Investor Presentation November 2019
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. • Such statements and estimates are based on assumptions as to the future and on management’s current expectations and are, naturally, subject to risks and uncertainties. • 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. 2
Company Overview
Company Overview Norbord Snapshot North America • Leading manufacturer of wood-based panel products • Largest global producer of Oriented Strand Board (OSB) – Stated OSB capacity of 9.0 Bsf-3/8” (1) – Stated panel capacity (including particleboard & MDF) of 9.9 Bsf-3/8” (1) – Approximately 2,500 employees at 17 plants across the US, Canada and Europe • Listed on the NYSE and TSX (“OSB”) • Report in US dollars and in accordance with IFRS • LTM Q3 2019 sales of $1.9 billion Panel Capacity by Region (1) Europe Oriented Strand Board (OSB) Particleboard Medium Density Fiberboard (MDF) Furniture 4 (1) Based on stated annual capacity as of December 31, 2018.
Company Overview The Leading Global OSB Company Top 10 Global OSB Producers * * Excluding OSB siding capacity Enterprise Value 5 Source: Company filings and Bloomberg. Enterprise values as at November 1, 2019.
Company Overview Norbord’s Wood-Based Panel Products • Norbord’s operations 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 69% of total North American structural panel production Roof Window Header Wall Sheathing Garage Webstock Door Header Flooring Door Rimboard Header 8 Source: APA, October 2019
Industry Overview Global OSB Industry Industry OSB Capacity (MMsf-3/8”) * * Excluding NA OSB siding capacity Norbord operates in the two significant global OSB producing regions 9 Source: Company documents and other public filings, Wood Based Panels International (WBPI)
Industry Overview North American & European OSB Industries North American OSB Industry European OSB Industry * * Excluding OSB siding capacity. Norbord is a significant player in both key markets 10 Source: Company documents and other public filings – stated industry capacity
Industry Overview US Housing Starts Are the Single Biggest End Use for OSB Source: U.S. Census Bureau and Forest Economic Advisors, LLC (FEA) 11
Industry Overview US Repair & Remodel Demand Also Drives OSB Consumption Bsf-3/8” basis US$ billions Source: Forest Economic Advisors, LLC (FEA); in billions of 2012 US$ 12
Industry Overview North American OSB Industry Stated Capacity of 27 Bsf The picture can't be displayed. The picture North American OSB Installed Capacity: can't be displayed. 35 Mills in Operation 6 Mills (Re)started in 2012/13 Georgie-Pacific 5 Mills (Re)started in 2017/18 announced indefinite curtailment of Allendale, 3 Mills Idle SC mill (800 MMsf) Norbord Mill effective December 2019 Norbord announced indefinite curtailment of Cordele, GA Line 1 (440 MMsf) effective mid- November 2019 Note: Excludes OSB siding production and capacity. 13 Source: APA, company documents and other public filings
Industry Overview Favourable Long-term OSB Industry Fundamentals North American OSB Demand Source: Forest Economic Advisors, LLC (FEA) 14
Industry Overview Historical North American OSB Prices • OSB prices are tied to demand for building products, which is influenced by the general economy, demographics and the need for housing North Central Benchmark OSB Price $400 $350 Annual Average NC Price $300 US$ per Msf 7/16" 15-year average: $253 $250 $200 $150 $100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 423 364 285 145 137 154 212 198 203 417 219 193 226 293 370 211 Q2 443 297 238 156 179 146 295 173 235 347 219 193 264 330 426 188 Q3 351 303 181 177 201 178 180 184 313 252 216 204 301 409 363 217 Q4 264 317 166 165 170 172 191 190 332 245 216 242 285 379 243 Average 369 320 217 161 172 163 219 186 271 315 218 209 269 353 351 15 Source: Random Lengths
Industry Overview Europe: Strong Demand Growth Driven by Substitution OSB Share of Structural Panels European OSB Demand (million m 3 ) 10 8% 8 2005-2018 CAGR 6 North America 4 2 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Eurostat, UN Comtrade Database, Destatis and Norbord estimates Europe Indicative average OSB price 16 Source: Forest Economic Advisors, LLC (FEA), European Panel Federation (EPF) and Norbord estimates Source: Random Lengths and Company documents
Industry Overview Japan: Stable Housing Market • Significant growth opportunity – OSB accounts for only ~9% of the structural panel market in Japan compared to 69% in North America Japanese Housing Starts (000’s) 17 Source: Japanese Ministry of Land, Infrastructure, Transport and Tourism and Company documents
Business Strategy
Business Strategy Norbord’s Strategy Is Well Defined Develop a world-class safety culture 1 Pursue growth in OSB 2 Own high-quality assets with low-cost positions 3 Maintain a margin-focused operating culture 4 Focus on growth customers through 5 best-in-class service and product development Allocate capital with discipline 6 19
Business Strategy Norbord’s Growth Focused on OSB Norbord OSB Capacity (Bsf-3/8”) (1) (2) (1) 2015 onwards reflects Norbord following completion of merger with Ainsworth. Pre 2015 reflects Norbord excluding Ainsworth. 20 (2) Norbord's total OSB capacity increased by 560 MMsf-3/8" effective December 31, 2018 based on recent capital investments and improved efficiency.
Business Strategy Margin Improvement Is an Operational Priority (1) Margin Improvement Program Gains (US$ in millions) “In Control of Our Controllables” • 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 • MIP has delivered $331 million of margin improvements over the past 15 years (2) (2) (3) (1) Measured relative to prior year at constant prices and exchange rates. (2) The benefits from richer product mix and improved productivity were offset by higher maintenance-related costs. In addition, 2018 MIP was negatively impacted by higher raw material usages and costs associated with executing on strategic capital and sales growth initiatives. Further, the excellent ramp up of the Huguley, Alabama and Inverness, Scotland mills were excluded from 2018 MIP calculation. (3) 2015 onwards reflects Norbord following completion of merger with Ainsworth. Pre 2015 reflects Norbord excluding Ainsworth. 21
Business Strategy Repositioning Business to Reduce Earnings Volatility Q3/19 LTM Sales • Strong operating footprint • Growing stable margin end-uses: (1) – North American industrial products – European panels – Asia-focused exports (1) $1.9 billion • Provides greater diversification than sales North American-based competitors • Better positioned to weather market cycles (1) Exports to Asia are handled by Interex and sales are reported in the North American geographic segment. 22
Business Strategy Focused Customer Strategy Sets Norbord Apart • New home construction sales volume tied to US housing starts • Repair & remodel sales volume growing in step with R+R expenditures • Industrial and export sales volume growing through substitution, has more stable margins Q3/19 LTM North American Shipments 6.4 Bsf-3/8” Commodity 23
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