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Press release from CNW Group

Norbord Reports First Quarter 2012 Results

Friday, April 27, 2012

Norbord Reports First Quarter 2012 Results06:00 EDT Friday, April 27, 2012Note:  Financial references in US dollars unless otherwise indicated.Q1 2012 HIGHLIGHTSAchieved positive EBITDA of $21 million - more than double the prior quarterImproved North American EBITDA - $14 million vs. $2 million the prior quarterEuropean panel markets holding - shipments up 11% vs. the prior quarterMargin improvement program delivered $7 million of gainsBest-ever quarterly safety performance - incident rate of just 0.40 YTDTORONTO, April 27, 2012 /CNW/ - Norbord Inc. (TSX: NBD, NBD.WT) today reported EBITDA of $21 million in the first quarter of 2012, a $12 million improvement from the fourth quarter of 2011 and a $7 million improvement from the same quarter last year.  North American operations generated EBITDA of $14 million in the first quarter of 2012 versus $2 million and $7 million in the fourth and first quarters of 2011, respectively.  European operations generated EBITDA of $11 million in the first quarters of 2012 and 2011 versus $10 million in the fourth quarter of 2011.Norbord recorded break-even earnings in the first quarter of 2012 compared to a loss of $9 million or $0.21 per share in the prior quarter.  In the same quarter last year, the Company recorded a loss of $2 million or $0.05 per share, which included a non-recurring income tax recovery of $5 million or $0.11 per share."Our first quarter results are evidence that business is getting better," said Barrie Shineton, President and CEO.  "Our EBITDA improvement reflects a 7% quarter-over-quarter increase in North American benchmark OSB prices as well as continuing strong results from our European operations.  I am particularly pleased with our Margin Improvement Program, which delivered another $7 million in gains from reduced raw material usages and record plant productivity.""This more positive trend should continue through the remainder of 2012.  In North America, US economic news is improving and housing starts appear to be making a slow comeback.  In Europe, our business is holding up better than expected and I now believe we will have another solid year."Market ConditionsUS housing starts were 20% higher during the first quarter of this year compared to the same period last year and permits were 30% higher.  More importantly for the OSB industry, US single family housing starts were 17% better versus last year.  In this firmer demand environment, the North American North Central benchmark OSB price averaged $203 per thousand square feet (Msf) (7⁄16-inch basis) in the first quarter compared to $190 per Msf in the prior quarter and $198 per Msf during the same quarter last year.  In the South East region, where approximately 55% of Norbord's North American capacity is located, prices averaged $190 per Msf in the first quarter, compared to $166 per Msf in the prior quarter and $177 per Msf during the same quarter last year.  Expert forecasts for 2012 US housing starts now range from 680,000 to 770,000, which is 11%-26% higher than last year's 610,000 starts.In Europe, despite the negative economic news, overall panel markets continued to show surprising strength.  In the UK, where the majority of Norbord's European assets are located, the housing market continues to slowly recover with home prices, housing starts activity and mortgage lending all trending up.  In addition, the UK government recently announced the "NewBuy" program to spur new home sales and increase home buyer eligibility by guaranteeing mortgages.  The UK government also announced legislative changes aimed at unblocking the permit planning pipeline.  Both of these initiatives are expected to be positive for housing demand over the longer term.In the quarter, average European panel prices softened slightly compared to the previous quarter but remain higher than last year.  After peaking mid-last year, OSB prices were 7% lower than the same quarter a year ago and 5% down from the prior quarter.  However, particleboard and MDF prices are holding on to double digit gains compared to the same quarter last year, at 13% and 11% higher, respectively.  Quarter-over-quarter, particleboard and MDF prices were essentially flat.PerformanceIn North America, OSB shipment volumes increased 5% versus the prior quarter and were consistent year-over-year. Norbord's operating OSB mills ran at approximately 85% of their capacity in the first quarter of 2012. Including the indefinitely closed mills in Huguley, Alabama and Jefferson, Texas, the North American operations ran at approximately 65% of capacity in the first quarter of 2012 compared to 60% the previous quarter and identical to the same period a year ago.Norbord's North American OSB cash production costs per unit decreased by 3% versus the same quarter last year due to lower raw material usage and productivity gains resulting from the Company's Margin Improvement Program (MIP).  Cash costs remained in line with the prior quarter.In Europe, panel shipments increased by 11% over the prior quarter and 3% over the same quarter a year ago.  