Norbord Reports First Quarter Results



    
    Note: Financial references in US dollars unless otherwise indicated

    HIGHLIGHTS

    -   Generated EBITDA of $18 million at European operations
    -   Ramped up new Cordele OSB line to 75% of design capacity
    -   Achieved record North American OSB production
    -   Completed early refinancing of 2008 debt maturity
    

    TORONTO, April 25 /CNW/ - Norbord Inc. (TSX:NBD) today reported a loss of
$16 million in the first quarter of 2007 or $0.11 per share compared to a loss
of $1 million or $0.01 per share in the fourth quarter of 2006. In the first
quarter of 2006, earnings were $58 million or $0.40 per share.
    "Our first quarter results reflect the lowest North American OSB prices
since 2001," said Barrie Shineton, President and CEO. "Our diversification
into Europe helped offset the decline in North American markets as our
European operations delivered another quarter of improved results."
    "Norbord produced and sold record North American OSB volume during the
first quarter," said Mr. Shineton. "This validates our sales strategy of
focusing on the largest retailers, contractor yards and homebuilders who are
growing their own market shares."

    Performance

    The North Central benchmark OSB price averaged $145 during the quarter,
down from $166 in the prior quarter and $285 in the same quarter last year.
The lower OSB prices reflect the 23% decline in housing starts over the past
12 months and the impact of tightening mortgage lending standards in response
to the subprime loan problems. Industry experts now forecast US housing starts
in the 1.5 to 1.6 million range for the year, well below the 1.8 million level
experienced in 2006. As a result, difficult market conditions are expected to
persist into next year.
    Notwithstanding these difficult market conditions, Norbord produced
record OSB volume in North America during the first quarter. Record production
was achieved despite a shorter operating quarter and scheduled maintenance
downtime and is the result of the excellent start-up of the second line at
Cordele, Georgia. Norbord's sales strategy of aligning with key customers
enabled all of this record production to be sold, keeping inventories at
minimal levels and avoiding costly curtailments.
    European panelboard prices improved in the first quarter with strong
demand being driven by more robust building activity, particularly in Germany,
and general economic expansion in Eastern Europe. Norbord's order files for
all European panels extend well into the second quarter and further price
increases are expected. The combination of expanding demand in the east and
capacity closures in the West should continue to support strong European
panelboard pricing through 2007 and into 2008.
    North American per unit OSB production costs were down 1% over the same
quarter last year despite a 30% increase in resin prices. In Europe, energy
prices moderated during the quarter, more than offsetting fibre price
increases experienced in Belgium.
    Gains from the Margin Improvement Program (MIP) were $3 million
year-to-date, measured relative to 2006 at trend prices and exchange rates.
The outstanding operating performance achieved in the first quarter of 2006,
when all mills were run flat out to benefit from the tail end of the prior
up-cycle, makes this year-over-year gain a notable result. Norbord's MIP
target for the full year 2007 is $45 million.
    Capital investments totaled $9 million during the quarter and are
expected to be $30 million for the full year. Net debt to total capitalization
was 31% on a market basis and Norbord has $112 million of unutilized,
committed bank lines to support short-term liquidity requirements.

    Developments

    Ramp up of the new OSB production line at Cordele, Georgia is well
underway. Start-up has exceeded expectations as the mill ran above 70% of its
design capacity after only eight weeks - well ahead of the four month target.
The new line is on track to produce at full capacity by year-end. Once fully
ramped up, the Cordele mill is expected to be amongst the lowest cost in the
industry. Capitalization of interest and start-up costs on this project ceased
and depreciation of the new line commenced on April 1, 2007.
    The early refinancing of Norbord's 2008 debt maturity was completed in
February. $200 million of 10 year senior notes were issued with an interest
rate of 6.45%. Pending the repayment of the 2008 debentures at maturity, the
proceeds are being invested in high-quality money market securities.

    Quarterly Dividend

    The Board of Directors declared a quarterly dividend of CAD $0.10 per
common share, payable on June 21, 2007 to shareholders of record on June 1,
2007. Norbord's Canadian common shareholders may participate in the Company's
Dividend Reinvestment Plan.

    Annual Meeting of Shareholders

    Norbord's annual meeting of shareholders will be held Wednesday,
April 25, 2007 at 10:30 a.m. EDT at the National Club, 303 Bay Street,
Toronto, Ontario. The meeting will be webcast live at Norbord's web site at
www.norbord.com.

    Conference Call

    Norbord will hold a conference call for investors on Thursday, April 26,
2007 at 11:00 a.m. EDT. The call will be broadcast live over the Internet via
www.norbord.com and www.newswire.ca. A replay will be available one hour
following the call until May 25, 2007 by dialing 1-888-203-1112. The pass code
is 6904094. Audio playback will also be available on the Norbord web site.

    Norbord Profile

    Norbord Inc. is an international producer of wood-based panels with
assets of $1.5 billion, employing approximately 2,800 people at 16 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), hardwood
plywood and related value-added products. Norbord is a publicly traded company
listed on the Toronto Stock Exchange under the symbol NBD.

    This news release and attached Shareholders Letter contain
forward-looking statements, as defined in applicable legislation. The words
"forecast," "are expected," "should," "is on track to," "is expected," 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 and the US Securities and Exchange
Commission.
    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, 2007 Annual Information Form and the cautionary statement
contained in the "Forward-Looking Statements" section of the 2006 Management's
Discussion and Analysis dated January 31, 2007.


    
                           LETTER TO SHAREHOLDERS
                           ----------------------
    

    April 25, 2007

    Dear Norbord Shareholder,

    Norbord recorded a loss of $16 million or $0.11 per share for the first
quarter of 2007. Market conditions were very challenging in North America,
with OSB prices reaching their lowest levels since 2001. Demand has been
impacted by weaker US housing starts, poor weather and by new capacity from
recent OSB investment coming on stream.
    
    However, we continue to make good progress on many key initiatives:

    -  Our strategy of geographic diversification is paying off,
    -  Our new Cordele mill start up has exceeded our expectations, and
    -  Our sales strategy has been validated.
    

