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Note: Unless otherwise stated, financial references are in U.S. dollars. This press release reviews Norbord’s independent performance in fiscal year 2020, as Norbord and West Fraser operated as independent companies in fiscal year 2020 (see the West Fraser acquisition section below).
Toronto, February 11, 2021/PRNewswire/-Norbord Inc. (Norbord) is a wholly-owned subsidiary of West Fraser Timber Co. Ltd. (West Fraser) (TSX and NYSE symbol: WFG) The company, effective on February 1, 2021, today reported that it has adjusted its full-year EBITDA for 2020 to US$865 million, compared with US$138 million in 2019. This improvement is due to the significant increase in North American Oriented Strand Board (OSB) prices, increased productivity, and lower raw material prices that have been achieved, partly offset by higher plant profit share. Costs are attributed to higher revenue, lower shipments and Higher raw material usage. The adjusted EBITDA generated by the North American business was US$832 million, compared with US$85 million in the previous year, and the adjusted EBITDA generated by the European business was US$48 million, compared with US$64 million in the previous year.
In the fourth quarter of 2020, Norbord reported adjusted EBITDA of US$384 million, compared with US$322 million in the third quarter of 2020 and US$27 million in the fourth quarter of 2019. Prices were partially offset by lower shipments, and the year-on-year increase was due to the sharp increase in OSB prices and increased shipments in North America. The adjusted EBITDA of the North American business in the fourth quarter was US$370 million, compared to US$310 million in the third quarter of 2020, and US$20 million in the fourth quarter of 2019. The adjusted EBITDA of the European business was US$20 million, compared to US$16 million in the previous quarter. Million U.S. dollars in the same period last year was 11 million U.S. dollars.
Peter Wijnbergen, President and CEO of Norbord and current President of West Fraser Engineered Wood, said: "The past year has been very good for Norbord in many ways." After implementing our production strategy, the OSB demand for new house construction, repair and renovation recovered beyond expectations and forecasts in the second half of the year, boosting the North American benchmark price to a record high. In fact, the demand recovery is so strong that we have consecutively announced record quarterly results in the third and fourth quarters. In Europe, our performance has been more adversely affected by the pandemic. We have seen steady improvement in the second half of this year. Panel prices have rebounded. The output of the recently commissioned Inverness Phase II expansion project in Scotland has also increased. "
"Given everything that happened this year, I am very satisfied that our team can continue to focus on the strict agreements required by the pandemic and significantly improve our safety performance. I am also proud that we have quickly learned how to scale up production based on demand at the same time. During these special periods, we controlled manufacturing costs and achieved record annual output in our three factories. In addition, we were able to release our first ESG report before the end of the year as planned."
"As customer demand exceeds our supply capacity, we announced plans to resume OSB production at the Chambord plant in Quebec in the spring of 2021 as part of our flexible operating strategy. We are optimistic that the worst of the pandemic has passed. , But we also recognize that economic uncertainty is still high and our business is cyclical in nature, so we remain vigilant. We will continue to pay attention to the health and safety of our employees and the needs of our customers, and manage our business so that it has Resilience, flexibility and sustainability."
"As we move forward with West Fraser as an organization, I would like to thank my Norbord colleagues for all their commitment and hard work, especially in the past year. I look forward to continuing to work with us as President of West Fraser Engineered Wood Work together because we open a new chapter in our company’s story."
On November 19, 2020, the company and West Fraser announced that they have reached an arrangement agreement under which West Fraser will acquire all issued common shares of the company in an all-share transaction, in which Norbord shareholders will receive 0.675 Each Norbord share is entitled to West Fraser shares. The transaction was completed on February 1, 2021. Norbord became a wholly-owned subsidiary of West Fraser. Norbord’s shares were delisted from the Toronto Stock Exchange on February 2, 2021, and from the New York Stock Exchange on February 1, 2021. The exchange is delisted.
