Q Investor Presentation. August 2014

Transcription

1 Q Investor Presentation August 2014

2 Forward-Looking Statements and Non-IFRS Financial Information All financial references are expressed in US$ unless otherwise noted. Financial numbers prior to 2010 were prepared in accordance with CGAAP, while numbers from 2010 onward have been prepared in accordance with IFRS. 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 Snapshot I. COMPANY OVERVIEW Norbord is a leading manufacturer of wood-based panel products and one of the largest global producers of OSB Installed OSB capacity of over 5 Bsf 1,950 employees at 13 plants across the US, Europe and Canada Listed on TSX ( NBD ) Reports in US dollars and in accordance with IFRS As at June 28, 2014: Total assets of $1,196million LTM sales of $1,227 million LTM EBITDA of $134 million CANADA US 61% Panel Capacity by Region Europe 6.1 Bsf Europe 27% Canada 12% Oriented Strand Board Medium Density Fibreboard UNITED STATES North America Particleboard Furniture UNITED KINGDOM FRANCE BELGIUM GERMANY MEXICO BAHAMAS _1.WOR (NY007FJI) TURKS AND CAICO CUBA _1.WOR (NY007FJI) 3

4 Norbord s Products I. COMPANY OVERVIEW Norbord s operations include 11 OSB mills, two particleboard mills, one medium density fibreboard ( MDF ) mill and one furniture plant OSB 84% of Capacity New home construction Repair and remodel Light commercial construction Industrial applications Particleboard 10% of Capacity New home construction Repair and remodel Furniture Fixtures MDF 6% of Capacity Furniture Fixtures Mill work 4

5 Typical Uses for OSB Products II. INDUSTRY OVERVIEW Roof Walls Flooring 5

6 Norbord Operates in the Two Significant Global OSB Markets II. INDUSTRY OVERVIEW 30 Industry OSB Capacity (MMsf 3/8 ) North America Europe South America Asia Source: Company Documents and Other Public Filings 6

7 Norbord a Significant Player in Both Key Markets II. INDUSTRY OVERVIEW North American OSB Industry European OSB Industry Tolko 8% Other 7% Louisiana- Pacific 22% Smartply 6% Kalavela 5% Huber 8% Sonae 8% Kronospan 33% Ainsworth 9% Industry Capacity 28 Bsf Georgia- Pacific 19% Egger 12% Industry Capacity 6 Bsf Weyerhaeuser 11% Norbord 16% Norbord 12% Kronoswiss 24% Source: Company Documents and Other Public Filings - Installed Capacity 7

8 Demand Growth Ahead in Both Key Markets II. INDUSTRY OVERVIEW 75% OSB Share of Structural Panels 50% North America 25% Europe 0% Source: FEA and Norbord Estimates 8

9 US Housing Starts Recovery is Real II. INDUSTRY OVERVIEW Leverage to US housing recovery Favourable long-term OSB industry fundamentals US Housing Starts (millions) OVER built UNDER built 0.5 Housing Starts Underlying Demand 0.0 Source: FEA 9

10 Additional OSB Capacity Restarted to Meet Growing Demand II. INDUSTRY OVERVIEW North American OSB Installed Capacity: 38 Mills in Operation 8 Mills Indefinitely Curtailed 6 Mills (Re)started in 2013 Norbord Mill Source: Company Documents and Other Public Filings 10

11 Annual Average NC Price US$ per Msf 7/16" Attractive OSB Outlook II. INDUSTRY OVERVIEW 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 remain above trend North Central Benchmark OSB Price year average F 2015F 2016F Sources: Random Lengths and FEA 11

12 Core European Housing Markets Recovering II. INDUSTRY OVERVIEW Housing Starts (000s) Germany +12% per year UK +30% in F Source: National House Builder Confederation (NHBC), Construction Products Association (CPA) & Bundesbank 12

13 Norbord s Strategy is Well Defined III. BUSINESS STRATEGY Pursue growth in OSB Own highest-quality assets with lowest cost position Maintain a margin-focused operating culture Focus on growth customers through best-in-class service and product development Allocate capital with discipline 13

14 Norbord s Growth Focused on OSB III. BUSINESS STRATEGY Norbord OSB Capacity (Billion Square Feet 3/8 ) '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 14

15 50% 40% 30% 20% 10% 0% % -20% -30% Norbord North American peer (1) Low Cost Margin-Focused Operating Platform III. BUSINESS STRATEGY Low cost operating platform providing superior margins versus peers North American OSB EBITDA Margin % 50% 40% 30% 20% 10% 0% LTM -10% -20% -30% Norbord North American peer (1) Source: Company Documents and Other Public Filings (1) North American peer = Louisiana-Pacific 15

