West Fraser Announces 2021 First Quarter Results

May 6, 2021 | Posted in Corporate News, News

Vancouver, B.C. – West Fraser Timber Co. Ltd. (“West Fraser” or the “Company“) (TSX and NYSE: WFG) reported today the first quarter results of 2021.  All dollar amounts in this news release are expressed in U.S. dollars unless noted otherwise.

The results of operations presented and discussed below include those of Norbord from February 1, 2021, the date of the completion of the acquisition of Norbord.

First Quarter Highlights

  • Sales increased 81% from the prior quarter to $2.343 billion
  • Earnings increased to $665 million, or 28% of sales, from $282 million in the prior quarter
  • Adjusted EBITDA increased to $1.008 billion from $453 million in the prior quarter
  • Completed the acquisition of Norbord on February 1, 2021
  • Commenced commissioning at the new lumber mill in Dudley, Georgia and shipments commenced from the recently re-started OSB mill in Chambord, Quebec
  • Repurchased $102 million of WFG shares for cancellation under Normal Course Issuer Bid
  • Executing on plan to redeem Norbord Notes and retire $665 million of debt
  • Finished the quarter with liquidity at $2.551 billion and net debt to capital ratio of (3%)

Results Compared to Previous Periods

($ millions except earnings per share (“EPS”))

Q1-21

Q4-20

Q1-20

Sales

2,343

1,294

890

Adjusted EBITDA1

1,0082

453

68

Operating earnings

879

395

9

Earnings

665

282

9

Basic EPS ($)

6.96

4.09

0.13

Diluted EPS ($)

6.96

4.09

(0.09)

  1. Throughout this news release, reference is made to Adjusted EBITDA, and liquidity (collectively “Non-IFRS measures”). For information on these Non-IFRS measures see below under the heading “Non-IFRS Measures”.
  2. Cost of products sold was increased and Adjusted EBITDA decreased by a one-time charge of $93 million related to inventory purchase price accounting.

Operational Results Summary

The acquisition of Norbord was completed on February 1, 2021.  As a result of the acquisition, we have combined the North American operations of Norbord and our Panels segment and renamed that segment North America (“NA”) Engineered Wood Products (“EWP”).  In addition, we have created a Europe EWP segment that includes the results from the United Kingdom (“U.K.”) and Belgium operations.

Our Lumber segment generated operating earnings in the quarter of $607 million (Q4-20 – $385 million) and Adjusted EBITDA of $646 million (Q4-20 – $425 million).  Prior quarter operating earnings included a $95 million duty recovery related to the AR1 duty rate finalization.  Adjusted EBITDA, which includes duties, increased due to higher lumber prices, partially offset by lower shipment volumes that were negatively impacted by seasonal railcar shortages in Canada and a period of extreme winter conditions in the U.S. South.  Higher SPF log costs resulting from B.C. fibre shortages and higher B.C. and Alberta stumpage rates also negatively impacted Adjusted EBITDA compared to the prior quarter.  Commissioning at Dudley continues on track and all major machine centres have now been operationalized.

Our NA EWP segment generated operating earnings in the quarter of $299 million (Q4-20 – $44 million) and Adjusted EBITDA of $353 million (Q4-20 – $48 million).  Segment operating earnings and Adjusted EBITDA were decreased by a one-time charge of $86 million related to inventory fair value adjustments from purchase price accounting.  The addition of our OSB operations from the date of the Norbord acquisition, higher plywood pricing and robust plywood demand positively impacted the NA EWP operating earnings for the quarter.  These positive drivers of operating earnings were partially offset by purchase price accounting related to the Norbord acquisition that increased cost of products sold and increased levels of amortization.  Higher log costs from increased B.C., Alberta and Ontario stumpage rates, higher resin costs and increased costs from the extreme weather in the U.S. South also negatively impacted operating earnings.  Production levels at Chambord continue to gradually increase toward targeted levels in line with expectations.