For the full year of 2020, Norbord recorded adjusted earnings of US$517 million or US$6.39 per basic share (diluted earnings per share of US$6.38), while adjusted losses for 2019 were US$30 million or per share (basic and diluted earnings). ) 0.37 USD. Norbord recorded adjusted earnings of US$261. The adjusted earnings for the fourth quarter of 2020 were US$204 million or US$2.52 per share (basic and diluted), and the adjusted loss of the fourth quarter of 2020 was US$11 million or US$0.13 per share ( Basic and diluted)) Same quarter last year. The adjusted income (loss) does not include non-recurring or other items, and uses a standardized income tax rate:
(Reversed) Net asset impairment
Asset disposal loss
Stock-based compensation and related costs
Costs associated with the closure of 100 Mile House
Cost of early termination of 2020 bills
Reported income tax expense (recovered)
Recover income tax (expense) at the statutory tax rate (1)
Represents Canadian federal and provincial statutory tax rates (2020-25%; 2019-26%). Based on the growth rate of 26% from the first quarter to the third quarter of 2020, the fourth quarter reflects the real situation of the annual growth rate of 25%.
According to data from APA-Engineering Wood Association (APA), new home construction is the largest end-use of the OSB industry in North America, accounting for approximately 58% of OSB consumption in 2020. In 2020, the rate of new housing starts in the United States increased by 7% year-on-year-to 1.38 million year-on-year, and the more forward-looking indicator, the seasonally adjusted annualized allowable growth rate was 1.67 million, an increase of 5% from December 2019. Single-family housing starts (using OSB approximately three times that of multi-family housing) increased by 12%, accounting for 72% of total housing starts, up from 69% in 2019. Since the low of 550,000 in 2009, new home construction has rebounded significantly, with seasonally adjusted housing starts in the United States exceeding the long-term annual average of 1.5 million in the past three months.
According to APA, North American OSB production in 2020 will be the same as 2019, approximately 23.0 Bsf (3/8 inch), accounting for 69% of North American structural board production and 96% of OSB industry operating capacity (85% of industrial installed capacity) . In comparison, the estimated operating rate for 2019 is 83%.
In 2020, the benchmark OSB price in North America will be significantly higher than in 2019. Prices began to rise at the beginning of the year, were suspended in the second quarter due to the impact of the COVID-19 pandemic on demand, and then climbed sharply to a record high in the second half of the year. The North Central benchmark OSB price ranges from a low of $220 per Msf (on a 7⁄16 inch basis) in January to a high of $710 per Msf in December, with an annual average of $443 per Msf. The following table summarizes the average benchmark OSB prices in various regions in the relevant years:
In Europe, panel prices continued the downward trend that began in 2019, especially in the United Kingdom, where the pandemic has more severe impact on customer demand than in continental Europe. In the United Kingdom, where three of Norbord’s four European factories are located, GDP has shrunk by 10% due to the impact of the pandemic, unemployment has risen, and housing starts have fallen. In Germany, Europe's largest continental OSB market, GDP growth rate dropped by 7%, and housing starts fell slightly from the previous year. In local currency terms, the annual average panel price dropped by 9% compared to 2019, but with the relaxation of pandemic restrictions and improved demand, prices began to rebound in the second half of the year.
Historically, the UK has been a net importer of panel products, and Norbord is the largest domestic producer. The weakening of the pound relative to the euro benefits Norbord's main business in the UK, as it improves sales opportunities in the UK and supports Norbord's export plan to the European continent. In 2020, the pound to euro exchange rate will range from 1.07 to 1.20, with an average of 1.13, while in 2019 it was 1.14.
Norbord's Occupational Safety and Health Administration (OSHA) has a recordable injury rate of 0.87 in 2020, which is 30% lower than in 2019. Five factories have completed recordable injury years.
In North America, due to the reduced demand due to the COVID-19 pandemic, production cuts in the second quarter resulted in a 6% decline in annual shipments. Shipments in the fourth quarter were down 8% from the previous quarter, but increased by 5% year-on-year. The quarter-on-quarter decline in shipments reflects the reduction in fiscal days and maintenance downtime during the typical seasonal slowdown in demand in the fourth quarter. The high-rise oriented strand board factory in Alberta has set annual production records.
Throughout the year, the capacity of Norbord's OSB plant in North America was 80% of the available capacity, compared with 85% in 2019 (excluding the reduced Québec shampoo plant). The decline in capacity utilization was due to the indefinite production cut last year and the impact of the pandemic in the second quarter on customer demand. Nonetheless, due to lower raw material prices and increased productivity, Norbord’s 2020 North American OSB production cost per unit of cash (excluding factory profit share) fell by 2% from the previous year, partially offset by the increase in the use of raw materials.
