Investor PresentationFebruary 2018
Forward-Looking Statements & Non-IFRS Financial Information
2
Notices
• All financial references are expressed in US$ unless otherwise noted.
• This presentation contains forward-looking statements and estimates.
• Such statements and estimates are based on assumptions as to the future and on management’s current expectations and are, naturally, subject to risks and uncertainties.
• 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 and quarterly 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.
Company Overview
Norbord Snapshot
• Leading manufacturer of wood-based panel products
• Largest global producer of Oriented Strand Board (OSB)
– Stated OSB capacity of 8.4 Bsf-3/8”
– Stated panel capacity (including particleboard & MDF) of 9.4 Bsf-3/8”
– Approximately 2,750 employees at 17 plants across the US, Canada and Europe
• Listed on the NYSE and TSX (“OSB”)
• Report in US dollars and in accordance with IFRS
• 2017 sales of $2.2 billion
4
Company Overview
North America
Europe
Oriented Strand Board (OSB)
Particleboard
Medium Density Fiberboard (MDF)
Furniture
Panel Capacity by Region(1)
(1) Based on estimated annual capacity at year-end 2017
The Leading Global OSB Company
5
Company Overview
Top 10 Global OSB Producers
Enterprise Value
Source: Bloomberg and company filings. Enterprise values as at February 8, 2018.
* Excluding OSB siding capacity
*
Norbord’s Products
6
Company Overview
OSB – 90% of Capacity
• Norbord’s operations 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
8
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 67% of total North American structural panel production
Source: APA, January 2018
Global OSB Industry
9
Industry Overview
Industry OSB Capacity (MMsf-3/8”)
Norbord operates in the two significant global OSB producing regions
Source: Company documents and other public filings, Wood Based Panels International (WBPI)
* Excluding NA OSB siding capacity
0
10
20
30
North America Europe Asia South America*
North American & European OSB Industries
10
Industry Overview
North American OSB Industry
Source: Company documents and other public filings – stated industry capacity
European OSB Industry
Norbord is a significant player in both key markets
* Excluding OSB siding capacity.
*
Substitution a Big Driver of OSB Demand Growth
11
Industry Overview
OSB Share of Structural Panels
Source: Forest Economic Advisors, LLC (FEA), European Panel Federation (EPF) and Norbord estimates
Europe
North America
US Housing Recovery Continues
12
Industry Overview
Favourable long-term OSB industry fundamentals
US Housing Starts and Underlying Demand
1.5 mm Over-Built
North American OSB Demand and Capacity
>6 mm Under-Built
Source: US Census Bureau and Forest Economic Advisors, LLC (FEA)
North American Capacity Restarts Needed to Meet Growing Demand
13
Industry Overview
37 Mills in Operation
4 Mills Available for Restart(1)
North American OSB Installed Capacity:
Norbord Mill
7 Mills (Re)started in 2012/13
Note: Excludes OSB siding production and capacity.
Source: APA, company documents and other public filings
(in Bsf-3/8”)
2012 2017
Production 16.2 22.1
Restarts/Idled 4.4 2.0
New 1.2
=27% =14%
(1)Norbord’s Huguley, AL mill resumed production
in October 2017
2 Greenfield Mills in Development
Attractive North American OSB Price Outlook
14
Industry Overview
North Central Benchmark OSB Price
Source: Random Lengths and Forest Economic Advisors, LLC (FEA); As of January 29, 2018.
• OSB prices are tied to demand for building products, which is influenced by the general economy, demographics and the need for housing
$100
$150
$200
$250
$300
$350
$400
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F
An
nu
al A
vera
ge N
C P
rice
US$
pe
r M
sf 7
/16
"
Historical Price Forecasted Price (FEA)
15-year average:$243
OSB Penetration Driving Strong Demand Growth in Europe
15
Industry Overview
European OSB Demand (million m3)
Source: Eurostat, UN Comtrade Database, Destatis and Norbord estimates
• Significant growth opportunity – OSB accounts for only ~9% of the structural panel market in Japan compared to 67% in North America
Japanese Housing Market Stable
16
Industry Overview
Japanese Housing Starts (000’s)
Source: Japanese Ministry of Land, Infrastructure, Transport and Tourism and Company documents
Business Strategy
Norbord’s Strategy Is Well Defined
18
Business Strategy
Pursue growth in OSB2
Own high-quality assets with low-cost positions3
Maintain a margin-focused operating culture4
Focus on growth customers through best-in-class service and product development
5
Allocate capital with discipline6
Develop a world-class safety culture 1
Norbord’s Growth Focused on OSB
19
Business Strategy
Norbord OSB Capacity (Bsf-3/8”)
(1) 2015 onwards reflects Norbord following completion of merger with Ainsworth. Pre 2015 reflects Norbord excluding Ainsworth.
