Norbord Reports Improved 2012 Results
February 4, 2013 | 10:33 am CST

TORONTO -- Norbord Inc. 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, TX 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, AL 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 Nov. 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.

Source: Norbord Inc.


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