Year-End 2012 Investor Presentation. February 2013

Transcription

1 Year-End 2012 Investor Presentation February 2013

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 restated or 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 1,900 employees at 13 plants across the US, Europe and Canada Listed on TSX ( NBD and NBD.WT ) Reports in US dollars and in accordance with IFRS As at December 31, 2012: Total assets of $1,115 million LTM sales of $1,149 million LTM EBITDA of $188 million Panel Capacity by Region US 61% 6.1 Bsf Europe 27% Canada 12% 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 The OSB Market II. INDUSTRY OVERVIEW OSB is an innovative, affordable and environmentally smart structural panel Serves many of the same uses as plywood, but produced at a lower cost Norbord expects that OSB will continue to capture market share from plywood North American Structural Panels Market Share Sources: APA-The Engineered Wood Association ( APA ) and Forest Economic Advisors, LLC ( FEA ) 5

6 US Housing Starts Recovery is Real II. INDUSTRY OVERVIEW Leverage to US housing recovery Favourable long-term OSB industry fundamentals US Housing Starts (millions) m homes OVER built m homes UNDER built 0.5 Housing Starts Underlying Demand 0.0 Source: Forest Economic Advisors, LLC ( FEA ) 6

7 OSB Industry Curtailments Continue II. INDUSTRY OVERVIEW Operating Mills - unutilized capacity 9% 15% Mothballed Mills - announced restarts for 2013 & 2014 Operating Mills Bsf Production in Q4/2012 (annualized) 60% Industry Capacity: 28 Bsf 16% Mothballed Mills - remaining Sources: APA & Norbord Estimates 7

8 Significant OSB Industry Capacity Curtailment II. INDUSTRY OVERVIEW North American OSB Installed Capacity: 38 Mills in Operation 9 Mills Indefinitely Curtailed 6 Mills Curtailed, but 2013/14 Restarts Announced Source: Company Documents 8

9 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 rise Average North Central Benchmark OSB Price per Msf (7/16 ) 400 Average North Central Benchmark OSB Price per Msf (7/16") E 2014E 2015E 2016E Sources: Random Lengths and FEA 9

10 Norbord a Significant Player in OSB Industry II. INDUSTRY OVERVIEW North American OSB Industry European OSB Industry Industry Capacity 28 Bsf Industry Capacity 5 Bsf Source: Company Documents - Installed Capacity 10

11 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 11

12 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 12

13 40%50% 20%30% 0%10% -20%-10% -30% 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% -10% % -30% Norbord North American peer (1) Source: Company Documents (1) North American peer = Louisiana-Pacific 13

14 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: $60 MIP Gains (US$ millions) 56 Increased productivity Reduced overhead costs Reduced raw material usage Improved product mix $50 $40 $30 $20 $ $

15 Customer Strategy Sets Norbord Apart III. BUSINESS STRATEGY New housing sales volume growing as US housing starts recover Norbord s pro-dealer shipments grew 35% in Industrial 30% NA Shipments 2.9 Bsf 35% New Home Construction (Pro-dealers) NA Shipments 3.1 Bsf 35% Repair & Remodel (Big Box) 15

16 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 16

17 Strong Operating Cash Flow Through Cycle IV. FINANCIAL OVERVIEW Total EBITDA (US$ millions) $700 $600 $ Norbord Sensitivity to North American OSB Price Changes: +$10/Msf 7/16 = +$36 million EBITDA (at full capacity) $400 $300 $200 $100 $0 ($100) Average $206 million (60) North Central Benchmark OSB Price

18 Strong Results Continue from European Operations IV. FINANCIAL OVERVIEW Norbord s European operations provide greater sales and earnings diversification than other North American-based competitors European EBITDA (US$ millions) $90 $80 $70 $60 $50 $40 $30 $20 $10 $

19 Norbord s Financial House Is In Order IV. FINANCIAL OVERVIEW Manageable Debt Maturities (1) Strong Liquidity US$ millions Q Cash 128 Revolving Bank Lines (Undrawn) 6.25% Bonds 7.70% Bonds Bank Lines 242 A/R Sec. (1) 85 Liquidity 455 Stable Issuer Credit Ratings DBRS Moody s S&P BB(low) Ba3 BB- (1) In addition, the Company has an $85 million 1 year evergreen A/R securitization program. 19

20 Attractive Investment Opportunity V. SUMMARY Leverage to accelerating US housing recovery Every +$10 in OSB price = +$36 million in EBITDA at full capacity Low-cost operating platform Superior margins versus peers Track record of disciplined capital allocation Well positioned for recovery Strong customer partnerships Diversification from European operations Strong financial liquidity and comfortable debt maturities Significant industry capacity permanently and indefinitely idled 20

21 Appendices 21

22 OSB Prices Strong Over the Cycle Average North Central Benchmark OSB Price per Msf (7/16 ) 15 year Average Q Q Q Q Average Source: Random Lengths 22

23 Financial Sensitivities Exposure Change EBITDA Impact (1) (2) ($ millions) North American OSB $10 per Msf 7/16 + $36 European OSB 10 per m 3 + $7 Canadian dollar $0.01 per Cdn$ + $1 Pound sterling 0.01 per + $2 (1) Assumes operation at full capacity levels (2) Tax operating loss carry-forwards as at Dec. 31, 2012 US $145 million, Canada C$85 million, Belgium 38 million 23

24 Analyst Coverage of Norbord Analyst Analyst Name Contact BMO Capital Markets Stephen Atkinson (514) Credit Suisse Andrew Kuske (416) Desjardins Securities Pierre Lacroix (514) ERA Forest Products Research John Tumazos Very Independent Research Claire Huxtable John Tumazos (604) (732) Raymond James Daryl Swetlishoff (604) RBC Capital Markets Paul Quinn (604) Salman Partners Mike Richmond (604) Scotia Capital Benoit Laprade (514) TD Securities Sean Steuart (416) Vertical Research Partners James Armstrong (212)

25 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 February 20, It is not exhaustive. North Central Benchmark OSB Price US$ per Msf 7/ Credit Suisse 300 Desjardins Securities 298 ERA Forest Products Research 350 Raymond James 310 RBC Capital Markets 375 Salman Partners 320 Scotia Capital 320 TD Securities 328 Vertical Research Partners 400 Average $333 25