Q Earnings Presentation July 26, 2016

Transcription

1 Q Earnings Presentation July 26, 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 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 Q Financial and Operational Highlights Adjusted earnings of $0.49 per diluted share, a $0.63 improvement over Q Adjusted EBITDA of $94 million, $75 million higher than Q Captured $32 million in cumulative merger synergies ($39 million annualized), 87% of $45 million total commitment Realized Margin Improvement Program gains of $14 million year-to-date Record quarterly production at four mills North American operating mills produced at 96% of stated capacity European mills produced at 104% of stated capacity North American manufacturing costs decreased 6% year-to-date Declared CAD $0.10/share quarterly dividend payable September 21,

4 US Housing Starts (in millions) F (1) June YTD data: housing starts up 7% and single family starts up 13% YoY (1) Based on US housing economist forecasts Source: US Department of Commerce, except where otherwise noted 4

5 US $/Msf-7/16 North American Benchmark OSB Prices North Central South East Western Canada 100 Q Q Q Q Q Spread SE vs NC Spread WC vs NC Source: Random Lengths 5

6 European Indicative OSB Prices (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 Financial Summary (US $ millions, except per share information) Q2 Q1 Q2 6 mos 6 mos Sales $ 447 $ 384 $ 365 $ 831 $ 716 Adjusted EBITDA North America Europe Unallocated (2) (2) (2) (4) (4) Total Earnings (loss) $ 44 $ 23 $ (23) $ 67 $ (60) Adjusted for: Merger transaction costs Costs to achieve merger synergies Costs related to High Level Fire Costs on early debt extinguishment Foreign exchange loss on Ainsworth Notes Gain on derivative financial instrument on Ainsworth Notes (4) Reported income tax expense (recovery) 10 3 (22) 13 (36) Adjusted pre-tax earnings (loss) (16) 84 (35) Income tax (expense) recovery at statutory rate (1) (15) (7) 4 (22) 9 Adjusted earnings (loss) (12) 62 (26) Adjusted EPS, basic and diluted (0.14) 0.72 (0.30) (1) Represents Canadian combined federal and provincial statutory rate 7

8 Adjusted EBITDA Variance (US $ millions) Q Q mos 2016 vs. vs. vs. Q Q mos 2015 Adjusted EBITDA current period $ 94 $ 94 $ 155 Adjusted EBITDA comparative period Variance Mill nets (1) Volume (2) Key input prices (3) Key input usage (3) Mill profit share and bonus (2) (3) (4) Other operating costs and foreign exchange (4) (10) (3) 1 Total $ 33 $ 75 $ 120 (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 Liquidity and Capital Resources (US $ millions, except per share information) Q Q Q mos mos 2015 Cash provided by (used for) operating activities $ 83 $ 3 $ (3) $ 86 $ (55) Cash provided by (used for) operating activities per share (0.04) 1.01 (0.64) Operating working capital Investment in property, plant and equipment & intangible assets regular capex budget is $75 million 2016 estimated capex of $45 million on $135 million Inverness project 9

10 Balance Sheet (US $ millions, unless otherwise noted) Bank Covenant Jun 25, 2016 Mar 26, 2016 Dec 31, 2015 Jun 27, 2015 Long-term debt, principal value $ 755 $ 755 $ 755 $ 755 Add: Other long-term debt (1) Less: Cash (12) (14) (9) (10) Net debt Less: Other long-term debt (1) - (55) (30) (50) Add: Letters of credit Net debt for financial covenant purposes Tangible net worth Min. $500 (2) Net debt to capitalization, book basis Max. 65% 48% 50% 51% 50% Liquidity of $374 million = $12 million in cash + $237 million in unused credit lines + $125 million undrawn A/R securitization (1) Drawings under A/R securitization program (carved out of Net debt for financial covenant purposes) (2) TNW was reset to $500 million from $450 million when the bank lines were renewed in June

11 Appendices

12 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 12

13 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 July 20, It is not exhaustive. Annual Average North Central Benchmark OSB Price US$ per Msf 7/16 Analyst 2016F 2017F Dundee Capital Markets Vertical Research Partners Raymond James Scotia Capital BMO CIBC TD Securities RBC Capital Markets Average $250 $276 13

14 Appendices North American Capacity Restarted to Meet Growing Demand North American OSB Installed Capacity: 39 Mills in Operation 8 Mills Indefinitely Curtailed 6 Mills (Re)started in 2013 Norbord Mill Source: Company documents and other public filings 14

15 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) 15