Our Pulp & Paper segment generated operating earnings in the quarter of $2 million (Q4-20 – loss of $28 million) and Adjusted EBITDA of $11 million (Q4-20 – negative $20 million) while the Europe EWP segment generated an operating loss in the quarter of $6 million (Q4 – N/A) and Adjusted EBITDA of $11 million (Q4-20 – N/A).  Our Europe EWP segment operating earnings and Adjusted EBITDA were decreased by a one-time charge of $7 million related to inventory fair value adjustments from purchase price accounting.

Capital Allocation

Strong first quarter results increased quarter-end available liquidity to $2,551 million from $1,272 million at the end of the prior quarter.  This balance sheet improvement has afforded us greater flexibility to undertake strategic capital investments, repay debt and repurchase shares.

Strategic Capital Program

With the milestones achieved at the Dudley and Chambord mills, we are also pleased to announce that we will be moving forward with approximately $180 million of additional capital projects identified under West Fraser’s strategic capital program.  Work on the identified projects will begin the second half of 2021 and continue through 2023.  This investment program will support safety, cost improvements and strategic growth initiatives as we continue our focus on capital execution and operational excellence.  The average project payback period for this strategic capital program is expected to be three to four years.  The addition of these new capital projects will largely offset lengthening lead times on projects currently underway and as such we are reiterating our capital expenditure target of approximately $450 million for 2021.

In the Lumber segment we expect to invest approximately $150 million at five of our U.S. South lumber mills under the strategic capital program.  Investments at the target mills will expand capacity, increase the mix of higher-margin 2x4s and reduce fixed and variable production costs.

In the North America EWP segment we expect to invest approximately $30 million at two of our OSB mills.  Investments at the target mills will reduce fixed and variable manufacturing costs and improve mill productivity.

Debt Repayment

Concurrent with the closing of the Norbord acquisition we assumed Norbord’s $315 million senior notes due April 2023 (the “2023 Notes”), bearing interest at 6.25%, and $350 million senior notes due July 2027 (the “2027 Notes”), bearing interest at 5.75%.

Subsequent to quarter-end we elected to redeem the remaining 2027 Notes.  On May 6, 2021, we funded the redemption using cash on hand, following which the 2027 Notes will no longer be outstanding.  As discussed below, we have also given notice to redeem the 2023 Notes.  Once the redemptions of the 2023 Notes and the 2027 Notes are complete, we will have retired $665 million of principal value of long-term debt and reduced annual interest expense by approximately $40 million.

Normal Course Issuer Bid

On February 17, 2021, we renewed our normal course issuer bid (“NCIB”) allowing us to acquire an additional 6,044,000 Common shares until the expiry of the bid on February 16, 2022.  In the first quarter of 2021, we repurchased approximately 1.56 million shares under the NCIB at an average share price of CAD$82.86 ($65.28) for aggregate consideration of $102 million.  All shares purchased by the Company under the NCIB will be cancelled.

Outlook

The most significant uses for our lumber and OSB products are residential construction, repair and remodelling, and industrial applications.  Low mortgage rates, low volumes of homes available for resale, favourable demographics, increasing acceptance of remote working and the underlying housing construction deficit due to several years of underbuilding appear to be positively influencing the demand for new housing in North America.  Economists are forecasting U.S. housing starts for 2021 to be approximately 1.5 million units, an increase of nearly 9% over 2020.  An aging housing stock and increased repair and renovation spending should also continue to drive strong lumber, plywood and OSB demand.

We expect to maximize our capacity utilization in lumber, OSB and plywood operations subject to required maintenance downtime and assuming no unexpected disruptions from COVID-19 or other supply chain disruptions from weather, transportation, raw material availability or other factors.

Demand for our European products is expected to continue to be robust as demand for OSB as an alternative to plywood in Europe continues to grow.

