msf – 70% higher than Q3 2011
  • Norbord sales volume to new home construction sector up 35% year-over-year, reflecting an accelerating US recovery
  • European EBITDA holding firm on stronger panel shipments

TORONTO, ON (October 25, 2012) – Norbord Inc. (TSX: NBD, NBD.WT) today reported EBITDA of $66 million in the third quarter of 2012 compared to $31 million in the second quarter of 2012 and $12 million in the third quarter of 2011. North American operations generated EBITDA of $58 million in the quarter versus $26 million in the prior quarter and $5 million in the same quarter last year. European operations generated EBITDA of $10 million in the third quarters of 2012 and 2011 versus $9 million in the prior quarter.

Norbord recorded earnings of $28 million or $0.64 per share ($0.61 per share diluted) in the third quarter of 2012. This compares to earnings of $6 million or $0.14 per share in the prior quarter and a loss of $1 million or $0.02 per share in the same quarter last year.

“This is our best sustained quarterly EBITDA result since the second quarter of 2006,” said Barrie Shineton, President and CEO. “This positive trend is due entirely to stronger demand from US new home construction that pushed North American OSB prices sharply higher this quarter. While prices have declined recently, they are still at very robust levels. The housing recovery is accelerating, consumer spending is picking up and both are key to a US economic recovery. All of this suggests that OSB demand will continue to improve over the next several years.”

“In Europe, our panel business delivered another positive quarterly result. The UK housing market remains stable and our construction panel business is holding up in spite of the economic challenges on the Continent. Our strong market position and ongoing currency advantage point to another solid result next year from our European operations.”

Market Conditions

September year-to-date US housing starts and permits were 27% and 32% higher, respectively, than the same period in 2011. More importantly for the OSB industry, US single family housing starts this year are up 24%. Further, the large public home builders are forecasting year-over-year increases of 25% to 35% in net orders and our pro-dealer customers are experiencing similar increases in their own sales activity as they scale up to meet this improving demand. The consensus forecast from US housing economists is for 760,000 starts in 2012, a significant 25% improvement over last year but well short of the underlying fundamental demand of 1.5 million.

Reflecting the increased demand from new home construction, North American OSB prices rose across all regions in the third quarter. The North Central benchmark price peaked at $360 per thousand square feet (Msf) (7⁄16-inch basis) and averaged $313 per Msf for the quarter, compared to $235 per Msf in the prior quarter and $184 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 $274 per Msf in the third quarter, compared to $204 per Msf in the prior quarter and $169 per Msf in the same quarter last year. The spread between North Central and South East benchmark prices widened further during the third quarter, reflecting continuing regional differences in the pace of the US housing recovery.

In Europe, panel markets remain resilient in spite of the persistent economic uncertainty. In the third quarter, average panel prices were only marginally lower than the prior quarter. Compared to the same quarter last year, average panel prices were down 9%, reflecting OSB prices that have come off 2011 peak levels.


In North America, third quarter OSB shipment volumes increased 7% over the same quarter last year, but decreased marginally compared to the prior quarter. Norbord’s North American operations produced at approximately 70% of estimated capacity (including the three indefinitely closed mills) in the third quarter compared to 75% in the prior quarter and 65% in the same quarter last year. The quarter-over-quarter decrease in both shipment volumes and capacity utilization is due to the indefinite curtailment of the Val-d’Or, Quebec mill that took effect in July and the related transition of specialty products to the La Sarre, Quebec mill.

In Europe, third quarter panel shipments were 3% and 6% higher than the prior quarter and the same quarter last year, respectively. Norbord’s European mills produced at approximately 95% of estimated capacity in the second and third quarters of 2012, reflecting a 6% increase in our stated panel capacity effective December 31, 2011. This compares to 100% in the third quarter of 2011.

Norbord’s Margin Improvement Program (MIP) has delivered $17 million in gains year-to-date. Contributions to the MIP included improved production efficiencies, raw material usage reduction initiatives and a richer added-value product mix.

Norbord’s North American OSB cash production costs per unit decreased by 2% year-to-date (excluding profit share) compared to the prior year due to lower raw material usages resulting from continuing MIP initiatives.

Capital investments totaled $6 million in the third quarter compared to $4 million in both the prior quarter and third quarter of 2011. Norbord’s 2012 capital investments are expected to total $25 million and continue to focus on productivity improvement and manufacturing cost reduction projects with quick paybacks.

Operating working capital was $77 million at quarter-end compared to $64 million in the prior quarter and $65 million in the same quarter last year. This increase is primarily due to the impact of significantly higher North American OSB prices on accounts receivable.

At quarter-end, Norbord had unutilized liquidity of $371 million, comprised of $242 million in undrawn revolving bank lines and $129 million in cash and cash equivalents. The Company’s tangible net worth was $380 million and net debt to total capitalization on a book basis was 45%, down from 50% at the end of the second quarter and well within bank covenants.


In the second quarter of 2012, Norbord issued $240 million in senior notes due in 2015 with an interest rate of 6.25%. During the third quarter, the Company used the proceeds to repay the $240 million 7.25% debentures that were due July 1, 2012.

Also in July 2012, Norbord renewed its committed revolving bank lines, extending the maturity by one year and reducing the aggregate commitment by $25 million. As a result, the Company now has a total aggregate commitment of $245 million which matures in May 2015. All other material terms of the bank lines remain unchanged.

Both of these initiatives had been previously announced in the second quarter of 2012.

Additional Information

Norbord’s Q3 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 Thursday, October 25, 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 November 23, 2012 by dialing 1-888-203-1112 or 647-436-0148. The passcode is 8347182. 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