Driven by strong growth in OSB demand, European shipments increased by 3% in 2020, which offset the impact of the pandemic on customer demand in the second quarter. The OSB plants in Genk, Belgium and Inverness, Scotland achieved annual production records. Norbord's panel factory will have 87% production capacity in 2020 and 88% in 2019. The decline in capacity utilization is due to the 225 million square feet (MMsf) (3/8 inch) capacity restatement after the completion of the phase 2 Inverness plant expansion project.
As a result of increased productivity, especially the improvement of the Inverness plant and product portfolio, the company generated US$55 million in net profit margin improvement program (MIP) revenue in 2020. This is consistent with the best MIP results the company has ever had in 2004.
Based on the strong free cash flow in the second half of 2020 and in line with Norbord's capital allocation priorities, many projects have been advanced to the 2020 fiscal year. Therefore, the investment in real estate, plant and equipment for the year was US$124 million (US$128 million, including intangible assets). In 2020, US$19 million (US$47 million in total) of the US$46 million (£35 million) budget will be invested in the Inverness Phase II expansion project. The project has now been completed, and the state-of-the-art continuous printing press continues to reiterate its second-phase capacity increase of 945 MMsf (3/8 inch basis). In Chambord, USD 7 million was invested in 2020 (the project budget is USD 71 million, and USD 58 million has been invested so far) to rebuild the Chambord factory, which is scheduled to restart in the spring of 2021.
Looking forward to 2021, the capital expenditure target is approximately US$185 million. This will include maintenance business projects, projects focused on eliminating capacity bottlenecks, reducing manufacturing costs and improving the process safety of the entire plant, as well as completing the remaining parts of the reconstruction of the Chambord plant. It will also include investments to support the company’s strategy to increase the production of specialty products for industrial applications and export.
As of the end of the year, the company's unused working capital was US$985 million, including US$568 million in cash and cash equivalents and US$417 million in unused credit lines. Operating working capital was US$121 million, compared with US$120 million in the same period last year. The company's tangible net assets are US$1.403 billion, and the net book debt capitalization rate is 7%.
Norbord returned $100 million in cash to shareholders in 2020 through dividends and stock repurchases. In 2020, a total of $72 million was paid in dividends, and 1.1 million common shares were repurchased at a price of $28 million. From November 5, 2019 to November 4, 2020, Norbord repurchased 1.4 million common shares at a weighted average price of 33.17 Canadian dollars per common share at a total cost of 33 million U.S. dollars. Norbord did not renew the NCIB when it expired on November 4, 2020, nor did it repurchase any shares in the fourth quarter of 2020.
After West Fraser repaid and terminated the company's revolving bank line after the completion of the acquisition, the Norbord asset-backed mortgage platform with revolving bank as the beneficiary was also terminated. Therefore, the mortgage platform that provided Norbord asset guarantees to senior note holders in 2023 and 2027 was terminated. The termination of the mortgage platform resulted in the lifting of the liens supporting the two mortgage platforms. As a result of such termination, the 2023 and 2027 senior notes are now Norbord's unsecured debt.
According to the contract for managing senior notes in 2023 and 2027, after Norbord is acquired by West Fraser, the company needs to make a control change offer to all note holders. The purchase price is equal to 101% of its total principal plus the accrued sum Unpaid interest. According to its contractual terms and conditions, any bills that have not submitted a bid for such an offer will continue to be Norbord’s outstanding obligations. Details will be provided in the notice of offer mailed to Norbord note holders.
Industry experts predict that the number of new housing starts in the United States in 2021 will be between 1.35 million and 1.55 million. Key indicators of the US housing market, including strong new home sales, housing permits and single-family starts, minimum new home inventory and low mortgage interest rates, will continue to provide positive prospects for OSB demand. Similarly, demand for repairs and renovations remains strong, and demand from industrial customers has normalized after being constrained by the pandemic earlier this year. Despite these positive trends, with the outbreak of the second wave of COVID-19, there is still considerable uncertainty in the broader economic environment. If circumstances change, Norbord can respond with its flexible operating strategy.