    Our European mills delivered EBITDA of $18 million during the quarter -
three times greater than one year ago. Recovering building construction
activity in Germany, rapid economic expansion in Eastern Europe and capacity
closures in Western Europe are supporting very strong panelboard demand. Our
predominantly UK based assets are benefiting from a strong Euro, lower wood
costs and energy price deregulation and we expect Norbord's European earnings
will continue to improve during the remainder of this year.
    Our new mill at Cordele, Georgia has started up exceptionally well. We
are currently operating at about 85% of design and should be at full capacity
well before our year-end target. Our project management team has done an
outstanding job of delivering this project on time and on budget. In fact, we
expect the new line to contribute positive cash flow in the second quarter of
this year.
    We also achieved record OSB production in the quarter. And more
importantly, we were able to sell it, maintaining normal inventory levels and
avoiding costly curtailments. This is the direct result of our ongoing efforts
to develop a quality customer base. We continue to align ourselves with the
largest retailers, contractor yards and homebuilders who are growing their own
market shares.
    Looking ahead to the rest of 2007, the diverging market trend we see in
North America and Europe will continue. In North America, OSB prices will
bounce along at the bottom, with some marginal seasonal relief. In Europe,
panelboard prices will continue to improve and Norbord will benefit with
stronger earnings from all its operations. This is the real earnings
diversification we've talked about in the past.
    Longer term, we continue to believe that OSB represents the best growth
opportunity in the forest products industry. Housing starts will recover, most
likely next year when the inventory of vacant new and resale homes returns to
more normal levels. And OSB, a replacement for higher cost plywood, will
continue to take market share at an accelerated rate.
    Both trends will ultimately result in improved OSB prices, beginning some
time in 2008.
    2007 looks to be a tougher year for the North American OSB industry, but
Norbord has been here before. We have a proven track record of weathering
these cycles and emerging a stronger company. I am confident that we'll do it
again.
    Thank you for your continuing support.


    (signed)
    Barrie Shineton



    
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
                     ------------------------------------
                             FIRST QUARTER 2007
                             ------------------
    

    April 24, 2007

    The Management's Discussion and Analysis (MD&A) provides a review of the
significant developments that impacted Norbord's performance during the
period. Norbord's significant accounting policies and other financial
disclosures are contained in the audited annual financial statements and
accompanying notes. All financial references in the MD&A are stated in US
dollars unless otherwise noted.

    Some of the statements included or incorporated by reference in this MD&A
constitute forward-looking statements within the meaning of applicable
legislation. Forward-looking statements are based on various assumptions and
are subject to various risks. See the cautionary statement contained in the
Forward-Looking Statements section in this MD&A.

    EBITDA, EBITDA margin, operating working capital, total working capital,
capital employed, ROCE, ROE, net debt, net debt to capitalization, book basis,
net debt to capitalization, market basis and book value per share are non-GAAP
measures described in the Definitions section. Non-GAAP measures do not have
any standardized meaning prescribed by GAAP and are therefore unlikely to be
comparable to similar measures presented by other companies. There are no
directly comparable GAAP measures to any of these measures. Where appropriate,
a quantitative reconciliation of the non-GAAP measure to the nearest
comparable GAAP measure is also provided.

    Additional information on Norbord, including the annual information form
and the 2006 annual report, containing the annual MD&A and audited annual
financial statements is available on SEDAR at www.sedar.com.

    Overview

    Norbord is an international producer of wood-based panels with 16 plant
locations in the United States, Europe and Canada. It is one of the world's
largest producers of oriented strand board (OSB) with annual capacity of
5.0 billion square feet (3/8-inch basis). The core of Norbord's OSB business
is located in the US South. The Company is a significant producer of
wood-based panels in Europe. The geographical breakdown of panel production
capacity is 60% US, 27% Europe and 13% Canada.
    Norbord's business strategy is focused entirely on the wood panels sector
- in particular OSB - in North America and Europe.
    Norbord's financial goal is to achieve top quartile return on equity
(ROE) and cash return on capital employed (ROCE) among North American forest
products companies. Norbord met this target in 2005 and management believes
this target was met again in 2006.
    Maintaining a strong balance sheet is an important element of Norbord's
financing strategy. Norbord believes that its record of superior operational
performance and prudent balance sheet management should enable it to access
public and private capital markets on attractive terms. At the end of the
quarter, the Company believes that it was well positioned with a net debt to
capitalization of 31% on a market basis and 56% on a book basis.
    Norbord manages its business to provide for a sustainable dividend to be
paid quarterly to common shareholders throughout the business cycle. At
March 31, 2007, the Board of Directors had declared 66 consecutive quarterly
common dividends of CAD $0.10 per share.

    
    Operating Results

                                               1st Qtr    4th Qtr    1st Qtr
    (US$ millions, unless otherwise noted)        2007       2006       2006
    -------------------------------------------------------------------------
    Return on equity (ROE)                       (15)%       (1)%        43%
    Return on capital employed (ROCE)               2%         8%        46%
    Earnings per share - diluted              $  (0.11)  $  (0.01)  $   0.40
    -------------------------------------------------------------------------


    Net sales                                 $    261   $    259   $    368
    EBITDA                                           4         22        111
    EBITDA margin                                   2%         9%        30%
    Depreciation                                    24         24         22
    Capital investments                              9         44         35
    -------------------------------------------------------------------------

    OSB shipments (MMsf 3/8")                    1,112      1,083      1,082
    Average OSB price - North Central
     ($/Msf 7/16")                                 145        166        285
    Average OSB price - Europe ((euro)/m(3))       234        219        197
    -------------------------------------------------------------------------
    