Norbord's European mills produced at approximately 95% of estimated capacity in the quarter, which reflects the 6% increase in stated panel capacity effective December 31, 2011.Norbord's MIP delivered $7 million in gains in the quarter.  Contributions to the MIP include improved production efficiencies, raw material usage reduction initiatives and a richer added-value product mix.Capital investments totaled $3 million in the first quarter of 2012 compared to $9 million in the prior quarter and $8 million in the first quarter of 2011.  Norbord's total capital investments for 2012 are expected to total $25 million, which will include a forming line upgrade at the Bemidji, Minnesota mill and the Company's pilot investment in fines screening technology at its Nacogdoches, Texas mill.Operating working capital was $71 million at quarter-end compared to $28 million in the prior quarter and $51 million in the prior year.  The quarter-over-quarter increase is due to seasonal logging in the northern mills, as well as higher accounts receivable driven by higher shipments and stronger North American OSB prices.  Finished goods inventory remains at minimal levels and accounts receivable performance is in line with prior periods.At quarter-end, Norbord had unutilized liquidity of $327 million, consisting of $267 million in undrawn revolving bank lines and $60 million in cash and cash equivalents.  The Company's tangible net worth was $344 million and net debt to total capitalization on a book basis was 53%, well within bank covenants.DevelopmentsSubsequent to quarter-end, Norbord announced that effective July 2012, production at its Val-d'Or, Quebec mill will be suspended indefinitely.  Approximately 120 employees are affected by this decision.  Prior to this announcement, the mill had been operating in a partially curtailed mode for the last five years.  Customers will continue to be serviced without disruption. The Company does not expect to incur any material one-time charges as a result of this decision.The Company continues to explore a range of attractive debt market refinancing options related to the July 1, 2012 bond maturity and expects to announce an outcome in the coming weeks.  In addition, Norbord still has the option to repay half the bond maturity from its revolving bank lines and the other half from a standby lending commitment from its largest shareholder, Brookfield Asset Management.Additional InformationNorbord's Q1 2012 letter to shareholders, news release, management's discussion and analysis, consolidated unaudited financial statements and notes to the financial statements have been filed on SEDAR (www.sedar.com) and are available in the investor section of the Company's website at www.norbord.com.  Shareholders are encouraged to read this material.Conference CallNorbord will hold a conference call for analysts and institutional investors on Friday, April 27, 2012 at 2:00 p.m. ET. The call will be broadcast live over the Internet via www.norbord.com and www.newswire.ca.  A replay number will be available approximately one hour after completion of the call and will be accessible until May 25, 2012 by dialing 1-888-203-1112 or 647-436-0148. The passcode is 4302017. Audio playback and a written transcript will be available on the Norbord website.Norbord ProfileNorbord Inc. is an international producer of wood-based panels with assets of $1 billion, employing approximately 2,000 people at 13 plant locations in the United States, Europe and Canada. Norbord is one of the world's largest producers of oriented strand board (OSB). In addition to OSB, Norbord manufactures particleboard, medium density fibreboard (MDF) and related value-added products. Norbord is a publicly traded company listed on the Toronto Stock Exchange under the symbols NBD and NBD.WT.This news release contains forward-looking statements, as defined in applicable legislation, including statements related to our strategy, projects, plans, future financial or operating performance and other statements that express management's expectations or estimates of future performance. Often, but not always, words such as "should," "appear," "suggest," "expect," "believe," "will," "will not," "intend," "plan," "can," "forecasts," "confident," "may," and other expressions which are predictions of or indicate future events, trends or prospects and which do not relate to historical matters identify forward-looking statements.  Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Norbord to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.Although Norbord believes it has a reasonable basis for making these forward-looking statements, readers are cautioned not to place undue reliance on such forward-looking information.  By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, which contribute to the possibility that the predictions, forecasts and other forward-looking statements will not occur.  Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include:  general economic conditions; risks inherent with product concentration; effects of competition and product pricing pressures; risks inherent with customer dependence; effects of variations in the price and availability of manufacturing inputs; risks inherent with a capital intensive industry; and other risks and factors described from time to time in filings with Canadian securities regulatory authorities.Except as required by applicable laws, Norbord does not undertake to update any forward-looking statements, whether as a result of new information, future events or otherwise, or to publicly update or revise the above list of factors affecting this information.  See the "Caution Regarding Forward-Looking Information" statement in the March 1, 2012 Annual Information Form and the cautionary statement contained in the "Forward-Looking Statements" section of the 2011 Management's Discussion and Analysis dated January 26, 2012 and Q1 2012 Management's Discussion and Analysis dated April 26, 2012.April 27, 2012To Our Shareholders,I'm pleased to report better first quarter results.  Norbord generated break-even earnings on positive EBITDA of $21 million, more than double the prior quarter and 50% ahead of the same period last year.  This improvement was driven by higher OSB prices in North America and the continuing strong performance of our European operations.  It's also the best EBITDA result we've posted in the last seven quarters.North American operations delivered the biggest quarter-over-quarter improvement, generating EBITDA of $14 million.  North Central benchmark OSB prices averaged 7% higher this quarter at $203/Msf.  Shipment volumes were up 5%, reflecting both increased sales to home building suppliers and our stronger position with key big box customers. In Europe, our panel business delivered another solid result despite the persistently negative economic news.  Overall sales volume was up 11% from the prior quarter and ahead of the same period last year.  Panel prices were also better than we had planned, although OSB prices did soften from their peak a year ago.  Particleboard and MDF prices, however, remained strong.Our Margin Improvement Program (MIP) is off to another great start, delivering $7 million in gains so far this year.  The step change in mill productivity we achieved last year continued into the first quarter, with three OSB mills setting new production records.  Our Margin Improvement efforts continue to help offset higher raw material input prices, positively impacting manufacturing costs and ultimately, our bottom line.  MIP remains a top priority for everyone in our Company and I expect a positive result for the rest of the year.Earlier this month, we took the unusual step of pre-releasing some of our numbers.  We did this so we could explore a broader range of debt refinancing options for our upcoming bond maturity.  We want the best possible deal for Norbord and are comfortable taking our time, knowing we have an actionable backup plan.  High Yield markets are open and we expect to make an announcement in the coming weeks.The US housing market is improving with year-over-year starts and permits both up sharply in the first quarter.  Most of the economists we follow are of the view that, after a five-year decline, housing stabilized mid-last year and we are now in the early phase of a gradual recovery. All of these experts have raised their forecasts for 2012 and the consensus view today is for 710,000 new home starts - 16% higher than last year's number. Longer-term demographics also suggest that pent-up demand for new homes is building.  US population growth over the past five years supports 9 million new household formations, yet less than 3.4 million new residential units have been built.  As the economy recovers and mortgage availability improves, this pent-up demographic demand, coupled with better housing numbers, points to a more positive market environment for all building materials, including our OSB.In spite of these positive trends, there are some headwinds that can't be ignored. Foreclosures and the so-called 'shadow' inventory of empty homes could drag on the housing recovery for several more years.  However, it is my view that the impact will be manageable as long as these foreclosed homes come back into the market in an orderly fashion. The economic uncertainty in Europe will continue for some time.  However, Norbord operates in northern Europe and not in the Mediterranean countries at the centre of the sovereign debt crisis.  Further, our UK-based manufacturing continues to be advantaged by a weaker Pound Sterling that limits competing imports and allows us to export more of our product to Continental Europe.  Our first quarter results were better than we had planned, a trend I now believe should continue for the rest of the year. Our business is improving.  All of Norbord's OSB mills are delivering a step change in productivity and manufacturing costs are trending in the right direction.  In North America, we are benefitting from a rebounding home improvement sector and our overall sales volume will grow along with the recovery in new home construction.  And in Europe, our panel business is set to have another good year. I look forward to reporting our results as the year progresses.