Norbord’s 2020 year-end press release, management’s discussion and analysis, annual consolidated audited financial statements and financial statement notes are currently being archived on SEDAR (www.sedar.com), EDGAR (www.sec.gov) and available on the company’s website www.norbord.com and the investor section of the West Fraser website www.westfraser.com. Norbord will soon submit the 2020 40-F annual report to the SEC on the 40-F form, including the audited financial statements for the year ended December 31, 2020, and submit it to the SEC on EDGAR (www.sec.gov) And submit it to the Canadian Securities Authority on SEDAR (www.sedar.com). These documents can also be found on the investor section of the company website and on the West Fraser website. Shareholders can obtain a hard copy of Norbord's audited annual financial statements for free on request. The company also provides presentation materials on its website that contain certain historical and forward-looking information related to Norbord, including materials that contain additional information about the company's financial performance. Encourage shareholders to read this material.
Representatives of West Fraser and Norbord will hold a joint conference call for analysts and institutional investors at 11:30 AM Eastern Time on Friday, February 12, 2021. The conference call will be broadcast live on the Internet through www.norbord.com and www.westfraser.com. Prior to the start of the conference call, an accompanying presentation will be provided in the "Investor/Conference Call" section of the Norbord website. The replay number will be provided approximately one hour after the call ends and will be obtained by dialing 1-888-390-0541 or 416-764-8677 (enter code 950002 #) before February 19, 2021. Audio playback and written transcripts will be available on the Norbord website.
Norbord is a wholly-owned subsidiary of West Fraser. West Fraser is a public company listed on the Toronto Stock Exchange and the New York Stock Exchange under the code "WFG". West Fraser is a diversified wood products company with more than 60 factories in Canada, the United States, the United Kingdom and Europe. West Fraser uses responsibly sourced and sustainably managed forest resources to produce wood, engineered wood (OSB, LVL, MDF, plywood, particleboard) and other products including pulp, newsprint, wood chips and renewable energy. West Fraser's products are used in house construction, repair and renovation, industrial applications, paper, tissues and box materials.
This press release contains forward-looking statements as defined by applicable securities legislation, including statements related to company strategies, projects, plans, future financial or operating performance, and other statements that express management’s expectations or estimates of future performance. Usually, but not always, forward-looking statements can be identified by using words such as "set", "as planned", "expected", "estimated", "forecast", "target", "forecast", etc. "Plan", "Representative", "Continue", "Intention", "Should", "Will", "May", "Will", "May", "May", "May" and other expressions that are predicted Or forward-looking statements that indicate future events, trends or prospects and have nothing to do with historical events. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Norbord's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Although Norbord believes that it has a reasonable basis for making these forward-looking statements, it cautions readers not to rely excessively on such forward-looking information. In terms of its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, including generality and specificity, which lead to the possibility that forecasts, forecasts and other forward-looking statements will not occur. These factors include but are not limited to: (1) Developments related to COVID-19 or any other plague, pandemic, pandemic, infectious disease outbreak or any other public health crisis, including health and safety measures taken to protect company employees , Government-imposed restrictions or other restrictions that may be applicable to the company’s employees and/or operations (including quarantine), the impact on customer demand, supply and distribution, etc.; (2) and the United States, Europe, Canada and global economic and financial conditions Relevant assumptions; (3) The risks inherent in product concentration and periodicity; (4) The impact of competition and product pricing pressure; (5) The inherent risks of relying on customers; (6) The impact of changes in the price and availability of manufacturing inputs , Including the impact of continuing to obtain fiber resources at a competitive price and third-party certification standards; (7) the availability of transportation services, including truck and rail services, and port facilities; (8) various events that may disrupt operations, including natural , Man-made or catastrophic events and ongoing relationships with employees; (9) the impact of environmental or other regulatory changes or non-compliance; (10) government restrictions, standards or regulations aimed at reducing greenhouse gas emissions; (11) weather and climate The impact of changes on Norbord’s operations or the operations or needs of its suppliers and customers; (12) the impact of any product liability claims beyond insurance coverage; (13) inherent risks in capital-intensive industries; (14) tax risks for the future The impact of results; (15) potential changes in future tax laws, including tax rates; (16) currency exposure and exchange rate fluctuations; (17) future operating costs; (18) financing, bank lines and/or other liquidity measures (19) the impact of future cross-border trade rulings or agreements; (20) the implementation of important strategic initiatives and the identification, completion and integration of acquisitions; (21) the ability to implement new or upgraded information technology infrastructure; ( 22) The impact of interruption or failure of information technology services; (23) changes in government policies and regulations and (24) the merger into West Fraser and the risks associated with the combined business.
