Investor Presentation August 2016

Transcription

1 Investor Presentation August 2016

2 Notices Forward-Looking Statements & Non-IFRS Financial Information All financial references are expressed in US$ unless otherwise noted. This presentation contains forward-looking statements and estimates. Actual company results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information can be found in the Company s annual information form, annual MD&A, and on Norbord s website ( about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information, and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. During the course of this presentation, certain non-ifrs financial information will be presented. Definitions and reconciliation of terms can be found in the Company s annual and quarterly MD&A. 2

3 Company Overview

4 Company Overview Norbord Snapshot Leading manufacturer of wood-based panel products Largest global producer of Oriented Strand Board (OSB) Stated OSB capacity of 8.0 Bsf-3/8 Stated panel capacity (including particleboard & MDF) of 8.9 Bsf-3/8 Approximately 2,600 employees at 17 plants across the US, Canada and Europe Listed on the NYSE and TSX ( OSB ) Report in US dollars and in accordance with IFRS LTM Q sales of $1.6 billion US 43% Panel Capacity by Region Europe 20% North America Europe 8.9 Bsf-3/8" Canada 37% Oriented Strand Board (OSB) Particleboard Medium Density Fiberboard (MDF) Furniture 4

5 Enterprise Value ($USmm) OSB Capacity (Bsf-3/8") Company Overview The Leading Global OSB Company * Top 10 Global OSB Producers Norbord Louisiana-Pacific Georgia-Pacific Kronospan Weyerhaeuser Tolko Huber KronoSwiss Egger Martco * Excluding OSB siding capacity $3,500 Enterprise Value $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- West Fraser Norbord Louisiana-Pacific Canfor Corp. Interfor Western Forest Products Source: Bloomberg and company filings. Enterprise values as at August 3,

6 Company Overview Norbord s Products Norbord s operations include 15 OSB mills and two other plant locations in the UK producing particleboard, MDF and related value-added products OSB 90% of Capacity New home construction Repair and remodel Light commercial construction Industrial applications Particleboard 6% of Capacity New home construction Repair and remodel Furniture Fixtures MDF 4% of Capacity Furniture Fixtures Mill work 6

7 Industry Overview

8 Industry Overview Typical Uses for OSB Products OSB is an innovative, affordable and environmentally sustainable structural panel Serves many of the same uses as plywood, but produced at a lower cost Norbord expects OSB will continue to capture market share from plywood Currently, OSB represents 67% of total North American structural panel production Roof Window Header Webstock Wall Sheathing Garage Door Header Flooring Rimboard Door Header Source: APA, July

9 Industry Overview Global OSB Industry Industry OSB Capacity (MMsf-3/8 ) North America* Europe South America Asia * Excluding NA OSB siding capacity Norbord operates in the two significant global OSB producing regions Source: Company documents and other public filings 9

10 Industry Overview North American & European OSB Industries North American OSB Industry European OSB Industry Martco 3% Other 5% Tolko 8% 26% Kalavela 3% Smartply Others 4% 2% Sonae 6% Huber 8% Weyerhaeuser 11% Louisiana- Pacific 21% * Georgia- Pacific 19% Industry Capacity 27 Bsf-3/8 * 10% 11% Egger 11% Industry Capacity 9 Bsf-3/8" KronoSwiss 18% Kronospan 47% * Excluding OSB siding capacity Norbord is a significant player in both key markets Source: Company documents and other public filings stated industry capacity 10

11 Industry Overview Demand Growth Ahead in Both Key Markets 75% OSB Share of Structural Panels 50% North America 25% Europe 0% F Source: Forest Economic Advisors, LLC (FEA) and Norbord estimates 11

12 Capacity (Bsf-3/8") U.S. Housing Starts (mm) Industry Overview US Housing Recovery is Real US Housing Starts and Underlying Demand mm Over-Built 3.7 mm Under-Built U.S. Housing Starts Underlying Demand North American OSB Demand and Capacity F 2017F 2018F 100% 90% 80% 70% 60% 50% 40% 30% Effective Demand / Capacity Effective Capacity Mothballed Capacity Effective Demand / Capacity Source: US Census Bureau and Forest Economic Advisors, LLC (FEA) Favourable long-term OSB industry fundamentals 12

13 Industry Overview North American Capacity Restarted to Meet Growing Demand North American OSB Installed Capacity*: 38 Mills in Operation 8 Mills Indefinitely Curtailed 6 Mills (Re)started in 2013 Norbord Mill * Excluding OSB siding capacity Source: Company documents and other public filings 13

14 Annual Average NC Price US$ per Msf 7/16" Industry Overview Attractive North American OSB Price Outlook OSB prices are tied to demand for building products, which is influenced by the general economy, demographics and the need for housing With US housing recovering, OSB prices are projected to rise above trend North Central Benchmark OSB Price $400 $350 Historical Price Forecasted Price (FEA) $300 $ year average: $229 $200 $150 $100 $50 $ F 2017F Source: Random Lengths and Forest Economic Advisors, LLC (FEA); As of July

