January 29, 2010 / 11:40 AM / 8 years ago

UPDATE 3-Canada's Norbord posts wider-than-expected Q4 loss

* Q4 loss/shr $0.25 vs estimate loss/shr $0.22

* Sees housing markets improving in 2010 (Recasts; adds CEO comment, analyst comment, conference call)

By Isheeta Sanghi

BANGALORE, Jan 29 (Reuters) - Canadian wood-based panels producer Norbord Inc NBD.TO posted a wider-than-expected fourth-quarter loss but said it was optimistic about housing market recoveries in the United States and Britain in 2010.

“I am feeling much better today about Norbord’s business outlook than I did at this time last year,” Chief Executive Barrie Shineton said on a conference call with analysts.

RBC Capital Markets analyst Paul Quinn said Norbord’s management has reason to be optimistic.

“I think it is realistic,” he said. “They scaled back production to match what the market demand is.... They have been realistic and pretty spot-on in terms of their expectation for the direction of the market.”

Norbord said its European mills would benefit from economic recovery in Britain, with unemployment moderating and credit availability improving for most qualified home buyers.

The company said its operations in Europe would also benefit from the weak pound sterling relative to the euro, a trend that provides both stronger local sales opportunities and new export opportunities for its UK-based business.

On Thursday, sterling hit a five-month high against a weak euro and a 4-1/2-month high against a basket of currencies. [ID:nLDE60R0QF]

“A housing market recovery, albeit fragile, is evident in North America,” the company said.

North American housing markets and prices of oriented strand board (OSB), an engineered wood product used in home construction, declined throughout the first half of 2009, reached a bottom at mid-year and then trended up in the third and fourth quarters, the company said.

“The relative strength of fourth-quarter OSB prices was due to weather-related log shortages and low distribution chain inventories,” Norbord said.

Demand was also supported in part by housing activity generated by the U.S. first-time home buyer tax credit program, which had been scheduled to expire but was later extended to mid-2010.

Q4 LOSS NARROWS

For the quarter, Norbord posted a loss of $11 million, or 25 cents a share, compared with a loss of $30 million, or $1.88 a share, a year earlier.

For the full year 2009, net sales for Norbord, one of the world’s largest producers of OSB, fell to $718 million from $943 million the previous year.

Analysts on average had expected the company, which also manufactures plywood and a range of other engineered wood products, to post a loss of 22 cents a share, according to Thomson Reuters I/B/E/S.

For the fourth quarter and the full year, Norbord’s North American OSB mills operated at about 60 percent of capacity compared with 80 percent in 2008.

The company operated at about 80 percent of its European capacity throughout the year.

Norbord said it conserved cash by curtailing considerable production capacity and reducing overhead costs, and said it would curtail activity in 2010 as well.

The company closed two OSB mills indefinitely in 2009 and reduced production at six other mills, in total curtailing 40 percent of its OSB capacity through North America and 20 percent of its panel capacity in Europe throughout the year.

“Over the course of 2010 it will be a smaller number than that (what it curtailed in 2010) but we will take significant curtailments nevertheless,” CEO Shineton told Reuters, adding that it will be between 20 percent and “something lower than 40 percent.”

RBC’s Quinn said at the beginning of the year, the industry as a whole ran into a problem since it overproduced, pushing prices down to unsustainable levels.

“Then they wisened up and they almost found religion on balancing supply with demand,” Quinn added.

“I think they are well positioned at this point, and I see a significant upside from here” said Quinn, who has a current “outperform” rating and C$24 price target on the stock.

Shares of the company touched a high of C$16.77 before paring some gains to trade up 5 Canadian cents at C$16.55 Friday afternoon on the Toronto Stock Exchange. (Reporting by Isheeta Sanghi in Bangalore; Editing by Unnikrishnan Nair)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below