Fibre costs for our B.C., Alberta, and Ontario lumber and EWP operations are expected to remain elevated as long as lumber, and EWP prices remain high and demand exceeds the available log supply in B.C.  A strengthening Canadian dollar and stresses across the Company’s supply chain, owing in part to a strong global economic recovery, are also expected to contribute to inflationary pressures on our input costs in the coming quarters.

Our balance sheet remains strong and is well equipped to face potential volatility that may exist in our markets over the coming quarters and to support capital expenditure plans and returning capital to shareholders.

Norbord Integration Update

Efforts to integrate the Norbord business are in the early stages and are a Company focus.  There have been some early successes identifying cost savings in our fibre supply chain, and we remain on track to achieve targeted annual synergies of $61 million over the next 18-24 months.

Adjusted EBITDA

The following tables reconcile Adjusted EBITDA to the most directly comparable IFRS measures.

Quarterly Adjusted EBITDA

($ millions)

Q1-21

Q4-20

Q1-20

Earnings

665

282

9

Tax provision (recovery)

205

103

(3)

Other

(4)

13

(9)

Finance expense, net

13

(3)

12

Equity-based compensation

7

4

7

Amortization

122

54

52

Adjusted EBITDA

1,008

453

68

Quarterly Adjusted EBITDA by segment

($ millions)

Q1-21

Lumber

NA EWP Pulp &
Paper
Europe EWP Corporate & Other

Total

Earnings before tax

609

298 (1) (6) (32)

870

Other

(7) 1 4

(4)

Finance expense, net

5

1 2 5

13

Equity-based compensation

7

7

Amortization

39

54 9 17 3

122

Adjusted EBITDA by Segment

646

353 11 11 (13)

1,008

 

Q4-20

Lumber

Panels Pulp &
Paper
Corporate & Other

Total

Earnings before tax

383

42 (33) (7)

385

Other

8

1 3 1

13

Finance expense, net

(6)

1 2

(3)

Equity-based compensation

4

4

Amortization

40

4 8 2

54

Adjusted EBITDA by segment

425

48 (20)

453

 

Q1-20

Lumber

Panels Pulp &
Paper
Corporate & Other

Total

Earnings before tax

17

2 1 (14)

6

Other

(12)

(3) 6

(9)

Finance expense, net

9

1 2

12

Equity-based compensation

7

7

Amortization

39

3 8 2

52

Adjusted EBITDA by segment

53

6 8 1

68

West Fraser has also made available on its website (www.westfraser.com) select historical quarterly and annual financial information converted from Canadian dollars to U.S. dollars.

Norbord Notes

West Fraser announced today that it will redeem on June 7, 2021 all of Norbord’s outstanding 2023 Notes.  A total of approximately $314 million of 2023 Notes are presently outstanding following the repurchase of approximately $1 million of 2023 Notes under the change of control offer required under the relevant note indentures in connection with the acquisition of Norbord.

The redemption will be completed under the optional redemption provisions of the indenture governing the 2023 Notes at a redemption price equal to par plus the make-whole premium in accordance with the indenture, together with accrued and unpaid interest to the redemption date.  The impact of this transaction is not expected to be material to West Fraser’s earnings.

This news release does not constitute a notice of redemption of the 2023 Notes, nor a solicitation to buy or an offer to purchase or sell any securities.  The notice of redemption was sent to the registered holders of the 2023 Notes on May 6, 2021.  The 2023 Notes are to be surrendered to the paying agent in exchange for payment of the redemption price.  On and after the date of redemption, the 2023 Notes will no longer be outstanding, interest thereon will cease to accrue and all rights of the holders of the 2023 Notes will cease to exist, except for the right to receive the redemption price on the date of redemption.

Further to West Fraser’s April 6, 2021 news release, on May 6, 2021, we funded the redemption of the 2027 notes, following which the 2027 Notes will no longer be outstanding.

Risks and Uncertainties

Risk and uncertainty disclosures are included under the heading “Risks and Uncertainties” in our first quarter 2021 MD&A.  These risks and uncertainties include risks and uncertainties related to the business of Norbord, and the integration of the business of Norbord into our business.

