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Q3 2018Earnings PresentationNovember 1, 2018
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 2018 Financial and Operational Highlights
3
Highlights
• Adjusted EBITDA of $211 million, a 6% increase year-over-year
• Adjusted earnings of $1.41 per diluted share
• European EBITDA increased 64% year-over-year to $23 million
• Declared dividend of C $0.60 per share for shareholders of record on
December 1, 2018
• Renewed Normal Course Issuer Bid (NCIB), allowing repurchase of up to
approximately 5.2 million shares before November 4, 2019
0.78
0.931.01
1.111.17 1.20
1.28
2012 2013 2014 2015 2016 2017 2018F
US Housing Starts
4
Business Drivers
Source: US Department of Commerce, except where otherwise noted
YTD 2018 US housing starts up 6% vs. 2017, with single-family starts also increasing by 6%.
(in millions)
(1) Based on US housing economists’ forecasts.
(1)
409
379370
426
363354 355
331
419
305
388
328
359
403
281
100
150
200
250
300
350
400
450
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
North Central
South East
Western Canada
North American Benchmark OSB Prices
5
Business Drivers
Spread SE vs NC 55 24 39 7 58
Spread WC vs NC 21 51 11 23 82
Source: Random Lengths
US$
/Msf
-7/1
6”
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.
233
262
274
298
305
200
225
250
275
300
325
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018
Financial Summary
7
Financials
(1) Represents Canadian combined federal and provincial statutory rate.
(US $ millions, except per share information)
Q3 Q2 Q3 9 mos 9 mos
2018 2018 2017 2018 2017Sales $ 640 $ 707 $ 578 $ 1,923 $ 1,581
Adjusted EBITDANorth America 190 256 184 602 443Europe 23 21 14 62 29Unallocated (2) (4) 2 (10) (4)
Total 211 273 200 654 468
Earnings $ 130 $ 174 $ 130 $ 399 $ 276
Adjusted for:Loss on disposal of assets - - 2 - 9
Stock-based compensation and related costs 2 1 1 4 3Costs related to Inverness expansion project - - 1 - 1Reported income tax expense 37 53 32 126 75
Adjusted pre-tax earnings 169 228 166 529 364Income tax expense at statutory rate(1) (46) (61) (45) (143) (98)
Adjusted earnings 123 167 121 386 266
Adjusted EPS, basic 1.42 1.93 1.40 4.46 3.09
Adjusted EPS, diluted 1.41 1.92 1.39 4.43 3.07
Adjusted EBITDA Variance
8
Financials
(US $ millions)
Q3 2018 Q3 2018 9 mos 2018vs. vs. vs.
Q2 2018 Q3 2017 9 mos 2017
Adjusted EBITDA – current period $ 211 $ 211 $ 654
Adjusted EBITDA – comparative period 273 200 468
Variance (62) 11 186
Mill nets(1) (70) 18 212
Volume(2) 1 20 51
Key input prices(3) - (13) (33)
Key input usage(3) 5 - (3)
Mill profit share and bonus 3 - (8)
Other operating costs and foreign exchange(4) (1) (14) (33)
Total $ (62) $ 11 $ 186
(1) The mill nets variance represents the estimated impact of changes in realized pricing across all products. Mill nets are calculated as sales (net of outbound freight costs)divided by shipment volumes.
(2) The volume variance represents the impact of shipment volume changes across all products.(3) The key inputs include 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 to ramp up the new Inverness,
Scotland line.
Liquidity and Capital Resources
9
Financials
(US $ millions, except per share information)
Q32018
Q22018
Q32017
9 mos 2018
9 mos 2017
Cash provided by operating activities before cash taxes and OWC changes $ 209 $ 259 $ 200 $ 635 $ 440
Cash taxes, net (10) (28) - (108) (2)
Operating working capital changes 29 19 3 (45) (52)
Cash provided by operating activities 228 250 203 482 386
Cash provided by operating activities per share 2.63 2.89 2.36 5.57 4.48
Operating working capital 173 212 156
Regular capital expenditures, including investment in intangible assets 40 50 35 136 98
Investment in Inverness project 1 4 38 9 93
Balance Sheet
10
Financials
(US $ millions, unless otherwise noted) Bank Covenant
Sep 29,
2018
Dec 31,
2017
Long-term debt, principal value $ 555 $ 555
Less: Cash and cash equivalents (193) (241)
Net debt 362 314
Add: Letters of credit and guarantees 15 19
Net debt for financial covenant purposes 377 333
Tangible net worth Min. $500 1,278 1,248
Net debt to capitalization, book basis Max. 65% 23% 21%
Liquidity of $548 million = $193 million in cash + $230 million in revolving bank lines+ $125 million undrawn A/R securitization
Appendices
$0
$50
$100
$150
$200
$250
$300
$350
$400
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
An
nu
al A
vera
ge N
C P
rice
US$
per
Msf
7/1
6"
Historical North American OSB Prices
12
Appendices
North Central Benchmark OSB Price
Source: Random Lengths
15-year average
Q1 163 175 423 364 285 145 137 154 212 198 203 417 219 193 226 293 370
Q2 159 215 443 297 238 156 179 146 295 173 235 347 219 193 264 330 426
Q3 159 381 351 303 181 177 201 178 180 184 313 252 216 204 301 409 363
Q4 156 401 264 317 166 165 170 172 191 190 332 245 216 242 285 379
Average 159 293 369 320 217 161 172 163 219 186 271 315 218 209 269 353
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 30, 2018. It is not exhaustive.
Forecast North American OSB Prices
13
Appendices
Annual Average North Central
Benchmark OSB Price US$ per Msf 7/16”
Analyst 2018F 2019F
RBC Capital Markets 375 350
Raymond James 365 330
Scotiabank 365 331
BMO Capital Markets 364 300
CIBC World Markets 363 305
Seaport Global 360 298
TD Securities 360 315
Vertical Research Partners 360 325
Bank of America Merrill Lynch 354 274
Average 363 314
North American Capacity Restarts Needed to Meet Growing Demand
14
Industry Overview
37 Mills in Operation
4 Mills Restarted/Available for Restart as of 2017
North American OSB Installed Capacity:
Norbord Mill
7 Mills (Re)started in 2012/13
Note: Excludes OSB siding production and capacity.
Source: APA, company documents and other public filings
(in Bsf-3/8”)
2012 2017
Production 16.2 22.1
Restarts/Idled 4.4 2.0
New 1.2
=27% =14%
Norbord’s Huguley, AL mill resumed
production in October 2017
2 Greenfield Mills in Development
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 + $12
Canadian dollar (3) $0.01 per C$ + $5
Pound sterling £0.01 per € < $1
(1) Assumes operation at full stated capacity levels (including the curtailed Chambord, Quebec mill). Impact on Adjusted EBITDA of a $10 per Msf-7/16” change is ± $53 million based on the last twelve months of production at September 29, 2018.Direct exposures only; before the impact of any cash flow currency hedges.Approximate operating loss carry-forwards for tax purposes (gross) as at December 31, 2017 – US $149 million, Canada C$22 million, Belgium €32 million and UK £1 million.
(2) Estimated impact of change in Norbord’s realized North American OSB price.
(3) Operating exposures only (excludes dividends on common shares).