    Norbord's strategy of geographic diversification continued to be
substantiated as markets for Norbord's European and North American products
moved in different directions. In Europe, prices for Norbord's products
continued to improve due to stronger market conditions, particularly in
Eastern Europe. In contrast, North American markets remained challenging with
North American OSB prices trading at their lowest levels since 2001.
    EBITDA of $4 million was generated in the quarter, versus $22 million in
the previous quarter and $111 million in the first quarter of 2006. Notable in
this result is the contribution from European operations, at $18 million up
from $10 million and $6 million in the fourth and first quarters of 2006,
respectively. Market conditions in Europe continued to show signs of
improvement. European OSB prices increased 7% over the fourth quarter with
strong demand being driven by a robust construction market in the West,
particularly in Germany, and stronger economic activity in Eastern Europe.
Norbord continued to focus its particleboard on the construction sector with
the particleboard business in Cowie, Scotland now devoted almost exclusively
to the construction sector. Particleboard and MDF markets remained firm with
price gains of 3% to 5% achieved in the quarter.
    The strengthening market conditions in Europe were partially offset by
continued cost pressures for fibre and resin. A number of initiatives have
been undertaken to address these cost pressures including the 2006
restructuring of Cowie MDF and South Molton, England particleboard and
lamination, the installation of a heat energy system at Cowie MDF, and the
on-going installation of a heat energy system at Genk, Belgium OSB
(operational fourth quarter 2007). Norbord expects that these initiatives will
result in higher overall margin contribution from the European mills.
    Notwithstanding the improved European results, overall results
deteriorated as North American OSB prices have retreated from the highs of
recent years. Benchmark North American OSB prices averaged $145 per Msf
(7/16-inch basis) in the quarter, and traded at their lowest level since 2001.
The decline in North American OSB prices, which began in the second half of
2006, is the result of lower housing starts in the US. New home construction
is the principal end use for OSB accounting for about 70% of demand in 2006.
North American OSB prices have also been impacted by an increase in production
capacity as a number of mills have come on stream. Relatively weak pricing
levels are expected to persist into 2008 as a result of weaker overall demand
and the impact of additional capacity.
    Throughout the cycle, Norbord took steps to prepare itself for this
cyclical downturn by focusing on cost containment and developing a higher
margin product mix. The Margin Improvement Program (MIP) has helped Norbord to
concentrate on improving its competitive position, generating $185 million of
margin improvement over the past five years. These gains have helped to offset
the impact of rising input costs and management believes its relative
competitive position in the industry has improved over this time. Gains from
MIP were $3 million year-to-date, measured relative to 2006 at constant prices
and exchange rates. The outstanding operating performance achieved in the
first quarter of 2006, when production was maximized to benefit from the tail
end of the prior up-cycle, makes the year-over-year gain notable. Norbord's
MIP target for the full year 2007 is $45 million.
    While weak North American OSB pricing is expected in the near term, the
long term fundamentals supporting North American housing and OSB demand
continue to be strong. Management continues to believe that OSB is the best
growth product in the forest products industry.
    Major components of the change in EBITDA compared to the prior quarter
and the same quarter last year are summarized in the following variance table.

    

                                                          1st Qtr    1st Qtr
                                                             2007       2007
                                                              vs.        vs.
    EBITDA Variance                                       4th Qtr    1st Qtr
    (US$ millions)                                           2006       2006
    -------------------------------------------------------------------------
    EBITDA - current period                              $      4   $      4
    EBITDA - comparative period                                22        111
    -------------------------------------------------------------------------
    Variance(1)                                          $    (18)  $   (107)
    -------------------------------------------------------------------------

    Mill nets(2)                                         $     (4)  $   (100)
    Volume(3)                                                  (2)        (7)
    Key input prices(4)                                        (1)        (7)
    Key input usage(4)                                         (2)         1
    Other(5)                                                   (9)         6
    -------------------------------------------------------------------------
                                                         $    (18)  $   (107)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1)  The variance excludes the impact of the second OSB line at Cordele,
         Georgia as this line's results were capitalized until April 2007.
    (2)  The mill net variance represents the change in realized pricing
         across all products. Mill net is calculated as net sales divided by
         shipment volume.
    (3)  The volume variance represents the impact of shipment volume changes
         across all products.
    (4)  Key inputs include fibre, resin and energy.
    (5)  Other category comprises all remaining variances including labour
         and benefits, supplies and maintenance, the impact of foreign
         exchange, and the $7 million refund of softwood lumber duties
         received in the fourth quarter of 2006.
    

    Ramp up of the new OSB line at Cordele, Georgia completed in December
2006 is well underway. The expansion added approximately 550 million square
feet (3/8-inch basis) of production capacity at a capital cost of $135 million
and increased Norbord's global OSB production capacity by 12%. Once fully
ramped up, this expansion will further strengthen Norbord's position as one of
the lowest cost OSB producers in the US South. Production on the line exceeded
75% of capacity for the month of March, ahead of the aggressive start-up
schedule. Any benefit from the additional volume from the new OSB line is not
reflected in EBITDA, or the EBITDA variance, as the results from this line
were capitalized until April 2007 while the facility remained in its start-up
phase. During the first quarter, $3 million was capitalized as start-up costs.
    Norbord achieved record OSB production in the quarter, driven by the
exceptional ramp up of the new OSB line at Cordele. Production volume in the
first quarter from Norbord's remaining eleven OSB facilities was down 3% over
the prior quarter and down 4% over the same quarter last year. The fewer
number of days in the first quarter of 2007 and additional unscheduled
downtime are the principal drivers for the decrease. The length of the first
quarter of 2007, fourth quarter of 2006 and first quarter of 2006 were 90, 92
and 91 days, respectively.
    Norbord's OSB shipments reached record levels in the quarter, a notable
achievement in light of current North American OSB market conditions and
validates the Company's sales strategy of aligning with growth customers.
    The global forest products industry continues to be challenged with
significantly higher energy, resin and fibre costs. Norbord has responded to
these price pressures by accelerating the installation of biomass heat energy
systems to limit the direct exposure to energy prices and by focusing on the
"controllable" aspects of its business through MIP initiatives with a sharp
focus on mix, volume and usage improvements.
    In the quarter Norbord's North American per unit OSB production costs,
including employee profit share, were up 4% over the prior quarter due to a
combination of increased input prices and costs associated with unscheduled
downtime. Production costs were down 1% over the first quarter of 2006 as
costs associated with unscheduled maintenance downtime were offset by lower
employee profit share costs.
    Net sales in the quarter were $261 million, compared to $259 million and
$368 million in the fourth and first quarters of 2006 respectively. Changes in
North American OSB price is the principal driver of the change in net sales.
Increased European pricing levels also impacts net sales relative to the
comparative periods.
    Interest expense of $9 million is higher than prior quarters due to
additional interest on borrowings under the Company's committed bank lines and
the February issuance of $200 million of senior notes maturing in 2017. First
quarter interest expense excludes $3 million of interest capitalized relating
to the new OSB line at Cordele. The line reached commercial production at the
end of the quarter and accordingly, no additional interest will be
capitalized. Depreciation expense of $24 million is in line with prior
quarters. Going forward depreciation expense is expected to increase as
depreciation will commence in the second quarter on the new OSB line. Annual
depreciation on the new OSB line is expected to be approximately $10 million.

