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BMO Timber & Wood Products Summit May 14, 2015
Forward-Looking Statements & Non-IFRS Financial Information
• All financial references are expressed in US$ unless otherwise noted.
• This presentation contains forward-looking statements and estimates.
• 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 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.
2
Notices
Company Overview
Norbord-Ainsworth Merger Now Closed
4
Company Overview
• Transaction announced on December 8, 2014
• Norbord and Ainsworth shareholders voted over 99% in favour of the transaction on January 27, 2015
• BC Supreme Court granted final order approving plan of arrangement on January 30, 2015
• Antitrust Division of the United States Department of Justice closed review on March 16, 2015
• Transaction closed on March 31, 2015 – Ainsworth shareholders received 0.1321 of a Norbord share for each Ainsworth share
– Ainsworth shares delisted from TSX on April 2, 2015
Norbord Snapshot
• Leading manufacturer of wood-based panel products
• Largest global producer of Oriented Strand Board (OSB) – Installed OSB capacity of 8.0 Bsf-3/8” (1) (2)
– Installed panel capacity (including particleboard & MDF) of 8.9 Bsf-3/8” (1) (2)
– Approximately 2,600 employees at 17 plants across the US, Canada and Europe
• Listed on the TSX (“NBD”)
• Report in US dollars and in accordance with IFRS
• LTM Q1-2015 Pro Forma Sales of $1.5 billion (2)
5
Company Overview
North America
Europe
Oriented Strand Board (OSB)
Particleboard
Medium Density Fibreboard (MDF)
Furniture
Europe 20%
Canada 37%
US 43%
8.9 Bsf-3/8” (1)(2)
Panel Capacity by Region
(1) Does not include the 600 MMsf-3/8” Grande Prairie, Alberta Line 2 (“GP2”) expansion project (2) Pro Forma the Ainsworth merger
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
West Fraser Canfor Corp. Louisiana-Pacific Norbord Interfor Western Forest Products Conifex
Ente
rpris
e Va
lue
($U
Smm
) The Leading Global OSB Company
6
Company Overview
Top 10 Global OSB Producers
Pro Forma Enterprise Value
Source: Bloomberg and company filings. Enterprise values as at May 12, 2015
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Norbord Louisiana-Pacific Georgia-Pacific Weyerhaeuser Kronospan Huber Tolko KronoSwiss Egger
OSB
Cap
acity
(Bsf
-3/8
")
Norbord’s Products
7
Company Overview
OSB – 90% of Capacity
• Norbord’s operations now include 15 OSB mills and two other plant locations in the UK producing particleboard, MDF and related value-added products
• New home construction
• Repair and remodel
• Light commercial construction
• Industrial applications
Particleboard – 6% of Capacity
• New home construction
• Repair and remodel
• Furniture
• Fixtures
MDF – 4% of Capacity
• Furniture
• Fixtures
• Mill work
Industry Overview
Typical Uses for OSB Products
9
Industry Overview
Wall Sheathing
Webstock
Flooring
Rimboard Door Header
Roof
Window Header
Garage Door Header
• OSB is an innovative, affordable and environmentally “sustainable” structural panel – Serves many of the same uses as plywood, but produced at a lower cost
• Norbord expects OSB will continue to capture market share from plywood – Currently, OSB represents 64% of total North American structural panels consumption
Global OSB Industry
10
Industry Overview
Industry OSB Capacity (MMsf-3/8”)
0
10
20
30
North America
Europe South America
Asia
Norbord operates in the two significant global OSB producing regions
Source: Company Documents and Other Public Filings
Kronospan 39%
KronoSwiss 20%
Egger 12%
Sonae 7%
Smartply 5%
Kalavela 4%
Others 2%
Industry Capacity 8 Bsf-3/8”
North American & European OSB Industries
11
Industry Overview
Louisiana-Pacific 22%
Georgia-Pacific 19%
