Year-End 2012 Investor Presentation February 2013 Forward-Looking - - PowerPoint PPT Presentation

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Year-End 2012 Investor Presentation February 2013 Forward-Looking - - PowerPoint PPT Presentation

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Year-End 2012 Investor Presentation February 2013 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

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Year-End 2012 Investor Presentation

February 2013

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  • 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 (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.

Forward-Looking Statements and Non-IFRS Financial Information

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Company Snapshot

  • 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

  • I. COMPANY OVERVIEW

US 61% Europe 27% Canada 12%

6.1 Bsf

Panel Capacity by Region

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Norbord’s Products

  • New home construction
  • Repair and remodel
  • Light commercial construction
  • Industrial applications

OSB – 84% of Capacity Particleboard – 10% of Capacity MDF – 6% of Capacity

  • New home construction
  • Repair and remodel
  • Furniture
  • Fixtures
  • Furniture
  • Fixtures
  • Mill work
  • Norbord’s operations include 11 OSB mills, two particleboard mills, one

medium density fibreboard (“MDF”) mill and one furniture plant

  • I. COMPANY OVERVIEW
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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

Sources: APA-The Engineered Wood Association (“APA”) and Forest Economic Advisors, LLC (“FEA”)

North American Structural Panels Market Share

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US Housing Starts Recovery is Real

0.0 0.5 1.0 1.5 2.0

Housing Starts Underlying Demand

US Housing Starts (millions)

Source: Forest Economic Advisors, LLC (“FEA”)

  • Leverage to US housing recovery
  • Favourable long-term OSB industry fundamentals

1.7m homes OVER built 5.3m homes UNDER built

  • II. INDUSTRY OVERVIEW
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Operating Mills - 16.8 Bsf Production in Q4/2012 (annualized) Operating Mills - unutilized capacity Mothballed Mills - remaining

60% 16% 9%

Industry Capacity: 28 Bsf Mothballed Mills - announced restarts for 2013 & 2014

15%

OSB Industry Curtailments Continue

  • II. INDUSTRY OVERVIEW

Sources: APA & Norbord Estimates

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6 Mills Curtailed, but 2013/14 Restarts Announced 38 Mills in Operation

Source: Company Documents

9 Mills Indefinitely Curtailed North American OSB Installed Capacity:

Significant OSB Industry Capacity Curtailment

  • II. INDUSTRY OVERVIEW
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Attractive OSB Outlook

  • II. INDUSTRY OVERVIEW

Sources: Random Lengths and FEA

  • 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”)

100 150 200 250 300 350 400 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E

Average North Central Benchmark OSB Price per Msf (7/16")

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Norbord a Significant Player in OSB Industry

Source: Company Documents - Installed Capacity

Industry Capacity 28 Bsf Industry Capacity 5 Bsf

  • II. INDUSTRY OVERVIEW

North American OSB Industry European OSB Industry

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Norbord’s Strategy is Well Defined

  • 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
  • III. BUSINESS STRATEGY
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Norbord’s Growth Focused on OSB

1 2 3 4 5 6

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Norbord OSB Capacity (Billion Square Feet 3/8”)

  • III. BUSINESS STRATEGY
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  • 30%
  • 20%
  • 10%

0% 10% 20% 30% 40% 50% 2005 2006 2007 2008 2009 2010 2011 2012 Norbord North American peer (1)

13

  • 3
%
  • 2
%
  • 1
% % 1 % 2 % 3 % 4 % 5 %

Low Cost Margin-Focused Operating Platform

  • Low cost operating platform providing superior margins versus peers

Source: Company Documents (1) North American peer = Louisiana-Pacific

  • III. BUSINESS STRATEGY

North American OSB EBITDA Margin %

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35 37 28 56 9 14 29 16 25 23 $0 $10 $20 $30 $40 $50 $60

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Margin Improvement is an Operational Priority

  • Margin Improvement Program

(MIP) gains help offset impact of industry-wide rising input costs, without capex investment: ─ Increased productivity ─ Reduced overhead costs ─ Reduced raw material usage ─ Improved product mix

  • III. BUSINESS STRATEGY

MIP Gains (US$ millions)

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Customer Strategy Sets Norbord Apart

  • New housing sales volume growing as US housing starts recover
  • Norbord’s pro-dealer shipments grew 35% in 2012

