Norbord Reports Second Quarter 2013 Results

Note:  Financial references in US dollars unless otherwise indicated.


  • Earnings per share of $0.99 diluted ($1.00 basic) - versus $0.14 in Q2 2012
  • EBITDA of $102 million - more than triple Q2 2012
  • Norbord added to S&P/TSX Composite Index in June
  • Declared quarterly dividend of CAD $0.60 per share

TORONTO, July 25, 2013 /CNW/ - Norbord Inc. (TSX: NBD, NBD.WT) today reported EBITDA of $102 million in the second quarter of 2013, compared to $31 million in the same quarter last year and $111 million in the first quarter of 2013.  North American operations generated EBITDA of $92 million in the quarter versus $26 million last year and $106 million in the prior quarter.  European operations generated EBITDA of $12 million in the quarter versus $9 million last year and $10 million in the prior quarter.

Norbord recorded $53 million of earnings ($0.99 per share diluted) in the second quarter of 2013 compared to $6 million ($0.14 per share diluted) in the same quarter last year and $67 million ($1.26 per share diluted) in the prior quarter.

"In North America, we experienced a significant OSB price correction in the second quarter," said Barrie Shineton, President and CEO.  "Although prices were expected to adjust after reaching record levels in the first quarter, I was surprised by the degree of the correction.  OSB prices are now recovering and I believe this trend will continue as the fundamentals supporting US new home construction remain very strong."

"In Europe, panel demand and prices, particularly for OSB and particleboard, improved again this quarter and are reflected in our financial results.  And, we are beginning to see early signs of a fundamental turnaround in UK housing.  This is encouraging as the UK continues to be Norbord's most important European market."

Market Conditions

June year-to-date US housing starts and permits were both 24% higher than the same period last year.  Single family starts were 20% better.  Other key housing metrics, including home prices, existing home sales and the inventory of foreclosed homes, continued to improve.  The consensus forecast of US housing economists remains at 1.0 million starts for 2013, a 28% increase over last year. 

After reaching a nine-year high of $430 per thousand square feet (Msf) (7⁄16-inch basis) in the first quarter, North American OSB prices moved steadily downward across all regions in the second quarter.  The North Central benchmark OSB price averaged $347 per Msf for the quarter, 48% higher than the same quarter last year but 17% lower than the previous quarter.  In the South East region, where approximately 55% of Norbord's North American capacity is located, prices averaged $313 per Msf in the second quarter, compared to $204 per Msf in the same quarter last year and $396 per Msf in the prior quarter.

Second quarter European panel prices were 6% higher than the same quarter last year and 2% better than the prior quarter.  OSB and particleboard markets performed the strongest, with prices up 8% and 5%, respectively, over the same quarter last year.  Versus the prior quarter, OSB prices increased 3% while particleboard prices were flat. MDF prices improved 3% versus both comparative periods.


In North America, second quarter OSB shipment volumes were flat year-over-year but increased 7% quarter-over-quarter due to improved mill operating performance and fewer scheduled annual maintenance shuts.  Norbord's OSB mills produced at approximately 75% of installed capacity, unchanged from a year ago and up 5% versus the prior quarter.  Excluding the three mothballed mills, Norbord produced at 105% of stated capacity compared to 95% a year ago and in the prior quarter.

In response to increased demand from Norbord's existing customers, the Company has been working to restart its Jefferson, Texas mill.  The mill had been mothballed since the first quarter of 2009 and represents 9% of the Company's 4.4 billion square feet (3/8-inch basis) of North American OSB capacity.  The mill began initial production in June 2013 and is currently in ramp-up mode.  Norbord will continue to monitor market conditions, but does not currently expect to restart its curtailed mills in Huguley, Alabama or Val-d'Or, Quebec in 2013.

