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Q3 2017Earnings PresentationOctober 27, 2017
1
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.
• 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.
Q3 2017 Financial and Operational Highlights
3
Highlights
• Adjusted earnings of $1.39 per diluted share, more than double Q3 2016
• Adjusted EBITDA of $200 million, $85 million higher than Q3 2016
• First board produced at both Huguley, Alabama and Inverness, Scotland mills
• North Central benchmark OSB price averaged $409 per Msf, up 36% from Q3 2016
• Declared quarterly dividend of C $0.60 per share for shareholders of record on December 1, 2017 – a 20% increase
0.78
0.931.01
1.111.17
1.21
2012 2013 2014 2015 2016 2017F
US Housing Starts
4
Business Drivers
Source: US Department of Commerce, except where otherwise noted
September YTD data: housing starts up 3% with single family starts up 9% YoY
(in millions)
(1) Based on US housing economists’ forecasts.
(1)
North American Benchmark OSB Prices
5
Business Drivers
Spread SE vs NC 45 22 1 10 55
Spread WC vs NC 36 49 28 6 21
Source: Random Lengths
US$
/Msf
-7/1
6” 301
285293
330
409
256263
292
320
354
265
236
265
324
388
100
150
200
250
300
350
400
450
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
North Central
South East
Western Canada
European Indicative OSB Price(1)
6
Business Drivers
€/m
3
(1) European indicative average OSB price represents the gross delivered price to the largest continental market.
235
230
226
230
233
200
225
250
Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Financial Summary
7
Financials
(2) Represents Canadian combined federal and provincial statutory rate.
(US $ millions, except per share information)
Q3 Q2 Q3 9 mos 9 mos2017 2017 2016 2017 2016
Sales $ 578 $ 536 $ 453 $ 1,581 $ 1,284
Adjusted EBITDANorth America 184 157 106 443 244
Europe 14 9 10 29 31Unallocated (1) 2 (1) (1) (4) (5)
Total 200 165 115 468 270
Earnings $ 130 $ 97 $ 55 $ 276 $ 122
Adjusted for:Loss on disposal of assets 2 2 - 9 -
Stock-based compensation and related costs 1 1 1 3 1Costs related to Inverness expansion project 1 - - 1 -Other costs incurred to achieve merger synergies - - 4 - 7
Costs related to High Level fire - - - - 1Reported income tax expense 32 30 19 75 32
Adjusted pre-tax earnings 166 130 79 364 163Income tax expense at statutory rate(2) (45) (35) (21) (98) (43)
Adjusted earnings 121 95 58 266 120
Adjusted EPS, basic(3) 1.40 1.10 0.68 3.09 1.40
(3) Basic and diluted earnings per share are the same except diluted Adjusted earnings per share for Q3 2017 is $1.39, Q3 2016 is $0.67, 9 months 2017 is $3.07 and 9 months 2016 is $1.39.
(1) The positive Adjusted EBITDA generated in the Unallocated segment during the quarter is a result of the change in policy to classify gains and losses on the translation of foreign currency-denominated tax balances from General and administrative expenses to Income tax expense.
Adjusted EBITDA Variance
8
Financials
(US $ millions)
Q3 2017 Q3 2017 9 mos 2017
vs. vs. vs.Q2 2017 Q3 2016 9 mos 2016
Adjusted EBITDA – current period $ 200 $ 200 $ 468
Adjusted EBITDA – comparative period 165 115 270
Variance 35 85 198
Mill nets(1) 38 98 249
Volume(2) (2) 9 24
Key input prices(3) 1 (9) (30)
Key input usage(3) 2 2 3
Mill profit share and bonus (1) (5) (12)
Other operating costs and foreign exchange(4) (3) (10) (36)
Total $ 35 $ 85 $ 198
(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, maintenance and costs related to preparing the
Huguley, Alabama mill for restart.
Liquidity and Capital Resources
9
Financials
(US $ millions, except per share information)
Q3 2017
Q2 2017
Q3 2016
9 mos2017
9 mos2016
Cash provided by operating activities $ 203 $ 144 $ 97 $ 386 $ 183
Cash provided by operating activities per share 2.36 1.67 1.13 4.48 2.14
Operating working capital 156 181 156
Investment in property, plant and equipment & intangible assets (excluding Inverness project)
35 34 16 98(1) 44
Investment in Inverness project 38 24 13 93 19
(1) Includes $37 million to prepare the Huguley, Alabama mill for restart.
Balance Sheet
10
Financials
(US $ millions, unless otherwise noted) Bank Covenant
Sep 30,
2017
Dec 31,
2016
Long-term debt, principal value $ 555 $ 755
Less: Cash and cash equivalents (126) (161)
Net debt 429 594
Add: Letters of credit 20 25
Net debt for financial covenant purposes 449 619
Tangible net worth Min. $500 1,128 905
Net debt to capitalization, book basis Max. 65% 28% 41%
Liquidity of $476 million = $126 million in cash + $225 million in revolving bank lines+ $125 million undrawn A/R securitization
Appendices
$0
$50
$100
$150
$200
$250
$300
$350
$400
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
An
nu
al A
vera
ge N
C P
rice
US$
per
Msf
7/1
6"
Historical North American OSB Prices
12
Appendices
North Central Benchmark OSB Price
Source: Random Lengths
15-year average
Q1 163 175 423 364 285 145 137 154 212 198 203 417 219 193 226 293
Q2 159 215 443 297 238 156 179 146 295 173 235 347 219 193 264 330
Q3 159 381 351 303 181 177 201 178 180 184 313 252 216 204 301 409
Q4 156 401 264 317 166 165 170 172 191 190 332 245 216 242 285
Average 159 293 369 320 217 161 172 163 219 186 271 315 218 209 269
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 27, 2017. It is not exhaustive.
Forecast North American OSB Prices
13
Appendices
Annual Average North Central
Benchmark OSB Price US$ per Msf 7/16”
Analyst 2017F 2018F
CIBC World Markets 365 310
TD Securities 362 300
Bank of America Merrill Lynch 353 329
Scotiabank 352 305
Raymond James 350 330
RBC Capital Markets 350 325
BMO Capital Markets 350 290
Buckingham Research Group 350 300
Armstrong Investment Research 345 360
Vertical Research Partners 340 335
Average $352 $318
North American Capacity Restarts Needed to Meet Growing Demand
14
Appendices
37 Mills in Operation
7 Mills Curtailed
North American OSB Installed Capacity:
Norbord Mill
7 Mills (Re)started in 2012/13
Note: Excludes OSB siding capacity.
Source: APA, company documents and other public filings
(in Bsf-3/8”)
2012Q3/17
LTM
Production 16.2 21.8
Restarts/Idled 4.4 3.1
=27% =14%
Financial Sensitivities
15
Appendices
Exposure Change
Adjusted EBITDA Impact (1)
(US$ millions)
North American OSB (2) $10 per Msf-7/16” + $59
European OSB €10 per 000 m3 + $8
Canadian dollar (3) $0.01 per C$ + $3
Pound sterling £0.01 per € < $1
(1) Assumes operation at full stated capacity levels (including the curtailed Huguley, Alabama and Chambord, Quebec mills). Impact on Adjusted EBITDA of a $10 per Msf-7/16” change is ± $50 million based on the last twelve months of production at September 30, 2017.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, 2016 – US $132 million, Canada C$186 million, Belgium €32 million.
(2) Estimated impact of change in Norbord’s realized North American OSB price, not benchmark.
(3) Operating exposures only (excludes dividends on common shares).
