Norbord Reports Second Quarter 2014 Results; Declares Quarterly Dividend

Note:  Financial references in US dollars unless otherwise indicated.


  • EBITDA of $33 million
  • Earnings of $11 million or $0.20 per share diluted
  • North American shipments up 10% year-to-date
  • Record quarterly European panel production; year-to-date shipments up 3%
  • Norbord received APA's 2013 Safest Company Award
  • Declared quarterly dividend of CAD $0.60 per share

TORONTO, July 29, 2014 /CNW/ - Norbord Inc. (TSX: NBD) today reported EBITDA of $33 million in the second quarter of 2014 compared to $27 million in the first quarter of 2014 and $102 million in the second quarter of 2013.  The year-over-year change is due to the exceptional North American OSB prices in the first half of 2013.  North American operations generated EBITDA of $24 million in the quarter versus $17 million in the prior quarter and $92 million in the same quarter last year.  European operations generated EBITDA of $12 million in the second quarters of both 2014 and 2013 versus $13 million in the prior quarter.

"In North America, homebuilding activity continues to improve.  But the pace has been held back by labour availability and a lack of entry-level buyers and OSB prices have been disappointing," said Peter Wijnbergen, President and CEO.  "However, we are not discouraged.  We always expected it would take time for OSB demand growth to absorb the additional capacity that has been ramping up since early 2013.  At Norbord, demand from our key customers in all core segments - new home construction, home improvement and industrial - continues to grow, driving 10% higher shipments so far this year.  At the same time, our OSB cash production costs are declining due to improved productivity and lower raw material usages."

"European panel markets were a bit slower in the second quarter, reflecting a pullback from a particularly robust first quarter.  Our business there performed well once again and our panel mills are operating at record production levels.  I expect we will continue to generate solid results through the second half of the year."

Norbord recorded earnings of $11 million or $0.21 per share ($0.20 per share diluted) in the second quarter of 2014 compared to $7 million or $0.13 per share (basic and diluted) in the prior quarter and $53 million or $1.00 per share ($0.99 per share diluted) in the second quarter of 2013.  There were no one-time items in either the current or comparative quarters' earnings.

Market Conditions

In North America, year-to-date US housing starts were 6% higher than the same period in 2013 and permits were 5% higher.  The consensus forecast from US housing economists is continuing to decline and currently stands at 1.05 million starts in 2014, which would still be a 13% improvement over last year.

North American OSB prices were relatively stable and continued to trade in a tight range in the second quarter.  The North Central benchmark averaged $219 per thousand square feet (Msf) (7⁄16-inch basis), unchanged from the previous quarter and down from $347 per Msf in the same quarter last year.  In the South East region, where more than half of Norbord's North American capacity is located, benchmark prices averaged $199 per Msf, compared to $193 per Msf in the prior quarter and $313 per Msf in the same quarter last year.

In Europe, panel markets slowed in the second quarter as strong demand on the Continent in the first quarter due to unseasonably mild and dry weather pulled homebuilding activity forward.  Average panel prices held firm in the quarter, unchanged versus the prior quarter and 2% higher than the same quarter last year.


In North America, Norbord's OSB shipments increased by 11% versus the prior quarter, 12% versus the same quarter last year and 10% year-to-date, primarily due to higher demand from all customer segments.

The North American OSB mills produced at approximately 85% of stated capacity (including the two curtailed mills in Huguley, Alabama and Val-d'Or, Quebec), compared to 80% in the prior quarter and 75% in the same quarter last year.  The increase versus both comparative periods is due to improved mill productivity.  The year-over-year improvement also reflects the additional volume from the Jefferson, Texas mill which restarted in the third quarter of 2013.

Norbord's North American OSB cash production costs per unit (before mill profit share) decreased by 4% versus both the prior quarter and the same quarter last year. Lower raw material usages and higher production volume more than offset higher raw material prices.  Excluding the impact of higher raw material prices, unit costs decreased by 6% year-over-year.

As previously announced, Norbord has begun rebuilding the press line at the curtailed Huguley, Alabama mill to prepare it for restart.  The Company has not set a restart date and will do so only when it is sufficiently clear that customers require more product.  Norbord does not currently expect to restart its curtailed mill in Val-d'Or, Quebec in 2014, but will continue to monitor market conditions.

In Europe, Norbord's shipments increased 3% year-to-date, but were 9% lower versus the prior quarter and 3% lower than the same quarter last year.  The Company's panel mills achieved a second consecutive quarterly production record.  The European mills produced at approximately 105% of stated capacity in the quarter, compared to 110% in the prior quarter and 100% in the same quarter last year.