Weyer- haeuser
11%
Huber 8%
Tolko 8%
Other 7%
Industry Capacity 28 Bsf-3/8”
North American OSB Industry
25%
Source: Company documents and other public filings – installed industry capacity
European OSB Industry
11%
Norbord is a significant player in both key markets
Demand Growth Ahead in Both Key Markets
12
Industry Overview
OSB Share of Structural Panels
Source: FEA and Norbord Estimates
0%
25%
50%
75%
80 85 90 95 00 05 10
North America
Europe
US Housing Recovery is Real
13
Industry Overview
0.5
1.0
1.5
2.0
2.5
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015F
US
Hous
ing
Star
ts (m
m)
US Housing Starts Underlying Demand
Favourable long-term OSB industry fundamentals
US Housing Starts and Underlying Demand
1.5 mm Over-Built
21.4 22.8 24.0 24.8 25.9 26.9 28.0 28.6 29.2 28.4 27.8 27.1 26.9 27.1 28.0 28.3 28.5 28.7
30%
40%
50%
60%
70%
80%
90%
100%
–
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
Effective Demand / Capacity
Capa
city
(Bsf
-3/8
")
Effective Capacity Mothballed Capacity Effective Demand / Capacity
North American OSB Demand and Capacity
3.7 mm Under-Built
Source: US Census Bureau and Forest Economic Advisors, LLC (FEA); As of April 2015
North American Capacity Restarted to Meet Growing Demand
14
Industry Overview
38 Mills in Operation
8 Mills Indefinitely Curtailed
North American OSB Installed Capacity:
Norbord Mill
6 Mills (Re)started in 2013
Source: Company documents and other public filings
Attractive North American OSB Price Outlook
15
Industry Overview
North Central Benchmark OSB Price
Source: Random Lengths and Forest Economic Advisors, LLC (FEA); As of April 2015
$0
$50
$100
$150
$200
$250
$300
$350
$400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
Annu
al A
vera
ge N
C Pr
ice
US$
per
Msf
7/1
6"
Historical Price Forecasted Price
15-year average: $229
• OSB prices are tied to demand for building products, which is influenced by the general economy, demographics and the need for housing
• With US housing recovering, OSB prices are projected to rise above trend
Core European Housing Markets Recovering
16
Industry Overview
50
75
100
125
150
175
200
225
250
275
2009 2010 2011 2012 2013 2014
Housing Starts (000’s)
UK +18% in 2014
Germany +5% in 2014
0%
5%
10%
15%
20%
25%
30%
35%
40%
80 85 90 95 00 05 10
European OSB Share of Structural Panels
Source: National House Builder Confederation (NHBC), Construction Products Association (CPA) & Bundesbank
• Significant growth opportunity – OSB accounts for only ~8% of the structural panel market in Japan compared to >60% in North America
543 556 505 517 430 460 465 487
550 489
693 729
556 577
358 353 369 396
430
403
1,236 1,285
1,061 1,093
788 813 834 883
980
892
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Wooden All Other
Japanese Housing Market Stable
17
Industry Overview
Japanese Housing Starts (000’s)
Source: Japanese Ministry of Land, Infrastructure, Transport and Tourism
Business Strategy
Norbord’s Strategy is Well Defined
19
Business Strategy
Pursue growth in OSB 2
Own high-quality assets with low-cost positions 3
Maintain a margin-focused operating culture 4
Focus on growth customers through best-in-class service and product development
5
Allocate capital with discipline 6
Develop a world-class safety culture 1
Norbord’s Growth Focused on OSB
20
Business Strategy
0
1
2
3
4
5
6
7
8
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 PF
Norbord OSB Capacity (Bsf-3/8”)
(1)
(1) Pro Forma for the Ainsworth Merger
Margin Improvement is an Operational Priority
21
Business Strategy
37
28
56
9 14
29
16
25 23
0
24
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(1) The benefits of improved productivity and a richer value-added product mix were offset by higher maintenance spending in 2013