35% 35% 30%

New Home Construction (Pro-dealers) Repair & Remodel (Big Box) Industrial NA Shipments 2.9 Bsf NA Shipments 3.1 Bsf

  • III. BUSINESS STRATEGY

2011 2012

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Disciplined Capital Allocation

  • Track record of disciplined capital

allocation ─ Accretive acquisitions ─ Low cost capacity additions ─ Divestment of non-core assets ─ Deleverage on cyclical upturns ─ Dividends ─ Share buybacks

$0 $20 $40 $60 $80 $100 $120 $140 $160 $180

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F

Capex Greenfield Expansion

  • III. BUSINESS STRATEGY

Capex Investment (US$ millions)

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Strong Operating Cash Flow Through Cycle

365 631 495 247 42 (60) 107 45 188 ($100) $0 $100 $200 $300 $400 $500 $600 $700 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Average $206 million

North Central Benchmark OSB Price 293 369 320 217 161 172 163 219 186 271

Norbord Sensitivity to North American OSB Price Changes: +$10/Msf 7/16” = +$36 million EBITDA (at full capacity)

Total EBITDA (US$ millions)

  • IV. FINANCIAL OVERVIEW
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Strong Results Continue from European Operations

  • Norbord’s European operations provide greater sales and earnings

diversification than other North American-based competitors

29 58 32 35 81 4 17 36 44 39 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

  • IV. FINANCIAL OVERVIEW

European EBITDA (US$ millions)

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6.25% Bonds Revolving Bank Lines (Undrawn) 7.70% Bonds

Strong Liquidity

US$ millions

Q4-2012 Cash 128 Bank Lines 242 A/R Sec.

(1)

85 Liquidity 455

(1) In addition, the Company has an $85 million 1 year evergreen A/R securitization program.

DBRS BB(low) Moody’s Ba3 S&P BB-

Norbord’s Financial House Is In Order

  • IV. FINANCIAL OVERVIEW

Manageable Debt Maturities (1) Strong Liquidity Stable Issuer Credit Ratings

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Attractive Investment Opportunity

  • 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

  • V. SUMMARY
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Appendices

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Source: Random Lengths Q1 157 217 261 132 163 175 423 364 285 145 137 154 212 198 203 Q2 195 291 240 190 159 215 443 297 238 156 179 146 295 173 235 Q3 287 301 171 180 159 381 351 303 181 177 201 178 180 184 313 Q4 178 230 155 140 156 401 264 317 166 165 170 172 191 190 332 Average 204 260 207 160 159 293 369 320 217 161 172 163 219 186 271

15 year Average

OSB Prices Strong Over the Cycle

Average North Central Benchmark OSB Price per Msf (7/16”)

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23 (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

Exposure Change EBITDA Impact (1) (2) ($ millions) North American OSB $10 per Msf 7/16” + $36 European OSB €10 per m3 + $7 Canadian dollar $0.01 per Cdn$ + $1 Pound sterling £0.01 per € + $2

Financial Sensitivities

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Analyst Analyst Name Contact BMO Capital Markets Stephen Atkinson (514) 286-7309 stephen.atkinson@bmo.com Credit Suisse Andrew Kuske (416) 352-4561 andrew.kuske@credit-suisse.com Desjardins Securities Pierre Lacroix (514) 281-4231 pierre.lacroix@vmd.desjardins.com ERA Forest Products Research Claire Huxtable (604) 886-5741 chuxtable@ERA-research.com John Tumazos Very Independent Research John Tumazos (732) 444-1083 john@veryindependentresearch.com Raymond James Daryl Swetlishoff (604) 659-8246 daryl.swetlishoff@raymondjames.ca RBC Capital Markets Paul Quinn (604) 257-7048 paul.c.quinn@rbccm.com Salman Partners Mike Richmond (604) 622-5563 mrichmond@salmanpartners.com Scotia Capital Benoit Laprade (514) 287-3627 benoit.laprade@scotiabank.com TD Securities Sean Steuart (416) 308-3399 sean.steuart@tdsecurities.com Vertical Research Partners James Armstrong (212) 256-6157 ja@verticalresearchpartners.com

Analyst Coverage of Norbord

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  • 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, 2013. It is not exhaustive. North Central Benchmark OSB Price

US$ per Msf 7/16”

2013 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

Forecast OSB Pricing – North Central 7/16”