July 22, 2010 / 10:22 AM / 7 years ago

UPDATE 3-Norbord Q2 beats, confident of future; shrs jump

* Q2 EPS $0.81 vs est. $0.48

* Q2 rev $278 mln vs est. $249.1 mln

* Says U.S. housing recovery taking hold

* Shares up 12 pct (Adds analyst comment, details, updates share movement)

By Isheeta Sanghi

BANGALORE, July 22 (Reuters) - Norbord Inc’s NBD.TO quarterly profit breezed past market estimates, helped by the run-up in North American oriented strand board (OSB) prices, and the Canadian wood-based panels producer said it remained confident of the future, sending its shares up 12 percent.

The company said North Central benchmark OSB prices ranged from $195 to $395 and averaged $295 in the second quarter. In the South East region -- where over half of Norbord’s North American capacity is located -- prices averaged $277, the company added.

Overall demand outstripped the ability of both OSB producers and distributors to increase supply, resulting in the surge in prices, which peaked at over $300 in May, before retreating to more sustainable levels.

“A housing recovery is taking hold and we remain confident that our financial performance will continue to improve on the prior year,” Chief Executive Barrie Shineton said in a statement.

New U.S. home construction hit its lowest level in eight months in June, further evidence the economy lost momentum in the second quarter, but a rise in permits offered hope of a pick up in homebuilding. [ID:nN20249501]

Desjardins Securities analyst Pierre Lacroix told Reuters, “We expect from the current point that we will see stabilizing to gradual improvement (in the U.S. housing market).”

He has a “buy” rating and C$18 price target on Norbord shares.

Actual year-to-date U.S. housing starts were 14 percent higher than last year and Norbord’s second-quarter North American OSB sales volume to its three core market segments rose 35 percent over the first quarter of the year, the company said.

However, CEO Shineton said the recovery in both U.S. housing starts and OSB demand is fragile.

In the United Kingdom, year-to-date housing starts improved more than 75 percent over last year, supporting stronger panel demand. European OSB prices rose 14 percent sequentially due to high plywood prices, lower imports from the United States and stronger demand.

The company said as market and economic conditions warrant, it expects to curtail production when necessary to conserve cash, manage inventory and maximize operating results.

OSB PRICES BOOST Q2

Norbord, one of the world’s largest producers of OSB, posted a second-quarter profit of $37 million, or 81 cents a share, compared with a loss of $18 million, or 42 cents a share, a year earlier.

Net sales for Norbord, which also manufactures plywood and a range of other engineered wood products, rose 60 percent to $278 million.

Analysts on average had expected a profit of 48 cents a share, before items, on revenue of $249.1 million, according to Thomson Reuters I/B/E/S.

Norbord’s operating North American OSB mills ran at nearly full capacity in the latest second quarter, up from 85 percent in the first quarter, and 80 percent a year earlier.

Shares of the company, which have gained 17 percent in value over the past year, were up 8 percent at C$12.67 Thursday on the Toronto Stock Exchange. They had touched a high of C$12.90 earlier in the session. (Reporting by Isheeta Sanghi; Editing by Unnikrishnan Nair)

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