MD&A

Our first quarter 2021 MD&A is available on our website at  www.westfraser.com and the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and the Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”) website at www.sec.gov/edgar.shtml under the Company’s profile.

Financial Information Related to Norbord and Norbord’s Notes

We have applied purchase price accounting to the Norbord acquisition, resulting in a significant increase from the historical cost base of Norbord and $1,374 million of goodwill.  Note 3 to our Financial Statements provides details on the purchase price allocation.  For additional information, refer to the section titled “Norbord Acquisition” in our first quarter 2021 Management’s Discussion & Analysis (“2021 Q1 MD&A”).

An addendum to this news release has been included to provide holders of Norbord’s Notes financial information regarding Norbord’s underlying performance for the first quarter of 2021 and to provide to such holders the information required under the terms of the relevant indentures governing the 2023 Notes and the 2027 Notes. The addendum discloses Norbord’s results for the period from January 1, 2021 to March 31, 2021 and comparative periods and provides a brief discussion of those results.

Norbord has filed its audited financial statements for the year ended December 31, 2020 (“Norbord 2020 Audited Financial Statements”), its annual MD&A for the year ended December 31, 2020 (“Norbord 2020 MD&A”) and annual information form for the year ended December 31, 2020 (“Norbord 2020 AIF”) (together, the “Norbord Annual Filings”) on SEDAR and EDGAR.  The Norbord Annual Filings include important information regarding the business of Norbord and the financial results of Norbord on a stand-alone basis in United States dollars for the year ended December 31, 2020.  This news release does not include a discussion of the financial results or operations of Norbord for the year ended December 31, 2020, and investors are referred to Norbord’s 2020 MD&A for this discussion.  In addition, investors are referred to the Norbord 2020 AIF for information on Norbord’s business.

Responsibility Report

West Fraser’s full Environmental, Social, and Governance (ESG) Responsibility Report is available on the Company’s website at www.westfraser.com.  This report reviews the Company’s key ESG topics, opportunities and performance and includes information aligned with the Sustainable Accounting Standards Board (SASB), Global Reporting Initiative (GRI), and the recommendations of the Task Force on Climate-Related Disclosures (TFCD).

The Company

West Fraser is a diversified wood products company with more than 60 facilities in Canada, the United States, the United Kingdom, and Europe.  From responsibly sourced and sustainably managed forest resources, the Company produces lumber, engineered wood products (OSB, LVL, MDF, plywood, and particleboard), pulp, newsprint, wood chips, other residuals and renewable energy.  West Fraser’s products are used in home construction, repair and remodelling, industrial applications, papers, tissue, and box materials.

Conference Call

West Fraser will hold an analysts’ conference call to discuss the Company’s first quarter 2021 financial and operating results on Friday, May 7, 2021 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time).  To participate in the call, please dial: 1-888-390-0605 (toll-free North America) or 416-764-8609 (toll) or connect on the webcast.  The call and an earnings presentation may also be accessed through West Fraser’s website at www.westfraser.com.  Please let the operator know you wish to participate in the West Fraser conference call chaired by Mr. Ray Ferris, President and Chief Executive Officer of the Company.

Following management’s discussion of the quarterly results, investors and the analyst community will be invited to ask questions.  The call will be recorded for webcasting purposes and will be available on the West Fraser website at www.westfraser.com.

Forward-Looking Statements

This news release contains “forward-looking information” and “forward-looking statements” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of the U.S. Securities Act of 1933, the U.S. Securities Exchange Act of 1934, and the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995.  Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements which reflect management’s expectations regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of West Fraser and its subsidiaries, including Norbord, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words such as “expects,” “anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.”  In particular, this news release contains forward-looking statements under the headings “Operational Results Summary” (regarding the commissioning of Dudley and increase in production levels at Chambord), “Capital Allocation – Strategic Capital Program” (regarding the amount and timing of planned capital expenditures, anticipated incremental Adjusted EBITDA and payback period) and – Debt Repayment (regarding the redemption of the 2023 Notes and reduction in long-term debt), “Outlook” (regarding housing start forecasts and lumber and EWP demand, fibre costs, lumber and OSB production, achievement of synergies and integration of Norbord), and “Norbord Notes” (regarding the completion of the redemption of the 2027 Notes and the timing of the redemption of the 2023 Notes).

