July 29, 2011 / 4:03 PM / 6 years ago

UPDATE 3-Slow US housing recovery to pinch OSB prices: Norbord

* Q2 EPS $0.03 vs $0.76 year ago

* Q2 rev falls 19 pct to $241 mln

* Says cautious of U.S. housing recovery

* Says Europe ops to deliver strong results for rest of 2011

* Shares at year-low (Adds analyst comments, details on Europe ops, OSB prices)

By Gowri Jayakumar

BANGALORE, July 29 (Reuters) - Norbord Inc forecast a weak U.S. housing market to squeeze prices of its core product, oriented strand boards (OSB), and said it expects European demand for its wood panels to remain strong for the rest of the year.

OSBs, similar to plywood but cheaper, are commonly used to sheath roofs, walls and floors.

Toronto-based Norbord’s European operations, which contributed nearly half its total revenue, rose 27 percent to $117 million in the second quarter.

The company, which has manufacturing facilities in UK, sees its European business gaining from a weak pound versus euro.

Norbord, which also makes plywood and other engineered wood products, expects U.S. housing activity to remain low.

“The OSB market is likely to remain challenging in the face of unbalanced supply and the lagging pace of single-family home construction,” Chief Executive Barrie Shineton said.

North Central benchmark OSB prices fell 41 percent to average $173 per thousand square feet in the quarter, and Norbord said U.S. housing starts for the year were being revised down, below levels seen last year.

On Tuesday, rival Tembec Inc also forecast soft lumber demand outlook and said prices were recovering at very low levels.

Groundbreaking for U.S. homes in June, however, scaled a six-month high on growing demand for rentals.

“We will see material improvement in prices probably in the first or second quarter of 2012, with the spring building season,” said Desjardins Securities analyst Pierre Lacroix.

He expects rising fuel and input costs to squeeze results at Norbord and other timber peers such as Canfor and West Fraser Timber .

April-June profit -- which included a non-recurring tax gain of $7 million -- fell to $1 million, or 3 cents a share, from $33 million, or 76 cents a share, a year ago. Analysts polled by Thomson Reuters I/B/E/S expected a loss of 12 cents a share.

Shares of the company fell almost 2 percent to $10.43, a new year-low, on Friday on the Toronto Stock Exchange. (Editing by Joyjeet Das)

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