(1)
Margin Improvement Is an Operational Priority
20
Business Strategy
(1) Measured relative to prior year at constant prices and exchange rates.(2) The benefits of improved productivity and a richer value-added product mix were offset by higher maintenance spending in 2013.(3) 2015 onwards reflects Norbord following completion of merger with Ainsworth. Pre 2015 reflects Norbord excluding Ainsworth.
(2)
Margin Improvement Program Gains ($ 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 $331 million of margin improvements over the past 14 years
• 2017 MIP gains of $12 million
(1)
(3)
Diversification From European & Asian End Market Exposure
21
Business Strategy
2017 Sales by Origin
(1) Exports to Asia are handled by Interex and sales are reported in the North American geographic segment.
• Strong North American footprint
• Stable margin operations:
– Europe
– Asia-focused exports(1)
• Provides greater diversification than North American-based competitors
• Better positioned to weather market cycles
(1)
$2.2 billionsales
Focused Customer Strategy Sets Norbord Apart
22
Business Strategy
2017 North American Shipments
• New housing sales volume growing as US housing starts recover• Industrial and export sales at more stable margins
6.1 Bsf-3/8”
23
Business Strategy
Capex Investment (US$ millions)
• Three main priorities:
– Re-invest in the business– Optimize capital structure– Return cash to shareholders
• 2017 capex of $253 million:
- $108 million regular capex
- $37 million for Huguley restart
- $101 million for Inverness project
- $7 million capitalized interest
• 2018 capex budget of $175 million
Disciplined Capital Allocation
(1)
Inverness, Scotland expansion - $135 million over two
years
(1) 2015 onwards reflects Norbord following completion of merger with Ainsworth. Pre 2015 reflects Norbord excluding Ainsworth.
Minimum Maintenance $25 million
Inverness: Expansion Completed to Meet Growing European Demand
24
Business Strategy
Capex: $135 million
Capacity: 720 MMsf-3/8” (640 km3)
• Produced first board in September 2017 • Started production in October 2017• Increased stated annual capacity by 325 MMsf (3/8-inch basis)
Specialty Products Will Drive North American Substitution Growth
25
Business Strategy
• Reduced dependence on new home construction
• More predictable, stable margins over business cycle
New home construction
Repair & remodel
Value-added
Commodity
Specialty
Industrial &Export
2017 Future
Significant OSB Substitution Opportunity in Industrial End Uses
26
Business Strategy
17%
EWP
Furniture
Commercial Roofing
Engineered Packaging
MDF
Particleboard
HW Plywood
SW Plywood
OSB
2015 North American Industrial Panel Consumption
Norbord is a leading supplier to current industrial end uses
Source: APA – The Engineered Wood Association, RISI, US Forest Products Annual Market Review and Prospects (USDA FS) and US International Trade Commission
Financial Overview
631
495
247
42
-60
10745
188
287
290
307
48
-23 5
58
13
106
145
921
802
295
19
-60
5
165
58
294
432
115 125
385
672
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Norbord Combined
Ainsworth
Norbord (excluding Ainsworth)
Strong Operating Cash Flow Through The Cycle
28
Financial Overview
North Central Benchmark OSB Price
$369 $320 $217 $161 $172 $163 $219 $186 $271 $315 $218 $209 $269 $353
US Housing Starts(000s)
1,956 2,068 1,801 1,355 906 554 587 609 781 925 1,003 1,112 1,174 1,202
Total Adjusted EBITDA (US$ millions)
14-year average:$302 million
(1) As disclosed in Ainsworth’s historical MD&As; converted to USD using annual average exchange rate.(2) Assumes operation at LTM production levels as of December 31, 2017.
Norbord Sensitivity to realized North American OSB Price Changes:
+$10/Msf 7/16” = +$50 million Adjusted EBITDA(2)(1)
Stable Results from European Operations
29
Financial Overview
• Norbord’s European operations provide greater sales and earnings diversification than other North American-based competitors
European Adjusted EBITDA (US$ millions)
Leverage Metrics Significantly Improved
30
Financial Overview
Adjusted EBITDA vs Net Debt
Quarterly Adj. EBITDA
Net Debt toLTM Adj. EBITDA
11.0x
0.5x
Strong Balance Sheet & Liquidity
31
Financial Overview
Q4 2017
Cash $ 241
Bank Lines(2) 226
A/R Securitization(3) 125
Liquidity $ 592
Manageable Debt Maturities (US$ millions) Strong Liquidity Profile (US$ millions)
Moody’s Ba1 (Stable)
S&P BB (Stable)
DBRS BB (Stable)
Stable Issuer Credit Ratings
Rep
aid
5.3
75
%
6.2
5%
(1) Norbord permanently repaid the 2017 bonds at maturity on February 15, 2017.(2) $245 million of committed revolving bank lines less $19 million outstanding letters of credit drawn at quarter-end.(3) $125 million of A/R Securitization limit undrawn at quarter-end.