Norbord's mills delivered Margin Improvement Program (MIP) gains of $6 million in the first half of 2014 from a richer value-added product mix, improved productivity, lower raw material usages, lower labour and maintenance costs and the timing of maintenance shuts.

Capital investments totaled $42 million year-to-date and the full year target remains at $65 million.  This year's capex target includes the rebuild of the wood handling end at the Joanna, South Carolina mill and a continuation of strategic investments across the Company's other mills to improve productivity and reduce manufacturing costs.  It also includes approximately $10 million for preliminary work to rebuild the press line at the mothballed Huguley, Alabama mill.  Further spending to prepare this mill for restart has been deferred to 2015.

Operating working capital was $96 million compared to $93 million in the prior quarter and $86 million in the prior year.  Working capital increased year-over-year due to the foreign exchange translation impact of a stronger Pound Sterling relative to the US dollar, as well as higher inventory and maintenance supplies on hand for annual maintenance shuts planned for the third quarter.

At quarter-end, Norbord had unutilized liquidity of $425 million, consisting of $83 million in cash and $342 million in unused credit lines.  The Company's tangible net worth was $453 million and net debt to total capitalization on a book basis was 44%.  Both ratios remain well within bank covenants.


The Board of Directors declared a quarterly dividend of CAD $0.60 per common share, payable on September 21, 2014 to shareholders of record on September 1, 2014.

As previously announced, the Board expects to maintain the quarterly dividend at this level for the remainder of 2014 (CAD $2.40 per share annualized).  This reflects the Company's positive outlook on the longer-term housing recovery and panel demand in its core North American and European markets.

Additional Information

Norbord's Q2 2014 letter to shareholders, news release, management's discussion and analysis, consolidated unaudited interim financial statements and notes to the financial statements have been filed on SEDAR ( and are available in the investor section of the Company's website at  Shareholders are encouraged to read this material.

Conference Call

Norbord will hold a conference call for analysts and institutional investors on Tuesday, July 29, 2014 at 11:00 a.m. ET.  The call will be broadcast live over the Internet via and  A replay number will be available approximately one hour after completion of the call and will be accessible until August 27, 2014 by dialing 1-888-203-1112 or 647-436-0148.  The passcode is 5610602.  Audio playback and a written transcript will be available on the Norbord website.

An accompanying presentation will be available in the "Investors/Conference Call" section of prior to the start of the call.

Norbord Profile

Norbord Inc. is an international producer of wood-based panels with assets of more than $1 billion, employing approximately 1,950 people at 13 plant locations in the United States, Europe and Canada.  Norbord is one of the world's largest producers of oriented strand board (OSB).  In addition to OSB, Norbord manufactures particleboard, medium density fibreboard (MDF) and related value-added products.  Norbord is a publicly traded company listed on the Toronto Stock Exchange under the symbol NBD.

This news release contains forward-looking statements, as defined in applicable legislation, including statements related to our strategy, projects, plans, future financial or operating performance and other statements that express management's expectations or estimates of future performance. Often, but not always, words such as  "expect," "believe," "forecast," "likely," "support," "target," "consider," "continue," "suggest," "intend,"  "should," "appear," "would," "will," "will not," "plan," "can," "may," and other expressions which are predictions of or indicate future events, trends or prospects and which do not relate to historical matters identify forward-looking statements.  Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Norbord to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Although Norbord believes it has a reasonable basis for making these forward-looking statements, readers are cautioned not to place undue reliance on such forward-looking information.  By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predictions, forecasts and other forward-looking statements will not occur.  Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include:  general economic conditions; risks inherent with product concentration; effects of competition and product pricing pressures; risks inherent with customer dependence; effects of variations in the price and availability of manufacturing inputs; risks inherent with a capital intensive industry; and other risks and factors described from time to time in filings with Canadian securities regulatory authorities.

Except as required by applicable laws, Norbord does not undertake to update any forward-looking statements, whether as a result of new information, future events or otherwise, or to publicly update or revise the above list of factors affecting this information.  See the "Caution Regarding Forward-Looking Information" statement in the March 3, 2014 Annual Information Form and the cautionary statement contained in the "Forward-Looking Statements" section of the 2013 Management's Discussion and Analysis dated January 29, 2014 and Q2 2014 Management's Discussion and Analysis dated July 28, 2014.

Norbord defines EBITDA as earnings before finance costs, income taxes, depreciation and non-recurring items.  EBITDA is a non-International Financial Reporting Standards (IFRS) financial measure, does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to similar measures presented by other companies. See "Non-IFRS Financial Measures" in Norbord's 2013 Management Discussion and Analysis dated January 29, 2014 and Q2 2014 Management's Discussion and Analysis dated July 28, 2014 for a quantitative reconciliation of EBITDA to earnings (the most directly comparable IFRS measure). 

July 29, 2014

To Our Shareholders,

The pace of improvement in the North American OSB market did not meet my expectations this quarter.  The ramp-up of restarted industry capacity has so far outpaced the recovery in US housing starts.  Even so, our EBITDA of $33 million was higher than the previous quarter as our mills ran more efficiently.  Our manufacturing costs declined and we generated meaningful MIP gains.  In fact, our Cordele Line 1, Bemidji, La Sarre and Joanna mills all set quarterly production records.  Our year-to-date North American sales volume is up by 10% as Norbord experienced strong demand growth from our key customers across all segments - new home construction, home improvement and industrial.

Many of you may be concerned about the disappointing US housing starts data recently released for June.  But the official statistics do not seem to reflect what we are seeing on the front lines of the housing market.  Experts on the ground still report improving single-family construction in all major markets, including the Southeast, our primary market. More importantly, permits, an indication of future construction activity, continue to rise each month.  With sluggish numbers in the first six months of the year, US housing data will probably come in closer to 1.00 million in 2014, still a healthy year-over-year growth of 8%.  We see stable OSB prices continuing over the next few months while industry supply is gradually absorbed by improving demand.  In response to this slower market environment, we are moving some of our annual maintenance shuts ahead into the third quarter.

I remain optimistic about the robust longer-term recovery.  Looking ahead, US housing economists are forecasting 1.25 million starts in 2015.  With new home construction advancing at this pace, all the current operating industry capacity should be fully absorbed next year.

I'm happy to report that our Margin Improvement Program (MIP) is back on track.  With mill productivity up and manufacturing costs down, we achieved total gains of $6 million in the first half of this year.  We expect this improvement to accelerate over the coming quarters as some of our more significant capital investments start to pay back.

Norbord's safety performance this year has been outstanding.  Six mills are injury-free and our year-to-date safety record shows a 45% improvement over the same period last year.  Recognizing our industry-leading performance, the APA - The Engineered Wood Association presented us with the 2013 Safest Company Award.  And in Europe, our South Molton, England mill received the Royal Society for the Prevention of Accidents Gold Award for the second year in a row.

In Europe, all of our operations continue to run exceptionally well.  The panel mills achieved another production record for the second consecutive quarter.  Panel markets eased somewhat in the second quarter, reflecting a pullback from the particularly robust first quarter.  Still, first half shipments continue to show an improvement over last year. Not surprisingly, the crisis in the Ukraine has negatively impacted Eastern European demand.  Some OSB production from Eastern Europe has been redirected into our markets in the West and as a result, OSB prices were softer than the first quarter.  We expect they will keep moving sideways for the remainder of the year. Particleboard and MDF prices, on the other hand, have continued to strengthen, reflecting our improved product mix.

The outlook for our European business is positive.  Economic indicators are solid in both the UK and our key Continental markets. Long-term market fundamentals remain favourable for OSB capacity expansion.  We have advanced on a number of fronts in developing our plans to grow Norbord's production volume, but have yet to make a final decision.

So far this year we have invested $42 million in capital projects.  We continue to work on completing the Joanna, South Carolina woodroom and Cordele, Georgia fines screening projects, with commissioning scheduled to be complete by the end of this year.  These projects will improve reliability, increase productivity and reduce our raw material use. At our Huguley, Alabama mill, the press rebuild is progressing, but we have slowed the pace of this work due to market conditions.  As a result, some of the capital allocated to Huguley has now shifted from 2014 into 2015.  No restart decision has been made and will be dictated by customer demand.

In closing, I want to thank you all for your ongoing support.  Like you, I am disappointed by our share price performance in the past month.  However, I am confident that Norbord will continue to deliver shareholder value in the quarters and years ahead.  Our strategy of growing our OSB business, continuously improving the efficiency of our North American capacity and building on our success in Europe enables us to navigate through volatile markets.  We are in a strong position to benefit from the ongoing housing recovery.

Peter Wijnbergen
President & CEO

This letter includes forward-looking statements, as defined by applicable securities legislation including statements related to our strategy, projects, plans, future financial or operating performance and other statements that express management's expectations or estimates of future performance.  Often, but not always, forward-looking statements can be identified by the use of words such as "expect," "suggest," "support," "believe," "should," "potential," "likely," "continue," "forecast," "plan," "indicate," "consider," "future," or variations of such words and phrases or statements that certain actions "may," "could," "must," "would," "might," or "will" be undertaken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Norbord to be materially different from any future results, performance or achievement expressed or implied by the forward-looking statements.  See the cautionary language in the Forward-Looking Statements section of the 2013 Management's Discussion and Analysis dated January 29, 2014 and Q2 2014 Management's Discussion and Analysis dated July 28, 2014.