(1)
Margin Improvement Program Gains ($ in millions) “In Control of Our Controllables”
• Margin Improvement Program (MIP) gains help offset impact of industry-wide rising input costs:
– Increased productivity – Reduced overhead costs – Reduced raw material usage – Improved product mix
• MIP has delivered $261 million of margin improvements over the past 11 years with minimal capital investments
Further MIP Ahead Through Identified Merger Synergies
22
Business Strategy
Operational Best
Practices Corporate Overhead
Sales & Logistics
Purchasing Savings
Product Specialization
Single Public Company
$45 Million in Annual Merger Synergies (1)
Achievable over 18-24 months
Ainsworth’s Forming Technology
Operational Standardization
Continuous Press Experience
Order File Optimization
(1) Costs to achieve ~50%
Diversification From European & Asian End Market Exposure
23
Business Strategy
64%
32%
4%
2014 Sales by Geography (1)
(1) Pro forma the Ainsworth merger - Ainsworth sales converted to US$ at an average exchange rate of C$1.1046 / US$
• Strong North American footprint
• Stable margin operations: – Europe – Asia-focused exports
• Provides greater diversification than North American-based competitors
• Better positioned to weather market cycles
Europe
North America
Asia
Focused Customer Strategy Sets Norbord Apart
24
Business Strategy
(1) Pro Forma the Ainsworth merger
New Home Construction (Pro-Dealers)
50%
Repair & Remodel (Big Box)
25%
Industrial 20%
Export 5%
5.3 Bsf-3/8” (1)
2014 North American Shipments (1)
• New housing sales volume growing as US housing starts recover • Pro-dealer shipments now represent 50% of Norbord sales volume
Disciplined Capital Allocation
25
Business Strategy
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015PF
Capex Greenfield Expansion
Capex Investment (US$ millions) • Three main priorities: – Investing in our mills
–Optimizing debt profile
–Returning cash to
shareholders
(1) 2015 target is pro forma for the Ainsworth merger
(1)
Financial Overview
$73
$21 $45
$631
$495
$247
$42
-$60
$0
$107
$45
$188
$287
$90 $139
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 LTM Q1-2015
Synergies Ainsworth Adjusted EBITDA Norbord Adjusted EBITDA
Strong Operating Cash Flow Through The Cycle
27
Financial Overview
North Central Benchmark OSB Price $369 $320 $217 $161 $172 $163 $219 $186 $271 $315 $218 $211
US Housing Starts (000s) 1,956 2,068 1,801 1,355 906 554 587 609 781 925 1,003 1,011
Total Adjusted EBITDA (US$ millions)
11-year average: $188 million
(2) (3)
(1) Pro forma for the Ainsworth merger (2) Includes approximately $45 million of identified annual synergies, achievable over 18 – 24 months (3) Ainsworth EBITDA converted at a period average exchange rate of C$1.13917 / US$
Norbord Sensitivity to North American OSB Price Changes:
+$10/Msf 7/16” = +$58 million(1) Adjusted EBITDA (at full capacity)
Stable Results from European Operations
28
Financial Overview
• Norbord’s European operations provide greater sales and earnings diversification than other North American-based competitors
European Adjusted EBITDA (US$ millions)
58
32 35
81
4
17
37 44
39 46 47
41
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 LTM Q1-2015
Strong Balance Sheet & Liquidity
29
Financial Overview
PF Q1 2015 (1) (3)
Cash $50
Bank Lines (2) 239
A/R Securitization(3) 80
Liquidity $369
Manageable Debt Maturities (US$ millions) Strong Liquidity Profile (US$ millions)
Moody’s Ba2 (Stable)
S&P BB- (Stable)
DBRS BB (Negative)
Stable Issuer Credit Ratings
$200
$240
$315
2015 2016 2017 2018 2019 2020 2021 2022 2023
7.70
%
5.37
5%
6.25
%
