Norbord Inc. reported adjusted EBITDA of $61 million for the first quarter of 2016 versus $16 million in the first quarter of 2015 and $57 million in the fourth quarter of 2015. Norbord says that the year-over-year improvement is primarily due to higher North American oriented strand board (OSB) prices and shipment volumes as well as lower resin prices and the weaker Canadian dollar.
Norbord's North American operations generated adjusted EBITDA of $53 million in the quarter compared to $11 million in the same quarter last year and $51 million in the prior quarter.
European operations delivered adjusted EBITDA of $10 million, $3 million higher than the same quarter last year and in line with the prior quarter.
“Our first quarter Adjusted EBITDA result is almost a four-fold increase from a year ago. I’m also encouraged by the sequential improvement despite the seasonally lower North American benchmark OSB prices,” said Peter Wijnbergen, Norbord’s President and CEO.
“Our mills in both North America and Europe continued to deliver strong operational results, generating $9 million in Margin Improvement Program gains. In the 12 months since our merger with Ainsworth, we have captured $32 million in annualized synergies and remain on track to deliver our full $45 million target by the end of 2016.”
“The pace of US housing starts is 14% higher than this time last year and single-family building activity is up even more. North American OSB demand continues to grow, sales to all our key customer segments are improving and our order files are strong. Benchmark OSB prices are currently up 16% since their February low as the seasonal pick-up in demand begins to materialize.”
“In Europe, our panel business delivered another solid quarter with $10 million of Adjusted EBITDA, reflecting sales growth and record utilization at our mills. OSB prices continued to rise on the continent and are now starting to turn up in the UK. Work is underway on our $135 million capital investment to modernize and expand our Inverness, Scotland OSB mill, with construction commencing this quarter.”
In North America, Wijnbergen says the pace of single-family starts, which use approximately three times more OSB than multi-family, increased by 23 percent. He cites a consensus forecast from U.S. housing economists of approximately 1.23 million starts in 2016, which translates to an 11 percent year-over-year improvement.
Norbord says benchmark OSB prices are up 16 percent over a February low as the seasonal pick-up in demand begins to materialize. OSB prices continued to rise Europe, and are now starting to turn up in the UK.
First quarter North American benchmark OSB prices were $225 per thousand square feet (Msf) in the North Central region. In the Southast region, where about 35 percent of Norbord's North American OSB capacity is located, prices averaged $215 per Msf in the quarter. In the Western Canada region, where 30 percent of Norbord's North American capacity is located, prices averaged $191 per Msf in the quarter.
In Europe, Norbord's core panel markets in the UK and Germany experienced strong demand growth in the quarter. "Work is underway on our $135 million capital investment to modernize and expand our Inverness, Scotland OSB mill, with construction commencing this quarter," Wijnbergen said.
Norbord says its operating North American OSB mills produced at 92 percent of capacity -excluding a pair of curtailed mills in Huguley, Alabama and Val-d'Or, Quebec- up from 86 percent in the same quarter last year. Capacity utilization increased due to fewer maintenance shutdown days, with improved productivity having additional impact year-over-year.
In January 2016, the Board of Directors approved a $135 million investment over the next two years to modernize and expand the company's Inverness, Scotland OSB mill. Norbord has decided to move an unused second press from its Grande Prairie, Alberta mill for use in the Inverness project, which is expected to shorten the project timeline by up to six months.
About Norbord
Norbord Inc. is a leading global manufacturer of wood-based panels and the world's largest producer of oriented strand board (OSB). In addition to OSB, Norbord manufactures particleboard, medium density fibreboard and related value-added products. Norbord has assets of approximately $1.8 billion and employs approximately 2,600 people at 17 plant locations in the United States, Canada and Europe.
