Norbord Reports Improved 2012 Results

Jan 31, 2013, 06:00 ET from Norbord Inc.

Note:  Financial references in US dollars unless otherwise indicated.


  • Full year earnings of $1.65 per share ($1.59 per share diluted)
  • 2012 EBITDA of $188 million - a fourfold increase over the prior year
  • Q4 EBITDA of $70 million - better than Q3 and eight times higher than Q4 2011
  • North Central benchmark OSB price averaged $271 per Msf - a 46% increase vs. 2011 and the highest average in seven years
  • North American OSB shipments 8% higher in stronger pricing environment
  • Annual production records at five of Norbord's eight operating OSB mills
  • Company-wide safety recordable rate of 0.74 - a best-ever result

TORONTO, Jan. 31, 2013 /CNW/ - Norbord Inc. (TSX: NBD, NBD.WT) today reported earnings of $72 million or $1.65 per share ($1.59 per share diluted) for the full year 2012 compared to a loss of $11 million or $0.25 per share in 2011.  The Company recorded earnings of $38 million or $0.86 per share ($0.76 per share diluted) in the fourth quarter of 2012 versus a loss of $9 million or $0.21 per share in the same quarter of 2011.

Norbord generated EBITDA of $188 million in 2012 compared to $45 million in 2011.  North American and European operations recorded EBITDA of $165 million and $39 million, respectively, versus $14 million and $44 million, respectively, in the prior year.  In the fourth quarter of 2012, Norbord delivered EBITDA of $70 million versus $66 million in the previous quarter and $9 million in the fourth quarter of 2011.

"Our improved 2012 financial results reflect a better-than-expected recovery in the US housing market and this recovery is gaining momentum," said Barrie Shineton, President and CEO.  "In North America, we increased shipments and were able to benefit from higher OSB pricing in the second half of last year.  I expect this strong improvement in OSB demand to continue as we move through 2013.  We are therefore advancing our plans to bring back some of our mothballed capacity.  However, in spite of these plans, and the restarts announced by some of our competitors, the lag in bringing back this capacity suggests to me improving OSB demand will continue to outstrip supply for at least the next three quarters."

"In Europe, our panel business delivered another strong result in spite of the challenging macroeconomic environment.  Panel markets remain surprisingly stable and we continue to benefit from an ongoing currency advantage due to a weaker Pound Sterling.  Both our customer order files and panel pricing trends indicate a positive start to the year."

Market Conditions

US housing starts finished the year at 780,000, up 28% from 610,000 in 2011.  Permits were 30% higher year-over-year. The seasonally-adjusted US housing starts number for December was 954,000, 37% ahead of the 2011 end-of-year pace.  This is an encouraging number for what is typically a seasonally slower period for the construction industry and OSB demand.

North American OSB prices improved significantly in the second half of the year. North Central benchmark OSB prices strengthened from a February low of $188 per thousand square feet (Msf) (7⁄16-inch basis) to finish the year at an annual high of $370. North Central prices averaged $271 in 2012 compared to $186 in 2011, a 46% increase. In the South East region, where approximately 55% of Norbord's North American OSB capacity is located, prices averaged $241 per Msf compared to $169 in the prior year.

In the fourth quarter, North Central benchmark OSB prices averaged $332 per Msf, up $19 from the prior quarter and $142 from the fourth quarter of 2011.  South East prices averaged $296 per Msf in the quarter, up $22 from the prior quarter and $130 from the fourth quarter of 2011.

In Norbord's primary European markets, housing activity remained stable but unremarkable with UK housing starts decreasing 9% and German housing starts increasing approximately 7% compared to 2011.  In the UK, where the majority of Norbord's European assets are located, home prices remain steady and mortgage lending restrictions are easing.

European panel prices decreased modestly in 2012.  OSB prices declined 11% from 2011 peak levels while particleboard and MDF prices held firm. The Pound Sterling remained weak versus the Euro and this continues to benefit Norbord's primarily UK-based operations.


North American OSB shipments for the full year increased 8% compared to the prior year.  In the fourth quarter, shipments were 3% lower than the third quarter and 12% higher than the same quarter in 2011. In 2012, Norbord's operating OSB mills ran at 95% of nameplate capacity versus 80% in 2011.

Norbord's 2012 North American OSB cash production costs per unit (excluding incentive compensation) decreased by 1% versus 2011.  Excluding the impact of higher raw material prices and higher maintenance costs, production cost per unit decreased by 3%.