    
    Liquidity and Capital Resources


    (US$ millions, except per share            1st Qtr    4th Qtr    1st Qtr
     information, unless otherwise noted)         2007       2006       2006
    -------------------------------------------------------------------------

    Cash provided(used) by operating
     activities                               $    (50)  $     54   $     30
    Cash provided(used) by operating
     activities per share                        (0.34)      0.37       0.21
    -------------------------------------------------------------------------

    Operating working capital                      109         33         73
    Total working capital                          304         53        204
    Capital investments                              9         44         35
    Net debt to capitalization, market basis       31%        27%        18%
    Net debt to capitalization, book basis         56%        51%        36%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Operating activities consumed $50 million of cash in the quarter
principally due to a seasonal increase in non-cash working capital balances.
The decrease in cash provided by operations from the prior quarter is
primarily due to non-cash working capital balance changes. The decrease from
the first quarter of 2006 is principally attributable to higher earnings in
the comparable period. The net change in non-cash working capital balances in
the first quarter resulted in the use of $68 million of cash, compared to the
use of $50 million in the first quarter of 2006.
    Operating working capital, consisting of accounts receivable and
inventory less accounts payable and accrued liabilities, at March 31, 2007 was
$109 million compared to $73 million at April 1, 2006, up due to an increase
in non-trade receivable balances. Collections of trade receivables are in line
with prior periods. The Company aims to minimize the amount of capital held as
operating working capital. Total working capital at March 31, 2007 was
$304 million including $198 million in cash and cash equivalents.
    During the quarter the Company issued $200 million of senior notes due in
2017 with an interest rate of 6.45% which is subject to a credit ratings based
coupon step-up provision. The notes were issued to pre-fund the March 2008
debenture maturity. Pending such use, the proceeds are being invested in high
quality money market securities.
    In addition to cash on hand and cash generated from operations, the
Company has $200 million of committed unsecured revolving bank lines available
to support short-term liquidity requirements, of which $88 million were
utilized at March 31, 2007; $84 million drawn as cash and $4 million drawn for
letters of credit. These committed bank lines mature in 2010, bear interest at
money market rates plus a margin that varies with the Company's credit rating,
and contain certain financial covenants which the Company must comply with on
a quarterly basis.
    Cash dividends of $8 million or CAD $0.10 per share were paid in the
quarter, down from prior quarters reflecting increased participation in the
Company's Dividend Reinvestment Program (DRIP), which permits Canadian
shareholders to elect to receive their dividends in the form of common shares.
Other uses of cash in the quarter include $9 million for capital investments
and cash used by operating activities. In addition, $44 million of cash was
received through the drawdown of the committed bank lines, which is reflected
as an increase in long-term debt.
    Norbord's net debt stood at $529 million at quarter end, representing 31%
of capitalization on a market basis and 56% of capitalization on a book basis.

    Outstanding Shares

    At April 24, 2007, there were 144.4 million common shares outstanding. In
addition, 2.5 million stock options were outstanding, of which approximately
one-third were fully vested.

    Capital Investments

    In the first quarter of 2007, capital investments were $9 million.
Norbord's 2007 capital investments are expected to be $30 million,
representing committed capital and essential maintenance only. Committed
capital includes heat energy systems in progress at Genk and Nacogdoches,
Texas. The 2007 capital investments will be funded with cash on hand, cash
generated from operations and, if necessary, drawdowns under the Company's
committed bank lines.

    Class Action Lawsuit

    Norbord and eight other North American OSB producers have been named as
defendants in several lawsuits filed in the United States District Court for
the Eastern District of Pennsylvania. The lawsuits allege that these nine
North American OSB producers violated United States and various state
antitrust and other laws by allegedly agreeing to fix prices and reduce the
supply of OSB from June 1, 2002 through the present.
    The named plaintiffs seek to have the cases certified as class actions.
One group of plaintiffs seeks to certify a class of persons and entities that
purchased OSB in the United States directly from any of the named North
American OSB producers between June 1, 2002 and the present. Other plaintiffs
seek to certify one or more classes of persons and entities that purchased OSB
in various states and the District of Columbia indirectly between June 1, 2002
and the present.
    Norbord believes that the lawsuits are entirely without merit and intends
to defend this matter vigorously.

    Selected Quarterly Information

    
                       2007              2006                     2005
    -------------------------------------------------------------------------
    (US$ millions,
     except per share
     information,
     unless otherwise   1st    4th    3rd    2nd    1st    4th    3rd    2nd
     noted)             Qtr    Qtr    Qtr    Qtr    Qtr    Qtr    Qtr    Qtr
    -------------------------------------------------------------------------

    Key Performance
     Metrics
    Return on
     equity (ROE)     (15)%   (1)%     6%    27%    43%    41%    38%    45%
    Cash provided by
     operating
     activities         (50)    54     37     70     30    121     55     98
    Cash provided by
     operating
     activities per
     share            (0.34)  0.37   0.26   0.49   0.21   0.83   0.38   0.67
    -------------------------------------------------------------------------

    Net Sales and
     Earnings
    Net Sales           261    259    291    334    368    351    338    369
    EBITDA                4     22     35     79    111    110    100    128
    Earnings            (16)    (1)     7     33     58     52     45     67

    Per Common Share
    Earnings
      Basic           (0.11)     -   0.05   0.23   0.40   0.36   0.31   0.39
      Diluted         (0.11) (0.01)  0.05   0.23   0.40   0.36   0.31   0.39
    -------------------------------------------------------------------------

