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
-- 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
-- Annual production records at five of Norbord's eight operating
-- Company-wide safety recordable rate of 0.74 - a best-ever
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."
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.
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 (www.sedar.com) and
are available in the investor section of the Company's website at
www.norbord.com. Shareholders are encouraged to read this material.
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 www.norbord.com and www.newswire.ca. 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 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
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
Cash $ 128 $ 83
Accounts receivable 125 102
Tax receivable - 5
Inventory 98 88
Property, plant and equipment 764 787
Other assets - 5
$ 1,115 $ 1,070
Liabilities and Shareholders' Equity
Accounts payable and accrued $ 173 $ 162
Current portion of long-term debt - 242
Long-term debt 433 196
Other long-term debt - 69
Other liabilities 40 40
Deferred income taxes 83 61
Shareholders' equity 386 300
$ 1,115 $ 1,070
Consolidated Statements of Earnings
Years ended December 31 (US $ 2012 2011
millions, except per share
Sales $ 1,149 $ 965
Cost of sales (945) (907)
General and administrative expenses (16) (13)
Earnings before interest, income tax 188 45
Interest expense (36) (33)
Earnings before income tax and 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
Foreign currency translation gain 7 (4)
(loss) on foreign operations
Net loss on hedge of net investment in - (1)
Actuarial loss on post-employment - (17)
Comprehensive income (loss) $ 79 $ (33)
Consolidated Statements of Changes in Shareholders' Equity
Years ended December 31 (US $ millions) 2012 2011
Balance, beginning of year $ 340 $ 340
Issue of common shares, net 6 -
Balance, end of year $ 346 $ 340
Balance, beginning of year $ 43 $ 41
Stock-based compensation 2 2
Stock options and warrants exercised (1) -
Balance, end of year $ 44 $ 43
Balance, beginning of year $ (82) $ (54)
Earnings 72 (11)
Other comprehensive loss - (17)
Balance, end of year $ (10) $ (82)
Accumulated Other Comprehensive Income
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
CASH PROVIDED BY (USED FOR):
Earnings $ 72 $ (11)
Items not affecting cash:
Depreciation 53 51
Deferred income tax 22 (31)
Other items 3 -
Net change in non-cash operating working (19) (23)
Net change in tax receivable 5 1
Investment in property, plant and equipment (22) (23)
Realized net investment hedge gain (loss) 3 (1)
Repayment of debt (240) -
Issue of debt 240 -
Accounts receivable securitization (71) 10
Debt issue costs (5) (1)
Issue of common shares, net 4 -
Increase (decrease) during the year 45 (28)
Balance, beginning of year 83 111
Balance, end of year $ 128 $ 83
Contact: Heather Colpitts Manager, Corporate Affairs Tel. (416) 365-0705
SOURCE: Norbord Inc.
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