Norbord's North American OSB cash production costs per unit (excluding mill profit share) increased by 11% year-over-year but decreased by 2% quarter-over-quarter.  Excluding the impact of higher raw material prices and Jefferson, Texas restart costs, unit costs increased by 4% compared to the prior year and decreased by 4% versus the prior quarter.  Year-over-year, the remaining increase in unit costs was driven primarily by higher supplies and maintenance costs.  Quarter-over-quarter, the decrease in unit costs is the result of fewer scheduled annual maintenance shuts and lower labour, supplies and maintenance costs.

In Europe, shipments were 6% higher than the same quarter last year and 2% higher than the prior quarter as panel demand improved.  Norbord's European panel mills produced at approximately 100% of capacity in both the first and second quarters of 2013, compared to 95% in the same quarter last year.

Norbord did not report any gains from its Margin Improvement Program (MIP) in the second quarter as the benefits of improved productivity and a richer added-value product mix were offset by continued higher supplies and maintenance, labour costs and raw material usages. 

Capital investments totaled $18 million in the quarter, $14 million higher year-over-year and $6 million higher quarter-over-quarter primarily due to capital spending to prepare the Jefferson, Texas mill for restart.  Norbord's 2013 planned capital expenditures are targeted at $70 million, including approximately $16 million for Jefferson.

Operating working capital was $86 million compared to $64 million at the end of the same quarter last year and $101 million in the prior quarter.  The changes were primarily driven by the impact of volatile North American OSB prices on accounts receivable.

At quarter-end, Norbord had unutilized liquidity of $562 million, including $220 million of cash.  The Company's tangible net worth was $520 million and net debt to total capitalization on a book basis was 30%, well within bank covenants.


The Board of Directors declared a quarterly dividend of CAD $0.60 per common share, payable on September 21, 2013 to shareholders of record on September 1, 2013.

Additional Information

Norbord's Q2 2013 letter to shareholders, news release, management's discussion and analysis, consolidated unaudited financial statements and notes to the financial statements have been filed on SEDAR ( and are available in the investor section of the Company's website at  Shareholders are encouraged to read this material.

Conference Call

Norbord will hold a conference call for analysts and institutional investors on Thursday, July 25, 2013 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 23, 2013 by dialing 1-888-203-1112 or 647-436-0148.  The passcode is 8838161.  Audio playback and a written transcript will be available on the Norbord website.

Norbord Profile

Norbord Inc. is an international producer of wood-based panels with assets of $1 billion, employing approximately 1,900 people at 13 plant locations in the United States, Europe and Canada.  Norbord is one of the world's largest producers of oriented strand board (OSB).  In addition to OSB, Norbord manufactures particleboard, medium density fibreboard (MDF) and related value-added products.  Norbord is a publicly traded company listed on the Toronto Stock Exchange under the symbols NBD and NBD.WT. 

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 1, 2013 Annual Information Form and the cautionary statement contained in the "Forward-Looking Statements" section of the 2012 Management's Discussion and Analysis dated January 30, 2013 and Q2 2013 Management's Discussion and Analysis dated July 24, 2013.

July 25, 2013

To Our Shareholders,

I'm pleased to report a strong second quarter result.  Norbord generated earnings of $1.00 per share on EBITDA of $102 million, in spite of 13 weeks of declining OSB prices in North America.  This is the first time since late 2005 that we've delivered two consecutive quarters with a triple-digit EBITDA result. 

Benchmark North Central OSB prices started sliding in mid-April, falling 40% over the quarter but still averaging a very strong $347 per Msf - almost 50% higher than last year.  A number of factors explain this sharp price correction.  First, the unexpectedly high OSB price in Q1 triggered a number of temporary supply and demand distortions: homebuilders substituted other panel products for some of their OSB needs to ensure an adequate supply for the spring building season; home improvement customers balked at high retail prices, impacting 'Big Box' sales volumes; and some OSB producers who had been exporting re-directed product back to the North American market.  Second, the well publicized start-up of two new mills caused OSB buyers to become cautious about the timing of their purchases.  And third, the poor weather that hit the mid-west and northeast hard in April and May delayed spring construction, just as supply chain inventories were peaking. 