By their nature, forward-looking statements involve 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, but are not limited to: (1) assumptions in connection with the economic and financial conditions in the U.S., Canada, Europe and globally and consequential demand for our products; (2) risks inherent in our product concentration and cyclicality; (3) effects of competition and product pricing pressures; (4) effects of variations in the price and availability of manufacturing inputs, including continued access to fibre resources at competitive prices and the impact of third-party certification standards; (5) availability of transportation services, including truck and rail services, and port facilities; (6) various events that could disrupt operations, including natural, man-made or catastrophic events and ongoing relations with employees; (7) risks inherent to customer dependence; (8) impact of future cross border trade rulings or agreements; (9) implementation of important strategic initiatives and identification, completion and integration of acquisitions; (10) impact of changes to, or non-compliance with, environmental or other regulations; (11) the impact of the COVID-19 pandemic on our operations and on customer demand, supply and distribution and other factors; (12) government restrictions, standards or regulations intended to reduce greenhouse gas emissions; (13) changes in government policy and regulation; (14) impact of weather and climate change on our operations or the operations or demand of our suppliers and customers; (15) ability to implement new or upgraded information technology infrastructure; (16) impact of information technology service disruptions or failures; (17) impact of any product liability claims in excess of insurance coverage; (18) risks inherent to a capital intensive industry; (19) impact of future outcomes of tax exposures; (20) potential future changes in tax laws, including tax rates; (21) effects of currency exposures and exchange rate fluctuations; (22) future operating costs; (23) availability of financing, bank lines, securitization programs and/or other means of liquidity; (24) integration of the Norbord business; and (25) other risks detailed from time-to-time in our annual information forms, annual reports, MD&A, quarterly reports and material change reports filed with and furnished to securities regulators.

In addition, actual outcomes and results of these statements will depend on a number of factors, including those matters described under “Risks and Uncertainties” in our 2020 MD&A, and may differ materially from those anticipated or projected.  This list of important factors affecting forward-looking statements is not exhaustive, and reference should be made to the other factors discussed in public filings with securities regulatory authorities.  Accordingly, readers should exercise caution in relying upon forward-looking statements, and we undertake no obligation to update or revise any forward-looking statements publicly, whether written or oral, to reflect subsequent events or circumstances except as required by applicable securities laws.

Non-IFRS Measures

Throughout this news release, reference is made to Adjusted EBITDA, available liquidity, and total and net debt to total capital ratio (collectively “these Non-IFRS measures”).  We believe that, in addition to earnings, these Non‑IFRS measures are useful performance indicators for investors with regard to operating and financial performance.  Adjusted EBITDA is also used to evaluate the operating and financial performance of our operating segments, generate future operating plans, and make strategic decisions.  These Non-IFRS measures are not generally accepted financial measures under IFRS and do not have standardized meanings prescribed by IFRS.  Investors are cautioned that none of these Non-IFRS measures should be considered as an alternative to earnings, EPS, or cash flow, as determined in accordance with IFRS.  As there is no standardized method of calculating any of these Non-IFRS measures, our method of calculating each of them may differ from the methods used by other entities and, accordingly, our use of any of these Non-IFRS measures may not be directly comparable to similarly titled measures used by other entities.  Accordingly, these Non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.  The reconciliation of the Non-IFRS measures used and presented by the Company to the most directly comparable IFRS measures is set out in our Q1 2021 MD&A.