    Key Statistics
    OSB shipments
     (MMsf 3/8")      1,112  1,083  1,076  1,048  1,082  1,021  1,062  1,040
    Average OSB price
     - North Central
     ($/Msf 7/16")      145    166    181    238    285    317    303    297
    Average OSB price
     - Europe
     (euro/m(3))        234    219    213    204    197    182    190    208
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    The price of OSB is the primary factor affecting the comparability of
Norbord's results over the past eight quarters. Fluctuations in earnings
during that time mirror fluctuations in the price of OSB in North America. The
Company estimates the annualized impact of a $10 per Msf (7/16-inch basis)
change in the North American OSB price on EBITDA in 2007 is approximately
$35 million or approximately $0.16 per share. Regional pricing variations,
particularly in the US South, make the North Central benchmark price a useful,
albeit imperfect, proxy for overall North American OSB pricing. Further, the
pricing lag effect of maintaining an order file, premiums obtained on value
added products, and volume and trade discounts cause realized prices to differ
from the benchmark.
    Norbord has a relatively low exposure to the Canadian dollar due to a
comparatively small manufacturing base in Canada, comprising 13% of panel
production capacity. The Company estimates the unfavourable impact of a US
one cent increase in the Canadian dollar to negatively impact annual earnings
by approximately $1 million or less than $0.01 per share.
    Quarterly results are also impacted by seasonal factors such as weather
and building activity. Market demand varies seasonally, as building activity
and repair and renovation work, the principal end use for Norbord's products,
are generally stronger in the spring and summer months. Adverse weather can
also limit access to logging areas, which can affect the supply of fibre to
Norbord's operations. Shipment volumes and commodity prices are affected by
these factors as well as by global supply and demand conditions.
    One-time items that had a significant impact on fourth quarter 2006
results include pre-tax income of $7 million ($0.03 per share) due to softwood
lumber duty refunds, the $13 million provision ($0.06 per share) for non-core
operation and tax recovery of $4 million ($0.03 per share) due to the
resolution of several income tax audit items relating to prior taxation years.
Foreign exchange on the redemption of preferred shares had a $0.06 per share
negative impact in the second quarter of 2005.

    Accounting Developments

    Effective January 1, 2007, the Company adopted new accounting
recommendations from the Canadian Institute of Chartered Accountants (CICA),
Handbook Section 1530, Comprehensive Income, Section 3855, Financial
Instruments - Recognition and Measurement and Section 3865 Hedges.
    Section 1530 established standards for reporting and presenting a
comprehensive income statement.
    Section 3855 requires all financial assets and financial liabilities to
be classified as one of five categories. Financial assets are to be classified
as either held for trading, available for sale, held to maturity or loans and
receivables. Financial liabilities are to be classified as either held for
trading or other financial liabilities. All financial assets and financial
liabilities are to be carried at fair value in the consolidated balance sheet,
except held to maturity, loans and receivables and other financial liabilities
which are carried at amortized cost.
    Subsequent accounting for changes in fair value will depend on initial
classification. Realized and unrealized gains and losses on financial assets
and liabilities that are held for trading will continue to be recorded in the
consolidated statement of earnings. Unrealized gains and losses on financial
assets that are held as available for sale are to be recorded in other
comprehensive income until realized, at which time they will be recorded in
the consolidated statement of earnings. During the quarter, the Company did
not have any financial assets or liabilities other than cash & cash
equivalents which would be designated as either held for trading or available
for sale.
    Section 3865 specifies the criteria that must be satisfied in order for
hedge accounting to be applied and the accounting for each of the permitted
hedging strategies: fair value hedges, cash flow hedges and hedges of foreign
currency exposures of net investments in self sustaining foreign operations.
    There was no impact to opening retained earnings on adoption of these
accounting recommendations.

    Definitions

    The following non-GAAP measures have been used in this MD&A. Non-GAAP
measures do not have any standardized meaning prescribed by GAAP and are
therefore unlikely to be comparable to similar measures presented by other
companies. There are no directly comparable GAAP measures to any of these
measures. Each non-GAAP measure is defined below. Where appropriate, a
quantitative reconciliation of the non-GAAP measure to the nearest comparable
GAAP measure is provided.
    EBITDA is earnings before interest, income taxes, depreciation and
amortization. Norbord views EBITDA as a measure of gross profit and interprets
EBITDA trends as an indicator of relative operating performance. EBITDA is
presented as a useful indicator of a company's ability to incur and service
debt and meet capital expenditure requirements. The following table reconciles
EBITDA to the nearest comparable GAAP measure:

    
    -------------------------------------------------------------------------
    (US dollar millions)                       1st Qtr    4th Qtr    1st Qtr
                                                  2007       2006       2006
    -------------------------------------------------------------------------

    Earnings                                  $    (16)  $     (1)  $     58
    Add: Provision for non-core operation            -         13          -
    Add: Interest expense                            9          7          7
    Less: Interest and other income                 (1)         -         (1)
    Add: Income tax                                (12)       (21)        25
    Add: Depreciation                               24         24         22
    -------------------------------------------------------------------------

    EBITDA                                    $      4   $     22   $    111
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    EBITDA margin (%) is EBITDA as a percentage of net sales.
    Operating working capital is accounts receivable plus inventory less
accounts payable.
    Total working capital is operating working capital plus cash and cash
equivalents less bank advances.
    Capital employed is the sum of property, plant and equipment, operating
working capital and other assets less any unrealized net investment hedge
losses included in other liabilities. Capital employed is comprised of:

    
    -------------------------------------------------------------------------
    (US dollars millions)                       Mar 31     Dec 31     Dec 31
                                                  2007       2006       2005
    -------------------------------------------------------------------------
    Property, plant and equipment             $    995   $  1,008   $    921
    Accounts receivable                            179        163        145
    Inventory                                      115         98         99
    Accounts payable and accrued liabilities      (185)      (228)      (225)
    Other assets                                     7          7          4
    Unrealized net investment hedge gain
     (loss)(1)                                     (29)       (25)         -
    -------------------------------------------------------------------------

    Capital employed                          $  1,082   $  1,023  $     944
    -------------------------------------------------------------------------
    (1)  Included in other liabilities
    

    ROCE (return on capital employed) is EBITDA divided by average capital
employed. The ratio is expressed on an annualized basis. ROCE is a measurement
of financial performance, focusing on cash generation and the efficient use of
capital.
    ROE (return on equity) is earnings available to common shareholders
(earnings) divided by average common shareholders' equity. The ratio is
expressed on an annualized basis. ROE is a measure for common shareholders to
determine how effectively their money is being employed.
    Net debt is the principal value of long-term debt including the current
portion and bank advances less cash and cash equivalents. Net debt is a useful
indicator of a company's debt position. Net debt is comprised of:

    
    -------------------------------------------------------------------------
    (US dollars millions)                       Mar 31     Dec 31     Dec 31
                                                  2007       2006       2005
    -------------------------------------------------------------------------

    Long-term debt (principal value)          $    724   $    480   $    440
    Bank advances                                    3          -          -
    Cash and cash equivalents                     (198)       (20)      (155)
    -------------------------------------------------------------------------

    Net debt                                  $    529   $    460   $    285
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net debt to capitalization, book basis is net debt divided by the sum of
net debt and shareholders' equity. Net debt to capitalization, book basis is a
measure of a company's relative debt position. Norbord interprets this measure
as an indicator of the relative strength and flexibility of its balance sheet.
    Net debt to capitalization, market basis is net debt divided by the sum
of net debt and market capitalization. Market capitalization is the number of
common shares outstanding at period end multiplied by the trailing 12-month
average per share market price. Market basis capitalization is intended to
correct for the low historical book value of Norbord's asset base relative to
its fair value. Net debt to capitalization, market basis is a measure of a
company's relative debt position and Norbord interprets this measure as an
indicator of the relative strength and flexibility of its balance sheet. While
the Company considers both book and market basis metrics, the Company believes
the market basis to be superior to the book basis in measuring the true
strength and flexibility of its balance sheet.
    Book value per share is common shareholders' equity divided by common
shares outstanding.

