Q2 2014 Investor Presentation August 2014 Forward-Looking - - PowerPoint PPT Presentation

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Q2 2014 Investor Presentation August 2014 Forward-Looking - - PowerPoint PPT Presentation

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Q2 2014 Investor Presentation August 2014 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 accordance

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Q2 2014 Investor Presentation

August 2014

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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 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 ─ 1,950 employees at 13 plants across the US, Europe and Canada

  • Listed on TSX (“NBD”)
  • Reports in US dollars and in accordance with IFRS
  • As at June 28, 2014:

─ Total assets of $1,196million ─ LTM sales of $1,227 million ─ LTM EBITDA of $134 million

  • I. COMPANY OVERVIEW

US 61% Europe 27% Canada 12%

6.1 Bsf

Panel Capacity by Region

UNITED STATES CANADA B

North America

GERMANY BELGIUM FRANCE UNITED KINGDOM

Europe Medium Density Fibreboard Oriented Strand Board Furniture Particleboard

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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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Typical Uses for OSB Products

  • II. INDUSTRY OVERVIEW

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Walls Flooring Roof

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Norbord Operates in the Two Significant Global OSB Markets

10 20 30 North America Europe South America Asia Industry OSB Capacity (MMsf 3/8”)

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  • II. INDUSTRY OVERVIEW

Source: Company Documents and Other Public Filings

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Kronospan 33% Kronoswiss 24% Norbord 12% Egger 12% Sonae 8% Smartply 6% Kalavela 5%

Norbord a Significant Player in Both Key Markets

Louisiana- Pacific 22% Georgia- Pacific 19% Norbord 16% Weyer- haeuser 11% Ainsworth 9% Huber 8% Tolko 8% Other 7%

Source: Company Documents and Other Public Filings - Installed Capacity

Industry Capacity 28 Bsf Industry Capacity 6 Bsf

North American OSB Industry European OSB Industry

  • II. INDUSTRY OVERVIEW
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Demand Growth Ahead in Both Key Markets

0% 25% 50% 75% 80 85 90 95 00 05 10

North America Europe

OSB Share of Structural Panels

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  • II. INDUSTRY OVERVIEW

Source: FEA and Norbord Estimates

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US Housing Starts (millions)

0.0 0.5 1.0 1.5 2.0 2.5 Housing Starts Underlying Demand

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US Housing Starts Recovery is Real

Source: FEA

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

OVER built UNDER built

  • II. INDUSTRY OVERVIEW
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Source: Company Documents and Other Public Filings

  • II. INDUSTRY OVERVIEW

Additional OSB Capacity Restarted to Meet Growing Demand

38 Mills in Operation 8 Mills Indefinitely Curtailed North American OSB Installed Capacity: Norbord Mill 6 Mills (Re)started in 2013

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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 remain above trend

North Central Benchmark OSB Price

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

Annual Average NC Price US$ per Msf 7/16"

10 year average

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50 100 150 200 250 300 2009 2010 2011 2012 2013 2014F

UK +30% in 2013 Germany +12% per year

Core European Housing Markets Recovering

Housing Starts (000s)

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  • II. INDUSTRY OVERVIEW

Source: National House Builder Confederation (NHBC) , Construction Products Association (CPA) & Bundesbank

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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 '13

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 2013 LTM Norbord North American peer (1)

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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)

Low Cost Margin-Focused Operating Platform

  • Low cost operating platform providing superior margins versus peers

Source: Company Documents and Other Public Filings (1) North American peer = Louisiana-Pacific

  • III. BUSINESS STRATEGY

North American OSB EBITDA Margin %

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

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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)

(1) The benefits of improved productivity and a richer value-added product mix were offset by higher maintenance spending in 2013.