(1) Pro forma for the Ainsworth merger and to reflect an increase in the A/R securitization program commitment from $100 million to $125 million subsequent to quarter-end (2) Undrawn bank lines less outstanding letters of credit (3) Pro forma program commitment limit (see note (1) above) less $45 million drawn at quarter-end
Attractive Investment Opportunity
30
Summary
Leverage to unfolding US housing recovery Every +$10 in NA OSB price = +$58 million in Adjusted EBITDA at full capacity
Diversification from European operations and Asian export sales
High quality asset base with low operating costs
Focused customer strategy and strong customer partnerships
Superior margins versus peers
Track record of disciplined capital allocation
Strong financial liquidity and comfortable debt maturities
Appendices
Shareholder Information
32
Appendices
Ticker Symbol TSX: NBD
Common Shares 85.3 million outstanding (as at May 12, 2015)
Quarterly Dividend CAD $0.25 per share (declared May 1, 2015, to be paid on June 21, 2015 to shareholders of record on June 1, 2015)
Majority Shareholder Brookfield Asset Management – 53%
OSB Prices Strong Over the Cycle
33
Appendices
Historical North Central Benchmark OSB Price
Source: Random Lengths
$0
$50
$100
$150
$200
$250
$300
$350
$400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annu
al A
vera
ge N
C Pr
ice
US$
per
Msf
7/1
6"
15-year average
Q1 261 132 163 175 423 364 285 145 137 154 212 198 203 417 219 193
Q2 240 190 159 215 443 297 238 156 179 146 295 173 235 347 219
Q3 171 180 159 381 351 303 181 177 201 178 180 184 313 252 216
Q4 155 140 156 401 264 317 166 165 170 172 191 190 332 245 216
Average 207 160 159 293 369 320 217 161 172 163 219 186 271 315 218
Financial Sensitivities
34
Appendices
(1) Pro forma for the Ainsworth merger Assumes operation at full stated capacity levels Direct exposures only; before the impact of any cash flow currency hedges Norbord standalone tax operating loss carry-forwards (gross) as at Dec. 31, 2014 – US $133 million, Canada C$108 million, Belgium €34 million Ainsworth standalone tax operating loss carry-forwards (gross) benefitted for financial statement purposes as at Dec. 31, 2014 – Canada C$192 million
(2) Operating exposures only (excludes dividends on common shares)
Exposure Change
Adjusted EBITDA Impact (1)
(US$ millions)
North American OSB $10 per Msf-7/16” + $58
European OSB €10 per 000 m3 + $8
Canadian dollar (2) $0.01 per C$ + $3
Pound sterling £0.01 per € < $1
Analyst Coverage
35
Appendices
Analyst Analyst Name Contact
CIBC World Markets Mark Kennedy (403) 221-4133 [email protected]
Credit Suisse Andrew Kuske (416) 352-4561 [email protected]
Dundee Capital Markets Stephen Atkinson (514) 396-0321 [email protected]
ERA Forest Products Research Claire Huxtable (604) 886-5741 [email protected]
John Tumazos Very Independent Research John Tumazos (732) 444-1083 [email protected]
Raymond James Daryl Swetlishoff (604) 659-8246 [email protected]
RBC Capital Markets Paul Quinn (604) 257-7048 [email protected]
Scotia Capital Benoit Laprade (514) 287-3627 [email protected]
TD Securities Sean Steuart (416) 308-3399 [email protected]
Vertical Research Partners James Armstrong (212) 256-6157 [email protected]
Forecast OSB Pricing – North Central 7/16”
36
Appendices
Norbord does not provide guidance regarding its expectations of future OSB prices. The following is a sample of price forecasts by analysts as at May 12, 2015. It is not exhaustive.
Annual Average North Central
Benchmark OSB Price US$ per Msf 7/16”
Analyst 2015F 2016F
CIBC World Markets 228 280
Dundee Capital Markets 195 205
Raymond James 225 260
RBC Capital Markets 215 250
Scotia Capital 215 256
TD Securities 202 250
Vertical Research Partners 205 280
Average $212 $254
Norbord Inc.
Suite 600 One Toronto Street
Toronto, Ontario, M5C 2W4 Canada
Tel: 416-365-0705 Fax: 416-365-3292
www.norbord.com
