Post on 12-Jul-2020
Q3 2016Earnings PresentationOctober 28, 2016
Forward-Looking Statements & Non-IFRS Financial Information
2
Notices
• 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 (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.
Q3 2016 Financial and Operational Highlights
3
• Adjusted earnings of $0.67 per diluted share, a $0.72 improvement over Q3 2015
• Adjusted EBITDA of $114 million, a more than threefold increase over Q3 2015
• Merger synergies target of $45 million (cumulative, annualized) now fully captured
• North Central average benchmark OSB price up 48% year-over-year
• North American manufacturing costs decreased 3% year-to-date
• Declared CAD $0.10/share quarterly dividend payable on December 21, 2016
• Reached agreement with LP to exchange ownership of Val-d’Or, Quebec mill for Chambord, Quebec
US Housing Starts
4
Source: US Department of Commerce, except where otherwise noted
September YTD data: housing starts up 4% and single family starts up 9% YoY
(in millions)
(1) Based on US housing economist forecasts.
(1)
0.61
0.78
0.931.01
1.11
~1.20
2011 2012 2013 2014 2015 2016F
North American Benchmark OSB Prices
5
US
$/M
sf-7
/16
”
Source: Random Lengths
204
242
226
264
301
176
221215
245256
158
204
191
242
265
100
150
200
250
300
350
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
North Central
South East
Western Canada
Spread SE vs NC 28 21 11 19 45
Spread WC vs NC 46 38 35 22 36
Q3 2016
European Indicative OSB Prices(1)
6
€/m
3
(1) European indicative average OSB price represents the gross delivered price to the largest continental market.
220226 230
237 235
0
50
100
150
200
250
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016Q3 2016
Financial Summary
7
(1) Represents Canadian combined federal and provincial statutory rate.(2) Basic and diluted Adjusted EPS are the same except diluted Adjusted EPS for Q3 2016 is $0.67 and for the 9 months 2016 is $1.39.
(US $ millions, except per share information)
Q3 Q2 Q3 9 mos 9 mos
2016 2016 2015 2016 2015
Sales $ 453 $ 447 $ 378 $ 1,284 $ 1,094
Adjusted EBITDA
North America 106 85 22 244 44
Europe 10 11 11 31 28Unallocated (2) (2) (3) (6) (7)
Total 114 94 30 269 65
Earnings (loss) $ 55 $ 44 $ (9) $ 122 $ (69)
Adjusted for:Merger transaction costs - - - - 8Severance costs related to merger - - - - 2Costs to achieve merger synergies 4 2 - 7 2Costs related to High Level fire - 1 - 1 -
Costs on early debt extinguishment - - - - 25Foreign exchange loss on Ainsworth Notes - - - - 28
Gain on derivative financial instrument on Ainsworth Notes - - - - (4)
Reported income tax expense (recovery) 19 10 3 32 (33)
Adjusted pre-tax earnings (loss) 78 57 (6) 162 (41)
Income tax (expense) recovery at statutory rate(1) (20) (15) 2 (42) 11
Adjusted earnings (loss) 58 42 (4) 120 (30)
Adjusted EPS, basic(2) 0.68 0.49 (0.05) 1.40 (0.36)
Adjusted EBITDA Variance
8
(US $ millions)
Q3 2016 Q3 2016 9 mos 2016vs. vs. vs.
Q2 2016 Q3 2015 9 mos 2015
Adjusted EBITDA – current period $ 114 $ 114 $ 269
Adjusted EBITDA – comparative period 94 30 65
Variance 20 84 204
Mill nets(1) 23 87 169
Volume(2) (5) (1) 17
Key input prices(3) (3) 5 19
Key input usage(3) - 1 10
Mill profit share and bonus - (3) (7)
Other operating costs and foreign exchange(4) 5 (5) (4)
Total $ 20 $ 84 $ 204
(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.
Liquidity and Capital Resources
9
(US $ millions, except per share information)
Q3 2016
Q2 2016
Q3 2015
9 mos2016
9 mos2015
Cash provided by (used for) operating activities $ 97 $ 83 $ 23 $ 183 $ (32)
Cash provided by (used for) operating activities per share 1.13 0.97 0.27 2.14 (0.38)
Operating working capital 156 163 145
Investment in property, plant and equipment & intangible assets
29 23 15 63 43
• 2016 regular capex budget is $75 million
• Excludes 2016 estimated capex of $45 million on $135 million Inverness project
Balance Sheet
10
(US $ millions, unless otherwise noted)
BankCovenant
Sep 24,
2016
Jun 25,
2016
Dec 31,
2015
Sep 26,
2015
Long-term debt, principal value $ 755 $ 755 $ 755 $ 755
Add: Other long-term debt(1) - - 30 44
Less: Cash (74) (12) (9) (2)
Net debt 681 743 776 797
Less: Other long-term debt(1) - - (30) (44)
Add: Letters of credit 24 8 5 5
Net debt for financial covenant purposes 705 751 751 758
Tangible net worth Min. $500(2) 848 799 724 722
Net debt to capitalization, book basis Max. 65% 45% 48% 51% 51%
Liquidity of $420 million = $74 million in cash + $221 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 reset to $500 million from $450 million when bank lines renewed in June 2016.
Appendices
$0
$50
$100
$150
$200
$250
$300
$350
$400
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
An
nu
al A
vera
ge N
C P
rice
US$
per
Msf
7/1
6"
OSB Prices Strong Over the Cycle
12
Appendices
Historical North Central Benchmark OSB Price
Source: Random Lengths
15-year average
Q1 163 175 423 364 285 145 137 154 212 198 203 417 219 193 226
Q2 159 215 443 297 238 156 179 146 295 173 235 347 219 193 264
Q3 159 381 351 303 181 177 201 178 180 184 313 252 216 204 301
Q4 156 401 264 317 166 165 170 172 191 190 332 245 216 242
Average 159 293 369 320 217 161 172 163 219 186 271 315 218 209
Forecast OSB Pricing – North Central 7/16”
13
Appendices
Norbord does not provide guidance regarding its expectations of future OSB prices. The following is a sample of price forecasts by analysts as at October 26, 2016. It is not exhaustive.
Annual Average North Central
Benchmark OSB Price US$ per Msf 7/16”
Analyst 2016F 2017F
Scotia Capital 258 270
CIBC 264 280
Vertical Research Partners 265 300
TD Securities 266 295
BMO 268 286
RBC Capital Markets 270 300
Raymond James 275 300
Average $267 $290
North American Capacity Restarted to Meet Growing Demand
14
Appendices
39 Mills in Operation
8 Mills Indefinitely Curtailed
North American OSB Installed Capacity:
Norbord Mill
6 Mills (Re)started in 2013
Source: Company documents and other public filings as of September 2016
Financial Sensitivities
15
Appendices
Exposure Change
Adjusted EBITDA Impact (1)
(US$ millions)
North American OSB $10 per Msf-7/16” + $58
European OSB €10 per 000 m3 + $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).