Addendum – Norbord Results

Norbord results are included in our consolidated results in the North America Engineered Wood Products and Europe Engineered Wood Products segments commencing on the closing of the acquisition of Norbord (the Acquisition), February 1, 2021.  As a result, in the first four quarters following the Acquisition, our prior period comparative figures will not include Norbord.  To provide the holders of Norbord’s 2023 Notes and 2027 Notes (the Norbord Notes) with the information required under the terms of the relevant indentures governing the Norbord Notes, we have provided a brief discussion of Norbord comparative operating results below.

Below is a summary of Norbord operating results for the quarters ended April 3, 2021, December 31, 2020 and April 4, 2020.  The results for the first quarter of 2021 include the period from January 1, 2021 to January 31, 2021, which are the results from 2021 prior to the closing of the Acquisition and not included in our consolidated results or available in any of Norbord’s prior standalone News Releases and exclude any impact of the purchase price allocation recognized upon closing of the Acquisition.

 

(US $ millions, unless otherwise noted) (unaudited) Q1 2021 Q4 2020 Q1 2020
Sales 984 794 467
Adjusted EBITDA(1) 526 384 75
KEY STATISTICS
Shipments (MMsf–3/8”)
North America OSB 1,446 1,405 1,459
Europe panels 543 485 499
SELECTED BALANCE SHEET DATA
Total assets(2) 2,791 2,477 1,904
Long-term debt, principal value(3) 663 665 685
Cash and cash equivalents 777 568 30
  1. Non-IFRS measure; excludes acquisition-related items and based on Norbord’s historical definition.
  2. Q1-21 excludes the fair value adjustments due to purchase price accounting upon closing of the Acquisition.
  3. Q1-20 included drawings on Norbord’s revolving bank lines.

Sales

Total sales in the quarter were $984 million, compared to $794 million in the fourth quarter of 2020 and $467 million in the first quarter of 2020.  Quarter-over-quarter, total sales increased by $190 million or 24%.  In North America, sales increased by 24% primarily due to higher realized OSB prices as well as a 3% increase in shipment volumes.  In Europe, sales increased by 21% due to higher average panel prices and a 12% increase in shipment volumes.  Year-over-year, total sales increased by $517 million or 111%.  In North America, sales increased by 138% due to significantly higher realized OSB prices.  In Europe, sales were 32% higher due to higher average panel prices and a 9% increase in shipment volumes.

Operating Results

Adjusted EBITDA(1) (US $ millions) (unaudited) Q1
2021
Q4
2020
Q1
2020
North America $503  $370 $68
Europe 25    20   10
Unallocated (2) (6)  (3)
Total $526  $384 $75
  1. Non-IFRS measure; excludes acquisition-related items and based on Norbord’s historical definition.

 

Norbord generated Adjusted EBITDA of $526 million in the first quarter of 2021, compared to $384 million in the fourth quarter of 2020 and $75 million in the first quarter of 2020.  The increase versus both comparative periods was driven primarily by higher realized North American OSB prices, with increased shipment volumes also contributing quarter-over-quarter.

Norbord’s North American operations generated Adjusted EBITDA of $503 million in the first quarter of 2021 versus $370 million in the fourth quarter of 2020 and $68 million in the first quarter of 2020.  Quarter-over-quarter, the increase of $133 million was primarily attributed to higher OSB prices and shipment volumes, as well as the timing of and lower costs associated with maintenance shuts, partially offset by higher input prices and the impact on production of weather-related issues in the U.S. South and resin supply disruptions.  The year-over-year increase of $435 million was primarily attributed to significantly higher OSB prices and improved productivity, partially offset by higher mill profit share costs attributed to higher earnings, higher input prices, and the impact on production of weather-related issues in the U.S. South and resin supply disruptions.

In the first quarter, Norbord’s North American OSB cash production costs per unit (excluding mill profit share) increased 3% versus the fourth quarter of 2020 due to higher input prices and the impact on production of weather-related issues in the U.S. South and resin supply disruptions during the quarter, partially offset by the timing of and lower costs associated with maintenance shuts.  Unit costs increased by 10% versus the first quarter of 2020 due to higher input prices, including Canadian stumpage-related wood costs, and the impact on production of weather-related issues in the U.S. South and resin supply disruptions.

