Norbord Reports Improved First Quarter 2013 Results; Declares Dividend
Note: Financial references in US dollars unless otherwise indicated.
Q1 2013 HIGHLIGHTS
-- Earnings of $1.26 per share (diluted) - versus break-even in Q1
-- EBITDA of $111 million - a fivefold increase over $21 million
in Q1 2012
-- North Central benchmark OSB price averaged $417 per Msf -
double Q1 2012 and the highest average price in 9 years
-- Announcement of new variable dividend policy and declaration of
quarterly dividend of CAD $0.60 per share to shareholders of
record on June 1
TORONTO, April 30, 2013 /CNW/ - Norbord Inc. (TSX: NBD, NBD.WT) today reported
EBITDA of $111 million in the first quarter of 2013, a $90 million
improvement over the first quarter of 2012 and a $41 million improvement over
the prior quarter. North American operations generated EBITDA of $106
million in the first quarter of 2013 versus $14 million and $67 million in the
first and fourth quarters of 2012, respectively. European operations
generated EBITDA of $10 million in the first quarter of 2013 versus $11
million and $9 million in the first and fourth quarters of 2012, respectively.
Norbord recorded $67 million of earnings ($1.26 per share diluted) in the
first quarter of 2013 compared to break-even in the first quarter of 2012 and
$38 million ($0.76 per share diluted) in the fourth quarter of 2012.
"Our strong first quarter results reflect a broad-based US housing recovery
that is accelerating," said Barrie Shineton, President and CEO. "Average North
American OSB prices climbed to their highest level in nine years during what
is normally the weakest season of the year. We are working hard to bring our
Jefferson, Texas mill back up by mid-year in spite of persistent equipment
delays and the challenge of recruiting a new workforce. While we will likely
see increasing market volatility, I believe improving OSB demand will continue
to outstrip supply for at least the rest of this year."
"In Europe, our panel business delivered another quarter of strong numbers in
spite of uncertainty in the Eurozone economies. OSB demand in particular is
strengthening and we continue to run all our panel mills full out."
"The variable dividend policy we are announcing today reflects the improvement
in our operating cash flow over the past year. Norbord now has strong
liquidity and is deleveraging quickly with our net debt to total
capitalization moving towards the bottom of our target range. We expect to
continue delivering significant free cash flow in the near term as the US
housing recovery supports increasing demand for OSB."
First quarter US housing starts were 36% higher than the same quarter last
year and permits were 22% higher. The seasonally adjusted US housing starts
number for March was 1,036,000, 47% higher than the year-ago pace. In this
rapidly improving demand environment, the North American North Central
benchmark OSB price averaged $417 per thousand square feet (Msf) (7⁄16-inch
basis) in the first quarter compared to $203 per Msf in the same quarter last
year and $332 per Msf in the prior quarter. In the South East region, where
approximately 55% of Norbord's North American capacity is located, prices
averaged $396 per Msf, compared to $190 per Msf in the same quarter last year
and $296 per Msf in the prior quarter. The consensus forecast from US
housing economists is for 1.0 million starts in 2013, which would be a 28%
improvement over 2012.
In Europe, despite continuing macroeconomic uncertainty, panel markets remain
steady. Average panel prices increased in the first quarter, rising 2%
year-over-year and 5% quarter-over-quarter. OSB and particleboard markets
were strong and MDF markets remain stable. The Pound Sterling remained in a
range versus the Euro that continues to support Norbord's primarily UK-based
In North America, OSB shipment volumes increased 4% year-over-year and
decreased 3% versus the prior quarter. The quarter-over-quarter decrease is
due to scheduled annual maintenance shuts and fewer fiscal days in the first
quarter. Norbord's OSB mills produced at approximately 70% of capacity, up
5% versus the first quarter of 2012 and unchanged from the fourth quarter of
In response to increased customer demand for OSB, Norbord continues to staff
up and prepare its curtailed mill in Jefferson, Texas for restart by mid-2013.
The mill has 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. 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 12% year-over-year and 8% quarter-over-quarter.
Excluding the impact of higher input prices, the scheduled annual maintenance
shuts and Jefferson, Texas restart costs, unit costs increased by 4% and 3%,
respectively, compared to the prior quarter and prior year. The remaining
increase in unit costs was driven primarily by higher resin and fibre prices.
In Europe, shipments were 3% lower than the same quarter last year due to
lower retail furniture sales over the holiday period, but shipments increased
by 5% over the prior quarter. Norbord's European panel mills produced at
approximately 100% of capacity in the quarter, compared to 95% in the same
quarter last year and 90% in the prior quarter.
Norbord did not generate any gains from its Margin Improvement Program (MIP)
due to the impact of the first quarter scheduled annual maintenance shuts.
Lower production volumes and shutdown-related costs effectively offset any raw
material usage and productivity gains.
