Bank of America Merrill Lynch Paper, Packaging & Builders Conference December 10, 2015

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Transcription:

Bank of America Merrill Lynch Paper, Packaging & Builders Conference December 10, 2015

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 (www.norbord.com) 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

Company Overview

Company Overview Norbord Snapshot Leading manufacturer of wood-based panel products Largest global producer of Oriented Strand Board (OSB) Installed OSB capacity of 8.0 Bsf-3/8 (1) (2) Installed panel capacity (including particleboard & MDF) of 8.9 Bsf-3/8 (1) (2) Approximately 2,600 employees at 17 plants across the US, Canada and Europe Listed on the TSX ( NBD ) Report in US dollars and in accordance with IFRS LTM Q3-2015 sales of $1.5 billion (2) US 43% Panel Capacity by Region Europe 20% North America Europe 8.9 Bsf-3/8 (1)(2) Oriented Strand Board (OSB) Particleboard Medium Density Fibreboard (MDF) Canada 37% Furniture (1) Does not include the 600 MMsf-3/8 Grande Prairie, Alberta Line 2 ( GP2 ) expansion project (2) Results reflect combined performance following completion of merger with Ainsworth 4

Enterprise Value ($USmm) OSB Capacity (Bsf-3/8") Company Overview The Leading Global OSB Company 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Top 10 Global OSB Producers Norbord Louisiana-Pacific Georgia-Pacific Weyerhaeuser Kronospan Huber Tolko KronoSwiss Egger Martco $3,500 Enterprise Value $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- West Fraser Louisiana-Pacific Norbord Canfor Corp. Interfor Western Forest Products Conifex Source: Bloomberg and company filings. Enterprise values as at October 30, 2015 5

Company Overview Norbord s Products Norbord s operations now 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

Industry Overview

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 panels Roof Window Header Webstock Wall Sheathing Garage Door Header Flooring Rimboard Door Header 8

Industry Overview Global OSB Industry 30 Industry OSB Capacity (MMsf-3/8 ) 20 10 0 North America Europe South America Asia Norbord operates in the two significant global OSB producing regions Source: Company Documents and Other Public Filings 9

Industry Overview North American & European OSB Industries North American OSB Industry European OSB Industry Kalavela 4% Others 2% Huber 8% Martco Other Tolko 3% 3% 8% 26% Sonae 7% Smartply 5% Kronospan 39% Weyerhaeuser 11% Industry Capacity 28 Bsf-3/8 11% Industry Capacity 8 Bsf-3/8 Georgia-Pacific 19% Louisiana-Pacific 22% Egger 12% KronoSwiss 20% Norbord is a significant player in both key markets Source: Company documents and other public filings installed industry capacity 10

Industry Overview Demand Growth Ahead in Both Key Markets 75% OSB Share of Structural Panels 50% North America 25% Europe 0% 80 85 90 95 00 05 10 Source: FEA and Norbord Estimates 11

Capacity (Bsf-3/8") US Housing Starts (mm) Industry Overview US Housing Recovery is Real US Housing Starts and Underlying Demand 2.5 1.5 mm Over-Built 2.0 3.7 mm Under-Built 1.5 1.0 0.5 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015F U.S. Housing Starts Underlying Demand North American OSB Demand and Capacity 35.0 30.0 25.0 20.0 15.0 10.0 5.0 21.4 22.8 24.0 24.8 25.9 26.9 28.0 28.6 29.2 28.4 27.8 27.1 26.9 27.1 28.0 28.4 28.7 29.0 100% 90% 80% 70% 60% 50% 40% Effective Demand / Capacity 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F Effective Capacity Mothballed Capacity Effective Demand / Capacity 30% Source: US Census Bureau and Forest Economic Advisors, LLC (FEA); As of October 2015 Favourable long-term OSB industry fundamentals 12

Industry Overview 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 13

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 Historical Price Forecasted Price $350 $300 $250 15-year average: $229 $200 $150 $100 $50 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F Source: Random Lengths and Forest Economic Advisors, LLC (FEA); As of September 2015 14

Industry Overview Core European Housing Markets Recovering Housing Starts (000 s) European OSB Share of Structural Panels 275 45% 250 40% 225 Germany +4% in 2014 35% 200 30% 175 25% 150 UK +9% in 2014 20% 125 15% 100 10% 75 5% 50 2009 2010 2011 2012 2013 2014 0% 80 85 90 95 00 05 10 Source: National House Builder Confederation (NHBC), Construction Products Association (CPA) & Bundesbank 15