Norbord’s North American operating mills produced at 88% of available capacity in the first quarter of 2021, compared with 80% in the fourth quarter of 2020 and 79% in the first quarter of 2020.  These figures do not include the Chambord, Quebec mill, which restarted at the end of the first quarter of 2021, and exclude the capacity of the 100 Mile House, British Columbia mill effective the fourth quarter of 2020, which was permanently closed during that quarter.  The improvement against the prior quarter reflects improved productivity and the holiday and maintenance downtime taken in the fourth quarter.  The improvement against the prior year quarter is driven primarily by improved productivity and the removal of the 100 Mile House mill’s capacity starting in the fourth quarter of 2020.

Norbord’s European operations generated Adjusted EBITDA of $25 million in the first quarter of 2021, $5 million higher than the fourth quarter of 2020 and $15 million higher than the same quarter last year.  Quarter-over-quarter, the increase was primarily due to higher average panel prices and higher shipment volumes, partially offset by higher input prices.  Year-over-year, the increase was due primarily to higher average panel prices and higher shipment volumes, partially offset by higher resin prices.

Norbord’s European mills produced at 87% of stated capacity in the first quarter of 2021, compared to 88% in the fourth quarter of 2020 and 93% in the first quarter of 2020.  Productivity is in-line quarter-over-quarter but decreased year-over-year due to the inclusion of the Phase 2 capacity at Inverness starting in the fourth quarter of 2020, partially offset by the continued ramp-up of the Inverness mill.

Information for Norbord bondholders

Prior to the Acquisition, Norbord had an aggregate commitment of $300 million in revolving bank lines which were secured by a first lien on Norbord’s North American OSB inventory and property, plant and equipment.  This lien was shared pari passu with the holders of the Norbord Notes, aggregating $665 million in principal value.  In addition, Norbord had a $125 million multi-currency accounts receivable securitization program with a third-party trust sponsored by a highly rated Canadian financial institution.  Both the revolving bank line commitment and the accounts receivables securitization program were terminated on February 1, 2021 upon closing of the Acquisition.

Following the repayment and termination of Norbord’s revolving bank lines, the collateral platform providing for security over assets of Norbord in favour of the revolving banks was terminated.  As a consequence, the collateral platform providing for security over assets of Norbord in favour of the holders of the Norbord Notes was terminated.  The termination of the collateral platforms resulted in the discharge of the liens that supported both collateral platforms.  The Norbord Notes are now, as a consequence of such termination, unsecured obligations of Norbord Inc.

Pursuant to each of the Norbord Notes indentures, Norbord commenced a change of control offer (the Offer) to repurchase the Norbord Notes on March 2, 2021 at a purchase price equal to 101% of the principal amount of the Notes.  Upon expiration of the Offer on April 1, 2021, $2 million of the Norbord Notes were tendered and these were repurchased on April 6, 2021.  On the same date, a redemption call for the remaining outstanding senior notes due in 2027 was announced at a redemption price equal to par plus a make-whole premium of $31 million.  The notes were redeemed on May 6, 2021 using cash on hand.  On that date a redemption call for the remaining outstanding senior notes due in 2023 was announced under the optional redemption provisions of the indenture governing the 2023 Notes at a redemption price equal to par plus the make-whole premium in accordance with the indenture, together with accrued and unpaid interest to the redemption date.  The notes will be redeemed on June 7, 2021.

 

For More Information

West Fraser Investors:
Robert B. Winslow, CFA
Director, Investor Relations & Corporate Development
Tel. (416) 777-4426
shareholder@westfraser.com

West Fraser Media:
Heather Colpitts
Director, Corporate Affairs
Tel. (416) 643-8838
shareholder@westfraser.com