(1)

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Customer Strategy Sets Norbord Apart

  • New housing sales volume growing as US housing starts recover
  • Pro-dealer shipments now represent 50% of Norbord sales volume

50% 30% 20% 35% 35% 30%

New Home Construction (Pro-dealers) Repair & Remodel (Big Box) Industrial NA Shipments 2.9 Bsf NA Shipments 3.4 Bsf

  • III. BUSINESS STRATEGY

2011 Q2 2014 (annualized)

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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

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F

Capex Greenfield Expansion

  • III. BUSINESS STRATEGY

Capex Investment (US$ millions)

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Strong Operating Cash Flow Through Cycle

631 495 247 42 (60) 107 45 188 287 134 ($100) $0 $100 $200 $300 $400 $500 $600 $700 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM 10 year average $198 million

North Central Benchmark OSB Price 369 320 217 161 172 163 219 186 271 315 234

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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Stable Results Continue from European Operations

  • Norbord’s European operations provide greater sales and earnings

diversification than other North American-based competitors

58 32 35 81 4 17 37 44 39 46 49

$0 $20 $40 $60 $80 $100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 LTM

  • IV. FINANCIAL OVERVIEW

European EBITDA (US$ millions)

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21 245 200 240

50 100 150 200 250 300 2015 2016 2017 2018 2019 2020 Principal Value - US $ millions

5.375% Bonds Revolving Bank Lines (Undrawn) 7.70% Bonds

Strong Liquidity

US$ millions

Q2 2014 Cash 83 Bank Lines 242 A/R Sec.

(1)

100 Liquidity 425

(1) In addition, the Company has an undrawn $100 million 1-year evergreen A/R securitization program.

Moody’s Ba2 (Stable) S&P BB- (Positive) DBRS BB (Stable)

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 unfolding US housing recovery

─ Every +$10 in NA OSB price = +$36 million in EBITDA at full capacity

  • Stable EBITDA contribution from European operations
  • Low-cost operating platform
  • Superior margins versus peers
  • Track record of disciplined capital allocation
  • Strong financial liquidity and comfortable debt maturities
  • Dividend yield of 10% (at August 27th C$23.19 closing share price)
  • V. SUMMARY
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Appendices

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Ticker Symbol TSX: NBD Common Shares 53.4 million outstanding

(as at July 31, 2014)

Quarterly Dividend CAD $0.60 per share

(payable on September 21, 2014 to shareholders of record on September 1, 2014)

Majority Shareholder Brookfield Asset Management – 52%

Shareholder Information

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50 100 150 200 250 300 350 400 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Annual Average NC Price US$ per Msf 7/16" Source: Random Lengths

15 year average

OSB Prices Strong Over the Cycle

Historical North Central Benchmark OSB Price

Q1 217 261 132 163 175 423 364 285 145 137 154 212 198 203 417 219 Q2 291 240 190 159 215 443 297 238 156 179 146 295 173 235 347 219 Q3 301 171 180 159 381 351 303 181 177 201 178 180 184 313 252 Q4 230 155 140 156 401 264 317 166 165 170 172 191 190 332 245 Average 260 207 160 159 293 369 320 217 161 172 163 219 186 271 315

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(1) Assumes operation at full capacity levels Direct exposures only; before the impact of any cash flow currency hedges Tax operating loss carry-forwards (gross) as at Dec. 31, 2013 – US $71 million, Canada C$49 million, Belgium €30 million (2) Excluding dividends on common shares

Exposure Change EBITDA Impact (1)

($ millions)

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

Financial Sensitivities

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Analyst Analyst Name Contact CIBC Mark Kennedy (403) 221-4133 mark.kennedy@cibc.ca Credit Suisse Andrew Kuske (416) 352-4561 andrew.kuske@credit-suisse.com Dundee Capital Markets Stephen Atkinson (514) 396-0321 satkinson@dundeecapitalmarkets.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 Rajiv Mukhi (604) 622-5289 rmukhi@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 August 27, 2014. It is not exhaustive. Annual Average North Central Benchmark OSB Price

US$ per Msf 7/16”

2014F 2015F CIBC 222 260 Dundee Capital Markets 220 225 Raymond James 245 280 RBC Capital Markets 225 250 Salman Partners 230 260 Scotia Capital 231 293 TD Securities 221 255 Vertical Research Partners 225 230 Average $227 $257

Forecast OSB Pricing – North Central 7/16”