Norbord posts record Q3 earnings as OSB prices rocket

The company recorded adjusted EBITDA of US$322m for Q3 compared to US$84m in the second quarter of 2020 and US$33m in the third quarter of 2019.

The increases versus all comparative periods were primarily driven by significantly higher realized North American OSB prices partially offset by higher North American profit share attributed to higher earnings. Benchmark OSB prices more than doubled in Q3 compared to Q2, 2020.

North American operations generated adjusted EBITDA of US$310m compared to US$84m in the second quarter of 2020 and US$24m in the third quarter of 2019, and European operations delivered adjusted EBITDA of US$16m compared to US$2m in the prior quarter and US$11m in the same quarter last year.

“The recovery in economic activity that unfolded in the latter stages of Q2 carried into Q3, driving strong new housing construction and repair-and-remodelling demand that helped lift North American benchmark OSB prices to all-time highs,” said Peter Wijnbergen, Norbord’s President & CEO.

“Our European results also benefitted from higher quarter-over-quarter panel prices and continued recovery of UK panel demand that had been significantly impacted by the pandemic in the second quarter. Adjusted EBITDA increased nearly tenfold from year-ago levels and was 18% above Norbord’s previous best quarterly result in the second quarter of 2018.

“Customer demand has been significantly stronger than expected during this unusual period of economic uncertainty. We are optimistic, but we also recognize that our business is cyclical and that it is not yet clear whether the worst of the pandemic is behind us.”

The September seasonally adjusted annualized rate of US housing starts was 1.42 million, which is an 11% year-over-year improvement. The pace of single-family starts, which use approximately three times more OSB than multi-family starts, improved 22% to 1.11 million.

In North America, Norbord’s third quarter shipments were up 9% quarter-over-quarter but declined 8% year-over-year. Excluding the Chambord, Quebec mill, Norbord’s North American mills produced at 86% of available capacity in the third quarter of 2020 compared to 74% in the second quarter and 92% in the third quarter of 2019.

In Europe, third quarter shipments were up 23% quarter-over quarter, reflecting a strong recovery after the significant curtailments across the company’s UK mills in the second quarter in response to reduced customer demand due to government-imposed pandemic restrictions. Year-over-year, shipments were up 12%, reflecting the continued ramp-up of the Inverness, Scotland mill.

Norbord also announced the permanent closure of the 100 Mile House mill in British Columbia, which will reduce Norbord’s North American stated capacity, as the ongoing wood supply shortage in that region makes the reopening of that mill uneconomic.