Jul 26, 2012 | Posted in Corporate News, News

Note:  Financial references in US dollars unless otherwise indicated.

  • EBITDA of $31 million – $21 million better than Q2 2011
  • North Central benchmark OSB price averaged $235/Msf – 36% higher than Q2 2011
  • Housing market one of few bright spots in US economy
  • European panel prices holding – OSB, particleboard and MDF prices flat versus Q1 2012
  • Maturing $240 million 2012 bonds refinanced with 6.25% senior notes due in 2015
  • Best-ever mid-year safety performance – incident rate of just 0.46 YTD
  • Inverness, Scotland and South Molton, England mills received Norbord Safety Star certification

TORONTO, ON (July 26, 2012) – Norbord Inc. (TSX: NBD, NBD.WT) today reported EBITDA of $31 million in the second quarter of 2012 compared to $10 million in the same quarter last year and $21 million in the first quarter of 2012.  North American operations generated EBITDA of $26 million in the quarter versus break-even last year and $14 million in the prior quarter.  European operations generated EBITDA of $9 million in the quarter versus $13 million last year and $11 million in the prior quarter.

Norbord recorded earnings of $6 million or $0.14 per share in the second quarter of 2012 compared to earnings of $1 million or $0.03 per share in the same quarter last year and break-even earnings in the prior quarter.  Earnings in the second quarter of 2011 included a $7 million or $0.16 per share income tax recovery due to the recognition of a non-recurring income tax benefit.  Excluding the impact of this non-recurring item, the loss in the second quarter of 2011 was $6 million or $0.14 per share.

“We are finally seeing a more sustainableUShousing market recovery and this is flowing through to our bottom line,” said Barrie Shineton, President and CEO.  “North American benchmark OSB prices moved steadily higher through the quarter and we more than tripled our EBITDA result compared to the same quarter last year.  Improving US housing activity, strong homebuilder backlogs and the lean supply chain suggest a positive OSB pricing environment through the rest of the year.”

“In Europe, our business has continued to perform well in spite of increasing economic uncertainty and I believe we will continue to generate solid results through the second half of the year.”

Market Conditions

June year-to-date US housing starts and permits were 27% and 29% higher, respectively, than the same period in 2011.  More importantly for the OSB industry, US single family housing starts were 21% better versus last year.  Further, public homebuilders have been easily surpassing analysts’ second quarter estimates with 30-50% year-over-year increases in net new orders and order backlogs as well as improving home prices.  Pro-dealers are experiencing similar increases in sales activity as they supply building materials to meet this growing demand.  Most expert forecasts for 2012 US housing starts are being adjusted upward and now range from 700,000 to 800,000, 15% to 30% higher than last year.

In this firmer demand environment, the North American North Central benchmark OSB price rose throughout the second quarter – from $202 per thousand square feet (Msf) (7⁄16-inch basis) to $255 per Msf.  The North Central benchmark price averaged $235 per Msf in the second quarter, compared to $203 per Msf in the prior quarter and $173 per Msf in the same quarter last year.  In the South East region, where approximately 55% of Norbord’s North American capacity is located, prices averaged $204 per Msf in the second quarter, compared to $190 per Msf in the prior quarter and $162 per Msf during the same quarter last year.  The spread between South East and North Central benchmark OSB prices was unusually wide in the second quarter, reflecting regional differences in the housing market recovery and in transportation availability.  Norbord expects this gap to narrow during the second half of the year.

InEurope, panel markets continued to hold up well despite the backdrop of negative economic news.  In the second quarter, all panel prices were essentially flat compared to the prior quarter.  OSB prices have come off their 2011 peak levels and were 13% lower compared to the same quarter last year.  However, MDF and particleboard prices have improved 3% year-over-year.


In North America, second quarter OSB shipment volumes increased 12% over last year as Norbord ran additional capacity to meet new home improvement customer commitments and built value-added products inventory in advance of the July 3rd Val-d’Or, Quebec mill indefinite curtailment.  Norbord’s operating OSB mills ran at approximately 95% of their capacity in the second quarter of 2012.  Including the indefinitely closed mills in Huguley, Alabama and Jefferson, Texas, the North American operations ran at approximately 75% of capacity in the second quarter of 2012 compared to 65% in both the first quarter of 2012 and second quarter of 2011.

In Europe, second quarter panel shipments were 4% lower than the prior year, but year-to-date shipments were consistent with the prior year.  Norbord’s European mills produced at approximately 95% of estimated capacity in the first and second quarters of 2012, which reflects the 6% increase in stated panel capacity effective December 31, 2011.  This compares to 100% in the second quarter of 2011 under the previously stated capacity.

Norbord’s Margin Improvement Program (MIP) delivered $10 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 1% versus both last year and last quarter due to lower raw material usages and increased production volume resulting from continuing MIP initiatives.

Capital investments totaled $4 million in the second quarters of both 2012 and 2011 and $3 million in the first quarter of 2012.  Norbord’s 2012 capital investments are expected to total a modest $25 million and continue to focus on productivity improvement and manufacturing cost reduction projects with quick paybacks.

Operating working capital was $64 million at quarter-end compared to $71 million in the prior quarter and $52 million in the prior year.  The quarter-over-quarter decrease is primarily due to increased accounts payable.  The year-over-year increase is primarily due to higher North American OSB prices and shipments volumes which increased accounts receivable.  Accounts receivable performance is in line with prior periods.

Pro forma for the repayment of the $240 million 2012 debentures and amendments to its revolving bank lines subsequent to quarter-end, Norbord had unutilized liquidity of $328 million, comprised of $242 million in undrawn revolving bank lines and $86 million in cash and cash equivalents.  The Company’s tangible net worth was $350 million and net debt to total capitalization on a book basis was 50%, well within bank covenants.


During the quarter, the Company issued $240 million in senior notes due in 2015 with a coupon of 6.25%.  The notes are comprised of two tranches.  The first tranche consists of $165 million of senior secured notes that rank pari passu with the Company’s existing 2017 senior secured notes and committed revolving bank lines.  The second tranche consists of $75 million of senior unsecured notes.  Subsequent to quarter-end, the Company used the proceeds to repay the $240 million 7.25% debentures due July 1, 2012.

Subsequent to quarter-end, 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.

As previously announced, Norbord indefinitely suspended production at its Val-d’Or, Quebec OSB mill effective July 3, 2012.  Approximately 120 employees were affected by this decision.  Prior to this announcement, the mill had, for the last five years, been operating in a partially curtailed mode.  Customers continue to be serviced without disruption.  The Company has not incurred any material one-time charges as a result of this decision.

Additional Information

Norbord’s Q2 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, July 26, 2012 at 1:00 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 August 26, 2012 by dialing 1-888-203-1112 or 647-436-0148.  The passcode is 1680425.  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 theUnited States, Europe andCanada.  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,” “believe,” “forecast,” “expect,” “appear,” “suggest,” “will,” “will not,” “intend,” “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, 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 Q2 2012 Management’s Discussion and Analysis dated July 25, 2012.