(1)
cou
po
n 5
.37
5%
cou
po
n 6
.25
%
Returning Cash to Shareholders Through Variable Dividend Policy
32
Financial Overview
Dividends Declared (US$ millions)
Annualized current level(1)
(1) Reflects current quarterly dividend level of C $0.60 per share (translated at C $1 = US $0.80).
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Norbord Peer1 Peer2 Peer3 Peer4 Peer5 Peer6 Peer7 Peer8 Peer9
Top Quartile ROCE Among Peers Over CycleFinancial Overview
15 Year Average ROCE % (Peak/Mean/Trough) (1)
(1) Return on capital employed (ROCE) is a measure of financial performance focusing on cash generation and the effective use of capital. ROCE is calculated as Adjusted EBITDA divided by average capital employed (operating working capital, PP&E, goodwill, intangibles, timberlands & licences).
Source: Capital IQ 33
Attractive Investment Opportunity
34
Summary
Leverage to unfolding US housing recoveryEvery +$10 in Norbord’s realized OSB price = +$50 million in Adjusted EBITDA(1)
Diversification from European operations, North American industrial sales 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
(1) Assumes operation at LTM production levels as of December 31, 2017.
Appendices
Shareholder Information
36
Appendices
Ticker Symbol NYSE: OSB
TSX: OSB
Common Shares 86.4 million outstanding(as at February 1, 2018)
Quarterly Dividend C $0.60 per share (declared February 2, 2018 to be paid on March 21, 2018 to shareholders of record on March 1, 2018)
Largest Shareholder Brookfield Asset Management – ~40%
Historical North American OSB Prices
37
Appendices
North Central Benchmark OSB Price
Source: Random Lengths
15-year average: $243
Q1 163 175 423 364 285 145 137 154 212 198 203 417 219 193 226 293
Q2 159 215 443 297 238 156 179 146 295 173 235 347 219 193 264 330
Q3 159 381 351 303 181 177 201 178 180 184 313 252 216 204 301 409
Q4 156 401 264 317 166 165 170 172 191 190 332 245 216 242 285 379
Average 159 293 369 320 217 161 172 163 219 186 271 315 218 209 269 353
Financial Sensitivities
38
Appendices
Exposure Change
Adjusted EBITDA Impact (1)
(US$ millions)
North American OSB (2) $10 per Msf-7/16” + $59
European OSB €10 per 000 m3 + $12
Canadian dollar (3) $0.01 per C$ + $5
Pound sterling £0.01 per € < $1
(1) Assumes operation at full stated capacity levels (including the curtailed Chambord, Quebec mill). Impact on Adjusted EBITDA of a $10 per Msf-7/16” change is ± $50 million based on the last twelve months of production at December 31, 2017.Direct exposures only; before the impact of any cash flow currency hedges.Approximate operating loss carry-forwards for tax purposes (gross) as at December 31, 2017 – US $149 million, Canada C$22 million, Belgium €32 million and UK £1 million.
(2) Estimated impact of change in Norbord’s realized North American OSB price.
(3) Operating exposures only (excludes dividends on common shares).
Analyst Coverage
39
Appendices
Analyst Analyst Name Contact
Bank of America Merrill Lynch John Babcock/George Staphos (646) 743-0046 [email protected]
BMO Capital Markets Ketan Mamtora / Mark Wilde (212) 883-5121 [email protected]
Buckingham Research Group Mark Weintraub (212) 922-2029 [email protected]
CIBC World Markets Hamir Patel (604) 331-3047 [email protected]
Credit Suisse Andrew Kuske (416) 352-4561 [email protected]
ERA Forest Products Research Claire Huxtable (604) 886-5741 [email protected]
John Tumazos Very Independent Research
John Tumazos (732) 444-1083 [email protected]
Raymond James Daryl Swetlishoff (604) 659-8246 [email protected]
RBC Capital Markets Paul Quinn (604) 257-7048 [email protected]
Scotia Capital Benoit Laprade (514) 287-3627 [email protected]
TD Securities Sean Steuart (416) 308-3399 [email protected]
Vertical Research Partners Chip Dillon (212) 257-6159 [email protected]
Norbord does not provide guidance regarding its expectations of future OSB prices. The following is a sample of price forecasts by analysts as at February 6, 2018. It is not exhaustive.
Forecast North American OSB Prices
40
Appendices
Annual Average North Central
Benchmark OSB Price US$ per Msf 7/16”
Analyst 2018F 2019F
Vertical Research Partners 345 320
Bank of America Merrill Lynch 335 308
Raymond James 330 -
RBC Capital Markets 325 300
Scotiabank 305 314
CIBC World Markets 302 290
Buckingham Research Group 300 -
BMO Capital Markets 293 290
TD Securities 293 280
Average 314 300
Norbord Inc.
Suite 600One Toronto Street
Toronto, Ontario, M5C 2W4Canada
Tel: 416-365-0705
www.norbord.com