Q Earnings Presentation. July 28, 2017

Transcription

1 Q Earnings Presentation July 28,

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. Such statements and estimates are based on assumptions as to the future and on management s current expectations and are, naturally, subject to risks and uncertainties. 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 and quarterly 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 Highlights Q Financial and Operational Highlights Adjusted earnings of $1.10 per diluted share, more than double Q Adjusted EBITDA of $165 million, $71 million higher than Q North Central benchmark OSB price averaged $330 per Msf, up 25% from Q Capacity utilization at Norbord s North American mills up 3% year-over-year Repaid $61 million in temporary drawings on accounts securitization program Declared quarterly dividend of C $0.50 per share for shareholders of record on September 1, 2017 an increase of C $0.20 3

4 Business Drivers US Housing Starts (in millions) F June 2017 SAAR housing starts at 1.22 million with single family starts up 8% YoY (1) (1) Based on US housing economists forecasts. Source: US Department of Commerce, except where otherwise noted 4

5 US$/Msf-7/16 Business Drivers North American Benchmark OSB Prices North Central South East 200 Western Canada Q Q Q Q Q Spread SE vs NC Spread WC vs NC Source: Random Lengths 5

6 Business Drivers European Indicative OSB Price (1) /m Q Q Q Q Q (1) European indicative average OSB price represents the gross delivered price to the largest continental market. 6

7 Financials Financial Summary Q2 Q1 Q2 6 mos 6 mos (US $ millions, except per share information) Sales $ 536 $ 467 $ 447 $ 1,003 $ 831 Adjusted EBITDA North America Europe Unallocated (1) (5) (2) (6) (4) Total Earnings $ 97 $ 49 $ 44 $ 146 $ 67 Adjusted for: Loss on disposal of assets Stock-based compensation and related costs Costs to achieve merger synergies Costs related to High Level fire Reported income tax expense Adjusted pre-tax earnings Income tax expense at statutory rate (1) (35) (18) (15) (53) (22) Adjusted earnings Adjusted EPS, basic (2) (1) Represents Canadian combined federal and provincial statutory rate. (2) Basic and diluted earnings per share are the same except diluted Adjusted earnings per share for 6 months 2017 is $1.67 and 6 months 2016 is $

8 Financials Adjusted EBITDA Variance (US $ millions) Q Q mos 2017 vs. vs. vs. Q Q mos 2016 Adjusted EBITDA current period $ 165 $ 165 $ 268 Adjusted EBITDA comparative period Variance Mill nets (1) Volume (2) Key input prices (3) (3) (14) (21) Key input usage (3) Mill profit share and bonus (3) (3) (6) Other operating costs and foreign exchange (4) 10 (4) (27) Total $ 62 $ 71 $ 113 (1) The mill nets variance represents the estimated impact of change in realized pricing across all products. Mill nets are calculated as sales (net of outbound freight costs) divided by shipment volume. (2) The volume variance represents the impact of shipment volume changes across all products. (3) The key inputs include wood fibre, resin, wax and energy. (4) The other operating costs and foreign exchange category covers all remaining variances including labour and benefits, and maintenance. 8

9 Financials Liquidity and Capital Resources (US $ millions, except per share information) 2017 Budget Q Q Q mos mos 2016 Cash provided by operating activities $ 144 $ 39 $ 83 $ 183 $ 86 Cash provided by operating activities per share Operating working capital Investment in property, plant and equipment & intangible assets (excluding Inverness project) (1) Investment in Inverness project (1) Regular capex budget includes the remaining $30 million to prepare the Huguley, Alabama mill for restart when warranted by customer demand. Year-to-date 2017, $23 million has been spent on the Huguley restart project. 9

10 Financials Balance Sheet (US $ millions, unless otherwise noted) Bank Covenant Jul 1, 2017 Dec 31, 2016 Long-term debt, principal value $ 555 $ 755 Less: Cash and cash equivalents (7) (161) Net debt Add: Letters of credit Net debt for financial covenant purposes Tangible net worth Min. $500 1, Net debt to capitalization, book basis Max. 65% 36% 41% Liquidity of $358 million = $7 million in cash + $226 million in revolving bank lines + $125 million undrawn A/R securitization 10

11 Appendices

12 Annual Average NC Price US$ per Msf 7/16" Appendices Historical North American OSB Prices North Central Benchmark OSB Price $400 $350 $300 $ year average $200 $150 $100 $50 $ Q Q Q Q Average Source: Random Lengths 12

13 Appendices Forecast North American OSB Prices Norbord does not provide guidance regarding its expectations of future OSB prices. The following is a sample of price forecasts by analysts as at July 27, It is not exhaustive. Annual Average North Central Benchmark OSB Price US$ per Msf 7/16 Analyst 2017F 2018F CIBC World Markets Raymond James RBC Capital Markets BMO Capital Markets Scotiabank Armstrong Investment Research Buckingham Research Group Vertical Research Partners TD Securities Average $312 $300 13

14 Appendices North American Capacity Restarts Needed to Meet Growing Demand (in Bsf-3/8 ) 2012 Q2/17 LTM Production Restarts/Idled =27% =14% North American OSB Installed Capacity: 37 Mills in Operation 7 Mills (Re)started in 2012/13 7 Mills Curtailed Norbord Mill Note: Excludes OSB siding capacity. Source: APA, company documents and other public filings 14

15 Appendices Financial Sensitivities Exposure Change Adjusted EBITDA Impact (1) (US$ millions) North American OSB $10 per Msf-7/16 + $59 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 curtailed Huguley, Alabama and Chambord, 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, 2016 US $132 million, Canada C$186 million, Belgium 32 million. (2) Operating exposures only (excludes dividends on common shares). 15