Capital investments totaled $12 million, $9 million higher year-over-year due
to capital spending to prepare the Jefferson, Texas mill for restart, and in
line with the prior quarter. Norbord's 2013 planned capital expenditures are
targeted at $70 million.
Operating working capital was $101 million compared to $71 million at the end
of the same quarter last year and $50 million at year-end. Both the
year-over-year and quarter-over-quarter increases were primarily driven by the
impact of higher North American OSB prices on accounts receivable. In
addition, seasonal logging in the northern mills increased inventories
quarter-over-quarter. Finished goods inventory remains at minimal levels and
accounts receivable performance is in line with prior periods.
Taking into account an increase in the accounts receivable securitization
program subsequent to quarter-end, Norbord had unutilized liquidity of $500
million, including $158 million of cash. The Company's tangible net worth
was $488 million and net debt to total capitalization on a book basis was 37%,
well within bank covenants.
Norbord announces today that its Board of Directors (the Board) has approved a
new variable dividend policy which targets the pay-out to shareholders of a
portion of expected future free cash flow through the cycle. For 2013, the
dividend is targeted at CAD $0.60 per share per quarter, which amounts to an
annualized dividend of CAD $2.40 per share. Norbord's liquidity is
improving, with cash of $158 million on the balance sheet and undrawn bank and
securitization lines of $342 million at quarter-end. The Company's balance
sheet is deleveraging quickly with net debt of just $285 million, representing
37% of total capitalization, and rapidly approaching the bottom of the
Company's target range over the cycle.
The decision to introduce a dividend policy at this point in the cycle
demonstrates the Board's and management's confidence that Norbord has
sufficient capital resources in the near term and the ability to generate
strong cash flow over the next few years. However, the Company operates in
highly cyclical markets, and the Board will review the pay-out as the cycle
progresses and adjust the dividend as appropriate.
Dividends are declared at the discretion of the Board. In determining its
ability to distribute capital to its shareholders, the Company considers
current and anticipated capital needs and its ability to generate free cash
flow in the future, subject to the covenants in its bank line agreements and
Under the new dividend policy, the Board declared a quarterly dividend of CAD
$0.60 per common share, payable on June 21, 2013 to shareholders of record on
June 1, 2013.
Warrant Indenture Amendment
Effective March 25, 2013, Norbord amended certain terms of the Warrant
Indenture dated December 24, 2008 to include a cashless exercise feature.
This feature allows warrant holders to elect to exercise their warrants on a
cashless basis, and receive common shares based on the in-the-money amount of
their warrants. The Board approved this amendment on the recommendation of
an independent committee comprised of the five members of the audit committee.
On March 25, 2013, Brookfield Asset Management Inc. (Brookfield) exercised all
their warrants on a cashless basis, receiving an additional 8.2 million common
shares and increasing their ownership of the Company to 59%.
On March 25, 2013, Brookfield and the Company entered into an agreement with a
syndicate of investment dealers to complete a secondary offering of Norbord's
common shares. Under the agreement, the syndicate agreed to purchase 3.3
million common shares at a purchase price of CAD $33.00 per common share.
Brookfield offered 2.75 million shares and the Company's senior management
offered 0.55 million shares. Brookfield also granted the underwriters an
over-allotment option to purchase up to an additional 0.5 million shares,
which was exercised in full prior to the closing. On April 16, 2013, upon
closing of the offering, Brookfield sold a total of 3.25 million shares to the
underwriters, decreasing their ownership of the Company to 53%. Norbord did
not receive any proceeds from the offering.
Norbord's Q1 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 (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 Tuesday, April 30, 2013 at 2:00 p.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 May 29, 2013 by dialing 1-888-203-1112 or 647-436-0148.
The passcode is 5721346. 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," "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 Q1
2013 Management's Discussion and Analysis dated April 29, 2013.
April 30, 2013
To Our Shareholders,
I'm pleased to report a very positive first quarter result. Norbord
generated earnings of $1.26 per share on EBITDA of $111 million, a more than
$40 million improvement from the previous quarter. In fact, this was our
best quarterly EBITDA result in the past seven years. Our improved
performance reflects increasing North American OSB demand and prices, driven
by the strength of the US housing recovery. And while our North American
business was the biggest contributor this quarter, our European operations
also delivered a solid performance.
In my previous shareholder letter I said that capital allocation had become a
priority. Today in our press release, we announced that the Board of
Directors approved a new variable dividend policy. We also declared the
first quarterly dividend payout in four and a half years, reflecting
confidence in our financial position and future cash flow generation. This
equates to an annualized dividend of CAD $2.40 per share. We know our
business is cyclical and the level of payout will vary over time. However,
the US housing recovery has momentum and I believe Norbord's peak earning
years are still ahead.
In March, our major shareholder Brookfield exercised their warrants on a
cashless basis and sold some of the new shares through a secondary offering.