    Forward-Looking Statements

    This document contains forward-looking statements, as defined in
applicable legislation. The words "believes," "believe," "forecasting,"
"expected," "expects," "will," "scheduled," "estimated," "estimates" 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.
    Examples of such statements include, but are not limited to, comments
with respect to: (1) outlook for the markets for products; (2) expectations
regarding future product pricing: (3) the outlook for operations; (4)
expectations regarding mill capacity and production volumes; (5) objectives;
(6) strategies to achieve those objectives; (7) sensitivity to changes in
product prices, such as the price of OSB; (8) sensitivity to changes in
foreign exchange rates; (9) margin improvement program targets; (10)
expectations regarding contingent liabilities, lawsuits and guarantees,
including the outcome of pending litigation; and (11) expectations regarding
the amount, timing and benefits of capital investments.
    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 and the US Securities and Exchange
Commission.
    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, 2007 Annual Information Form and the cautionary statement
contained in the "Forward-Looking Statements" section of the 2006 Management's
Discussion and Analysis dated January 31, 2007.





    
                                  SHIPMENTS
                                  ---------
    -------------------------------------------------------------------------
                                               1st Qtr    4th Qtr    1st Qtr
                                                  2007       2006       2006
    -------------------------------------------------------------------------

    OSB (MMsf-3/8")(1)                           1,112      1,083      1,082
    Particleboard (MMsf-3/8")(2)                   169        158        157
    MDF (MMsf-3/8")                                126        112        149
    Hardwood Plywood (MMsf-3/8")                    20         18         22
    -------------------------------------------------------------------------

    (1)  Includes volume from the second OSB line at Cordele, Georgia
         (66 MMsf, nil, nil for each of the above periods, respectively).
    (2)  Excludes particleboard consumed internally (34 MMsf, 37 MMsf,
         51 MMsf for each of the above periods, respectively).



                                NORBORD INC.
                     CONSOLIDATED STATEMENTS OF EARNINGS

    (unaudited)

    (US $ millions, except                                1st Qtr    1st Qtr
     per share information)                                  2007       2006
    -------------------------------------------------------------------------

    Earnings
    Net sales                                            $    261   $    368
    -------------------------------------------------------------------------

    Earnings before interest, income tax and
     depreciation                                               4        111

    Interest and other income                                   1          1
    Interest expense                                           (9)        (7)
    -------------------------------------------------------------------------

    Earnings before income tax and depreciation                (4)       105

    Depreciation                                              (24)       (22)
    Income tax (note 7)                                        12        (25)
    -------------------------------------------------------------------------

    Earnings                                             $    (16)  $     58
    -------------------------------------------------------------------------

    Earnings per common share (note 6)
      - Basic                                            $  (0.11)  $   0.40
      - Diluted                                          $  (0.11)  $   0.40
    -------------------------------------------------------------------------
    (See accompanying notes)



                                NORBORD INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    (unaudited)

                                                          1st Qtr    1st Qtr
    (US $ millions)                                          2007       2006
    -------------------------------------------------------------------------

    CASH PROVIDED BY (USED FOR):

    Operating Activities
    Earnings                                             $    (16)  $     58
    Items not affecting cash:
      Depreciation                                             24         22
      Future income taxes (note 7)                             11          2
    Other items                                                (1)        (2)
    -------------------------------------------------------------------------
                                                               18         80

    Net change in non-cash working capital balances           (68)       (50)
    -------------------------------------------------------------------------

                                                              (50)        30
    -------------------------------------------------------------------------

    Investing Activities
    Capital investments                                        (9)       (35)
    Other                                                       -          4
    -------------------------------------------------------------------------

                                                               (9)       (31)
    -------------------------------------------------------------------------

    Financing Activities
    Issue of senior notes (note 3)                            198          -
    Other debt incurred (note 3)                               47          -
    Dividends                                                  (8)       (13)
    Issue of common shares (note 5)                             -          1
    Repurchase of common shares (note 5)                        -        (11)
    -------------------------------------------------------------------------

                                                              237        (23)
    -------------------------------------------------------------------------

    Increase (decrease) in cash and cash
     equivalents                                         $    178   $    (24)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes)



                                NORBORD INC.
                         CONSOLIDATED BALANCE SHEETS

    (unaudited)

                                                           Mar 31     Dec 31
    (US $ millions)                                          2007       2006
    -------------------------------------------------------------------------

    ASSETS
    Current assets:
      Cash and cash equivalents                          $    198   $     20
      Accounts receivable                                     179        163
      Inventory                                               115         98
      Future income taxes                                       3          3
    -------------------------------------------------------------------------
                                                              495        284

    Property, plant and equipment                             995      1,008
    Other assets                                                7          7
    -------------------------------------------------------------------------

                                                         $  1,497   $  1,299
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Bank advances                                      $      3   $      -
      Accounts payable and accrued liabilities                185        228
      Current portion of long-term debt (note 3)              199          -
    -------------------------------------------------------------------------
                                                              387        228

    Long-term debt (note 3)                                   523        480
    Other liabilities(note 4)                                  52         44
    Future income taxes                                       123        113
    Shareholders' equity (note 5)                             412        434
    -------------------------------------------------------------------------

                                                         $  1,497   $  1,299
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes)



                                NORBORD INC.
      CONSOLIDATED STATEMENTS OF RETAINED EARNINGS AND COMPREHENSIVE INCOME

    (unaudited)
                                                          1st Qtr    1st Qtr
    (US $ millions)                                          2007       2006
    -------------------------------------------------------------------------