15 Industry Overview Core European Housing Markets Recovering 300 Housing Starts (1) (000 s) 50% European OSB Share of Structural Panels 250 Germany +6% in % % UK +6% in % 10% F 0% F (1) Values for Germany represent housing completions Source: Euroconstruct and Norbord estimates 15

16 Industry Overview Japanese Housing Market Stable Significant growth opportunity OSB accounts for only ~10% of the structural panel market in Japan compared to >60% in North America Japanese Housing Starts (000 s) 1,285 Wooden All Other 729 1,061 1, Source: Japanese Ministry of Land, Infrastructure, Transport and Tourism and Company documents 16

17 Business Strategy

18 Business Strategy Norbord s Strategy is Well Defined 1 Develop a world-class safety culture 2 Pursue growth in OSB 3 Own high-quality assets with low-cost positions Maintain a margin-focused operating culture Focus on growth customers through best-in-class service and product development Allocate capital with discipline 18

19 Business Strategy Norbord s Growth Focused on OSB 8 Norbord OSB Capacity (Bsf-3/8 ) (1) (1) 2015 reflects Norbord following completion of merger with Ainsworth. Pre 2015 reflects Norbord excluding Ainsworth. 19

20 Business Strategy Margin Improvement is an Operational Priority Margin Improvement Program (MIP) gains help offset impact of industry-wide rising input costs: Increased productivity Reduced overhead costs Reduced raw material usage Improved product mix MIP has delivered $304 million of margin improvements over the past 12 years 2015 MIP gains of $43 million YTD-2016 MIP gains of $14 million Margin Improvement Program Gains (1) ($ in millions) In Control of Our Controllables (2) 43 (3) (1) Measured relative to prior year at constant prices and exchange rates. (2) The benefits of improved productivity and a richer value-added product mix were offset by higher maintenance spending in (3) 2015 reflects Norbord following completion of merger with Ainsworth. Pre 2015 reflects Norbord excluding Ainsworth. 20

21 Business Strategy Further MIP Ahead Through Identified Merger Synergies Target $45 Million in Annual Merger Synergies (1) Captured $32 million in synergies ($39 million annualized) as of Q Product Specialization Ainsworth s Forming Technology Order File Optimization Sales & Logistics Corporate Overhead Operational Best Practices Operational Standardization Continuous Press Experience Single Public Company Purchasing Savings Additional $18 million of capital and operating cost avoidance (1) Costs to achieve ~50%; Achievable by year-end

22 Business Strategy Diversification From European & Asian End Market Exposure Strong North American footprint LTM Q Shipments by Origin Stable margin operations: Europe Asia-focused exports (1) Europe 24% Provides greater diversification than North American-based competitors Europe 7.5 Bsf-3/8" North North America America 76% Better positioned to weather market cycles (1) Exports to Asia are included in North American shipments. Net sales to Asian markets were $50 million for LTM Q

23 Business Strategy Focused Customer Strategy Sets Norbord Apart New housing sales volume growing as US housing starts recover Industrial and export sales at more stable margins LTM Q North American Shipments Industrial 15% Export 5% 5.7 Bsf-3/8" New Home Construction (Pro-Dealers) 55% Repair & Remodel (Big Box) 25% 23

24 Business Strategy Business Strategy Three main priorities: Investing in our mills Optimizing debt profile Returning cash to shareholders 2016 regular capex budget of $75 million, plus $45 million for Inverness project $180 $160 $140 $120 $100 $80 $60 $40 $20 Capex Investment (US$ millions) Inverness, Scotland - $135 million over next two years. $ Target (1) (1) Capex Brownfield Expansion (1) 2015 and 2016 numbers reflect Norbord following completion of merger with Ainsworth. Pre 2015 reflects Norbord excluding Ainsworth. 24

25 Business Strategy Inverness: Expanding to Meet Growing European Demand Capex budget: Capacity once complete: $135 million ( 95 million) 720 mmsf-3/8 (640 km 3 ) Start-up target: H Existing production lines will run until new line ramps up ensuring no disruption to customers 25

26 Business Strategy Specialty Products Will Drive North American Substitution Growth Reduced dependence on new home construction More predictable, stable margins over business cycle Specialty Industrial & export New home construction Repair & remodel Value added Commodity 2015 Future 26

27 Financial Overview

28 Financial Overview Strong Operating Cash Flow Through The Cycle 921 Total Adjusted EBITDA (US$ millions) Norbord Combined Adjusted EBITDA Ainsworth Adjusted EBITDA (1) Norbord (excluding Ainsworth) Adjusted EBITDA Norbord Sensitivity to North American OSB Price Changes: +$10/Msf 7/16 = +$58 million Adjusted EBITDA (at full capacity) year average: $264 million LTM Q North Central Benchmark OSB Price US Housing Starts (000s) $369 $320 $217 $161 $172 $163 $219 $186 $271 $315 $218 $209 $234 1,956 2,068 1,801 1, ,003 1,111 1,189 (1) As disclosed in Ainsworth s historical MD&As; converted to USD using annual average exchange rate 28