This is a positive development, as there are now almost four million more
shares in our trading float available to other investors.
All US housing indicators point to a broad-based recovery. The key metrics -
home prices, new and existing home sales, affordability and the foreclosure
inventory - are improving. The seasonally-adjusted 1 million housing starts
number for March is more than double the pace when housing bottomed in 2009.
And underlying pent-up demand will support a return to the 1.5 million
normalized level over the next few years.
Heading into the second quarter, I remain positive about the rest of this
year. In April, North American OSB prices corrected - the result of weather
related delays in spring construction, some new capacity and a build in
inventory in the supply chain. We expect pricing volatility to continue.
However, I am not concerned and expect overall pricing to remain at
above-trend levels, particularly as we move toward the peak demand summer
months. To this end, we are working hard to bring our idled mill in
Jefferson, Texas back on-line by mid-year. So far, we are on track and all
of the volume from this mill is already spoken for by existing Norbord
In Europe, our UK-based manufacturing is benefitting from an ongoing currency
advantage. We have extended order files for all our panel products and OSB
markets, in particular, are strengthening. Barring any significant currency
swings, I expect continued steady performance from our European business.
Norbord's liquidity is strong and our balance sheet is deleveraging quickly.
And I'm pleased that we're now in a position to start returning some of our
cash to our shareholders. The US housing recovery is accelerating, but given
that we're only halfway back to a longer-term sustainable trend, I continue to
see strong earnings potential ahead for Norbord.
I look forward to reporting our results as the year progresses.
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," "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 Q1 2013 Management's Discussion and
Analysis dated April 29, 2013.
Consolidated Balance Sheets
(US $ millions) Mar 30, 2013 Dec 31, 2012
Cash and cash equivalents $ 158 $ 128
Accounts receivable 152 125
Inventory 110 98
Property, plant and 755 764
$ 1,175 $ 1,115
Accounts payable and $ 161 $ 173
Long-term debt 434 433
Other liabilities 38 42
Deferred income taxes 95 82
Shareholders' equity 447 385
$ 1,175 $ 1,115
Consolidated Statements of Earnings
Quarters ended Mar 30 and Mar 31
(US $ millions, except per share
information) Q1 2013 Q1 2012
Sales $ 365 $ 253
Cost of sales (249) (228)
General and administrative expenses (5) (4)
Earnings before finance costs,
income tax and depreciation 111 21
Finance costs (9) (8)
Earnings before income tax and
depreciation 102 13
Depreciation (13) (13)
Income tax expense (22) -
Earnings $ 67 $ -
Earnings per common share
Basic $ 1.51 $ -
Diluted 1.26 -
Consolidated Statements of Comprehensive Income
Quarters ended Mar 30 and Mar 31 (US $
millions) Q1 2013 Q1 2012
Earnings $ 67 $ -
Other comprehensive income (loss), net
Items that will not be
reclassified to earnings
Actuarial gain on 9 -
Items that may be reclassified
subsequently to earnings
Foreign currency translation (14) 6
(loss) gain on foreign operations
Net loss on hedge of net - (1)
investment in foreign operations
Comprehensive income $ 62 $ 5
Consolidated Statements of Changes in Shareholders' Equity
Quarters ended Mar 30 and Mar 31 (US
$ millions) Q1 2013 Q1 2012
Balance, beginning of period $ 346 $ 340
Issue of common shares 294 -
Balance, end of period $ 640 $ 340
Balance, beginning of period $ 44 $ 43
Stock-based compensation - 1
Warrants and stock options exercised (35) -
Balance, end of period $ 9 $ 44
Balance, beginning of period $ (10) $ (82)
Adoption of new accounting standard (1) (1)
Adjusted balance, beginning of (11) (83)
Earnings 67 -
Warrants exercised (259) -
Other comprehensive income 9 -
Balance, end of period $ (194) $ (83)
Accumulated Other Comprehensive Income
Balance, beginning of period $ 6 $ (1)
Other comprehensive (loss) income (14) 5
Balance, end of period $ (8) $ 4
Shareholders' equity $ 447 $ 305
Consolidated Statements of Cash Flows
Quarters ended Mar 30 and Mar 31 (US $
millions) Q1 2013 Q1 2012
CASH PROVIDED BY (USED FOR):
Earnings $ 67 $ -
Items not affecting cash:
Depreciation 13 13
Deferred income tax 22 -
Other items (2) 1
Net change in non-cash operating working (55) (42)
Net change in tax receivable - 1
Investment in property, plant and (15) (3)
Realized net investment hedge gain - 3
Accounts receivable securitization - 4
Cash and Cash Equivalents
Increase (decrease) during the period 30 (23)
Balance, beginning of period 128 83
Balance, end of period $ 158 $ 60
Heather Colpitts Manager, Corporate Affairs Tel. (416) 365-0705
SOURCE: Norbord Inc.
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