February 1, 2008 / 6:04 PM / in 10 years

Norbord's loss deepens amid "suicide" OSB prices

TORONTO (Reuters) - Norbord Inc NBD.TO reported a wider fourth-quarter loss on Friday, in line with expectations, as a slowing North American housing market and “suicide” prices hobbled the Canadian timber products firm.

The North American operations of Norbord, which makes construction materials such as oriented strand board (OSB) and plywood, logged more than half of 2007’s total OSB downtime in the last quarter as U.S. housing starts sputtered amid the subprime mortgage crisis and a slowing U.S. economy.

Norbord said weak demand stemming from lower housing starts led to sharply lower OSB prices, prompting it to idle mills amid a widespread slowdown in the wood products industry.

The price of OSB, the company’s key product, dipped in all regions of the United States amid the battered housing market.

Chief Executive Barrie Shineton described the OSB prices seen in early January as “suicide prices.”

“We’ve got better options than to do business at those prices and those better options are to take mill curtailments -- and that’s what we’ll do,” he said on a conference call.

He suggested the company may also use this quiet period to make OSB-related acquisitions.

“We are in a period in North America that, if there’s going to be ... (growth) opportunities, it’s probably going to happen in the next few years,” he told investors on the open call.

A relatively healthy European housing market partly offset weakness in North America, boosting net sales 1.5 percent to $263 million, but the company said it doesn’t expect to match that pace in 2008.

The overall loss was $13 million, or 9 cents a share on a diluted basis in the quarter. That compares with a loss of $1 million, or 1 cent a share, a year earlier.

The company has 15 plants in the United States, Europe and Canada, and annual OSB capacity of 5 billion square feet.

Capital expenditure is expected to be a modest $40 million in 2008 because North American demand and pricing for OSB are expected to remain weak in the near term.

In the long term, however, Norbord expects the fundamentals to remain strong for the building material.

Despite the slowdown, Norbord declared a quarterly dividend of 10 Canadian cents a share, payable in March.

It also appointed Robin Lampard senior vice-president and chief financial officer, effective February 15. Lampard will replace John Tremayne.

The company’s shares edged up by 11 Canadian cents, or 1.8 percent, to C$6.40 on the Toronto Stock Exchange. Dundee Capital Markets rated the stock “outperform” with a C$10 price target.

($1=$1.00 Canadian)

Reporting by Jonathan Spicer; Editing by Rob Wilson

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