Industry Overview Japanese Housing Market Stable Significant growth opportunity OSB accounts for only ~8% of the structural panel market in Japan compared to >60% in North America Japanese Housing Starts (000 s) 1,236 1,285 1,061 1,093 Wooden All Other 980 693 729 556 577 788 358 813 834 353 369 883 396 430 892 403 543 556 505 517 430 460 465 487 550 489 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Japanese Ministry of Land, Infrastructure, Transport and Tourism 16

Business Strategy

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 4 5 6 Maintain a margin-focused operating culture Focus on growth customers through best-in-class service and product development Allocate capital with discipline 18

Business Strategy Norbord s Growth Focused on OSB 8 Norbord OSB Capacity (Bsf-3/8 ) 7 6 5 4 3 2 1 0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 19

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 Margin Improvement Program Gains (1) ($ in millions) In Control of Our Controllables 56 37 MIP has delivered $261 million of margin improvements over the past 11 years with minimal capital investments 28 14 29 16 25 23 24 2015 Q3 YTD MIP gains of $34 million 9 0 (2) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (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 2013 20

Business Strategy Further MIP Ahead Through Identified Merger Synergies $45 Million in Annual Merger Synergies (1) As of Q3 2015, $5 million in realized synergies ($20 million annualized) 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 (1) Costs to achieve ~50%; Achievable over 18-24 months 21

Business Strategy Diversification From European & Asian End Market Exposure Strong North American footprint LTM Q3-2015 Shipments by Geography (1) Stable margin operations: Asia Europe Asia-focused exports 4% Europe Provides greater diversification than North American-based competitors 24% 7.1 Bsf-3/8 (1) North America 72% Better positioned to weather market cycles (1) Results reflect combined performance following completion of merger with Ainsworth 22

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 Q3-2015 North American Shipments (1) Export 5% Industrial 20% New Home Construction (Pro-Dealers) 50% 5.4 Bsf-3/8 (1) Repair & Remodel (Big Box) 25% (1) Results reflect combined performance following completion of merger with Ainsworth 23

Business Strategy Capital Allocation Three main priorities: Investing in our mills Optimizing debt profile $180 $160 $140 $120 Capex Investment (US$ millions) Returning cash to shareholders $100 $80 $60 $40 $20 $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (1) Fcast Target (1) Capex Greenfield Expansion (1) 2015 and 2016 numbers reflect Norbord following completion of merger with Ainsworth. Pre 2015 reflects Norbord excluding Ainsworth. 24

Financial Overview

Financial Overview Strong Operating Cash Flow Through The Cycle 921 Total Adjusted EBITDA (US$ millions) 290 631 802 307 Norbord (excluding Ainsworth) Adjusted EBITDA Ainsworth Adjusted EBITDA (1) Norbord Combined Adjusted EBITDA (2) Norbord Sensitivity to North American OSB Price Changes: +$10/Msf 7/16 = +$58 million Adjusted EBITDA (at full capacity) North Central Benchmark OSB Price US Housing Starts (000s) 495 295 48 247 19 42-23 11-year average: $277 million -60 5 5-60 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 LTM Q3-2015 $369 $320 $217 $161 $172 $163 $219 $186 $271 $315 $218 $202 1,956 2,068 1,801 1,355 906 554 587 609 781 925 1,003 1,089 165 58 107 58 13 45 294 106 188 432 145 287 117 80 (1) As disclosed in Ainsworth s historical MD&As; converted to USD using annual average exchange rate (2) As disclosed in the Q2-2015 and Q3-2015 MD&A 26

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) $90 $80 81 $70 $60 58 $50 $40 $30 32 35 37 44 39 46 47 39 $20 17 $10 $0 4 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 LTM Q3-2015 27

7.70% 5.375% 6.25% Financial Overview Strong Balance Sheet & Liquidity Manageable Debt Maturities (US$ millions) Strong Liquidity Profile (US$ millions) $200 $240 $315 Q3 2015 Cash $ 2 Bank Lines (1) 240 A/R Securitization (2) 81 Liquidity $323 Stable Issuer Credit Ratings Moody s S&P DBRS Ba2 (Stable) BB- (Stable) BB (Negative) 2015 2016 2017 2018 2019 2020 2021 2022 2023 (1) $245 million of bank lines less $5 million outstanding letters of credit drawn at quarter-end (2) $125 million of A/R Securitization limit less $44 million drawn at quarter-end 28

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 29

Norbord Inc. Suite 600 One Toronto Street Toronto, Ontario, M5C 2W4 Canada Tel: 416-365-0705 Fax: 416-365-3292 www.norbord.com