In Europe, panel shipments increased 2% over the prior year.  Production was also higher as Norbord's four panel mills ran on full operating schedules.  Effective for 2012, Europe's stated annual OSB capacity was increased by 90 MMsf (3/8-inch basis), reflecting improvements from both capital investments and operating efficiencies at the Genk, Belgium mill.  Norbord's European mills operated at the same 95% of capacity in both 2012 and 2011, although the 2012 percentage was impacted by the stated capacity increase.

Norbord's Margin Improvement Program (MIP) delivered $23 million in gains in 2012, primarily from lower raw materials usage and higher productivity achieved from the Company's resin conversion and fines screening projects.

Capital investments continued to be constrained, totaling $26 million in 2012 versus $25 million in 2011. Norbord's 2013 planned capital expenditures have been ramped up to $70 million, including the necessary investments to restart a portion of the Company's mothballed capacity.

Operating working capital increased by $22 million during the year to $50 million at year-end compared to $28 million at year-end 2011.  This increase reflects the impact of higher North American OSB prices on accounts receivable.

At year-end, Norbord had unutilized liquidity of $455 million, consisting of $242 million in undrawn revolving bank lines, $85 million undrawn under its accounts receivable securitization program and $128 million in cash.  The Company's tangible net worth was $422 million and net debt to total capitalization on a book basis was 43%, down from 51% a year ago despite repaying $82 million under the accounts receivable securitization program. Both ratios are well within bank covenants.


In response to increased customer demand for OSB, Norbord intends to restart its curtailed mill in Jefferson, Texas by mid-2013.  The mill has been mothballed since the first quarter of 2009.  The Company will invest approximately $10 million to bring the mill back into production.  Norbord will continue to monitor market conditions, but does not currently expect to restart its mills in Huguley, Alabama or Val-d'Or, Quebec in 2013.

In January, Norbord applied to the Toronto Stock Exchange (TSX) for approval to commence a normal course issuer bid in accordance with TSX rules.  Under the previous bid that expired on December 20, 2012, the Company could have purchased up to 2,178,705 of its common shares, which represented approximately 5% of the 43.6 million issued and outstanding common shares as at November 30, 2011. No share purchases were made under the Company's previous bid.  Full details of the normal course issuer bid will be announced upon receipt of TSX approval. 

Additional Information

Norbord's year-end 2012 letter to shareholders, news release, management's discussion and analysis, annual consolidated audited 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, January 31, 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 March 1, 2013 by dialing 1-888-203-1112 or 647-436-0148. The passcode is 5040392. 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," "continue," "suggest," "intend,"  "should," "believe," "forecast," "appear," "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, 2012 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.

January 31, 2013

To Our Shareholders,

Norbord's 2012 result was our best since US housing first began its unprecedented decline in 2006.  We generated earnings of $1.65 per share on EBITDA of $188 million - a substantial improvement over the $45 million of EBITDA and negative earnings of the previous year.

Last year, I told you the US housing market was at an inflection point and I was optimistic about the positive signs we were starting to see in our business.  But I also said OSB pricing would move sideways for most of 2012 as the structural impediments to a housing recovery were worked through.  So now I'm particularly pleased to tell you that our financial results were much better than I had expected.  And what's even more encouraging is that this upside is carrying over into 2013 and will be reflected in our bottom line again this year. 

Our results reflect a US housing recovery that is now well entrenched.  Housing starts - the largest driver of OSB demand - jumped 28% last year.  In North America, we ran more of our capacity, increased shipments and were able to benefit from 46% higher OSB prices.  At the same time, our European panel business delivered a third straight year of strong results.

I'm also pleased to see our improving financial performance reflected in our stock.  Norbord's share price has rebounded, starting the year at CAD $8.10 and finishing at CAD $30.19.  That's almost four times higher, making Norbord the Top Gainer on the Toronto Stock Exchange in 2012.

Record Operating Performance

Our panelboard mills performed well in 2012.  Five of our eight operating OSB facilities set annual production records and overall shipments were up 6%.  To meet recovering North American OSB demand, we ran more of our capacity than the prior year and this additional volume was sold at higher prices as the year progressed.

In 2012, we delivered $23 million in Margin Improvement Program (MIP) gains.  Our North American mills continued to build on the raw material usage and productivity benefits achieved from the resin conversion and fines screening projects.  Our Chief Operating Officer, Peter Wijnbergen, has a simple MIP goal: maintain competitiveness by being better tomorrow than we are today.  His operating team continues to push hard on new MIP initiatives each year to deliver on this goal.