The above list of important factors affecting forward-looking information is not exhaustive. Other factors are noted elsewhere and should refer to other risks discussed in documents filed with Canadian and U.S. securities regulators. Except as required by applicable laws, Norbord does not undertake to update any forward-looking statements made by the company or on behalf of the company from time to time, whether written or oral, whether due to new information, future events or other circumstances, or public updates or revisions that affect this information A list of the above factors. Please refer to the "forward-looking statements" section of the annual information sheet dated February 11, 2021 and the cautionary statements in the "forward-looking statements" section of the 2020 management discussion and analysis dated February 11, 2021.
When evaluating the company’s business, the management uses non-International Financial Reporting Standards (IFRS) financial indicators. The management believes that these indicators are important supplementary indicators of the company’s performance and believe that investors, securities analysts and other relevant parties often use these indicators . Evaluation of Norbord and other similar companies. In this press release, the following non-IFRS financial indicators are used: adjusted EBITDA, adjusted earnings (loss), adjusted earnings (loss) per share, working capital, tangible net worth and net debt capitalization, book basis. Norbord defines adjusted EBITDA as the unaccounted financial cost, interest income, income tax, depreciation, amortization, and income (loss) of non-recurring or other items determined in accordance with IFRS; adjusted income (loss) is based on the international financial report Earnings (losses) for non-recurring or other items determined by the standard and using a standardized income tax rate; adjusted earnings (loss) per share is the adjusted earnings (loss) divided by the weighted average number of ordinary shares issued (in Basic or diluted basis, according to regulations); working capital as accounts receivable plus inventory and prepayments minus accounts payable and accrued liabilities; as tangible net value of shareholders’ equity, including certain adjustments; net debt capitalization , The book basis is the net debt for the purpose of the financial contract divided by the sum of the net debt for the purpose of the financial contract and the tangible net value; the net debt for the purpose of the financial contract is regarded as the net debt, excluding other long-term debts, including the classification for the purpose of the financial contract as Debt other liabilities, letters of credit and outstanding guarantees, and any bank advances; and net debt as the principal of long-term debt, including the current portion, other long-term debts and bank advances (if any) minus cash and cash equivalents . Non-IFRS financial measures do not have any standardized meanings required by IFRS, and therefore are unlikely to be compared with similar measures provided by other companies that may have different financing and capital structures and/or tax rates. Please refer to "Non-IFRS Financial Measures" in Norbord's 2020 Management Discussion and Analysis dated February 11, 2021 for the quantitative reconciliation between these non-IFRS financial measures and the most directly comparable IFRS measures.
Accounts payable and accrued liabilities
Statement of Comprehensive Income (Loss)
For the year ended December 31, (millions of dollars, except per share information)
Asset disposal loss, net
Costs associated with the closure of 100 Mile House
Cost of early termination of 2020 bills
Income (loss) before income tax
Earnings (loss) per common share
Consolidated statement of comprehensive income (loss)
For the year ended December 31, (Millions of U.S. dollars)
Other comprehensive income (loss), net after tax
Items that will not be reclassified as revenue:
Actuarial loss of post-employment obligations
Items that may be reclassified after earnings:
Foreign currency conversion income of overseas business
Other comprehensive income, net after tax
Consolidated Statement of Changes in Shareholders’ Equity
For the year ended December 31, (Millions of U.S. dollars)
Issuance of ordinary shares when the option is exercised
Common stock repurchase and cancellation
Reverse accruals of common shares repurchased and cancelled under ASPP
Common stock repurchase and cancellation
Reverse accruals of common shares repurchased and cancelled under ASPP
Year-end balance (i)
Other comprehensive income, net after tax
(i) Retained income (loss) includes:
Loss of cashless exercise warrants in 2013
All other retained earnings (deficit)
Consolidated Cash Flow Statement
For the year ended December 31, (Millions of U.S. dollars)
Cash provided (used for):
Cost of early termination of 2020 bills
Costs associated with the closure of 100 Mile House
Asset disposal loss, net
Net change in non-cash working capital balance
Net change in tax receivable and tax payable
Property, plant and equipment investment
Securitization of accounts receivable (repayment) withdrawal, net
2020 premium for early termination of bills
Foreign exchange revaluation of cash and cash equivalents held
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