April 27, 2010 / 10:23 AM / 7 years ago

UPDATE 3-Norbord's loss narrows, sees stronger Q2 on price rise

* Q1 loss/shr $0.12 vs loss/shr $0.52 yr ago

* Q1 rev $184 mln vs est $156 mln yr ago

* Sees OSB prices rise continuing in Q2

* Sees mills running at full capacity in Q2 (Recasts; adds analyst comments, stock activity)

BANGALORE, April 27 (Reuters) - Canadian wood-based panels producer Norbord Inc NBD.TO posted a narrower quarterly loss that missed estimates, as severe weather hurt costs and productivity, offsetting stronger-than-expected oriented strand board (OSB) prices in North America.

Norbord however said second quarter results would benefit from improving weather conditions, full capacity at its mills and a continuing rise in prices of OSB, which is used mainly as sheathing in walls, floors, and roofs.

Norbord, one of the world’s largest producers of OSB, is expected to swing to a second-quarter profit, compared with a year-ago loss, according to Thomson Reuters I/B/E/S.

North American Central OSB prices rose about 40 percent in the first quarter. Prices more than tripled in the South East region, which accounts for more than half of its North American capacity.

OSB prices are expected to remain high, and help Norbord’s earnings before interest, taxes, depreciation and amortization (EBITDA) to continue to rise in the coming months, said RBC Capital Markets analyst Paul Quinn.

“They mentioned $17 million expected in EBITDA in April. May and June are just going to be that much stronger,” said Quinn, who has an “outperform” rating and a C$29 price target on the company’s stock.

The company, which gets about 60 percent of its revenue from North America, however warned that a meaningful recovery in U.S. housing activity needed to take hold to sustain rising prices.

Q1 LOSS MISSES STREET

Norbord’s first quarter loss narrowed to $5 million, or 12 cents a share, from $22 million, or 52 cents a share, last year.

Analyst Quinn said he tried to take the weather into account in his estimates, but clearly it was not enough.

“The other thing that surprised me was that shipments were down about 10 percent. I took weather in terms of increased costs, but I didn’t take shipments out of it.”

Net sales for Norbord, which also manufactures plywood and a range of other engineered wood products, rose 18 percent to $184 million.

Analysts on average had expected a loss of 2 cents a share, before items, on revenue of $211.8 million.

All of its open mills in North America and Europe are expected to run at full capacity in the second quarter, compared with capacities of 65 percent and 90 percent respectively in the first quarter.

The company said it indefinitely closed two North American mills, which represent 20 percent of capacity in that region.

Shares of the company were down 3 percent at C$20.87 Tuesday during late morning trade on the Toronto Stock Exchange. (Reporting by Isheeta Sanghi in Bangalore; Editing by Unnikrishnan Nair, Jarshad Kakkrakandy and Savio D‘Souza)

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