Many of these factors were temporary in nature.  With lower OSB prices, product substitution has stopped, producers are back exporting and 'Big Box' retail prices have adjusted.  

OSB prices bottomed in early July and have increased in each of the past three weeks.  I expect this trend to continue, with a slow and steady recovery that should extend well into the third quarter. 

First half North American OSB industry production is reportedly up 7% over last year although Norbord's production volume is unchanged year-over-year.  As you know, we've been working hard to get our mothballed Jefferson, Texas plant back up and running.  The mill started up on a limited shift schedule in June and while the restart is progressing well, we do not expect to reach a full production schedule until the fourth quarter, subject as always to market conditions.  And as I've indicated before, all of the Jefferson mill's planned output is committed to existing Norbord customers.

In spite of the OSB price volatility in the second quarter, demand from recovering US new home construction remains strong.  Year-to-date housing starts and permits are both 24% higher than last year.  Although the June headline housing numbers were lower than anticipated, there is now a growing indication that the larger public builders are constraining home sales because of limited lot availability and labour shortages.  Nonetheless, all key housing metrics - affordability, home inventories, house prices - remain positive.  And housing economists still agree that starts are on track to reach 1.0 million in 2013, a 28% improvement over last year.

In Europe, our panel business continues to generate solid results, delivering $12 million of EBITDA.  Panel demand and prices, particularly for OSB and particleboard, strengthened again this quarter.  More importantly, we are beginning to see early signs of a fundamental recovery in UK housing.  Starts are up 30% so far this year and almost 50% in April and May.  This turnaround is being supported by a range of government incentive programs aimed at mortgage lenders, housebuilders and homebuyers.  Germany, our other core market, is in the third year of a similar rebound.  While our UK-based manufacturing has performed well - in spite of the current economic uncertainty -  the improving housing trend we see coming should add to demand for our panel products going forward.

Today in our press release, we announced a second quarterly dividend of CAD $0.60 per share.  Since reinstating a dividend last quarter, we've had a lot of questions from investors about the Company's new dividend policy.  Let me be clear - Norbord's dividend will reflect the cyclicality, not the seasonality, of our business.  In other words, we intend to continue paying a substantial dividend during the strong part of the cycle, while cash flows will support it.  However, we recognize we may have to reduce the level of pay-out during the weaker part of the cycle.  We still believe the US housing recovery will drive strong cash flow for Norbord for the foreseeable future.  In addition to returning a portion of that cash to our shareholders and reinvesting in high-return capital projects, we are also exploring opportunities to reduce the level of debt on our balance sheet.

In my last letter, I said that OSB market volatility would continue as industry supply adjusts to the improving pace of a US housing recovery.  Even though we saw this volatility play out in the second quarter, our Company has continued to perform well.  And, although OSB demand is typically softer later in the year, 2013 will be another excellent year for Norbord.

I look forward to reporting our results next quarter.

J. Barrie Shineton
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 2012 Management's Discussion and Analysis dated January 30, 2013 and Q2 2013 Management's Discussion and Analysis dated July 24, 2013.

Consolidated Balance Sheets

(US $ millions)
  Jun 29, 2013 Dec 31, 2012
Current assets          
  Cash and cash equivalents   $            220 $          128
  Accounts receivable                   146              125
  Tax receivable                       5                 -  
  Inventory                  108                98
                   479              351
Non-current assets          
  Property, plant and equipment                  758              764
    $        1,237 $       1,115
Liabilities and Shareholders' Equity          
Current liabilities          
  Accounts payable and accrued liabilities   $            168 $          173
Non-current liabilities          
  Long-term debt                  434              433
  Other liabilities                    30                42
  Deferred income taxes                  120                82
                   584              557
Shareholders' equity                  485              385
    $        1,237 $       1,115