    Retained Earnings
    Balance, beginning of period                         $    305   $    412
    Earnings                                                  (16)        58
    Common share dividends                                    (12)       (13)
    Repurchase of common shares (note 5)                        -        (10)
    -------------------------------------------------------------------------
    Balance, end of period                               $    277   $    447
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Comprehensive Income
    Earnings
                                                         $    (16)  $     58
    Other comprehensive income:
      Net change in cumulative translation
       adjustment                                               1          2
    -------------------------------------------------------------------------

    Comprehensive Income                                 $    (15)        60
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See accompanying notes)



                                NORBORD INC.
           NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

    (unaudited)

    (In millions of US dollars, except per share information,
     unless otherwise noted)

    Note 1 - Basis of Presentation
    ------------------------------

    The interim financial statements are unaudited and follow the accounting
    policies summarized in the notes to the annual consolidated financial
    statements.

    The interim financial statements do not conform in all respects to the
    disclosure requirements of Canadian generally accepted accounting
    principles for annual financial statements and should, therefore, be read
    in conjunction with the annual consolidated financial statements of
    Norbord Inc. which includes information necessary or useful to
    understanding the Company's business and financial statement
    presentation. In particular, the Company's significant accounting
    policies and practices are presented as Note 1 to the annual consolidated
    financial statements. Certain prior period amounts have been reclassified
    to conform to the current period's presentation.

    Note 2 - Changes in Accounting Policies
    ---------------------------------------

    Effective January 1, 2007, the Company adopted new accounting
    recommendations from the Canadian Institute of Chartered Accountants
    (CICA), Handbook Section 1530, Comprehensive Income, Section 3855,
    Financial Instruments - Recognition and Measurement and Section 3865
    Hedges.

    Section 1530 established standards for reporting and presenting a
    comprehensive income statement.

    Section 3855 requires all financial assets and financial liabilities to
    be classified as one of five categories. Financial assets are to be
    classified as either held for trading, available for sale, held to
    maturity or loans and receivables. Financial liabilities are to be
    classified as either held for trading or other financial liabilities. All
    financial assets and financial liabilities are to be carried at fair
    value in the consolidated balance sheet, except held to maturity, loans
    and receivables and other financial liabilities which are carried at
    amortized cost.

    Subsequent accounting for changes in fair value will depend on initial
    classification. Realized and unrealized gains and losses on financial
    assets and liabilities that are held for trading will continue to be
    recorded in the consolidated statement of earnings. Unrealized gains and
    losses on financial assets that are held as available for sale are to be
    recorded in other comprehensive income until realized, at which time they
    will be recorded in the consolidated statement of earnings. During the
    quarter, the Company did not have any financial assets or liabilities
    other than cash & cash equivalents which would be designated as either
    held for trading or available for sale.

    Section 3865 specifies the criteria that must be satisfied in order for
    hedge accounting to be applied and the accounting for each of the
    permitted hedging strategies: fair value hedges, cash flow hedges and
    hedges of foreign currency exposures of net investments in self
    sustaining foreign operations.

    There was no impact to opening retained earnings on adoption of these new
    accounting recommendations.

    Note 3 - Long-Term Debt
    -----------------------
                                                               Book Value
    -------------------------------------------------------------------------
                                  Principal  Fair Value    Mar 31     Dec 31
                                    Value    Adjustments     2007       2006
    -------------------------------------------------------------------------
    8 1/8% debentures due 2008     $    200   $     (1)  $    199   $    200
    7 1/4% debentures due 2012          240          2        242        240
    6.45% senior notes due 2017         200         (3)       197          -
    Other debt                           84          -         84         40
    -------------------------------------------------------------------------
                                        724         (2)       722        480
    Less current portion of
     long-term debt:
      8 1/8% debentures due 2008       (200)         1       (199)         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                   $    524   $     (1)  $    523   $    480
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    At March 31, 2007, the Company had $365 (December 31, 2006 - $365) of
    interest rate swaps outstanding.  The terms of these swaps correspond to
    the terms of the underlying hedged debt.

    The Company has committed unsecured revolving bank lines of $200 which
    mature in 2010, bear interest at money market rates that vary with the
    Company's credit rating, and contain certain financial covenants which
    the Company must comply with on a quarterly basis.  At quarter end, $88
    of these lines were utilized; $84 drawn as cash and $4 drawn for letters
    of credit. The balance of $112 is available to support short-term
    liquidity requirements.

    During the quarter, the Company issued $200 of senior notes due in 2017
    with an interest rate of 6.45% which are subject to a credit ratings
    based coupon step-up provision.  The notes were issued to pre-fund the
    March 2008 debenture maturity.

    Note 4 - Other Liabilities
    --------------------------

                                                           Mar 31     Dec 31
                                                             2007       2006
    -------------------------------------------------------------------------

    Unrealized net investment hedge losses               $     29   $     25
    Unrealized interest rate swap losses                       13          -
    Deferred interest rate swap gains                           -         11
    Accrued pension and post-retirement benefits                4          4
    Other liabilities                                           6          4
    -------------------------------------------------------------------------
                                                         $     52   $     44
    -------------------------------------------------------------------------

    The unrealized net investment hedge losses and unrealized interest rate
    swap losses are offset by unrealized gains on the underlying exposures
    being hedged.

    Note 5 - Shareholders' Equity
    -----------------------------

                                                           Mar 31     Dec 31
                                                             2007       2006
    -------------------------------------------------------------------------
    Capital stock:
      Common shares                                      $    131   $    127
      Contributed surplus                                       1          -
    Retained earnings                                         277        305
    Accumulated other comprehensive income                      3          2
    -------------------------------------------------------------------------
                                                         $    412   $    434
    -------------------------------------------------------------------------

    Summary of common share transactions:

                                           Mar 31                Dec 31
                                            2007                  2006
                                   --------------------  --------------------
                                     Shares     Amount     Shares     Amount
                                   (million)             (million)
    -------------------------------------------------------------------------
    Balance at beginning of period    143.7   $    127      144.8   $    118
    Dividend reinvestment plan          0.5          4        1.4         11
    Issue of common shares              0.1          -        0.3          1
    Repurchase of common shares           -          -       (2.7)        (3)
    -------------------------------------------------------------------------
    Balance at end of period          144.3    $   131      143.7   $    127
    -------------------------------------------------------------------------

    During the quarter, 0.8 million options were granted under the stock
    option plan. Year-to-date, cost of sales include less than $1 related to
    stock based compensation expense.