Europe Is Holding Steady

In Europe, panel markets remained surprisingly stable in spite of the challenging macroeconomic environment.  Our operations had another strong year and we continued to run our mills at capacity.  While OSB prices were off their 2011 peak levels, particleboard and MDF prices held firm.  The Pound Sterling drifted weaker against the Euro in the second half of the year and this kept our UK-based business competitive.

Balance Sheet Is Improving

In 2012, our Chief Financial Officer, Robin Lampard, successfully refinanced our $240 million bond maturity with new three-year senior notes that will save $10 million in interest over the life of the bonds.  She pursued this shorter-term solution based on our expectation that Norbord's improving financial performance would enable a more opportunistic refinancing in 2015.

Our balance sheet is de-levering quickly.  Last year, we generated $136 million of operating cash flow and we took the opportunity to fully repay our accounts receivable securitization program.  At year-end, we had more than $450 million of cash and unutilized liquidity, allowing us to commit to a more ambitious capital reinvestment program in 2013.

New Home Construction Demand Growing

A decade ago, we purposely diversified away from new home construction by growing our big box, industrial and export volumes.  This strategy served us well through what turned out to be a protracted housing downturn by providing a customer channel that is far less cyclical and has steadier annual growth.  However, we have always maintained relationships with the large national pro-dealers who service homebuilders.  Last year, our strongest growth came from this market segment.  Norbord's shipments to pro-dealers grew by 35% in 2012 and now represent almost half of our total sales volume.

World-Class Safety Remains the Goal

We believe that safety and operating performance go hand in hand.  Our safety record continued to improve in 2012 with a best-ever Occupational Safety and Health Administration (OSHA) rate of 0.74.  Our Joanna, South Carolina and Guntown, Mississippi mills each completed the year without a single recordable injury and our Nacogdoches, Texas facility achieved 10 years without a lost-time incident.  In addition, three of our sites (La Sarre, Quebec; Inverness, Scotland; and South Molton, England) obtained Norbord Safety Star certifications, a rigorous program based on standards that go well beyond regulatory requirements.  These industry-leading achievements bring our mills another step closer to the goal of world-class safety performance.

Encouraging Outlook for 2013

In the fourth quarter, all the housing indicators we follow continued to strengthen.  Foreclosures and existing home inventories are trending down, while home prices and builder confidence are improving.  Public homebuilder order backlogs are outpacing expectations, growing 40% year-over-year.  The more credible housing economists are now forecasting 2013 housing starts at the 1.0 million level - another 28% increase over the 2012 number.  In January, in what is normally the slowest season for construction activity, OSB prices remained surprisingly strong with the North Central benchmark price averaging more than $400 per Msf.  This all points to strengthening OSB markets in 2013. 

Some of our competitors have announced capacity restarts and we are advancing our own plans to bring our Jefferson, Texas mill online by mid-2013.  Norbord's timeline for adding back capacity continues to be dictated by the long lead times required for equipment deliveries, the hiring and training of a new workforce and the rebuilding of a log supply infrastructure.  These challenges and the extended timeline suggest to me that improving OSB demand will continue to outstrip supply for at least the next three quarters. 

I'm expecting another good result from our European panel business.  In the UK, where three of our four mills are located, housing starts, mortgage lending and home prices are below trend but remain stable.  Both our January order files and panel prices indicate we are off to a positive start this year.

We continue to monitor pricing trends that impact our manufacturing costs.  We will likely see upward pressure on our raw material input prices, particularly wood fibre and resin, as the broader US economy improves.  However, we should be able to offset these higher costs through ongoing MIP initiatives.

Disciplined Capital Allocation

With the bottom of the cycle now behind us and peak earnings years ahead of us, we need to prioritize capital allocation alternatives.  However, our framework for making these decisions hasn't changed.  Our highest priority is to reinvest in our existing OSB business through low-risk, high-return projects at our mills.  We will also look for opportunities to grow our OSB business through attractive acquisitions.  Further, we will consider paying down debt and returning surplus cash to shareholders if it makes financial sense to do so.  Long-term investors will recall that during previous peak earnings years, we paid dividends and bought back shares.

After five years of constraining capital and in keeping with these priorities, we are ramping up capital expenditures to $150 million over the next three years.  The $70 million we are planning to spend in 2013 is focused on reducing costs and improving productivity, and includes a $10 million investment to restart our Jefferson mill. 

