TORONTO, ON (July 22, 2010) – Norbord Inc. (TSX: NBD, NBD.WT) today reported positive earnings of $37 million or $0.85 per share in the second quarter of 2010, a significant improvement from losses of $5 million or $0.12 per share in the prior quarter and $18 million or $0.42 per share in the same quarter last year.
Norbord recorded EBITDA of $71 million in Q2 2010 compared to $9 million in Q1 2010 and negative $2 million in Q2 2009. North American operations generated EBITDA of $63 million in Q2 2010, an improvement of $55 million and $69 million compared to Q1 2010 and Q2 2009 respectively. Norbord’s European operations generated EBITDA of $10 million in Q2 2010, compared to $5 million and $4 million recorded in Q1 2010 and Q2 2009 respectively.
"I am pleased to report very strong second quarter earnings," said Barrie Shineton, President and CEO. "All our operating mills ran full out this quarter and we benefitted from the run-up in North American OSB prices. As we have said for some time, the recovery in both US housing starts and OSB demand is fragile. Economic news continues to be mixed, however a housing recovery is taking hold and we remain confident that our financial performance will continue to improve on the prior year."
North Central benchmark OSB prices ranged from $195 to $395 and averaged $295 in the second quarter. In the South East region, where over half of Norbord’s North American capacity is located, prices averaged $277.
Expert forecasts for 2010 US housing starts range from 0.6 million to 0.7 million, well below the historical average of 1.5 million. News relating to housing activity has been mixed and Norbord expects this uncertainty will continue through the remainder of the year. However, actual year-to-date housing starts were 14% higher than last year and Norbord’s second quarter North American OSB sales volume to its three core market segments increased 35% over the first quarter of 2010.
In the UK, year-to-date housing starts improved more than 75% over last year supporting stronger panel demand. On the continent German housing starts were up a more modest 3%. European OSB prices improved 14% quarter-over-quarter due to high plywood prices, lower imports from the US and stronger demand. Particleboard and MDF prices increased 4% quarter-over-quarter
Norbord’s operating North American OSB mills ran at approximately 100% of their capacity in the second quarter compared to 85% in the prior quarter and 80% in the same quarter last year. Norbord’s two indefinitely closed mills in Texas and Alabama have not operated since the first quarter of 2009 and represent 20% of the Company’s North American OSB capacity. All of Norbord’s European mills operated at full capacity in the quarter versus 90% in the first quarter of 2010 and 75% in the second quarter of 2009. As market and economic conditions warrant, Norbord expects to curtail production when necessary to conserve cash, manage inventory and maximize operating results.
Norbord’s North American OSB production cash costs per unit decreased 4% versus the prior quarter on improved operating performance. Cash costs increased 11% versus the same quarter last year as higher fibre and resin prices more than offset the benefit of higher production volumes.
At the end of the second quarter, Norbord had cash and cash equivalents of $74 million and revolving bank lines were undrawn. The Company’s tangible net worth was $360 million and net debt to total capitalization, book basis, was 51%.
Capital investments totaled $5 million in the second quarter. Norbord’s 2010 capital investment program will be limited to essential capital projects and is expected to be $15 million, unless market conditions warrant investments at a higher level.
During the quarter, Norbord entered into an $85 million accounts receivable securitization program with a third party trust sponsored by a highly rated Canadian bank to replace the existing program. The new program has an evergreen commitment subject to termination on twelve months notice. The facility contains no financial covenants and is subject to a minimum credit rating requirement of single B (mid) or the equivalent.
Subsequent to quarter-end, Norbord increased its committed revolving bank lines from $205 million to $245 million by adding a seventh lender to its bank group and extended the maturity date to May 2013. Coincident with these amendments, Norbord cancelled its $50 million debt facility with Brookfield. Pro forma for these changes, Norbord had unused liquidity of $311 million at the end of the second quarter.
Norbord announced today that it has extended the expiry date of its small shareholder selling program to August 30, 2010. The program gives registered or beneficial holders of 99 or fewer Common Shares the opportunity to sell all of their Common Shares without incurring commission charges. Additional information concerning this program can be obtained by contacting the Company's transfer agent - CIBC Mellon Trust Company by telephone at 416.643.5500 or toll-free at 1.800.387.0825, or through e-mail to [email protected] - or Norbord at 416.643.8830 or 1.888.667.2673.
Norbord announces that it intends to apply to the Toronto Stock Exchange (TSX) for approval to conduct a normal course issuer bid for up to 5% of its Common Shares in accordance with TSX rules. The normal course issuer bid will be subject to TSX acceptance. Full details of the bid will be announced upon receipt of TSX consent.
Norbord Inc. is an international producer of wood-based panels with assets of $1.0 billion, employing approximately 1,950 people at 14 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.
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