29 Financial Overview Stable Results from European Operations Norbord s European operations provide greater sales and earnings diversification than other North American-based competitors European Adjusted EBITDA (US$ millions) LTM Q

30 Financial Overview Leverage Metrics Improving Rapidly Adjusted EBITDA vs Net Debt Quarterly Adj. EBITDA $ x Analyst Forecast Net Debt to LTM Adj. EBITDA 12x $125 9x $100 $75 6x $50 $25 3.1x 2.2x 3x $0 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16F Q4 16F 0x Source: Analyst reports 30

31 7.70% 5.375% 6.25% Financial Overview Strong Balance Sheet & Liquidity Manageable Debt Maturities (US$ millions) Strong Liquidity Profile (US$ millions) $200 (1) $240 $315 Q Cash $ 12 Bank Lines (2) 237 A/R Securitization (3) 125 Liquidity $374 Stable Issuer Credit Ratings Moody s S&P DBRS Ba2 (Stable) BB- (Stable) BB (Negative) (1) Norbord intends to permanently repay the 2017 bonds at maturity using free cash flow (2) $245 million of bank lines less $8 million outstanding letters of credit drawn at quarter-end (3) $125 million of A/R Securitization limit. No funds drawn at quarter-end 31

32 Financial Overview Variable Dividend Policy in Place since April 2013 Dividends Declared (US$ millions) $ $ $ $ $ YTD 2016 Quarterly dividends Special dividends 32

33 Summary Attractive Investment Opportunity Leverage to unfolding US housing recovery Every +$10 in NA OSB price = +$58 million in Adjusted EBITDA at full capacity Diversification from European operations, North American industrial sales and Asian export sales High quality asset base with low operating costs Focused customer strategy and strong customer partnerships Superior margins versus peers Track record of disciplined capital allocation Strong financial liquidity and comfortable debt maturities 33

34 Appendices

35 Appendices Shareholder Information Ticker Symbol NYSE: OSB TSX: OSB Common Shares 85.6 million outstanding (as at July 25, 2016) Quarterly Dividend CAD $0.10 per share (declared July 26, 2016, to be paid on September 21, 2016 to shareholders of record on September 1, 2016) Majority Shareholder Brookfield Asset Management 53% 35

36 Annual Average NC Price US$ per Msf 7/16" Appendices OSB Prices Strong Over the Cycle Historical North Central Benchmark OSB Price $400 $350 $300 $ year average $200 $150 $100 $50 $ Q Q Q Q Average Source: Random Lengths 36

37 Appendices Financial Sensitivities Direct Exposure Change Adjusted EBITDA Impact (1) (US$ millions) North American OSB $10 per Msf-7/16 + $58 European OSB 10 per 000 m 3 + $8 Canadian dollar (2) $0.01 per C$ + $3 Pound sterling 0.01 per < $1 (1) Assumes operation at full stated capacity levels (including the indefinitely curtailed Huguley, Alabama and Val-d Or, Quebec mills) Direct exposures only; before the impact of any cash flow currency hedges Approximate operating loss carry-forwards for tax purposes (gross) as at Dec. 31, 2015 US $186 million, Canada C$483 million, Belgium 33 million (2) Operating exposures only (excludes dividends on common shares) 37

38 Appendices Analyst Coverage Analyst Analyst Name Contact BMO Capital Markets Ketan Mamtora / Mark Wilde (212) ketan.mamtora@bmo.com CIBC World Markets Hamir Patel (416) hamir.patel@cibc.com Credit Suisse Andrew Kuske (416) andrew.kuske@credit-suisse.com Dundee Capital Markets Stephen Atkinson (514) satkinson@dundeecapitalmarkets.com ERA Forest Products Research John Tumazos Very Independent Research Claire Huxtable (604) chuxtable@era-research.com John Tumazos (732) john@veryindependentresearch.com Raymond James Daryl Swetlishoff (604) daryl.swetlishoff@raymondjames.ca RBC Capital Markets Paul Quinn (604) paul.c.quinn@rbccm.com Scotia Capital Benoit Laprade (514) benoit.laprade@scotiabank.com TD Securities Sean Steuart (416) sean.steuart@tdsecurities.com Vertical Research Partners James Armstrong (212) ja@verticalresearchpartners.com 38

39 Appendices Forecast OSB Pricing North Central 7/16 Norbord does not provide guidance regarding its expectations of future OSB prices. The following is a sample of price forecasts by analysts as at August 3, It is not exhaustive. Annual Average North Central Benchmark OSB Price US$ per Msf 7/16 Analyst 2016F 2017F Scotia Capital BMO Dundee Capital Markets TD Securities CIBC Raymond James Vertical Research Partners RBC Capital Markets Average $258 $283 39

40 Norbord Inc. Suite 600 One Toronto Street Toronto, Ontario, M5C 2W4 Canada Tel: Fax: