Q317 results above expectations – Normalized EBITDA was $200MM vs. consensus at $190MM and our estimate of $205MM. NA operations generated EBITDA of $184MM (RBCe $199MM), up $27MM q/q (+$78MM y/y), primarily due to higher OSB prices and volumes. European operations contributed EBITDA of $14MM (RBCe $10MM), up $5MM q/q and $4MM y/y as panel price appreciation outpaced FX headwinds.
Dividend increased for the 3rd consecutive quarter – Following an increase of the quarterly dividend in Q1 (from C$0.10 to C$0.30) and the Q2 increase to C$0.50, the Board raised it again to C$0.60 for shareholders of record on December 1, 2017.
Norbord running at 97% in NA (excl. idled) in Q317 – Excluding idled capacity (2 mills), Norbord operated at 97% in NA during the third quarter (vs. 95% in Q316 and 99% in Q217). The q/q decrease in NA was a result of weather-related curtailments from the BC fires and US South hurricanes. NA OSB shipments were up 5% y/y on increased mill productivity (flat q/ q). OSB prices averaged $351/msf in the SE (+9% q/q), $407 in NC (+24% q/q), and $388 in WC (+32% q/q). US housing starts are up 3% YTD with single-family starts rising 9% YTD.
Europe produced at 100% capacity in Q317 – Shipments were 8% higher y/y in Q3 (flat q/q). Mill capacity utilization increased y/y (99% Q316) due to improved productivity but was down q/q (105% in Q217) due to annual maintenance shuts taken at three mills. The significant devaluation in the UK pound, following the Brexit referendum in June 2016, has insulated Norbord’s domestically produced panels from competition coming from continental OSB or South American plywood.
Brookfield distributes Ainsworth interest – On October 13th, a fund managed by Brookfield distributed 7.1MM shares of Norbord to its fund investors. Brookfield continues to hold a 40% interest in Norbord.
Positive outlook for 2018; start-up of Huguley and Inverness –
Management remains positive on the demand picture in both North America and Europe. Norbord has restarted its Huguley, AL mill and started-up the expanded Inverness, Scotland OSB facility.
Company conference call is on Friday, October 27 at 11AM ET – Dial-in: 1-800-289-0438 (Conference ID: 8525181).