16 Margin Improvement is an Operational Priority III. BUSINESS STRATEGY Margin Improvement Program (MIP) gains help offset impact of industry-wide rising input costs, without capex investment: Increased productivity Reduced overhead costs Reduced raw material usage Improved product mix $60 $50 $40 $30 $20 $10 $0 MIP Gains (US$ millions) (1) (1) The benefits of improved productivity and a richer value-added product mix were offset by higher maintenance spending in

17 Customer Strategy Sets Norbord Apart III. BUSINESS STRATEGY New housing sales volume growing as US housing starts recover Pro-dealer shipments now represent 50% of Norbord sales volume 2011 Q (annualized) Industrial 30% NA Shipments 2.9 Bsf 35% New Home Construction (Pro-dealers) 20% NA Shipments 3.4 Bsf 50% 30% 35% Repair & Remodel (Big Box) 17

18 Disciplined Capital Allocation III. BUSINESS STRATEGY Track record of disciplined capital allocation Accretive acquisitions Low cost capacity additions Divestment of non-core assets Deleverage on cyclical upturns Dividends Share buybacks $180 $160 $140 $120 $100 $80 $60 $40 $20 Capex Investment (US$ millions) $ F Capex Greenfield Expansion 18

19 Strong Operating Cash Flow Through Cycle IV. FINANCIAL OVERVIEW $700 $600 $ Total EBITDA (US$ millions) Norbord Sensitivity to North American OSB Price Changes: +$10/Msf 7/16 = +$36 million EBITDA (at full capacity) $400 $300 $200 $100 $0 ($100) North Central Benchmark OSB Price year average $198 million LTM (60)

20 Stable Results Continue from European Operations IV. FINANCIAL OVERVIEW Norbord s European operations provide greater sales and earnings diversification than other North American-based competitors $100 $80 $60 $40 $20 $0 European EBITDA (US$ millions) LTM 20

21 Principal Value - US $ millions Norbord s Financial House Is In Order IV. FINANCIAL OVERVIEW Manageable Debt Maturities (1) Strong Liquidity Revolving Bank Lines (Undrawn) % Bonds 5.375% Bonds 240 US$ millions Q Cash 83 Bank Lines 242 A/R Sec. (1) 100 Liquidity Stable Issuer Credit Ratings Moody s S&P Ba2 (Stable) BB- (Positive) DBRS BB (Stable) (1) In addition, the Company has an undrawn $100 million 1-year evergreen A/R securitization program. 21

22 Attractive Investment Opportunity V. SUMMARY Leverage to unfolding US housing recovery Every +$10 in NA OSB price = +$36 million in EBITDA at full capacity Stable EBITDA contribution from European operations Low-cost operating platform Superior margins versus peers Track record of disciplined capital allocation Strong financial liquidity and comfortable debt maturities Dividend yield of 10% (at August 27 th C$23.19 closing share price) 22

23 Appendices 23

24 Shareholder Information Ticker Symbol Common Shares Quarterly Dividend TSX: NBD 53.4 million outstanding (as at July 31, 2014) CAD $0.60 per share (payable on September 21, 2014 to shareholders of record on September 1, 2014) Majority Shareholder Brookfield Asset Management 52% 24

25 Annual Average NC Price US$ per Msf 7/16" OSB Prices Strong Over the Cycle Historical North Central Benchmark OSB Price year average Q Q Q Q Average Source: Random Lengths 25

26 Financial Sensitivities Exposure Change EBITDA Impact (1) ($ millions) North American OSB $10 per Msf 7/16 + $36 European OSB 10 per m 3 + $7 Canadian dollar (2) $0.01 per Cdn$ < $1 Pound sterling 0.01 per < $1 (1) Assumes operation at full capacity levels Direct exposures only; before the impact of any cash flow currency hedges Tax operating loss carry-forwards (gross) as at Dec. 31, 2013 US $71 million, Canada C$49 million, Belgium 30 million (2) Excluding dividends on common shares 26

27 Analyst Coverage of Norbord Analyst Analyst Name Contact CIBC Mark Kennedy (403) Credit Suisse Andrew Kuske (416) Dundee Capital Markets Stephen Atkinson (514) ERA Forest Products Research John Tumazos Very Independent Research Claire Huxtable (604) John Tumazos (732) Raymond James Daryl Swetlishoff (604) RBC Capital Markets Paul Quinn (604) Salman Partners Rajiv Mukhi (604) Scotia Capital Benoit Laprade (514) TD Securities Sean Steuart (416) Vertical Research Partners James Armstrong (212)

28 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 27, It is not exhaustive. Annual Average North Central Benchmark OSB Price US$ per Msf 7/ F 2015F CIBC Dundee Capital Markets Raymond James RBC Capital Markets Salman Partners Scotia Capital TD Securities Vertical Research Partners Average $227 $257 28