October 28, 2011 / 10:24 AM / 7 years ago

UPDATE 2-Norbord loss narrows, sees Europe slowing

* Sales rise 6 pct

* Expects European panel market to soften

* Sees little near-term rebound in N American new home construction (Adds details, shares)

Oct 28 (Reuters) - Canadian wood panels maker Norbord Inc posted a smaller third-quarter loss as panel prices held up in Europe, but warned that the next two quarters would be tough because of growing economic gloom.

Norbord — a producer of oriented strand boards (OSB) that are commonly used to sheath roofs, walls and floors — has also been grappling with high raw material costs and a weak U.S. housing market.

Norbord’s results are in line with those of its peers in the industry, which is bracing for a weak fourth quarter. On Thursday, Canfor posted a narrower-than-expected quarterly loss but said it expects North American lumber demand to slow in the fourth quarter.

“I do expect the very robust demand of the past two years (in Europe) to ease,” Chief Executive Barrie Shineton said in a letter to shareholders.

He said the company’s customers in the U.K. and across the Eurozone have become cautious due to the economic uncertainty.

Norbord, whose timber peers include West Fraser Timber , expects European panel prices to moderate from the robust levels of the past two years due to the sovereign debt crisis.

The company, which drew nearly half its total revenue from Europe in the second quarter, expects the European panel market to soften.

“I am becoming increasingly bearish about any near-term rebound in new home construction,” CEO Shineton said, referring to the U.S. housing market.

U.S. housing starts are expected to end the year below 0.6 million, marginally lower than the prior year and well below the 25-year historical annualized average of 1.5 million.

Toronto-based Norbord, which also competes with Tembec Inc , reported net loss of $1 million, or 2 cents a share, compared with net loss of $4 million, or 9 cents a share, a year ago.

Sales rose 6 percent to $242 million.

Analysts, on average, were expecting a loss of 3 cents a share, on revenue of $260.3 million, according to Thomson Reuters I/B/E/S.

North Central benchmark OSB prices rose 2 percent to average $184 per thousand square feet in the quarter from the year-ago period.

Norbord shares, which have lost more than a third of their value so far this year, closed at C$8.94 on Thursday on the Toronto Stock Exchange. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Saumyadeb Chakrabarty)

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