Consolidated Statements of Earnings

Periods ended June 29 and June 30 (US $ millions, except per share information)
6 mos
6 mos
Sales   $     365 $       272 $     730 $      525
Cost of sales          (261)         (237)       (510)          (465)
General and administrative expenses               (2)             (4)             (7)             (8)
Earnings before finance costs, income tax and depreciation            102             31          213             52
Finance costs               (9)              (9)          (18)           (17)
Earnings before income tax and depreciation              93             22          195             35
Depreciation             (15)           (13)          (28)           (26)
Income tax expense            (25)             (3)          (47)             (3)
Earnings   $        53 $           6 $     120 $           6
Earnings per common share                  
  Basic   $   1.00 $      0.14 $    2.46 $      0.14
  Diluted           0.99          0.14        2.26          0.14

Consolidated Statements of Comprehensive Income

Periods ended June 29 and June 30 (US $ millions)
6 mos
6 mos
Earnings   $        53 $          6 $      120 $          6
Other comprehensive income (loss), net of tax                  
     Items that will not be reclassified to earnings                  
       Actuarial gain (loss) on post-employment obligation     6              (2)   15             (2)
     Items that may be reclassified subsequently to earnings                  
       Foreign currency translation loss on foreign operations                  (6)           (14)               - 
       Net gain on hedge of net investment in foreign operations       2                1
                   (4)          (14)   1
      6            (6)     1             (1)
Comprehensive income   $        59 $          -   $      121         5

Consolidated Statements of Changes in Shareholders' Equity

Periods ended June 29 and June 30 (US $ millions)
6 mos
6 mos
Share capital          
Balance, beginning of period   $    640 $      340 $     346 $      340
Issue of common shares              16              -          310             - 
Balance, end of period   $     656 $      340 $     656 $      340
Contributed surplus                  
Balance, beginning of period   $          9 $        44 $       44 $        43
Stock-based compensation                1              -               1              1
Warrants and stock options exercised              (3)              -            (38)             - 
Balance, end of period   $          7 $        44 $         7 $        44
Retained earnings                  
Balance, beginning of period   $   (194) $       (83) $     (10) $      (82)
Adoption of new accounting standard              -               -               (1)            (1)
Adjusted balance, beginning of period          (194)           (83)           (11)          (83)
Earnings              53               6          120              6
Common share dividends            (31)              -            (31)             - 
Warrants exercised               (4)              -         (263)             - 
Other comprehensive income (loss)                6             (2)            15            (2)
Balance, end of period   $   (170) $       (79) $   (170) $      (79)
Accumulated Other Comprehensive (Loss) Income        
Balance, beginning of period   $       (8) $          4 $         6 $        (1)
Other comprehensive (loss) income                -             (4)           (14)              1
Balance, end of period   $        (8) $           -   $        (8) $           -  
Shareholders' equity   $     485 $      305 $     485 $    305

Consolidated Statements of Cash Flows

Periods ended June 29 and June 30 (US $ millions)
6 mos
6 mos
Operating Activities          
Earnings   $    53 $       6 $   120 $       6
Items not affecting cash:                  
   Depreciation           15         13          28        26
   Deferred income tax          22           1          44          1
Other items              2         (4)           -           (3)
            92         16       192         30
Net change in non-cash operating working capital balances           14           8       (41)        (34)
Net change in tax receivable            (5)           1          (5)           2
         101          25       146          (2)
Investing Activities                  
Investment in property, plant and equipment          (18)          (3)       (33)          (6)
Realized net investment hedge gain             -             1           -             4
           (18)         (2)         (33)          (2)
Financing Activities                  
Common share dividends paid          (31)         -          (31)          -  
Issue of common shares, net           10         -            10          -  
Issue of debt             -         240           -         240
Accounts receivable securitization proceeds            -             7           -           11
Debt issue costs            -           (4)           -           (4)
          (21)        243        (21)        247
Cash and Cash Equivalents                  
Increase during the period         62       266          92       243
Balance, beginning of period        158         60       128          83
Balance, end of period   $ 220 $   326 $ 220 $   326

SOURCE: Norbord Inc.

For further information:


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

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