(signed) Barrie ShinetonThis letter includes forward-looking statements, as defined by applicable securities legislation including statements related to our strategy, projects, plans, future financial or operating performance and other statements that express management's expectations or estimates of future performance.  Often, but not always, forward-looking statements can be identified by the use of words such as "expect," "suggest," "believe," "should," "likely," "would," or variations of such words and phrases or statements that certain actions "may," "could," "must," "would," "might," or "will" be undertaken, occur or be achieved.  Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Norbord to be materially different from any future results, performance or achievement expressed or implied by the forward-looking statements.  See the cautionary language in the Forward-Looking Statements section of the 2011 Management's Discussion and Analysis dated January 26, 2012 and Q1 2012 Management's Discussion and Analysis dated April 26, 2012. Consolidated Balance Sheets                                    (US $ millions)           Mar 31 2012(unaudited)    Dec 31 2011Assets                 Current assets                  Cash and cash equivalents          $60   $83 Accounts receivable           126    102 Tax receivable           4    5 Inventory           98    88            288    278Non-current assets                  Property, plant and equipment           782    787 Other assets           1    5            783    792           $1,071   $1,070Liabilities and Shareholders' Equity                 Current liabilities                  Accounts payable and accrued liabilities          $153   $162 Current portion of long-term debt           241    242            394    404Non-current liabilities                  Long-term debt           196    196 Other long-term debt           74    69 Other liabilities           39    40 Deferred income taxes           62    61            371    366                  Shareholders' equity           306    300           $1,071   $1,070             Consolidated Statements of Earnings                         (unaudited)Quarters ended March 31 and April 2 (US $ millions, except per share information)      Q12012    Q12011Sales     $253   $253Cost of sales      (228)    (235)General and administrative expenses      (4)    (4)Earnings before interest, income tax and depreciation      21    14             Interest expense      (8)    (8)Earnings before income tax and depreciation      13    6             Depreciation      (13)    (14)Income tax recovery      -    6Earnings     $-   $(2)Earnings per common share              Basic and Diluted     $-   $(0.05)          Consolidated Statements of Comprehensive Income                                   (unaudited)Quarters ended March 31 and April 2 (US $ millions)           Q12012    Q12011Earnings          $-   $(2)Other comprehensive income, net of tax                   Foreign currency translation gain on foreign operations           6    8  Net loss on hedge of net investment in foreign operations           (1)    (5)  Actuarial gain on post-employment obligation           -    2            5    5Comprehensive income          $5   $3                  Consolidated Statements of Changes in Shareholders' Equity                  (unaudited)Quarters ended March 31 and April 2 (US $ millions)           Q12012    Q12011Share capital                 Balance, beginning and end of period          $340   $340Contributed surplus                 Balance, beginning of period          $43   $41Stock-based compensation           1    1Balance, end of period          $44   $42Retained earnings                 Balance, beginning of period          $(82)   $(54)Earnings           -    (2)Other comprehensive income           -    2Balance, end of period          $(82)   $(54)Accumulated Other Comprehensive Income (Loss)                 Balance, beginning of period          $(1)   $4Other comprehensive income           5    3Balance, end of period          $4   $7Shareholders' equity          $306   $335                  Consolidated Statements of Cash Flows                                   (unaudited)Quarters ended March 31 and April 2 (US $ millions)           Q12012    Q12011CASH PROVIDED BY (USED FOR):                 Operating Activities                 Earnings          $-   $(2)Items not affecting cash:                   Depreciation           13    14  Deferred income tax           -    (4)Other items           1    3            14    11Net change in non-cash operating working capital balances           (42)    (45)Net change in tax receivable           1    1            (27)    (33)Investing Activities                 Investment in property, plant and equipment           (3)    (8)Realized net investment hedge gain           3    1Other           -    2            -    (5)Financing Activities                 Accounts receivable securitization proceeds           4    10Cash and Cash Equivalents                 Decrease during the period           (23)    (28)Balance, beginning of period           83    111Balance, end of period          $60   $83     For further information: Heather Colpitts Manager, Corporate Affairs Tel. (416) 365-0705info@norbord.com