    Summary of accumulated other comprehensive income movements:

                                                           Mar 31     Dec 31
                                                             2007       2006
    -------------------------------------------------------------------------
    Balance at beginning of period, including
     reclassification of cumulative translation
     adjustment                                          $      2   $     (8)
    Net change in cumulative translation
     adjustment                                                 1         10
    -------------------------------------------------------------------------
    Balance at end of period                             $      3          2
    -------------------------------------------------------------------------

    Note 6 - Earnings per Common Share
    ----------------------------------

    Earnings per common share were calculated as follows:

                                                          1st Qtr    1st Qtr
                                                             2007       2006
    -------------------------------------------------------------------------

    Earnings available to common shareholders            $    (16)  $     58
                                                         --------------------
    Common shares (millions):
    Weighted average number of common shares
     outstanding                                            143.8      144.6
      Stock options                                           0.5        0.7
                                                         --------------------
      Diluted number of common shares                       144.3      145.3
                                                         --------------------
                                                         --------------------

    Earnings per common share:
      Basic                                              $  (0.11)  $   0.40
      Diluted                                            $  (0.11)  $   0.40
    -------------------------------------------------------------------------

    Stock options issued under the Company's stock option plan were included
    in the calculation of diluted number of common shares to the extent the
    exercise price of those options was less than the average market price of
    the Company's common shares during the period.

    Note 7 - Income Tax
    -------------------

    Interim income tax is calculated based on expected annual effective tax
    rates.

                                                          1st Qtr    1st Qtr
                                                             2007       2006
    -------------------------------------------------------------------------

    Current income tax expense                           $    (23)  $     23
    Future income tax expense                                  11          2
    -------------------------------------------------------------------------
    Income tax expense                                   $    (12)  $     25
    -------------------------------------------------------------------------

    Note 8 - Related Party Transactions
    -----------------------------------

    The Company's major shareholder has various interests over which it has
    control or otherwise has significant influence (a "related company" or
    collectively "related companies").

    During the quarter, the Company provided certain administrative services
    to a related company which was charged on a cost recovery basis. In
    addition, the Company periodically engages the services of related
    companies for various financial, real estate and other business advisory
    services. During the quarter, the fees for these services were less than
    $1 and were charged at market rates.

    Note 9 - Commitments and Contingencies
    --------------------------------------

    Foreign Exchange Hedges
    -----------------------
    The Company has outstanding forward foreign exchange contracts of
    (pnds stlg) 6 (2006 - pnds stlg 4) and euro 64 (2006 - euro 64) and
    cross-currency swaps of pnds stlg 125 (2006 - pnds stlg 125), which are
    designated as hedges against its net investments in Europe. During the
    period, the Company realized a gain of $3 (2006 - nil) on its matured
    net investment hedges, and at period end, the Company had an unrealized
    loss of $29 (2006 - loss of $4) on its outstanding net investment hedges.
    These realized and unrealized gains are offset by realized and unrealized
    losses on the net investments being hedged.

    In addition, at period end, the Company has outstanding forward foreign
    exchange contracts of CAD $33 (2006 - CAD $26), which serve to hedge
    certain Canadian dollar-denominated monetary liabilities. During the
    period, the Company realized a gain of nil (2006 - nil) on its matured
    monetary liability hedges, and at period end, the Company had an
    unrealized gain of nil (2006 - nil) on these outstanding hedges. These
    realized and unrealized gains, if any, are offset by realized and
    unrealized losses on the monetary liabilities being hedged.

    The Company has entered into various commitments for capital expenditures
    and services in connection with the Cordele mill expansion project. The
    Company has outstanding forward foreign exchange contracts of (euro) 2
    (2006 -  (euro) 7) which are designated as hedges against certain of
    these commitments denominated in Euros. No gains or losses were realized
    during the period, and at period end, the Company had an unrealized loss
    of nil on the outstanding hedges. Realized and unrealized losses, if any,
    are offset by realized and unrealized gains on the purchase commitments
    being hedged.

    Class Action Lawsuit
    --------------------

    Norbord and eight other North American OSB producers have been named as
    defendants in several lawsuits filed in the United States District Court
    for the Eastern District of Pennsylvania. The lawsuits allege that these
    nine North American OSB producers violated United States and various
    state antitrust and other laws by allegedly agreeing to fix prices and
    reduce the supply of OSB from June 1, 2002 through the present.

    The named plaintiffs seek to have the cases certified as class actions.
    One group of plaintiffs seeks to certify a class of persons and entities
    that purchased OSB in the United States directly from any of the named
    North American OSB producers between June 1, 2002 and the present. Other
    plaintiffs seek to certify one or more classes of persons and entities
    that purchased OSB in various states and the District of Columbia
    indirectly between June 1, 2002 and the present.

    The Company believes that the lawsuits are entirely without merit and
    intends to defend this matter vigorously.

    Note 10 - Geographic Segments
    -----------------------------

    The Company has a single reportable segment. The Company operates
    principally in North America and Europe. Net sales by geographic segment
    are determined based on the origin of shipment and therefore include
    export sales.

    -------------------------------------------------------------------------
    1st Qtr 2007                    North
                                   America     Europe  Unallocated   Total
    -------------------------------------------------------------------------

    Net sales                     $     134   $    127   $      -   $    261
    EBITDA(1)                            (8)        18         (6)         4
    Depreciation                         15          9          -         24
    Property, plant and equipment       717        274          4        995
    Capital investments                   7          2          -          9

    -------------------------------------------------------------------------
    1st Qtr 2006                    North
                                   America     Europe  Unallocated   Total
    -------------------------------------------------------------------------

    Net sales                     $     265   $    103   $      -   $    368
    EBITDA(1)                           109          6         (4)       111
    Depreciation                         14          8          -         22
    Property, plant and equipment       675        256          4        935
    Capital investments                  34          1          -         35
    -------------------------------------------------------------------------

    (1)  EBITDA is earnings before interest, income tax and depreciation.

    





For further information:

For further information: Anita Veel, Director, Corporate Affairs, (416)
643-8838, anita.veel@norbord.com


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