Consolidated Balance Sheets

(US $ millions)
  Jun 28, 2014 Dec 31, 2013
Current assets      
  Cash and cash equivalents   $ 83 $ 193
  Accounts receivable   146 130
  Tax receivable   12 11
  Inventory   131 120
    372 454
Non-current assets      
  Property, plant and equipment   809 794
  Deferred income tax assets   15 14
    824 808
    $ 1,196 $ 1,262
Liabilities and shareholders' equity      
Current liabilities      
  Accounts payable and accrued liabilities   $ 181 $ 206
Non-current liabilities      
  Long-term debt   434 433
  Other liabilities   27 27
  Deferred income tax liabilities   116 120
    577 580
Shareholders' equity   438 476
    $ 1,196 $ 1,262


Consolidated Statements of Earnings

Periods ended Jun 28 and Jun 29 (US $ millions, except per share information)
6 mos
6 mos
Sales   $ 311 $ 365 $ 614 $ 730
Cost of sales   (275) (261) (548) (510)
General and administrative expenses   (3) (2) (6) (7)
Earnings before finance costs, income tax and depreciation   33 102 60 213
Finance costs   (7) (9) (15) (18)
Earnings before income tax and depreciation   26 93 45 195
Depreciation   (15) (15) (28) (28)
Income tax (expense) recovery   - (25) 1 (47)
Earnings   $ 11 $ 53 $ 18 $ 120
Earnings per common share          
  Basic   $    0.21 $    1.00 $    0.34 $    2.46
  Diluted   0.20 0.99 0.33 2.26


Consolidated Statements of Comprehensive Income

Periods ended Jun 28 and Jun 29 (US $ millions)
6 mos
6 mos
Earnings   $ 11 $ 53 $ 18 $ 120
Other comprehensive income, net of tax          
  Items that will not be reclassified to earnings:          
    Actuarial (loss) gain on post-employment obligation   (2) 6 (3) 15
  Items that may be reclassified subsequently to earnings:          
    Foreign currency translation gain (loss) on foreign operations   5 4 (14)
    3 6 1 1
Comprehensive income   $ 14 $ 59 $ 19 $ 121


Consolidated Statements of Changes in Shareholders' Equity

Periods ended Jun 28 and Jun 29 (US $ millions)
6 mos
6 mos
Share capital          
Balance, beginning of period   $     661 $     640 $     661 $      346
Issue of common shares   1 16 1 310
Balance, end of period   $     662 $     656 $     662 $      656
Contributed surplus          
Balance, beginning of period   $          6 $         9 $         6 $        44
Stock-based compensation   - 1 - 1
Warrants and stock options exercised   - (3) - (38)
Balance, end of period   $          6 $         7 $         6 $          7
Retained earnings          
Balance, beginning of period   $   (224) $   (194) $   (201) $     (11)
Earnings   11 53 18 120
Common share dividends   (29) (31) (58) (31)
Warrants exercised   - (4) - (263)
Other comprehensive (loss) income     (2) 6 (3) 15
Balance, end of periodi   $    (244) $    (170) $ (244) $   (170)
Accumulated other comprehensive income (loss)          
Balance, beginning of period   $          9 $       (8) $       10 $          6
Other comprehensive gain (loss)   5 - 4 (14)
Balance, end of period   $        14 $       (8) $       14 $        (8)
Shareholders' equity   $    438 $     485 $     438 $      485
i Retained earnings comprised of:          
Deficit arising on cashless exercise of warrants in 2013           $   (263) $    (263)
All other retained earnings            19 93


Consolidated Statements of Cash Flows

Periods ended Jun 28 and Jun 29 (US $ millions)
6 mos
6 mos
Operating activities          
Earnings   $       11 $      53 $      18 $    120
Items not affecting cash:          
  Depreciation   15 15 28 28
  Deferred income tax   (2) 22 (5) 44
Other items   1 2 5 -
    25 92 46 192
Net change in non-cash operating working capital balances   (4) 14 (51) (41)
Net change in tax receivable   (1) (5) (1) (5)
    20 101 (6) 146
Investing activities          
Investment in property, plant and equipment   (25) (18) (45) (33)
Financing activities          
Dividends   (29) (31) (58) (31)
Debt issue costs   - - (1) -
Issue of common shares, net   - 10 - 10
    (29) (21) (59) (21)
Cash and cash equivalents          
(Decrease) increase during period   (34) 62 (110) 92
Balance, beginning of period   117 158    193 128
Balance, end of period   $      83 $     220 $      83 $    220


SOURCE: Norbord Inc.

For further information:

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

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