Norbord Is Well Positioned

I'm pleased that we delivered strong earnings and a much improved 21% return on equity in 2012.  And I firmly believe that 2013 will be even better.

Our mills are performing well and productivity is at an all-time high.  We have strong customer partnerships.  Demand from US new home construction is accelerating.  Our European business is stable and continues to provide a reliable earnings contribution.  And we have a solid balance sheet that is de-levering quickly.  Norbord will generate robust cash flow now that OSB demand is gaining momentum.

On behalf of everyone at Norbord, I thank you for your ongoing support during the past five challenging years.  We remain focused on maximizing shareholder value and I am delighted that your patience is finally being rewarded.

I look forward to reporting on our progress throughout the year.


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," "point to," "plan," "indicate," "consider," "would," 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.

Consolidated Balance Sheets
(US $ millions)   Dec 31, 2012   Dec 31, 2011
Current assets            
  Cash   $         128   $            83
  Accounts receivable     125     102
  Tax receivable     -     5
  Inventory     98     88
      351     278
Non-current assets            
  Property, plant and equipment     764     787
  Other assets      -     5
      764     792
    $      1,115   $       1,070
Liabilities and Shareholders' Equity            
Current liabilities            
  Accounts payable and accrued liabilities   $         173   $          162
  Current portion of long-term debt     -     242
      173     404
Non-current liabilities            
  Long-term debt     433     196
  Other long-term debt     -     69
  Other liabilities     40     40
  Deferred income taxes     83     61
      556     366
Shareholders' equity     386     300
    $      1,115   $       1,070

Consolidated Statements of Earnings
Years ended December 31 (US $ millions, except per share information)         2012     2011
Sales   $     1,149   $         965
Cost of sales     (945)     (907)
General and administrative expenses     (16)     (13)
Earnings before interest, income tax and depreciation     188     45
Interest expense     (36)     (33)
Earnings before income tax and depreciation     152     12
Depreciation     (53)     (51)
Income tax (expense) recovery     (27)     28
Earnings   $          72   $        (11)
Earnings per common share                
  Basic   $        1.65   $      (0.25)
  Diluted     1.59     (0.25)

Consolidated Statements of Comprehensive Income/(Loss)
Years ended December 31 (US $ millions)     2012     2011
Earnings   $       72   $      (11)
Other comprehensive income (loss), net of tax            
  Foreign currency translation gain (loss) on foreign operations       7     (4)
  Net loss on hedge of net investment in foreign operations     -     (1)
  Actuarial loss on post-employment obligation     -     (17)
      7     (22)
Comprehensive income (loss)   $       79   $ (33)

Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31 (US $ millions)     2012     2011
Share capital            
Balance, beginning of year   $    340   $      340
Issue of common shares, net     6    
Balance, end of year   $     346   $      340
Contributed surplus              
Balance, beginning of year   $       43   $        41
Stock-based compensation     2     2
Stock options and warrants exercised     (1)    
Balance, end of year   $       44   $        43
Retained earnings            
Balance, beginning of year   $     (82)   $      (54)
Earnings     72     (11)
Other comprehensive loss     -     (17)
Balance, end of year   $     (10)   $      (82)
Accumulated Other Comprehensive Income (Loss)            
Balance, beginning of year   $        (1)   $          4
Other comprehensive income (loss)     7     (5)
Balance, end of year   $         6   $        (1)
Shareholders' equity   $     386   $      300

Consolidated Statements of Cash Flows
Years ended December 31 (US $ millions)     2012     2011
Operating Activities            
Earnings    $      72   $    (11)
Items not affecting cash:            
  Depreciation     53     51
  Deferred income tax     22     (31)
Other items     3     -
      150     9
Net change in non-cash operating working capital balances     (19)     (23)
Net change in tax receivable     5     1
      136     (13)
Investing Activities              
Investment in property, plant and equipment     (22)     (23)
Realized net investment hedge gain (loss)     3     (1)
      (19)     (24)
Financing Activities            
Repayment of debt     (240)     -
Issue of debt     240     -
Accounts receivable securitization (repayments) proceeds     (71)     10
Debt issue costs     (5)     (1)
Issue of common shares, net     4     -
      (72)     9
Increase (decrease) during the year     45     (28)
Balance, beginning of year     83     111
Balance, end of year   $    128   $     83



SOURCE Norbord Inc.